exv10w70



 







 

 






SECURITY AGREEMENT




by




HERBALIFE INTERNATIONAL, INC.,




HERBALIFE LTD.,

WH INTERMEDIATE HOLDINGS LTD.,

HBL LTD.,

WH LUXEMBOURG HOLDINGS S.à.R.L.,

HLF LUXEMBOURG HOLDINGS S.à R.L.,

WH CAPITAL CORPORATION,

WH LUXEMBOURG INTERMEDIATE HOLDINGS S.à.R.L.,

HERBALIFE INTERNATIONAL LUXEMBOURG S.à.R.L.,

HV HOLDINGS LTD.,

HERBALIFE DISTRIBUTION LTD.,

HERBALIFE LUXEMBOURG DISTRIBUTION S.à.R.L.,

THE SUBSIDIARY GUARANTORS PARTY HERETO,

as Pledgors




in favor of




MERRILL LYNCH CAPITAL CORPORATION,

as Collateral Agent




Dated as of July 21, 2006




 

 






 









 












TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I Definitions and Interpretation; Perfection Certificate
	 	 	2	 
	SECTION 1.01. Definitions
	 	 	2	 
	SECTION 1.02. Interpretation
	 	 	7	 
	SECTION 1.03. Perfection Certificate
	 	 	7	 
	 
	 	 	 	 
	ARTICLE II Grant of Security and Secured Obligations
	 	 	7	 
	SECTION 2.01. Pledge
	 	 	7	 
	SECTION 2.02. Certain Limited Exclusions
	 	 	9	 
	SECTION 2.03. Secured Obligations; Continuing Liability
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III Perfection; Supplements; Further Assurances; Use of Security Agreement Collateral
	 	 	10	 
	SECTION 3.01. Delivery of Certificated Securities Collateral
	 	 	10	 
	SECTION 3.02. Perfection of Uncertificated Securities Collateral
	 	 	10	 
	SECTION 3.03. Financing Statements and Other Filings
	 	 	10	 
	SECTION 3.04. Other Actions
	 	 	11	 
	SECTION 3.05. Supplements; Further Assurances
	 	 	14	 
	 
	 	 	 	 
	ARTICLE IV Representations, Warranties and Covenants
	 	 	15	 
	SECTION 4.01. Title
	 	 	15	 
	SECTION 4.02. Organization; Authority; Enforceability
	 	 	15	 
	SECTION 4.03. Authorizations and Approvals
	 	 	15	 
	SECTION 4.04. Reserved
	 	 	16	 
	SECTION 4.05. Limitation on Liens
	 	 	16	 
	SECTION 4.06. Other Financing Statements
	 	 	16	 
	SECTION 4.07. Chief Executive Office; Change of Name; Jurisdiction of Organization.

	 	 	16	 
	SECTION 4.08. Certain Provisions Concerning Securities Collateral
	 	 	17	 
	SECTION 4.09. Certain Provisions Concerning Intellectual Property
	 	 	18	 
	SECTION 4.10. Inspection and Verification
	 	 	20	 
	SECTION 4.11. Payment of Taxes; Contesting Liens; Claims
	 	 	21	 
	SECTION 4.12. Transfers and Other Liens
	 	 	21	 
	SECTION 4.13. Insurance
	 	 	21	 
	 
	 	 	 	 
	ARTICLE V Remedies
	 	 	21	 
	SECTION 5.01. Remedies
	 	 	21	 
	SECTION 5.02. Notice of Sale
	 	 	23	 
	SECTION 5.03. Waiver of Notice and Claims
	 	 	23	 
	SECTION 5.04. Certain Sales of Security Agreement Collateral
	 	 	24	 
	SECTION 5.05. No Waiver; Cumulative Remedies
	 	 	24	 
	 
	 	 	 	 
	ARTICLE VI Obligations Absolute; Waivers
	 	 	24	 
	SECTION 6.01. Liability of the Pledgors Absolute
	 	 	24	 
	SECTION 6.02. General Waivers
	 	 	26	 
	SECTION 6.03. California Waivers
	 	 	26	 
	 
	 	 	 	 
	ARTICLE VII Miscellaneous
	 	 	27	 
	SECTION 7.01. Concerning Collateral Agent
	 	 	27	 
	SECTION 7.02. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact
	 	 	28	 






-i-









 






	 	 	 	 	 
	SECTION 7.03. Expenses
	 	 	28	 
	SECTION 7.04. Indemnity
	 	 	29	 
	SECTION 7.05. Continuing Security Interest; Assignment
	 	 	29	 
	SECTION 7.06. Termination; Release
	 	 	30	 
	SECTION 7.07. Modification in Writing
	 	 	30	 
	SECTION 7.08. Notices
	 	 	30	 
	SECTION 7.09. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	31	 
	SECTION 7.10. WAIVER OF JURY TRIAL
	 	 	31	 
	SECTION 7.11. Severability of Provisions
	 	 	32	 
	SECTION 7.12. Execution in Counterparts
	 	 	32	 
	SECTION 7.13. Business Days
	 	 	32	 
	SECTION 7.14. No Credit for Payment of Taxes or Imposition
	 	 	32	 
	SECTION 7.15. No Claims Against Collateral Agent
	 	 	32	 
	SECTION 7.16. No Release Under Agreements; No Liability of Collateral Agent or Secured Parties

	 	 	32	 
	SECTION 7.17. Obligations Absolute
	 	 	33	 
	SECTION 7.18. Marshaling; Payments Set Aside
	 	 	33	 
	SECTION 7.19. Release of Pledgors
	 	 	33	 






EXHIBITS



Exhibit A Form of Issuer Acknowledgment




-ii-









 








SECURITY AGREEMENT




          This SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to
time, this “Agreement”), dated as of July 21, 2006, is made by HERBALIFE INTERNATIONAL, INC., a
Nevada corporation (“Borrower”); HERBALIFE LTD., a Cayman Islands exempted company with limited
liability (“Holdings”); WH INTERMEDIATE HOLDINGS LTD., a Cayman Islands exempted company with
limited liability and a direct wholly-owned subsidiary of Holdings (“Parent”); HBL LTD., a Cayman
Islands exempted company with limited liability and a direct wholly-owned subsidiary of Parent
(“Cayman III”); WH LUXEMBOURG HOLDINGS S.à.R.L., a Luxembourg corporation and a direct wholly-owned
subsidiary of Parent (“Luxembourg Holdings”); HERBALIFE INTERNATIONAL LUXEMBOURG S.à.R.L., a
Luxembourg corporation and a direct wholly-owned subsidiary of Luxembourg Holdings (“HIL”); HLF
LUXEMBOURG HOLDINGS, S.à.R.L., a Luxembourg corporation and a direct wholly-owned subsidiary of
Luxembourg Holdings (“New Lux”); WH CAPITAL CORPORATION, a Nevada corporation and a direct
wholly-owned subsidiary of New Lux (“WH Capital”); WH LUXEMBOURG INTERMEDIATE HOLDINGS S.à.R.L., a
Luxembourg corporation and a direct wholly-owned subsidiary of WH Capital (“Luxembourg Intermediate
Holdings”); HV HOLDINGS LTD., a Cayman Islands exempted company with limited liability and a direct
wholly-owned subsidiary of Parent ( “HV”); HERBALIFE DISTRIBUTION LTD., a Cayman Islands exempted
company with limited liability and a direct wholly-owned subsidiary of HV ( “Cayman Distribution”);
HERBALIFE LUXEMBOURG DISTRIBUTION S.à.R.L., a Luxembourg corporation and a direct wholly-owned
subsidiary of HIL (“Luxembourg Distribution”); EACH OF THE SUBSIDIARY GUARANTORS LISTED ON THE
SIGNATURE PAGES HERETO OR FROM TIME TO TIME BECOMING A PARTY HERETO BY EXECUTION OF A JOINDER
AGREEMENT (together with Holdings, Parent, Cayman III, Luxembourg Holdings, HIL, HIL Swiss, New
Lux, WH Capital, Luxembourg Intermediate Holdings, HV, Cayman Distribution, Luxembourg Distribution
and each other Subsidiary Guarantor from time to time executing a Guarantee (defined herein) as
required hereunder, the “Guarantors”), as pledgors and collateral assignors (Borrower, together
with the Guarantors, in such capacities and together with any successors in such capacities, the
“Pledgors”), in favor of MERRILL LYNCH CAPITAL CORPORATION (“Merrill Lynch”), in its capacity as
collateral agent for the lending institutions from time to time party to the Credit Agreement
(defined below) (such lending institutions, collectively, the “Lenders”), as pledgee, collateral
assignee and secured party (in such capacities and together with any successors in such capacities,
“Collateral Agent”).




WITNESSETH:




          WHEREAS, simultaneously herewith, Borrower, certain of the Guarantors, the Lenders and Merrill
Lynch, as Administrative Agent, have entered into that certain Credit Agreement, dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), whereby the Lenders have agreed to make certain Loans and to issue certain
Credit Agreement L/Cs (defined below) to or for the account of Borrower;




          WHEREAS, in accordance with the Credit Agreement, it is contemplated that one or more of the
Pledgors may enter into one or more Hedging Agreements with one or more of the Lenders or their
respective Affiliates;




 









 








          WHEREAS, in accordance with the Credit Agreement, each Guarantor has, among other things,
guaranteed the obligations of Borrower under the Credit Agreement and the other Loan Documents (the
“Guarantees”);




          WHEREAS, each Guarantor will receive substantial benefits from the execution, delivery and
performance of the Loan Documents and each is, therefore, willing to enter into this Agreement;




          WHEREAS, each Pledgor is or will be the legal or beneficial owner of the rights in the
Security Agreement Collateral (defined below) to be pledged by it hereunder;




          WHEREAS, it is a condition precedent to the obligations of the Lenders to make Loans under the
Credit Agreement or to enter into Hedging Agreements, and of the Issuing Bank to issue Credit
Agreement L/Cs thereunder, that each Pledgor execute and deliver the applicable Loan Documents,
including this Agreement; and




          WHEREAS, this Agreement is given by each Pledgor in favor of Collateral Agent for its benefit
and the benefit of the Lenders and any of their respective Affiliates party to any Hedging
Agreement (collectively, the “Secured Parties”) to secure the payment and performance of all of the
Secured Obligations (defined below).




          NOW THEREFORE, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and
Collateral Agent hereby agree as follows:




ARTICLE I




Definitions and Interpretation; Perfection Certificate




          SECTION 1.01. Definitions.




               (a) The following capitalized terms have the meanings assigned to them in the UCC:



          “Account,” “Bank,” “Certificate of Title,” “Chattel Paper,” “Commercial Tort Claim,”
“Commodity Account,” “Commodity Contract,” “Commodity Intermediary,” “Contract,” “Document,”
“Electronic Chattel Paper,” “Entitlement Holder,” “Entitlement Order,” “Equipment,” “Financial
Asset,” “Fixtures,” “General Intangible,” “Goods,” “Inventory,” “Investment Property,”
“Letter-of-Credit Right,” “Letter of Credit,” “Money,” “Proceeds,” “Record,” “Securities
Entitlement,” “Securities Intermediary,” “Supporting Obligation,” and “Tangible Chattel Paper.”




               (b) Capitalized terms used in this Agreement (including the preamble and recitals hereof) but
not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. In
this Agreement:



          “Agreement” has the meaning assigned to such term in the preamble hereof.




          “Borrower” has the meaning assigned to such term in the preamble hereof.




2









 








          “Charges” mean any and all property and other taxes, assessments and special assessments,
levies, fees and all governmental charges imposed on or assessed against, and all claims (including
landlords’, carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and
warehousemen’s Liens and other claims arising by operation of law) against, all or any portion of
the Security Agreement Collateral.




          “Collateral Account” shall mean any account established and maintained in accordance with
Article IX of the Credit Agreement, and all funds from time to time on deposit in such account,
including all Cash Equivalents, and all certificates and instruments from time to time representing
or evidencing such Cash Equivalents.




          “Collateral Agent” has the meaning assigned to such term in the preamble hereof.




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




          “Collateral Support” means all property (real or personal) assigned, hypothecated or otherwise
securing any Security Agreement Collateral, including any security agreement or other agreement
granting a lien or security interest in such real or personal property.




          “Control Agreement” means an agreement in form and substance satisfactory to Collateral Agent
sufficient to establish control over any applicable Investment Property (including any Securities
Account or Commodity Account) or Deposit Account.




          “Copyrights” mean, collectively, with respect to each Pledgor, all copyrights (whether
statutory or common law and whether established or registered in the United States or any other
country) now owned or hereafter created or acquired by or assigned to such Pledgor, whether
published or unpublished, and all copyright registrations and applications made by such Pledgor,
including the copyrights, registrations and applications listed in Section II.H of the Perfection
Certificate, together with any and all (a) rights and privileges arising under applicable law with
respect to such Pledgor’s use of any copyrights, (b) reissues, renewals, continuations and
extensions thereof, (c) income, fees, royalties, damages, claims and payments now or hereafter due
or payable with respect thereto, including damages and payments for past, present or future
infringements thereof, (d) rights corresponding thereto throughout the world and (e) rights to sue
for past, present or future infringements thereof.




          “Credit Agreement” has the meaning assigned to such term in the recitals hereof.




          “Credit Agreement L/C” has the meaning assigned to the term “Letter of Credit” in the Credit
Agreement.




          “Deposit Account” means, collectively, with respect to each Pledgor, (a) all “deposit
accounts” as such term is defined in the UCC and in any event shall include the L/C Sub-Account and
all accounts and sub-accounts relating to any of the foregoing accounts, and (b) all cash, funds,
checks, notes and any instruments from time to time on deposit in any of the accounts or
sub-accounts described in clause (a) of this definition.




3









 








          “Distributions” mean, collectively, with respect to each Pledgor, all dividends, cash,
options, warrants, rights, instruments, distributions, returns of capital or principal, income,
interest, profits and other property, interests (debt or equity) or proceeds, including as a result
of a split, revision, reclassification or other like change of the Pledged Equity Interests, from
time to time received, receivable or otherwise distributed to such Pledgor in respect of or in
exchange for any or all of the Pledged Equity Interests or Pledged Intercompany Debt.




          “Documents Evidencing Goods” means all Documents evidencing, representing or issued in
connection with Goods.




          “Guarantee” has the meaning assigned to such term in the recitals hereof.




          “Guarantor” has the meaning assigned to such term in the preamble hereof.




          “Indemnified Liabilities” has the meaning assigned to such term in Section 7.04(a).




          “Indemnitees” has the meaning assigned to such term in Section 7.04(a).




          “Instruments” mean, collectively, with respect to each Pledgor, all “instruments,” as such
term is defined in Article 9, rather than Article 3, of the UCC to the extent such instruments
evidence any amounts payable under or in connection with any item of Security Agreement Collateral
or such instruments constitute Proceeds of any item of Security Agreement Collateral, and in any
event shall include all promissory notes, drafts, bills of exchange or acceptances.




          “Insurance” means all insurance policies covering any or all of the Security Agreement
Collateral (regardless of whether Collateral Agent is the loss payee thereof), and all key-man life
insurance policies.




          “Intellectual Property” means, collectively, with respect to each Pledgor, (a) all Patents,
(b) all Trademarks, (c) all Copyrights, (d) all Licenses and (e) the goodwill connected with such
Pledgor’s business including (i) all goodwill connected with the use of and symbolized by any of
the Intellectual Property in which such Pledgor has any interest and (ii) all know-how, trade
secrets, customer and supplier lists, proprietary information, inventions, methods, procedures,
formulae, descriptions, compositions, technical data, drawings, specifications, name plates,
catalogs, confidential information and the right to limit the use or disclosure thereof by any
person or entity, pricing and cost information, business and marketing plans and proposals,
consulting agreements, engineering contracts and such other assets that relate to such goodwill.




          “Intercompany Indebtedness” means Indebtedness (whether or not evidenced by a writing) of any
Company (including any Pledgor) payable to a Pledgor.




          “Issuer” means any issuer of any Pledged Equity Interests.




          “Lenders” has the meaning assigned to such term in the preamble hereof.




          “Licenses” mean, collectively, with respect to each Pledgor, all license and distribution
agreements, covenants not to sue or any other agreement with any other party with respect to any
Patent, Trademark or Copyright, whether such Pledgor is a licensor or licensee, distributor or
distributee under any such license or distribution agreement, together with any and




4









 







all (a) renewals, extensions, supplements and continuations thereof; (b) income, fees,
royalties, damages, claims and payments now and hereafter due or payable thereunder and with
respect thereto, including damages and payments for past, present or future infringements or
violations thereof; (c) rights to sue for past, present and future infringements or violations
thereof; and (d) any other rights to use, exploit or practice any or all of the Patents, Trademarks
or Copyrights.




          “Material Contract” means any Contract or other arrangement that any Pledgor is a party to and
for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to
have a Material Adverse Effect. Notwithstanding the foregoing, each agreement set forth in
Schedule 3.08 of the Credit Agreement shall constitute a Material Contract.




          “Non-payment Contract” means any Contract or agreement to which any Pledgor is a party other
than a contract whereby the account debtor’s principal obligation is a monetary obligation;
provided that, Non-payment Contracts shall not include Receivables.




          “Operative Agreement” means (a) in the case of any limited liability company or partnership or
other noncorporate entity, any membership or partnership agreement or other organizational
agreement or document thereof and (b) in the case of any corporation, any charter or certificate of
incorporation and bylaws thereof.




          “Patents” mean, collectively, with respect to each Pledgor, all patents issued or assigned to
and all patent applications made by such Pledgor (whether established or registered or recorded in
the United States or any other country), including the patents, patent applications and recordings
listed in Section II.H of the Perfection Certificate, together with any and all (a) rights and
privileges arising under applicable law with respect to such Pledgor’s use of any patents; (b)
inventions and improvements described and claimed therein; (c) reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (d) income, fees, royalties, damages,
claims and payments now or hereafter due or payable thereunder and with respect thereto including
damages and payments for past, present or future infringements thereof; (e) rights corresponding
thereto throughout the world; and (f) rights to sue for past, present or future infringements
thereof.




          “Pledged Equity Interests” mean, collectively, with respect to each Pledgor, (a) the issued
and outstanding Equity Interests of each person; and (b) all rights, privileges, authority and
powers of such Pledgor in and to each such person or under the Operative Agreements of each such
person, and the certificates, instruments and agreements representing the Pledged Equity Interests
and any and all interest of such Pledgor in the entries on the books of any financial intermediary
pertaining to the Pledged Equity Interests, it being understood that, subject to Section 5.11 of
the Credit Agreement, Pledged Equity Interests do not include any Equity Interests in excess of
66.0% of the Equity Interests of any Non-Guarantor Subsidiary, provided that, such Non-Guarantor
Subsidiary is also a Foreign Subsidiary.




          “Pledged Intercompany Debt” means, with respect to each Pledgor, all Intercompany Indebtedness
payable to such Pledgor by any Company (and each other intercompany note hereafter acquired by such
Pledgor) and all Intercompany Notes, certificates, Instruments or agreements evidencing such
Intercompany Indebtedness, and all assignments, amendments, restatements, supplements, extensions,
renewals, replacements or modifications thereof.




          “Pledgor” has the meaning assigned to such term in the preamble hereof.




5









 








          “Receivables” means all rights to payment, whether or not earned by performance, for Goods or
other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or
to be rendered, including all such rights constituting or evidenced by any Account, Chattel Paper,
Instrument, General Intangible or Investment Related Property, together with all rights, if any, in
any Goods or other property giving rise to such right to payment and all Collateral Support and
Supporting Obligations related thereto and all Accounts, Chattel Paper, General Intangibles,
Instruments and Receivables Records.




          “Receivables Records” means (a) all original copies of all documents, instruments or other
writings or electronic records or other Records evidencing the Receivables; (b) all books,
correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers
relating to Receivables, including all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems and other papers and documents relating to the Receivables, whether in the
possession or under the control of the Company or any computer bureau or agent from time to time
acting for the Company or otherwise; (c) all evidences of the filing of financing statements and
the registration of other instruments in connection therewith, and amendments, supplements or other
modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgments, or other writings, including lien-search reports, from filing or other
registration officers; (d) all credit information, reports and memoranda relating thereto; and (e)
all other written or nonwritten forms of information related in any way to the foregoing.




          “Secured Obligations” mean all obligations (whether or not constituting future advances,
obligatory or otherwise) of Borrower and all of the Guarantors from time to time arising under or
in respect of this Agreement, the Credit Agreement, the Notes (if any), the Guarantee, the Credit
Agreement L/Cs, the other Loan Documents and all Hedging Agreements entered into with any Lender
(including the obligations to pay principal, interest and all other charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to or in respect of
the obligations contained in this Agreement, the Credit Agreement, the Notes (if any), the
Guarantee, the Credit Agreement L/Cs, the other Loan Documents and all Hedging Agreements entered
into with any Lender), in each case whether (a) such obligations are direct or indirect, secured or
unsecured, joint or several, absolute or contingent, reduced to judgment or not, liquidated or
unliquidated, disputed or undisputed, legal or equitable, due or to become due whether at stated
maturity, by acceleration or otherwise; (b) arising in the regular course of business or otherwise;
(c) for payment or performance; (d) discharged, stayed or otherwise affected by any bankruptcy,
insolvency, reorganization or similar proceeding with respect to any Loan Party or any other
person; or (e) now existing or hereafter arising (including interest and other obligations arising
or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar
proceeding with respect to any Loan Party or any other person, or that would have arisen or accrued
but for the commencement of such proceeding, even if such obligation or the claim therefor is not
enforceable or allowable in such proceeding).




          “Secured Parties” has the meaning assigned to such term in the recitals hereof.




          “Securities Account” has the meaning assigned to such term in the UCC; provided that, the
Collateral Account shall be treated as a Securities Account.




          “Securities Collateral” means, collectively, the Pledged Equity Interests, the Pledged
Intercompany Debt and the Distributions.




6









 








          “Security Agreement Collateral” has the meaning assigned to such term in Section 2.01.




          “Software Embedded in Goods” means, with respect to any Goods, any computer program embedded
in such Goods and any supporting information provided in connection with a transaction relating to
such program if (a) the program is customarily considered part of such Goods or (b) by becoming the
owner of such Goods a person acquires a right to use such program in connection therewith.




          “Trademarks” mean, collectively, with respect to each Pledgor, all trademarks (including
service marks), slogans, logos, certification marks, domain names, trade dress, corporate names and
trade names, whether registered or unregistered, owned by or assigned to such Pledgor and all
registrations and applications for the foregoing (whether statutory or common law and whether
established or registered in the United States or any other country) including the registrations
and applications listed in Section II.H of the Perfection Certificate, together with any and all
(a) rights and privileges arising under applicable law with respect to such Pledgor’s use of any
trademarks; (b) reissues, continuations, extensions and renewals thereof; (c) income, fees,
royalties, damages and payments now and hereafter due or payable thereunder and with respect
thereto, including damages, claims and payments for past, present or future infringements thereof;
(d) rights corresponding thereto throughout the world; and (e) rights to sue for past, present and
future infringements thereof.




          “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New
York; provided that, if by reason of mandatory provisions of law, the perfection or the effect of
perfection or nonperfection of the security interest in any item or portion of the Security
Agreement Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of New York, “UCC” also means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of
perfection or nonperfection.




          SECTION 1.02. Interpretation. The rules of interpretation specified in the Credit Agreement,
including Sections 1.03 and 11.11 thereof, shall be applicable to this Agreement. If any conflict
or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall
govern.




          SECTION 1.03. Perfection Certificate. Collateral Agent and each Loan Party agree that the
Perfection Certificate and all descriptions of Security Agreement Collateral, schedules, amendments
and supplements thereto are and shall at all times remain a part of this Agreement.




ARTICLE II




Grant of Security and Secured Obligations




          SECTION 2.01. Pledge. As collateral security for the payment and performance in full of all the Secured
Obligations, each Pledgor hereby grants to Collateral Agent, for its benefit and for the benefit of
the Secured Parties, a security interest in and continuing lien on all personal property of such
Pledgor, including all of such Pledgor’s right, title and interest in, to and under all of the
following property, wherever located, whether now





7









 







owned or existing, or hereafter arising or
acquired from time to time (collectively, the “Security Agreement Collateral”):




               (i) all Accounts;



               (ii) all Chattel Paper;


               
(iii) all Commercial Tort Claims;

               
(iv) all Deposit Accounts;



               (v) all Documents;



               (vi) all General Intangibles;



               (vii) all Goods (including, in any event, Equipment, Fixtures, Inventory,
Documents Evidencing Goods and Software Embedded in Goods);



               (viii) all Instruments;



               (ix) all Insurance;



               (x) all Intellectual Property;



               (xi) all Investment Property and Financial Assets;



               (xii) all Letters of Credit and Letter-of-Credit Rights;



               (xiii) all Material Contracts and Non-payment Contracts;



               (xiv) all
Money;


               (xv) all
Receivables;

               (xvi) all Securities Collateral;



               (xvii) all books and Records relating to any and/or all of the foregoing;



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



               (xix) to the extent not otherwise included above, all other personal property
and all Proceeds and products of, accessions and
additions to, profits and rents from, and replacements for or in respect of
any of the foregoing;


it being understood that, subject to the other provisions hereof and of the Credit
Agreement, the foregoing grant of a security interest shall not diminish any Pledgor’s




8









 







exclusive right and license to use, or grant to other persons license or sublicenses in,
the Intellectual Property.




          SECTION 2.02. Certain Limited Exclusions. Notwithstanding anything herein to the contrary, in
no event shall the security interest granted under Section 2.01(a) attach to, and the
Security Agreement Collateral shall not include:




               (a) any agreement to which any Pledgor is a party to the extent that the collateral assignment
thereof or the creation of a security interest therein would constitute a breach of the terms of
such agreement, or would permit any party to such agreement to terminate such agreement, in each
case as entered into by the applicable Pledgor; provided that, any of the agreements excluded in
accordance with the foregoing shall cease to be so excluded (x) to the extent such term is, or
would be (in the case of after-acquired property or changes to applicable law), rendered
ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction (or
any successor provision) or any other applicable law (including the Bankruptcy Code) or principles
of equity; or (y) if the applicable Pledgor has obtained all of the consents of the other parties
to such agreement necessary for the collateral assignment of, or creation of a security interest
in, such agreement;



               (b) any property or asset hereafter acquired by any Pledgor that is subject to a Lien
permitted to be incurred pursuant to Sections 6.02(g), (h), (i) and (k) of the Credit Agreement,
solely to the extent that the documents evidencing such Lien prohibit the grant of a security
interest in or Lien on such property or asset; provided that, upon such property or asset no longer
being subject to such Lien or prohibition, such property or asset shall (without any act or
delivery by any person) constitute Security Agreement Collateral hereunder;



               (c) subject to Section 5.11 of the Credit Agreement, no more than 66.0% of the Equity
Interests of Parent, Cayman III, Luxembourg Holdings, HIL, HV or any Non-Guarantor Subsidiary,
provided that, such Non-Guarantor Subsidiary is also a Foreign Subsidiary; or



               (d) the Equity Interests of the Designated Subsidiaries.


Collateral Agent agrees that, at any Pledgor’s reasonable request and expense, it will provide such
Pledgor confirmation that the assets described in this Section 2.02 are in fact excluded
from the Security Agreement Collateral.




          SECTION 2.03. Secured Obligations; Continuing Liability.




               (a) Security for Obligations. This Agreement secures, and the Security Agreement
Collateral is collateral security for, the payment and performance in full when due of all the
Secured Obligations.



               (b) Continuing Liability under Security Agreement Collateral. Notwithstanding
anything herein to the contrary, (i) each Pledgor shall remain liable under each of the obligations
and agreements included in the Security Agreement Collateral, including any obligations or
agreements relating to any Pledged Equity Interests, to perform all of the obligations undertaken
by it thereunder, all in accordance with the terms and provisions thereof, and neither Collateral
Agent nor any Secured Party shall have any obligation or liability (x) under any of such agreements
by reason of this Agreement or any other document relating hereto, or (y) to make any inquiry
regarding the nature or sufficiency of any payment received by it, or have



9









 




any obligation to take
any action to collect or enforce any rights under any agreement included in the Security Agreement
Collateral, including any agreements relating to any Pledged Equity Interests; (ii) the exercise by
Collateral Agent of any of its rights hereunder shall not release any Pledgor from any of its
duties or obligations under the contracts and agreements included in the Security Agreement
Collateral; and (iii) nothing herein is intended to or shall be a delegation of duties to
Collateral Agent or any other Secured Party.




ARTICLE III




Perfection; Supplements; Further Assurances; Use of Security Agreement Collateral




          SECTION 3.01. Delivery of Certificated Securities Collateral. All certificates, agreements or
instruments representing or evidencing the Securities Collateral, to the extent not previously
delivered to Collateral Agent, shall promptly upon receipt thereof by any Pledgor be delivered to
and held by or on behalf of Collateral Agent pursuant hereto. All certificated Securities
Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time upon the occurrence and
during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to
register in the name of Collateral Agent or any of its nominees or endorse for negotiation any or
all of the Securities Collateral, without any indication that such Securities Collateral is subject
to the security interest hereunder. In addition, Collateral Agent shall have the right, at any
time upon the occurrence and during the continuance of any Event of Default, to exchange
certificates representing or evidencing Securities Collateral for certificates of smaller or larger
denominations.




          SECTION 3.02. Perfection of Uncertificated Securities Collateral. If any Issuer of Pledged
Equity Interests is organized in a jurisdiction that does not permit the use of certificates to
evidence equity ownership, or if any of the Pledged Equity Interests are at any time not evidenced
by certificates of ownership, then each applicable Pledgor shall, to the extent permitted by
applicable law, record such pledge on the equityholder register or the books of the Issuer, cause
the Issuer to execute and deliver to Collateral Agent an acknowledgment of the pledge of such
Pledged Equity Interests substantially in the form of Exhibit A annexed hereto and, upon
Collateral Agent’s request therefor, execute any customary pledge forms or other documents
necessary or appropriate to complete the pledge and give Collateral Agent the right to transfer
such Pledged Equity Interests under the terms hereof and provide to Collateral Agent an opinion of
counsel, in form and substance satisfactory to Collateral Agent, confirming such pledge and
perfection thereof; provided that there shall be no obligation to deliver, or cause to be
delivered, any such documentation (other than an acknowledgment of the pledge) to the extent the
Issuer is organized in a jurisdiction other than the United States,
Cayman Islands, Luxembourg, England and Wales, Japan, Mexico, Switzerland or any political
subdivision of any thereof).




          SECTION 3.03. Financing Statements and Other Filings. Each Pledgor agrees that at any time
and from time to time, at the sole cost and expense of the Pledgors, it will execute and file and
refile (in accordance with Section 3.04), or permit Collateral Agent to file and refile,
such financing statements, continuation statements and other documents (including this Agreement),
in form acceptable to Collateral Agent, in such offices (including the United States Patent and
Trademark Office and the United States Copyright Office) as Collateral Agent may deem necessary or
appropriate, wherever required by law to perfect, continue and




10









 







maintain a valid, enforceable,
first-priority security interest in the Security Agreement Collateral as provided herein and to
preserve the other rights and interests granted to Collateral Agent hereunder, as against third
parties, with respect to any Security Agreement Collateral.




          SECTION 3.04. Other Actions. To further ensure the attachment, perfection and priority of,
and the ability of Collateral Agent to enforce, Collateral Agent’s security interest in the
Security Agreement Collateral, each Pledgor acknowledges and agrees as follows:




               (a) UCC Financing Statements. Each Pledgor hereby irrevocably authorizes Collateral
Agent at any time and from time to time to file in any relevant jurisdiction any financing
statements (including fixture filings), continuation statements, and amendments thereto that
contain the information required by Article 9 of the UCC of each applicable jurisdiction for the
filing of any financing statement or amendment, including (i) whether the Pledgor is an
organization, the type of organization and any organizational identification number issued to such
Pledgor and (ii) in the case of a financing statement filed as a fixture filing, a sufficient
description of the real property to which such Security Agreement Collateral relates. The Pledgor
agrees to provide such information to Collateral Agent promptly upon request. Such financing
statements or amendments may describe the Security Agreement Collateral as “all assets” or “all
personal property, whether now owned or hereafter acquired,” or in any other manner that Collateral
Agent, in its sole discretion, deems necessary, advisable or prudent to ensure the perfection of
the security interests granted hereunder. Each Pledgor hereby ratifies its authorization for
Collateral Agent to file in any relevant jurisdiction any financing statements or amendments
thereto if filed prior to the date hereof.



               (b) Intellectual Property Filings. Each Pledgor hereby irrevocably authorizes
Collateral Agent to file documents with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any other country) for
the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest
granted by each Pledgor hereunder and naming any Pledgor or the Pledgors as debtors and Collateral
Agent for its benefit and the benefit of the Lenders as secured party.



               (c) Instruments and Tangible Chattel Paper. If any amount payable under or in
connection with any of the Security Agreement Collateral shall be evidenced by any Instrument or
Tangible Chattel Paper, the Pledgor acquiring such Instrument or Tangible Chattel Paper shall
contemporaneously with the delivery of financial statements in accordance with Section 5.01(a) or
(b) of the Credit Agreement endorse, assign and deliver the same to
Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in
blank as Collateral Agent may from time to time specify.



               (d) Deposit Accounts. Each Pledgor shall notify Collateral Agent of any new Deposit
Account such Pledgor has opened contemporaneously with the delivery of financial statements in
accordance with Section 5.01(a) or (b) of the Credit Agreement and solely in the case of Deposit
Accounts maintained in the United States of America (unless waived in writing by Collateral Agent
in its sole discretion) either (i) pursuant to a Control Agreement cause the depository Bank to
agree to comply at any time with instructions from Collateral Agent to such depository Bank
directing the disposition of funds from time to time credited to such Deposit Account, without
further consent of such Pledgor or any other person, or (ii) arrange for Collateral Agent to become
the customer of the Bank with respect to the Deposit Account, with the Pledgor being permitted, so
long as no Default or Event of Default exists and is continuing, to exercise rights to withdraw
funds from such Deposit Account pursuant to an agreement in form



11









 




and substance satisfactory to
Collateral Agent. The preceding sentence shall not apply to Deposit Accounts for which Collateral
Agent is the depository. Each Pledgor represents and warrants to Collateral Agent that, as of the
date hereof, it maintains no Deposit Accounts other than (i) those set forth in the Perfection
Certificate or (ii) those for which the applicable Pledgor has provided notice thereof to
Collateral Agent pursuant to the preceding sentence.




               (e) Investment Property.



                    (i) If any Pledgor shall at any time hold or acquire any certificated
securities constituting Investment Property, such Pledgor shall contemporaneously
with the delivery of financial statements in accordance with Section 5.01(a) or
(b) of the Credit Agreement endorse, assign and deliver the same to Collateral
Agent, accompanied by such instruments of transfer or assignment duly executed in
blank, all in form and substance satisfactory to Collateral Agent. If any
securities now or hereafter acquired by any Pledgor constituting Investment
Property are uncertificated and are issued to such Pledgor or its nominee directly
by the issuer thereof, such Pledgor shall contemporaneously with the delivery of
financial statements in accordance with Section 5.01(a) or (b) of the Credit
Agreement notify Collateral Agent thereof and such Pledgor shall either (A)
pursuant to a Control Agreement cause the issuer to agree to comply with
instructions from Collateral Agent as to such securities, without further consent
of any Pledgor, such nominee or any other person, or (B) arrange for Collateral
Agent to become the registered owner of the securities. If any securities
constituting Investment Property, whether certificated or uncertificated, or other
Investment Property now or hereafter acquired by any Pledgor is held by such
Pledgor or its nominee through a Securities Intermediary or Commodity
Intermediary, such Pledgor shall contemporaneously with the delivery of financial
statements in accordance with Section 5.01(a) or (b) of the Credit Agreement
notify Collateral Agent thereof and, unless waived in writing by Collateral Agent
in its sole discretion, either (A) pursuant to a Control Agreement cause such
Securities Intermediary or Commodity Intermediary, as the case may be, to agree to
comply with Entitlement Orders or other instructions from Collateral Agent to such
Securities Intermediary as to such securities or other Investment Property, or to
apply any value distributed on account of any Commodity Contract as directed by
Collateral Agent to such Commodity Intermediary, as the case may be, in each case
without further consent of any Pledgor, such nominee or any other person,
or (B) in the case of Financial Assets constituting Investment Property or
other Investment Property held through a Securities Intermediary, arrange for
Collateral Agent to become the Entitlement Holder with respect to such Investment
Property, with the Pledgor being permitted, so long as no Default or Event of
Default has occurred and is continuing, to exercise rights to withdraw or
otherwise deal with such Investment Property pursuant to an agreement in form and
substance satisfactory to Collateral Agent. The preceding sentence shall not
apply to any Financial Assets credited to a Securities Account for which
Collateral Agent is the Securities Intermediary. Each Pledgor represents and
warrants to Collateral Agent that, as of the date hereof, such Pledgor maintains
no Securities Accounts or Commodity Accounts with any Securities Intermediary or
Commodity Intermediary other than (i) as set forth in Section II.E of the
Perfection Certificate or (ii) those for which the applicable Pledgor has provided
notice thereof to Collateral Agent pursuant to the preceding sentence.




12









 








               (ii) As between Collateral Agent and the Pledgors, the Pledgors shall bear
the investment risk with respect to the Investment Property, and the risk of loss
of, damage to, or the destruction of the Investment Property, whether in the
possession of, or maintained as a Security Entitlement by, or subject to the
control of, Collateral Agent, a Securities Intermediary, Commodities Intermediary,
the Pledgor or any other person; provided that, nothing contained in this
Section 3.04(e)(ii) shall release or relieve any Securities Intermediary
or Commodities Intermediary of its duties and obligations to the Pledgors or any
other person under any Control Agreement or under applicable law. Each Pledgor
shall promptly pay all Charges and fees of whatever kind or nature with respect to
the Investment Property pledged by it or this Agreement. In the event any Pledgor
shall fail to make such payment contemplated in the immediately preceding
sentence, Collateral Agent may do so for the account of such Pledgor and the
Pledgors shall promptly reimburse and indemnify Collateral Agent from all costs
and expenses incurred by Collateral Agent under this Section 3.04(e)(ii)
in accordance with Section 7.03.



               (f) Electronic Chattel Paper and Transferable Records. If any amount payable under or
in connection with any of the Security Agreement Collateral shall be evidenced by any Electronic
Chattel Paper or any “transferable record,” as that term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, the Pledgor acquiring such
Electronic Chattel Paper or transferable record shall promptly notify Collateral Agent thereof and,
at the request of Collateral Agent, shall take such action as Collateral Agent may request to vest
in Collateral Agent control under UCC Section 9-105 of such Electronic Chattel Paper or control
under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as
the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such
jurisdiction, of such transferable record. Collateral Agent agrees with such Pledgor that
Collateral Agent will arrange, pursuant to procedures satisfactory to Collateral Agent and so long
as such procedures will not result in Collateral Agent’s loss of control, for the Pledgor to make
alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section
9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a party in
control to allow without loss of control, unless an Event of Default has occurred and is continuing
or would occur after taking into account any action by such Pledgor with respect to such Electronic
Chattel Paper or transferable record.



               (g) Letter-of-Credit Rights. If any Pledgor is at any time a beneficiary under a
Letter of Credit in excess of $1.0 million now or hereafter issued in favor of such Pledgor, such
Pledgor shall contemporaneously with the delivery of financial statements in accordance with
Section 5.01(a) or (b) of the Credit Agreement notify Collateral Agent thereof and, at the request
of Collateral Agent, such Pledgor shall, pursuant to an agreement in form and substance
satisfactory to Collateral Agent, either (i) arrange for the issuer and any confirmer of such
Letter of Credit to consent to an assignment to Collateral Agent of the proceeds of any drawing
under the Letter of Credit or (ii) arrange for Collateral Agent to become the transferee
beneficiary of the Letter of Credit.



               (h) Commercial Tort Claims. If any Pledgor shall at any time hold or acquire a
Commercial Tort Claim relating to any of the Security Agreement Collateral and such Pledgor, in the
exercise of its reasonable business judgment, elects to pursue such commercial tort claim, such
Pledgor shall contemporaneously with the delivery of financial



13









 




statements in accordance with
Section 5.01(a) or (b) of the Credit Agreement notify Collateral Agent in writing signed by such
Pledgor of the brief details thereof and grant to Collateral Agent in such writing a security
interest therein and in the Proceeds thereof, all in accordance with this Agreement, with such
writing to be in form and substance satisfactory to Collateral Agent.




          SECTION 3.05. Supplements; Further Assurances.



               (a) The Pledgors shall cause each person that, from time to time after the date hereof, shall
be required to pledge any assets to Collateral Agent for the benefit of the Secured Parties
pursuant to the provisions of the Credit Agreement, to execute and deliver to Collateral Agent a
Joinder Agreement and, upon such execution and delivery, such person shall constitute a “Guarantor”
and a “Pledgor” for all purposes hereunder with the same force and effect as if originally named as
a Guarantor and Pledgor herein. The execution and delivery of such Joinder Agreement shall not
require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder
shall remain in full force and effect notwithstanding the addition of any new Guarantor and Pledgor
as a party to this Agreement.



               (b) Upon obtaining any Pledged Equity Interests or Pledged Intercompany Debt of any person,
each Pledgor shall accept the same in trust for the benefit of Collateral Agent and
contemporaneously with the delivery of financial statements in accordance with Section 5.01(a) or
(b) of the Credit Agreement deliver to Collateral Agent the certificates and other documents
required under this Article III in respect of the additional Pledged Equity Interests,
Pledged Intercompany Debt or other possessory Security Agreement Collateral that is to be pledged
pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in
respect of such additional Pledged Equity Interests or Pledged Intercompany Debt.



               (c) Each Pledgor agrees to take such further actions, and to execute and deliver to Collateral
Agent such additional assignments, agreements, supplements, powers and instruments, as Collateral
Agent may in its reasonable judgment deem necessary or appropriate, to perfect, preserve and
protect the security interest in the Security Agreement Collateral as provided herein and the
rights and interests granted to Collateral Agent hereunder, to carry into effect the purposes
hereof or to better assure and confirm unto Collateral Agent or permit Collateral Agent to exercise
and enforce its rights, powers and remedies hereunder with respect to any Security Agreement
Collateral. By way of example, such actions may include appearing in and defending any action or
proceeding, at Collateral Agent’s request, that may affect such Pledgor’s title to or Collateral
Agent’s security interest in all or any part of the Security Agreement Collateral. Upon the
reasonable request of Collateral Agent, each Pledgor
shall further make, execute, endorse, acknowledge, file or refile or deliver to Collateral
Agent from time to time such lists, descriptions and designations of the Security Agreement
Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements,
additional security agreements, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments. If an Event of Default has
occurred and is continuing, Collateral Agent may institute and maintain, in its own name or in the
name of any Pledgor, such suits and proceedings as Collateral Agent deems necessary or expedient to
prevent any impairment of the security interest in or the perfection thereof in the Security
Agreement Collateral. All of the foregoing shall be at the sole cost and expense of the Pledgors.



               (d) For the avoidance of doubt, the Pledgors and Collateral Agent acknowledge that this
Agreement is intended to grant to Collateral Agent, for the benefit of the



14









 




Secured Parties, a
security interest in and continuing Lien on the Security Agreement Collateral, and does not
constitute a present assignment of ownership rights, a transfer of ownership or title to any
Security Agreement Collateral, except as otherwise provided herein following the occurrence and
during the continuance of an Event of Default. Unless an Event of Default shall have occurred and
be continuing, Collateral Agent agrees from time to time to deliver, upon written request of any
Pledgor and at such Pledgor’s sole cost and expense (including reasonable expenses of counsel to,
among other things, review the effect thereof on Collateral Agent’s security interest granted
hereunder), any and all instruments, certificates or other documents, in a form reasonably
requested by such Pledgor, necessary or appropriate in the reasonable judgment of such Pledgor to
enable such Pledgor to continue to exploit, license, use and protect the Security Agreement
Collateral in accordance with the terms hereof and of the Credit Agreement.




ARTICLE IV




Representations, Warranties and Covenants




Each Pledgor represents, warrants and covenants as follows:




          SECTION 4.01. Title. Except for the security interest granted to Collateral Agent for its
benefit and for the benefit of the Secured Parties pursuant to this Agreement and Permitted Liens,
such Pledgor owns the rights in each item of Security Agreement Collateral pledged by it hereunder,
and with regard to each item of Security Agreement Collateral now existing or hereafter acquired,
will continue to own or have such rights, in each case free and clear of any and all Liens or
claims of others. No effective financing statement or other public notice with respect to all or
any part of the Security Agreement Collateral is on file or of record in any public office, except
such as have been filed in favor of Collateral Agent pursuant to this Agreement, are permitted by
the Credit Agreement, or for which proper termination statements or other release documentation
have been (or, in the case of financing statements or other public notices filed in connection with
the Existing Credit Agreement, will be) delivered to Collateral Agent for filing. No person other
than Collateral Agent has control or possession of all or any part of the Security Agreement
Collateral, except as permitted hereby or by the Credit Agreement.



          SECTION 4.02. Organization; Authority; Enforceability. Such Pledgor (a) is duly organized or incorporated and validly existing under the laws of
the jurisdiction of its organization or incorporation, (b) has all requisite power and authority
enter into this Agreement and to carry out the obligations hereunder, and (c) has duly executed and
delivered this Agreement. This Agreement and each other document, statement, or instrument
relating hereto, when executed and delivered by such Pledgor, will constitute, a legal, valid and
binding obligation of such Pledgor, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.



          SECTION 4.03. Authorizations and Approvals. No authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority is required for either (i) the pledge
or grant by such Pledgor of the Liens purported to be created in favor of Collateral Agent
hereunder, or (ii) the exercise by Collateral Agent of any rights or remedies in respect of any
Security Agreement Collateral, in each case except for the filings and registrations contemplated
under the Security Documents and as may be required in connection



15









 




with the disposition of any
Securities Collateral (by laws generally affecting the offering and sale of securities) or by laws
pertaining to Intellectual Property.




          SECTION 4.04. Reserved.



          SECTION 4.05. Limitation on Liens. Such Pledgor shall, at its own cost and expense, defend
title to the Security Agreement Collateral pledged by it hereunder and the security interest
therein and Lien thereon granted to Collateral Agent and the priority thereof against all claims
and demands of all persons, at its own cost and expense, at any time claiming (except to the extent
related to a Permitted Lien) any interest therein adverse to Collateral Agent or any other Secured
Party.



          SECTION 4.06. Other Financing Statements. So long as any of the Secured Obligations remain
unpaid, or the Commitments of the Lenders to make any Loan or to issue any Credit Agreement L/Cs
shall not have expired or been sooner terminated, such Pledgor shall not execute, authorize or
permit to be filed in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to any Security Agreement
Collateral, except, in each case, financing statements filed or to be filed in respect of and
covering the security interests granted by such Pledgor to the holder of Permitted Liens.



          SECTION 4.07. Chief Executive Office; Change of Name; Jurisdiction of Organization.



               (a) Such Pledgor’s exact legal name, type and jurisdiction of organization or incorporation,
federal taxpayer and organizational identification numbers of such Pledgor (if applicable) is set
forth in the Perfection Certificate, and its chief executive office is set forth in the Perfection
Certificate. Such Pledgor shall not (a) change its corporate name, (b) change its identity or type
of organization or corporate structure, or (c) change its federal taxpayer
identification number or organizational identification number (including by merging with or
into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in
any other jurisdiction) unless (A) it shall have given Collateral Agent not less than 30 days’
prior written notice of its intention so to do, clearly describing such change and providing such
other information in connection therewith as Collateral Agent may request, and (B) with respect to
such change, such Pledgor shall have taken all action that Collateral Agent deems necessary or
desirable to maintain the perfection and priority of the security interest of Collateral Agent for
the benefit of the Secured Parties in the Security Agreement Collateral intended to be granted
hereby. Each Pledgor agrees to promptly provide Collateral Agent with certified organizational
documents reflecting any of the changes described in the preceding sentence.



               (b) Such Pledgor agrees to maintain, at its own cost and expense, such complete and accurate
records with respect to the Security Agreement Collateral owned by it as is consistent with its
current practices and in accordance with such prudent and standard practices used in industries
that are the same as or similar to those in which such Pledgor is engaged, but in any event to
include complete accounting records as required by the Credit Agreement, and, at such time or times
as Collateral Agent may request, promptly to prepare and deliver to Collateral Agent a duly
certified schedule or schedules in form and detail satisfactory to Collateral Agent showing in
summary form the identity, amount and location of any and all Security Agreement Collateral (except
Security Agreement Collateral in the possession or control of Collateral Agent).



16









 





               (c) Contemporaneously with the delivery of financial statements in accordance with Section
5.01(a) or (b) of the Credit Agreement, the Pledgors shall notify Collateral Agent in writing
(certified by an officer of the applicable Pledgor) of each location where Security Agreement
Collateral is maintained, which notification may take the form of supplementing or restating prior
notifications.



          SECTION 4.08. Certain Provisions Concerning Securities Collateral.



               (a) Such Pledgor has delivered to Collateral Agent true, correct and complete copies of the
Operative Agreements, which are in full force and effect and have not as of the date hereof been
amended or modified except as permitted by the Credit Agreement. Such Pledgor shall deliver to
Collateral Agent a copy of any notice of default given or received by it under any Operative
Agreement within ten days after such Pledgor gives or receives such notice.



               (b) Such Pledgor is not in default in the payment of any portion of any mandatory capital
contribution, if any, required to be made under any agreement to which such Pledgor is a party
relating to the Pledged Equity Interests pledged by it, and such Pledgor is not in violation of any
other provisions of any such agreement to which such Pledgor is a party, or otherwise in default or
violation thereunder, except where such default or noncompliance, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. No Securities Collateral
pledged by such Pledgor is subject to any defense, offset or counterclaim, nor have any of the
foregoing been asserted or alleged against such Pledgor by any person with respect thereto, and as
of the date hereof, there are no certificates, instruments, documents or other writings (other than
the Operative Agreements and certificates, if any, delivered to Collateral Agent) that evidence any
Pledged Equity Interests of such Pledgor.



               (c) So long as no Event of Default shall have occurred and be continuing (and Borrower or such
Pledgor has not received written notice relating to such Event of Default from Collateral Agent):




               (i) Such Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Securities Collateral or any part thereof for
any purpose not inconsistent with the terms or purposes hereof, the Credit
Agreement, or any other Loan Document evidencing the Secured Obligations; provided
that, such Pledgor shall not in any event exercise such rights in any manner that
would reasonably be expected to have a material adverse effect on the value of the
Security Agreement Collateral or the Lien and security interest intended to be
granted to Collateral Agent hereunder;




               (ii) Such Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the Lien hereof, any and all Distributions, but only if and to
the extent made in accordance with the provisions of the Credit Agreement;
provided that, any and all such Distributions consisting of rights or interests in
the form of certificated securities shall be delivered to Collateral Agent to hold
as Security Agreement Collateral and shall, if received by such Pledgor, be
received in trust for the benefit of Collateral Agent, be segregated from the
other property or funds of such Pledgor and be delivered to Collateral Agent as
Security Agreement Collateral in the same form as so received (with any necessary
endorsement), in each case as and when required pursuant to Article III
hereof; and



17









 






               (iii) Without further action or formality, Collateral Agent shall be deemed
to have granted to such Pledgor all necessary consents relating to voting rights
and shall, if necessary, upon written request of such Pledgor and at the sole cost
and expense of the Pledgors, from time to time execute and deliver (or cause to be
executed and delivered) to such Pledgor all such instruments as such Pledgor may
reasonably request to permit such Pledgor to exercise the voting and other rights
that it is entitled to exercise pursuant to Section 4.08(c)(i) and to
receive the Distributions that it is authorized to receive and retain pursuant to
Section 4.08(c)(ii).



               (d) Upon the occurrence and during the continuance of any Event of Default (and once Borrower
or any Pledgor has received written notice relating to such Event of Default from Collateral
Agent):




               (i) All rights of such Pledgor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to Section
4.08(c)(i) without any action or the giving of any notice shall cease, and all
such rights shall thereupon become vested in Collateral Agent, which shall
thereupon have the sole right to exercise such voting and other consensual rights;
and




               (ii) All rights of such Pledgor to receive Distributions that it would
otherwise be authorized to receive and retain pursuant to Section
4.08(c)(ii) shall cease and all such rights shall thereupon become vested in
Collateral Agent, who shall thereupon have the sole right to receive and hold as
Security Agreement Collateral such Distributions;


provided that, the rights described in clauses (i) and (ii) above shall revert back to such Pledgor
following the cure or waiver of such Event of Default.








               (e) Such Pledgor shall, at its sole cost and expense, from time to time execute and deliver to
Collateral Agent appropriate instruments as Collateral Agent may request to permit Collateral Agent
to exercise the voting and other rights that it may be entitled to exercise pursuant to Section
4.08(d)(i) and to receive all Distributions that it may be entitled to receive under
Section 4.08(d)(ii).



               (f) All Distributions that are received by such Pledgor contrary to the provisions of
Section 4.08(d)(ii) shall be received in trust for the benefit of Collateral Agent, shall
be segregated from other funds of such Pledgor and shall promptly be paid over to Collateral Agent
as Security Agreement Collateral in the same form as so received (with any necessary endorsement).



          SECTION 4.09. Certain Provisions Concerning Intellectual Property.



               (a) Such Pledgor agrees that it will not, nor will it knowingly permit or authorize any of its
licensees to, do any act, or omit to do any act, whereby any issued Patent may become invalidated,
dedicated to the public, or unenforceable, and agrees that it shall continue to mark any products
covered by a Patent with the relevant Patent Number or indication that such product is subject to a
pending Patent application as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws, except where the failure to so mark would not be reasonably likely to
result in a Material Adverse Effect.



18









 





               (b) Such Pledgor (either itself or through its licensees or its sublicensees) will, for each
material Trademark, (i) maintain such Trademark in full force free from any claim of abandonment or
invalidity for nonuse, (ii) not materially diminish the value of such Trademark or the goodwill
associated therewith, (iii) display such Trademark with notice of federal or foreign registration
to the extent necessary and sufficient to establish and preserve its maximum rights under
applicable law, except where the failure to display with such notice would not be reasonably likely
to result in a Material Adverse Effect, and (iv) not knowingly use or knowingly permit the use of
such Trademark in violation of any third party rights.



               (c) Such Pledgor (either itself or through licensees) will, for each work covered by a
material Copyright, continue to publish, reproduce, display, adopt and distribute the work with
appropriate copyright notice as necessary and sufficient to establish and preserve its maximum
rights under applicable copyright laws, except where the failure to include notice would not be
reasonably likely to result in a Material Adverse Effect.



               (d) Such Pledgor shall notify Collateral Agent promptly if it knows or has reason to know that
any Intellectual Property material to such Pledgor’s business (whether individually or in the
aggregate) may become, or knows of circumstances that would cause any such Intellectual Property to
become: (i) abandoned, lost or dedicated to the public; (ii) invalid or unenforceable; or (iii)
subject to any adverse determination or development regarding such Pledgor’s ownership of any
Intellectual Property, its right to register the same, or to keep and maintain the same.



               (e) Such Pledgor will take all reasonable steps in the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political subdivision of the
United States, Canada or in any other country, to maintain and pursue each application relating to
the Intellectual Property (and to obtain the relevant grant or registration) and to maintain each
issued Patent and each registration of the Trademarks and Copyrights, including timely filings of
applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and to initiate opposition, interference and
cancellation proceedings against third parties, in each case where necessary for the operation of
such Pledgor’s business as presently conducted and as contemplated by the Credit Agreement.



               (f) In the event that such Pledgor knows that any Security Agreement Collateral consisting of
Intellectual Property material to the conduct of such Pledgor’s business has been or is about to be
infringed, misappropriated or diluted by a third party, such Pledgor promptly shall notify
Collateral Agent and shall promptly sue for infringement, misappropriation or dilution and to
recover any and all damages for such infringement, misappropriation or dilution, or take such other
actions as are appropriate under the circumstances to protect such Security Agreement Collateral,
except where the failure to so notify or take such actions would not be reasonably likely to result
in a Material Adverse Effect.



               (g) Upon the occurrence and during the continuance of an Event of Default, such Pledgor shall
use its commercially reasonable efforts to obtain all requisite consents or approvals by the
licensor of each License to effect the assignment of all of such Pledgor’s right, title and
interest thereunder to the Security Agreement Collateral Agent or its designee.



               (h) Solely for the purpose of enabling Collateral Agent to exercise its rights and remedies
upon the occurrence of an Event of Default, such Pledgor hereby grants to Collateral Agent, to the
extent assignable, an irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Pledgor) to use, license or sublicense



19









 




any of the Intellectual Property
now owned or hereafter acquired by such Pledgor, wherever the same may be located, including in
such license access to all media in which any of the licensed items may be recorded or stored and
to all computer programs used for the compilation or printout thereof.




               (i) It shall contemporaneously with the delivery of financial statements in accordance with
Section 5.01(a) or (b) of the Credit Agreement report to Collateral Agent (i) the filing of any
application to register any Intellectual Property with the United States Patent and Trademark
Office, the United States Copyright Office, or any state registry or foreign counterpart of the
foregoing (whether such application is filed by such Pledgor or through any agent, employee,
licensee, or designee thereof); and (ii) the registration of any Intellectual Property by any such
office.



               (j) It shall, promptly upon the reasonable request of Collateral Agent, execute and deliver to
Collateral Agent any document required to acknowledge, confirm, register, record, or perfect
Collateral Agent’s security interest granted hereunder in any part of the Intellectual Property,
whether now owned or hereafter acquired.



               (k) Except with the prior consent of Collateral Agent or as permitted under the Credit
Agreement, such Pledgor shall not execute any financing statement or other document or instrument,
and there will not be on file in any public office any effective financing statement or other
document or instruments, except financing statements or other documents or instruments filed or to
be filed in favor of Collateral Agent or in respect of Permitted Liens, and such Pledgor shall not
sell, assign, transfer, license, grant any option in, or create any Lien, claim, security interest
or other encumbrance on or with respect to the Intellectual Property, or suffer to exist any
effective Lien, claim, security interest or other encumbrance on or with respect to the
Intellectual Property, except for the security interest created by and under this Security
Agreement and Permitted Liens as otherwise permitted by the Credit Agreement.



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



          SECTION 4.10. Inspection and Verification. Collateral Agent or any representative designated
by Collateral Agent shall have the same access and inspection rights as granted to the
Administrative Agent by the Companies pursuant to Section 5.07 of the Credit Agreement; provided
that, upon the occurrence and during the continuance of an Event of Default, Collateral Agent and
its representatives shall at all times have the right to enter any premises of such Pledgor and
inspect any property of such Pledgor where any of the Security Agreement Collateral of such Pledgor
is located for the purpose of inspecting the same, observing its use, protecting its interests
therein, or otherwise exercising the remedies provided under Article V. For the avoidance
of doubt, in respect of Accounts or Security Agreement Collateral in the possession of any third
person, upon the occurrence and during the continuance of an Event of Default, Collateral Agent or
any designated representative shall have the right to contact such account debtors or third persons
in possession of such Security Agreement Collateral for verification purposes. Collateral Agent
shall have the absolute right to share any information it gains from such inspection or
verification with any other Secured Party.



20









 





          SECTION 4.11. Payment of Taxes; Contesting Liens; Claims. Such Pledgor represents and
warrants that all Charges imposed on or assessed against the Security Agreement Collateral have
been paid and discharged except to the extent such Charges (a) constitute a Permitted Lien or a
Lien not yet due and payable or (b) are being contested in good faith by appropriate proceedings
and for which such Pledgor shall have set aside on its books adequate reserves in accordance with
GAAP. Notwithstanding the foregoing, such Pledgor may at its own expense contest the validity,
amount or applicability of any Charges so long as the contest thereof shall satisfy the Contested
Collateral Lien Conditions. Notwithstanding the foregoing provisions of this Section 4.11,
no contest of any such obligation may be pursued by such Pledgor if such contest would expose
Collateral Agent or any other Secured Party to any possible criminal liability.



          SECTION 4.12. Transfers and Other Liens. Such Pledgor shall not sell, convey, assign or
otherwise dispose of, or grant any option with respect to, any of the Security Agreement Collateral
pledged by it hereunder except as permitted by the Credit Agreement. Such Pledgor shall not make
or permit to be made an assignment for security, pledge or hypothecation of the Security Agreement
Collateral or shall grant any other Lien in respect of the Security Agreement Collateral, except as
permitted by Section 6.02 of the Credit Agreement.



          SECTION 4.13. Insurance. Such Pledgor, at its own expense, shall maintain or cause to be
maintained, insurance covering physical loss or damage to the Inventory and Equipment in accordance
with Section 5.04 of the Credit Agreement. Such Pledgor irrevocably makes, constitutes and
appoints Collateral Agent (and all officers, employees or agents designated by Collateral Agent)
as such
Pledgor’s true and lawful agent (and attorney-in-fact) for the purposes, during the
continuance of an Event of Default, of making, settling and adjusting claims in respect of Security
Agreement Collateral under policies of insurance, endorsing the name of such Pledgor on any check,
draft, instrument or other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that such Pledgor at
any time or times fails to obtain or maintain any of the policies of insurance required hereby or
to pay any premium in whole or in part relating thereto, Collateral Agent may, without waiving or
releasing any obligation or liability of any Pledgor hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as Collateral Agent deems advisable. All sums disbursed by Collateral
Agent in connection with this Section 4.13, including reasonable attorneys’ fees, court
costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Pledgors
to Collateral Agent and shall be additional Secured Obligations.



ARTICLE V




Remedies




          SECTION 5.01. Remedies. Upon the occurrence and during the continuance of any Event of
Default, Collateral Agent may from time to time exercise in respect of the Security Agreement
Collateral, in addition to the other rights and remedies provided for herein or otherwise available
to it:



               (a) Personally, or by agents or attorneys, immediately take possession of the Security
Agreement Collateral or any part thereof, from any Pledgor or any other person who then has
possession of any part thereof with or without notice or process of law, and for that



21









 




purpose may
enter on any Pledgor’s premises where any of the Security Agreement Collateral is located, remove
such Security Agreement Collateral, remain present at such premises to receive copies of all
communications and remittances relating to the Security Agreement Collateral and use in connection
with such removal and possession any and all services, supplies, aids and other facilities of any
Pledgor;




               (b) Demand, sue for, collect or receive any money or property at any time payable or
receivable in respect of the Security Agreement Collateral including instructing the obligor or
obligors on any agreement, instrument or other obligation constituting part of the Security
Agreement Collateral to make any payment required by the terms of such agreement, instrument or
other obligation directly to Collateral Agent, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications with respect thereto;
provided that, in the event that any such payments are made directly to any Pledgor, prior to
receipt by any such obligor of such instruction, such Pledgor shall segregate all amounts received
pursuant thereto in trust for the benefit of Collateral Agent and shall promptly (but in no event
later than one Business Day after receipt thereof) pay such amounts into the Collateral Account;



               (c) Sell, assign, grant a license to use or otherwise liquidate, or direct any Pledgor to
sell, assign, grant a license to use or otherwise liquidate, any and all investments made in whole
or in part with the Security Agreement Collateral or any part thereof, and take possession of the
proceeds of any such sale, assignment, license or liquidation;



               (d) Take possession of the Security Agreement Collateral or any part thereof by directing any
Pledgor in writing to deliver the same to Collateral Agent at any place or places so designated by
Collateral Agent, in which event such Pledgor shall at its own expense: (i) forthwith cause the
same to be moved to the place or places designated by Collateral Agent and there delivered to
Collateral Agent, (ii) store and keep any Security Agreement Collateral so delivered to Collateral
Agent at such place or places pending further action by Collateral Agent and (iii) while the
Security Agreement Collateral shall be so stored and kept, provide such security and maintenance
services as shall be necessary to protect the same and to preserve and maintain them in good
condition. Each Pledgor’s obligation to deliver the Security Agreement Collateral as contemplated
in this Section 5.01(d) is of the essence hereof. Upon application to a court of equity
having jurisdiction, Collateral Agent shall be entitled to a decree requiring specific performance
by any Pledgor of such obligation;



               (e) Withdraw all moneys, instruments, securities and other property in any bank, financial
securities, deposit or other account of any Pledgor constituting Security Agreement Collateral for
application to the Secured Obligations as provided in Article IX of the Credit Agreement;



               (f) Retain and apply the Distributions to the Secured Obligations as provided in the Credit
Agreement;



               (g) Exercise any and all rights as beneficial and legal owner of the Security Agreement
Collateral, including perfecting assignment of and exercising any and all voting, consensual and
other rights and powers with respect to any Security Agreement Collateral; and



               (h) All the rights and remedies of a secured party on default under the UCC, and Collateral
Agent may also in its sole discretion, without notice except as specified in



22









 




Section 5.02,
sell, assign or grant a license to use the Security Agreement Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange, broker’s board or at any of Collateral
Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or
prices and on such other terms as Collateral Agent deems commercially reasonable. Collateral Agent
or any other Secured Party or any of their respective Affiliates may be the purchaser, licensee,
assignee or recipient of any or all of the Security Agreement Collateral at any such sale and shall
be entitled, for the purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Security Agreement Collateral sold, assigned or licensed at such sale, to
use and apply any of the Secured Obligations owed to such person as a credit on account of the
purchase price of any Security Agreement Collateral payable by such person at such sale. Each
purchaser, assignee, licensee or recipient at any such sale shall acquire the property sold,
assigned or licensed absolutely free from any claim or right on the part of any Pledgor, and each
Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and
appraisal that it now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted. Collateral Agent shall not be obligated to make any sale of
Security Agreement Collateral regardless of notice of sale having been given. Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and place to which it was
so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law, any claims
against Collateral Agent arising by reason of the fact that the price at which any Security
Agreement Collateral may have been sold, assigned or licensed at such a private sale was less than
the price that might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such Security Agreement
Collateral to more than one offeree.




               (i) Upon the written demand of Collateral Agent, each Pledgor shall execute and deliver to
Collateral Agent an assignment or assignments of the registered Intellectual Property and such
other documents as are necessary or appropriate to carry out the intent and purposes hereof.



          SECTION 5.02. Notice of Sale. Each Pledgor acknowledges and agrees that, to the extent notice
of sale shall be required by law, ten days’ notice to such Pledgor of the time and place of any
public sale or of the time after which any private sale or other intended disposition is to take
place shall be commercially reasonable notification of such matters. No notification need be given
to any Pledgor if it has signed, during the occurrence of an Event of Default, a statement
renouncing or modifying any right to notification of sale or other intended disposition.



          SECTION 5.03. Waiver of Notice and Claims. Each Pledgor hereby waives, to the fullest extent
permitted by applicable law, notice or judicial hearing in connection with Collateral Agent’s
taking possession or Collateral Agent’s disposition of any of the Security Agreement Collateral,
including any and all prior notice and hearing for any prejudgment remedy or remedies and any such
right that such Pledgor would otherwise have under law, and each Pledgor hereby further waives, to
the fullest extent permitted by applicable law: (a) all damages occasioned by such taking of
possession, (b) all other requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of Collateral Agent’s rights hereunder and (c) all
rights of redemption, appraisal, valuation, stay, extension and moratorium now or hereafter in
force under any applicable law. Collateral Agent shall not be liable for any incorrect or improper
payment made pursuant to this Article V in the absence of gross negligence or willful
misconduct. Any sale of, or the grant of options to purchase, or any other realization on, any
Security Agreement Collateral shall operate to divest all right, title, interest, claim and



23









 




demand,
either at law or in equity, of the applicable Pledgor therein and thereto, and shall be a perpetual
bar both at law and in equity against such Pledgor and against any and all persons claiming or
attempting to claim the Security Agreement Collateral so sold, optioned or realized on, or any part
thereof, from, through or under such Pledgor.




          SECTION 5.04. Certain Sales of Security Agreement Collateral. Each Pledgor recognizes that,
by reason of certain prohibitions contained in the Securities Act, and applicable state securities
laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the
Securities Collateral, to limit purchasers to persons who will agree, among other things, to
acquire such Securities Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Collateral Agent than those obtainable through a public sale
without such restrictions (including a public offering made pursuant to a registration statement
under the Securities Act), and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and that Collateral
Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any
Securities Collateral for the period of time necessary to permit the issuer thereof to register it
for a form of public sale
requiring registration under the Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.



          SECTION 5.05. No Waiver; Cumulative Remedies.



               (a) No failure on the part of Collateral Agent to exercise, no course of dealing with respect
to, and no delay on the part of Collateral Agent in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such
right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or remedy; nor shall Collateral Agent be required to look first to, enforce
or exhaust any other security, collateral or guarantees. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.



               (b) In the event that Collateral Agent shall have instituted any proceeding to enforce any
right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall have been determined
adversely to Collateral Agent, then and in every such case, the Pledgors, Collateral Agent and each
other Secured Party shall be restored to their respective former positions and rights hereunder
with respect to the Security Agreement Collateral, and all rights, remedies and powers of
Collateral Agent and the other Secured Parties shall continue as if no such proceeding had been
instituted.



ARTICLE VI




Obligations Absolute; Waivers




          SECTION 6.01. Liability of the Pledgors Absolute. Each Pledgor agrees that its obligations
hereunder are irrevocable, absolute, independent, unconditional, and shall not be affected by any
circumstance that constitutes a legal or equitable discharge of a pledgor or surety, except for
payment in full of the Secured Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Pledgor agrees as follows:



24









 





               (a) the obligations of each Pledgor hereunder are independent of the obligations of each other
Pledgor and each guarantor of the obligations of the Loan Parties, and separate actions may be
brought and prosecuted against such Pledgor whether or not any action is brought against any other
Pledgor or guarantor, and whether or not such other Pledgor or guarantor is joined in any such
actions;



               (b) payment by any Loan Party of a portion of the Secured Obligations shall in no way limit,
affect, modify or abridge such Pledgor’s grant hereunder securing any portion of the Secured
Obligations that has not been paid. By way of example and without limiting the generality of the
foregoing, if Collateral Agent is awarded a judgment in any suit brought to enforce any Loan
Party’s covenant to pay a portion of the Secured Obligations, such judgment shall not be deemed to
release such Pledgor from its grant hereunder securing the portion of the Secured Obligations that
is not the subject of such suit, and such judgment shall not, except to the extent satisfied by
such Pledgor, limit, affect, modify or abridge any other Pledgor’s grant hereunder securing the
Secured Obligations;



               (c) upon such terms as Collateral Agent deems appropriate, without obligation to give notice
or demand, without affecting the validity or enforceability hereof, and without giving rise to any
reduction, limitation, impairment, discharge or termination of the security interests granted
hereunder or such Pledgor’s liability hereunder, Collateral Agent may, from time to time, (i)
renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place
and manner or terms of payment of any of the Secured Obligations in accordance with the terms of
the other Loan Documents; (ii) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, any of the Secured Obligations or any
agreement relating thereto, or subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other pledges as security for any of the Secured Obligations,
and take and hold security for the payment hereof or any of the Secured Obligations; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify,
with or without consideration, any security for payment of any of the Secured Obligations, any
guarantees of any of the Secured Obligations, or any other obligation of any person (including any
other Pledgor) with respect to any of the Secured Obligations; (v) enforce and apply any security
now or hereafter held by it in respect hereof or any of the Secured Obligations, and direct the
order or manner of sale thereof, or exercise any other right or remedy that it may have against any
such security, including foreclosure on any such security in accordance with one or more judicial
or nonjudicial sales, whether or not every aspect of any such sale is economically reasonable, and
even though such action operates to impair or extinguish any right of reimbursement or subrogation
or other right or remedy of any Pledgor against any other Loan Party, or any security for any of
the Secured Obligations; and (vi) exercise any other rights available to it under the Loan
Documents; and



               (d) this Agreement and such Pledgor’s obligations hereunder shall be valid and enforceable,
and shall not be subject to any reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of all the Secured Obligations), including the occurrence of any
of the following (whether or not such Pledgor shall have had notice or knowledge of any of them):
(i) any failure or omission to assert or enforce, any agreement or election not to assert or
enforce, or any stay or enjoining by order of any court, by operation of law or otherwise, of the
exercise or enforcement of any claim or demand, or any right, power or remedy (whether arising
under the Loan Documents, at law, in equity, or otherwise) with respect to the Secured Obligations
or any agreement related thereto, or with respect to any other guarantee of or security for the
payment of the Secured Obligations; (ii) any rescission, waiver, amendment or modification of, or
any consent to departure from, any of the



25









 




terms or provisions (including provisions relating to
events of default) hereof, any of the other Loan Documents, any agreement or instrument executed
pursuant thereto, or any guarantee or other security for the Secured Obligations or any agreement
relating thereto at any time being found to be illegal, invalid or unenforceable in any respect;
(iv) the application of payments received form any source (other than payments received pursuant to
the other Loan Documents or from the proceeds of any security for the Secured Obligations, except
to the extent such security also serves as collateral for Indebtedness other than the Secured
Obligations); (v) consent of Collateral Agent or any other Secured Party to the change,
reorganization or termination of the corporate structure or existence of any Loan Party or any
Subsidiary thereof, and to any corresponding restructuring of the Secured Obligations; (vi) any
failure to perfect or continue perfection of a security interest in any collateral that secures any
of the Secured Obligations; (vii) any defenses, set-offs or counterclaims that any Loan Party may
allege or assert against Collateral Agent or any other Secured Party in respect of the Secured
Obligations, including failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction, and usury; and (viii) any other act, thing or
omission, or delay to do any other act or
thing, that in any manner and to any extent may vary such Pledgor’s risk as a grantor of
security securing the Secured Obligations.




          SECTION 6.02. General Waivers. Each Pledgor hereby waives, for the benefit of Collateral
Agent and the Secured Parties: (a) all rights to require Collateral Agent or any other Secured
Party, as a condition to exercising Collateral Agent’s rights hereunder against the Security
Agreement Collateral, to (i) proceed against any other Loan Party, any other pledgor (including any
other Pledgor) of security securing any of the Secured Obligations, or any other person, (ii)
proceed against or exhaust any security held from any other Loan Party, any such other pledgor or
any other person, (iii) proceed against or have resort to any balance of any Deposit Account or
credit on the books of Collateral Agent or any other Secured Party in favor of any other Loan Party
or any other person, or (iv) pursue any other remedy whatsoever in the capacity of secured party;
(b) any defense arising by reason of incapacity, lack of authority, or any disability or other
defenses of any other Loan Party, including any defense based on or arising from the lack of
validity or enforceability of any of the Secured Obligations or any agreement or instrument
relating thereto, or by reason of the cessation of the liability of any other Loan Party from any
cause other than the payment in full of all the Secured Obligations; (c) any defense based on any
statute or rule of law that provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (d) any defense based on
errors or omissions by Collateral Agent or any other Secured Party in the administration of any of
the Secured Obligations, except behavior that amounts to bad faith, gross negligence or willful
misconduct; (e) any principles or provisions of law, statutory or otherwise, that are or may be in
conflict with the terms hereof, and any legal or equitable discharge of such Pledgor’s obligations
hereunder; (f) the benefit of any statute of limitations affecting such Pledgor’s counterclaims;
(g) promptness, diligence and any requirement that Collateral Agent or any other Secured Party
protect, secure, perfect or insure any security interest or Lien or any property subject thereto;
(h) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices
of any action or inaction, including acceptance hereof, notices of default hereunder, notices of
any renewal, extension or modification of any of the Secured Obligations or any agreement related
thereto, notices of any extension of credit to any other Loan party and notices of any of the
matters referred to in Section 6.01, and any right to consent to any thereof; and (i) any
defenses or benefits that may be derived from or afforded by law that limit the liability of or
exonerate pledgors or sureties, or that may conflict with the terms hereof.



          SECTION 6.03. California Waivers. For purposes of this Section 6.03 only, references
to the “principal” include each Loan Party and references to the “creditor”



26









 




include each Secured
Party. In accordance with Section 2856 of the California Civil Code, each Pledgor waives all
rights and defenses (i) available to such Pledgor by reason of Sections 2787 through 2855, 2899,
and 3433 of the California Civil Code, including all rights or defenses such Pledgor may have by
reason of protection afforded to the principal with respect to any of the Secured Obligations, or
to any other person liable for any of the Secured Obligations, in either case in accordance with
the antideficiency or other laws of the State of California limiting or discharging the principal’s
Indebtedness or such person’s obligations, including Sections 580a, 580b, 580d and 726 of the
California Code of Civil Procedure; and (ii) arising out of an election of remedies by the
creditor, even though such election, such as a nonjudicial foreclosure with respect to security for
any Secured Obligation (or any obligation of any other person of any of the Secured Obligations),
has destroyed such Pledgor’s right of subrogation and reimbursement against the principal (or such
other person), by operation of Section 580d of the California Code of Civil Procedure or
otherwise. No other provision of this Agreement shall be construed as limiting the generality of
any of the covenants and waivers set forth in this Section 6.03. As provided below, this
Agreement shall be governed by, and shall be construed and enforced in accordance with the laws of
the State of New York. This Section 6.03 is included solely out of an abundance of
caution, and shall not be construed to mean that any of the above-referenced provisions of
California law are in any way applicable to this Agreement or to any of the Secured Obligations.




ARTICLE VII




Miscellaneous




          SECTION 7.01. Concerning Collateral Agent.



               (a) Collateral Agent has been appointed as Collateral Agent pursuant to Article X of the
Credit Agreement. The actions of Collateral Agent hereunder are subject to the provisions of the
Credit Agreement. Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or refrain from taking
action (including the release or substitution of the Security Agreement Collateral), in accordance
with this Agreement and the Credit Agreement. Collateral Agent may employ agents and
attorneys-in-fact in connection herewith. Collateral Agent may resign and a successor Collateral
Agent may be appointed in the manner provided in the Credit Agreement. Upon the acceptance of any
appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent
shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of
the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement. After any retiring
Collateral Agent’s resignation, the provisions hereof shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Collateral Agent.



               (b) Collateral Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Security Agreement Collateral in its possession if such Security Agreement
Collateral is accorded treatment substantially equivalent to that which Collateral Agent, in its
individual capacity, accords its own property consisting of similar instruments or interests, it
being understood that neither Collateral Agent nor any of the Secured Parties shall have
responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Securities Collateral, whether or not
Collateral Agent or any other Secured Party has or is deemed to have knowledge



27









 




of such matters, or
(ii) taking any necessary steps to preserve rights against any person with respect to any Security
Agreement Collateral.




               (c) Collateral Agent shall be entitled to rely on any written notice, statement, certificate,
order or other document or any telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person, and, with respect to all matters pertaining to
this Agreement and its duties hereunder, on advice of counsel selected by it.



               (d) With respect to any of its rights and obligations as a Lender, Collateral Agent shall have
and may exercise the same rights and powers hereunder. The term “Lenders,” “Lender” or any similar
terms shall, unless the context clearly otherwise indicates,
include Collateral Agent in its individual capacity as a Lender. Collateral Agent may accept
deposits from, lend money to, and generally engage in any kind of banking, trust or other business
with such Pledgor or any Affiliate of such Pledgor to the same extent as if Collateral Agent were
not acting as Collateral Agent.



               (e) If any item of Security Agreement Collateral also constitutes collateral granted to
Collateral Agent under any other security agreement, pledge or instrument of any type, in the event
of any conflict between the provisions hereof and the provisions of such other deed of trust,
mortgage, security agreement, pledge or instrument of any type in respect of such collateral,
Collateral Agent, in its sole discretion, shall select which provision or provisions shall control.



          SECTION 7.02. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact. If
an Event of Default shall have occurred and be continuing, Collateral Agent may (but shall not be
obligated to) remedy or cause to be remedied any such breach, and may expend funds for such
purpose; provided that, Collateral Agent shall in no event be bound to inquire into the validity of
any tax, lien, imposition or other obligation that such Pledgor fails to pay or perform as and when
required hereby and that such Pledgor does not contest in accordance with the provision of Section
6.02 of the Credit Agreement. Any and all amounts so expended by Collateral Agent shall be paid by
the Pledgors in accordance with the provisions of Section 7.03. Neither the provisions of
this Section 7.02 nor any action taken by Collateral Agent pursuant to the provisions of
this Section 7.02 shall prevent any such failure by any Pledgor to observe any covenant
contained in this Agreement nor any breach of warranty from constituting an Event of Default. Each
Pledgor hereby appoints Collateral Agent its attorney-in-fact, with full authority in the place and
stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time during the
continuance of an Event of Default in Collateral Agent’s discretion to take any action and to
execute any instrument consistent with the terms hereof and the other Loan Documents that
Collateral Agent may deem necessary or advisable to accomplish the purposes hereof. The foregoing
grant of authority is an irrevocable power of attorney coupled with an interest and such
appointment shall be irrevocable for the term hereof. Each Pledgor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof.



          SECTION 7.03. Expenses. Each Pledgor will promptly pay to Collateral Agent the amount of any
and all costs and expenses, including the reasonable fees and expenses of its counsel and the fees
and expenses of any experts and agents, that Collateral Agent may incur in connection with this
Agreement, including all costs and expenses relating to (a) any and all filings and other actions
taken to ensure the attachment, perfection and priority of, and the ability of Collateral Agent to
enforce, Collateral Agent’s security interest in the Security



28









 




Agreement Collateral; (b) any action,
suit or other proceeding affecting the Security Agreement Collateral or any part thereof commenced,
in which action, suit or proceeding Collateral Agent is made a party or participates or in which
the right to use the Security Agreement Collateral or any part thereof is threatened, or in which
it becomes necessary in the judgment of Collateral Agent to defend or uphold the Lien hereof
(including any action, suit or proceeding to establish or uphold the compliance of the Security
Agreement Collateral with any requirements of any Governmental Authority or law); (c) the
collection of the Secured Obligations; (d) the enforcement and administration hereof; (e) the
custody or preservation of, or the sale of, collection from, or other realization on, any of the
Security Agreement Collateral; (f) the exercise or enforcement of any of the rights of Collateral
Agent or any Secured Party hereunder; or (g) the failure by any Pledgor to perform or observe
any of the provisions hereof. All amounts expended by Collateral Agent and payable by any Pledgor
under this Section 7.03 shall be due upon demand therefor (together with interest thereon
accruing at the default rate during the period from and including the date on which such funds were
so expended to the date of repayment) and shall be part of the Secured Obligations. Each Pledgor’s
obligations under this Section 7.03 shall survive the termination hereof and the discharge
of such Pledgor’s other obligations under this Agreement, the Credit Agreement and the other Loan
Documents.




          SECTION 7.04. Indemnity.



               (a) Indemnity. Each Pledgor agrees to indemnify, defend and hold harmless Collateral
Agent and each of the other Secured Parties, and the officers, directors, employees, agents and
Affiliates of Collateral Agent and each of the other Secured Parties (collectively, the
“Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including settlement costs), expenses or disbursements of
any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding, commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed
on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or any other Loan Document (including any misrepresentation by any Pledgor in this
Agreement or any other Loan Document) (the “Indemnified Liabilities”); provided that, no Pledgor
shall have any obligation to an Indemnitee hereunder with respect to Indemnified Liabilities if it
has been determined by a final decision of a court of competent jurisdiction that such Indemnified
Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence
may be unenforceable because it is violative of any law or public policy, each Pledgor shall
contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them.



               (b) Survival. The obligations of the Pledgors contained in this Section 7.04
shall survive the termination hereof and the discharge of the Pledgors’ other obligations under
this Agreement, any Hedging Agreement and under the other Loan Documents.



               (c) Reimbursement. Any amounts paid by any Indemnitee as to which such Indemnitee has
the right to reimbursement shall constitute Secured Obligations secured by the Security Agreement
Collateral.



          SECTION 7.05. Continuing Security Interest; Assignment. This Agreement shall create a
continuing security interest in the Security Agreement Collateral and shall (a) remain in full
force and effect until the payment in full of all Secured Obligations, (b) be



29









 




binding on the
Pledgors, their respective successors and assigns, and (b) inure, together with the rights and
remedies of the Lender hereunder, to the benefit of Collateral Agent and the other Secured Parties
and each of their respective permitted successors, transferees and assigns. No other persons
(including any other creditor of any Pledgor) shall have any interest herein or any right or
benefit with respect hereto. Without limiting the generality of the foregoing clause (b), any
Secured Party may assign or otherwise transfer any Indebtedness held by it that is secured by this
Agreement to any other person, and such other person shall thereupon become vested with all the
benefits in respect thereof granted to such Secured Party,
herein or otherwise, subject however, to the provisions of the other Loan Documents and any
Hedging Agreement to which such Secured Party is a party.




          SECTION 7.06. Termination; Release. Upon payment in full of all the Secured Obligations, or
upon any partial release of Security Agreement Collateral in accordance with the other Loan
Documents, the security interests granted hereby shall terminate hereunder and of record, and all
rights to the Security Agreement Collateral shall revert to the Pledgors, it being understood that
in the case any such partial release, the security interests granted hereby shall terminate
hereunder and of record only with respect to such Security Agreement Collateral subject to such
partial release. Upon any such termination, Collateral Agent shall, at the Pledgors’ expense,
execute and deliver to the Pledgors such documents, and take such other actions, as the Pledgors
reasonably request to evidence such termination.


Notwithstanding anything to the contrary contained herein, the Collateral Agent and the other
Secured Parties agree to cooperate with each Pledgor with respect to any sale of Security Agreement
Collateral permitted by Section 6.04 of the Credit Agreement and promptly take such action and
execute and deliver such instruments and documents necessary to release the Liens and security
interests created hereby relating to any of the assets or property affected by any sale of Security
Agreement Collateral permitted by Section 6.04 of the Credit Agreement (including, without
limitation, any necessary Uniform Commercial Code amendment, termination or partial termination
statement).




          SECTION 7.07. Modification in Writing. No amendment, modification, supplement, termination or
waiver of or to any provision hereof, nor consent to any departure by any Pledgor therefrom, shall
be effective unless the same shall be made in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or supplement of or
to any provision hereof, any waiver of any provision hereof and any consent to any departure by any
Pledgor from the terms of any provision hereof shall be effective only in the specific instance and
for the specific purpose for which made or given. Except where notice is specifically required by
this Agreement or any other document evidencing the Secured Obligations, no notice to or demand on
any Pledgor in any case shall entitle any Pledgor to any other or further notice or demand in
similar or other circumstances.



          SECTION 7.08. Notices. Unless otherwise provided herein or in the Credit Agreement, any
notice or other communication herein required or permitted to be given shall be given in the manner
and become effective as set forth in the Credit Agreement, if to any Pledgor, addressed to it at
the address of Borrower set forth in the Credit Agreement, and if to Collateral Agent, addressed to
it at the address set forth in the Credit Agreement, or in each case at such other address as shall
be designated by such party in a written notice to the other party complying as to delivery with
the terms of this Section 7.08.



30









 





          SECTION 7.09. Governing Law; Jurisdiction; Consent to Service of Process.



               (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), EXCEPT TO THE EXTENT, IN ACCORDANCE WITH CHOICE-OF-LAW PRINCIPLES, THAT THE PERFECTION
OF THE SECURITY INTERESTS GRANTED HEREUNDER, OR REMEDIES HEREUNDER IN RESPECT OF ANY ITEM OR TYPE
OF SECURITY AGREEMENT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.



               (b) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that Collateral Agent or any other Secured Party may otherwise have
to bring any action or proceeding relating to this Agreement or any other Loan Document against any
Pledgor or its properties in the courts of any jurisdiction.



               (c) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any court
referred to in Section 7.09(b). Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.



               (d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.08. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by law.



          SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.



31









 





          SECTION 7.11. Severability of Provisions. Any provision hereof that 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 or
affecting the validity or enforceability of such provision in any other jurisdiction.



          SECTION 7.12. Execution in Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be deemed to be an
original, but all such counterparts together shall constitute one and the same agreement.



          SECTION 7.13. Business Days. In the event any time period or any date provided in this
Agreement ends or falls on a day other than a Business Day, then such time period shall be deemed
to end and such date shall be deemed to fall on the next succeeding Business Day, and performance
herein may be made on such Business Day, with the same force and effect as if made on such other
day.



          SECTION 7.14. No Credit for Payment of Taxes or Imposition. Each Pledgor shall not be
entitled to any credit against the principal, premium (if any), or interest payable under the
Credit Agreement, and such Pledgor shall not be entitled to any credit against any other sums that
may become payable under the terms thereof or hereof, by reason of the payment of any Tax on the
Security Agreement Collateral or any part thereof.



          SECTION 7.15. No Claims Against Collateral Agent. Nothing contained in this Agreement shall
constitute any consent or request by Collateral Agent, express or implied, for the performance of
any labor or services or the furnishing of any materials or other property in respect of the
Security Agreement Collateral or any part thereof, nor as giving any Pledgor any right, power or
authority to contract for or permit the performance of any labor or services or the furnishing of
any materials or other property in such fashion as would permit the making of any claim against
Collateral Agent in respect thereof or any claim that any Lien based on the performance of such
labor or services or the furnishing of any such materials or other property is prior to the Lien
hereof.



          SECTION 7.16. No Release Under Agreements; No Liability of Collateral Agent or Secured
Parties. Nothing set forth in this Agreement shall relieve the Pledgor from the performance of any
term, covenant, condition or agreement on the Pledgor’s part to be performed or observed under or
in respect of any of the Security Agreement Collateral, or from any liability to any person under
or in respect of any of the Security Agreement Collateral, or shall impose any obligation on
Collateral Agent or any other Secured Party to perform or observe any such term, covenant,
condition or agreement on the Pledgor’s part to be so performed or observed, or shall
impose any liability on Collateral Agent or any other Secured Party for any act or omission on
the part of the Pledgor relating thereto or for any breach of any Hedging Agreement, any
representation or warranty on the part of the Pledgor contained in this Agreement, Credit Agreement
or the other Security Documents, or under or in respect of the Security Agreement Collateral or
made in connection herewith or therewith. The obligations of the Pledgor contained in this
Section 7.16 shall survive the termination hereof and the discharge of the Pledgor’s other
obligations under this Agreement, the Credit Agreement, any Hedging Agreement and the other
Security Documents.



32









 





          SECTION 7.17. Obligations Absolute. Subject to Section 7.09 of the Credit Agreement, all
obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of:



               (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
liquidation or the like of any Pledgor or any other Loan Party;



               (b) any lack of validity or enforceability of the Credit Agreement, any Hedging Agreement or
any other Loan Document, or any other agreement or instrument relating thereto;



               (c) any change in the time, manner or place of payment of, or in any other term of, all or any
of the Secured Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document, any Hedging Agreement or any other agreement or
instrument relating thereto;



               (d) any pledge, exchange, release or nonperfection of any other collateral, or any release or
amendment or waiver of or consent to any departure from any guarantee, for all or any of the
Secured Obligations, except to the extent that any such amendment, waiver or consent expressly
relieves such Pledgor of any obligations;



               (e) any exercise, nonexercise or waiver of any right, remedy, power or privilege under or in
respect hereof, the Credit Agreement, any Hedging Agreement or any other Loan Document except as
specifically set forth in a waiver granted pursuant to the provisions of Section 5.03; or



               (f) any other circumstances that might otherwise constitute a defense available to, or a
discharge of, any Pledgor.



          SECTION 7.18. Marshaling; Payments Set Aside. Collateral Agent shall not be under any
obligation to marshal any assets in favor of any Pledgor or any other person or against or in
payment of ay or all of the Secured Obligations.



          SECTION 7.19. Release of Pledgors. If any Pledgor is released from its Guarantee in
accordance with the provisions of the Credit Agreement, then Collateral Agent shall (at the expense
of Borrower) take all action necessary to release its security interest in that portion of the
Security Agreement Collateral owned by such Pledgor, and shall release such Pledgor from its
obligations hereunder (other than
obligations intended to survive the termination hereof), in each case subject to and in
accordance with Section 7.09 of the Credit Agreement.



[Signature Pages Follow]






33









 








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




	 	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL, INC.,	 	 
	 	 	a Nevada corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WH CAPITAL CORPORATION,	 	 
	 	 	a Nevada corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL OF AMERICA, INC.,	 	 
	 	 	a Nevada corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL OF EUROPE, INC.,	 	 
	 	 	a California corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL COMMUNICATIONS, INC.,	 	 
	 	 	a California corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 





Security
Agreement



 









 






	 	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL DISTRIBUTION, INC.,	 	 
	 	 	a California corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE TAIWAN, INC.,	 	 
	 	 	a California corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL (THAILAND), LTD.,	 	 
	 	 	a California corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL DO BRASIL LTDA.,	 	 
	 	 	a corporation dually organized in Brazil and Delaware,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






Security
Agreement




 









 






	 	 	 	 	 	 	 
	 	 	HERBALIFE LTD.,	 	 
	 	 	a Cayman Islands exempted company with limited liability,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WH INTERMEDIATE HOLDINGS LTD.,	 	 
	 	 	a Cayman Islands exempted company with limited liability,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HBL LTD.,	 	 
	 	 	a Cayman Islands exempted company with limited liability,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HV HOLDINGS LTD.,	 	 
	 	 	a Cayman Islands exempted company with limited liability,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE DISTRIBUTION LTD.,	 	 
	 	 	a Cayman Islands exempted company with limited liability,	 	 
	 	 	as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






Security
Agreement




 









 






	 	 	 	 	 	 	 
	 	 	WH LUXEMBOURG HOLDINGS S.à.R.L.,	 	 
	 	 	a Luxembourg corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HLF LUXEMBOURG HOLDINGS S.à R.L.,	 	 
	 	 	a Luxembourg corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WH LUXEMBOURG INTERMEDIATE HOLDINGS S.à.R.L.,	 	 
	 	 	a Luxembourg corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE INTERNATIONAL LUXEMBOURG S.à.R.L.,	 	 
	 	 	a Luxembourg corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HERBALIFE LUXEMBOURG DISTRIBUTION S.à.R.L.,	 	 
	 	 	a Luxembourg corporation, as a Pledgor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 





Security
Agreement






 









 






	 	 	 	 	 	 	 
	 	 	MERRILL LYNCH CAPITAL CORPORATION,	 	 
	 	 	as Collateral Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






Security
Agreement




 









 






EXHIBIT A




Form of

ISSUER ACKNOWLEDGMENT




          The undersigned hereby (a) acknowledges receipt of a copy of that certain security agreement
(as amended, amended and restated, supplemented or otherwise modified from time to time, the
“Security Agreement”; capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Security Agreement), dated as of July 21, 2006, among
Herbalife International, Inc., a Nevada corporation (“Borrower”), the Guarantors (defined therein),
and Merrill Lynch Capital Corporation, as collateral agent (in such capacity and together with any
successors in such capacity, “Collateral Agent”); (b) agrees promptly to note on its books the
security interests granted to Collateral Agent and confirmed under the Security Agreement; (c)
agrees that it will comply with Collateral Agent’s instructions with respect to the applicable
Securities Collateral without further consent by the applicable Pledgor; (d) agrees to notify
Collateral Agent upon obtaining knowledge of any interest in favor of any person in the applicable
Securities Collateral that is adverse to the interest of Collateral Agent therein; and (e) waives
any right or requirement at any time hereafter to receive a copy of the Security Agreement in
connection with the registration of any Securities Collateral thereunder in the name of Collateral
Agent or its nominee or the exercise of voting rights by Collateral Agent or its nominee.




	 	 	 	 	 	 	 
	 	 	[NAME OF ISSUER]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 







A-1