Exhibit 10.2
Execution Version
 
GUARANTEE AND COLLATERAL AGREEMENT
dated as of
January 22, 2008,
among
BUFFETS, INC., a Debtor and Debtor in Possession,
BUFFETS HOLDINGS, INC., a Debtor and Debtor in Possession
the Subsidiaries of BUFFETS, INC.
from time to time party hereto,
and
CREDIT SUISSE,
as Collateral Agent
 

 

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Table of Contents

                      Page ARTICLE I.

 
            DEFINITIONS

 
           
SECTION 1.01
  Credit Agreement     2  
SECTION 1.02
  Other Defined Terms     2  
 
            ARTICLE II.

 
            GUARANTEE

 
           
SECTION 2.01
  Guarantee     6  
SECTION 2.02
  Guarantee of Payment     6  
SECTION 2.03
  No Limitations, Etc     6  
SECTION 2.04
  Reinstatement     7  
SECTION 2.05
  Agreement To Pay; Subrogation     8  
SECTION 2.06
  Information     8  
 
            ARTICLE III.

 
            PLEDGE OF SECURITIES

 
           
SECTION 3.01
  Pledge     8  
SECTION 3.02
  Delivery of the Pledged Collateral     9  
SECTION 3.03
  Representations, Warranties and Covenants     9  
SECTION 3.04
  Certification of Limited Liability Company and Limited Partnership Interests  
  11  
SECTION 3.05
  Registration in Nominee Name; Denominations     11  
SECTION 3.06
  Voting Rights; Dividends and Interest, etc     12  
 
            ARTICLE IV.

 
            SECURITY INTERESTS IN PERSONAL PROPERTY

 
           
SECTION 4.01
  Security Interest     14  
SECTION 4.02
  Representations and Warranties     15  
SECTION 4.03
  Covenants     18  
SECTION 4.04
  Other Actions     21  
SECTION 4.05
  Covenants regarding Intellectual Property Collateral     23  

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                      Page ARTICLE V.

 
            REMEDIES

 
           
SECTION 5.01
  Remedies upon Default     25  
SECTION 5.02
  Application of Proceeds     27  
SECTION 5.03
  Grant of License to Use Intellectual Property     27  
SECTION 5.04
  Securities Act, etc     28  
 
            ARTICLE VI.

 
            INDEMNITY, SUBROGATION AND SUBORDINATION

 
           
SECTION 6.01
  Indemnity and Subrogation     29  
SECTION 6.02
  Contribution and Subrogation     29  
SECTION 6.03
  Subordination     29  
 
            ARTICLE VII.

 
            MISCELLANEOUS

 
           
SECTION 7.01
  Notices     30  
SECTION 7.02
  Security Interest Absolute     30  
SECTION 7.03
  Survival of Agreement     30  
SECTION 7.04
  Binding Effect; Several Agreement     30  
SECTION 7.05
  Successors and Assigns     31  
SECTION 7.06
  Collateral Agent’s Fees and Expenses; Indemnification     31  
SECTION 7.07
  Collateral Agent Appointed Attorney-in-Fact     31  
SECTION 7.09
  Waivers; Amendment     32  
SECTION 7.10
  WAIVER OF JURY TRIAL     33  
SECTION 7.11
  Severability     33  
SECTION 7.12
  Counterparts     33  
SECTION 7.13
  Headings     34  
SECTION 7.14
  Jurisdiction; Consent to Service of Process     34  
SECTION 7.15
  Termination or Release     34  
SECTION 7.16
  Additional Grantors     35  
SECTION 7.17
  Right of Setoff     35  
SECTION 7.18
  Collateral Delivered under the Existing Credit Agreement.     36  

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Schedules
           
 
           
Schedule I
  Subsidiary Guarantors        
Schedule II
  Equity Interests; Pledged Debt Securities        
Schedule III
  Intellectual Property        
 
           
Exhibits
           
 
           
Exhibit A
  Form of Supplement        
Exhibit B
  Form of Perfection Certificate        

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     GUARANTEE AND COLLATERAL AGREEMENT dated as of January 22, 2008 (as
amended, restated, supplemented or otherwise modified, this “Agreement”), among
BUFFETS, INC., a Minnesota corporation, as a debtor and debtor in possession
under Chapter 11 of the Bankruptcy Code (the “Borrower”), BUFFETS HOLDINGS,
INC., a Delaware corporation, as a debtor and a debtor in possession under
Chapter 11 of the Bankruptcy Code (“Holdings”), the Subsidiaries of the Borrower
identified herein and CREDIT SUISSE (“Credit Suisse”), as collateral agent (in
such capacity, the “Collateral Agent”).
     WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Borrower, Holdings, the lenders from time to time party thereto
(collectively, the “Lenders”) and Credit Suisse, as administrative agent (in
such capacity, the “Administrative Agent”) and Collateral Agent, are entering
into a Secured Super-Priority Debtor in Possession Credit Agreement (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) dated as of the date of this Agreement, to provide for the making of
Loans to and for the benefit of the Borrower;
     WHEREAS, the Lenders have agreed to extend credit to the Borrower pursuant
to, and upon the terms and conditions specified in, the Credit Agreement;
     WHEREAS, the obligations of the Lenders to extend credit to the Borrower
are conditioned upon, among other things, the execution and delivery of this
Agreement by Holdings, the Borrower and the Subsidiary Guarantors;
     WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
     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;
     WHEREAS, in order to induce the Administrative Agent, the Collateral Agent
and the Lenders to enter into the Credit Agreement and the other Loan Documents
and to induce the Lenders to make the Loans as provided for in the Credit
Agreement, each Subsidiary Guarantor has agreed to guarantee the Obligations of
the Borrower under the Credit Agreement and each Grantor has agreed to grant a
continuing Lien on the Collateral (as hereinafter defined) to secure the
Obligations pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;
     WHEREAS, the execution, delivery and performance of this Agreement and the
grant of a security interest, pledge and lien on all of the assets and
properties of the

 

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Grantors and the proceeds thereof to secure the Obligations have been authorized
pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code
by the Interim Order and, after the entry thereof, will have been so authorized
by the Final Order (collectively, the “Orders”); and
     WHEREAS, to supplement the Orders without in any way diminishing or
limiting the effect of the Orders or the security interest, pledge and lien
granted thereunder, the parties hereto desire to more fully set forth their
respective rights in connection with such security interest, pledge, and lien;
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
Definitions
          SECTION 1.01 Credit Agreement. (a)  Capitalized terms used in this
Agreement and not otherwise defined herein have the meanings specified in the
Credit Agreement. All terms defined in the New York UCC (as defined herein) and
not defined in this Agreement have the meanings specified therein; all
references to the Uniform Commercial Code shall mean the New York UCC; the term
“instrument” shall have the meaning specified in Article 9 of the New York UCC.
          (b) The rules of construction specified in Section 1.02 of the Credit
Agreement also apply to this Agreement.
          SECTION 1.02 Other Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
          “Account Debtor” means any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
          “Accounts Receivable” shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
          “Agreement” shall have the meaning assigned to such term in the
preamble hereto.
          “Article 9 Collateral” has the meaning assigned to such term in
Section 4.01.
          “Collateral” means Article 9 Collateral and Pledged Collateral.

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          “Copyright License” with respect to any Grantor, all agreements
(whether or not in writing) naming such Grantor as licensor or licensee
(including those material agreements listed in Schedule III), granting any right
under any Copyright, including the grant of rights to print, publish, copy,
distribute, exploit and sell materials derived from any Copyright.
          “Copyrights” means all (a)  copyrights and copyrightable works,
whether or not the underlying works of authorship have been published or
registered, subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, (b) all
registrations and applications for registration of any such copyright in the
United States or any other country, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office (or any successor office or any similar office in
any other country), including those listed on Schedule III, (c) the right to sue
or otherwise recover for any and all past, present and future infringements or
other violations thereof, (d) all income, royalties, damages and other payments
now and hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection therewith,
and damages and payments for past, present or future infringements thereof), and
(e) all other rights of any kind whatsoever accruing thereunder or pertaining
thereto.
          “Credit Agreement” has the meaning assigned to such term in the
preliminary statement of this Agreement.
          “Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity interests in any person, or any obligations
convertible into or exchangeable for, or giving any person a right, option or
warrant to acquire such equity interests or such convertible or exchangeable
obligations.
          “General Intangibles” means all choses in action and causes of action
and all other intangible personal property of any Grantor of every kind and
nature (other than Accounts) now owned or hereafter acquired by any Grantor,
including all rights and interests in partnerships, limited partnerships,
limited liability companies and other unincorporated entities, corporate or
other business records, indemnification claims, contract rights (including
rights under leases, whether entered into as lessor or lessee, hedging
agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts.
          “Grantors” means Holdings, the Borrower and the Subsidiary Guarantors.
          “Guarantors” means Holdings and the Subsidiary Guarantors.
          “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United

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States, multinational or foreign laws or otherwise, including all Copyrights,
Patents, Trademarks, Trade Secrets, and Licenses and all rights to sue at law or
in equity for any past, present and future infringement, misappropriations,
dilutions, or other violations thereof, including the right to receive all
proceeds and damages therefrom.
          “License” means any Patent License, Trademark License, Copyright
License, Trade Secret License, or other license or sublicense agreement to any
Intellectual Property or to intellectual property now owned or hereafter
acquired by third parties to which any Grantor is a party, including those
material Licenses listed on Schedule III.
          “New York UCC” means the Uniform Commercial Code as from time to time
in effect in the State of New York.
          “Obligations” means (a) the due and punctual payment of (i) the
principal of and interest (including interest accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether allowed or allowable in such proceeding) on the Loans, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and (ii) all other monetary obligations of the Borrower
to any of the Secured Parties under the Credit Agreement and each of the other
Loan Documents, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), (b) the due and punctual performance of all other
obligations of the Borrower under or pursuant to the Credit Agreement and each
of the other Loan Documents and (c) the due and punctual payment and performance
of all the obligations of each other Loan Party under or pursuant to this
Agreement and each of the other Loan Documents.
          “Patent License” with respect to any Grantor, all agreements (whether
or not in writing) providing for the grant by or to such Grantor of any right to
manufacture, use, import, export, distribute, offer for sale or sell any
invention covered in whole or in part by a Patent (including those material
agreements listed on Schedule III).
          “Patents” means (a) all letters patent of the United States or the
equivalent thereof in any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or the
equivalent thereof in any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office (or any
successor or any similar offices in any other country), including those listed
on Schedule III, (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein, (c) the right to sue or otherwise
recover for any and all past, present and future infringements thereof, (d) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present

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or future infringements thereof), and (e) and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
          “Perfection Certificate” means a certificate substantially in the form
of Exhibit B, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Responsible Officer of the
Borrower.
          “Pledged Collateral” has the meaning assigned to such term in
Section 3.01.
          “Pledged Debt Securities” has the meaning assigned to such term
in Section 3.01.
          “Pledged Securities” means any promissory notes, stock certificates or
other securities now or hereafter included in the Pledged Collateral, including
all certificates, instruments or other documents representing or evidencing any
Pledged Collateral.
          “Pledged Stock” has the meaning assigned to such term in Section 3.01.
          “Proceeds” has the meaning specified in Section 9-102 of the New York
UCC.
          “Registered Intellectual Property” has the meaning assigned to such
term in Section 4.02(e).
          “Secured Parties” means (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the beneficiaries of each indemnification
obligation undertaken by any Loan Party under any Loan Document and (e) the
permitted successors and assigns of each of the foregoing.
          “Security Interest” has the meaning assigned to such term in
Section 4.01.
          “Subsidiary Guarantors” means (a) the Subsidiaries identified on
Schedule I and (b) each other Subsidiary that becomes a party to this Agreement
as a Subsidiary Guarantor after the Closing Date.
          “Trademarks” means all (a) trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office
(or any successor office) or any similar offices in any State of the United
States or any other country or any political subdivision thereof, and all
extensions or renewals thereof, including those listed on Schedule III, (b) the
right to sue or otherwise recover for any and all past, present and future
infringements and dilutions thereof, (c) all income, royalties, damages and
other payments now and hereafter due

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and/or payable with respect thereto (including payments under all licenses
entered into in connection therewith, and damages and payments for past, present
or future infringements and dilutions thereof), and (d) all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together in each case
with the goodwill of the business connected with the use of, and symbolized by,
each of the above.
          “Trademark License” with respect to any Grantor, any agreement
(whether or not in writing) providing for the grant by or to such Grantor of any
right to use any Trademark (including those material agreements listed on
Schedule III).
          “Trade Secrets”: (i) all trade secrets and all confidential
information, (ii) the right to sue or otherwise recover for any and all past,
present and future misappropriations thereof, (iii) all income, royalties,
damages and other payments now and hereafter due and/or payable with respect
thereto (including payments under all licenses entered into in connection
therewith, and damages and payments for past, present or future
misappropriations thereof), and (iv) all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
          “Trade Secret License”: with respect to any Grantor, any agreement,
whether written or oral, providing for the grant by or to such Grantor of any
right to use any Trade Secret, including any of the foregoing agreements
referred to in Schedule III.
ARTICLE II.
Guarantee
          SECTION 2.01 Guarantee. Each Guarantor unconditionally guarantees,
jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, the due and punctual payment and performance of the
Obligations. Each of the Guarantors further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligation. Each of the Guarantors waives
presentment to, demand of payment from and protest to the Borrower or any other
Loan Party of any of the Obligations, and also waives notice of acceptance of
its guarantee and notice of protest for nonpayment.
          SECTION 2.02 Guarantee of Payment. Each of the Guarantors further
agrees that its guarantee hereunder constitutes a guarantee of payment when due
and not of collection, and waives any right to require that any resort be had by
the Collateral Agent or any other Secured Party to any security held for the
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Collateral Agent or any other Secured Party in favor of the
Borrower or any other person.
          SECTION 2.03 No Limitations, Etc. (a)  Except for termination of a
Guarantor’s obligations hereunder as expressly provided in Section 7.15, the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release,

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surrender, alteration or compromise, and shall not be subject to any defense
(other than a defense of payment) or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by (i) the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any right or remedy under the provisions of any Loan Document or
otherwise; (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Loan Document or any other
agreement, including with respect to any other Guarantor under this Agreement;
(iii) the release of, or any impairment of or failure to perfect any Lien on or
security interest in, any security held by the Collateral Agent or any other
Secured Party for the Obligations or any of them; (iv) any default, failure or
delay, willful or otherwise, in the performance of the Obligations; or (v) any
other act or omission that may or might in any manner or to any extent vary the
risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a
matter of law or equity (other than the payment in full in cash of all the
Obligations). Each Guarantor expressly authorizes the Collateral Agent to take
and hold security for the payment and performance of the Obligations, to
exchange, waive or release any or all such security (with or without
consideration), to enforce or apply such security and direct the order and
manner of any sale thereof in its sole discretion (unless the Required Lenders
direct otherwise) or to release or substitute any one or more other guarantors
or obligors upon or in respect of the Obligations, all without affecting the
obligations of any Guarantor hereunder.
          (b) To the fullest extent permitted by applicable law, each Guarantor
waives any defense based on or arising out of any defense of the Borrower or any
other Loan Party or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
or any other Loan Party, other than the payment in full in cash of all the
Obligations. The Collateral Agent and the other Secured Parties may, at their
election, foreclose on any security held by one or more of them by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other Loan Party or exercise any other
right or remedy available to them against the Borrower or any other Loan Party,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Obligations have been fully and indefeasibly
paid in full in cash. To the fullest extent permitted by applicable law, each
Guarantor waives any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Loan Party, as the case may be, or any
security.
          SECTION 2.04 Reinstatement. Each of the Guarantors agrees that its
guarantee hereunder shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of any Obligation is
rescinded or must otherwise be restored by the Collateral Agent or any other
Secured Party upon the bankruptcy or reorganization of the Borrower, any other
Loan Party or otherwise.

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          SECTION 2.05 Agreement To Pay; Subrogation. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Collateral Agent
for distribution to the applicable Secured Parties in cash the amount of such
unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral
Agent as provided above, all rights of such Guarantor against the Borrower or
any other Guarantor arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subject to Article VI.
          SECTION 2.06 Information.  Each Guarantor assumes all responsibility
for being and keeping itself informed of the Borrower’s and each other Loan
Party’s financial condition and assets and of all other circumstances bearing
upon the risk of nonpayment of the Obligations and the nature, scope and extent
of the risks that such Guarantor assumes and incurs hereunder, and agrees that
neither the Collateral Agent nor any other Secured Party will have any duty to
advise such Guarantor of information known to it or any of them regarding such
circumstances or risks.
ARTICLE III.
Pledge of Securities
          SECTION 3.01 Pledge. As security for the payment or performance, as
the case may be, in full of the Obligations, each Grantor hereby grants and
pledges to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in, all of such Grantor’s right, title and interest in, to and
under (a)(i) the Equity Interests owned by it on the date hereof (including all
such Equity Interests listed on Schedule II) (other than the Equity Interests of
any Inactive Subsidiary), (ii) any other Equity Interests obtained in the future
by such Grantor and (iii) the certificates representing all such Equity
Interests (all the foregoing collectively referred to herein as the “Pledged
Stock”); provided that the Pledged Stock shall not include (i) more than 65% of
the issued and outstanding voting Equity Interests and 100% of the issued and
outstanding shares of nonvoting Equity Interests (if any) of any Foreign
Subsidiary or (ii) any Equity Interests of any Foreign Subsidiary owned by a
Foreign Subsidiary; (b)(i) the debt securities held by such Grantor on the date
hereof (including all such debt securities listed opposite the name of such
Grantor on Schedule II), (ii) any debt securities in the future issued to such
Grantor and (iii) the promissory notes and any other instruments evidencing such
debt securities (all the foregoing collectively referred to herein as the
“Pledged Debt Securities”); (c) all other property that may be delivered to and
held by the Collateral Agent pursuant to the terms of this Section 3.01;
(d) subject to Section 3.06, all payments of principal or interest, dividends,
cash, instruments and other property from time to time received,

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receivable or otherwise distributed in respect of, in exchange for or upon the
conversion of, and all other Proceeds received in respect of, the securities
referred to in clauses (a) and (b) above; (e) subject to Section 3.06, all
rights and privileges of such Grantor with respect to the securities and other
property referred to in clauses (a), (b), (c) and (d) above; and (f) all
Proceeds of any of the foregoing (the items referred to in clauses (a) through
(f) above being collectively referred to as the “Pledged Collateral”).
          TO HAVE AND TO HOLD the Pledged Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or incidental
thereto, unto the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, forever; subject, however, to the terms,
covenants and conditions hereinafter set forth.
          SECTION 3.02 Delivery of the Pledged Collateral. (a)  Each Grantor
agrees concurrently with the delivery of this Agreement, or in the case of
Pledged Securities acquired after the date hereof, promptly after the date of
acquisition to deliver or cause to be delivered to the Collateral Agent any and
all certificates, instruments or other documents representing or evidencing
Pledged Securities (other than certificates, instruments or other documents
representing or evidencing Pledged Debt Securities with a face amount less than
$200,000 acquired after the date hereof).
          (b) Each Grantor will cause any Indebtedness for borrowed money in
excess of $200,000 owed to such Grantor by the Borrower or any Subsidiary to be
evidenced by a duly executed promissory note that is pledged and delivered to
the Collateral Agent pursuant to the terms hereof.
          (c) Upon delivery to the Collateral Agent, (i) any certificate,
instrument or document representing or evidencing Pledged Securities shall be
accompanied by undated stock powers duly executed in blank or other undated
instruments of transfer reasonably satisfactory to the Collateral Agent and duly
executed in blank and by such other instruments and documents as the Collateral
Agent may reasonably request and (ii) all other property comprising part of the
Pledged Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Grantor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the applicable securities, which
schedule shall be attached hereto as Schedule II and made a part hereof;
provided that failure to attach any such schedule hereto shall not affect the
validity of such pledge of such Pledged Securities. Each schedule so delivered
shall supplement any prior schedules so delivered.
          SECTION 3.03 Representations, Warranties and Covenants. The Grantors
jointly and severally represent, warrant and covenant to and with the Collateral
Agent, for the benefit of the Secured Parties, that:
     (a) As of the date hereof, Schedule II correctly sets forth the percentage
of the issued and outstanding shares of each class of the Equity Interests of
the issuer thereof represented by such Pledged Stock and includes all

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Equity Interests, debt securities and promissory notes required to be pledged
hereunder;
     (b) the Pledged Stock and, to the best of each Grantor’s knowledge, the
Pledged Debt Securities have been duly and validly authorized and issued by the
issuers thereof and (i) in the case of Pledged Stock, are fully paid and
nonassessable and (ii) in the case of Pledged Debt Securities, to the best of
each Grantor’s knowledge, are legal, valid and binding obligations of the
issuers thereof;
     (c) except for the security interests granted hereunder (or otherwise
permitted under the Credit Agreement), each of the Grantors (i) is and, subject
to any transfers made in compliance with the Credit Agreement, will continue to
be the direct owner, beneficially and of record, of the Pledged Securities
indicated on Schedule II as owned by such Grantor, (ii) holds the same free and
clear of all Liens (other than Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement), (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security interest
in or other Lien on, the Pledged Collateral, other than Liens created by this
Agreement and transfers made in compliance with the Credit Agreement, and Liens
permitted pursuant to Section 6.02 of the Credit Agreement, and (iv) subject to
Section 3.06, will cause any and all Pledged Collateral (other than Pledged Debt
Securities with a face amount less than $200,000 acquired after the date
hereof), whether for value paid by the Grantor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned hereunder;
     (d) except for restrictions and limitations imposed by the Loan Documents,
the Orders or securities laws generally, as of the date hereof, the Pledged
Collateral is and will continue to be freely transferable and assignable, and
none of the Pledged Collateral is or will be subject to any option, right of
first refusal, shareholders agreement, charter or by-law provisions or
contractual restriction of any nature that might prohibit, impair, delay or
otherwise affect the pledge of such Pledged Collateral hereunder, the sale or
disposition thereof pursuant hereto or the exercise by the Collateral Agent of
rights and remedies hereunder;
     (e) upon entry of the Orders, each of the Grantors (i) has the power and
authority to pledge the Pledged Collateral pledged by it hereunder in the manner
hereby done or contemplated and (ii) will defend its title or interest thereto
or therein against any and all Liens (other than the Lien created by this
Agreement or Liens expressly permitted pursuant to Section 6.02 of the Credit
Agreement or any other Loan Document), however arising, of all persons
whomsoever;
     (f) except for the Orders, no consent or approval of any Governmental
Authority, any securities exchange or any other person was or is necessary to
the

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validity of the pledge effected hereby (other than such as have been obtained
and are in full force and effect);
          (g) upon entry of the Orders, by virtue of the execution and delivery
by the Grantors of this Agreement, when any Pledged Securities are delivered to
the Collateral Agent in accordance with this Agreement, the Collateral Agent
will obtain a legal, valid and perfected first priority lien upon and security
interest in such Pledged Securities as security for the payment and performance
of the Obligations; and
          (h) upon entry of the Orders, the pledge effected hereby is effective
to vest in the Collateral Agent, for the ratable benefit of the Secured Parties,
the rights of the Collateral Agent in the Pledged Collateral as set forth
herein.
          SECTION 3.04 Certification of Limited Liability Company and Limited
Partnership Interests. (a) Each Grantor acknowledges and agrees that (i) each
interest in any limited liability company or limited partnership controlled by
such Grantor, pledged hereunder and represented by a certificate shall be a
“security” within the meaning of Article 8 of the New York UCC and shall be
governed by Article 8 of the New York UCC and (ii) each such interest shall at
all times hereafter be represented by a certificate.
          (b) Each Grantor further acknowledges and agrees that (i) each
interest in any limited liability company or limited partnership controlled by
such Grantor, pledged hereunder and not represented by a certificate shall not
be a “security” within the meaning of Article 8 of the New York UCC and shall
not be governed by Article 8 of the New York UCC, (ii) such Grantor has not
elected, and shall at no time elect, to treat any such interest as a “security”
within the meaning of Article 8 of the New York UCC or issue any certificate
representing such interest and (iii) the charter documents of any such limited
liability company or limited partnership (A) do not, and shall not, prohibit any
such interest from being pledged and (B) shall not be amended, supplemented or
otherwise modified in a manner materially adverse to the Collateral Agent
without the prior written consent of the Collateral Agent, unless (y) such
Grantor provides prior written notification to the Collateral Agent of such
election and immediately delivers any such certificate to the Collateral Agent
pursuant to the terms hereof or (z) the Collateral Agent has otherwise perfected
its Security Interest in such interest.
          SECTION 3.05 Registration in Nominee Name; Denominations. Upon the
occurrence and continuance of an Event of Default, the Collateral Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion (unless the Required Lenders direct otherwise)) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as pledgee or as
sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank
or in favor of the Collateral Agent. Each Grantor will promptly give to the
Collateral Agent copies of any material notices or other communications received
by it with respect to Pledged Securities registered in the name of such Grantor.
Upon the occurrence and continuance of an Event of Default, the Collateral Agent
shall at all times have the right to exchange the certificates representing

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Pledged Securities for certificates of smaller or larger denominations for any
purpose consistent with this Agreement.
          SECTION 3.06 Voting Rights; Dividends and Interest, etc. (a) Unless
and until an Event of Default shall have occurred and be continuing and the
Collateral Agent shall have given the Grantors notice of its intent to exercise
its rights under this Agreement (which notice shall be deemed to have been given
immediately upon the occurrence of an Event of Default under Article VII of the
Credit Agreement):
          (i) Each Grantor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of this
Agreement, the Credit Agreement and the other Loan Documents; provided that such
rights and powers shall not be exercised in any manner that could materially and
adversely affect the rights inuring to a holder of any Pledged Securities or the
rights and remedies of any of the Collateral Agent or the other Secured Parties
under this Agreement or the Credit Agreement or any other Loan Document or the
ability of the Secured Parties to exercise the same.
          (ii) The Collateral Agent shall execute and deliver to each Grantor,
or cause to be executed and delivered to such Grantor, all such proxies, powers
of attorney and other instruments as such Grantor may reasonably request for the
purpose of enabling such Grantor to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to subparagraph (i) above.
          (iii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions paid on or distributed in
respect of the Pledged Securities to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of
the Credit Agreement, the other Loan Documents and applicable laws; provided
that any noncash dividends, interest, principal or other distributions that
would constitute Pledged Stock or Pledged Debt Securities, whether resulting
from a subdivision, combination or reclassification of the outstanding Equity
Interests of the issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption thereof, or as a result
of any merger, consolidation, acquisition or other exchange of assets to which
such issuer may be a party or otherwise, shall be and become part of the Pledged
Collateral, and, if received by any Grantor, shall not be commingled by such
Grantor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the ratable benefit of the Secured
Parties and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement or instrument of
assignment). This paragraph (iii) shall not apply to dividends by or among the
Borrower, the Guarantors and any Subsidiaries only of property subject to a
perfected security interest under this Agreement; provided that the Borrower
notifies the Collateral Agent in writing, specifically referring to this
Section 3.06 at the time of such

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dividend and takes any actions the Collateral Agent reasonably specifies to
ensure the continuance of its perfected security interest in such property under
this Agreement.
          (b) Upon the occurrence and during the continuance of an Event of
Default, after the Collateral Agent shall have notified (or shall be deemed to
have notified pursuant to Section 3.06(a)) the Grantors of its intent to
exercise its rights under paragraph (a)(iii) of this Section 3.06, then all
rights of any Grantor to dividends, interest, principal or other distributions
that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of
this Section 3.06 shall cease, and all such rights shall thereupon become vested
in the Collateral Agent, which shall have the sole and exclusive right and
authority to receive and retain such dividends, interest, principal or other
distributions. All dividends, interest, principal or other distributions
received by any Grantor contrary to the provisions of this Section 3.06 shall be
held in trust for the benefit of the Collateral Agent, shall be segregated from
other property or funds of such Grantor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement or instrument of assignment). Any and all money and other property
paid over to or received by the Collateral Agent pursuant to the provisions of
this paragraph (b) shall be retained by the Collateral Agent in an account to be
established by the Collateral Agent upon receipt of such money or other property
and shall be applied in accordance with the provisions of Section 5.02. After
all Events of Default have been cured or waived and the applicable Grantor or
Grantors have delivered to the Administrative Agent certificates to that effect,
the Collateral Agent shall, promptly after all such Events of Default have been
cured or waived, repay to each applicable Grantor (without interest) all
dividends, interest, principal or other distributions that such Grantor would
otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of
this Section 3.06 and that remain in such account.
          (c) Upon the occurrence and during the continuance of an Event of
Default, after the Collateral Agent shall have notified (or shall be deemed to
have notified pursuant to Section 3.06(a)) the Grantors of its intent to
exercise its rights under paragraph (a)(i) of this Section 3.06, then all rights
of any Grantor to exercise the voting and consensual rights and powers it is
entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this
Section 3.06, shall cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall have the sole and exclusive right and
authority to exercise such voting and consensual rights and powers; provided
that, unless otherwise directed by the Required Lenders, the Collateral Agent
shall have the right from time to time following and during the continuance of
an Event of Default to permit the Grantors to exercise such rights.
          (d) Any notice given by the Collateral Agent to the Grantors
exercising its rights under paragraph (a) of this Section 3.06 (i) may be given
by telephone if promptly confirmed in writing, (ii) may be given to one or more
of the Grantors at the same or different times and (iii) may suspend the rights
of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without
suspending all such rights (as specified by the Collateral Agent in its sole and
absolute discretion (unless the Required

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Lenders direct otherwise)) and without waiving or otherwise affecting the
Collateral Agent’s rights to give additional notices from time to time
suspending other rights so long as an Event of Default has occurred and is
continuing.
ARTICLE IV.
Security Interests in Personal Property
          SECTION 4.01 Security Interest. (a) As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
grants and pledges to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest (the “Security Interest”), in all right, title or
interest in or to any and all of the following assets and properties now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest
(collectively, the “Article 9 Collateral”):
          (i) all Accounts;
          (ii) all Chattel Paper;
          (iii) all Deposit Accounts;
          (iv) all Money;
          (v) all Documents;
          (vi) all Equipment;
          (vii) all General Intangibles; provided that the grant of the Security
Interest hereunder shall not include any application for a Trademark that would
be deemed invalidated, canceled or abandoned due to the grant and/or enforcement
of such Security Interest unless and until such time that the grant and/or
enforcement of the Security Interest will not affect the status or validity of
such Trademark;
          (viii) all Instruments;
          (ix) all Inventory;
          (x) all Investment Property;
          (xi) all Letter-of-credit rights;
          (xii) all commercial tort claims;
          (xiii) all Goods;

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          (xiv) all books and records pertaining to the Article 9 Collateral;
and
          (xv) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees given
by any person with respect to any of the foregoing; provided that the foregoing
shall not include any asset that such Grantor now has or at any time in the
future may acquire the right, title or interest of which is (i) the subject of a
capital lease (as determined in accordance with GAAP) and (ii) legally or
beneficially owned by a person other than a Grantor.
          (b) Each Grantor hereby irrevocably authorizes the Collateral Agent at
any time and from time to time to file in any relevant jurisdiction any initial
financing statements (including fixture filings) with respect to the Article 9
Collateral or any part thereof and amendments thereto that (i) indicate the
Article 9 Collateral as “all assets” of such Grantor or words of similar effect,
and (ii) contain the information required by Article 9 of the Uniform Commercial
Code of each applicable jurisdiction for the filing of any financing statement
or amendment, including (A) whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such Grantor
and (B) in the case of a financing statement filed as a fixture filing, a
sufficient description of the real property to which such Article 9 Collateral
relates. Each Grantor agrees to provide such information to the Collateral Agent
promptly upon request.
               Each Grantor also ratifies its authorization for the Collateral
Agent to file in any relevant jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof.
               The Collateral Agent is further authorized to file with the
United States Patent and Trademark Office or United States Copyright Office (or
any successor office or any similar office in any other country) such documents
or other instruments as may be necessary or advisable for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantor, and
naming any Grantor or the Grantors as debtors and the Collateral Agent as
secured party.
          (c) The Security Interest is granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or in any way alter
or modify, any obligation or liability of any Grantor with respect to or arising
out of the Article 9 Collateral.
          SECTION 4.02 Representations and Warranties. The Grantors jointly and
severally represent and warrant to the Collateral Agent and the Secured Parties
that:
          (a) To the best of each Grantor’s knowledge, each Grantor has good and
valid rights in and title to the Article 9 Collateral with respect to which it
has purported to grant a Security Interest hereunder and upon entry of the
Orders, has

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full power and authority to grant to the Collateral Agent, for the ratable
benefit of the Secured Parties, the Security Interest in such Article 9
Collateral pursuant hereto and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any other person other than the Orders and any consent or approval that has
been obtained.
          (b) The Perfection Certificate has been duly prepared, completed and
executed and the information set forth therein, including (x) the exact legal
name of each Grantor and (y) the jurisdiction of organization of each Grantor,
is correct and complete in all material respects (except that the information
referred to in the preceding clauses (x) and (y) shall not be subject to such
materiality qualifier) as of the Closing Date. Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Article 9
Collateral (the “UCC Filings”) have been prepared by the Collateral Agent based
upon the information provided to the Administrative Agent and the Secured
Parties in the Perfection Certificate for filing in each governmental, municipal
or other office specified in Section 2 to the Perfection Certificate (or
specified by notice from the Borrower to the Administrative Agent after the
Closing Date in the case of filings, recordings or registrations required by
Section 5.06 or 5.09 of the Credit Agreement), which are all the filings,
recordings and registrations (other than (i) the Orders and (ii) filings that
may be required or recommended to be made in the United States Patent and
Trademark Office or the United States Copyright Office in order to perfect the
Security Interest in Article 9 Collateral consisting of United States Patents,
Trademarks, and Copyrights) that are necessary as of the Closing Date to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Article 9 Collateral in which
the Security Interest may be perfected by filing, recording or registration in
the United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements. Each Grantor represents and warrants that a fully
executed agreement in the form hereof (or a fully executed short form agreement
in form and substance reasonably satisfactory to the Collateral Agent), and
containing a description of all Article 9 Collateral consisting of Intellectual
Property with respect to United States Patents and United States registered
Trademarks (and Trademarks for which United States registration applications are
pending) and United States registered Copyrights has been delivered to the
Collateral Agent for recording by the United States Patent and Trademark Office
and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. §
1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and
otherwise as may be required pursuant to the laws of any other necessary
jurisdiction, to protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Article 9 Collateral
consisting of Patents, Trademarks and Copyrights in which

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a security interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than the UCC Filings and such actions as are
necessary to perfect the Security Interest with respect to any Article 9
Collateral consisting of Patents, Trademarks and Copyrights (or registration or
application for registration thereof) acquired or developed after the date
hereof).
          (c) Subject to the entry of the Orders, the Security Interest
constitutes (i) a legal and valid security interest in all the Article 9
Collateral securing the payment and performance of the Obligations, (ii) subject
to the filings described in Section 4.02(b), a perfected security interest in
all Article 9 Collateral in which a security interest may be perfected by
filing, recording or registering a financing statement or analogous document in
the United States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable law in
such jurisdictions and (iii) a security interest that shall be perfected in all
Article 9 Collateral in which a security interest may be perfected upon the
receipt and recording of this Agreement, or a short form version thereof, with
the United States Patent and Trademark Office and the United States Copyright
Office, as applicable. Subject to the entry of the Orders, the Security Interest
is and shall be prior to any other Lien on any of the Article 9 Collateral.
          (d) The Article 9 Collateral is owned by the Grantors free and clear
of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of
the Credit Agreement. None of the Grantors has filed or consented to the filing
on or after the date hereof of (i) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Article 9 Collateral, (ii) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Article 9 Collateral with the United States Patent and Trademark Office or the
United States Copyright Office or (iii) any assignment in which any Grantor
assigns any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with any foreign governmental, municipal or
other office, which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each
case, for Liens expressly permitted pursuant to Section 6.02 of the Credit
Agreement. None of the Grantors hold any commercial tort claim as of the date
hereof except as indicated on the Perfection Certificate.
          (e) Schedule III lists all Patents, registrations and applications to
register Trademarks and registered Copyrights owned by each Grantor in its own
name on the date hereof (the “Registered Intellectual Property”). Except as set
forth in Schedule III, such Grantor is the exclusive owner of the entire right,
title and interest in and to such applications, registrations and issuances free
and clear of any Lien, except for Liens expressly permitted pursuant to
Section 6.02 of the

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Credit Agreement. On the date hereof, all Registered Intellectual Property of
such Grantor described on Schedule III is subsisting and unexpired and, to the
knowledge of such Grantor, has not been abandoned and is valid and enforceable.
To the knowledge of such Grantor, neither the operation of such Grantor’s
business as currently conducted nor the use of the Intellectual Property in
connection therewith infringes, misappropriates, dilutes, misuses or otherwise
violates the Intellectual Property rights of any other Person. To the knowledge
of such Grantor, the consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the
Intellectual Property owned or licensed by such Grantor.
          SECTION 4.03 Covenants. (a) Each Grantor agrees to maintain, at its
own cost and expense, such complete and accurate records with respect to the
Article 9 Collateral owned by it as is consistent with its current practices and
in accordance with such prudent and standard practices used in industries that
are the same as or similar to those in which such Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Article 9 Collateral, and, at
such time or times as the Collateral Agent may reasonably request, promptly to
prepare and deliver to the Collateral Agent a duly certified schedule or
schedules in form and detail reasonably satisfactory to the Collateral Agent
showing the identity, amount and location of any and all Article 9 Collateral.
          (b) Each Grantor shall, at its own expense, take any and all actions
necessary to defend title to the Article 9 Collateral (other than any Article 9
Collateral consisting of a Patent, Trademark or Copyright which shall be
governed by the provisions of Section 4.05(g) hereof or any other immaterial
Intellectual Property) against all persons and to defend the Security Interest
of the Collateral Agent in the Article 9 Collateral and the priority thereof
against any Lien not expressly permitted pursuant to Section 6.02 of the Credit
Agreement.
          (c) Each Grantor agrees, at its own expense, to execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Collateral Agent may from time to time
reasonably request to better assure, obtain, preserve, protect and perfect the
Security Interest and the rights and remedies created hereby, including the
payment of any reasonable fees and Taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing or continuation statements (including fixture
filings) or other documents in connection herewith or therewith. If any amount
payable to any Grantor under or in connection with any of the Article 9
Collateral shall be or become evidenced by any promissory note or other
instrument in excess of $200,000, such note or instrument shall be promptly
pledged and delivered to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent; provided that promissory notes or
instruments evidencing advances permitted under Section 6.04(d) of the Credit
Agreement will not be required to be so pledged.
          Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to

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supplement this Agreement by supplementing Schedule III or adding additional
schedules hereto to specifically identify any asset or item that may constitute
Copyrights, material Licenses, Patents or Trademarks; provided that any Grantor
shall have the right, exercisable within 10 days after it has been notified by
the Collateral Agent of the specific identification of such Collateral, to
advise the Collateral Agent in writing of any material inaccuracy of the
representations and warranties made by such Grantor hereunder with respect to
such Collateral. Each Grantor agrees that it will use commercially reasonable
efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct in all
material respects with respect to such Collateral within 30 days after the date
it has been notified by the Collateral Agent of the specific identification of
such Collateral.
          (d) The Collateral Agent and such persons as the Collateral Agent may
reasonably designate shall have the right, at the Grantors’ own cost and
expense, to inspect the Article 9 Collateral, all records related thereto (and
to make extracts and copies from such records) and the premises upon which any
of the Article 9 Collateral is located, to discuss the Grantors’ affairs with
the officers of the Grantors and their independent accountants and to verify
under reasonable procedures, in accordance with Section 5.03 of the Credit
Agreement, the existence, validity, amount, quality, quantity, value, condition
and status of, or any other matter relating to, the Article 9 Collateral,
including, in the case of Accounts or other Article 9 Collateral in the
possession of any third person (after the occurrence and continuation of a
Default), by contacting Account Debtors or the third person possessing such
Article 9 Collateral for the purpose of making such a verification. The
Collateral Agent shall have the absolute right to share any information it gains
from such inspection or verification with any Secured Party.
          (e) Subject to the Orders, at its option, the Collateral Agent may
discharge past due Taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Article 9 Collateral
and not expressly permitted pursuant to Section 6.02 of the Credit Agreement,
and may pay for the maintenance and preservation of the Article 9 Collateral to
the extent any Grantor fails to do so as required by the Credit Agreement or
this Agreement, and each Grantor jointly and severally agrees to reimburse the
Collateral Agent on demand for any payment made or any expense incurred by the
Collateral Agent pursuant to the foregoing authorization; provided, however,
that nothing in this paragraph shall be interpreted as excusing any Grantor from
the performance of, or imposing any obligation on the Collateral Agent or any
Secured Party to cure or perform, any covenants or other promises of any Grantor
with respect to Taxes, assessments, charges, fees, Liens, security interests or
other encumbrances and maintenance as set forth herein or in the other Loan
Documents.
          (f) If at any time any Grantor shall take a security interest in any
material property of an Account Debtor or any other person to secure payment and
performance of an Account, such Grantor shall promptly assign such security
interest to the Collateral Agent for the ratable benefit of the Secured Parties.
Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other person granting the security
interest.

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          (g) Each Grantor shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Article 9 Collateral, all in
accordance with the terms and conditions thereof, and each Grantor jointly and
severally agrees to indemnify and hold harmless the Collateral Agent and the
Secured Parties from and against any and all liability for such performance.
          (h) None of the Grantors shall make or permit to be made an
assignment, pledge or hypothecation of the Article 9 Collateral or shall grant
any other Lien in respect of the Article 9 Collateral, except as expressly
permitted by Section 6.02 of the Credit Agreement. None of the Grantors shall
make or permit to be made any transfer of the Article 9 Collateral and each
Grantor shall remain at all times in possession or otherwise in control of the
Article 9 Collateral owned by it, except that (i) Inventory may be sold in the
ordinary course of business and (ii) unless and until the Collateral Agent shall
notify the Grantors that an Event of Default shall have occurred and be
continuing and that during the continuance thereof the Grantors shall not sell,
convey, lease, assign, transfer or otherwise dispose of any Article 9 Collateral
(which notice may be given by telephone if promptly confirmed in writing), the
Grantors may use and dispose of the Article 9 Collateral in any lawful manner
not inconsistent with the provisions of this Agreement, the Credit Agreement or
any other Loan Document. Without limiting the generality of the foregoing, each
Grantor agrees that it shall not permit any Inventory in excess of $300,000 to
be in the possession or control of any warehouseman, bailee, agent or processor
at any time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have acknowledged in writing, in
form and substance reasonably satisfactory to the Collateral Agent, that such
bailee or processor holds the Inventory for the benefit of the Collateral Agent
subject to the Security Interest and shall act upon the instructions of the
Collateral Agent without further consent from the Grantor, and that such
warehouseman, agent, bailee or processor further agrees to waive and release any
Lien held by it with respect to such Inventory, whether arising by operation of
law or otherwise.
          (i) None of the Grantors will, without the Collateral Agent’s prior
written consent, grant any extension of the time of payment of any Accounts
included in the Article 9 Collateral, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or partly, any person
liable for the payment thereof or allow any credit or discount whatsoever
thereon, other than extensions, credits, discounts, compromises, compoundings or
settlements granted or made in the ordinary course of business and consistent
with its current practices and in accordance with such prudent and standard
practice used in industries that are the same as or similar to those in which
such Grantor is engaged.
          (j) The Grantors, at their own expense, shall maintain or cause to be
maintained insurance covering physical loss or damage to the Inventory and
Equipment in accordance with the requirements set forth in Section 5.02 of the
Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact)
for the purpose, upon the occurrence and during

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the continuance of an Event of Default, of making, settling and adjusting claims
in respect of Article 9 Collateral under policies of insurance, endorsing the
name of such Grantor on any check, draft, instrument or other item of payment
for the proceeds of such policies of insurance and for making all determinations
and decisions with respect thereto. In the event that any Grantor at any time or
times shall fail to obtain or maintain any of the policies of insurance required
hereby or under the Credit Agreement or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this paragraph, including reasonable attorneys’ fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by the Grantors
to the Collateral Agent and shall be additional Obligations secured hereby.
          (k) Each Grantor shall maintain, in form and manner reasonably
satisfactory to the Collateral Agent, records of its Chattel Paper and its
books, records and documents evidencing or pertaining thereto.
          SECTION 4.04 Other Actions. In order to further insure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Security Interest in the Article 9 Collateral, each Grantor agrees, in each
case at such Grantor’s own expense, to take the following actions with respect
to the following Article 9 Collateral:
          (a) Instruments. If any Grantor shall at any time hold or acquire any
Instruments with a value in excess of $200,000, such Grantor shall forthwith
endorse, assign and deliver the same to the Collateral Agent, accompanied by
such undated instruments of endorsement, transfer or assignment duly executed in
blank as the Collateral Agent may from time to time specify.
          (b) Deposit Accounts. For each deposit account that any Grantor at any
time opens or maintains, such Grantor shall comply with the requirements of
Section 5.12 of the Credit Agreement.
          (c) Investment Property. Except to the extent otherwise provided in
Article III, if any Grantor shall at any time hold or acquire any certificated
securities, such Grantor shall forthwith endorse, assign and deliver the same to
the Collateral Agent, accompanied by such undated instruments of transfer or
assignment duly executed in blank as the Collateral Agent may from time to time
specify. If any securities now or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the
issuer thereof, such Grantor shall immediately notify the Collateral Agent
thereof and, at the Collateral Agent’s request and option, pursuant to an
agreement in form and substance reasonably satisfactory to the Collateral Agent,
either (a) cause the issuer to agree to comply with instructions from the
Collateral Agent as to such securities, without further consent of any Grantor
or such nominee, or (b) arrange

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for the Collateral Agent to become the registered owner of the securities. If
any securities, whether certificated or uncertificated, or other investment
property with a value in excess of $200,000 now or hereafter acquired by any
Grantor are held by such Grantor or its nominee through a securities
intermediary or commodity intermediary, such Grantor shall immediately notify
the Collateral Agent thereof and, at the Collateral Agent’s request and option,
pursuant to an agreement in form and substance reasonably satisfactory to the
Collateral Agent, either (i) cause such securities intermediary or (as the case
may be) commodity intermediary to agree to comply with entitlement orders or
other instructions from the Collateral Agent to such securities intermediary as
to such securities or other investment property, or (as the case may be) to
apply any value distributed on account of any commodity contract as directed by
the Collateral Agent to such commodity intermediary, in each case without
further consent of any Grantor or such nominee, or (ii) in the case of
“financial assets” (within the meaning of Article 8 of the New York UCC and
governed by Article 8 of the New York UCC) or other Investment Property held
through a securities intermediary, arrange for the Collateral Agent to become
the entitlement holder with respect to such investment property, with the
Grantor being permitted, only with the consent of the Collateral Agent, to
exercise rights to withdraw or otherwise deal with such investment property. The
Collateral Agent agrees with each of the Grantors that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by any
Grantor, unless an Event of Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights would occur. The
provisions of this paragraph shall not apply to any financial assets credited to
a securities account for which the Collateral Agent is the securities
intermediary.
          (d) Electronic Chattel Paper and Transferable Records. If any Grantor
at any time holds or acquires an interest in any electronic chattel paper or any
“transferable record,” with a value in excess of $200,000 as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act, or in Section 16 of the Uniform Electronic Transactions
Act as in effect in any relevant jurisdiction, such Grantor shall promptly
notify the Collateral Agent thereof and, at the request of the Collateral Agent,
shall take such action as the Collateral Agent may reasonably request to vest in
the Collateral Agent control under New York UCC Section 9-105 of such electronic
chattel paper or control under Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. The Collateral Agent agrees with such Grantor that the
Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to
the Collateral Agent and so long as such procedures will not result in the
Collateral Agent’s loss of control, for the Grantor to make alterations to the
electronic chattel paper or transferable record permitted under UCC
Section 9-105 or, as the case may be, Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or Section 16 of the Uniform
Electronic

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Transactions Act for a party in control to allow without loss of control, unless
an Event of Default has occurred and is continuing or would occur after taking
into account any action by such Grantor with respect to such electronic chattel
paper or transferable record.
          (e) Letter-of-credit Rights. If any Grantor is at any time a
beneficiary under a letter of credit with a value in excess of $200,000 now or
hereafter issued in favor of such Grantor, such Grantor shall promptly notify
the Collateral Agent thereof and, at the request and option of the Collateral
Agent, such Grantor shall, pursuant to an agreement in form and substance
reasonably satisfactory to the Collateral Agent, either (i) arrange for the
issuer and any confirmer of such letter of credit to consent to an assignment to
the Collateral Agent of the proceeds of any drawing under the letter of credit
or (ii) arrange for the Collateral Agent to become the transferee beneficiary of
the letter of credit, with the Collateral Agent agreeing, in each case, that the
proceeds of any drawing under the letter of credit are to be paid to the
applicable Grantor unless an Event of Default has occurred or is continuing.
          (f) Commercial Tort Claims. If any Grantor shall at any time hold or
acquire a commercial tort claim in an amount reasonably estimated to exceed
$400,000, the Grantor shall promptly notify the Collateral Agent thereof in a
writing signed by such Grantor including a summary description of such claim and
grant to the Collateral Agent, for the ratable benefit of the Secured Parties,
in such writing a security interest therein and in the proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to the Collateral Agent.
          SECTION 4.05 Covenants regarding Intellectual Property Collateral.
(a) Each Grantor agrees that it will not, and will use its commercially
reasonable efforts to not permit any of its licensees to, do any act, or omit to
do any act, whereby any Patent that is material to the conduct of such Grantor’s
business may become invalidated or dedicated to the public domain, and agrees
that it shall continue to mark any products covered by a Patent with the
relevant patent number as necessary and sufficient to establish and preserve its
maximum rights under applicable patent laws.
          (b) With respect to each material Trademark owned by such Grantor,
such Grantor (either itself or through licensees) will take all reasonably
necessary steps to (i) continue to use such 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
and take all reasonably necessary steps to ensure that all licensed users of
such Trademark maintain as in the past such quality, (iii) not adopt or use any
mark which is confusingly similar or a colorable imitation of such Trademark
unless the Collateral Agent, for the benefit of the Agents and the Lenders,
shall obtain a perfected security interest in such mark (if a United States
mark) pursuant to this Agreement, and (iv) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly

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omit to do any act whereby such Trademark may become invalidated or impaired in
any material respect.
          (c) Each Grantor (either itself or through its licensees or
sublicensees) will, for each work covered by a material Copyright, continue to
publish, reproduce, display, adopt and distribute the work with appropriate
copyright notice as required under applicable copyright laws.
          (d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, cancelled, lost or dedicated
to the public, or of any material adverse determination or development
(including the institution of, or any such material determination or development
in, any proceeding in the United States Patent and Trademark Office, United
States Copyright Office or any court or similar office of any country) regarding
such Grantor’s ownership of any material Patent, Trademark or Copyright, its
right to register the same, or its right to keep and maintain the same.
          (e) In the event any Grantor, either itself or through any agent,
employee, licensee or designee, files an application for any Patent, Trademark
or Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, it shall promptly inform the
Collateral Agent, and, upon request of the Collateral Agent, execute and deliver
any and all agreements, instruments, documents and papers as the Collateral
Agent may reasonably request to evidence the Security Interest in such Patent,
Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as
its attorney-in-fact to execute and file such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, is irrevocable.
          (f) Each Grantor will take all necessary steps that it deems
appropriate under the circumstances and are consistent with such Grantor’s prior
practice, if reasonable, in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor’s business, including timely filings of applications for renewal,
affidavits of use and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancellation
proceedings against third parties.
          (g) In the event that any Grantor has reason to believe that any
Article 9 Collateral consisting of any Intellectual Property material to the
conduct of any Grantor’s business has been or is about to be infringed,
misappropriated, diluted, or otherwise violated by a third party, such Grantor
promptly shall notify the Collateral

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Agent and shall, if consistent with reasonable business judgment, promptly sue
for infringement, misappropriation, dilution, or other violation and to recover
any and all damages for such infringement, misappropriation or dilution, and
take such other actions as are appropriate under the circumstances to protect
such Article 9 Collateral. Such Grantor may discontinue or settle any such suit
or other action if the Grantor deems such discontinuance or settlement to be
appropriate in its reasonable business judgment.
          (h) Upon the occurrence and during the continuance of an Event of
Default, each Grantor shall, at the request of the Collateral Agent, use its
reasonable best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License, and
each other material License, to effect the assignment of all such Grantor’s
right, title and interest thereunder to the Collateral Agent, for the ratable
benefit of the Secured Parties, or its designee.
ARTICLE V.
Remedies
          SECTION 5.01 Remedies upon Default. Subject to the Orders, upon the
occurrence and during the continuance of an Event of Default, each Grantor
agrees to deliver each item of Collateral to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right to take any of or
all the following actions at the same or different times: (a) with respect to
any Article 9 Collateral consisting of Intellectual Property, on demand, to
cause the Security Interest to become an assignment, transfer and conveyance of
any of or all such Article 9 Collateral by the applicable Grantors to the
Collateral Agent, or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9
Collateral throughout the world on such terms and conditions and in such manner
as the Collateral Agent shall determine (other than in violation of any
then-existing licensing arrangements to the extent that waivers cannot be
obtained), and (b) with or without legal process and with or without prior
notice or demand for performance (except as otherwise provided in the Credit
Agreement), to take possession of the Article 9 Collateral and without liability
for trespass to enter any premises where the Article 9 Collateral may be located
for the purpose of taking possession of or removing the Article 9 Collateral
and, generally, to exercise any and all rights afforded to a secured party under
the Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral at a public or private
sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each

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such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of any Grantor, and the Grantors hereby
waive (to the extent permitted by law) all rights of redemption, stay and
appraisal which such Grantor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
          Subject to the Orders, the Collateral Agent shall give the applicable
Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice
within the meaning of Section 9-611 of the New York UCC or its equivalent in
other jurisdictions) of the Collateral Agent’s intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale.
At any such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may
determine (in its sole and absolute discretion (unless the Required Lenders
direct otherwise)). The Collateral Agent shall not be obligated to make any sale
of any Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The Collateral
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. At any public (or, to the
extent permitted by law, private) sale made pursuant to this Agreement, any
Secured Party may bid for or purchase, free (to the extent permitted by law)
from any right of redemption, stay, valuation or appraisal on the part of any
Grantor (all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and payable to such
Secured Party from any Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to any Grantor therefor.
For purposes hereof, a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof; the Collateral Agent shall
be free to carry out such sale pursuant to such agreement and no Grantor shall
be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose this Agreement and to sell the Collateral
or any portion thereof pursuant to a judgment or decree of a court or courts
having competent jurisdiction or

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pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 5.01 shall be deemed to conform to the commercially
reasonable standards as provided in Section 9-610(b) of the New York UCC or its
equivalent in other jurisdictions.
          SECTION 5.02 Application of Proceeds. Subject to the Orders and the
terms of the Credit Agreement, the Collateral Agent shall apply the proceeds of
any collection, sale, foreclosure or other realization upon any Collateral,
including any Collateral consisting of cash, as follows:
          FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in their respective capacities as
such hereunder or under any other Loan Document) in connection with such
collection, sale, foreclosure or realization or otherwise in connection with
this Agreement, any other Loan Document or any of the Obligations, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Administrative Agent and/or
the Collateral Agent hereunder or under any other Loan Document on behalf of any
Grantor and any other reasonable costs or expenses incurred in connection with
the exercise of any right or remedy hereunder or under any other Loan Document;
          SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance with
the amounts of the Obligations owed to them on the date of any such
distribution); and
          THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement, unless the Required Lenders direct otherwise. Upon any sale of
Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.
          SECTION 5.03 Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Agreement or under the Credit Agreement, at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to the Collateral Agent a nonexclusive license
(exercisable without payment of royalty or other compensation to the Grantors)
to use, license or sublicense (provided that the quality and nature of the goods
and/or services with which the Collateral Agent and its sublicensees uses the
Intellectual Property shall be of such standards and quality such that the
value,

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reputation and goodwill and enforceability of the Intellectual Property is not
diminished in any material respect) any of the Article 9 Collateral consisting
of Intellectual Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. The use of such license by the Collateral Agent shall be exercised, at
the option of the Collateral Agent, only upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
other transaction entered into by the Collateral Agent in accordance herewith
shall be binding upon the Grantors notwithstanding any subsequent cure of an
Event of Default.
          SECTION 5.04 Securities Act, etc. In view of the position of the
Grantors in relation to the Pledged Collateral, or because of other current or
future circumstances, a question may arise under the U.S. Securities Act of
1933, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being called the “Federal Securities Laws”) with respect
to any disposition of the Pledged Collateral permitted hereunder. Each Grantor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Collateral could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Collateral under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Grantor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Collateral, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Collateral for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Grantor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion (unless the Required Lenders direct
otherwise) (a) may proceed to make such a sale whether or not a registration
statement for the purpose of registering such Pledged Collateral or part thereof
shall have been filed under the Federal Securities Laws and (b) may approach and
negotiate with a limited number of potential purchasers (including a single
potential purchaser) to effect such sale. Each Grantor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Collateral Agent shall incur no responsibility or
liability for selling all or any part of the Pledged Collateral at a price that
the Collateral Agent, in its sole and absolute discretion (unless the Required
Lenders direct otherwise), may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a limited number of purchasers (or a single purchaser)
were approached. The provisions of this Section 5.04 will apply notwithstanding
the existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.

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ARTICLE VI.
Indemnity, Subrogation and Subordination
          SECTION 6.01 Indemnity and Subrogation. In addition to all such rights
of indemnity and subrogation as the Guarantors may have under applicable law
(but subject to Section 6.03), the Borrower agrees that (a) in the event a
payment shall be made by any Guarantor under this Agreement, the Borrower shall
indemnify such Guarantor for the full amount of such payment and such Guarantor
shall be subrogated to the rights of the person to whom such payment shall have
been made to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy in whole or
in part a claim of any Secured Party, the Borrower shall indemnify such
Guarantor in an amount equal to the greater of the book value or the fair market
value of the assets so sold.
          SECTION 6.02 Contribution and Subrogation. Each Guarantor (a
“Contributing Guarantor”) agrees (subject to Section 6.03) that, in the event a
payment shall be made by any other Guarantor hereunder in respect of any
Obligation or assets of any other Guarantor shall be sold pursuant to any
Security Document to satisfy any Obligation owed to any Secured Party and such
other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified
by the Borrower as provided in Section 6.01, the Contributing Guarantor shall
indemnify the Claiming Guarantor in an amount equal to the amount of such
payment or the greater of the book value or the fair market value of such
assets, as the case may be, in each case multiplied by a fraction of which the
numerator shall be the net worth of the Contributing Guarantor on the date
hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 7.16, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the
rights of such Claiming Guarantor under Section 6.01 to the extent of such
payment.
          SECTION 6.03 Subordination. (a) Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and
6.02 and all other rights of indemnity, contribution or subrogation under
applicable law or otherwise shall be fully subordinated to the payment in full
in cash of the Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its obligations
hereunder, and each Guarantor shall remain liable for the full amount of the
obligations of such Guarantor hereunder.
          (b) Each of the Borrower and the Subsidiary Guarantors hereby agrees
that all Indebtedness and other monetary obligations owed by it to the Borrower
or any Subsidiary shall be fully subordinated to the payment in full in cash of
the Obligations.

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ARTICLE VII.
Miscellaneous
          SECTION 7.01 Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Subsidiary Guarantor shall be given to it in care of the
Borrower as provided in Section 9.01 of the Credit Agreement.
          SECTION 7.02 Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest, the grant of a security interest in the
Pledged Collateral and all obligations of each Grantor hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Obligations or any other agreement or instrument
relating to any of the foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument, (c) any
exchange, release or non-perfection of any Lien on other collateral, or any
release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
          SECTION 7.03 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders and shall survive the
execution and delivery of the Loan Documents and the making of any Loans,
regardless of any investigation made by any Lender or on their behalf and
notwithstanding that the Collateral Agent or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended under the Credit Agreement, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under any Loan Document is outstanding and
unpaid and so long as the Commitments have not expired or terminated.
          SECTION 7.04 Binding Effect; Several Agreement. This Agreement shall
become effective as to any Loan Party when a counterpart hereof executed on
behalf of such Loan Party shall have been delivered to the Collateral Agent and
a counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Loan Party and the Collateral Agent
and their respective permitted successors and assigns, and shall inure to the
benefit of such Loan Party, the Collateral Agent and the other Secured Parties
and their respective successors and assigns, except that no Loan Party shall
have the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such

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assignment or transfer shall be void) except as expressly contemplated by this
Agreement or the Credit Agreement. This Agreement shall be construed as a
separate agreement with respect to each Loan Party and may be amended, modified,
supplemented, waived or released with respect to any Loan Party without the
approval of any other Loan Party and without affecting the obligations of any
other Loan Party hereunder.
          SECTION 7.05 Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
          SECTION 7.06 Collateral Agent’s Fees and Expenses; Indemnification.
(a)  The parties hereto agree that the Collateral Agent shall be entitled to
reimbursement of its expenses incurred hereunder as provided in Section 9.05 of
the Credit Agreement.
          (b) Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees (as defined in Section 9.05 of the
Credit Agreement) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, charges and disbursements, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of, the execution,
delivery or performance of this Agreement or any agreement or instrument
contemplated hereby or any claim, litigation, investigation or proceeding
relating to any of the foregoing agreement or instrument contemplated hereby, or
to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
          (c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Collateral Agent or any other Secured Party. All amounts due under
this Section 7.06 shall be payable on written demand therefor and shall bear
interest, on and from the date of demand, at the rate specified in Section 2.06
of the Credit Agreement.
          SECTION 7.07 Collateral Agent Appointed Attorney-in-Fact. Each Grantor
hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for
the purpose of carrying out the provisions of this Agreement and taking any
action and

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executing any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent’s name or in the name of such Grantor (but subject to the
Orders) (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading
relating to any of the Collateral; (d) to send verifications of Accounts
Receivable to any Account Debtor; (e) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (f) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral; (g) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent; and (h) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and
things necessary to carry out the purposes of the Credit Agreement, the Orders,
this Agreement and the other Loan Documents, as fully and completely as though
the Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct. The Collateral Agent agrees not to exercise
the power of attorney provided for in this Section 7.07 unless an Event of
Default shall have occurred and be continuing.
          SECTION 7.08. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
           SECTION 7.09 Waivers; Amendment. (a) No failure or delay by the
Collateral Agent, the Administrative Agent or any Lender in exercising any right
or power hereunder, under any other Loan Document or under the Orders shall
operate as a waiver hereof or thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Collateral Agent, the Administrative Agent and the Lenders hereunder and under
the other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party

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therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the Collateral
Agent or any Lender may have had notice or knowledge of such Default at the
time. No notice or demand on any Loan Party in any case shall entitle any Loan
Party to any other or further notice or demand in similar or other
circumstances.
          (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Loan Party or Loan Parties with
respect to which such waiver, amendment or modification is to apply, subject to
any consent required in accordance with Section 9.08 of the Credit Agreement.
          SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.
          SECTION 7.11 Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction shall not
in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions..
          SECTION 7.12 Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in
Section 7.04. Delivery of an executed signature page to this Agreement by
facsimile or e-mail transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.

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          SECTION 7.13 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
          SECTION 7.14 Jurisdiction; Consent to Service of Process. (a) Each of
the Loan Parties hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Bankruptcy Court and any
New York State court or Federal court of the United States of America, sitting
in New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan
Document, or for recognition or enforcement of any judgment, and each of the
Loan Parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the Loan Parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Collateral Agent, the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or any other Loan
Document against any Loan Party or its properties in the courts of any
jurisdiction.
          (b) Each of the Loan Parties hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (a) of this Section. Each of
the Loan Parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
          (c) Each Loan Party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 7.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
          SECTION 7.15 Termination or Release. (a)  This Agreement, the
Guarantees, the Security Interest, the pledge of the Pledged Collateral and all
other security interests granted hereby shall terminate when all the Loan
Document Obligations (other than (i) wholly contingent indemnification
obligations or (ii) compensation obligations with respect to increased costs or
reductions in amounts received or receivable or reductions in return on capital
pursuant to Section 2.14(d) of the Credit Agreement) then due and owing have
been paid in full in cash and the Lenders have no further commitment to lend
under the Credit Agreement.
          (b) A Subsidiary Guarantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Subsidiary Guarantor shall be automatically released upon the consummation of
any transaction

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permitted by the Credit Agreement as a result of which such Subsidiary Guarantor
ceases to be a Subsidiary of the Borrower; provided that the Required Lenders
shall have consented to such transaction (to the extent required by the Credit
Agreement) and the terms of such consent did not provide otherwise.
          (c) Upon any sale or other transfer by any Grantor of any Collateral
that is permitted under the Credit Agreement to any person that is not the
Borrower or a Guarantor, or, upon the effectiveness of any written consent to
the release of the Security Interest granted hereby in any Collateral pursuant
to Section 9.08 of the Credit Agreement, the Security Interest in such
Collateral shall be automatically released.
          (d) In connection with any termination or release pursuant to
paragraph (a), (b) or (c) the Collateral Agent shall execute and deliver to any
Grantor, at such Grantor’s expense, all documents that such Grantor shall
reasonably request to evidence such termination or release. Any execution and
delivery of documents pursuant to this Section 7.15 shall be without recourse to
or representation or warranty by the Collateral Agent or any Secured Party.
Without limiting the provisions of Section 7.06, the Borrower shall reimburse
the Collateral Agent upon demand for all costs and expenses, including the fees,
charges and disbursements of counsel, incurred by it in connection with any
action contemplated by this Section 7.15.
          SECTION 7.16 Additional Grantors. Pursuant to Section 5.09 of the
Credit Agreement, each Domestic Subsidiary of a Loan Party (other than any
Inactive Subsidiary) that was not in existence or not a Subsidiary on the date
of the Credit Agreement, that ceases to be an Inactive Subsidiary after the date
of this Agreement is required to enter in this Agreement as a Subsidiary
Guarantor and a Grantor upon becoming such a Subsidiary (or ceasing to be an
Inactive Subsidiary). Upon execution and delivery by the Collateral Agent and a
Domestic Subsidiary of an instrument in the form of Exhibit A hereto, such
Domestic Subsidiary shall become a Subsidiary Guarantor and a Grantor hereunder
with the same force and effect as if originally named as a Subsidiary Guarantor
and a Grantor herein. The execution and delivery of any such instrument shall
not require the consent of any other Loan Party hereunder. The rights and
obligations of each Subsidiary Guarantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Loan Party as a party to this
Agreement.
          SECTION 7.17 Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Secured Party is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all Collateral (including any deposits (general or special, time
or demand, provisional or final)) at any time held and other obligations at any
time owing by such Secured Party or Affiliate to or for the credit or the
account of any Grantor against any and all of the obligations of such Grantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Secured Party, irrespective of whether or not such Secured Party shall
have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. The rights of each Secured Party
under this Section are in addition to other rights and remedies (including other
rights of setoff) which such Secured Party may have.

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          SECTION 7.18 Collateral Delivered under the Existing Credit Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
obligation of the Grantors to deliver Collateral hereunder shall be deemed
satisfied to the extent such Collateral has been delivered under the Existing
Credit Agreement.

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          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                  BUFFETS, INC.    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: EVP, Chief Financial Officer
   
 
                BUFFETS HOLDINGS, INC.    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: EVP, Chief Financial Officer
   
 
                HOMETOWN BUFFET, INC.    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: EVP, Chief Financial Officer
   
 
                OCB PURCHASING CO.    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: EVP, Chief Financial Officer
   
 
                OCB RESTAURANT COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: EVP, Chief Financial Officer,
Chief Finance Manager    
 
                BUFFETS FRANCHISE HOLDINGS, LLC
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    

 

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                  BUFFETS LEASING COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                RYAN’S RESTAURANT GROUP, INC.
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Officer    
 
                RYAN’S RESTAURANT LEASING COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                RYAN’S RESTAURANT
MANAGEMENT GROUP, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                HOMETOWN LEASING COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                OCB LEASING COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    

 

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                  FIRE MOUNTAIN RESTAURANTS, LLC
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                FIRE MOUNTAIN LEASING COMPANY,
LLC
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                FIRE MOUNTAIN MANAGEMENT
GROUP, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                BIG R PROCUREMENT COMPANY, LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    
 
                TAHOE JOE’S, INC.    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Financial Officer    
 
                TAHOE JOE’S LEASING COMPANY,
LLC    
 
           
 
  by:   /s/ A. Keith Wall    
 
                Name: A. Keith Wall         Title: Chief Finance Manager    

 

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                  CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as Collateral Agent    
 
           
 
  by:   /s/ Robert Hetu    
 
                Name: Robert Hetu         Title: Managing Director    
 
           
 
  by:   /s/ Denise Alvarez    
 
                Name: Denise Alvarez         Title: Vice President    

 

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     SUPPLEMENT NO. [•] (this “Supplement”)dated as of [•], to the Guarantee and
Collateral Agreement dated as of January 22, 2008 (the “Guarantee and Collateral
Agreement”), among BUFFETS, INC., a Minnesota corporation, a debtor and debtor
in possession under Chapter 11 of the Bankruptcy Code (the “Borrower”), BUFFETS
HOLDINGS, INC., a Delaware corporation (“Holdings”), as a debtor and debtor in
possession under Chapter 11 of the Bankruptcy Code, each Subsidiary of the
Borrower from time to time party thereto (each such subsidiary individually a
“Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”; the
Subsidiary Guarantors, Holdings and the Borrower are referred to collectively
herein as the “Grantors”) and CREDIT SUISSE, (together with its affiliates,
“Credit Suisse”), as collateral agent (in such capacity, the “Collateral Agent”)
for the Secured Parties (as defined therein).
     A. Reference is made to the Credit Agreement dated as of January 22, 2008
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, Holdings, the lenders from time to time party
thereto (the “Lenders”) and Credit Suisse, as administrative agent for the
Lenders and as Collateral Agent.
     B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement or the
Guarantee and Collateral Agreement referred to therein, as applicable.
     C. The Grantors have entered into the Guarantee and Collateral Agreement in
order to induce the Lenders to make Loans. Section 7.16 of the Guarantee and
Collateral Agreement provides that additional Domestic Subsidiaries of the Loan
Parties may become Subsidiary Guarantors and Grantors under the Guarantee and
Collateral Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing
this

 

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Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Guarantor and a Grantor under the Guarantee and Collateral
Agreement in order to induce the Lenders to make additional Loans and as
consideration for Loans previously made.
     Accordingly, the Collateral Agent and the New Subsidiary agree as follows:
     SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral
Agreement, the New Subsidiary by its signature below becomes a Grantor and
Subsidiary Guarantor under the Guarantee and Collateral Agreement with the same
force and effect as if originally named therein as a Grantor and Subsidiary
Guarantor and the New Subsidiary hereby (a) agrees to all the terms and
provisions of the Guarantee and Collateral Agreement applicable to it as a
Grantor and Subsidiary Guarantor thereunder and (b) represents and warrants that
the representations and warranties made by it as a Grantor and Subsidiary
Guarantor thereunder are true and correct in all material respects on and as of
the date hereof. In furtherance of the foregoing, the New Subsidiary,
(a) unconditionally guarantees, jointly with the other Guarantors and severally,
as a primary obligor and not merely as a surety, the due and punctual payment
and performance of the Obligations and (b) as security for the payment and
performance in full of the Obligations (as defined in the Guarantee and
Collateral Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Subsidiary’s right, title and interest in and to the Collateral (as defined in
the Guarantee and Collateral Agreement) of the New Subsidiary. Each reference to
a

 

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“Grantor” or a “Subsidiary Guarantor” in the Guarantee and Collateral Agreement
shall be deemed to include the New Subsidiary. The Guarantee and Collateral
Agreement is hereby incorporated herein by reference.
     SECTION 2. The New Subsidiary represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
     SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Subsidiary and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
     SECTION 4. The New Subsidiary hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
information, with respect to such New Subsidiary, required by the Perfection
Certificate attached as Exhibit B to the Guarantee and Collateral Agreement and
(b) set forth under its signature hereto, is the true and correct legal name of
the New Subsidiary and its jurisdiction of organization.
     SECTION 5. Except as expressly supplemented hereby, the Guarantee and
Collateral Agreement shall remain in full force and effect.

 

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SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
     SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee and Collateral Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
hereto shall endeavor in good-faith negotiations to replace the invalid, illegal
or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
     SECTION 8. All communications and notices hereunder shall (except as
otherwise expressly permitted by the Guarantee and Collateral Agreement) be in
writing and given as provided in Section 7.01 of the Guarantee and Collateral
Agreement. All communications and notices hereunder to the New Subsidiary shall
be given to it in care of the Borrower as provided in Section 9.01 of the Credit
Agreement.
     SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
[Remainder of page intentionally left blank]

 

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     IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly
executed this Supplement to the Guarantee and Collateral Agreement as of the day
and year first above written.

                  [NAME OF NEW SUBSIDIARY]
 
           
 
      by    
 
           
 
           
 
          Name:
 
          Title:
 
          Address:
 
          Legal Name:
 
          Jurisdiction of Formation:
 
                CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as     Collateral Agent
 
           
 
      by    
 
           
 
           
 
          Name:
 
          Title:
 
          Address:
 
          Legal Name:
 
          Jurisdiction of Formation:
 
           
 
      by    
 
           
 
           
 
          Name:
 
          Title:
 
          Address:
 
          Legal Name:
 
          Jurisdiction of Formation:

 

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Schedule I to
Supplement No. [•] to the
Guarantee and
Collateral Agreement
Collateral of the New Subsidiary
[Follow format of Perfection Certificate attached as
Exhibit B to the Guarantee and Collateral Agreement.]

 

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Exhibit B to the Guarantee
and Collateral Agreement
FORM OF PERFECTION CERTIFICATE
[To be provided under separate cover.]