Exhibit 10.8 









GUARANTEE AND
COLLATERAL AGREEMENT 



made by 



HANGER ORTHOPEDIC
GROUP, INC., 
as Borrower, 



and certain of its
Subsidiaries 



in favor of 



CITICORP NORTH AMERICA,
INC., 
as Administrative Agent 



Dated as of May 26, 2006 












TABLE OF CONTENTS 





			Page
	SECTION 1.	DEFINED TERMS	  1
	    1.1	Definitions	  1
	    1.2	Other Definitional Provisions	  6
	SECTION 2.	GUARANTEE	  7
	    2.1	Guarantee	7
	    2.2	Right of Contribution	  8
	    2.3	Subrogation	  8
	    2.4	Amendments, etc. with respect to the Borrower Obligations	  9
	    2.5	Guarantee Absolute and Unconditional	  9
	    2.6	Reinstatement	11
	    2.7	Payments	11
	SECTION 3.	GRANT OF SECURITY INTEREST	12
	SECTION 4.	REPRESENTATIONS AND WARRANTIES	13
	    4.1	Representations in Credit Agreement	13
	    4.2	Title; No Other Liens	13
	    4.3	Perfected First Priority Liens	13
	    4.4	Jurisdiction of Organization; Chief Executive Office	13
	    4.5	Inventory and Equipment	14
	    4.6	Farm Products	14
	    4.7	Investment Property	14
	    4.8	Receivables	14
	    4.9	Intellectual Property	14
	SECTION 5.	COVENANTS	15
	    5.1	Covenants in Credit Agreement	15
	    5.2	Delivery of Instruments and Chattel Paper	15
	    5.3	Maintenance of Insurance	16
	    5.4	Payment of Obligations	16
	    5.5	Maintenance of Perfected Security Interest; Further Documentation	16
	    5.6	Changes in Name, etc	17
	    5.7	Notices	17
	    5.8	Investment Property	18












	 	 	 
	    5.9	Receivables	19
	    5.10	Intellectual Property	19
	    5.11	Vehicles	21
	    5.12	Commercial Tort Claims	21
	SECTION 6.	REMEDIAL PROVISIONS	21
	    6.1	Certain Matters Relating to Receivables	21
	    6.2	Communications with Obligors; Grantors Remain Liable	22
	    6.3	Pledged Stock	23
	    6.4	Proceeds to be Turned Over To Administrative Agent	23
	    6.5	Application of Proceeds	24
	    6.6	Code and Other Remedies	24
	    6.7	Sale of Pledged Stock	25
	    6.8	Deficiency	26
	SECTION 7.	THE ADMINISTRATIVE AGENT	26
	    7.1	Administrative Agent's Appointment as Attorney-in-Fact, etc	26
	    7.2	Duty of Administrative Agent	27
	    7.3	Execution of Financing Statements	28
	    7.4	Authority of Administrative Agent	28
	SECTION 8.	MISCELLANEOUS	28
	    8.1	Amendments in Writing	28
	    8.2	Notices	29
	    8.3	No Waiver by Course of Conduct; Cumulative Remedies	29
	    8.4	Enforcement Expenses; Indemnification	29
	    8.5	Successors and Assigns	29
	    8.6	Set-Off	30
	    8.7	Counterparts	30
	    8.8	Severability	30
	    8.9	Section Headings	30
	    8.10	Integration	30
	    8.11	GOVERNING LAW	30
	    8.12	Submission To Jurisdiction; Waivers	31
	    8.13	Acknowledgements	31
	    8.14	Additional Grantors	31




ii 












	 	 	 
	    8.15	Releases	31
	    8.16	WAIVER OF JURY TRIAL	32
























iii 











Schedules 



	Schedule 1	Notice Addresses of Guarantors
	Schedule 2	Description of Pledged Securities
	Schedule 3	Filings and Other Actions Required to Perfect Security Interest
	Schedule 4	Jurisdiction of Organization, Identification Number and Location of Chief Executive Office
	Schedule 5	Locations of Inventory and Equipment
	Schedule 6	Existing Prior Liens
	Schedule 7	Intellectual Property
	Schedule 8	Intellectual Property Matters
	Schedule 9	Deposit Accounts






Annexes 



		
	Annex I	Assumption Agreement
	Annex II	Acknowledgment and Consent
	Annex III  	Form of Patent Security Agreement
	Annex IV	Form of Trademark Security Agreement

















        GUARANTEE
AND COLLATERAL AGREEMENT, dated as of May 26, 2006, made by each of the signatories hereto
(together with any other entity that may become a party hereto as provided herein, the
“Grantors”), in favor of CITICORP NORTH AMERICA, INC., as Administrative
Agent (in such capacity, the “Administrative Agent”) for the banks and
other financial institutions (the “Lenders”) from time to time parties to
the Credit Agreement, dated as of May 26, 2006, (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among HANGER
ORTHOPEDIC GROUP, INC., a Delaware corporation (the “Borrower”), the
several banks and other financial institutions or entities from time to time parties to
the Credit Agreement (the “Lenders”), LEHMAN BROTHERS INC., as joint lead
arranger and joint bookrunner, CITIGROUP GLOBAL MARKETS INC., as joint lead arranger and
joint bookrunner, the Administrative Agent, LEHMAN COMMERCIAL PAPER, INC., as syndication
agent (in such capacity, the “Syndication Agent”), GENERAL ELECTRIC
CAPITAL CORPORATION, as co-documentation agent, and LASALLE BANK, N.A., as
co-documentation agent. 



W I T N E S S E T H:



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



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



Grantor; 



        WHEREAS, the
proceeds of the extensions of credit under the Credit Agreement will be used in part to
enable the Borrower to make valuable transfers to one or more of the other Grantors in
connection with the operation of their respective businesses; 



        WHEREAS,
certain of the Qualified Counterparties may enter into Specified Hedge Agreements with one
or more of the Grantors; 



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



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



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



SECTION 1.
                                        DEFINED TERMS 



    1.1        Definitions.
(a) Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement and the following
terms are used herein as defined in the New York UCC: Accounts, Certificated Security,
Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products, General
Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights and Supporting
Obligations.  












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




	 	        “Agreement”:
this Guarantee and Collateral Agreement, as the same may be amended, supplemented or
otherwise modified from time to time. 







	 	        “Borrower
Credit Agreement Obligations”: the collective reference to the unpaid principal
of and interest on the Loans and Reimbursement Obligations and all other obligations and
liabilities of the Borrower (including interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) to the
Administrative Agent or any Lender, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, this Agreement, or the other Loan
Documents, or any Letter of Credit, or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all
fees and disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of any of the foregoing
agreements). 







	 	        “Borrower
Hedge Agreement Obligations”: the collective reference to all obligations and
liabilities of the Borrower (including interest accruing at the then applicable rate
provided in any Specified Hedge Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to any Qualified Counterparty, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, any Specified Hedge Agreement or any other document
made, delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the relevant Qualified
Counterparty that are required to be paid by the Borrower pursuant to the terms of any
Specified Hedge Agreement). 







	 	        “Borrower
Obligations”: the collective reference to (i) the Borrower Credit Agreement
Obligations, (ii) the Borrower Hedge Agreement Obligations, but only to the extent that,
and only so long as, the Borrower Credit Agreement Obligations are secured and guaranteed
pursuant hereto, and (iii) all other obligations and liabilities of the Borrower, whether
direct or indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this Agreement
(including all fees and disbursements of counsel to the Administrative Agent or to the
Secured Parties that are required to be paid by the Borrower pursuant to the terms of this
Agreement). 








2 









	 	        “Collateral”:
as defined in Section 3. 







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







	 	        “Copyrights”:
all copyrights arising under the laws of the United States, any other country or any
political subdivision thereof, whether registered, including any renewals thereof, or
unregistered and whether published or unpublished (including those listed in
Schedule 7), all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications in the
United States Copyright Office. 







	 	        “Copyright
Licenses”: any written agreement naming any Grantor as licensor or licensee
(including those listed in Schedule 7), granting any right under any Copyright,
including the grant of rights to manufacture, distribute, exploit and sell materials
derived from any Copyright. 







	 	        “Deposit
Account”: as defined in the Uniform Commercial Code of any applicable
jurisdiction and, in any event, including any demand, time, savings, passbook or like
account maintained with a depositary institution. 







	 	        “Excluded
Assets”: the collective reference to (i) any contract, General Intangible,
Copyright License, Patent License or Trademark License (“Intangible
Assets”), in each case to the extent the grant by the relevant Grantor of a
security interest pursuant to this Agreement in such Grantor’s right, title and
interest in such Intangible Asset (A) is prohibited by legally enforceable provisions of
any contract, agreement, instrument or indenture governing such Intangible Asset, (B)
would give any other party to such contract, agreement, instrument or indenture a legally
enforceable right to terminate its obligations thereunder or (C) is permitted only with
the consent of another party, if the requirement to obtain such consent is legally
enforceable and such consent has not been obtained; provided, that in any event any
Receivable or any money or other amounts due or to become due under any such contract,
agreement, instrument or indenture shall not be Excluded Assets to the extent that any of
the foregoing is (or if it contained a provision limiting the transferability or pledge
thereof would be) subject to Section 9-406 of the New York UCC, and (ii) Foreign
Subsidiary Voting Stock excluded from the definition of “Pledged Stock” set
forth in this Section 1.1. 







	 	        “Foreign
Subsidiary”:  any Subsidiary organized under the laws of any jurisdiction
outside the  United States of America.  







	 	        “Foreign
Subsidiary Voting Stock”: the voting Capital Stock of any Foreign Subsidiary.  








3 









	 	        “Guarantor
Hedge Agreement Obligations”: the collective reference to all obligations and
liabilities of a Guarantor (including interest accruing at the then applicable rate
provided in any Specified Hedge Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding, relating to such
Guarantor, whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to any Qualified Counterparty, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, any Specified Hedge Agreement or any other document
made, delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the relevant Qualified
Counterparty that are required to be paid by such Guarantor pursuant to the terms of any
Specified Hedge Agreement). 







	 	        “Guarantor
Obligations”: with respect to any Guarantor, the collective reference to (i) any
Guarantor Hedge Agreement Obligations of such Guarantor, but only to the extent that, and
only so long as, the other Obligations of such Guarantor are secured and guaranteed
pursuant hereto, and (ii) all obligations and liabilities of such Guarantor which may
arise under or in connection with this Agreement (including Section 2) or any other Loan
Document to which such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including all fees and disbursements of counsel to the Administrative Agent or to any
Secured Party that are required to be paid by such Guarantor pursuant to the terms of this
Agreement or any other Loan Document). 







	 	        “Guarantors”:
 the collective reference to each Grantor other than the Borrower. 







	 	        “Hedge
Agreements”: as to any Person, all interest rate swaps, currency exchange
agreements, commodity swaps, caps or collar agreements or similar arrangements entered
into by such Person providing for protection against fluctuations in interest rates,
currency exchange rates or commodity prices or the exchange of nominal interest
obligations, either generally or under specific contingencies. For avoidance of doubt,
Hedge Agreements shall include any interest rate swap or similar agreement that provides
for the payment by the Borrower or any of its Subsidiaries of amounts based upon a
floating rate in exchange for receipt by the Borrower or such Subsidiary of amounts based
upon a fixed rate. 







	 	        “Intellectual
Property”: the collective reference to all rights, priorities and privileges
relating to intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including the Copyrights, the Copyright Licenses, the Patents,
the Patent Licenses, the Trademarks and the Trademark Licenses, inventions, processes,
designs, formulae, trade secrets and know-how, computer software (including data and
related documentation), other than off-the-shelf software, and all rights to sue at law or
in equity for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom. 







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








4 










	 	        “Investment
Property”: the collective reference to (i) all “investment property” as
such term is defined in Section 9-102(a)(49) of the New York UCC (other than any Foreign
Subsidiary Voting Stock excluded from the definition of “Pledged Stock” in this
Section 1.1) and (ii) whether or not constituting “investment property” as so
defined, all Pledged Notes and all Pledged Stock. 







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







	 	        “Licensed
Intellectual Property”: as defined in Section 4.10.  







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







	 	        “Obligations”:
(i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of
each Guarantor, its Guarantor Obligations. 







	 	        “Patents”:
(i) all letters patent, including any reissues or extensions, of the United States, any
other country or any political subdivision thereof, all reissues and extensions thereof
and all goodwill associated therewith, including any of the foregoing referred to in
Schedule 7 and (ii) all applications for letters patent of the United States or any
other country and all divisions, continuations and continuations-in-part thereof,
including any of the foregoing referred to in Schedule  7. 







	 	        “Patent
License”: any agreement, whether written or oral, providing for the grant by or
to any Grantor of any right to manufacture, use or sell any invention covered in whole or
in part by a Patent, including any of the foregoing referred to in Schedule 7. 







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







	 	        “Pledged
Securities”:  the collective reference to the Pledged Notes and the Pledged
Stock. 







	 	        “Pledged
Stock”: the shares of Capital Stock listed on Schedule 2, together with
any other shares, stock certificates, options or rights of any nature whatsoever in
respect of the Capital Stock of any Person that may be issued or granted to, or held by,
any Grantor while this Agreement is in effect; provided that in no event shall more
than 65% of the total outstanding Foreign Subsidiary Voting Stock of any Foreign
Subsidiary be required to be pledged hereunder. 







	 	        “Proceeds”:
all “proceeds” as such term is defined in Section 9-102(a)(64) of the Uniform
Commercial Code in effect in the State of New York on the date hereof and, in any event,
including all dividends or other income from the Investment Property, collections thereon
or distributions or payments with respect thereto. 








5 









	 	        “Qualified
Counterparty”: with respect to any Specified Hedge Agreement, any counterparty
thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or
an affiliate of a Lender. 







	 	        “Receivable”:
any right to payment for goods sold, leased, licensed, assigned or otherwise disposed of,
or for services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including any
Account). 







	 	        “Secured
Parties”: the collective reference to the Administrative Agent, the Syndication
Agent, the Lenders (including any Issuing Lender in its capacity as Issuing Lender) and
any Qualified Counterparties. 







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







	 	        “Specified
Hedge Agreement”: any Hedge Agreement entered into by (i) the Borrower or any
Guarantor and (ii) any Qualified Counterparty. 







	 	        “Trademarks”:
all registered and unregistered trademarks, trade names, corporate names, company names,
business names, Internet domain names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, including any renewals thereof, and
all goodwill associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law rights
related thereto, including any of the foregoing referred to in Schedule 7. 







	 	        “Trademark
License”: any agreement, whether written or oral, providing for the grant by or
to any Grantor of any right to use any Trademark, including any of the foregoing referred
to in Schedule 7. 







	 	        “Vehicles”:
all cars, trucks, trailers, construction and earth moving equipment and other vehicles
covered by a certificate of title law of any state and all tires and other appurtenances
to any of the foregoing. 







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



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




        (c)              The
terms “include”, “includes” and “including”          shall
be deemed to be followed by the phrase “without limitation”.  





6 









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




SECTION 2.
                                         GUARANTEE 



    2.1        Guarantee.
(a) (i) The Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantee to the Administrative Agent, for the ratable benefit of the Secured Parties and
their respective successors, indorsees, transferees and assigns, the prompt and complete
payment and performance by the Borrower when due (whether at stated maturity, by
acceleration or otherwise) of the Borrower Obligations (other than, in the case of each
Guarantor, Borrower Obligations arising pursuant to clause (ii) of this Section 2.1(a) in
respect of Guarantor Hedge Agreement Obligations in respect of which such Guarantor is a
primary obligor).  



        (ii)              The
Borrower hereby unconditionally and irrevocably guarantees to the
          Administrative Agent, for the ratable benefit of the Secured Parties and their
          respective successors, endorsees, transferees and assigns, the prompt and
          complete payment and performance by each Guarantor when due (whether at stated
          maturity, by acceleration or otherwise) of the Guarantor Hedge Agreement
          Obligations of such Guarantor.  




        (b)              Anything
herein or in any other Loan Document to the contrary notwithstanding,           (i) the
maximum liability of each Guarantor hereunder and under the other Loan
          Documents shall in no event exceed the amount which can be guaranteed by such
          Guarantor under applicable federal and state laws relating to fraudulent
          conveyances or transfers or the insolvency of debtors (after giving effect to
          the right of contribution established in Section 2.2) and (ii) the maximum
          liability of the Borrower under this Section 2 shall in no event exceed the
          amount which can be guaranteed by the Borrower under applicable federal and
          state laws relating to fraudulent conveyances or transfers or the insolvency of
          debtors (after giving effect to the right of contribution established in
Section           2.2).  




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




        (ii)              The
Borrower agrees that the Guarantor Hedge Agreement Obligations may at any           time
and from time to time exceed the amount of the liability of the Borrower           under
this Section 2 without impairing the guarantee of the Borrower contained           in
this Section 2 or affecting the rights and remedies of the Administrative           Agent
or any other Secured Party hereunder.  




        (d)              Subject
to Section 8.15 hereof, the guarantee contained in this Section 2 shall           remain
in full force and effect until all the Borrower Obligations (other than
          Borrower Obligations arising under Section 2.1(a)(ii) hereof) and the
          obligations of each Guarantor under the guarantee contained in this Section 2
          (other than Guarantor Obligations in respect of Borrower Obligations arising
          under Section 2.1(a)(ii) hereof) shall have been satisfied by full and final
          payment in cash, no Letter of Credit shall be outstanding and the Commitments
          shall be terminated, notwithstanding that from time to time during the term of
          the Credit Agreement the Borrower may be free from any Borrower Obligations and
          any or all of the Guarantors may be free from their respective Guarantor Hedge
          Agreement Obligations.  




7 










        (e)              No
payment made by the Borrower, any of the Guarantors, any other guarantor or           any
other Person or received or collected by the Administrative Agent or any
          Secured Party from the Borrower, any of the Guarantors, any other guarantor or
          any other Person by virtue of any action or proceeding or any set-off or
          appropriation or application at any time or from time to time in reduction of
or           in payment of the Borrower Obligations or the Guarantor Hedge Agreement
          Obligations shall be deemed to modify, reduce, release or otherwise affect the
          liability of the Borrower or any Guarantor under this Section 2 which shall,
          notwithstanding any such payment (other than any payment made by the Borrower
or           such Guarantor in respect of the Borrower Obligations or the Guarantor Hedge
          Agreement Obligations or any payment received or collected from the Borrower or
          such Guarantor in respect of the Borrower Obligations or the Guarantor Hedge
          Agreement Obligations), remain liable for the Borrower Obligations and the
          Guarantor Hedge Agreement Obligations up to the maximum liability of the
          Borrower or such Guarantor hereunder until the Borrower Obligations and the
          Guarantor Hedge Agreement Obligations are fully and finally paid in cash, no
          Letter of Credit shall be outstanding and the Commitments are terminated.  




    2.2        Right
of Contribution. (a) Each Guarantor hereby agrees that to the extent that a Guarantor
shall have paid more than its proportionate share of any payment made hereunder or the
Guarantor Hedge Agreement Obligations, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment.  



        (b)              The
Borrower and each Guarantor agrees that to the extent that the Borrower or           any
Guarantor shall have paid more than its proportionate share of any payment           made
hereunder in respect of any Guarantor Hedge Agreement Obligation of any           other
Guarantor, the Borrower or such Guarantor, as the case may be, shall be
          entitled to seek and receive contribution from and against the Borrower and any
          other Guarantor which has not paid its proportionate share of such payment.  




        (c)              The
Borrower’s and each Guarantor’s right of contribution under this
          Section 2.2 shall be subject to the terms and conditions of Section 2.3. The
          provisions of this Section 2.2 shall in no respect limit the obligations and
          liabilities of the Borrower or any Guarantor to the Administrative Agent and
the           Secured Parties, and the Borrower and each Guarantor shall remain liable to
the           Administrative Agent and the Secured Parties for the full amount guaranteed
by           the Borrower or such Guarantor hereunder.  




    2.3        Subrogation.
Notwithstanding any payment made by the Borrower or any Guarantor hereunder or any
set-off or application of funds of the Borrower or any Guarantor by the Administrative
Agent or any Secured Party, neither the Borrower nor any Guarantor shall be entitled to
be subrogated to any of the rights of the Administrative Agent or any Secured Party
against the Borrower or any other Guarantor or any collateral security or guarantee or
right of offset held by the Administrative Agent or any Secured Party for the payment of
the Borrower Obligations or the Guarantor Hedge Agreement Obligations, nor shall the
Borrower or any Guarantor seek or be entitled to seek any contribution or reimbursement
from the Borrower or any other Guarantor in respect of payments made by the Borrower or
such Guarantor hereunder, until all amounts owing to the Administrative Agent and the
Secured Parties by the Borrower on account of the Borrower Obligations are fully and
finally paid in cash, no Letter of Credit shall be outstanding and the Commitments are
terminated. If any amount shall be paid to the Borrower or any Guarantor on account of
such subrogation rights at any time when all of the Borrower Obligations shall not have
been fully and finally paid in cash, such amount shall be held by the Borrower or such
Guarantor in trust for the Administrative Agent and the Secured Parties, segregated from
other funds of the Borrower or such Guarantor, and shall, forthwith upon receipt by the
Borrower or such Guarantor, be turned over to the Administrative Agent in the exact form
received by the Borrower or such Guarantor (duly indorsed by the Borrower or such
Guarantor to the Administrative Agent, if required), to be applied against the Borrower
Obligations or the Guarantor Hedge Agreement Obligations, whether matured or unmatured,
in such order as the Administrative Agent may determine.  




8 









    2.4        Amendments,
etc. with respect to the Borrower Obligations. The Borrower and each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of rights
against the Borrower or any Guarantor and without notice to or further assent by the
Borrower or any Guarantor, any demand for payment of any of the Borrower Obligations or
Guarantor Hedge Agreement Obligations made by the Administrative Agent or any Secured
Party may be rescinded by the Administrative Agent or such Secured Party and any of the
Borrower Obligations or Guarantor Hedge Agreement Obligations continued, and the Borrower
Obligations or Guarantor Hedge Agreement Obligations, or the liability of any other
Person upon or for any part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Secured Party (with the consent of such of
the Borrower and the Guarantors as shall be required thereunder), and the Specified Hedge
Agreements, the Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required Lenders or
all Lenders, as the case may be) may (with the consent of such of the Borrower and the
Guarantors as shall be required thereunder) deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the Administrative
Agent or any Secured Party for the payment of the Borrower Obligations or Guarantor Hedge
Agreement Obligations may (with the consent of such of the Borrower and the Guarantor as
shall be required thereunder) be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any Secured Party shall, except to the extent set
forth in, and for the benefit of the parties to, the agreements and instruments governing
such Lien or guarantee, have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Borrower Obligations or Guarantor Hedge
Agreement Obligations or for the guarantees contained in this Section 2 or any property
subject thereto.  




9 









    2.5        Guarantee
Absolute and Unconditional. (a) Each Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of the Borrower Obligations (other than
any notice with respect to any Guarantor Hedge Agreement Obligation with respect to which
such Guarantor is a primary obligor and to which it is entitled pursuant to the
applicable Specified Hedge Agreement) and notice of or proof of reliance by the
Administrative Agent or any Secured Party upon the guarantee contained in this Section 2
or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee contained in this
Section 2; and all dealings between the Borrower and any of the Guarantors, on the one
hand, and the Administrative Agent and the Secured Parties, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the Borrower
or any of the Guarantors with respect to the Borrower Obligations (other than any
diligence, presentment, protest, demand or notice with respect to any Guarantor Hedge
Agreement Obligation with respect to which such Guarantor is a primary obligor and to
which it is entitled pursuant to the applicable Specified Hedge Agreement). Each
Guarantor understands and agrees that the guarantee of such Guarantor contained in this
Section 2 shall be construed as a continuing, absolute and unconditional guarantee of
payment without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any collateral security
therefor or guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any time be
available to or be asserted by the Borrower or any other Person against the
Administrative Agent or any Secured Party, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Borrower or such Guarantor) which constitutes,
or might be construed to constitute, an equitable or legal discharge of the Borrower for
the Borrower Obligations, or of such Guarantor under the guarantee of such Guarantor
contained in this Section 2, in bankruptcy or in any other instance. When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Secured Party may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and remedies as
it may have against the Borrower, any other Guarantor or any other Person or against any
collateral security or guarantee for the Borrower Obligations or any right of offset with
respect thereto, and any failure by the Administrative Agent or any Secured Party to make
any such demand, to pursue such other rights or remedies or to collect any payments from
the Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any release
of the Borrower, any other Guarantor or any other Person or any such collateral security,
guarantee or right of offset, shall not relieve any Guarantor of any obligation or
liability under this Section 2, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Administrative Agent or
any Secured Party against any Guarantor. For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.  




10 









        (b)              The
Borrower waives any and all notice of the creation, renewal, extension or
          accrual of any of the Guarantor Hedge Agreement Obligations and notice of or
          proof of reliance by the Administrative Agent or any Secured Party upon the
          guarantee by the Borrower contained in this Section 2 or acceptance of the
          guarantee by the Borrower contained in this Section 2; the Guarantor Hedge
          Agreement Obligations, and any of them, shall conclusively be deemed to have
          been created, contracted or incurred, or renewed, extended, amended or waived,
          in reliance upon the guarantee by the Borrower contained in this Section 2; and
          all dealings between the Borrower and any of the Guarantors, on the one hand,
          and the Administrative Agent and the Secured Parties, on the other hand, with
          respect to any Guarantor Hedge Agreement Obligation likewise shall be
          conclusively presumed to have been had or consummated in reliance upon the
          guarantee by the Borrower contained in this Section 2. The Borrower waives
          diligence, presentment, protest, demand for payment and notice of default or
          nonpayment to or upon the Borrower with respect to the Guarantor Hedge
Agreement           Obligations. The Borrower understands and agrees that the guarantee
by the           Borrower contained in this Section 2 shall be construed as a continuing,
          absolute and unconditional guarantee of payment without regard to (a) the
          validity or enforceability of the Guarantor Hedge Agreement Obligations or any
          other collateral security therefor or guarantee or right of offset with respect
          thereto at any time or from time to time held by the Administrative Agent or
any           Secured Party, (b) any defense, set-off or counterclaim (other than a
defense of           payment or performance) which may at any time be available to or be
asserted by           any Person against the Administrative Agent or any Secured Party,
or (c) any           other circumstance whatsoever (with or without notice to or
knowledge of the           Borrower or any Guarantor) which constitutes, or might be
construed to           constitute, an equitable or legal discharge of the applicable
Guarantor for the           applicable Guarantor Hedge Agreement Obligations, or of the
Borrower under its           guarantee contained in this Section 2, in bankruptcy or in
any other instance.           When making any demand under this Section 2 or otherwise
pursuing its rights and           remedies under this Section 2 against the Borrower, the
Administrative Agent or           any Secured Party may, but shall be under no obligation
to, make a similar           demand on or otherwise pursue such rights and remedies as it
may have against           any Guarantor or any other Person or against any collateral
security or           guarantee for the Guarantor Hedge Agreement Obligations or any
right of offset           with respect thereto, and any failure by the Administrative
Agent or any Secured           Party to make any such demand, to pursue such other rights
or remedies or to           collect any payments from any Guarantor or any other Person
or to realize upon           any such collateral security or guarantee or to exercise any
such right of           offset, or any release of any Guarantor or any other Person or
any such           collateral security, guarantee or right of offset, shall not relieve
the           Borrower of any obligation or liability under this Section 2, and shall not
          impair or affect the rights and remedies, whether express, implied or available
          as a matter of law, of the Administrative Agent or any Secured Party against
the           Borrower under this Section 2. For the purposes hereof “demand” shall
          include the commencement and continuance of any legal proceedings.  







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



    2.7        Payments.
The Borrower and each Guarantor hereby guarantees that payments by it hereunder will be
paid to the Administrative Agent without set-off or counterclaim (i) in the case of
obligations in respect of Borrower Obligations arising under the Credit Agreement or any
other Loan Document in Dollars at the Payment Office specified in the Credit Agreement
and (ii) in the case of obligations in respect of any Borrower Hedge Agreement
Obligations or any Guarantor Hedge Agreement Obligations, in the currency and at the
place specified in the applicable Specified Hedge Agreement.  




11 









SECTION 3.
                                  GRANT OF SECURITY INTEREST 



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



        (a)              all
Accounts;  




        (b)              all
Chattel Paper;  




        (c)              all
Deposit Accounts;  




        (d)              all
Documents;  




        (e)              all
Equipment;  




        (f)              all
General Intangibles;  




        (g)              all
Instruments;  




        (h)              all
Intellectual Property;  




        (i)              all
Inventory;  




        (j)              all
Investment Property;  




        (k)              all
Vehicles;  




        (l)              all
Letter-of-Credit Rights;  




        (m)              all
Commercial Tort Claims to the extent they have been notified to the
          Administrative Agent pursuant to Section 5.13;  




        (n)              all
Goods and other property not otherwise described above;  




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




        (p)              to
the extent not otherwise included, all Proceeds and products of any and all           of
the foregoing, all Supporting Obligations in respect of any of the foregoing
          and all collateral security and guarantees given by any Person with respect to
          any of the foregoing;  




provided, that the Collateral
shall not include any Excluded Assets. 




12 









SECTION 4.
                                 REPRESENTATIONS AND WARRANTIES 



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



    4.1        Representations
in Credit Agreement. In the case of each Guarantor, the representations and
warranties set forth in Section 4 of the Credit Agreement as they relate to such
Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is
hereby incorporated herein by reference, are true and correct, and the Administrative
Agent and each Lender shall be entitled to rely on each of them as if they were made by
such Guarantor and fully set forth herein, provided that each reference in each
such representation and warranty to the Borrower’s knowledge shall, for the purposes
of this Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.  



    4.2        Title;
No Other Liens. Except for the security interest granted to the Administrative Agent
for the ratable benefit of the Secured Parties pursuant to this Agreement and the other
Liens permitted to exist on the Collateral by the Credit Agreement, such Grantor owns
each item of the Collateral free and clear of any and all Liens. On the date hereof, no
financing statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have been filed
in favor of the Administrative Agent, for the ratable benefit of the Secured Parties,
pursuant to this Agreement or as are permitted by the Credit Agreement.  



    4.3        Perfected
First Priority Liens. The security interests granted pursuant to this Agreement (a)
upon completion of the filings and other actions specified on Schedule 3 (which, in
the case of all filings and other documents referred to on said Schedule, have been
delivered to the Administrative Agent in completed and duly executed form) will
constitute valid perfected security interests in all of the Collateral (other than
Vehicles) in favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior to all other
Liens on the Collateral in existence on the date hereof except for (i) unrecorded Liens
permitted by the Credit Agreement which have priority over the Liens on the Collateral by
operation of law and (ii) Liens described on Schedule 6.  



    4.4        Jurisdiction
of Organization; Chief Executive Office. On the date hereof, such Grantor’s
correct legal name, jurisdiction of organization, organizational identification number
(if any) from its jurisdiction of organization, and the location of such Grantor’s
chief executive office or sole place of business, as the case may be, are specified on
Schedule 4. Such Grantor has furnished to the Administrative Agent a certified charter,
certificate of incorporation or other organization document and long-form good standing
certificate as of a date which is recent to the date hereof.  



    4.5        Inventory
and Equipment. On the date hereof, the Inventory and the Equipment (other than mobile
goods) are kept at the locations listed on Schedule 5.  




13 









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



    4.7        Investment
Property. (a) The shares of Pledged Stock pledged by such Grantor hereunder
constitute all the issued and outstanding shares of all classes of the Capital Stock of
each Issuer owned by such Grantor or, in the case of Foreign Subsidiary Voting Stock, if
less, 65% of the outstanding Foreign Subsidiary Voting Stock of each relevant Issuer.  



        (b)              All
the shares of the Pledged Stock have been duly and validly issued and are           fully
paid and nonassessable, except as permitted by Section 180.0622 of the
          Wisconsin Statutes.  




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




        (d)              Such
Grantor is the record and beneficial owner of, and has good and marketable
          title to, the Investment Property pledged by it hereunder, free of any and all
          Liens or options in favor of, any other Person, except the security interest
          created by this Agreement.  




    4.8        Receivables.
(a) No amount payable to such Grantor under or in connection with any Receivable is
evidenced by any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent to the extent required by Section 5.2.  



        (b)              None
of the obligors on any Receivable is a Governmental Authority, except for
          Receivables constituting not more than 5% of the face amount of all
Receivables.  




        (c)              The
amounts represented by such Grantor to the Secured Parties from time to time           as
owing to such Grantor in respect of the Receivables will at such times be
          accurate.  




    4.9        Intellectual
Property. (a) Schedule 7 lists, the Intellectual Property (other than trade
secrets) owned by such Grantor in its own name on the date hereof and, to the best of
such Grantor’s knowledge, all Intellectual Property subject to a license or other
agreement licensed or otherwise made available to such Grantor (the “Licensed
Intellectual Property”).  



        (b)              On
the date hereof, all material Intellectual Property of such Grantor described
          on Schedule 7 is in compliance in all material respects with applicable
          legal requirements (including payment of maintenance fees and the like) and, to
          the best of such Grantor’s knowledge, all such rights are valid,
          subsisting, and enforceable.  




        (c)              On
the date hereof, to the best of such Grantor’s knowledge, the conduct by
          such Grantor of its business does not infringe upon, misappropriate, constitute
          an unauthorized use of or otherwise violate the Intellectual Property rights of
          any other Person in any material respect. Except as set forth in Schedule
          8, no claim or demand of any Person has been made in writing, nor is there
          any proceeding that is pending or to the knowledge of such Grantor threatened,
          which (in any such case) (i) challenges the rights of such Grantor in respect
of           any Intellectual Property or (ii) asserts that such Grantor is infringing
upon,           misappropriating, making an unauthorized use of or otherwise violating or
in           conflict with, or is required to pay any royalty, license fee, charge or
other           amount with regard to, any Intellectual Property.  




14 










        (d)              On
the date hereof, to the best of such Grantor’s knowledge, no other           Person
is infringing upon, misappropriating, constituting an unauthorized use of           or
otherwise violating any material Intellectual Property owned by or licensed           to
such Grantor or the rights of such Grantor in any material Intellectual
          Property of such Grantor described on Schedule 8.  




        (e)              Except
as set forth in Schedule 7, on the date hereof, none of the           Intellectual
Property is the subject of any licensing or franchise agreement           pursuant to
which such Grantor is the licensor or franchisor.  




        (f)              None
of the Intellectual Property described in Schedule 8 is subject to           any
outstanding order, ruling, decree, judgment or stipulation which would           limit,
cancel or call into question the validity of, or such Grantor’s           rights in,
the Intellectual Property in any respect that could reasonably be           expected to
have a Material Adverse Effect.  




        (g)              Except
as set forth in Schedule 8, no action or proceeding is           pending, or,
to the knowledge of such Grantor, threatened, on the date hereof           (i) seeking to
limit, cancel or question the validity of any material           Intellectual Property or
such Grantor’s ownership interest therein, or (ii)           which, if adversely
determined, would have a material adverse effect on the           value of any
Intellectual Property.  




SECTION 5.
                                            COVENANTS 



        Each
Grantor covenants and agrees with the Administrative Agent and the Secured Parties that,
from and after the date of this Agreement until the Obligations shall have been paid in
full, no Letter of Credit shall be outstanding and the Commitments shall have terminated: 



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



    5.2        Delivery
of Instruments and Chattel Paper. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any Instrument, Certificated
Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall
be immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to this
Agreement; provided, that the Grantors shall not be obligated to deliver to the
Administrative Agent any Instruments or Chattel Paper held by any Grantor at any time to
the extent that the aggregate face amount of all such Instruments and Chattel Paper held
by all Grantors at such time does not exceed $1,000,000.  




15 









    5.3        Maintenance
of Insurance. (a) Such Grantor will maintain, with financially sound and reputable
companies, insurance policies (i) insuring the Inventory, Equipment and Vehicles against
loss by fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Administrative Agent and (ii) to the extent requested by the
Administrative Agent, insuring such Grantor, the Administrative Agent and the Secured
Parties against liability for personal injury and property damage relating to such
Inventory, Equipment and Vehicles, such policies to be in such form and amounts and
having such coverage as may be reasonably satisfactory to the Administrative Agent and
the Lenders.  



        (b)              All
such insurance shall (i) provide that no cancellation, material reduction in
          amount or material change in coverage thereof shall be effective until at least
          30 days after receipt by the Administrative Agent of written notice thereof,
          (ii) name the Administrative Agent as insured party or loss payee, as
          applicable, (iii) if reasonably requested by the Administrative Agent, include
a           breach of warranty clause and (iv) be reasonably satisfactory in all other
          respects to the Administrative Agent.  




        (c)              The
Borrower shall deliver to the Administrative Agent and the Lenders a report           of
a reputable insurance broker with respect to such insurance substantially
          concurrently with the delivery by the Borrower to the Administrative Agent of
          its audited financial statements for each fiscal year and such supplemental
          reports with respect thereto as the Administrative Agent may from time to time
          reasonably request.  




    5.4        Payment
of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of income or
profits therefrom, as well as all material claims of any kind (including claims for
labor, materials and supplies) against or with respect to the Collateral, except that no
such charge need be paid if the amount or validity thereof is currently being contested
in good faith by appropriate proceedings, reserves in conformity with GAAP with respect
thereto have been provided on the books of such Grantor and such proceedings could not
reasonably be expected to result in the sale, forfeiture or loss of any material portion
of the Collateral or any interest therein.  



    5.5        Maintenance
of Perfected Security Interest; Further Documentation. (a) Such Grantor shall
maintain the security interest created by this Agreement (other than the security
interest in Vehicles) as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the claims
and demands of all Persons whomsoever.  



        (b)              In
addition to the obligations of the Borrower under the Credit Agreement, after
          the occurrence and during the continuance of an Event of Default, such Grantor
          will furnish to the Administrative Agent and the Lenders from time to time
          statements and schedules further identifying and describing the assets and
          property of such Grantor and such other reports in connection with the
          Collateral as the Administrative Agent may reasonably request, all in
reasonable           detail.  




16 










        (c)              Each
of such Grantor’s Deposit Accounts is set forth on Schedule 9          and
such Grantor will, on the Closing Date or as provided in Schedule 6.12 of           the
Credit Agreement, execute and deliver to the Administrative Agent Deposit
          Account control agreements in favor of the Administrative Agent with respect to
          each such Deposit Account in a form reasonably satisfactory to the
          Administrative Agent; provided that the Grantors, collectively, shall
not           be required to deliver to the Administrative Agent a Deposit Account
control           agreement with respect to such Deposit Account in which amounts on
deposit,           together with the amounts on deposit in all other such Deposit
Accounts not           subject to a Deposit Account control agreement, in the aggregate,
do not exceed           $1,000,000 at any time.  




        (c)              Such
Grantor will execute and deliver to the Administrative Agent from time to           time,
Deposit Account control agreements in favor of the Administrative Agent           with
respect to all of such Grantor’s Deposit Accounts in a form reasonably
          satisfactory to the Administrative Agent; provided that the Grantors,
          collectively, may maintain amounts on deposit in Deposit Accounts not subject
to           any Deposit Account control agreement, so long as the aggregate amount of
all           such deposits does not exceed $1,000,000 at any time.  




        (d)              At
any time and from time to time, upon the written request of the           Administrative
Agent, and at the sole expense of such Grantor, such Grantor will           promptly and
duly execute and deliver, and have recorded, such further           instruments and
documents and take such further actions as the Administrative           Agent may
reasonably request for the purpose of obtaining or preserving the full           benefits
of this Agreement and of the rights and powers herein granted,           including (i)
the filing of any financing or continuation statements under the           Uniform
Commercial Code (or other similar laws) in effect in any jurisdiction           with
respect to the security interests created hereby and (ii) in the case of
          Investment Property and Letter-of-Credit Rights, taking any actions necessary
to           enable the Administrative Agent to obtain “control” (within the
          meaning of the applicable Uniform Commercial Code) with respect thereto.  




    5.6        Changes
in Name, etc. Such Grantor will not, except upon 15 days’ prior written notice
to the Administrative Agent and delivery to the Administrative Agent of all additional
executed financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the security
interests provided for herein:  



        (a)              change
its jurisdiction of organization or the location of its chief executive           office
or sole place of business from that referred to in Section 4.4; or  




        (b)              change
its name.  




    5.7        Notices.
Such Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable
detail, of:  



        (a)              any
Lien (other than security interests created hereby or Liens permitted under           the
Credit Agreement) on any of the Collateral which would adversely affect the
          ability of the Administrative Agent to exercise any of its remedies hereunder;
          and  




        (b)              the
occurrence of any other event which could reasonably be expected to have a
          material adverse effect on the aggregate value of the Collateral or on the
          security interests created hereby.  





17  










    5.8        Investment
Property. (a) If such Grantor shall become entitled to receive or shall receive any
certificate (including any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or
in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such
Grantor shall accept the same as the agent of the Administrative Agent and the Secured
Parties, hold the same in trust for the Administrative Agent and the Secured Parties and
deliver the same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by such Grantor and
with, if the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral security for
the Obligations. Any sums paid upon or in respect of Investment Property upon the
liquidation or dissolution of any Issuer other than a Grantor shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall be made on or in respect of
Investment Property, or any property shall be distributed upon or with respect to the
Investment Property not issued by a Grantor pursuant to the recapitalization or
reclassification of the capital of such Issuer or pursuant to the reorganization thereof,
the property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the Administrative Agent
to be held by it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of Investment Property shall
be received by such Grantor, such Grantor shall, until such money or property is paid or
delivered to the Administrative Agent, hold such money or property in trust for the
Secured Parties, segregated from other funds of such Grantor, as additional collateral
security for the Obligations. Notwithstanding the foregoing, the Grantors shall not be
required to pay over to the Administrative Agent or deliver to the Administrative Agent
as Collateral any proceeds of any liquidation or dissolution of any Issuer, or any
distribution of capital or property in respect of any Investment Property, to the extent
that (i) such liquidation, dissolution or distribution, if treated as a Disposition
of the relevant Issuer, would be permitted by the Credit Agreement and (ii) the proceeds
thereof are applied toward prepayment of Loans and reduction of Commitments to the extent
required by the Credit Agreement.  



        (b)              Without
the prior written consent of the Administrative Agent, such Grantor will           not
(i) vote to enable, or take any other action to permit, any Issuer to issue           any
stock or other equity securities of any nature or to issue any other           securities
convertible into or granting the right to purchase or exchange for           any stock or
other equity securities of any nature of any Issuer, unless such           securities are
delivered to the Administrative Agent, concurrently with the           issuance thereof,
to be held by the Administrative Agent as Collateral, (ii)           sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option           with respect
to, the Investment Property or Proceeds thereof (except pursuant to           a
transaction not prohibited by the Credit Agreement), (iii) create, incur
          or permit to exist any Lien or option in favor of, or any claim of any Person
          with respect to, any of the Investment Property or Proceeds thereof, or any
          interest therein, except for Permitted Liens or (iv) enter into any
          agreement or undertaking restricting the right or ability of such Grantor or
the           Administrative Agent to sell, assign or transfer any of the Pledged
Securities           or Proceeds thereof.  




18 










        (c)              In
the case of each Grantor which is an Issuer, such Issuer agrees that           (i) it
will be bound by the terms of this Agreement relating to the Pledged           Securities
issued by it and will comply with such terms insofar as such terms           are
applicable to it, (ii) it will notify the Administrative Agent promptly           in
writing of the occurrence of any of the events described in Section 5.8(a)           with
respect to the Pledged Securities issued by it and (iii) the terms of
          Sections 6.3(c) and 6.7 shall apply to it, mutatismutandis, with
          respect to all actions that may be required of it pursuant to Section 6.3(c) or
          6.7 with respect to the Pledged Securities issued by it.  




        (d)              Each
Issuer that is a partnership or a limited liability company (i) confirms           that
none of the terms of any equity interest issued by it provides that such           equity
interest is a “security” within the meaning of Sections 8-102           and
8-103 of the New York UCC (a “Security”), (ii) agrees that           it
will take no action to cause or permit any such equity interest to become a
          Security, (iii) agrees that it will not issue any certificate representing any
          such equity interest and (iv) agrees that if, notwithstanding the foregoing,
any           such equity interest shall be or become a Security, such Issuer will (and
the           Grantor that holds such equity interest hereby instructs such Issuer to)
comply           with instructions originated by the Administrative Agent for the
purposes of           implementing or effectuating the provisions of this Agreement, or
of more fully           perfecting or renewing the rights of the Administrative Agent and
the Lenders           with respect to such equity interests (or with respect to any
additions thereto           or replacements or proceeds thereof whether now existing or
hereafter           acquired), without further consent by such Grantor.  




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



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




    5.10        Intellectual
Property. (a) Such Grantor (either itself or through licensees) will (i) continue
to use each material Trademark in each international class for the goods and/or services
set forth in its applications or registrations to maintain such Trademark in full force,
free from any claim of abandonment for non-use, (ii) maintain the past quality of
products and services offered under such Trademark, (iii) use such Trademark with
the appropriate notice of registration and all other notices and legends required by
applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless the Administrative Agent, for
the ratable benefit of the Secured Parties, shall obtain a perfected security interest in
such mark pursuant to this Agreement, and (v) not (and not authorized any licensee
or sublicensee thereof to) knowingly do any act or knowingly omit to do any act whereby
such Trademark may become invalidated or impaired in any way; unless, in each case, such
Grantor, in the exercise of its best business judgment, deems it not commercially
reasonable to do so under the circumstances.  




19 









        (b)              Such
Grantor (either itself or through licensees) will not knowingly do any act,           or
knowingly omit to do any act, whereby any material Patent may become           forfeited,
abandoned or dedicated to the public; unless such Grantor, in the           exercise of
its best business judgment, deems it commercially reasonable to do           so under the
circumstances.  




        (c)              Such
Grantor (either itself or through licensees) (i) will not (and will not           permit
any licensee or sublicensee thereof to) knowingly do any act or knowingly           omit
to do any act whereby any material portion of the Copyrights may become
          invalidated or otherwise impaired and (ii) will not knowingly do any act
whereby           any material portion of the Copyrights may fall into the public domain
unless,           in each case, such Grantor, in the exercise of its best business
judgment, deems           it commercially reasonable to do so under the circumstances.  




        (d)              Such
Grantor (either itself or through licensees) will not do any act that           knowingly
uses any material Intellectual Property to infringe the intellectual           property
rights of any other Person.  




        (e)              Such
Grantor will promptly notify the Administrative Agent and the Lenders in
          writing if it knows that any application or registration relating to any
          material Intellectual Property may become forfeited, abandoned or dedicated to
          the public, or of any adverse determination or development (including the
          institution of, or any such determination or development in, any proceeding in
          the United States Patent and Trademark Office, the United States Copyright
          Office or any court or tribunal in any country) regarding such Grantor’s
          ownership of, or the validity of, any material Intellectual Property or such
          Grantor’s right to register the same or to own and maintain the same.  




        (f)              Whenever
such Grantor, either by itself or through any agent, employee, licensee           or
designee, shall file an application for the registration of any Intellectual
          Property with the United States Patent and Trademark Office, the United States
          Copyright Office or any similar office or agency in any other country or any
          political subdivision thereof, such Grantor shall report such filing to the
          Administrative Agent within 30 Business Days after the last day of the fiscal
          quarter in which such filing occurs. Upon request of the Administrative Agent,
          such Grantor shall execute, deliver and authorize the recording of any and all
          agreements, instruments, documents, and papers as the Administrative Agent may
          request to evidence the Administrative Agent’s and the Secured
          Parties’ security interest in any Copyright, Patent or Trademark and the
          goodwill and general intangibles of such Grantor relating thereto or
represented           thereby.  




        (g)              Such
Grantor will, at its own expense, take all steps which such Grantor shall
          reasonably deem appropriate under the circumstances, which may include any
          proceeding before the United States Patent and Trademark Office, the United
          States Copyright Office or any similar office or agency in any other country or
          any political subdivision thereof, to maintain and pursue each application
          relating to any material Intellectual Property (and to obtain the relevant
          registration) and to maintain each registration of the material Intellectual
          Property, including filing of applications for renewal, affidavits of use and
          affidavits of incontestability.  




        (h)              In
the event that any other Person infringes upon, misappropriates, makes an
          unauthorized use of or otherwise violates any material Intellectual Property,
          such Grantor shall (i) take such actions as such Grantor shall reasonably
          deem appropriate under the circumstances to protect such Intellectual Property
          and (ii) if such Intellectual Property is of material economic value, promptly
          notify the Administrative Agent after it learns thereof.  




20 











        (i)              Such
Grantor shall execute and deliver to the Administrative Agent in form and
          substance reasonably acceptable to the Administrative Agent and suitable for
          filing in the United States Patent and Trademark Office, (i) a patent
          security agreement in the form attached hereto as Annex III for all Patents of
          such Grantor and (ii) a trademark security agreement in the form attached
          hereto as Annex IV for all Trademarks of such Grantor.  




    5.11        Vehicles.
With respect to any Vehicles now owned or hereafter acquired by such Grantor subsequent
to the date hereof, within 30 days after the request of the Administrative Agent, all
applications for certificates of title or ownership, as applicable, indicating the
Administrative Agent’s first priority security interest in the Vehicle covered by
such certificate, and any other necessary documentation, shall be filed in each office in
each jurisdiction which the Administrative Agent shall deem advisable to perfect its
security interests in the Vehicles; provided, that the Grantors shall not be
obligated to make such filings to the extent that the aggregate book value or fair market
value of all Vehicles owned by all Grantors at such time does not exceed $1,000,000.  



    5.12        Commercial
Tort Claims. If any Grantor shall at any time commence a suit, action or proceeding
with respect to any Commercial Tort Claim held by it with a value which such Grantor
reasonably believes to be of $1,000,000 or more, such Grantor shall promptly notify the
Administrative Agent thereof in a writing signed by such Grantor and describing the
details thereof and shall grant to the Administrative Agent for the benefit of the
Secured Parties in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to the Administrative Agent.  



SECTION 6.
                                    REMEDIAL PROVISIONS 



    6.1        Certain
Matters Relating to Receivables.  (a) The Administrative Agent shall have the right,
at any time after the occurrence and during the continuance of an Event of Default, to
make test verifications of the Receivables in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such assistance and
information as the Administrative Agent may require in connection with such test
verifications. At any time and from time to time after the occurrence and during the
continuance of an Event of Default, upon the Administrative Agent’s request and at
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test verifications of,
and trial balances for, the Receivables.  



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





21 









        (c)              At
the Administrative Agent’s request, at any time after the occurrence and
          during the continuation of an Event of Default, each Grantor shall deliver to
          the Administrative Agent all original and other documents evidencing, and
          relating to, the agreements and transactions which gave rise to the
Receivables,           including all original orders, invoices and shipping receipts.  




        (d)              At
any time after the occurrence and during the continuance of an Event of
          Default, each Grantor will cooperate with the Administrative Agent to establish
          a system of lockbox accounts, under the sole dominion and control of the
          Administrative Agent, into which all Receivables shall be paid and from which
          all collected funds will be transferred to a Collateral Account.  




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



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




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





22 










    6.3        Pledged
Stock. (a) Unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent’s intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in
respect of the Pledged Stock and all payments made in respect of the Pledged Notes, in
each case paid in the normal course of business of the relevant Issuer and consistent
with past practice, to the extent permitted by the Credit Agreement, and to exercise all
voting and corporate rights with respect to the Pledged Securities; provided, however,
that no vote shall be cast or corporate right exercised or other action taken which, in
the Administrative Agent’s reasonable judgment, would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.  



        (b)              If
an Event of Default shall occur and be continuing and the Administrative           Agent
shall give notice of its intent to exercise such rights to the relevant           Grantor
or Grantors, (i) the Administrative Agent shall have the right to           receive
any and all cash dividends, payments or other Proceeds paid in respect           of the
Pledged Securities and make application thereof to the Obligations in the           order
set forth in Section 6.5, and (ii) any or all of the Pledged           Securities
shall be registered in the name of the Administrative Agent or its           nominee, and
the Administrative Agent or its nominee may thereafter exercise (x)           all voting,
corporate and other rights pertaining to such Pledged Securities at           any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and           (y) any
and all rights of conversion, exchange and subscription and any           other rights,
privileges or options pertaining to such Pledged Securities as if           it were the
absolute owner thereof (including the right to exchange at its           discretion any
and all of the Pledged Securities upon the merger, consolidation,
          reorganization, recapitalization or other fundamental change in the corporate
          structure of any Issuer, or upon the exercise by any Grantor or the
          Administrative Agent of any right, privilege or option pertaining to such
          Pledged Securities, and in connection therewith, the right to deposit and
          deliver any and all of the Pledged Securities with any committee, depositary,
          transfer agent, registrar or other designated agency upon such terms and
          conditions as the Administrative Agent may determine), all without liability
          except to account for property actually received by it, but the Administrative
          Agent shall have no duty to any Grantor to exercise any such right, privilege
or           option and shall not be responsible for any failure to do so or delay in so
          doing.  




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




    6.4        Proceeds
to be Turned Over To Administrative Agent. In addition to the rights of the
Administrative Agent and the Secured Parties specified in Section 6.1 with respect to
payments of Receivables, if an Event of Default shall occur and be continuing, all
Proceeds received by any Grantor consisting of cash, checks and Instruments shall be held
by such Grantor in trust for the Administrative Agent and the Secured Parties, segregated
from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received
by the Administrative Agent hereunder shall be held by the Administrative Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds while
held by the Administrative Agent in a Collateral Account (or by such Grantor in trust for
the Administrative Agent and the Secured Parties) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 6.5.  




23 









    6.5        Application
of Proceeds. At such intervals as may be agreed upon by the Borrower and the
Administrative Agent, or, if an Event of Default shall have occurred and be continuing,
at any time at the Administrative Agent’s election, the Administrative Agent may
apply all or any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account, and any proceeds of the guarantee set forth in Section 2, in payment
of the Obligations in the following order:  



	 	        First,
to pay incurred and unpaid fees and expenses of the Administrative Agent under the Loan
Documents; 







	 	        Second,
to the Administrative Agent, for application by it towards payment of amounts then due and
owing and remaining unpaid in respect of the Obligations, pro rata among the
Secured Parties according to the amounts of the Obligations then due and owing and
remaining unpaid to the Secured Parties; 







	 	        Third,
to the Administrative Agent, for application by it towards prepayment of the Obligations,
pro rata among the Secured Parties according to the amounts of the
Obligations then held by the Secured Parties; and 







	 	        Fourth,
any balance of such Proceeds remaining after the Obligations shall have been paid in full,
no Letters of Credit shall be outstanding and the Commitments shall have terminated shall
be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the
same. 







    6.6        Code
and Other Remedies. If an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Secured Parties, may exercise, in addition to all
other rights and remedies granted to them in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all rights and remedies
of a secured party under the New York UCC or any other applicable law. Without limiting
the generality of the foregoing, the Administrative Agent, without demand of performance
or other demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker’s board or office of the
Administrative Agent or any Secured Party or elsewhere, subject to applicable law, upon
such terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right or equity
of redemption in any Grantor, which right or equity is hereby waived and released. Each
Grantor further agrees, at the Administrative Agent’s request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor’s premises or
elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by
it pursuant to this Section 6.6 with respect to any Grantor’s Collateral, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral of such
Grantor or in any way relating to the Collateral of such Grantor or the rights of the
Administrative Agent and the Secured Parties hereunder with respect thereto, including
reasonable attorneys’ fees and disbursements, to the payment in whole or in part of
the Obligations of such Grantor, in the order specified in Section 6.5, and only after
such application and after the payment by the Administrative Agent of any other amount
required by any provision of law, including Section 9-615(a)(3) of the New York UCC, need
the Administrative Agent account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Administrative Agent or any Secured Party arising out of the exercise
by them of any rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.  




24 









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



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




25 











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



SECTION 7.
                                 THE ADMINISTRATIVE AGENT 



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



        (i)              in
the name of such Grantor or its own name, or otherwise, take possession of           and
indorse and collect any checks, drafts, notes, acceptances or other           instruments
for the payment of moneys due under any Receivable or with respect           to any other
Collateral and file any claim or take any other action or           proceeding in any
court of law or equity or otherwise deemed appropriate by the           Administrative
Agent for the purpose of collecting any and all such moneys due           under any
Receivable or with respect to any other Collateral whenever payable;  




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




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




        (iv)              execute,
in connection with any sale provided for in Section 6.6 or 6.7, any
          indorsements, assignments or other instruments of conveyance or transfer with
          respect to the Collateral;  




26 










        (v)              (1) direct
any party liable for any payment under any of the Collateral to           make payment of
any and all moneys due or to become due thereunder directly to           the
Administrative Agent or as the Administrative Agent shall direct;           (2) ask
or demand for, collect, and receive payment of and receipt for, any           and all
moneys, claims and other amounts due or to become due at any time in           respect of
or arising out of any Collateral; (3) sign and indorse any           invoices,
freight or express bills, bills of lading, storage or warehouse           receipts,
drafts against debtors, assignments, verifications, notices and other           documents
in connection with any of the Collateral;(4)  commence and           prosecute any
suits, actions or proceedings at law or in equity in any court of           competent
jurisdiction to collect the Collateral or any portion thereof and to           enforce
any other right in respect of any Collateral; (5) defend any suit,           action
or proceeding brought against such Grantor with respect to any           Collateral;(6)  settle,
compromise or adjust any such suit, action or           proceeding and, in connection
therewith, give such discharges or releases as the           Administrative Agent may
deem appropriate; (7) assign any Copyright, Patent           or Trademark (along
with the goodwill of the business to which any such           Copyright, Patent or
Trademark pertains), throughout the world for such term or           terms, on such
conditions, and in such manner, as the Administrative Agent shall           in its sole
discretion determine; and (8) generally, sell, transfer, pledge           and make
any agreement with respect to or otherwise deal with any of the           Collateral as
fully and completely as though the Administrative Agent were the           absolute owner
thereof for all purposes, and do, at the Administrative           Agent’s option and
such Grantor’s expense, at any time, or from time           to time, all acts and
things which the Administrative Agent deems necessary to           protect, preserve or
realize upon the Collateral and the Administrative           Agent’s and the Secured
Parties’ security interests therein and to           effect the intent of this
Agreement, all as fully and effectively as such           Grantor might do; and  




        (vi)              license
or sublicense whether on an exclusive or non-exclusive basis, any           Intellectual
Property for such term and on such conditions and in such manner as           the
Administrative Agent shall in its sole judgment determine and, in connection
          therewith, such Grantor hereby grants to the Administrative Agent for the
          benefit of the Secured Parties a royalty-free, world-wide irrevocable license
of           its Intellectual Property.  




        Anything
in this Section 7.1 (a) to the contrary notwithstanding, the Administrative Agent agrees
that it will not exercise any rights under the power of attorney provided for in this
Section 7.1(a) unless an Event of Default shall have occurred and be continuing, and then
subject to applicable law. 



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




        (c)              The
expenses of the Administrative Agent incurred in connection with actions
          undertaken as provided in this Section 7.1, together with interest thereon at a
          rate per annum equal to the rate per annum at which interest would then be
          payable on past due Revolving Credit Loans that are Base Rate Loans under the
          Credit Agreement, from the date of payment by the Administrative Agent to the
          date reimbursed by the relevant Grantor, shall be payable by such Grantor to
the           Administrative Agent on demand.  




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




    7.2        Duty
of Administrative Agent. The Administrative Agent’s sole duty with respect to
the custody, safekeeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the
same manner as the Administrative Agent deals with similar property for its own account.
Neither the Administrative Agent, any Secured Party nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any obligation
to sell or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the Collateral or any
part thereof. The powers conferred on the Administrative Agent and the Secured Parties
hereunder are solely to protect the Administrative Agent’s and the Secured Parties’ interests
in the Collateral and shall not impose any duty upon the Administrative Agent or any
Secured Party to exercise any such powers. The Administrative 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.  




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    7.3        Execution
of Financing Statements. Pursuant to any applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Administrative Agent determines
appropriate to perfect the security interests of the Administrative Agent under this
Agreement. Each Grantor authorizes the Administrative Agent to use the collateral
description “all personal property” or “all assets” in any such
financing statements. Each Grantor hereby ratifies and authorizes the filing by the
Administrative Agent of any financing statement with respect to the Collateral made prior
to the date hereof.  



    7.4        Authority
of Administrative Agent. Each Grantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Agreement with respect to any
action taken by the Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, voting right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the Secured Parties, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from time to
time among them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and no Grantor
shall be under any obligation, or entitlement, to make any inquiry respecting such
authority. Notwithstanding any other provision herein or in any Loan Document, the only
duty or responsibility of the Administrative Agent to any Qualified Counterparty under
this Agreement is the duty to remit to such Qualified Counterparty any amounts to which
it is entitled pursuant to Section 6.5.  



SECTION 8.
                                        MISCELLANEOUS 



    8.1        Amendments
in Writing. None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except in accordance with Section 10.1 of the
Credit Agreement. No consent of any Qualified Counterparty shall be required for any
waiver, amendment, supplement or other modification to this Agreement.  



    8.2        Notices.
All notices, requests and demands to or upon the Administrative Agent or any Grantor
hereunder shall be effected in the manner provided for in Section 10.2 of the Credit
Agreement; provided that any such notice, request or demand to or upon any
Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule
1.  




28 









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



    8.4        Enforcement
Expenses; Indemnification. (a) Each Guarantor agrees to pay, or reimburse each
Secured Party and the Administrative Agent for, all its reasonable costs and expenses
incurred in collecting against such Guarantor under the guarantee contained in Section 2
or otherwise enforcing or preserving any rights under this Agreement and the other Loan
Documents to which such Guarantor is a party, including the reasonable fees and
disbursements of counsel to each Secured Party and of counsel to the Administrative
Agent.  



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




        (c)              Each
Guarantor agrees to pay, and to save the Administrative Agent and the           Secured
Parties harmless from, any and all liabilities, obligations, losses,           damages,
penalties, actions, judgments, suits, costs, expenses or disbursements           of any
kind or nature whatsoever with respect to the execution, delivery,           enforcement,
performance and administration of this Agreement to the extent the           Borrower
would be required to do so pursuant to Section 10.5 of the Credit
          Agreement.  




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




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




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    8.6        Set-Off.
Each Grantor hereby irrevocably authorizes the Administrative Agent and each Secured
Party at any time and from time to time pursuant to Section 10.7(b) of the Credit
Agreement, without notice to such Grantor or any other Grantor, any such notice being
expressly waived by each Grantor upon any amount becoming due and payable by a Grantor
hereunder or under any other Loan Document (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or owing by the
Administrative Agent or such Secured Party to or for the credit or the account of such
Grantor, or any part thereof in such amounts as the Administrative Agent or such Secured
Party may elect, against and on account of the obligations and liabilities of such
Grantor to the Administrative Agent or such Secured Party hereunder and claims of every
nature and description of the Administrative Agent or such Secured Party against such
Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any
other Loan Document or otherwise, as the Administrative Agent or such Secured Party may
elect, whether or not the Administrative Agent or any Secured Party has made any demand
for payment and although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Secured Party shall notify such Grantor
promptly of any such set-off and the application made by the Administrative Agent or such
Secured Party of the proceeds thereof, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights of the
Administrative Agent and each Secured Party under this Section are in addition to other
rights and remedies (including other rights of set-off) which the Administrative Agent or
such Secured Party may have.  



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



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



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



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



    8.11        GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.  



    8.12        Submission
To Jurisdiction; Waivers.  Each Grantor hereby irrevocably and unconditionally: 




30 









        (a)              submits
for itself and its property in any legal action or proceeding relating           to this
Agreement and the other Loan Documents to which it is a party, or for
          recognition and enforcement of any judgment in respect thereof, to the
          non-exclusive general jurisdiction of the Courts of the State of New York, the
          courts of the United States of America for the Southern District of
          New York, and appellate courts from any thereof;  




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




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




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




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




    8.13        Acknowledgements.
 (a) Each Grantor hereby acknowledges that: 



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




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




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




    8.14        Additional
Grantors. Each Subsidiary of the Borrower that is required to become a party to this
Agreement pursuant to Section 6.10 of the Credit Agreement shall become a Grantor
for all purposes of this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex I hereto.  



    8.15        Releases.
(a) At such time as the Loans, the Reimbursement Obligations and the other Obligations
(other than Borrower Hedge Agreement Obligations and Guarantor Hedge Agreement
Obligations) shall have been paid in full, the Commitments have been terminated and no
Letters of Credit shall be outstanding, the Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those expressly stated
to survive such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantors. At the request and sole
expense of any Grantor following any such termination, the Administrative Agent shall
deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.  




31 









        (b)              If
any of the Collateral shall be sold, transferred or otherwise disposed of by
          any Grantor in a transaction permitted by the Credit Agreement, then the
          Administrative Agent, at the request and sole expense of such Grantor, shall
          execute and deliver to such Grantor all releases or other documents reasonably
          necessary or desirable for the release of the Liens created hereby on such
          Collateral. At the request and sole expense of the Borrower, a Subsidiary
          Guarantor shall be released from its obligations hereunder in the event that
all           the Capital Stock of such Subsidiary Guarantor shall be sold, transferred
or           otherwise disposed of in a transaction permitted by the Credit Agreement; provided that
the Borrower shall have delivered to the Administrative           Agent, at least five
Business Days prior to the date of the proposed release, a           written request for
release identifying the relevant Subsidiary Guarantor and           the terms of the sale
or other disposition in reasonable detail, including the           price thereof in
connection therewith, together with a certification by the           Borrower stating
that such transaction is in compliance with the Credit           Agreement and the other
Loan Documents.  




        (c)              No
consent of any Qualified Counterparty shall be required for any release of
          Collateral or Guarantors pursuant to this Section.  




    8.16        WAIVER
OF JURY TRIAL. EACH GRANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH AGENT AND
EACH SECURED PARTY, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.  



[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK] 









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




	 	
HANGER
ORTHOPEDIC GROUP, INC.,                                                      
as Grantor







	 	
By:___________________________________
                                                                                    
      Name:
                                                          
      Title:






















33 
















	 	
DOSTEON
SOLUTIONS, LLC                                                      
INNOVATIVE
NEUROTRONICS, INC.                                                      
DOBI-SYMPLEX,
INC.                                                      
HANGER PROSTHETICS & ORTHOTICS,
INC.                                                      
SOUTHERN PROSTHETIC SUPPLY,
INC.                                                      
OPNET, INC.
                                                     
HANGER SERVICES CORPORATION
                                                     
LINKIA, LLC
                                                     
ABI ORTHOTIC/PROSTHETIC
LABORATORIES, LTD.                                                     
 HPO, INC.
                                                     
EUGENE TEUFEL & SON ORTHOTICS
& PROSTHETICS, INC.                                                      
REHAB
DESIGNS OF AMERICA CORPORATION                                                      
THE
BRACE SHOP PROSTHETIC ORTHOTIC CENTERS, INC.
                                                     
GREATER CHESAPEAKE ORTHOTICS & PROSTHETICS,
INC.                                                      
HANGER PROSTHETICS & ORTHOTICS
WEST, INC.                                                      
HANGER PROSTHETICS & ORTHOTICS
EAST, INC.                                                      
CERTIFIED ORTHOTIC & PROSTHETIC
ASSOCIATES, INC.                                                      
ADVANCED
BIO-MECHANICS, INC.                                                     
 NWPO ASSOCIATES,
INC.                                                      
REHAB DESIGNS OF COLORADO, INC.
                                                     
LAURENCE’S ORTHOTICS & PROSTHETICS,
INC.                                                      
SHASTA ORTHOTIC PROSTHETIC
SERVICE, INC.                                                      
REHAB DESIGNS OF
WISCONSIN, INC.                                                      
CONNER BRACE CO.,
INC.                                                      
ELITE CARE, INCORPORATED
                                                     
FORTITUDE MEDICAL SPECIALISTS, INC.,
                                                     
as Grantor and Guarantor







	 	
By:___________________________________
                                                                                    
      Name:
                                                          
      Title:






 







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