Exhibit 10.11


 


EXECUTION VERSION


 


EXHIBIT G TO

FIRST LIEN CREDIT AND GUARANTY AGREEMENT


 




 





FIRST LIEN PLEDGE AND SECURITY AGREEMENT


 


dated as of October 26, 2007


 


among


 


CHEM RX CORPORATION,


 


EACH OF THE OTHER GRANTORS PARTY HERETO


 


and


 


CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK
AGENCY,


 


as the Collateral Agent




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
  Section 1.01

  	
  General Definitions

  	
  1

  
	
  Section 1.02

  	
  Definitions; Interpretation

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE II GRANT OF SECURITY

  	
  7

  
	
  Section 2.01

  	
  Grant of Security

  	
  7

  
	
  Section 2.02

  	
  Certain Limited Exclusions

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE III SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE

  	
  9

  
	
  Section 3.01

  	
  Security for Obligations

  	
  9

  
	
  Section 3.02

  	
  Continuing Liability Under Collateral

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES AND COVENANTS

  	
  9

  
	
  Section 4.01

  	
  Generally

  	
  9

  
	
  Section 4.02

  	
  Equipment and Inventory

  	
  11

  
	
  Section 4.03

  	
  Receivables

  	
  12

  
	
  Section 4.04

  	
  Investment Related Property

  	
  13

  
	
  Section 4.05

  	
  Pledged Equity Interests

  	
  15

  
	
  Section 4.06

  	
  Pledged Debt

  	
  17

  
	
  Section 4.07

  	
  Investment Accounts

  	
  17

  
	
  Section 4.08

  	
  Material Contracts

  	
  18

  
	
  Section 4.09

  	
  Letter of Credit Rights

  	
  19

  
	
  Section 4.10

  	
  Intellectual Property

  	
  19

  
	
  Section 4.11

  	
  Commercial Tort Claims

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE V FURTHER ASSURANCES; ADDITIONAL GRANTORS

  	
  22

  
	
  Section 5.01

  	
  Further Assurances

  	
  22

  
	
  Section 5.02

  	
  Additional Grantors

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT

  	
  23

  
	
  Section 6.01

  	
  Power of Attorney

  	
  23

  
	
  Section 6.02

  	
  No Duty on the Part of Collateral Agent or
  Secured Parties

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII REMEDIES

  	
  25

  
	
  Section 7.01

  	
  Generally

  	
  25

  
	
  Section 7.02

  	
  Application of Proceeds

  	
  26

  
	
  Section 7.03

  	
  Sales on Credit

  	
  26

  
	
  Section 7.04

  	
  Deposit Accounts

  	
  27

  
	
  Section 7.05

  	
  Investment Related Property

  	
  27

  
	
  Section 7.06

  	
  Intellectual Property

  	
  27

  
	
  Section 7.07

  	
  Cash Proceeds

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII COLLATERAL AGENT

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX CONTINUING SECURITY INTEREST; TRANSFER OF LOANS

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE X STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM

  	
  29

  



 


i

















 


	
  ARTICLE XI MISCELLANEOUS.

  	
  30

  



 


ii

















 


	
  SCHEDULE
  4.01 — GENERAL INFORMATION

  
	
   

  
	
  SCHEDULE
  4.02 — LOCATION OF EQUIPMENT AND INVENTORY

  
	
   

  
	
  SCHEDULE
  4.05 — INVESTMENT RELATED PROPERTY

  
	
   

  
	
  SCHEDULE
  4.09 — DESCRIPTION OF LETTERS OF CREDIT

  
	
   

  
	
  SCHEDULE
  4.10 — INTELLECTUAL PROPERTY EXCEPTIONS

  
	
   

  
	
  SCHEDULE
  4.11 — COMMERCIAL TORT CLAIMS

  
	
   

  
	
  EXHIBIT A –
  PLEDGE SUPPLEMENT

  
	
   

  
	
  EXHIBIT B –
  FIRST LIEN TRADEMARK SECURITY AGREEMENT

  
	
   

  
	
  EXHIBIT C –
  FIRST LIEN COPYRIGHT SECURITY AGREEMENT

  
	
   

  
	
  EXHIBIT D –
  FIRST LIEN PATENT SECURITY AGREEMENT

  



 


iii

















 


This FIRST LIEN PLEDGE AND SECURITY
AGREEMENT, dated as of October 26, 2007 (this “Agreement”), between EACH
OF THE UNDERSIGNED,
whether as an original signatory hereto or as an Additional Grantor (as herein
defined) (each, a “Grantor”), and Canadian Imperial Bank of Commerce,
New York Agency, as Collateral Agent for the Secured Parties (as herein
defined) (in such capacity as Collateral Agent, the “Collateral Agent”).


 


RECITALS:


 


WHEREAS, reference is made to that certain
First Lien Credit and Guaranty Agreement, dated as of the date hereof (as it
may be amended, restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”), by and among Chem Rx Corporation (formerly Paramount
Acquisition Corp.), a Delaware corporation (“Company”), certain subsidiaries of
the Company, as Guarantors, the lenders party thereto from time to time (the “Lenders”),
CIBC WORLD MARKETS CORP., as Sole Lead Arranger and Sole Book Runner, and
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent
(in such capacity, the “Administrative Agent”) and Collateral Agent;


 


WHEREAS, subject to the terms and conditions
of the Credit Agreement, certain Grantors may enter into one or more Hedge
Agreements with one or more Lender Counterparties;


 


WHEREAS, in consideration of the extensions
of credit and other accommodations of Lenders and Lender Counterparties as set
forth in the Credit Agreement and the Hedge Agreements, respectively, each Grantor
has agreed to secure such Grantor’s Obligations under the Loan Documents and
the Hedge Agreements as set forth herein; and


 


NOW, THEREFORE, in consideration of the
premises and the agreements, provisions and covenants herein contained, each
Grantor and the Collateral Agent agree as follows:


 


ARTICLE I



DEFINITIONS


 


Section 1.01           General Definitions.
In this Agreement, the following terms shall have the following meanings:


 


“Account Debtor” shall mean each
Person who is obligated on a Receivable or any Supporting Obligation related
thereto.


 


“Accounts” shall mean all “accounts”
as defined in Article 9 of the UCC including Health-Care Insurance Receivables.


 


“Additional Grantors” shall have the
meaning assigned in Section 5.02.


 


“Administrative Agent” shall have the
meaning set forth in the recitals.


 


“Agreement” shall have the meaning set
forth in the preamble.


 


“Assigned Agreements” shall mean all
agreements and contracts to which such Grantor is a party as of the date
hereof, or to which such Grantor becomes a party after the date hereof,
including, without limitation, each Material Contract, as each such agreement
may be amended, supplemented, restated or otherwise modified from time to time.


 

















 


“Borrower” shall have the meaning set
forth in the preamble.


 


“Cash Proceeds” shall have the meaning
assigned in Section 7.07.


 


“Chattel Paper” shall mean all “chattel
paper” as defined in Article 9 of the UCC, including, without limitation, “electronic
chattel paper” or “tangible chattel paper”, as each term is defined in Article
9 of the UCC.


 


“Collateral” shall have the meaning
assigned in Section 2.01.


 


“Collateral Account” means any account
established by the Collateral Agent for the purpose of serving as a collateral
account under this Agreement.


 


“Collateral Agent” shall have the
meaning set forth in the preamble.


 


“Collateral Records” shall mean books,
records, ledger cards, files, correspondence, customer lists, blueprints,
technical specifications, manuals, computer software, computer printouts,
tapes, disks and related data processing software and similar items that at any
time evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon.


 


“Collateral Support” shall mean all
property (real or personal) assigned, hypothecated or otherwise securing any
Collateral and shall include any security agreement or other agreement granting
a lien or security interest in such real or personal property.


 


“Commercial Tort Claims” shall mean
all “commercial tort claims” as defined in Article 9 of the UCC,
including, without limitation, all commercial tort claims listed on Schedule
4.11 (as such schedule may be amended or supplemented from time to time).


 


“Commodities Accounts” (i) shall mean
all “commodity accounts” as defined in Article 9 of the UCC and (ii) shall
include, without limitation, all of the accounts listed on Schedule 4.05(A)
under the heading “Commodities Accounts” (as such schedule may be amended or
supplemented from time to time).


 


“Company” shall have the meaning set
forth in the recitals.


 


“Copyright Licenses” shall mean any
and all agreements providing for the granting of any right in or to Copyrights
(whether such Grantor is licensee or licensor thereunder) including, without
limitation, each agreement referred to in Schedule 4.10(B) (as such schedule
may be amended or supplemented from time to time).


 


“Copyrights” shall mean all United
States and foreign copyrights (including Community designs), including but not
limited to copyrights in software and databases, and all Mask Works (as defined
under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or
unregistered, and with respect to any and all of the foregoing: (i) all
registrations and applications therefor including, without limitation, the
registrations and applications referred to in Schedule 4.10(A) (as such
schedule may be amended or supplemented from time to time), (ii) all extensions
and renewals thereof, (iii) all rights corresponding thereto throughout the
world, (iv) all rights to sue for past, present and future infringements
thereof, and (v) all Proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages, and proceeds of suit.


 


2

















 


“Credit Agreement” shall have the
meaning set forth in the recitals.


 


“Deposit Accounts” (i) shall mean all “deposit
accounts” as defined in Article 9 of the UCC and (ii) shall include, without
limitation, all of the accounts listed on Schedule 4.05(A) under the heading “Deposit
Accounts” (as such schedule may be amended or supplemented from time to time).


 


“Documents” shall mean all “documents”
as defined in Article 9 of the UCC.


 


“Equipment” shall mean:  (i) all “equipment” as defined in Article 9
of the UCC, (ii) all machinery, manufacturing equipment, data processing
equipment, computers, office equipment, furnishings, furniture, appliances,
fixtures and tools (in each case, regardless of whether characterized as
equipment under the UCC) and (iii) all accessions or additions thereto, all
parts thereof, whether or not at any time of determination incorporated or
installed therein or attached thereto, and all replacements therefor, wherever
located, now or hereafter existing, including any fixtures.


 


“Event of Default” means each of the conditions or
events set forth in Section 8.01 of the Credit Agreement.


 


“General Intangibles” (i) shall mean
all “general intangibles” as defined in Article 9 of the UCC, including “payment
intangibles” also as defined in Article 9 of the UCC and (ii) shall include,
without limitation, all interest rate or currency protection or hedging
arrangements, all tax refunds, all licenses, permits, concessions and
authorizations, all Assigned Agreements and all Intellectual Property (in each
case, regardless of whether characterized as general intangibles under the
UCC).


 


“Goods” (i) shall mean all “goods” as
defined in Article 9 of the UCC and (ii) shall include, without limitation, all
Inventory and Equipment (in each case, regardless of whether characterized as
goods under the UCC).


 


“Grantor” shall have the meaning set
forth in the preamble.


 


“Health-Care Insurance Receivable”
shall mean all “health-care insurance receivable” as defined in Article 9 of
the UCC.


 


“Instruments” shall mean all “instruments”
as defined in Article 9 of the UCC.


 


“Insurance” shall mean (i) all
insurance policies covering any or all of the Collateral (regardless of whether
the Collateral Agent is the loss payee thereof) and (ii) any key man life
insurance policies.


 


“Intellectual Property” shall mean,
collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the
Trade Secret Licenses.


 


“Internal Revenue Code” shall mean the
United States Internal Revenue Code of 1986, as amended from time to time.


 


“Inventory” shall mean (i) all “inventory”
as defined in Article 9 of the UCC and (ii) all goods held for sale or lease or
to be furnished under contracts of service or so leased or furnished, all raw
materials, work in process, finished goods, and materials used or consumed in
the manufacture, packing, shipping, advertising, selling, leasing, furnishing
or production of such inventory or otherwise used or consumed in any Grantor’s
business; and all goods which are returned to or repossessed by any Grantor,


 


3

















 


all computer
programs embedded in any goods and all accessions thereto and products thereof
(in each case, regardless of whether characterized as inventory under the UCC).


 


“Investment Accounts” shall mean the
Collateral Account, Securities Accounts, Commodities Accounts and Deposit
Accounts.


 


“Investment Related Property” shall
mean:  (i) all “investment property” (as
such term is defined in Article 9 of the UCC) and (ii) all of the following
(regardless of whether classified as investment property under the UCC): all
Pledged Equity Interests, Pledged Debt, the Investment Accounts and
certificates of deposit, excluding, in any case, stock or interests in any
Consent Subsidiary.


 


“Lenders” shall have the meaning set
forth in the recitals.


 


“Letter of Credit Right” shall mean “letter-of-credit
right” as defined in Article 9 of the UCC.


 


“Loan Documents” shall mean the Credit
Agreement, the other Loan Documents (as defined in the Credit Agreement) and
the Hedge Agreements.


 


“Money” shall mean “money” as defined
in the UCC.


 


“Non-Assignable Contract” shall mean
any agreement, contract or license to which any Grantor is a party that by its
terms purport to restrict or prevent the assignment or granting of a security
interest therein (either by its terms or by any federal or state statutory
prohibition or otherwise irrespective of whether such prohibition or
restriction is enforceable under Section 9-406 through 409 of the UCC).


 


“Patent Licenses” shall mean all
agreements providing for the granting of any right in or to Patents (whether
such Grantor is licensee or licensor thereunder) including, without limitation,
each agreement referred to in Schedule 4.10(D) (as such schedule may be amended
or supplemented from time to time).


 


“Patents” shall mean all United States
and foreign patents and certificates of invention, or similar industrial
property rights, and applications for any of the foregoing, including, but not
limited to: (i) each patent and patent application referred to in Schedule
4.10(C) hereto (as such schedule may be amended or supplemented from time to
time), (ii) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals, and reexaminations thereof, (ii) all rights corresponding
thereto throughout the world, (ii) all inventions and improvements described
therein, (iv) all rights to sue for past, present and future infringements
thereof, (v) all licenses, claims, damages, and proceeds of suit arising
therefrom, and (v) all Proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims, damages, and proceeds
of suit.


 


“Pledge Supplement” shall mean any
supplement to this agreement in substantially the form of Exhibit A.


 


“Pledged Debt” shall mean all
Indebtedness owed to such Grantor, including, without limitation, all
Indebtedness described on Schedule 4.05(A) under the heading “Pledged Debt” (as
such schedule may be amended or supplemented from time to time), issued by the
obligors named therein, the instruments evidencing such Indebtedness, and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such Indebtedness.


 


4

















 


“Pledged Equity Interests” shall mean
all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and
Pledged Trust Interests.


 


“Pledged LLC Interests” shall mean all
interests in any limited liability company including, without limitation, all
limited liability company interests listed on Schedule 4.05(A) under the heading
“Pledged LLC Interests” (as such schedule may be amended or supplemented from
time to time) and the certificates, if any, representing such limited liability
company interests and any interest of such Grantor on the books and records of
such limited liability company or on the books and records of any securities
intermediary pertaining to such interest and all dividends, distributions,
cash, warrants, rights, options, instruments, securities and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such limited liability company
interests, excluding, in any case, interests in any Consent Subsidiary.


 


“Pledged Partnership Interests” shall
mean all interests in any general partnership, limited partnership, limited
liability partnership or other partnership including, without limitation, all
partnership interests listed on Schedule 4.05(A) under the heading “Pledged
Partnership Interests” (as such schedule may be amended or supplemented from
time to time) and the certificates, if any, representing such partnership
interests and any interest of such Grantor on the books and records of such
partnership or on the books and records of any securities intermediary
pertaining to such interest and all dividends, distributions, cash, warrants,
rights, options, instruments, securities and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such partnership interests, excluding, in any case,
interests in any Consent Subsidiary.


 


“Pledged Stock” shall mean all shares
of capital stock owned by such Grantor, including, without limitation, all
shares of capital stock described on Schedule 4.05(A) under the heading “Pledged
Stock” (as such schedule may be amended or supplemented from time to time), and
the certificates, if any, representing such shares and any interest of such
Grantor in the entries on the books of the issuer of such shares or on the
books of any securities intermediary pertaining to such shares, and all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, excluding, in any case, capital stock of any Consent
Subsidiary.


 


“Pledged Trust Interests” shall mean
all interests in a Delaware business trust or other trust including, without
limitation, all trust interests listed on Schedule 4.05(A) under the heading “Pledged
Trust Interests” (as such schedule may be amended or supplemented from time to
time) and the certificates, if any, representing such trust interests and any
interest of such Grantor on the books and records of such trust or on the books
and records of any securities intermediary pertaining to such interest and all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
trust interests, excluding, in any case, trust interests in any Consent
Subsidiary.


 


“Proceeds” shall mean:  (i) all “proceeds” as defined in Article 9 of
the UCC, (ii) payments or distributions made with respect to any Investment
Related Property and (iii) whatever is receivable or received when Collateral
or proceeds are sold, exchanged, collected or otherwise disposed of, whether
such disposition is voluntary or involuntary.


 


“Receivables” shall mean all rights to
payment, whether or not earned by performance, for goods or other property
sold, leased, licensed, assigned or otherwise disposed of, or services rendered
or to be rendered, including, without limitation all such rights constituting
or evidenced by any Account, Chattel Paper, Instrument, General Intangible or
Investment Related Property, together with all of


 


5

















 


Grantor’s
rights, if any, in any goods or other property giving rise to such right to
payment and all Collateral Support and Supporting Obligations related thereto
and all Receivables Records.


 


“Receivables Records” shall mean (i)
all original copies of all documents, instruments or other writings or electronic
records or other Records evidencing the Receivables, (ii) all books,
correspondence, credit or other files, Records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems and other papers and documents relating to the
Receivables, whether in the possession or under the control of Grantor or any
computer bureau or agent from time to time acting for Grantor or otherwise,
(iii) all evidences of the filing of financing statements and the registration
of other instruments in connection therewith, and amendments, supplements or
other modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgments, or other writings, including, without
limitation, lien search reports, from filing or other registration officers,
(iv) all credit information, reports and memoranda relating thereto and (v) all
other written or nonwritten forms of information related in any way to the
foregoing or any Receivable.


 


“Record” shall have the meaning
specified in Article 9 of the UCC.


 


“Secured Obligations” shall have the
meaning assigned in Section 3.01.


 


“Secured Parties” shall mean the
Lenders and the Lender Counterparties and shall include, without limitation,
all former Lenders and Lender Counterparties to the extent that any Obligations
owing to such Persons were incurred while such Persons were Lenders or Lender
Counterparties and such Obligations have not been paid or satisfied in full.


 


“Securities Accounts” (i) shall mean
all “securities accounts” as defined in Article 8 of the UCC and
(ii) shall include, without limitation, all of the accounts listed on
Schedule 4.05(A) under the heading “Securities Accounts” (as such schedule may
be amended or supplemented from time to time).


 


“Supporting Obligation” shall mean all
“supporting obligations” as defined in Article 9 of the UCC.


 


“Trademark Licenses” shall mean any
and all agreements providing for the granting of any right in or to Trademarks
(whether such Grantor is licensee or licensor thereunder) including, without
limitation, each agreement referred to in Schedule 4.10(F) (as such schedule
may be amended or supplemented from time to time).


 


“Trademarks” shall mean all United
States, state and foreign trademarks, trade names, corporate names, company
names, business names, fictitious business names, internet domain names, trade
styles, service marks, certification marks, collective marks, logos, other source
or business identifiers, designs and general intangibles of a like nature, all
registrations and applications for any of the foregoing including, but not
limited to the registrations and applications referred to in Schedule 4.10(E)
(as such schedule may be amended or supplemented from time to time), all
extensions or renewals of any of the foregoing, all of the goodwill of the
business connected with the use of and symbolized by the foregoing, the right
to sue for past, present and future infringement or dilution of any of the
foregoing or for any injury to goodwill, and all proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims,
damages, and proceeds of suit.


 


“Trade Secret Licenses” shall mean any
and all agreements providing for the granting of any right in or to Trade
Secrets (whether such Grantor is licensee or licensor thereunder) including,


 


6

















 


without
limitation, each agreement referred to in Schedule 4.10(G) (as such schedule
may be amended or supplemented from time to time).


 


“Trade Secrets” shall mean all trade
secrets and all other confidential or proprietary information and know-how
whether or not such Trade Secret has been reduced to a writing or other
tangible form, including all documents and things embodying, incorporating, or
referring in any way to such Trade Secret, including but not limited to: (i)
the right to sue for past, present and future misappropriation or other
violation of any Trade Secret, and (ii) all Proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims,
damages, and proceeds of suit.


 


“UCC” shall mean the Uniform
Commercial Code as in effect from time to time in the State of New York or,
when the context implies, the Uniform Commercial Code as in effect from time to
time in any other applicable jurisdiction.


 


“United States” shall mean the United
States of America.


 


Section 1.02           Definitions;
Interpretation. All capitalized terms used herein (including the preamble
and recitals hereto) and not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement or, if not defined therein, in the UCC.
References to “Sections,” “Exhibits” and “Schedules” shall be to Sections,
Exhibits and Schedules, as the case may be, of this Agreement unless otherwise
specifically provided. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect. Any of the
terms defined herein may, unless the context otherwise requires, be used in the
singular or the plural, depending on the reference. The use herein of the word “include”
or “including”, when following any general statement, term or matter, shall not
be construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as “without limitation” or “but
not limited to” or words of similar import) is used with reference thereto, but
rather shall be deemed to refer to all other items or matters that fall within
the broadest possible scope of such general statement, term or matter. If any
conflict or inconsistency exists between this Agreement and the Credit
Agreement, the Credit Agreement shall govern. All references herein to
provisions of the UCC shall include all successor provisions under any
subsequent version or amendment to any Article of the UCC.


 


ARTICLE II



GRANT OF SECURITY


 


Section 2.01           Grant of Security.
Each Grantor hereby grants to the Collateral Agent, for the benefit of the
Secured Parties, a security interest and continuing lien on all of such Grantor’s
right, title and interest in, to and under all personal property of such
Grantor including, but not limited to the following, in each case whether now
owned or existing or hereafter acquired or arising and wherever located (all of
which being hereinafter collectively referred to as the “Collateral”):


 


(a)           Accounts;


 


(b)           Chattel Paper;


 


(c)           Documents;


 


(d)           General Intangibles;


 


7

















 


(e)           Goods;


 


(f)            Instruments;


 


(g)           Insurance;


 


(h)           Intellectual Property;


 


(i)            Investment Related Property;


 


(j)            Letter of Credit Rights;


 


(k)           Money;


 


(l)            Receivables and Receivable Records;


 


(m)          Commercial Tort Claims;


 


(n)           to the extent not otherwise included above, all
Collateral Records, Collateral Support and Supporting Obligations relating to
any of the foregoing; and


 


(o)           to the extent not otherwise included above, all
Proceeds, products, accessions, rents and profits of or in respect of any of
the foregoing.


 


Section 2.02           Certain Limited
Exclusions. Notwithstanding anything herein to the contrary, in no event
shall the Collateral include or the security interest granted under Section
2.01 hereof attach to any lease, license, Receivable, General Intangible,
Investment Account, contract, property rights or agreement to which any Grantor
is a party or any of its rights or interests thereunder if and for so long as
the grant of such security interest or inclusion in the Collateral shall
constitute or result in (i) the abandonment, invalidation or unenforceability
of any right, title or interest of any Grantor therein or (ii) in a breach or
termination pursuant to the terms of, or a default under, or violate, any
lease, license, Receivable, General Intangible, Investment Account, contract
property rights or agreement to which any Grantor is a party or pursuant to any
applicable laws or requirement of a Governmental Authority or any Governmental
Authorization (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or
any successor provision or provisions) of any relevant jurisdiction or any
other applicable law (including the Bankruptcy Code) or requirement of a
Governmental Authority or any Governmental Authorization or principles of
equity), provided however that the Collateral shall include and such security
interest shall attach immediately at such time as the condition causing such
abandonment, invalidation or unenforceability or breach, termination, default
or violation shall be remedied and to the extent severable, shall attach
immediately to any portion of such Lease, license, Receivable, General
Intangible, Investment Account, contract, property rights, agreement or other
property or asset that does not result in any of the consequences specified in
(i) or (ii) above.


 


ARTICLE III



SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE


 


Section 3.01           Security for
Obligations. This Agreement secures, and the Collateral is collateral
security for, the prompt and complete payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including the


 


8

















 


payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (and any
successor provision thereof)), of all Obligations with respect to every Grantor
(the “Secured Obligations”).


 


Section 3.02           Continuing Liability
Under Collateral. Notwithstanding anything herein to the contrary, (i) each
Grantor shall remain liable for all obligations under the Collateral and
nothing contained herein is intended or shall be a delegation of duties to the
Collateral Agent or any Secured Party, (ii) each Grantor shall remain liable
under each of the agreements included in the Collateral, including, without
limitation, any agreements relating to Pledged Partnership Interests or Pledged
LLC Interests, to perform all of the obligations undertaken by it thereunder
all in accordance with and pursuant to the terms and provisions thereof and
neither the Collateral Agent nor any Secured Party shall have any obligation or
liability under any of such agreements by reason of or arising out of this
Agreement or any other document related thereto nor shall the Collateral Agent
nor any Secured Party have any obligation to make any inquiry as to the nature
or sufficiency of any payment received by it or have any obligation to take any
action to collect or enforce any rights under any agreement included in the
Collateral, including, without limitation, any agreements relating to Pledged
Partnership Interests or Pledged LLC Interests, and (iii) the exercise by the
Collateral Agent of any of its rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral.


 


ARTICLE IV



REPRESENTATIONS AND WARRANTIES AND COVENANTS


 


Section 4.01           Generally.


 


(a)           Representations and Warranties. Each
Grantor hereby represents and warrants, on the Closing Date and on each Credit
Date, that:


 


(i)            it has indicated on Schedule 4.01(A)(as such schedule
may be amended or supplemented from time to time): (w) the type of organization
of such Grantor, (x) the jurisdiction of organization of such Grantor, (y) its
organizational identification number and (z) the jurisdiction where the chief
executive office or its sole place of business is (or the principal residence
if such Grantor is a natural person), and for the one-year period preceding the
date hereof has been, located.


 


(ii)           the full legal name of such Grantor is as set forth on
Schedule 4.01(A) and it has not done in the last five (5) years, and does not
do, business under any other name (including any trade-name or fictitious
business name) except for those names set forth on Schedule 4.01(B) (as such
schedule may be amended or supplemented from time to time);


 


(iii)          except as provided on Schedule 4.01(C), it has not
changed its name, jurisdiction of organization, chief executive office or sole
place of business (or principal residence if such Grantor is a natural person)
or its corporate structure in any way (e.g., by merger, consolidation, change
in corporate form or otherwise) within the past five (5) years;


 


(iv)          when executed and delivered, this Agreement will be
effective to create a favor of the Collateral Agent, for the benefit of the
Secured Parties, a valid and enforeceable security interest in the Collateral;


 


9

















 


(v)           when financing statements in the appropriate form are
filed in the offices specified on Schedule 4.01(D), this Agreement will create
a perfected security interest in all right, title and interest of the Grantors
in the Collateral to the extent perfection can be obtained by filing financing
statements under the UCC in effect in such jurisdiction, prior and superior in
right to any other Person, except for Permitted Liens;


 


(vi)          when financing statements in the appropriate form are
filed in the offices specified on Schedule 4.01(D) and when filings in the
appropriate form are made with the United States Patent and Trademark Office
and the United States Copyright Office in respect of Intellectual Property
specified in such filings, this Agreement will create a perfected security interest
in all right, title and interest of the Grantors in such Intellectual Property
to the extent perfection can be obtained by such filings, prior and superior in
right to any other Person, except for Permitted Liens;


 


(vii)         none of the Collateral constitutes, or is the Proceeds
of, “farm products” (as defined in the UCC);


 


(viii)        it does not own any “as extracted collateral” (as
defined in the UCC) or any timber to be cut; and


 


(ix)           such Grantor has been duly organized as an entity of
the type as set forth opposite such Grantor’s name on Schedule 4.01(A) solely
under the laws of the jurisdiction as set forth opposite such Grantor’s name on
Schedule 4.01(A) and remains duly existing as such. Such Grantor has not filed
any certificates of domestication, transfer or continuance in any other
jurisdiction.


 


(b)           Covenants and Agreements. Each
Grantor hereby covenants and agrees that:


 


(i)            except for the security interest created by this
Agreement, it shall not create or suffer to exist any Lien upon or with respect
to any of the Collateral, except Permitted Liens, and such Grantor shall defend
the Collateral against all Persons at any time claiming any interest therein;
and


 


(ii)           it shall not change such Grantor’s name, identity,
corporate structure (e.g., by merger, consolidation, change in corporate form
or otherwise), sole place of business (or principal residence if such Grantor
is a natural person), chief executive office, type of organization or
jurisdiction of organization or establish any trade names unless it shall have
(a) notified the Collateral Agent in writing, by executing and delivering to
the Collateral Agent a completed Pledge Supplement, substantially in the form
of Exhibit A attached hereto, together with all Supplements to Schedules
thereto, at least fifteen (15) days prior to any such change or establishment,
identifying such new proposed name, identity, corporate structure, sole place
of business (or principal residence if such Grantor is a natural person), chief
executive office, jurisdiction of organization or trade name and providing such
other information in connection therewith as the Collateral Agent may
reasonably request and (b) taken all actions necessary or advisable to maintain
the continuous validity, perfection and the same or better priority of the
Collateral Agent’s security interest in the Collateral intended to be granted
and agreed to hereby.


 


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Section 4.02           Equipment and
Inventory.


 


(a)           Representations and Warranties.
Each Grantor represents and warrants, on the Closing Date and on each Credit
Date, that:


 


(i)            all
of the Equipment and Inventory (other than vehicles) included in the Collateral
is kept only at the locations specified in Schedule 4.02 (as such schedule may
be amended or supplemented from time to time); and


 


(ii)           none
of the Inventory or Equipment of such Grantor included in the Collateral and
with a value in excess of $250,000 in the aggregate is in the possession of an
issuer of a negotiable document (as defined in Section 7-104 of the UCC)
therefor or otherwise in the possession of a bailee or a warehouseman (other
than Inventory in transit in the ordinary course and other than in connection
with repairs in the ordinary course) and other than Collateral with respect to
which Section 4.02(b)(iv) has been complied with.


 


(b)           Covenants and Agreements.
Each Grantor covenants and agrees that:


 


(i)            it shall keep the Equipment, Inventory and any
Documents evidencing any Equipment and Inventory in the locations specified on
Schedule 4.02 (as such schedule may be amended or supplemented from time
to time) unless it shall have notified the Collateral Agent in writing, by
executing and delivering to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, at least thirty (30) days prior to any change
in locations, identifying such new locations and providing such other
information in connection therewith as the Collateral Agent may reasonably
request;


 


(ii)           if any Grantor’s Equipment or Inventory (other than
Equipment or Inventory in transit or out for repairs in the ordinary course of
business) is in possession or control of any third party, such Grantor shall
join with the Collateral Agent in notifying the third party of the Collateral
Agent’s security interest and if reasonably requested by the Collateral Agent
shall use commercially reasonable efforts to obtain an acknowledgement from the
third party that it is holding the Equipment and Inventory for the benefit of
the Collateral Agent;


 


(iii)          it shall keep correct and accurate records of the
Inventory, as is customarily maintained under similar circumstances by Persons
of established reputation engaged in similar business, and in any event in
conformity with GAAP; and


 


(iv)          if any Equipment or Inventory is in possession or
control of any third party, any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall join with the Collateral
Agent in notifying the third party of the Collateral Agent’s security interest
and obtaining an acknowledgment from the third party that it is holding the
Equipment and Inventory for the benefit of the Collateral Agent.


 


Section 4.03           Receivables.


 


(a)           Representations and Warranties.
Each Grantor represents and warrants, on the Closing Date and on each Credit
Date, that no Receivable is evidenced by, or constitutes, an Instrument or 


 


11

















 


Chattel Paper which has not been delivered
to, or otherwise subjected to the control of, the Collateral Agent to the
extent required by, and in accordance with Section 4.03(c).


 


(b)           Covenants and Agreements:  Each Grantor hereby covenants and agrees that
it shall continue to collect all amounts due or to become due to such Grantor
under the Receivables and any Supporting Obligation. Notwithstanding the
foregoing, the Collateral Agent shall have the right at any time after and
during the continuance of an Event of Default to:  (1) notify, or require any Grantor to notify,
any Account Debtor of the Collateral Agent’s security interest in the
Receivables and any Supporting Obligation and direct the Account Debtors under
any Receivables to make payment of all amounts due or to become due to such
Grantor thereunder directly to the Collateral Agent; (2) notify, or require any
Grantor to notify, each Person maintaining a lockbox or similar arrangement to
which Account Debtors under any Receivables have been directed to make payment
to remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to the Collateral Agent; and (3) enforce, at the expense of such
Grantor, collection of any such Receivables and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as
such Grantor might have done. If the Collateral Agent notifies any Grantor that
it has elected to collect the Receivables in accordance with the preceding
sentence, any payments of Receivables received by such Grantor shall be
forthwith (and in any event within two (2) Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Collateral Agent if required, in the Collateral Account maintained under the
sole dominion and control of the Collateral Agent, and until so turned over,
all amounts and proceeds (including checks and other instruments) received by
such Grantor in respect of the Receivables, any Supporting Obligation or
Collateral Support shall be received in trust for the benefit of the Collateral
Agent hereunder and shall be segregated from other funds of such Grantor and
such Grantor shall not adjust, settle or compromise the amount or payment of
any Receivable, or release wholly or partly any Account Debtor or obligor
thereof, or allow any credit or discount thereon. Notwithstanding any of the
foregoing to the contrary, the Collateral Agent shall not be permitted to take
any of the foregoing actions to the extent they would be prohibited by
applicable law or Governmental Authorization.


 


(c)           Delivery and Control of Receivables.
With respect to any Receivables in excess of $250,000 individually or $500,000
in the aggregate that is evidenced by, or constitutes, Chattel Paper or
Instruments, each Grantor shall cause each originally executed copy thereof to
be delivered to the Collateral Agent (or its agent or designee) appropriately
indorsed to the Collateral Agent or indorsed in blank:  (i) with respect to any such Receivables in
existence on the date hereof, on or prior to the date hereof and (ii) with
respect to any such Receivables hereafter arising, within ten (10) days of such
Grantor acquiring rights therein. With respect to any Receivables in excess of
$250,000 individually or $500,000 in the aggregate which would constitute “electronic
chattel paper” under Article 9 of the UCC, each Grantor shall take all steps reasonably
requested by the Collateral Agent to give the Collateral Agent control over
such Receivables (within the meaning of Section 9-105 of the UCC):  (i) with respect to any such Receivables in
existence on the date hereof, on or prior to the date hereof and (ii) with
respect to any such Receivables hereafter arising, within ten (10) days of
such Grantor acquiring rights therein. Any Receivable not otherwise required to
be delivered or subjected to the control of the Collateral Agent in accordance
with this subsection (c) shall be delivered or subjected to such control upon the
reasonable request of the Collateral Agent.


 


Section 4.04           Investment Related
Property.


 


(a)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that:


 


(i)            in the event it acquires rights in any Investment
Related Property after the date hereof, it shall deliver to the Collateral
Agent, no less frequently than on a 


 


12

















 


quarterly basis or as otherwise expressly
required by the Credit Agreement, a completed Pledge Supplement, substantially
in the form of Exhibit A attached hereto, together with all Supplements to
Schedules thereto, reflecting such new Investment Related Property and all
other Investment Related Property. Notwithstanding the foregoing, it is
understood and agreed that the security interest of the Collateral Agent shall
attach to all Investment Related Property immediately upon any Grantor’s
acquisition of rights therein and shall not be affected by the failure of any
Grantor to deliver a supplement to Schedule 4.05 as required hereby;


 


(ii)           except as provided in the next sentence, in the event
such Grantor receives any dividends, interest or distributions on any
Investment Related Property, or any securities or other property upon the
merger, consolidation, liquidation or dissolution of any issuer of any
Investment Related Property, then (a) such dividends, interest or distributions
and securities or other property shall be included in the definition of
Collateral without further action and (b) such Grantor shall promptly take all
steps, if any, reasonably requested by the Collateral Agent to ensure the
validity, perfection, priority and, if applicable, control of the Collateral
Agent over such Investment Related Property (including, without limitation,
delivery thereof to the Collateral Agent) and pending any such action such
Grantor shall be deemed to hold such dividends, interest, distributions,
securities or other property in trust for the benefit of the Collateral Agent
and shall segregate such dividends, distributions, Securities or other property
from all other property of such Grantor. Notwithstanding the foregoing, so long
as no Event of Default shall have occurred and be continuing, the Collateral
Agent authorizes each Grantor to retain all ordinary cash dividends and
distributions paid in the normal course of the business of the issuer and
consistent with the past practice of the issuer and all scheduled payments of
interest;


 


(iii)          each Grantor consents to the grant by each other
Grantor to the Collateral Agent of a security interest in all Investment
Related Property.


 


(b)           Delivery and Control.


 


(i)            Each Grantor agrees that with respect to any
Investment Related Property in which it currently has rights it shall comply
with the provisions of this Section 4.04(b) on or before the Credit Date and
with respect to any Investment Related Property hereafter acquired by such
Grantor it shall comply with the provisions of this Section 4.04(b) promptly
after acquiring rights therein, in each case in form and substance reasonably satisfactory
to the Collateral Agent. With respect to any Investment Related Property that
is represented by a certificate or that is an “instrument” (other than any Investment
Related Property credited to a Securities Account) it shall cause such
certificate or instrument to be delivered to the Collateral Agent, indorsed in
blank by an “effective endorsement” (as defined in Section 8-107 of the
UCC), regardless of whether such certificate constitutes a “certificated
security” for purposes of the UCC. With respect to any Investment Related
Property that is an “uncertificated security” for purposes of the UCC (other
than any “uncertificated securities” credited to a Securities Account), it
shall cause the issuer of such uncertificated security which is a Subsidiary,
and shall use commercially reasonable efforts to cause any issuer of such
uncertificated security which is not a Subsidiary, to either (i) register the
Collateral Agent as the registered owner thereof on the books and records of
the issuer or (ii) execute an uncertificated securities control agreement in a
form to be approved by the Collateral Agent in its reasonable discretion,
pursuant to which such issuer agrees, after the 


 


13

















 


occurrence and during the continuance of an
Event of Default, to comply with the Collateral Agent’s instructions with
respect to such uncertificated security without further consent by such
Grantor.


 


(c)           Voting and
Distributions.


 


(i)            So long as no Event of Default shall have occurred and
be continuing, except as otherwise provided under the covenants and agreements
relating to Investment Related Property in this Agreement or elsewhere herein
or in the Credit Agreement, each Grantor shall be entitled to exercise or
refrain from exercising any and all voting and other consensual rights
pertaining to the Investment Related Property or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Credit
Agreement.


 


(ii)           Upon the occurrence and during the continuation of an
Event of Default:


 


(1)           Upon written notice from the Collateral Agent with
respect thereto, all rights of each Grantor to exercise or refrain from exercising
the voting and other consensual rights which it would otherwise be entitled to
exercise pursuant hereto shall cease and all such rights shall thereupon become
vested in the Collateral Agent who shall thereupon have the sole right to
exercise such voting and other consensual rights; and


 


(2)           in order to permit the Collateral Agent to exercise
the voting and other consensual rights which it may be entitled to exercise
pursuant hereto and to receive all dividends and other distributions which it
may be entitled to receive hereunder: (A) upon the request of the Collateral
Agent, each Grantor shall promptly execute and deliver (or cause to be executed
and delivered) to the Collateral Agent all proxies, dividend payment orders and
other instruments as the Collateral Agent may from time to time reasonably
request and (B) each Grantor acknowledges that the Collateral Agent may utilize
the power of attorney set forth in Section 6.01.


 


Section 4.05           Pledged Equity
Interests.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and on each
Credit Date, that:


 


(i)            Schedule 4.05(A) (as such schedule may be amended or
supplemented from time to time) sets forth under the headings “Pledged Stock, “Pledged
LLC Interests,” “Pledged Partnership Interests” and “Pledged Trust Interests,”
respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged
Partnership Interests and Pledged Trust Interests owned by any Grantor and such
Pledged Equity Interests constitute the percentage of issued and outstanding
shares of stock, percentage of membership interests, percentage of partnership
interests or percentage of beneficial interest of the respective issuers
thereof indicated on such Schedule;


 


(ii)           except as set forth on Schedule 4.05(B), it has not
acquired any equity interests of another entity or substantially all the assets
of another entity within the past five (5) years;


 


14

















 


(iii)          it is the record and beneficial owner of the Pledged
Equity Interests free of all Liens, rights or claims of other Persons other
than Permitted Liens and there are no outstanding warrants, options or other
rights to purchase, or shareholder, voting trust or similar agreements
outstanding with respect to, or property that is convertible into, or that
requires the issuance or sale of, any Pledged Equity Interests;


 


(iv)          without limiting the generality of Section 4.01(a)(v),
no consent of any Person including any other general or limited partner, any
other member of a limited liability company, any other shareholder or any other
trust beneficiary is necessary or desirable in connection with the creation,
perfection or First Priority status of the security interest of the Collateral
Agent in any Pledged Equity Interests or the exercise by the Collateral Agent
of the voting or other rights provided for in this Agreement or the exercise of
remedies in respect thereof; and


 


(v)           none of the Pledged LLC Interests nor Pledged
Partnership Interests are or represent interests in issuers that:  (a) are registered as investment companies,
(b) are dealt in or traded on securities exchanges or markets or (c) have opted
to be treated as securities under the uniform commercial code of any
jurisdiction.


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that:


 


(i)            without the prior written consent of the Collateral
Agent, it shall not vote to enable or take any other action to:  (a) amend, waive any default under, breach, or
terminate any partnership agreement, limited liability company agreement,
certificate of incorporation, by-laws or other organizational documents in any
way that adversely affects the validity, perfection or priority of the
Collateral Agent’s security interest, (b) other than as permitted under
the Credit Agreement, permit any issuer of any Pledged Equity Interest to
dispose of all or a material portion of their assets, or (c) cause any
issuer of any Pledged Partnership Interests or Pledged LLC Interests which are
not securities (for purposes of the UCC) on the date hereof to elect or
otherwise take any action to cause such Pledged Partnership Interests or
Pledged LLC Interests to be treated as securities for purposes of the UCC;
provided, however, notwithstanding the foregoing, if any issuer of any Pledged
Partnership Interests or Pledged LLC Interests takes any such action in
violation of the foregoing in this clause (e), such Grantor shall promptly
notify the Collateral Agent in writing of any such election or action and, in such
event, shall take all steps necessary or advisable to establish the Collateral
Agent’s “control” thereof;


 


(ii)           without the prior written consent of the Collateral
Agent, it shall not permit any issuer of any Pledged Equity Interest to merge
or consolidate unless (i) such issuer creates a security interest that is
perfected by a filed financing statement (that is not effective solely under
section 9-508 of the UCC) in Collateral in which such new debtor has or
acquires rights, and (ii) all the outstanding capital stock or other equity
interests of the surviving or resulting corporation, limited liability company,
partnership or other entity is, upon such merger or consolidation, pledged
hereunder;


 


(iii)          each Grantor consents to the grant by each other Grantor
of a security interest in all Investment Related Property to the Collateral
Agent and, without limiting the foregoing, consents to the transfer of any
Pledged Partnership Interest and any Pledged LLC Interest to the Collateral
Agent or its nominee following and during the continuance of an Event of
Default and to the substitution of the Collateral Agent or its nominee as a
partner in any partnership or as a member in any limited liability company 


 


15

















 


with all the rights and powers related
thereto following and during the continuance of an Event of Default; and


 


(iv)          it shall notify the Collateral Agent of any default
under any Pledged Debt that has caused, either in any case or in the aggregate,
a Material Adverse Effect.


 


Section 4.06           Pledged Debt.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and each Credit
Date, that Schedule 4.05(A) (as such schedule may be amended or supplemented
from time to time) sets forth under the heading “Pledged Debt” all of the
Pledged Debt evidenced by promissory notes.


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that it shall notify the Collateral
Agent of any default under any Pledged Debt that has caused, either in any
individual case or in the aggregate, a Material Adverse Effect.


 


Section 4.07           Investment Accounts.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and each
Credit Date, that:


 


(i)            Schedule 4.05(A) hereto (as such schedule may be
amended or supplemented from time to time) sets forth under the headings “Securities
Accounts” and “Commodities Accounts,” respectively, all of the Securities
Accounts and Commodities Accounts in which each Grantor has an interest. Each
Grantor is the sole entitlement holder of each such Securities Account and
Commodity Account, and such Grantor has not consented to, and is not otherwise
aware of, any Person (other than the Collateral Agent pursuant hereto and the
collateral agent pursuant to the Second Lien Credit Agreement) having “control”
(within the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other
interest in, any such Securities Account or Commodity Account or securities or
other property credited thereto;


 


(ii)           Schedule 4.05(A) hereto (as such schedule may be
amended or supplemented from time to time) sets forth under the headings “Deposit
Accounts” all of the Deposit Accounts in which each Grantor has an interest. Each
Grantor is the sole account holder of each such Deposit Account and such
Grantor has not consented to, and is not otherwise aware of, any Person (other
than the Collateral Agent pursuant hereto and the collateral agent pursuant to
the Second Lien Credit Agreement) having either sole dominion and control
(within the meaning of common law) or “control” (within the meanings of Section
9-104 of the UCC) over, or any other interest in, any such Deposit Account or
any money or other property deposited therein; and


 


(iii)          To the extent required by Section 5.15 of the
Credit Agreement, each Grantor has taken all actions necessary or otherwise
reasonably requested by Collateral Agent, to: (a) establish Collateral Agent’s “control”
(within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion
of the Investment Related Property constituting Certificated Securities,
Uncertificated Securities, Securities Accounts, Securities Entitlements or
Commodities Accounts (each as defined in the UCC); (b) establish the Collateral
Agent’s “control” (within the meaning of Section 9-104 of the UCC) over all
Deposit Accounts; and (c) deliver all Instruments to the Collateral Agent.


 


16

















 


(b)           Delivery and Control.
With respect to any Investment Related Property consisting of Securities
Accounts or Securities Entitlements, it shall cause the securities intermediary
maintaining such Securities Account or Securities Entitlement to enter into a securities
account control agreement in a form to be approved by the Collateral Agent in
its reasonable discretion pursuant to which it shall agree to comply with the
Collateral Agent’s “entitlement orders” without further consent by such Grantor
after and during the continuance of an Event of Default. To the extent required
by Section 5.15 of the Credit Agreement, with respect to any Investment Related
Property that is a “Deposit Account,” it shall cause the depositary institution
maintaining such account to enter into a deposit account control agreement in a
form to be approved by the Collateral Agent in its reasonable discretion,
pursuant to which the Collateral Agent shall have “control” (within the meaning
of Section 9-104 of the UCC) over such Deposit Account. Each Grantor shall
have entered into such control agreement or agreements required above with
respect to:  (i) any Securities Accounts,
Securities Entitlements or Deposit Accounts that exist on the Closing Date, within
60 days after the Closing Date and (ii) any Securities Accounts, Securities
Entitlements or Deposit Accounts that are created or acquired after the Closing
Date, as of or prior to the deposit or transfer of any such Securities
Entitlements or funds, whether constituting moneys or investments, into such
Securities Accounts or Deposit Accounts.


 


(c)           Certain Rights of Collateral Agent. Upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent shall have the right,
without notice to any Grantor, to transfer all or any portion of the Investment
Related Property to its name or the name of its nominee or agent. In addition,
the Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, without notice to any Grantor,
to exchange any certificates or instruments representing any Investment Related
Property for certificates or instruments of smaller or larger denominations.


 


Section 4.08           Material Contracts.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and on each
Credit Date, that no Material Contract prohibits assignment or requires consent
of or notice to any Person in connection with the assignment to the Collateral
Agent hereunder, except such consent or notice as has been given or made or is
currently sought pursuant to Section 4.08(b)(vii) hereof.


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that:


 


(i)            in addition to any rights under this Agreement
relating to Receivables, the Collateral Agent may at any time after the
occurrence and during the continuance of an Event of Default, notify, or
require any Grantor to so notify, the counterparty on any Material Contract of
the security interest of the Collateral Agent therein. In addition, after the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may upon written notice to the applicable Grantor, notify, or require any
Grantor to notify, such counterparty to make all payments under such Material
Contracts directly to the Collateral Agent; and


 


(ii)           each Grantor shall, within thirty (30) days of the
date hereof with respect to any material Non-Assignable Contract in effect on
the date hereof and within thirty (30) days after entering into any material Non-Assignable
Contract after the Closing Date, request in writing the consent of the
counterparty or counterparties to the Non-Assignable Contract pursuant to the
terms of such Non-Assignable Contract or applicable law to the assignment or
granting of a security interest in such Non-Assignable Contract or the property
or assets of any Grantor subject thereto, as the case may be, to the 


 


17

















 


Collateral Agent, for the benefit of the
Secured Parties, and use its commercially reasonable efforts to obtain such
consent as soon as practicable thereafter (it being understood that such
consent may not be obtainable).


 


Section 4.09           Letter of Credit
Rights.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and on each
Credit Date, that:


 


(i)            all material letters of credit to which such Grantor
has rights is listed on Schedule 4.09 (as such schedule may be amended or
supplemented from time to time) hereto; and


 


(ii)           it has used commercially reasonable efforts to obtain
the consent of each issuer of any material letter of credit to the assignment
as collateral of the proceeds of the letter of credit to the Collateral Agent.


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that with respect to any letter of
credit hereafter arising for an amount in excess of $250,000, it shall use
commercially reasonable efforts to obtain the consent of the issuer thereof to
the assignment as collateral of the proceeds of the letter of credit to the
Collateral Agent and shall deliver to the Collateral Agent a completed Pledge
Supplement, substantially in the form of Exhibit A attached hereto, together
with all Supplements to Schedules thereto.


 


Section 4.10           Intellectual
Property.


 


(a)           Representations and Warranties.
Except as disclosed in Schedule 4.10(H) (as such schedule may be amended or
supplemented from time to time), each Grantor hereby represents and warrants,
on the Closing Date and on each Credit Date, that:


 


(i)            Schedule 4.10 (as such schedule may be amended or
supplemented from time to time) sets forth a true and complete list of (i) all
United States, state and foreign registrations of and applications for registered
Patents, registered Trademarks, and registered Copyrights owned by each Grantor
and (ii) all Patent Licenses, Trademark Licenses, Trade Secret Licenses and
Copyright Licenses material to the business of Borrower and its Subsidiaries,
taken as a whole;


 


(ii)           it is the sole and exclusive owner of the entire
right, title, and interest in and to all Intellectual Property listed on
Schedule 4.10 (as such schedule may be amended or supplemented from time to
time); and


 


(iii)          all registrations and applications for Copyrights,
Patents and Trademarks are standing in the name of each Grantor and none of the
Trademarks, Patents, Copyrights or Trade Secrets has been licensed by any
Grantor to any affiliate or third party, except as disclosed in Schedule 4.10(B),
(D), (F), or (G) (as each may be amended or supplemented from time to time).


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees as follows:


 


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(i)            it shall not do any act or omit to do any act whereby
any of the Intellectual Property which is material to the business of Borrower
and its Subsidiaries, taken as a whole, may lapse, or become abandoned,
dedicated to the public, or unenforceable, or which would adversely affect the
validity, grant, or enforceability of the security interest granted therein;


 


(ii)           it shall not, with respect to any Trademarks which are
material to the business of any Borrower and its Subsidiaries, taken as a whole,
cease the use of any of such Trademarks or fail to maintain the level of the
quality of products sold and services rendered under any of such Trademarks at
a level at least substantially consistent with the quality of such products and
services as of the date hereof, and each Grantor shall use commercially
reasonable efforts to cause licensees of such Trademarks use such consistent
standards of quality;


 


(iii)          it shall, within thirty (30) days of the creation or
acquisition of any Copyrightable work which is material to the business of
Grantor, apply to register the Copyright in the United States Copyright Office
except for works with respect to which the Grantor has determined with the
exercise of its commercially reasonable judgment that it shall not so apply;


 


(iv)          it shall promptly notify the Collateral Agent if it
knows that any item of the Intellectual Property that is material to the
business of Borrower and its Subsidiaries, taken as a whole, may become (a)
abandoned or dedicated to the public or placed in the public domain, (b)
invalid or unenforceable, or (c) subject to any adverse determination or
development (including the institution of proceedings) in any action or
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office, any state registry, any foreign counterpart of the foregoing,
or any court;


 


(v)           it shall take commercially reasonable steps in the
United States Patent and Trademark Office, the United States Copyright Office,
any state registry or any foreign counterpart of the foregoing, to pursue any
application and maintain any registration of each Trademark, Patent, and Copyright
owned by any Grantor and material to its business which is now or shall become
included in the Intellectual Property including, but not limited to, those
items on Schedule 4.10(A), (C) and (E) (as each may be amended or supplemented
from time to time) except for works with respect to which the Grantor has
determined with the exercise of its commercially reasonable judgment that it
shall not so apply;


 


(vi)          in the event that any Intellectual Property owned by
or exclusively licensed to any Grantor that is material to the business of such
Grantor is, to such Grantor’s knowledge, infringed, misappropriated, or diluted
by a third party, such Grantor shall promptly take all reasonable actions to
stop such infringement, misappropriation, or dilution and protect its rights in
such Intellectual Property including, but not limited to, the initiation of a
suit for injunctive relief and to recover damages except for works with respect
to which the Grantor has determined with the exercise of its commercially
reasonable judgment that it shall not take such actions;


 


(vii)         it shall promptly (but in no event more than thirty
(30) days after any Grantor obtains knowledge thereof) report to the Collateral
Agent (i) the filing of any application to register any Intellectual Property
with the United States Patent and Trademark Office, the United States Copyright
Office, or any state registry or foreign 


 


19

















 


counterpart of the foregoing (whether such
application is filed by such Grantor or through any agent, employee, licensee,
or designee thereof) and (ii) the registration of any Intellectual Property by
any such office, in each case by executing and delivering to the Collateral
Agent a completed Pledge Supplement, substantially in the form of
Exhibit A attached hereto, together with all Supplements to Schedules
thereto;


 


(viii)        it shall, execute and deliver to the Collateral Agent
any document reasonably requested by the Collateral Agent to acknowledge,
confirm, register, record, or perfect the Collateral Agent’s interest in any
part of the Intellectual Property, whether now owned or hereafter acquired
(including, but not limited to Trademark Security Agreements, Copyright
Security Agreements and Patent Security Agreements), in the form of Exhibits B,
C and D, respectively);


 


(ix)           except with the prior consent of the Collateral Agent
or as permitted under the Credit Agreement, each Grantor shall not execute, and
there will not be on file in any public office, any financing statement or
other document or instruments, except financing statements or other documents
or instruments filed or to be filed in favor of the Collateral Agent (as
defined in the Second Lien Credit Agreement) and except as permitted in the
Credit Agreement each Grantor shall not sell, assign, transfer, license, grant
any option, or create or suffer to exist any Lien upon or with respect to the
Intellectual Property, except for the Lien created by and under this Agreement,
the other Loan Documents, the Second Lien Credit Agreement and the related
documents;


 


(x)            it shall hereafter use commercially reasonable efforts
so as not to permit the inclusion in any contract to which it hereafter becomes
a party of any provision that could or might in any way materially impair or
prevent the creation of a security interest in, or the assignment of, such
Grantor’s rights and interests in any property included within the definitions
of any Intellectual Property acquired under such contracts; and


 


(xi)           it shall continue to collect, at its own expense, all
amounts due or to become due to such Grantor in respect of the Intellectual
Property or any portion thereof. In connection with such collections, each
Grantor may take (and, at the Collateral Agent’s reasonable direction, after the
occurrence and during the continuance of an Event of Default shall take) such
action as such Grantor or the Collateral Agent may deem reasonably necessary or
advisable to enforce collection of such amounts. Notwithstanding the foregoing,
the Collateral Agent shall have the right at any time, after the occurrence and
during the continuance of an Event of Default, to notify, or require any
Grantor to notify, any obligors with respect to any such amounts of the
existence of the security interest created hereby.


 


Section 4.11           Commercial Tort
Claims.


 


(a)           Representations and Warranties.
Each Grantor hereby represents and warrants, on the Closing Date and on each
Credit Date, that Schedule 4.11 (as such schedule may be amended or
supplemented from time to time) sets forth all Commercial Tort Claims with a
value that is reasonably expected to be in excess of $250,000 of each Grantor;
and


 


(b)           Covenants and Agreements.
Each Grantor hereby covenants and agrees that with respect to any Commercial
Tort Claim with a value that is reasonably expected to be in excess of $250,000
hereafter arising it shall deliver to the Collateral Agent a completed Pledge
Supplement, 


 


20

















 


substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto,
identifying such new Commercial Tort Claims.


 


ARTICLE V



FURTHER ASSURANCES; ADDITIONAL GRANTORS


 


Section 5.01           Further Assurances.


 


(a)           Each Grantor agrees that from time
to time, at the expense of such Grantor, that it shall promptly execute and
deliver all further instruments and documents, and take all further action,
that the Collateral Agent may reasonably request, in order to create and/or
maintain the validity, perfection or priority of and protect any security
interest granted or purported to be granted hereby or to enable the Collateral
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, each Grantor
shall:


 


(i)            file such financing or continuation statements, or
amendments thereto, and execute and deliver such other agreements, instruments,
endorsements, powers of attorney or notices, as the Collateral Agent may
reasonably request, in order to perfect and preserve the security interests
granted or purported to be granted hereby; and


 


(ii)           take all actions reasonably requested by the
Collateral Agent to ensure the recordation of appropriate evidence of the liens
and security interest granted hereunder in the Intellectual Property with any
intellectual property registry in which said Intellectual Property is
registered or in which an application for registration is pending including,
without limitation, the United States Patent and Trademark Office, the United
States Copyright Office, the various Secretaries of State, and the foreign
counterparts on any of the foregoing.


 


(b)           Each Grantor hereby authorizes the
Collateral Agent to file a Record or Records, including, without limitation,
financing or continuation statements, and amendments thereto, in any
jurisdictions and with any filing offices as the Collateral Agent may
determine, in its sole discretion, are necessary or advisable to perfect the
security interest granted to the Collateral Agent herein. Such financing
statements may describe the Collateral in the same manner as described herein
or may contain an indication or description of collateral that describes such
property in any other manner as the Collateral Agent may determine, in its sole
discretion, is necessary, advisable or prudent to ensure the perfection of the
security interest in the Collateral granted to the Collateral Agent herein,
including, without limitation, describing such property as “all assets” or “all
personal property, whether now owned or hereafter acquired.”


 


(c)           Each Grantor hereby authorizes the
Collateral Agent to modify this Agreement after obtaining such Grantor’s written
approval of or signature to such modification by amending Schedule 4.10 (as
such schedule may be amended or supplemented from time to time) to include
reference to any right, title or interest in any existing Intellectual Property
or any Intellectual Property acquired or developed by any Grantor after the
execution hereof or to delete any reference to any right, title or interest in
any Intellectual Property in which any Grantor no longer has or claims any
right, title or interest.


 


Section 5.02           Additional Grantors.
From time to time subsequent to the date hereof, additional Persons may become
parties hereto as additional Grantors (each, an “Additional Grantor”),
by executing a Counterpart Agreement. Upon delivery of any such counterpart
agreement to the Collateral 


 


21

















 


Agent, notice of which is
hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall
be as fully a party hereto as if Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its Obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of Collateral Agent not to cause any
Subsidiary of Borrower to become an Additional Grantor hereunder. This
Agreement shall be fully effective as to any Grantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Grantor hereunder.


 


ARTICLE VI



COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT


 


Section 6.01           Power of Attorney. Each Grantor hereby irrevocably appoints
the Collateral Agent (such appointment being coupled with an interest) as such
Grantor’s attorney-in-fact, effective after and during the continuance of an
Event of Default, with full authority in the place and stead of such Grantor
and in the name of such Grantor, the Collateral Agent or otherwise, from time
to time in the Collateral Agent’s discretion to take any action and to execute
any instrument that the Collateral Agent may deem reasonably necessary or
advisable (and to the extent permitted by applicable laws) to accomplish the
purposes of this Agreement, including, without limitation, the following:


 


(a)           to obtain and adjust insurance required to be
maintained by such Grantor or paid to the Collateral Agent pursuant to the
Credit Agreement;


 


(b)           to ask for, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral;


 


(c)           to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection with clause (b)
above;


 


(d)           to file any claims or take any action or
institute any proceedings that the Collateral Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to any of the Collateral;


 


(e)           to prepare and file any UCC financing
statements against such Grantor as debtor;


 


(f)            to prepare, sign, and file for recordation in
any intellectual property registry, appropriate evidence of the lien and
security interest granted herein in the Intellectual Property in the name of
such Grantor as debtor;


 


(g)           to take or cause to be taken all actions
necessary to perform or comply or cause performance or compliance with the
terms of this Agreement, including, without limitation, actions to pay or
discharge taxes or Liens (other than Permitted Liens) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by the Collateral
Agent in its sole discretion, any such payments made by the Collateral Agent to
become Obligations of such Grantor to the Collateral Agent, due and payable
immediately without demand; and


 


(h)           generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Collateral Agent were the absolute owner thereof
for all purposes, and to do, at the Collateral Agent’s option and 


 


22

















 


such
Grantor’s expense, at any time or from time to time, all acts and things that
the Collateral Agent deems reasonably necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent’s security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.


 


Section 6.02           No Duty on the Part
of Collateral Agent or Secured Parties.
The powers conferred on the Collateral Agent hereunder are solely to protect
the interests of the Secured Parties in the Collateral and shall not impose any
duty upon the Collateral Agent or any Secured Party to exercise any such
powers. The Collateral Agent and the Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.


 


ARTICLE VII



REMEDIES


 


Section 7.01           Generally.


 


(a)           If any Event of Default shall have occurred and be continuing, the
Collateral Agent may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it at
law or in equity, all the rights and remedies of the Collateral Agent on
default under the UCC (whether or not the UCC applies to the affected
Collateral) to collect, enforce or satisfy any Secured Obligations then owing,
whether by acceleration or otherwise, and also may pursue any of the following
separately, successively or simultaneously:


 


(i)            require any Grantor to, and each Grantor
hereby agrees that it shall at its expense and promptly upon request of the
Collateral Agent forthwith, assemble all or part of the Collateral as directed
by the Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent that is reasonably convenient to
both parties;


 


(ii)           enter onto the property where any Collateral
is located and take possession thereof with or without judicial process;


 


(iii)          prior to the disposition of the Collateral,
store, process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent the Collateral Agent
deems appropriate; and


 


(iv)          without notice except as specified below or
under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive
basis) or otherwise dispose of the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Collateral Agent’s
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable.


 


(b)           The Collateral Agent or any Secured Party may be the purchaser of any
or all of the Collateral at any public or private (to the extent the portion of
the Collateral being privately sold is of a kind that is customarily sold on a
recognized market or the subject of widely distributed standard price
quotations) sale in accordance with the UCC and the Collateral Agent, as
Collateral Agent for and representative of the Secured Parties, shall be entitled,
for the purpose of bidding and making settlement 


 


23

















 


or payment of the purchase price for all or any
portion of the Collateral sold at any such sale made in accordance with the
UCC, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by the Collateral Agent at such
sale. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of any Grantor, and each Grantor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Each Grantor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) days notice to such Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor agrees that it would not be commercially unreasonable
for the Collateral Agent to dispose of the Collateral or any portion thereof by
using Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets. Each Grantor hereby waives any
claims against the Collateral Agent arising by reason of the fact that the
price at which any Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale, even if
the Collateral Agent accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be liable for the deficiency and the fees of any
attorneys employed by the Collateral Agent to collect such deficiency. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section will cause irreparable injury to the Collateral Agent, that the
Collateral Agent has no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this Section shall
be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this Section shall in any way alter the rights of
the Collateral Agent hereunder.


 


(c)           The Collateral Agent may sell the Collateral without giving any
warranties as to the Collateral. The Collateral Agent may specifically disclaim
or modify any warranties of title or the like. This procedure will not be considered
to adversely affect the commercial reasonableness of any sale of the
Collateral.


 


(d)           The Collateral Agent shall have no obligation to marshal any of the
Collateral.


 


Section 7.02           Application of
Proceeds. Except as expressly
provided elsewhere in this Agreement or in the Intercreditor Agreement, all
proceeds received by the Collateral Agent in respect of any sale, any
collection from, or other realization upon all or any part of the Collateral
shall be applied in full or in part by the Collateral Agent against, the
Secured Obligations in the following order of priority:  first, to the payment of all costs and
expenses of such sale, collection or other realization, including reasonable
compensation to the Collateral Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by the Collateral Agent in
connection therewith, and all amounts for which the Collateral Agent is
entitled to indemnification hereunder (in its capacity as the Collateral Agent
and not as a Lender) and all advances made by the Collateral Agent hereunder
for the account of the applicable Grantor, and to the payment of all costs and
expenses paid or incurred by the Collateral Agent in connection with the
exercise of any right or remedy hereunder or under the Credit Agreement, all in
accordance with the terms hereof or thereof; second, to the extent of any
excess of such proceeds, to the payment of all other Secured Obligations for
the ratable benefit of the Lenders and the Lender Counterparties; and third, to
the extent of any excess of such proceeds, to the payment to or upon the 


 


24

















 


order of such Grantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.


 


Section 7.03           Sales on Credit. If Collateral Agent sells any of the
Collateral upon credit, Grantor will be credited only with payments actually
made by purchaser and received by Collateral Agent and applied to indebtedness
of the purchaser. In the event the purchaser fails to pay for the Collateral,
Collateral Agent may resell the Collateral and Grantor shall be credited with
proceeds of the sale.


 


Section 7.04           Deposit Accounts. If any Event of Default shall have occurred
and be continuing, the Collateral Agent may, to the extent permitted by
applicable law, apply the balance from any Deposit Account or instruct the bank
at which any Deposit Account is maintained to pay the balance of any Deposit
Account to or for the benefit of the Collateral Agent.


 


Section 7.05           Investment Related
Property. Each Grantor recognizes
that, by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws, the Collateral Agent may be compelled, with
respect to any sale of all or any part of the Investment Related Property
conducted without prior registration or qualification of such Investment
Related Property under the Securities Act and/or such state securities laws, to
limit purchasers to those who will agree, among other things, to acquire the
Investment Related Property for their own account, for investment and not with
a view to the distribution or resale thereof. Each Grantor acknowledges that
any such private sale may be at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, each Grantor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Collateral Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Investment Related
Property for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such issuer
would, or should, agree to so register it. If the Collateral Agent determines to
exercise its right to sell any or all of the Investment Related Property, upon
written request, each Grantor shall and shall cause each issuer of any Pledged
Stock to be sold hereunder, each partnership and each limited liability company
from time to time to furnish to the Collateral Agent all such information as
the Collateral Agent may request in order to determine the number and nature of
interest, shares or other instruments included in the Investment Related
Property which may be sold by the Collateral Agent in exempt transactions under
the Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.


 


Section 7.06           Intellectual
Property.


 


(a)           Anything contained herein to the contrary notwithstanding, upon the
occurrence and during the continuation of an Event of Default:


 


(i)            the Collateral Agent shall have the right
(but not the obligation) to bring suit or otherwise commence any action or
proceeding in the name of any Grantor, the Collateral Agent or otherwise, in
the Collateral Agent’s sole discretion, to enforce any of such Grantor’s rights
in any Intellectual Property, in which event such Grantor shall, at the request
of the Collateral Agent, do any and all lawful acts and execute any and all
documents required by the Collateral Agent in aid of such enforcement and such
Grantor shall promptly, upon demand, reimburse and indemnify the Collateral
Agent as provided in Article 10 of the Credit Agreement in connection with the
exercise of its rights under this Section;


 


25

















 


(ii)           upon written demand from the Collateral
Agent, each Grantor shall grant, assign, convey or otherwise transfer to the
Collateral Agent an absolute assignment of all of such Grantor’s right, title
and interest in and to the Intellectual Property and shall execute and deliver
to the Collateral Agent such documents as are necessary or appropriate to carry
out the intent and purposes of this Agreement;


 


(iii)          each Grantor agrees that such a grant,
conveyance, transfer, assignment and/or recording shall be applied to reduce
the Secured Obligations outstanding only to the extent that the Collateral
Agent (or any Secured Party) receives cash proceeds in respect of the sale of,
or other realization upon, the Intellectual Property; and


 


(iv)          the Collateral Agent shall have the right to
notify, or require each Grantor to notify, any obligors with respect to amounts
due or to become due to such Grantor in respect of the Intellectual Property,
of the existence of the security interest created herein, to direct such
obligors to make payment of all such amounts directly to the Collateral Agent,
and, upon such notification and at the expense of such Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done.


 


(b)           If (i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing, (ii) no
other Event of Default shall have occurred and be continuing, (iii) an
assignment or other transfer to the Collateral Agent of any rights, title and
interests in and to the Intellectual Property shall have been previously made
and shall have become absolute and effective, and (iv) the Secured Obligations
shall not have become immediately due and payable, upon the written request of
any Grantor, the Collateral Agent shall promptly execute and deliver to such
Grantor, at such Grantor’s sole cost and expense, such assignments or other
transfer as may be necessary to reassign to such Grantor any such rights, title
and interests as may have been assigned to the Collateral Agent as aforesaid,
subject to any disposition thereof that may have been made by the Collateral
Agent; provided, after giving effect to such reassignment, the Collateral
Agent’s security interest granted pursuant hereto, as well as all other rights
and remedies of the Collateral Agent granted hereunder, shall continue to be in
full force and effect; and provided further, the rights, title and interests so
reassigned shall be free and clear of any other Liens granted by or on behalf
of the Collateral Agent and the Secured Parties.


 


(c)           Solely for the purpose of enabling the Collateral Agent to exercise
rights and remedies under this Article 7 and at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to the Collateral Agent, to the extent it has the right
to do so, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Grantor), subject, in the case of
Trademarks, to sufficient rights to quality control and inspection in favor of
such Grantor to avoid the risk of invalidation of said Trademarks, to use,
operate under, license, or sublicense any Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located.


 


Section 7.07           Cash Proceeds. In addition to the rights of the Collateral
Agent specified in Section 4.03 with respect to payments of Receivables, any
cash, checks and other near-cash items (collectively, “Cash Proceeds”)  received by the Collateral Agent (whether from
a Grantor or otherwise):  (i) if no Event
of Default shall have occurred and be continuing, shall be paid by the
Collateral Agent to Borrower or as otherwise instructed by Borrower and (ii) if
an Event of Default shall have occurred and be continuing, may, in the sole
discretion of the Collateral Agent, (A) be paid to Borrower, (B) be held by the
Collateral Agent for the ratable benefit of the Secured Parties, as collateral
security for the Secured 


 


26

















 


Obligations (whether matured or unmatured)
and/or (C) then or at any time thereafter may be applied by the Collateral
Agent against the Secured Obligations then due and owing.


 


ARTICLE VIII



COLLATERAL AGENT


 


The
Collateral Agent has been appointed to act as Collateral Agent under the Credit
Agreement by Lenders and, by their acceptance of the benefits hereof, the other
Secured Parties. The Collateral Agent shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action
(including, without limitation, the release or substitution of Collateral),
solely in accordance with this Agreement and the Credit Agreement. In
furtherance of the foregoing provisions of this Section, each Secured Party, by
its acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Collateral hereunder, it being
understood and agreed by such Secured Party that all rights and remedies
hereunder may be exercised solely by the Collateral Agent for the benefit of
the Secured Parties in accordance with the terms of this Section.


 


ARTICLE IX



CONTINUING SECURITY INTEREST; TRANSFER OF LOANS


 


This
Agreement shall create a continuing security interest in the Collateral and
shall remain in full force and effect until the Termination Date, be binding
upon each Grantor, its successors and assigns, and inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing, but subject to the terms of the Credit
Agreement, any Lender may assign or otherwise transfer any Loans held by it to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to Lenders herein or otherwise. Upon
the Termination Date, the security interest granted hereby shall terminate
hereunder and of record and all rights to the Collateral shall revert to
Grantors. Upon any such termination the Collateral Agent shall, at Grantors’
expense, execute and deliver to Grantors such documents as Grantors shall
reasonably request to evidence such termination.


 


ARTICLE X



STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM


 


The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. The Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Collateral Agent accords its
own property. Neither the Collateral Agent nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or otherwise. If any Grantor fails to perform any
agreement contained herein, if an Event of Default has occurred and is continuing,
the Collateral Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Collateral 


 


27

















 


Agent
incurred in connection therewith shall be payable by each Grantor under Section
10.02 of the Credit Agreement.


 


ARTICLE XI



MISCELLANEOUS.


 


Any
notice required or permitted to be given under this Agreement shall be given in
accordance with Section 10.01 of the Credit Agreement. No failure or delay on
the part of the Collateral Agent in the exercise of any power, right or
privilege hereunder or under any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists. This Agreement
shall be binding upon and inure to the benefit of the Collateral Agent and
Grantors and their respective successors and assigns. No Grantor shall, without
the prior written consent of the Collateral Agent given in accordance with the
Credit Agreement, or as permitted by the Credit Agreement, assign any right,
duty or obligation hereunder. This Agreement and the other Loan Documents
embody the entire agreement and understanding between Grantors and the
Collateral Agent and supersede all prior agreements and understandings between
such parties relating to the subject matter hereof and thereof. Accordingly,
the Loan Documents 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. This Agreement may be executed
in one or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.


 


THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
AND RULE 327(b) OF THE NEW YORK CIVIL PRACTICE LAW AND RULES.


 


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IN WITNESS WHEREOF, each Grantor and the
Collateral Agent have caused this Agreement to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first
written above.


 


	
   

  	
  CHEM RX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name: Jerry
  Silva

  	
   

  
	
   

  	
   

  	
  Title:
  Chairman and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  B.J.K. INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name: Jerry
  Silva

  	
   

  
	
   

  	
   

  	
  Title:
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHEM RX NEW JERSEY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name:  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Title:  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHEM RX/SALERNO’S, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name:  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Title:  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHEMRX-BOCA RATON, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name:  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Title:  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHEMRX CARE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Name:  Jerry Silva

  	
   

  
	
   

  	
   

  	
  Title:  President

  	
   

  



 


29

















 


	
   

  	
  CANADIAN IMPERIAL BANK OF COMMERCE,

  NEW YORK AGENCY,

  
	
   

  	
  as the Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Doug Cornett

  	
   

  
	
   

  	
   

  	
  Name:  Doug Cornett

  	
   

  
	
   

  	
   

  	
  Title:  Authorized Signatory

  	
   

  



 


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