exv10w4





 Exhibit 10.4



SUBORDINATED GUARANTY AND PLEDGE AGREEMENT




Dated as of

June 18, 2008




made by




Teton Energy Corporation

and

each of the other Obligors




in favor of




Whitebox Advisors, LLC

as subordinated noteholder representative




     The indebtedness and other obligations of the Borrower and its subsidiaries evidenced by this
Agreement and the Debentures issued hereunder owed to the Purchasers party to this Agreement are
junior and subordinate to the indebtedness and other obligations of the Borrower and its
subsidiaries in accordance with the provisions of the Intercreditor and Subordination Agreement
dated as of June 9, 2008, among JPMorgan Chase Bank, N.A., as Senior Agent, Whitebox Advisors, LLC,
as Subordinated Noteholder Representative, the Company and certain of its affiliates, as amended
from time to time.




 









 









TABLE OF CONTENTS




	 	 	 	 	 
	 	 	 	 	Page
	Article I
	 	Definitions	 	1
	Section 1.01
	 	Definitions	 	2
	Section 1.02
	 	Other Definitional Provisions	 	4
	Section 1.03
	 	Rules of Interpretation	 	4
	 
	 	 	 	 
	Article II
	 	Guarantee	 	4
	Section 2.01
	 	Guarantee	 	4
	Section 2.02
	 	Right of Contribution	 	5
	Section 2.03
	 	No Subrogation	 	5
	Section 2.04
	 	Guaranty Amendments, Etc. with respect to the Obligations	 	5
	Section 2.05
	 	Waivers	 	6
	Section 2.06
	 	Guaranty Absolute and Unconditional	 	6
	Section 2.07
	 	Reinstatement	 	8
	Section 2.08
	 	Payments	 	8
	 
	 	 	 	 
	Article III
	 	Grant of Security Interest	 	8
	Section 3.01
	 	Grant of Security Interest	 	8
	Section 3.02
	 	Transfer of Pledged Securities	 	8
	 
	 	 	 	 
	Article IV
	 	Representations and Warranties	 	9
	Section 4.01
	 	Representations in Credit Agreement	 	9
	Section 4.02
	 	Title; No Other Liens	 	9
	Section 4.03
	 	Perfected First Priority Liens	 	9
	Section 4.04
	 	Obligor Information	 	10
	Section 4.05
	 	Pledged Securities	 	10
	Section 4.06
	 	Benefit to the Guarantor	 	10
	Section 4.07
	 	Solvency	 	11
	 
	 	 	 	 
	Article V
	 	Covenants	 	11
	Section 5.01
	 	Maintenance of Perfected Security Interest; Further Documentation	 	11
	Section 5.02
	 	Changes in Locations, Name, Etc.	 	11
	Section 5.03
	 	Pledged Securities	 	12
	 
	 	 	 	 
	Article VI
	 	Remedial Provisions	 	14
	Section 6.01
	 	Code and Other Remedies	 	14
	Section 6.02
	 	Pledged Securities	 	15
	Section 6.03
	 	Private Sales of Pledged Securities	 	17
	Section 6.04
	 	Waiver; Deficiency	 	18
	Section 6.05
	 	Non-Judicial Enforcement	 	18
	 
	 	 	 	 
	Article VII
	 	The Subordinated Noteholder Representative	 	18
	Section 7.01
	 	Subordinated Noteholder
Representative’s Appointment as Attorney-in-Fact, Etc.	 	18






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	 	 	 	 	Page
	Section 7.02
	 	Duty of Subordinated Noteholder Representative	 	19
	Section 7.03
	 	Filing of Financing Statements	 	20
	Section 7.04
	 	Authority of Subordinated Noteholder Representative	 	20
	 
	 	 	 	 
	Article VIII
	 	Subordination of Indebtedness	 	21
	Section 8.01
	 	Subordination of All Obligor Claims	 	21
	Section 8.02
	 	Claims in Bankruptcy	 	21
	Section 8.03
	 	Payments Held in Trust	 	21
	Section 8.04
	 	Liens Subordinate	 	22
	Section 8.05
	 	Notation of Records	 	22
	 
	 	 	 	 
	Article IX
	 	Miscellaneous	 	22
	Section 9.01
	 	Waiver	 	22
	Section 9.02
	 	Notices	 	22
	Section 9.03
	 	Payment of Expenses, Indemnities, Etc.	 	22
	Section 9.04
	 	Amendments in Writing	 	23
	Section 9.05
	 	Successors and Assigns	 	23
	Section 9.06
	 	Survival; Revival; Reinstatement	 	23
	Section 9.07
	 	Counterparts; Integration; Effectiveness	 	24
	Section 9.08
	 	Severability	 	24
	Section 9.09
	 	Set-Off	 	24
	Section 9.10
	 	Governing Law; Submission to Jurisdiction	 	24
	Section 9.11
	 	Headings	 	25
	Section 9.12
	 	Acknowledgments	 	26
	Section 9.13
	 	Additional Obligors and Pledgors	 	26
	Section 9.14
	 	Releases	 	26
	Section 9.15
	 	Acceptance	 	27






SCHEDULES:




	 	 	 	 	 
	Schedule 1

	 	—
	 	Notice Addresses of Obligors
	Schedule 2

	 	—
	 	Description of Pledged Securities
	Schedule 3

	 	—
	 	Filings and Other Actions Required to Perfect Security Interests
	Schedule 4

	 	—
	 	Location of Jurisdiction of Organization and Chief Executive Office
	 
	 	 	 	 
	ANNEXES:
	 	 	 	 
	 
	 	 	 	 
	Annex I

	 	—
	 	Form of Assumption Agreement
	Annex II

	 	—
	 	Form of Supplement






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     This SUBORDINATED GUARANTY AND PLEDGE AGREEMENT, dated as of June 18, 2008, is made by TETON
ENERGY CORPORATION, a Delaware corporation (the “Borrower”), and each of the signatories
hereto (the Borrower and each of the signatories hereto, together with any other Subsidiary or
holding company of the Borrower that becomes a party hereto from time to time after the date
hereof, the “Obligors”), in favor of WHITEBOX ADVISORS, LLC, as agent for the Subordinated
Noteholders (in such capacity, together with its successors in such capacity, the “Subordinated
Noteholder Representative”).



R E C I T A L S




     A. The Borrower has previously entered into that certain Amended and Restated Credit Agreement
dated as of August 9, 2007, among the Borrower, the financial institutions party thereto (the
“Lenders”), and JPMorgan Chase Bank, NA, as administrative agent (the “Senior
Agent”) for the Lenders (as heretofore amended, supplemented or restated, the “Existing
Credit Agreement”).



     B. As a condition precedent to the obligation of the Lenders to make their respective
extensions of credit to the Borrower under the Existing Credit Agreement, the Obligors executed and
delivered that certain Amended and Restated Guaranty and Pledge Agreement dated as of August 9,
2007 (the “Existing Guaranty and Pledge Agreement”) to Senior Agent for the ratable benefit
of the Lenders.



     C. The Existing Credit Agreement was amended and restated in its entirety as a Second Amended
and Restated Credit Agreement dated as of April 2, 2008 by and among the Borrower, the Lenders and
the Senior Agent (as amended, supplemented or restated from time to time, the “Credit
Agreement”), pursuant to which the Lenders have agreed to extend credit to the Borrower.



     D. The Existing Guaranty and Pledge Agreement was amended and restated in its entirety as an
Amended and Restated Guaranty and Pledge Agreement dated as of April 2, 2008 by and among the
Borrower, the Obligors, the Lenders and the Senior Agent (as amended, supplemented or restated from
time to time, the “Senior Guaranty and Pledge Agreement”), pursuant to which the Lenders
have agreed to extend credit to the Borrower.



     E. The Borrower has entered into a Securities Purchase Agreement dated as of June 9, 2008 (the
“Purchase Agreement”) together with certain ancillary agreements (collectively the
“Transaction Documents” as defined in the Purchase Agreement) with the Purchasers signatory
thereto and their respective successors and assigns (the “Subordinated Noteholders”),
including, without limitation, an Intercreditor and Subordination Agreement with the Senior Agent,
the provisions of which shall be applicable to this Agreement, whether specifically referred to in
any particular section or not.



     F. Now, therefore, in consideration of the premises herein and to induce the Subordinated
Noteholder Representative and the Subordinated Noteholders to enter into the Purchase Agreement and
the other Transaction Documents with the Borrower and to induce the Subordinated Noteholders to
make their respective extensions of credit to the Borrower



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thereunder, each Obligor hereby agrees with the Subordinated Noteholder Representative, for
the ratable benefit of the Subordinated Noteholders as follows:



ARTICLE I

Definitions




     Section 1.01 Definitions.



          (a) Unless otherwise defined herein, terms defined in any Transaction Document and used herein
have the meanings given to them in such Transaction Document, and all uncapitalized terms which are
defined in the UCC as in effect in the State of New York on the date hereof are used herein as so
defined.




          (b) The following terms have the following meanings:




          “Agreement” means this Subordinated Guaranty and Pledge Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time.




          “Bankruptcy Code” means title 11, United States Code, as amended from time to time.




          “Collateral” has the meaning assigned such term in Section 3.01.




          “Guaranteed Creditors” means the collective reference to the Subordinated Noteholder
Representative and the Subordinated Noteholders.




          “Guaranteed Documents” means the Purchase Agreement, the Security Documents, and other
Transaction Documents.




          “Guarantor Obligations” means with respect to any Guarantor, the collective reference
to (a) the Obligations and (b) all obligations and liabilities of such Guarantor which may arise
under or in connection with any Guaranteed Document to which such Guarantor is a party, in each
case, whether on account of principal, interest, guarantee obligations, reimbursement obligations,
payments in respect of an early termination date, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable fees and disbursements of counsel to any Guaranteed
Creditor under any Guaranteed Document).




          “Guarantors” means the collective reference to each Obligor other than the Borrower.




          “Issuers” means the collective reference to each issuer of a Pledged Security.




          “LLC” means, with respect to each Pledgor, each limited liability company described or
referred to in Schedule 2 in which such Pledgor has an interest.




          “LLC Agreement” means, with respect to each Pledgor, each operating agreement or other
governing documents relating to an LLC, as each agreement has heretofore been, and may hereafter
be, amended, restated, supplemented or otherwise modified from time to time.




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          “Obligations” means: (a) in the case of the Borrower, the obligations of the Borrower
under each of the Transaction Documents and (b) in the case of each Guarantor, its Guarantor
Obligations.




          “Obligor Claims” has the meaning assigned to such term in Section 8.01.




          “Partnership” means, with respect to each Pledgor, each partnership described or
referred to in Schedule 2 in which such Pledgor has an interest.




          “Partnership Agreement” means, with respect to each Pledgor, each partnership
agreement governing a Partnership, as each such agreement has heretofore been, and may hereafter
be, amended, restated, supplemented or otherwise modified.




          “Pledged LLC Interests” means, with respect to each Pledgor, all right, title and
interest of such Pledgor as a member of each LLC and all right, title and interest of any Pledgor
in, to and under each LLC Agreement.




          “Pledged Partnership Interests” means, with respect to each Pledgor, all right, title
and interest of such Pledgor as a limited or general partner in all Partnerships and all right,
title and interest of any Pledgor in, to and under the Partnership Agreements.




          “Pledged Securities” means: (a) the equity interests described or referred to in
Schedule 2 (as the same may be supplemented from time to time pursuant to a Supplement);
and (b) (i) the certificates or instruments, if any, representing such Equity Interests, (ii) all
dividends (cash, equity interests or otherwise), cash, instruments, rights to subscribe, purchase
or sell and all other rights and property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such securities, (iii) all replacements,
additions to and substitutions for any of the property referred to in this definition, including,
without limitation, claims against third parties, (iv) the proceeds, interest, profits and other
income of or on any of the property referred to in this definition, (v) all security entitlements
in respect of any of the foregoing, if any and (vi) all books and records relating to any of the
property referred to in this definition.




          “Pledgor” means any Obligor that now or hereafter pledges Pledged Securities
hereunder.




          “Proceeds” means all “proceeds” as such term is defined in Section 9.102(65) of the
Uniform Commercial Code in effect in the State of Texas on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from the Pledged Securities, collections
thereon or distributions or payments with respect thereto.




          “Securities Act” shall mean the Securities Act of 1933, as amended.




          “Supplement” means a Supplement substantially in the form attached hereto as Annex
II.




          “UCC” means the Uniform Commercial Code as from time to time in effect in the State of
New York; provided, however, that, in the event that, by reason of mandatory provisions



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of law, any of the attachment, perfection or priority of the Subordinated Noteholder
Representative’s and the Guaranteed Creditors’ security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the
term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection, the effect thereof or
priority and for purposes of definitions related to such provisions.




     Section 1.02 Other Definitional Provisions. Where the context requires, terms
relating to the Collateral or any part thereof, when used in relation to a Pledgor, refer to such
Pledgor’s Collateral or the relevant part thereof.



ARTICLE II

Guarantee




     Section 2.01 Guarantee.



          (a) Upon the terms and subject to the conditions of this Agreement, each of the Guarantors
hereby jointly and severally, unconditionally and irrevocably, guarantees to the Guaranteed
Creditors and each of their respective successors, indorsees, transferees and assigns, the prompt
and complete payment in cash and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. This is a guarantee of payment and not
collection and the liability of each Guarantor is primary and not secondary.




          (b) Anything herein or in any other Transaction Document to the contrary notwithstanding, the
maximum liability of each Guarantor hereunder and under the other Transaction Documents shall in no
event exceed the amount which can be guaranteed by such Guarantor under applicable federal and
state laws relating to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.02).




          (c) Each Guarantor agrees that the Obligations may at any time and from time to time exceed
the amount of the liability of such Guarantor hereunder without impairing the guarantee contained
in this Article II or affecting the rights and remedies of any Guaranteed Creditor
hereunder.




          (d) Each Guarantor agrees that if the maturity of the Obligations is accelerated by bankruptcy
or otherwise, such maturity shall also be deemed accelerated for the purpose of this guarantee
without demand or notice to such Guarantor. The guarantee contained in this Article II shall
remain in full force and effect until all the Obligations shall have been satisfied by payment in
full in cash.




          (e) No payment made by any Obligor, any other guarantor or any other Person or received or
collected by any Guaranteed Creditor from the Borrower, any of the Guarantors, any other guarantor
or any other Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of the Obligations shall
be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder
which shall, notwithstanding any such payment (other than any payment made by such Guarantor in
respect of the Obligations or any payment received or collected from such Guarantor in respect of
the Obligations), remain liable for the Obligations up



4









 






to the maximum liability of such Guarantor hereunder until the Obligations are paid in full in
cash, no Letter of Credit shall be outstanding and all of the Commitments are terminated.




     Section 2.02 Right of Contribution. Each Guarantor hereby agrees that to the extent
that a Guarantor shall have paid more than its proportionate share of any payment made hereunder,
such Guarantor shall be entitled to seek and receive contribution from and against any other
Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s
right of contribution shall be subject to the terms and conditions of Section 2.03. The
provisions of this Section 2.02 shall in no respect limit the obligations and liabilities of any
Guarantor to the Guaranteed Creditors, and each Guarantor shall remain liable to the Guaranteed
Creditors for the full amount guaranteed by such Guarantor hereunder.



     Section 2.03 No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by any Guaranteed Creditor, no
Guarantor shall be entitled to be subrogated to any of the rights of any Guaranteed Creditor
against the Borrower or any other Guarantor or any collateral security or guarantee or right of
offset held by any Guaranteed Creditor for the payment of the Obligations, nor shall any Guarantor
seek or be entitled to seek any indemnity, exoneration, participation, contribution or
reimbursement from the Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the Guaranteed Creditors by the Borrower on account
of the Obligations are irrevocably and indefeasibly paid in full in cash. If any amount shall be
paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations
shall not have been irrevocably and indefeasibly paid in full in cash, such amount shall be held by
such Guarantor in trust for the Guaranteed Creditors, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Subordinated Noteholder Representative in the exact form received
by such Guarantor (duly indorsed by such Guarantor to the Subordinated Noteholder Representative,
if required), to be applied against the Obligations, whether matured or unmatured, in accordance
with Section 10.02(c) of the Credit Agreement.



     Section 2.04 Guaranty Amendments, Etc. with respect to the Obligations. Each
Guarantor shall remain obligated hereunder, and such Guarantor’s obligations hereunder shall not be
released, discharged or otherwise affected, notwithstanding that, without any reservation of rights
against any Guarantor and without notice to, demand upon or further assent by any Guarantor (which
notice, demand and assent requirements are hereby expressly waived by such Guarantor), (a) any
demand for payment of any of the Obligations made by any Guaranteed Creditor may be rescinded by
such Guaranteed Creditor or otherwise and any of the Obligations continued; (b) the Obligations,
the liability of any other Person upon or for any part thereof or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or
released by, or any indulgence or forbearance in respect thereof granted by, any Guaranteed
Creditor; (c) any Guaranteed Document may be amended, modified, supplemented or terminated, in
whole or in part, as the Guaranteed Creditors may deem advisable from time to time; (d) any
collateral security, guarantee or right of offset at any time held by any Guaranteed Creditor for
the payment of the Obligations may be sold, exchanged, waived, surrendered or released; (e) any
additional guarantors, makers or endorsers of the Borrower’s Obligations may from time to time be
obligated on the Borrower’s Obligations or any additional security or collateral for the payment
and performance of the Borrower’s



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Obligations may from time to time secure the Borrower’s Obligations; or (f) any other event
shall occur which constitutes a defense or release of sureties generally. No Guaranteed Creditor
shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as
security for the Obligations or for the guarantee contained in this Article II or any property
subject thereto.



     Section 2.05 Waivers. Each Guarantor hereby waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of or proof of
reliance by any Guaranteed Creditor upon the guarantee contained in this Article II or acceptance
of the guarantee contained in this Article II; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Article II and no notice of creation of the
Obligations or any extension of credit already or hereafter contracted by or extended to the
Borrower need be given to any Guarantor; and all dealings between the Borrower and any of the
Guarantors, on the one hand, and the Guaranteed Creditors, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the guarantee contained in
this Article II. Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to
the Obligations.



     Section 2.06 Guaranty Absolute and Unconditional.



          (a) Each Guarantor understands and agrees that the guarantee contained in this Article II is,
and shall be construed as, a continuing, completed, absolute and unconditional guarantee of
payment, and each Guarantor hereby waives any defense of a surety or guarantor or any other obligor
on any obligations arising in connection with or in respect of any of the following and hereby
agrees that its obligations hereunder shall not be discharged or otherwise affected as a result of
any of the following:





          (i) the invalidity or unenforceability of any Guaranteed Document, any of the
Obligations or any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Guaranteed Creditor;




          (ii) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the Borrower or any
other Person against any Guaranteed Creditor;




          (iii) the insolvency, bankruptcy arrangement, reorganization, adjustment, composition,
liquidation, disability, dissolution or lack of power of the Borrower or any other Guarantor
or any other Person at any time liable for the payment of all or part of the Obligations,
including any discharge of, or bar or stay against collecting, any Obligation (or any part
of them or interest therein) in or as a result of such proceeding;



6









 







          (iv) any sale, lease or transfer of any or all of the assets of the Borrower or any
other Guarantor, or any changes in the shareholders of the Borrower or any other Guarantor;




          (v) any change in the corporate existence (including its constitution, laws, rules,
regulations or power), structure or ownership of any Obligor or in the relationship between
the Borrower and any Obligor;




          (vi) the fact that any Collateral or Lien contemplated or intended to be given, created
or granted as security for the repayment of the Obligations shall not be properly perfected
or created, or shall prove to be unenforceable or subordinate to any other Lien, it being
recognized and agreed by each of the Guarantors that it is not entering into this Agreement
in reliance on, or in contemplation of the benefits of, the validity, enforceability,
collectability or value of any of the Collateral for the Obligations;




          (vii) the absence of any attempt to collect the Obligations or any part of them from
any Obligor;




          (viii) (A) any Guaranteed Creditor’s election, in any proceeding instituted under
chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of the
Bankruptcy Code; (B) any borrowing or grant of a Lien by the Borrower, as
debtor-in-possession, or extension of credit, under Section 364 of the Bankruptcy Code; (C)
the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of any
Guaranteed Creditor’s claim (or claims) for repayment of the Obligations; (D) any use of
cash collateral under Section 363 of the Bankruptcy Code; (E) any agreement or stipulation
as to the provision of adequate protection in any bankruptcy proceeding; (F) the avoidance
of any Lien in favor of the Guaranteed Creditors or any of them for any reason; or (G)
failure by any Guaranteed Creditor to file or enforce a claim against the Borrower or its
estate in any bankruptcy or insolvency case or proceeding; or




          (ix) any other circumstance or act whatsoever, including any action or omission of the
type described in Section 2.04 (with or without notice to or knowledge of the
Borrower or such Guarantor), which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under
the guarantee contained in this Article II, in bankruptcy or in any other instance.



          (b) When making any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, any Guaranteed Creditor may, but shall be under no obligation to, join or
make a similar demand on or otherwise pursue or exhaust such rights and remedies as it may have
against the Borrower, any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and any failure by any
Guaranteed Creditor to make any such demand, to pursue such other rights or remedies or to collect
any payments from the Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any release of the
Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any



7









 








obligation or liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of any Guaranteed Creditor against any
Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.




     Section 2.07 Reinstatement. The guarantee contained in this Article II shall continue
to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned by any Guaranteed
Creditor upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been made.



     Section 2.08 Payments. Each Guarantor hereby guarantees that payments hereunder will
be paid to the Subordinated Noteholder Representative, for the ratable benefit of the Guaranteed
Creditors, without set-off, deduction or counterclaim, in dollars, in immediately available funds,
at the offices of the Subordinated Noteholder Representative as specified in Section 5.4 of the
Purchase Agreement.



ARTICLE III

Grant of Security Interest




     Section 3.01 Grant of Security Interest. Subject only to the prior pledge of each
such item of Collateral to the Senior Agent, under the Senior Guaranty and Pledge Agreement, which
such prior pledge is acknowledged by the Subordinated Noteholder Agent and each Guaranteed
Creditor, each Pledgor hereby pledges, assigns and transfers to the Subordinated Noteholder
Representative, and hereby grants to the Subordinated Noteholder Representative, for the ratable
benefit of the Guaranteed Creditors, a security interest in all of the following property now owned
or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time
in the future may acquire any right, title or interest (collectively, the “Collateral”), as
collateral security for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of such Pledgor’s Obligations:



          (a) all Pledged Securities;




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




          (c) 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.




     Section 3.02 Transfer of Pledged Securities. All certificates or instruments
representing or evidencing such Pledged Securities shall be delivered to and held pursuant hereto
by the Subordinated Noteholder Representative or a Person designated by the Subordinated Noteholder
Representative (which such designee shall be the Senior Agent until the termination of the security
interest created by the Senior Guaranty and Pledge Agreement, after which such time, the designee
shall be the Subordinated Noteholder Representative) and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or



8









 







assignment in blank, and accompanied by any required transfer tax stamps to effect the pledge
of the Pledged Securities to the Subordinated Noteholder Representative. Notwithstanding the
preceding sentence, at the Subordinated Noteholder Representative’s reasonable discretion, all such
Pledged Securities must be delivered or transferred in such manner as to permit the Subordinated
Noteholder Representative to be a “protected purchaser” to the extent of its security interest as
provided in Section 8.303 of the UCC (if the Subordinated Noteholder Representative otherwise
qualifies as a protected purchaser). During the continuance of an Event of Default, the
Subordinated Noteholder Representative, subject to its compliance with applicable federal and state
securities laws and the prior rights of the Senior Agent, shall have the right, at any time in its
discretion and without notice, to transfer to or to register in the name of the Subordinated
Noteholder Representative or any of its nominees any or all of the Pledged Securities, subject only
to the revocable rights specified in Section 6.03. In addition, during the continuance of
an Event of Default, the Subordinated Noteholder Representative shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged Securities for certificates
or instruments of smaller or larger denominations.



ARTICLE IV

Representations and Warranties




     To induce the Subordinated Noteholder Representative and the Subordinated Noteholders to enter
into the Transaction Documents and to induce the Subordinated Noteholders to make their respective
extensions of credit to the Borrower thereunder, each Obligor hereby represents and warrants to the
Subordinated Noteholder Representative and each Subordinated Noteholder that:



     Section 4.01 Representations in Credit Agreement. In the case of each Guarantor, the
representations and warranties set forth in Section 3.1 of the Purchase Agreement as they relate to
such Guarantor or to the Transaction Documents to which such Guarantor is a party are true and
correct in all material respects, provided that each reference in each such representation and
warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.01, be
deemed to be a reference to such Guarantor’s knowledge.



     Section 4.02 Title; No Other Liens. Except for the security interest granted to the
Senior Agent for the ratable benefit of the Lenders under the Credit Agreement and the Subordinated
Noteholder Representative for the ratable benefit of the Guaranteed Creditors pursuant to this
Agreement, such Pledgor is the record and beneficial owner of its respective items of the
Collateral free and clear of any and all Liens and has rights in or the power to transfer each item
of the Collateral in which a Lien is granted by it hereunder, free and clear of any Lien. No
financing statement or other public notice with respect to all or any part of the Collateral is on
file or of record in any public office, except such as have been filed in favor of the Senior
Agent, for the ratable benefit of the Lenders or the Subordinated Noteholder Representative, for
the ratable benefit of the Guaranteed Creditors, pursuant to this Agreement or the Security
Documents.



     Section 4.03 Perfected Second Priority Liens. The security interests granted pursuant
to this Agreement (a) upon the completion of the filings and the other actions specified on
Schedule 3 constitute valid perfected security interests in all of the Collateral in favor
of the



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Subordinated Noteholder Representative, for the ratable benefit of the Guaranteed Creditors,
as collateral security for such Pledgor’s Obligations, enforceable in accordance with the terms
hereof against all creditors of such Pledgor and any Persons purporting to purchase any Collateral
from such Pledgor and (b) are prior to all other Liens on the Collateral in existence on the date
hereof other than the prior Liens in favor of the Senior Agent for the ratable benefit of the
Lenders.



     Section 4.04 Obligor Information. On the date hereof, the correct legal name of such
Obligor, all names and trade names that such Obligor has used in the last five years, such
Obligor’s jurisdiction of organization and each jurisdiction of organization of such Obligor over
the last five years, organizational number, taxpayer identification number, and the location(s) of
such Obligor’s chief executive office or sole place of business over the last five years are
specified on Schedule 4.



     Section 4.05 Pledged Securities.



          (a) The Pledged Securities required to be pledged hereunder by such Pledgor are listed in
Schedule 2. The shares of Pledged Securities pledged by such Pledgor hereunder constitute
all the issued and outstanding shares of all classes of the equity interests of each Issuer owned
by such Pledgor. All the shares of the Pledged Securities have been duly and validly issued and
are fully paid and nonassessable; and such Pledgor is the record and beneficial owner of, and has
good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options
in favor of, or claims of, any other Person, except the security interest created by this Agreement
or by the Senior Guaranty and Pledge Agreement, and has rights in or the power to transfer the
Pledged Securities in which a Lien is granted by it hereunder, free and clear of any Lien.




          (b) There are no restrictions on transfer (that have not been waived or otherwise consented
to) in the LLC Agreement governing any Pledged LLC Interest and the Partnership Agreement governing
any Pledged Partnership Interest or any other agreement relating thereto which would limit or
restrict (i) the grant of a security interest in the Pledged LLC Interests and the Pledged
Partnership Interests, (ii) the perfection of such security interest or (iii) the exercise of
remedies in respect of such perfected security interest in the Pledged LLC Interests and the
Pledged Partnership Interests, in each case, as contemplated by this Agreement. Upon the exercise
of remedies in respect of the Pledged LLC Interests and the Pledged Partnership Interests, a
transferee or assignee of a membership interest or partnership interest, as the case may be, of
such LLC or Partnership, as the case may be, shall become a member or partner, as the case may be,
of such LLC or Partnership, as the case may be, entitled to participate in the management thereof
and, upon the transfer of the entire interest of such Pledgor, such Pledgor ceases to be a member
or partner, as the case may be.




     Section 4.06 Benefit to the Guarantor. The Borrower is a member of an affiliated
group of companies that includes each Guarantor, and the Borrower and the other Guarantors are
engaged in related businesses. Each Guarantor is a Subsidiary of the Borrower and its guaranty and
surety obligations pursuant to this Agreement may reasonably be expected to benefit, directly or
indirectly, such Subsidiary; and each Guarantor has determined that this Agreement is



10









 







necessary and convenient to the conduct, promotion and attainment of the business of such
Guarantor and the Borrower.



     Section 4.07 Solvency. Each Obligor (a) is not insolvent as of the date hereof and
will not be rendered insolvent as a result of this Agreement (after giving effect to Section 2.02),
(b) is not engaged in business or a transaction, or about to engage in a business or a transaction,
for which any property remaining with it constitutes unreasonably small capital, and (c) does not
intend to incur, or believe it will incur, Debt that will be beyond its ability to pay as such Debt
matures.



ARTICLE V

Covenants




     Each Obligor covenants and agrees with the Subordinated Noteholder Representative and the
Subordinated Noteholders that, from and after the date of this Agreement until the Obligations
shall have been paid in full in cash:



     Section 5.01 Maintenance of Perfected Security Interest; Further Documentation. Each
Pledgor agrees that:



          (a) it shall maintain the security interest created by this Agreement as a perfected security
interest having at least the priority described in Section 4.03 and shall defend such
security interest against the claims and demands of all Persons whomsoever.




          (b) it will furnish to the Subordinated Noteholder Representative from time to time statements
and schedules further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Subordinated Noteholder Representative may reasonably
request, all in reasonable detail.




          (c) At any time and from time to time, upon the written request of the Subordinated Noteholder
Representative, and at the sole expense of such Pledgor, it will promptly and duly execute and
deliver, and have recorded, such further instruments and documents and take such further actions as
the Subordinated Noteholder Representative may reasonably deem necessary for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights and powers herein
granted, including, without limitation, the delivery of certificated securities and the filing of
any financing or continuation statements under the UCC (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.




     Section 5.02 Changes in Locations, Name, Etc. Such Obligor recognizes that financing
statements pertaining to the Collateral have been or may be filed where such Obligor maintains any
Collateral or is organized. Such Obligor will not cause or permit any change in its (a) corporate
name or in any trade name used to identify it in the conduct of its business or in the ownership of
its properties, (b) the location of its chief executive office or principal place of business, (c)
its identity or corporate structure or in the jurisdiction in which it is incorporated or formed,
(d) its jurisdiction of organization or its organizational identification number in such
jurisdiction of organization or (e) its federal taxpayer identification number, unless, in each
case, such Obligor shall have first (i) notified the Subordinated Noteholder Representative of such



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change at least thirty (30) days prior to the effective date of such change, and (ii) taken
all action reasonably requested by the Subordinated Noteholder Representative for the purpose of
maintaining the perfection and priority of the Subordinated Noteholder Representative’s security
interests under this Agreement. In any notice furnished pursuant to this Section 5.02,
such Obligor will expressly state in a conspicuous manner that the notice is required by this
Agreement and contains facts that may require additional filings of financing statements or other
notices for the purposes of continuing perfection of the Subordinated Noteholder Representative’s
security interest in the Collateral. At the request of the Subordinated Noteholder Representative,
on or prior to the occurrence of such event, the Borrower will provide to the Subordinated
Noteholder Representative and the Subordinated Noteholders an opinion of counsel, in form and
substance reasonably satisfactory to the Subordinated Noteholder Representative, to the effect that
such event will not impair the validity of the security interests hereunder, the perfection and
priority thereof, the enforceability of the Transaction Documents, and such other matters as may be
reasonably requested by the Subordinated Noteholder Representative.



     Section 5.03 Pledged Securities.



          (a) If such Pledgor shall become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the equity interests of any
Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any
shares of the Pledged Securities, or otherwise in respect thereof, such Pledgor shall accept the
same as the agent of the Guaranteed Creditors, hold the same in trust for the Guaranteed Creditors,
segregated from other property of such Pledgor, and, subject to any prior rights of the Senior
Agent, deliver the same forthwith to the Subordinated Noteholder Representative in the exact form
received, duly indorsed by such Pledgor to the Subordinated Noteholder Representative, if required,
together with an undated stock power covering such certificate duly executed in blank by such
Pledgor and with, if the Subordinated Noteholder Representative so requests, signature guaranteed,
to be held by the Subordinated Noteholder Representative, subject to the terms hereof, as
additional collateral security for the Obligations.




          (b) Without the prior written consent of the Subordinated Noteholder Representative, such
Pledgor will not (i) unless otherwise expressly permitted hereby or under the other Transaction
Documents, vote to enable, or take any other action to permit, any Issuer to issue any equity
interests of any nature or to issue any other securities convertible into or granting the right to
purchase or exchange for any equity interests of any nature of any Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged
Securities or Proceeds thereof (except pursuant to a transaction expressly permitted by the
Transaction Documents), (iii) create, incur or permit to exist any Lien or option in favor of, or
any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement and the Senior
Guaranty and Pledge Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Pledgor or the Subordinated Noteholder Representative to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.




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          (c) In the case of each Pledgor that is an Issuer, such Issuer agrees that (i) it will be
bound by the terms of this Agreement relating to the Pledged Securities issued by it and will
comply with such terms insofar as such terms are applicable to it, (ii) it will notify the
Subordinated Noteholder Representative promptly in writing of the occurrence of any of the events
described in Section 5.03(a) with respect to the Pledged Securities issued by it and (iii)
the terms of Sections Section 6.02(a) and Section 6.03 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section 6.02(d) or
Section 6.03 with respect to the Pledged Securities issued by it.




          (d) In the case of each Pledgor that is a partner in a Partnership, such Pledgor hereby
consents to the extent required by the applicable Partnership Agreement to the pledge by each other
Pledgor, pursuant to the terms hereof, of the Pledged Partnership Interests in such Partnership and
to the transfer of such Pledged Partnership Interests to the Subordinated Noteholder Representative
or its nominee and to the substitution of the Subordinated Noteholder Representative or its nominee
as a substituted partner in such Partnership with all the rights, powers and duties of a general
partner or a limited partner, as the case may be. In the case of each Pledgor member of an LLC,
such Pledgor hereby consents to the extent required by the applicable LLC Agreement to the pledge
by each other Pledgor, pursuant to the terms hereof, of the Pledged LLC Interests in such LLC and
to the transfer of such Pledged LLC Interests to the Subordinated Noteholder Representative or its
nominee and to the substitution of the Subordinated Noteholder Representative or its nominee as a
substituted member of the LLC with all the rights, powers and duties of a member of the LLC in
question.




          (e) Such Pledgor shall not agree to any amendment of a Partnership Agreement or LLC Agreement
that in any way adversely affects the perfection of the security interest of the Subordinated
Noteholder Representative in the Pledged Partnership Interests or Pledged LLC Interests pledged by
such Pledgor hereunder, including any amendment electing to treat the membership interest or
partnership interest of such Pledgor as a security under Section 8-103 of the UCC.




          (f) Each Pledgor shall furnish to the Subordinated Noteholder Representative such stock powers
and other instruments as may be required by the Subordinated Noteholder Representative to assure
the transferability of the Pledged Securities when and as often as may be reasonably requested by
the Subordinated Noteholder Representative.




          (g) The Pledged Securities will at all times constitute not less than 100% of the equity
interests of the Issuer thereof owned by any Pledgor. Each Pledgor will not permit any Issuer of
any of the Pledged Securities to issue any new shares of any class of equity interests of such
Issuer without the prior written consent of the Subordinated Noteholder Representative.




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ARTICLE VI

Remedial Provisions




     Section 6.01 Code and Other Remedies.



          (a) Upon the occurrence and during the continuance of an Event of Default, and subject always
to any prior rights of the Senior Agent and the Lenders under the Senior Guaranty and Pledge
Agreement and the Intercreditor and Subordination Agreement, the Subordinated Noteholder
Representative, on behalf of the Guaranteed Creditors, may exercise, in addition to all other
rights and remedies granted to them in this Agreement, the other Transaction Documents and in any
other instrument or agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the UCC or any other applicable law or otherwise available at law
or equity. Without limiting the generality of the foregoing, the Subordinated Noteholder
Representative, without demand of performance or other demand, presentment, protest, advertisement
or notice of any kind (except any notice required by law referred to below) to or upon any Pledgor
or any other Person (all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to
do any of the foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of any Guaranteed Creditor or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. Any Guaranteed Creditor shall have
the right upon any such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in any Pledgor, which right or equity is hereby waived and released.
If applicable to any particular item of Collateral, each Pledgor further agrees, at the
Subordinated Noteholder Representative’s request, to assemble the Collateral and make it available
to the Subordinated Noteholder Representative at places which the Subordinated Noteholder
Representative shall reasonably select, whether at such Pledgor’s premises or elsewhere. Any such
sale or transfer by the Subordinated Noteholder Representative either to itself or to any other
Person shall be absolutely free from any claim of right by Pledgor, including any equity or right
of redemption, stay or appraisal which Pledgor has or may have under any rule of law, regulation or
statute now existing or hereafter adopted (and such Pledgor hereby waives any rights it may have in
respect thereof). Upon any such sale or transfer, the Subordinated Noteholder Representative shall
have the right to deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. The Subordinated Noteholder Representative shall apply the net
proceeds of any action taken by it pursuant to this Section 6.01, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights
of the Subordinated Noteholder Representative and the Guaranteed Creditors hereunder, including,
without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in
part of the Obligations, and only after such application and after the payment by the Subordinated
Noteholder Representative of any other amount required by any provision of law, including, without
limitation, Section 9-615 of the UCC, need the Subordinated Noteholder Representative account for
the surplus, if any, to any Pledgor. To the extent permitted
by applicable law, each



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Pledgor waives all claims, damages and demands it may acquire against the Subordinated
Noteholder Representative or any Guaranteed Creditor arising out of the exercise by them of any
rights hereunder except to the extent caused by the gross negligence or willful misconduct of the
Subordinated Noteholder Representative or such Guaranteed Creditor or their respective agents. If
any notice of a proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before such sale or other
disposition.




          (b) In the event that the Subordinated Noteholder Representative elects not to sell the
Collateral, the Subordinated Noteholder Representative retains its rights to dispose of or utilize
the Collateral or any part or parts thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards payment of the Obligations. Each and every
method of disposition of the Collateral described in this Agreement shall constitute disposition in
a commercially reasonable manner.




          (c) The Subordinated Noteholder Representative may appoint any Person as agent to perform any
act or acts necessary or incident to any sale or transfer of the Collateral.




     Section 6.02 Pledged Securities.



          (a) Unless an Event of Default shall have occurred and be continuing and the Subordinated
Noteholder Representative shall have given notice to the relevant Pledgor of the Subordinated
Noteholder Representative’s intent to exercise its corresponding rights pursuant to Section
6.02(c), each Pledgor shall be permitted to receive all cash dividends paid in respect of the
Pledged Securities paid in the normal course of business of the relevant Issuer (other than
liquidating or distributing dividends), to the extent permitted under the Transaction Documents.
Any sums paid upon or in respect of any Pledged Securities upon the liquidation or dissolution of
any issuer of any Pledged Securities, any distribution of capital made on or in respect of any
Pledged Securities or any property distributed upon or with respect to any Pledged Securities
pursuant to the recapitalization or reclassification of the capital of any issuer of Pledged
Collateral or pursuant to the reorganization thereof shall, unless otherwise subject to a perfected
security interest in favor of the Subordinated Noteholder Representative, unless delivered to the
Senior Agent, be delivered to the Subordinated Noteholder Representative to be held by it hereunder
as additional collateral security for the Obligations. If any sum of money or property so paid or
distributed in respect of any Pledged Securities shall be received by such Pledgor, such Pledgor
shall, until such money or property is paid or delivered to the Subordinated Noteholder
Representative (or the Senior Agent), hold such money or property in trust for the Subordinated
Noteholder Representative, segregated from other funds of such Pledgor, as additional security for
the Obligations.




          (b) Unless an Event of Default shall have occurred and be continuing and the Subordinated
Noteholder Representative shall have given notice to the relevant Pledgor of the Subordinated
Noteholder Representative’s intent to exercise its corresponding rights pursuant to Section
6.02(c), each Pledgor shall be entitled to exercise all voting, consent and corporate, partnership
or limited liability rights with respect to the Pledged Securities; provided, however, that no vote
shall be cast, consent given or right exercised or other action taken by such Pledgor that would
impair the Collateral, be inconsistent with or result in any violation of any provision



15









 






of the this Agreement or any other Transaction Document or, without the prior consent of the
Subordinated Noteholder Representative and the Subordinated Noteholders, enable or permit any
issuer of Pledged Collateral to issue any equity interest or to issue any other securities
convertible into or granting the right to purchase or exchange for any Stock of any issuer of
Pledged Collateral other than as permitted by this Agreement.




          (c) Upon the occurrence and during the continuance of an Event of Default, upon notice by the
Subordinated Noteholder Representative of its intent to exercise such rights to the relevant
Pledgor or Pledgors, and subject to the prior rights of the Senior Agent, (i) the Subordinated
Noteholder Representative shall have the right to receive any and all cash dividends, payments,
property or other Proceeds paid in respect of the Pledged Securities and make application thereof
to the Obligations, and (ii) any or all of the Pledged Securities shall be registered in the name
of the Subordinated Noteholder Representative or its nominee, and (iii) the Subordinated Noteholder
Representative or its nominee may exercise (A) all voting, consent, corporate, partnership or
limited liability and other rights pertaining to such Pledged Securities at any meeting of
shareholders, partners or members (or other equivalent body), as the case may be, of the relevant
Issuer or Issuers or otherwise and (B) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at its discretion any
and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the organizational structure of any Issuer, or upon the exercise by
any Pledgor or the Subordinated Noteholder Representative of any right, privilege or option
pertaining to such Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the Subordinated Noteholder
Representative may determine), all without liability except to account for property actually
received by it, but the Subordinated Noteholder Representative shall have no duty to any Pledgor to
exercise any such right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.




          (d) Upon the occurrence and during the continuance of an Event of Default, in order to permit
the Subordinated Noteholder Representative to exercise the voting and other consensual rights that
it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions
that it may be entitled to receive hereunder, subject to any prior rights to the same items as may
be held by the Senior Agent, (i) each Pledgor shall promptly execute and deliver (or cause to be
executed and delivered) to the Subordinated Noteholder Representative all such proxies, dividend
payment orders and other instruments as the Subordinated Noteholder Representative may from time to
time reasonably request and (ii) without limiting the effect of clause (i) above, such
Pledgor hereby grants to the Subordinated Noteholder Representative an irrevocable proxy to vote
all or any part of the Pledged Securities and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Securities would be entitled (including giving or
withholding written consents of shareholders, partners or members, as the case may be, calling
special meetings of shareholders, partners or members, as the case may be, and voting at such
meetings), which proxy shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Securities on the record books of the Issuer thereof) by any
other Person (including the Issuer of such Pledged Collateral or any officer or agent thereof).




16









 








          (e) Each Pledgor hereby authorizes and instructs each Issuer of any Pledged Securities pledged
by such Pledgor hereunder to (i) comply with any instruction received by it from the Subordinated
Noteholder Representative in writing that (A) states that an Event of Default has occurred and is
continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other
or further instructions from such Pledgor, and each Pledgor agrees that each Issuer shall be fully
protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends
or other payments with respect to the Pledged Securities directly to the Subordinated Noteholder
Representative.




          (f) Upon the occurrence and during the continuance of an Event of Default, if the Issuer of
any Pledged Securities is the subject of bankruptcy, insolvency, receivership, custodianship or
other proceedings under the supervision of any governmental authority, then all rights of the
Pledgor in respect thereof to exercise the voting and other consensual rights which such Pledgor
would otherwise be entitled to exercise with respect to the Pledged Securities issued by such
Issuer shall cease, and all such rights shall thereupon become vested in the Subordinated
Noteholder Representative (subject to any prior rights of the Senior Agent) who shall thereupon
have the sole right to exercise such voting and other consensual rights, but the Subordinated
Noteholder Representative shall have no duty to exercise any such voting or other consensual rights
and shall not be responsible for any failure to do so or delay in so doing.




     Section 6.03 Private Sales of Pledged Securities.



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




          (b) Each Pledgor agrees to use its best efforts to do or cause to be done all such other acts
as may reasonably be necessary to make such sale or sales of all or any portion of the Pledged
Securities pursuant to this Section 6.03 valid and binding and in compliance with any and all other
applicable governmental requirements, including any federal or state securities laws.. Each
Pledgor further agrees that a breach of any o the covenants contained in this Section 6.03 will
cause irreparable injury to the Guaranteed Creditors, that the Guaranteed Creditors have no
adequate remedy at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 6.03 shall be specifically enforceable against such Pledgor, and
such Pledgor hereby waives and agrees not to assert any defenses against an action



17









 








for specific performance of such covenants except for a defense that no Event of Default has
occurred or is continuing under the Credit Agreement.




     Section 6.04 Waiver; Deficiency. Each Pledgor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the Subordinated Noteholder
Representative or any Guaranteed Creditor to collect such deficiency.



     Section 6.05 Non-Judicial Enforcement. Provided that there is no breach of the peace,
the Subordinated Noteholder Representative may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by and carried out in accordance with
applicable law, each Pledgor expressly waives any and all legal rights which might otherwise
require the Subordinated Noteholder Representative to enforce its rights by judicial process.



ARTICLE VII

The Subordinated Noteholder Representative




     Section 7.01 Subordinated Noteholder Representative’s Appointment as Attorney-in-Fact,
Etc.



          (a) Each Pledgor hereby irrevocably constitutes and appoints the Subordinated Noteholder
Representative and any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such
Pledgor and in the name of such Pledgor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all reasonably appropriate action and to execute any and
all documents and instruments which may be reasonably necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of the foregoing, each Pledgor
hereby gives the Subordinated Noteholder Representative the power and right, on behalf of such
Pledgor, without notice to or assent by such Pledgor, to do any or all of the following; provided,
the Subordinated Noteholder Representative agrees that it will not exercise any of the following
rights under such power of attorney unless an Event of Default shall have occurred and be
continuing:





          (i) in the name of such Pledgor or its own name, or otherwise, take possession of and
indorse and collect any check, draft, note, acceptance or other instrument for the payment
of moneys due with respect to any Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the Subordinated
Noteholder Representative for the purpose of collecting any such moneys due with respect to
any other Collateral whenever payable;




          (ii) unless being disputed in good faith, pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement or any other Transaction Document and pay all or any part
of the premiums therefor and the costs thereof;



18









 







          (iii) execute, in connection with any sale provided for in Section 6.01 or Section
6.03, any endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and




          (iv) (A) direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the Subordinated
Noteholder Representative or as the Subordinated Noteholder Representative shall direct; (B)
ask or demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or arising out of
any Collateral; (C) commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or any portion
thereof and to enforce any other right in respect of any Collateral; (D) defend any suit,
action or proceeding brought against such Pledgor with respect to any Collateral; (E)
settle, compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Subordinated Noteholder Representative
may deem appropriate; and (F) generally, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely as though
the Subordinated Noteholder Representative were the absolute owner thereof for all purposes,
and do, at the Subordinated Noteholder Representative’s option and such Pledgor’s expense,
at any time, or from time to time, all acts and things which the Subordinated Noteholder
Representative deems necessary to protect, preserve or realize upon the Collateral and the
Subordinated Noteholder Representative’s and the Guaranteed Creditors’ security interests
therein and to effect the intent of this Agreement, all as fully and effectively as such
Pledgor might do.



          (b) If any Obligor fails to perform or comply with any of its agreements contained herein
within the applicable grace periods, the Subordinated Noteholder Representative, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.




          (c) The reasonable expenses of the Subordinated Noteholder Representative incurred in
connection with actions undertaken as provided in this Section 7.01, together with interest
thereon at a rate per annum equal to the post-default rate specified in Section 8(b) of the
Debentures, but in no event to exceed the maximum rate permitted by applicable law, from the date
of payment by the Subordinated Noteholder Representative to the date reimbursed by the relevant
Obligor, shall be payable by such Obligor to the Subordinated Noteholder Representative on demand.




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




     Section 7.02 Duty of Subordinated Noteholder Representative. The Subordinated
Noteholder Representative’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise,



19









 







shall be to deal with it in the same manner as the Subordinated Noteholder Representative
deals with similar property for its own account and shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which comparable secured parties accord comparable
collateral. Neither the Subordinated Noteholder Representative, any Guaranteed Creditor nor any of
their related parties shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Pledgor or any other Person or to take any other
action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the
Subordinated Noteholder Representative and the Guaranteed Creditors hereunder are solely to protect
the Subordinated Noteholder Representative’s and the Guaranteed Creditors’ interests in the
Collateral and shall not impose any duty upon the Subordinated Noteholder Representative or any
Guaranteed Creditor to exercise any such powers. The Subordinated Noteholder Representative and
the Guaranteed Creditors shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers, and neither they nor any of their related parties shall be
responsible to any Obligor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct. To the fullest extent permitted by applicable law, the
Subordinated Noteholder Representative shall be under no duty whatsoever to make or give any
presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice
of intent to accelerate, notice of acceleration, or other notice or demand in connection with any
Collateral or the Obligations, or to take any steps necessary to preserve any rights against any
Pledgor or other Person or ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral, whether or not it has
or is deemed to have knowledge of such matters. Each Obligor, to the extent permitted by
applicable law, waives any right of marshaling in respect of any and all Collateral, and waives any
right to require the Subordinated Noteholder Representative or any Guaranteed Creditor to proceed
against any Obligor or other Person, exhaust any Collateral or enforce any other remedy which the
Subordinated Noteholder Representative or any Guaranteed Creditor now has or may hereafter have
against any Obligor or other Person.



     Section 7.03 Filing of Financing Statements. Pursuant to the UCC and any other
applicable law, each Pledgor authorizes the Subordinated Noteholder Representative to file or
record financing statements and other filing or recording documents or instruments with respect to
the Collateral without the signature of such Pledgor in such form and in such offices as the
Subordinated Noteholder Representative reasonably determines appropriate to perfect the security
interests of the Subordinated Noteholder Representative under this Agreement. A photographic or
other reproduction of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.



     Section 7.04 Authority of Subordinated Noteholder Representative. Each Obligor
acknowledges that the rights and responsibilities of the Subordinated Noteholder Representative
under this Agreement with respect to any action taken by the Subordinated Noteholder Representative
or the exercise or non-exercise by the Subordinated Noteholder Representative of any option, voting
right, request, judgment or other right or remedy provided for herein or resulting or arising out
of this Agreement shall, as between the Subordinated Noteholder Representative and the Guaranteed
Creditors, be governed by the Purchase Agreement and by Annex III hereto as may exist from
time to time among them, but, as between the Subordinated



20









 







Noteholder Representative and the Obligors, the Subordinated Noteholder Representative shall
be conclusively presumed to be acting as agent for the Guaranteed Creditors with full and valid
authority so to act or refrain from acting, and no Obligor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.



ARTICLE VIII

Subordination of Indebtedness




     Section 8.01 Subordination of All Obligor Claims. As used herein, the term
“Obligor Claims” shall mean all debts and obligations of the Borrower or any other Obligor
to any other Obligor, whether such debts and obligations now exist or are hereafter incurred or
arise, or whether the obligation of the debtor thereon be direct, contingent, primary, secondary,
several, joint and several, or otherwise, and irrespective of whether such debts or obligations be
evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such debts or obligations may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be acquired. After and during the
continuation of an Event of Default, no Obligor shall receive or collect, directly or indirectly,
from any other obligor in respect thereof any amount upon the Obligor Claims.



     Section 8.02 Claims in Bankruptcy. In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving any
Obligor, the Subordinated Noteholder Representative on behalf of the Guaranteed Creditors shall
have the right to prove their claim in any proceeding, so as to establish their rights hereunder
and receive directly from the receiver, trustee or other court custodian, dividends and payments
which would otherwise be payable upon Obligor Claims. Each Obligor hereby assigns such dividends
and payments to the Subordinated Noteholder Representative for the benefit of the Guaranteed
Creditors for application against the Obligations. Should any Agent or Guaranteed Creditor
receive, for application upon the Obligations, any such dividend or payment which is otherwise
payable to any Obligor, and which, as between such Obligors, shall constitute a credit upon the
Obligor Claims, then upon payment in full in cash of the Obligations, the intended recipient shall
become subrogated to the rights of the Subordinated Noteholder Representative and the Guaranteed
Creditors to the extent that such payments to the Subordinated Noteholder Representative and the
Guaranteed Creditors on the Obligor Claims have contributed toward the liquidation of the
Obligations, and such subrogation shall be with respect to that proportion of the Obligations which
would have been unpaid if the Subordinated Noteholder Representative and the Guaranteed Creditors
had not received dividends or payments upon the Obligor Claims.



     Section 8.03 Payments Held in Trust. In the event that, notwithstanding Section 8.01
and Section 8.02, any Obligor should receive any funds, payments, claims or distributions
which is prohibited by such Sections, then it agrees: (a) to hold in trust for the Subordinated
Noteholder Representative and the Guaranteed Creditors an amount equal to the amount of all funds,
payments, claims or distributions so received, and (b) that it shall have absolutely no dominion
over the amount of such funds, payments, claims or distributions except to pay them promptly to the
Subordinated Noteholder Representative, for the benefit of the Guaranteed Creditors; and each
Obligor covenants promptly to pay the same to the Subordinated Noteholder Representative.



21









 





     Section 8.04 Liens Subordinate. Each Obligor agrees that, until the Obligations are
paid in full in cash, any Liens securing payment of the Obligor Claims shall be and remain inferior
and subordinate to any Liens securing payment of the Obligations, regardless of whether such
encumbrances in favor of such Obligor, the Subordinated Noteholder Representative or any Guaranteed
Creditor presently exist or are hereafter created or attach. Without the prior written consent of
the Subordinated Noteholder Representative, no Obligor, during the period in which any of the
Obligations are outstanding, shall (a) exercise or enforce any creditor’s right it may have against
any debtor in respect of the Obligor Claims, or (b) foreclose, repossess, sequester or otherwise
take steps or institute any action or proceeding (judicial or otherwise, including without
limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s
relief or insolvency proceeding) to enforce any Lien securing payment of the Obligor Claims held by
it.



     Section 8.05 Notation of Records. Upon the request of the Subordinated Noteholder
Representative, all promissory notes and all accounts receivable ledgers or other evidence of the
Obligor Claims accepted by or held by any Obligor shall contain a specific written notice thereon
that the indebtedness evidenced thereby is subordinated under the terms of this Agreement.



ARTICLE IX

Miscellaneous




     Section 9.01 Waiver. No failure on the part of the Subordinated Noteholder
Representative or any Subordinated Noteholder to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power, privilege or remedy or any abandonment or
discontinuance of steps to enforce such right, power, privilege or remedy under this Agreement or
any other Transaction Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, privilege or remedy under this Agreement or any other Transaction
Document preclude or be construed as a waiver of any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law or equity.



     Section 9.02 Notices. All notices and other communications provided for herein shall
be given in the manner and subject to the terms of Section 5.4 of the Purchase Agreement; provided
that any such notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.



     Section 9.03 Payment of Expenses, Indemnities, Etc.



          (a) Each Guarantor agrees to pay or reimburse each Guaranteed Creditor and the Subordinated
Noteholder Representative for all out-of-pocket expenses incurred by such Person, including the
fees, charges and disbursements of any counsel for the Subordinated Noteholder Representative or
any Guaranteed Creditor, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Transaction Document, including, without limitation,
all costs and expenses incurred in collecting against such Guarantor under the guarantee contained
in Article II or otherwise enforcing or preserving any rights under this Agreement and the other
Transaction Documents to which such Guarantor is a party.




22









 








          (b) Each Guarantor agrees to pay, and to save the Subordinated Noteholder Representative and
the Guaranteed Creditors harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all taxes (other than income taxes payable by such Subordinated
Noteholder) which may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.




          (c) Each Guarantor agrees to pay, and to save the Subordinated Noteholder Representative and
the Guaranteed Creditors harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and administration of
this Agreement to the extent the Borrower would be required to do so pursuant to any Transaction
Document.




     Section 9.04 Amendments in Writing. None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified except in accordance with Section 5.5 of
the Purchase Agreement.



     Section 9.05 Successors and Assigns. The provisions of this Agreement shall be
binding upon the Obligors and their successors and assigns and shall inure to the benefit of the
Subordinated Noteholder Representative and the Guaranteed Creditors and their respective successors
and assigns.



     Section 9.06 Survival; Revival; Reinstatement.



          (a) All covenants, agreements, representations and warranties made by any Obligor herein and
in the certificates or other instruments delivered in connection with or pursuant to this Agreement
or any other Transaction Document to which it is a party shall be considered to have been relied
upon by the Subordinated Noteholder Representative and the Subordinated Noteholders and shall
survive the execution and delivery of this Agreement and the purchase of any Debentures, regardless
of any investigation made by any such other party or on its behalf and notwithstanding that the
Subordinated Noteholder Representative or any Subordinated Noteholder may have had notice or
knowledge of any Event of Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the principal of or any
accrued interest on any Debenture or any fee or any other amount payable under any Transaction
Document is outstanding and unpaid. The provisions of Section 9.03 shall survive and
remain in full force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Debentures or the termination of this Agreement, any other Transaction
Document or any provision hereof or thereof.




          (b) To the extent that any payments on the Guarantor Obligations or proceeds of any Collateral
are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law,
common law or equitable cause, then to such extent, the Guarantor Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received and the Subordinated
Noteholder Representative’s and the Guaranteed Creditors’ Liens, security



23









 






interests, rights, powers and remedies under this Agreement and each other Transaction
Document shall continue in full force and effect. In such event, each Transaction Document shall
be automatically reinstated and the Borrower shall take such action as may be reasonably requested
by the Subordinated Noteholder Representative and the Guaranteed Creditors to effect such
reinstatement.




     Section 9.07 Counterparts; Integration; Effectiveness.



          (a) 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.




          (b) This Agreement and the other Transaction Documents constitute the entire contract among
the parties relating to the subject matter hereof and thereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter hereof and thereof.
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.




          (c) This Agreement shall become effective when it shall have been executed by the Subordinated
Noteholder Representative and when the Subordinated Noteholder Representative shall have received
counterparts hereof which, when taken together, bear the signatures of each of the other parties
hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto, the
Lenders and their respective successors and assigns. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.




     Section 9.08 Severability. Any provision of this Agreement or any other Transaction
Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining provisions hereof or
thereof; and the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.



     Section 9.09 Not Used.



     Section 9.10 Governing Law; Submission to Jurisdiction.



          (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.




          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,



24









 






BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY ACCEPTS FOR ITSELF AND
(TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.




          (c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 5.4 OF THE PURCHASE AGREEMENT (OR
SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 5.4 OF THE PURCHASE AGREEMENT) OR
SCHEDULE 1 HERETO, AS APPLICABLE, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.




          (d) EACH PARTY HEREBY (1) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (2) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (3) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (4) ACKNOWLEDGES THAT IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 9.10.




     Section 9.11 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 shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.



25









 





     Section 9.12 Acknowledgments. Each Obligor hereby acknowledges that:



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




          (b) neither the Subordinated Noteholder Representative nor any Guaranteed Creditor has any
fiduciary relationship with or duty to any Obligor arising out of or in connection with this
Agreement or any of the other Transaction Documents, and the relationship between the Obligors, on
the one hand, and the Subordinated Noteholder Representative and Guaranteed Creditors, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor; and




          (c) no joint venture is created hereby or by the other Transaction Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Guaranteed Creditors or among
the Obligors and the Guaranteed Creditors.




          (d) Each of the parties hereto specifically agrees that it has a duty to read this Agreement,
the Security Documents and the other Transaction Documents and agrees that it is charged with
notice and knowledge of the terms of this Agreement, the Security Documents and the other
Transaction Documents; that it has in fact read this Agreement, the Security Documents and the
other Transaction Documents and is fully informed and has full notice and knowledge of the terms,
conditions and effects thereof; that it has been represented by independent legal counsel of its
choice throughout the negotiations preceding its execution of this Agreement and the Security
Documents; and has received the advice of its attorney in entering into this Agreement and the
Security Documents; and that it recognizes that certain of the terms of this Agreement and the
Security Documents result in one party assuming the liability inherent in some aspects of the
transaction and relieving the other party of its responsibility for such liability. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY
EXCULPATORY PROVISION OF THIS AGREEMENT AND THE SECURITY DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”




     Section 9.13 Additional Obligors and Pledgors. Each Subsidiary of the Borrower that
is formed or acquired after the date hereof shall become an Obligor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement and shall
thereafter have the same rights, benefits and obligations as an Obligor party hereto on the date
hereof. Each Guarantor that is required to pledge equity interests of its Subsidiaries shall
execute and deliver a Supplement, if such equity interests were not previously pledged.



     Section 9.14 Releases.



          (a) Release Upon Payment in Full. The grant of a security interest hereunder and all
of rights, powers and remedies in connection herewith shall remain in full force and effect until
the Subordinated Noteholder Representative has (i) retransferred and delivered all Collateral in
its possession to the Pledgors, and (ii) executed a written release or termination statement and
reassigned to the Pledgors without recourse or warranty any remaining Collateral



26









 






and all rights conveyed hereby. Upon the complete payment of the Obligations and the
compliance by the Obligors with all covenants and agreements hereof, the Subordinated Noteholder
Representative, at the expense of the Borrower, will promptly release, reassign and transfer the
Collateral to the Pledgors and declare this Agreement to be of no further force or effect.




          (b) Partial Releases. If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Pledgor in a transaction permitted by this Agreement, then the
Subordinated Noteholder Representative, at the request and sole expense of such Pledgor, shall
promptly execute and deliver to such Pledgor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Collateral and the equity
interests of the Issuer thereof. At the request and sole expense of the Borrower, a Guarantor
shall be released from its obligations hereunder in the event that all the equity interests of such
Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by this
Agreement; provided that the Borrower shall have delivered to the Subordinated Noteholder
Representative, at least ten Business Days prior to the date of the proposed release, a written
request of the Borrower for release identifying the relevant Guarantor and the terms of the sale or
other disposition in reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Borrower stating that such transaction is in
compliance with this Agreement and the other Transaction Documents.




          (c) Retention in Satisfaction. Except as may be expressly applicable pursuant to
Section 9-620 of the UCC, no action taken or omission to act by the Subordinated Noteholder
Representative or the Guaranteed Creditors hereunder, including, without limitation, any exercise
of voting or consensual rights or any other action taken or inaction, shall be deemed to constitute
a retention of the Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full force and effect, until
the Subordinated Noteholder Representative and the Guaranteed Creditors shall have applied payments
(including, without limitation, collections from Collateral) towards the Obligations in the full
amount then outstanding or until such subsequent time as is provided in Section 9.14(a).




     Section 9.15 Acceptance. Each Obligor hereby expressly waives notice of acceptance of
this Agreement, acceptance on the part of the Subordinated Noteholder Representative and the
Guaranteed Creditors being conclusively presumed by their request for this Agreement and delivery
of the same to the Subordinated Noteholder Representative.



[Remainder of page intentionally left blank; signature pages follow]




27









 







     IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and
delivered as of the date first above written.



	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	BORROWER:	 	TETON ENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	GUARANTORS:	 	TETON NORTH AMERICA LLC	 	 
	 	 	By:	 	Teton Energy Corporation, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TETON PICEANCE LLC	 	 
	 	 	By:	 	Teton North America LLC, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TETON DJ LLC	 	 
	 	 	By:	 	Teton North America LLC, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TETON WILLISTON LLC	 	 
	 	 	By:	 	Teton North America LLC, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 





Signature Page

Subordinated Guaranty and Pledge Agreement





 









 











	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	TETON BIG HORN LLC	 	 
	 	 	By:	 	Teton North America LLC, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TETON DJCO LLC	 	 
	 	 	By:	 	Teton Energy Corporation, its sole member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 





Signature Page

Subordinated Guaranty and Pledge Agreement




 









 




Acknowledged and Agreed to as of the date
hereof by:




	 	 	 	 	 
	SUBORDINATED NOTEHOLDER REPRESENTATIVE:WHITEBOX ADVISORS, LLC.

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 



Signature Page

Subordinated Guaranty and Pledge Agreement




 









 








Schedule 1




NOTICE ADDRESSES OF OBLIGORS




Teton Energy Corporation

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton North America LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton Piceance LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton DJ LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton Williston LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton Big Horn LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Teton DJCO LLC

410 17th Street, Suite 1850

Denver, Colorado 80202

Attention: Lonnie Brock




Schedule 1-1




 









 










Schedule 2




DESCRIPTION OF PLEDGED SECURITIES



Pledged Securities:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Percentage	 	Percentage	 	Class of Stock or
	Owner	 	Issuer	 	Owned	 	Pledged	 	other Equity Interest
	Teton Energy Corporation

	 	Teton North America LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests
	Teton North America LLC

	 	Teton Piceance LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests
	Teton North America LLC

	 	Teton DJ LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests
	Teton North America LLC

	 	Teton Williston LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests
	Teton North America LLC

	 	Teton Big Horn LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests
	Teton Energy Corporation

	 	Teton DJCO LLC
	 	 	100	%	 	 	100	%	 	Limited Liability Company Interests






Schedule 2-1




 









 










Schedule 3




FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS




     1.   .



Schedule
3-1



 









 









Schedule 4




LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE




	 	 	 
	Legal name of the Borrower:

	 	Teton Energy Corporation
	Address:

	 	410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 

    last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Delaware
	Current jurisdiction of organization:

	 	Delaware
	Organizational number:

	 	2896826
	Taxpayer identification number:

	 	84-1482290
	Location of chief executive office or sole place of

	 	410 17th Street, Suite 1850,
	     business over the last five years:

	 	Denver, Colorado 80202
	 
	 	 
	Legal name of the Obligor:

	 	Teton North America LLC
	Address:

	 	410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 

     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number: 
	 	 20051069170
	Location of chief executive office or sole place of

	 	410 17th Street, Suite 1850,
	     business over the last five years:

	 	Denver, Colorado 80202
	 
	 	 
	Legal name of the Obligor:

	 	Teton Piceance LLC
	Address:

	 	410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 
     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number:

	 	20051069213
	Location of chief executive office or sole place of

	 	410 17th Street, Suite 1850,
	     business over the last five years:

	 	 Denver, Colorado 80202
	 

	 	






Schedule
4-1




 









 







	 	 	 
	Legal name of the Obligor:

	 	Teton DJ LLC
	Address:

	 	 410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 

     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number:

	 	 20051069240
	Location of chief executive office or sole place of

	 	 410 17th Street, Suite 1850, 
	     business over the last five years:

	 	Denver, Colorado 80202
	 
	 	 
	Legal name of the Obligor:

	 	Teton Williston LLC
	Address:

	 	 410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 

     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number:

	 	 20061183886
	Location of chief executive office or sole place of

	 	 410 17th Street, Suite 1850, 
	     business over the last five years:

	 	Denver, Colorado 80202
	 
	Legal name of the Obligor:

	 	Teton Big Horn LLC
	Address: 
	 	410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 
     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number:

	 	 20071277018
	Location of chief executive office or sole place of

	 	 410 17th Street, Suite 1850,
	     business over the last five years:

	 	Denver, Colorado 80202
	 
	 	 







Schedule 4-2




 









 









	 	 	 
	Legal name of the Obligor:

	 	Teton DJCO LLC
	Address:

	 	 410 17th Street, Suite 1850, 
	 

	 	Denver, Colorado 80202
	All names and trade names that the Borrower has used
in the 

     last five years:

	 	None
	Jurisdictions of organization over the last five years:

	 	Colorado
	Current jurisdiction of organization:

	 	Colorado
	Organizational number:

	 	 20071416728
	Location of chief executive office or sole place of

	 	 410 17th Street, Suite 1850, 
	     business over the last five years:

	 	Denver, Colorado 80202






Schedule 4-3




 









 








ACKNOWLEDGMENT AND CONSENT




     The undersigned hereby acknowledges receipt of a copy of the Subordinated Guaranty and Pledge
Agreement dated as of June ___, 2008 (the “Guaranty and Pledge Agreement”), made by the Obligors
parties thereto for the benefit of Whitebox Advisors, LLC, as Subordinated Noteholder
Representative. The undersigned agrees for the benefit of the Subordinated Noteholder
Representative and the Guaranteed Creditors as follows:



     1. The undersigned will be bound by the terms of the Subordinated Guaranty and Pledge
Agreement and will comply with such terms insofar as such terms are applicable to the undersigned.



     2. The terms of Section 6.01(a) and Section 6.03 of the Subordinated Guaranty and
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be
required of it pursuant to Section 6.02(a) or Section 6.03 of the Subordinated Guaranty and Pledge
Agreement.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	[NAME OF ISSUER]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:
	 
	 	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Fax:	 	 	 	 
	 

	 	 	 	 	 	 







 




			
	*	 	This consent is necessary only with respect to any Issuer which is not also an Obligor. This
consent may be modified or eliminated with respect to any Issuer that is not controlled by a
Obligor.





Schedule 4-4




 









 








Annex I




Assumption Agreement




     ASSUMPTION AGREEMENT, dated as of [                    ], 200[                    ], made by [ 
                   ],
a [                    ] (the “Additional Obligor”), in favor of Whitebox Advisors, LLC, as
Subordinated Noteholder Representative (in such capacity, the “Subordinated Noteholder
Representative”) for the Guaranteed Creditors (used herein as defined in the Subordinated
Guaranty and Pledge Agreement referred to below). All capitalized terms not defined herein shall
have the meaning ascribed to them in the Transaction Documents referred to below.



W I T N E S S E T H:




     WHEREAS, Teton Energy Corporation, a Delaware corporation (the “Borrower”), the
Subordinated Noteholder Representative, and certain investors have entered into that certain
Securities Purchase Agreement, dated as of June ___, 2008 (as amended, restated, supplemented or
otherwise modified from time to time, the “Purchase Agreement”);



     WHEREAS, in connection with the Purchase Agreement, the Borrower and certain of its Affiliates
(other than the Additional Obligor) have entered into a Subordinated Guaranty and Pledge Agreement,
dated as of June ___, 2008 (as amended, restated, supplemented or otherwise modified from time to
time, the “Subordinated Guaranty and Pledge Agreement”) in favor of the Subordinated
Noteholder Representative for the benefit of the Guaranteed Creditors;



     WHEREAS, the Transaction Documents require the Additional Obligor to become a party to the
Subordinated Guaranty and Pledge Agreement; and



     WHEREAS, the Additional Obligor has agreed to execute and deliver this Assumption Agreement in
order to become a party to the Subordinated Guaranty and Pledge Agreement;



     NOW, THEREFORE, IT IS AGREED:



     1. Subordinated Guaranty and Pledge Agreement. By executing and delivering this Assumption
Agreement, the Additional Obligor, as provided in Section 9.13 of the Subordinated Guaranty
and Pledge Agreement, hereby becomes a party to the Subordinated Guaranty and Pledge Agreement as
an Obligor thereunder with the same force and effect as if originally named therein as an Obligor
and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of an Obligor thereunder and expressly grants to the Subordinated Noteholder
Representative, for the benefit of the Guaranteed Creditors, a security interest in all Collateral
owned by such Additional Obligor to secure all of such Additional Obligor’s obligations and
liabilities thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in Schedules 1 through 4 to the Subordinated Guaranty and Pledge Agreement.
The Additional Obligor hereby represents and warrants that each of the representations and
warranties contained in Article IV of the Subordinated Guaranty and Pledge Agreement is true and
correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.



Annex I-1









 







     2. Governing Law. This Assumption Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.



     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed
and delivered as of the date first above written.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	[ADDITIONAL OBLIGOR]	 	 
	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 






Annex I-2









 








Annex II




Supplement




     SUPPLEMENT, dated as of [                    ], 200[                    ], made by [             
       ], a
[                    ] (the “Additional Pledgor”), in favor of Whitebox Advisors, LLC., as
Subordinated Noteholder Representative (in such capacity, the “Subordinated Noteholder
Representative”) for the Guaranteed Creditors (used herein as defined in the Subordinated
Guaranty and Pledge Agreement referred to below). All capitalized terms not defined herein shall
have the meaning ascribed to them in the Transaction Documents referred to below.



W I T N E S S E T H:




     WHEREAS, Teton Energy Corporation, a Delaware corporation (the “Borrower”), the
Subordinated Noteholder Representative, and certain investors have entered into that certain
Securities Purchase Agreement, dated as of June ___, 2008 (as amended, restated, supplemented or
otherwise modified from time to time, the “Purchase Agreement”);



     WHEREAS, in connection with the Purchase Agreement, the Borrower and certain of its Affiliates
(other than the Additional Obligor) have entered into a Subordinated Guaranty and Pledge Agreement,
dated as of June ___, 2008 (as amended, restated, supplemented or otherwise modified from time to
time, the “Subordinated Guaranty and Pledge Agreement”) in favor of the Subordinated
Noteholder Representative for the benefit of the Guaranteed Creditors;



     WHEREAS, the Subordinated Guaranty and Pledge Agreement requires the Additional Pledgor to
pledge the equity interests described hereto on Schedule 2-S; and



     WHEREAS, the Additional Pledgor has agreed to execute and deliver this Supplement in order to
pledge such equity interests;



     NOW, THEREFORE, IT IS AGREED:



     1. Guaranty and Pledge Agreement. By executing and delivering this Supplement, the Additional
Pledgor, as provided in Section 9.13 of the Subordinated Guaranty and Pledge Agreement,
hereby becomes a party to the Subordinated Guaranty and Pledge Agreement as an Obligor thereunder
with the same force and effect as if originally named as an Obligor therein, and without limiting
the generality of the foregoing, hereby pledges and grants a security interest in (a) the
securities described or referred to in Schedule 2-S and (b) (i) the certificates or
instruments, if any, representing such securities, (ii) all dividends (cash, equity interests or
otherwise), cash, instruments, rights to subscribe, purchase or sell and all other rights and
property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such securities, (iii) all replacements, additions to and substitutions
for any of the property referred to in this definition, including, without limitation, claims
against third parties, (iv) the proceeds, interest, profits and other income of or on any of the
property referred to in this definition, (v) all security entitlements in respect of any of the
foregoing, if any, (vi) all books and records relating to any of the property referred to in this
definition and



 









 






     (vii) all proceeds of any of the foregoing (collectively, the “Collateral”). Upon
execution of this Supplement, such securities will constitute “Pledged Securities” for purposes of
the Subordinated Guaranty and Pledge Agreement with the same force and effect as if originally
listed on Schedule 2 thereto and, without limiting the generality of the foregoing, the
Additional Pledgor hereby expressly assumes all obligations and liabilities of a Pledgor thereunder
and expressly grants to the Subordinated Noteholder Representative, for the benefit of the
Guaranteed Creditors, a security interest in all Collateral owned by such Additional Pledgor to
secure all of such its obligations and liabilities thereunder. The information set forth in
Schedule 2-S hereto is hereby added to the information set forth in Schedule 2 to
the Subordinated Guaranty and Pledge Agreement. The Additional Pledgor hereby represents and
warrants that each of the representations and warranties contained in Article IV of the
Subordinated Guaranty and Pledge Agreement is true and correct on and as the date hereof (after
giving effect to this Supplement) as if made on and as of such date.



     2. Governing Law. This Supplement shall be governed by, and construed in accordance
with, the laws of the State of New York.



     IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and
delivered as of the date first above written.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	[ADDITIONAL PLEDGOR]	 	 
	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





 









 






Annex III




Rights and Obligations of the Subordinated Noteholder Representative with Respect to the

Subordinated Noteholders



1. Nature of Duties. The Subordinated Noteholder Representative shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither the Subordinated
Noteholder Representative nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as such under this
Agreement or any other Transaction Document or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or answerable for any loss, unless caused
solely by its or their gross negligence or willful misconduct as determined by a final judgment
(not subject to further appeal) of a court of competent jurisdiction. The duties of the
Subordinated Noteholder Representative shall be mechanical and administrative in nature; the
Subordinated Noteholder Representative shall not have by reason of this Agreement or any other
Transaction Document a fiduciary relationship in respect of any Obligor or any Subordinated
Noteholder; and nothing in this Agreement or any other Transaction Document, expressed or implied,
is intended to or shall be so construed as to impose upon the Subordinated Noteholder
Representative any obligations in respect of this Agreement or any other Transaction Document
except as expressly set forth herein and therein.



2. Lack of Reliance on the Subordinated Noteholder Representative. Independently and without
reliance upon the Subordinated Noteholder Representative, each Subordinated Noteholder, to the
extent it deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Obligors in connection with such
Subordinated Noteholder’s investment in the Obligors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the taking or not
taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of
the Obligors, and of the value of the Collateral from time to time, and the Subordinated Noteholder
Representative shall have no duty or responsibility, either initially or on a continuing basis, to
provide any Subordinated Noteholder with any credit, market or other information with respect
thereto, whether coming into its possession before any Obligations are incurred or at any time or
times thereafter. The Subordinated Noteholder Representative shall not be responsible to the
Obligors or any Subordinated Noteholder for any recitals, statements, information, representations
or warranties herein or in any document, certificate or other writing delivered in connection
herewith, or for the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of this Agreement or any other Transaction Document, or for
the financial condition of the Obligors or the value of any of the Collateral, or be required to
make any inquiry concerning either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Transaction Document, or the financial condition of the
Obligors, or the value of any of the Collateral, or the existence or possible existence of any
default or Event of Default under this Agreement, the Debentures or any of the other Transaction
Documents.




 









 







3. Certain Rights of the Subordinated Noteholder Representative. The Subordinated Noteholder
Representative shall have the right to take any action with respect to the Collateral, on behalf of
all of the Subordinated Noteholders. To the extent practical, the Subordinated Noteholder
Representative shall request instructions from the Subordinated Noteholders with respect to any
material act or action (including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in accordance with the
instructions of a majority in interest (based on outstanding principal amount of Debentures); if
such instructions are not provided despite the Subordinated Noteholder Representative’s request
therefor, the Subordinated Noteholder Representative shall be entitled to refrain from such act or
taking such action, and if such action is taken, shall be entitled to appropriate indemnification
from the Subordinated Noteholders in respect of actions to be taken by the Subordinated Noteholder
Representative; and the Subordinated Noteholder Representative shall not incur liability to any
person or entity by reason of so refraining. Without limiting the foregoing, (a) no Subordinated
Noteholder shall have any right of action whatsoever against the Subordinated Noteholder
Representative as a result of the Subordinated Noteholder Representative acting or refraining from
acting hereunder in accordance with the terms of this Agreement or any other Transaction Document,
and the debtors shall have no right to question or challenge the authority of, or the instructions
given to, the Subordinated Noteholder Representative pursuant to the foregoing and (b) the
Subordinated Noteholder Representative shall not be required to take any action which the
Subordinated Noteholder Representative believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable
law.



4. Reliance. The Subordinated Noteholder Representative shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, statement, certificate,
telecopier message, order or other document or telephone message signed, sent or made by the proper
person or entity, and, with respect to all legal matters pertaining to the Agreement and the other
Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all
other matters pertaining to this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of other experts selected by it. Anything to the contrary notwithstanding,
the Subordinated Noteholder Representative shall have no obligation whatsoever to any Subordinated
Noteholder to assure that the Collateral exists or is owned by the Obligors or is cared for,
protected or insured or that the liens granted pursuant to this Agreement have been properly or
sufficiently or lawfully created, perfected, or enforced or are entitled to any particular
priority.



5. Indemnification. To the extent that the Subordinated Noteholder Representative is not
reimbursed and indemnified by the debtors, the Subordinated Noteholders will jointly and severally
reimburse and indemnify the Subordinated Noteholder Representative, in proportion to their
initially purchased respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Subordinated Noteholder Representative in performing its duties hereunder or under this
Agreement or any other Transaction Document, or in any way relating to or arising out of this
Agreement or any other Transaction Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have resulted


 









 






solely from the Subordinated Noteholder Representative’s own gross negligence or willful
misconduct. Prior to taking any action hereunder as Subordinated Noteholder Representative, the
Subordinated Noteholder Representative may require each Subordinated Noteholder to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Subordinated Noteholder
Representative for costs and expenses associated with taking such action.



6. Resignation by the Subordinated Noteholder Representative.





     (a) The Subordinated Noteholder Representative may resign from the performance of all
its functions and duties under the Agreement and the other Transaction Documents at any time
by giving 30 days’ prior written notice (as provided in the Purchase Agreement) to the
Obligors, the Senior Agent and the Subordinated Noteholders. Such resignation shall take
effect upon the appointment of a successor Subordinated Noteholder Representative pursuant
to clauses (b) and (c) below.




     (b) Upon any such notice of resignation, the Subordinated Noteholders, acting by a
majority in interest based upon the outstanding principal amount of Debentures, shall
appoint a successor Subordinated Noteholder Representative hereunder.




     (c) If a successor Subordinated Noteholder Representative shall not have been so
appointed within said 30-day period, the Subordinated Noteholder Representative shall then
appoint a successor Subordinated Noteholder Representative who shall serve as Subordinated
Noteholder Representative until such time, if any, as the Subordinated Noteholders appoint a
successor Subordinated Noteholder Representative as provided above. If a successor
Subordinated Noteholder Representative has not been appointed within such 30-day period, the
Subordinated Noteholder Representative may petition any court of competent jurisdiction or
may interplead the Obligors and the Subordinated Noteholders in a proceeding for the
appointment of a successor Subordinated Noteholder Representative, and all fees, including,
but not limited to, extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Obligors on demand.


7. Rights with Respect to Collateral. Each Subordinated Noteholder agrees with all other
Subordinated Noteholders and the Subordinated Noteholder Representative (i) that it shall not, and
shall not attempt to, exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to this Agreement), or
take or institute any action against the Subordinated Noteholder Representative or any of the other
Subordinated Noteholders in respect of the Collateral or its rights hereunder (other than any such
action arising from the breach of this Agreement) and (ii) that such Subordinated Noteholder has no
other rights with respect to the Collateral other than as set forth in this Agreement and the other
Transaction Documents. Upon the acceptance of any appointment as Subordinated Noteholder
Representative hereunder by a successor Subordinated Noteholder Representative, such successor
Subordinated Noteholder Representative shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Subordinated Noteholder Representative and
the retiring Subordinated Noteholder


 









 






Representative shall be discharged from its duties and obligations under the Agreement.  After any
retiring Subordinated Noteholder Representative’s resignation or removal hereunder as Subordinated
Noteholder Representative, the provisions of the Agreement including this Annex III shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was Subordinated
Noteholder Representative.