EX-10.4



 





EXHIBIT 10.4




      




SECURITY AGREEMENT




among




TOWN SPORTS INTERNATIONAL, LLC,




CERTAIN SUBSIDIARIES OF TOWN SPORTS INTERNATIONAL, LLC




and




DEUTSCHE BANK TRUST COMPANY AMERICAS,

as COLLATERAL AGENT




 






Dated as of February 27, 2007




 






 





 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I SECURITY INTERESTS
	 	 	2	 
	 
	 	 	 	 
	1.1 Grant of Security Interests
	 	 	2	 
	1.2 Power of Attorney
	 	 	3	 
	 
	 	 	 	 
	ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	4	 
	 
	 	 	 	 
	2.1 Necessary Filings
	 	 	4	 
	2.2 No Liens
	 	 	4	 
	2.3 Other Financing Statements
	 	 	4	 
	2.4 Chief Executive Office, Record Locations
	 	 	5	 
	2.5 Location of Inventory and Equipment
	 	 	5	 
	2.6 Legal Names; Type of Organization (and Whether a Registered Organization
and/or a Transmitting Utility); Jurisdiction of Organization; Location;
Organizational Identification Numbers; Changes Thereto; etc.
	 	 	5	 
	2.7 Trade Names; Etc.
	 	 	5	 
	2.8 Certain Significant Transactions
	 	 	6	 
	2.9 Non-UCC Property
	 	 	6	 
	2.10 As-Extracted Collateral; Timber-to-be-Cut
	 	 	6	 
	2.11 Collateral in the Possession of a Bailee
	 	 	6	 
	 
	 	 	 	 
	ARTICLE III
SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER AND CERTAIN OTHER COLLATERAL
	 	 	7	 
	 
	 	 	 	 
	3.1 Additional Representations and Warranties
	 	 	7	 
	3.2 Maintenance of Records
	 	 	7	 
	3.3 Direction to Account Debtors; Contracting Parties; etc.
	 	 	7	 
	3.4 Modification of Terms; etc.
	 	 	8	 
	3.5 Collection
	 	 	8	 
	3.6 Instruments
	 	 	8	 
	3.7 Assignors Remain Liable Under Accounts
	 	 	9	 
	3.8 Assignors Remain Liable Under Contracts
	 	 	9	 
	3.9 Deposit Accounts; Etc.
	 	 	9	 
	3.10 Letter-of-Credit Rights
	 	 	10	 
	3.11 Commercial Tort Claims
	 	 	11	 
	3.12 Chattel Paper
	 	 	11	 
	3.13 Further Actions
	 	 	11	 
	 
	 	 	 	 
	ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS AND DOMAIN NAMES
	 	 	11	 
	 
	 	 	 	 
	4.1 Additional Representations and Warranties
	 	 	11	 
	4.2 Licenses and Assignments
	 	 	12	 






i









 






	 	 	 	 	 
	 	 	Page	 
	4.3 Infringements
	 	 	12	 
	4.4 Preservation of Marks and Domain Names
	 	 	12	 
	4.5 Maintenance of Registration
	 	 	12	 
	4.6 Future Registered Marks and Domain Names
	 	 	12	 
	4.7 Remedies
	 	 	13	 
	 
	 	 	 	 
	ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS
	 	 	13	 
	 
	 	 	 	 
	5.1 Additional Representations and Warranties
	 	 	13	 
	5.2 Licenses and Assignments
	 	 	14	 
	5.3 Infringements
	 	 	14	 
	5.4 Maintenance of Patents or Copyrights
	 	 	14	 
	5.5 Prosecution of Patent or Copyright Applications
	 	 	14	 
	5.6 Other Patents and Copyrights
	 	 	14	 
	5.7 Remedies
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL
	 	 	15	 
	 
	 	 	 	 
	6.1 Protection of Collateral Agent’s Security
	 	 	15	 
	6.2 Warehouse Receipts Non-Negotiable
	 	 	15	 
	6.3 Additional Information
	 	 	15	 
	6.4 Further Actions
	 	 	15	 
	6.5 Financing Statements
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT
	 	 	16	 
	 
	 	 	 	 
	7.1 Remedies; Obtaining the Collateral Upon Default
	 	 	16	 
	7.2 Remedies; Disposition of the Collateral
	 	 	18	 
	7.3 Waiver of Claims
	 	 	18	 
	7.4 Application of Proceeds
	 	 	19	 
	7.5 Remedies Cumulative
	 	 	21	 
	7.6 Discontinuance of Proceedings
	 	 	22	 
	 
	 	 	 	 
	ARTICLE VIII INDEMNITY
	 	 	22	 
	 
	 	 	 	 
	8.1 Indemnity
	 	 	22	 
	8.2 Indemnity Obligations Secured by Collateral; Survival
	 	 	23	 
	 
	 	 	 	 
	ARTICLE IX DEFINITIONS
	 	 	23	 
	 
	 	 	 	 
	ARTICLE X MISCELLANEOUS
	 	 	29	 
	 
	 	 	 	 
	10.1 Notices
	 	 	29	 
	10.2 Waiver; Amendment
	 	 	30	 
	10.3 Obligations Absolute
	 	 	31	 
	10.4 Successors and Assigns
	 	 	31	 
	10.5 Headings Descriptive
	 	 	31	 
	10.6 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL
	 	 	31	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	10.7 Assignor’s Duties
	 	 	32	 
	10.8 Termination; Release
	 	 	32	 
	10.9 Counterparts
	 	 	34	 
	10.10 Severability
	 	 	34	 
	10.11 The Collateral Agent and the other Secured Creditors
	 	 	34	 
	10.12 Additional Assignors
	 	 	34	 






	 	 	 
	ANNEX A

	 	Schedule of Chief Executive Offices Address(es) of Chief Executive Office
	ANNEX B

	 	Schedule of Inventory and Equipment Locations
	ANNEX C

	 	Schedule of Legal Names, Type of Organization (and Whether a Registered Organization and/or a
Transmitting Utility), Jurisdiction of Organization, Location, Organizational Identification
Numbers and Federal Employer Identification Numbers
	ANNEX D

	 	Schedule of Trade and Fictitious Names
	ANNEX E

	 	Description of Certain Significant Transactions Occurring Within One Year Prior to the Date of
the Security Agreement
	ANNEX F

	 	Schedule of Deposit Accounts
	ANNEX G

	 	Form of Control Agreement Regarding Deposit Accounts
	ANNEX H

	 	Schedule of Commercial Tort Claims
	ANNEX I

	 	Schedule of Marks and Applications; Internet Domain Name Registrations
	ANNEX J

	 	Schedule of Patents
	ANNEX K

	 	Schedule of Copyrights
	ANNEX L

	 	Grant of Security Interest in United States Trademarks
	ANNEX M

	 	Grant of Security Interest in United States Patents
	ANNEX N

	 	Grant of Security Interest in United States Copyrights






[Remainder of this page intentionally left blank]




iii









 








SECURITY AGREEMENT




          SECURITY AGREEMENT, dated as of February 27, 2007, made by each of the undersigned assignors
(each, an “Assignor” and, together with any other entity that becomes an assignor hereunder
pursuant to Section 10.12 hereof, the “Assignors”) in favor of Deutsche Bank Trust
Company Americas, as collateral agent (together with any successor collateral agent, the
“Collateral Agent”), for the benefit of the Secured Creditors (as defined below). Certain
capitalized terms as used herein are defined in Article IX hereof. Except as otherwise
defined herein, all other capitalized terms used herein and defined in the Credit Agreement (as
defined below) shall be used herein as therein defined.




W I T N E S S E T H:




          WHEREAS, Town Sports International Holdings, LLC, Town Sports International, LLC (the
“Borrower”), the lenders from time to time party thereto (the “Lenders”) and
Deutsche Bank Trust Company Americas, as administrative agent (together with any successor
administrative agent, the “Administrative Agent”), have entered into a Credit Agreement,
dated as of February 27, 2007 (as amended, modified, restated and/or supplemented from time to
time, the “Credit Agreement”), providing for the making of Loans to, and the issuance of,
and participation in, Letters of Credit for the account of the Borrower, all as contemplated
therein (the Lenders, each Issuing Lender, the Administrative Agent and the Collateral Agent are
herein called the “Lender Creditors”);




          WHEREAS, the Borrower and/or one or more of its Subsidiaries may at any time and from time to
time enter into one or more Interest Rate Protection Agreements and/or Other Hedging Agreements
with one or more Lenders or any affiliate thereof (each such Lender or affiliate, even if the
respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason,
together with such Lender’s or affiliate’s successors and assigns, if any, collectively, the
“Other Creditors” and, together with the Lender Creditors, the “Secured
Creditors”);




          WHEREAS, pursuant to the Subsidiaries Guaranty, each Assignor (other than the Borrower) has
jointly and severally guaranteed the payment and performance when due of all Guaranteed Obligations
as described (and defined) therein;




          WHEREAS, it is a condition precedent to the making of Loans to the Borrower, and the issuance
of, and participation in, Letters of Credit for the account of the Borrower under the Credit
Agreement and to the Other Creditors entering into Interest Rate Protection Agreements and Other
Hedging Agreements that each Assignor shall have executed and delivered to the Collateral Agent
this Agreement; and




          WHEREAS, each Assignor will obtain benefits from the incurrence of Loans by the Borrower and
the issuance of, and participation in, Letters of Credit for the account of the Borrower under the
Credit Agreement and the entering into by the Borrower and/or one or more of its Subsidiaries of
Interest Rate Protection Agreements or Other Hedging Agreements and, accordingly, desires to
execute this Agreement in order to satisfy the condition described in the





1









 







preceding recital and to induce the Lenders to make Loans to the Borrower and issue, and/or
participate in, Letters of Credit for the account of the Borrower and the Other Creditors to enter
into Interest Rate Protection Agreements or Other Hedging Agreements with the Borrower and/or one
or more of its Subsidiaries;




          NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes
the following representations and warranties to the Collateral Agent for the benefit of the Secured
Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured
Creditors as follows:




ARTICLE I




SECURITY INTERESTS




          1.1 Grant of Security Interests. (a) As security for the prompt and complete payment
and performance when due of all of its Obligations, each Assignor does hereby assign and transfer
unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent, in each case
for the benefit of the Secured Creditors, a continuing security interest in all of the right, title
and interest of such Assignor in, to and under all of the following personal property and fixtures
(and all rights therein) of such Assignor, or in which or to which such Assignor has any rights, in
each case whether now existing or hereafter from time to time acquired:





	 	(i)	 	each and every Account;
	 
	 	(ii)	 	all cash;
	 
	 	(iii)	 	the Cash Collateral Account and all monies, securities,
Instruments and other investments deposited or required to be deposited in the
Cash Collateral Account;
	 
	 	(iv)	 	all Chattel Paper (including, without limitation, all Tangible
Chattel Paper and all Electronic Chattel Paper);
	 
	 	(v)	 	all Commercial Tort Claims (including all Commercial Tort
Claims described in Annex H hereto);
	 
	 	(vi)	 	all computer programs of such Assignor and all intellectual
property rights therein and all other proprietary information of such Assignor,
including but not limited to Domain Names and Trade Secret Rights;
	 
	 	(vii)	 	all Contracts, together with all Contract Rights arising thereunder;
	 
	 	(viii)	 	all Copyrights;
	 
	 	(ix)	 	all Equipment;
	 
	 	(x)	 	all Deposit Accounts and all other demand, deposit, time,
savings, cash 




2









 












	 	 	 	management, passbook and similar accounts maintained by such
Assignor with any Person and all monies, securities, Instruments and other
investments deposited or required to be deposited in any of the foregoing;
	 
	 	(xi)	 	all Documents;
	 
	 	(xii)	 	all General Intangibles;
	 
	 	(xiii)	 	all Goods;
	 
	 	(xiv)	 	all Instruments;
	 
	 	(xv)	 	all Inventory;
	 
	 	(xvi)	 	all Investment Property;
	 
	 	(xvii)	 	all Letter-of-Credit Rights (whether or not the respective letter of credit
is evidenced by a writing);
	 
	 	(xviii)	 	all Marks, together with the registrations and right to all renewals
thereof, the goodwill of the business of such Assignor symbolized by the Marks
and all causes of action arising prior to or after the date hereof for
infringement of any of the Marks or unfair competition regarding the same;
	 
	 	(xix)	 	all Patents, together with all causes of action arising prior
to or after the date hereof for infringement of any of the Patents or unfair
competition regarding the same;
	 
	 	(xx)	 	all Permits;
	 
	 	(xxi)	 	all Software and all Software licensing rights, all writings,
plans, specifications and schematics, all engineering drawings, customer lists,
goodwill and licenses, and all recorded data of any kind or nature, regardless
of the medium of recording;
	 
	 	(xxii)	 	all Supporting Obligations; and
	 
	 	(xxiii)	 	all Proceeds and products of any and all of the foregoing (all of the above,
including this clause (xxiii), the “Collateral”).





          (b) The security interest of the Collateral Agent under this Agreement extends to all
Collateral which any Assignor may acquire, or with respect to which any Assignor may obtain rights,
at any time during the term of this Agreement.




          1.2 Power of Attorney. Each Assignor hereby constitutes and appoints the Collateral
Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the
continuance of an Event of Default (in the name of such Assignor or otherwise) to





3









 







act, require,
demand, receive, compound and give acquittance for any and all moneys and claims for moneys due or
to become due to such Assignor under or arising out of the Collateral, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or take any action or
institute any proceedings which the Collateral Agent may deem to be necessary or advisable to
protect the interests of the Secured Creditors, which appointment as attorney is coupled with an
interest.




ARTICLE II




GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS



Each Assignor represents, warrants and covenants, which representations, warranties and covenants
shall survive execution and delivery of this Agreement, as follows:



     2.1 Necessary Filings. All filings, registrations, recordings and other actions
necessary or appropriate to create, preserve and perfect the security interest granted by such
Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished (or
will be accomplished within the time periods set forth in the first sentence of Section 7.11(a) of
the Credit Agreement) and the security interest granted to the Collateral Agent pursuant to this
Agreement in and to the Collateral creates (or upon such filings will create) a valid and, together
with all such filings, registrations, recordings and other actions, a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other Liens (other than
Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the UCC or
other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each
case to the extent that the Collateral consists of the type of property in which a security
interest may be perfected by possession or control (within the meaning of the UCC as in effect on
the date hereof in the State of New York), by filing a financing statement under the UCC as enacted
in any relevant jurisdiction or by a filing of a Grant of Security Interest in the respective form
attached hereto in the United States Patent and Trademark Office or in the United States Copyright
Office.



     2.2 No Liens. Such Assignor is, and as to all Collateral acquired by it from time to
time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien,
security interest, encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and such Assignor shall defend the Collateral against all claims and demands of
all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent.



     2.3 Other Financing Statements. As of the date hereof, there is no financing
statement (or similar statement or instrument of registration under the law of any jurisdiction)
covering or purporting to cover any interest of any kind in the Collateral (other than financing
statements filed in respect of Permitted
Liens), and so long as the Termination Date has not occurred, such Assignor will not execute
or authorize 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 the
Collateral, except financing statements filed or to be filed in respect of and covering the
security interests granted hereby by such Assignor or in connection with Permitted Liens.




4









 








          2.4 Chief Executive Office, Record Locations. The chief executive office of such
Assignor is, on the date of this Agreement, located at the address indicated on Annex A
hereto for such Assignor. During the period of the four calendar months preceding the date of this
Agreement, the chief executive office of such Assignor has not been located at any address other
than that indicated on Annex A in accordance with the immediately preceding sentence, in
each case unless each such other address is also indicated on Annex A hereto for such
Assignor.




          2.5 Location of Inventory and Equipment. All Inventory and Equipment held on the date
hereof, or held at any time during the four calendar months prior to the date hereof, by each
Assignor is located at one of the locations shown on Annex B hereto for such Assignor.




          2.6 Legal Names; Type of Organization (and Whether a Registered Organization and/or a
Transmitting Utility); Jurisdiction of Organization; Location; Organizational Identification
Numbers; Changes Thereto; etc. As of the date hereof, the exact legal name of each Assignor,
the type of organization of such Assignor, whether or not such Assignor is a Registered
Organization, the jurisdiction of organization of such Assignor, such Assignor’s Location, the
organizational identification number (if any) of such Assignor, and whether or not such Assignor is
a Transmitting Utility, is listed on Annex C hereto for such Assignor. Such Assignor shall
not change its legal name, its type of organization, its status as a Registered Organization (in
the case of a Registered Organization), its status as a Transmitting Utility or as a Person which
is not a Transmitting Utility, as the case may be, its jurisdiction of organization, its Location,
or its organizational identification number (if any) from that listed on Annex C hereto,
except that any such changes shall be permitted (so long as not in violation of the applicable
requirements of the Secured Debt Agreements and so long as same do not involve (x) a Registered
Organization ceasing to constitute same or (y) such Assignor changing its jurisdiction of
organization or Location from the United States or a State thereof to a jurisdiction of
organization or Location, as the case may be, outside the United States or a State thereof) if (i)
it shall have given to the Collateral Agent not more than 15 days’ written notice after each change
to the information listed on Annex C (as adjusted for any subsequent changes thereto
previously made in accordance with this sentence), together with a supplement to Annex C
which shall correct all information contained therein for such Assignor, and (ii) in connection
with such respective change or changes, it shall have taken all action reasonably requested by the
Collateral Agent to maintain the security interests of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and effect. In
addition, to the extent that such Assignor does not have an organizational identification number on
the date hereof and later
obtains one, such Assignor shall promptly thereafter notify the Collateral Agent of such
organizational identification number and shall take all actions reasonably satisfactory to the
Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent
in the Collateral intended to be granted hereby fully perfected and in full force and effect.




          2.7 Trade Names; Etc. Such Assignor does not have nor does it operate in any
jurisdiction under, nor in the preceding five years has it had or operated in any jurisdiction
under, any trade names, fictitious names or other names except its legal name as specified in
Annex C and such other trade or fictitious names as are listed on Annex D hereto
for such Assignor. Such Assignor may assume or operate in any jurisdiction under any new trade,
fictitious or other name if (i) it shall have given to the Collateral Agent not more than 15 days’
written notice after any





5









 







such assumption or operation, clearly describing such new name and the
jurisdictions in which such new name will be used and providing such other information in
connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such
new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain
the security interest of the Collateral Agent in the Collateral intended to be granted hereby at
all times fully perfected and in full force and effect.




          2.8 Certain Significant Transactions. During the one year period preceding the date
of this Agreement, no Person shall have merged or consolidated with or into any Assignor, and no
Person shall have liquidated into, or transferred all or substantially all of its assets to, any
Assignor, in each case except as described in Annex E hereto. With respect to any
transactions so described in Annex E hereto, the respective Assignor shall have furnished
such information with respect to the Person (and the assets of the Person and locations thereof)
which merged with or into or consolidated with such Assignor, or was liquidated into or transferred
all or substantially all of its assets to such Assignor, and shall have furnished to the Collateral
Agent such UCC lien searches as may have been requested with respect to such Person and its assets,
to establish that no security interest (excluding Permitted Liens) continues perfected on the date
hereof with respect to any Person described above (or the assets transferred to the respective
Assignor by such Person), including without limitation pursuant to Section 9-316(a)(3) of the UCC.




          2.9 Non-UCC Property. The aggregate fair market value (as determined by the Assignors in good faith) of all
property of the Assignors of the types described in clauses (1), (2) and (3) of Section 9-311(a) of
the UCC does not exceed $500,000. If the aggregate value of all such property at any time owned by
all Assignors exceeds $500,000, the Assignors shall provide prompt written notice thereof to the
Collateral Agent and, upon the request of the Collateral Agent, the Assignors shall promptly (and
in any event within 30 days) take such actions (at their own cost and expense) as may be required
under the respective United States, State or other laws referenced in Section 9-311(a) of the UCC
to perfect the security interests granted herein in any Collateral where the filing of a financing
statement does not perfect the security interest in such property in accordance with the provisions
of Section 9-311(a) of the UCC.




          2.10 As-Extracted Collateral; Timber-to-be-Cut. On the date hereof, such Assignor
does not own, or expect to acquire, any property which constitutes, or would constitute,
As-Extracted Collateral or Timber-to-be-Cut. If at any time after the date of this Agreement such
Assignor owns, acquires or obtains rights to any As-Extracted Collateral or Timber-to-be-Cut, such
Assignor shall furnish the Collateral Agent with prompt written notice thereof (which notice shall
describe in reasonable detail the As-Extracted Collateral and/or Timber-to-be-Cut and the locations
thereof) and shall take all actions as may be deemed reasonably necessary or desirable by the
Collateral Agent to perfect the security interest of the Collateral Agent therein.




          2.11 Collateral in the Possession of a Bailee. If any Inventory or other Goods are at
any time in the possession of a bailee, such Assignor shall promptly notify the Collateral Agent
thereof and, if requested by the Collateral Agent, shall use its reasonable best efforts to
promptly obtain an acknowledgment from such bailee, in form and substance reasonably satisfactory
to the Collateral Agent, that the bailee holds such Collateral for the benefit of the Collateral
Agent and shall act upon the instructions of the Collateral Agent, without the further





6









 







consent of
such Assignor. The Collateral Agent agrees with such Assignor that the Collateral Agent shall not
give any such instructions unless an Event of Default has occurred and is continuing or would occur
after taking into account any action by the respective Assignor with respect to any such bailee.




ARTICLE III




SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS;

INSTRUMENTS; CHATTEL PAPER AND CERTAIN OTHER COLLATERAL




          3.1 Additional Representations and Warranties. As of the time when each of its
Accounts arises, each Assignor shall be deemed to have represented and warranted that each such
Account, and all original records, papers and documents relating thereto (if any) are genuine and
what they purport to be, and that all papers and documents (if any) relating thereto (i) will, to
the knowledge of such Assignor, represent the genuine, legal, valid and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out
of the performance of labor or
services or the sale or lease and delivery of the merchandise listed therein, or both, (ii)
will be the only original writings evidencing and embodying such obligation of the account debtor
named therein (other than copies created for general accounting purposes), (iii) will, to the
knowledge of such Assignor, evidence true and valid obligations, enforceable in accordance with
their respective terms, and (iv) will be in compliance and will conform in all material respects
with all applicable federal, state and local laws and applicable laws of any relevant foreign
jurisdiction.




          3.2 Maintenance of Records. Each Assignor will keep and maintain at its own cost and
expense accurate records in all material respects of its Accounts and Contracts, including, but not
limited to, originals of all documentation (including each Contract) with respect thereto, records
of all payments received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and such Assignor will make the same available on such Assignor’s premises to
the Collateral Agent for inspection as otherwise permitted by the terms of the respective Secured
Debt Agreements. Upon the occurrence and during the continuance of an Event of Default and at the
request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all
tangible evidence of its Accounts and Contract Rights (including, without limitation, all documents
evidencing the Accounts and all Contracts) and such books and records to the Collateral Agent or to
its representatives (copies of which evidence and books and records may be retained by such
Assignor). Upon the occurrence and during the continuance of an Event of Default and if the
Collateral Agent so directs, such Assignor shall legend, in form and manner satisfactory to the
Collateral Agent, the Accounts and the Contracts, as well as books, records and documents (if any)
of such Assignor evidencing or pertaining to such Accounts and Contracts with an appropriate
reference to the fact that such Accounts and Contracts have been assigned to the Collateral Agent
and that the Collateral Agent has a security interest therein.




          3.3 Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and
during the continuance of an Event of Default, if the Collateral Agent so directs any Assignor,
such Assignor agrees (x) to cause all payments on account of the Accounts and Contracts to be made
directly to the Cash Collateral Account, (y) that the Collateral Agent may,





7









 







at its option, directly
notify the obligors with respect to any Accounts and/or under any Contracts to make payments with
respect thereto as provided in the preceding clause (x), and (z) that the Collateral Agent may
enforce collection of any such Accounts and Contracts and may adjust, settle or compromise the
amount of payment thereof, in the same manner and to the same extent as such Assignor. Without
notice to or assent by any Assignor, the Collateral Agent may, upon the occurrence and during the
continuance of an Event of Default, apply any or all amounts then in, or thereafter deposited in,
the Cash Collateral Account toward the payment of the Obligations in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses of collection (including
reasonable attorneys’ fees), whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred
to in the preceding clause (y) to the relevant Assignor, provided that (x) the failure by
the Collateral Agent to so notify such Assignor shall not affect the effectiveness of such notice
or the other rights of the Collateral Agent created by this Section 3.3 and (y) no such
notice shall be required if an Event of Default of the type described in Section 10.05 of the
Credit Agreement has occurred and is
continuing.




          3.4 Modification of Terms; etc. Except in accordance with such Assignor’s ordinary
course of business or as is consistent with reasonable business judgment or as permitted by
Section 3.5 hereof, no Assignor shall rescind or cancel any indebtedness evidenced by any
Account or under any Contract, or modify any material term thereof or make any material adjustment
with respect thereto, or extend or renew the same, or compromise or settle any material dispute,
claim, suit or legal proceeding relating thereto, or sell any Account or Contract, or interest
therein, without the prior written consent of the Collateral Agent. No Assignor will do anything
to impair the rights of the Collateral Agent in the Accounts or Contracts.




          3.5 Collection. Each Assignor shall endeavor in accordance with reasonable business
practices to cause to be collected from the account debtor named in each of its Accounts or obligor
under any Contract, as and when due (including, without limitation, amounts which are delinquent,
such amounts to be collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Account or Contract. Except as otherwise
directed by the Collateral Agent after the occurrence and during the continuation of an Event of
Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing
under its Accounts and Contracts (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which such Assignor finds appropriate in
accordance with reasonable business judgment, and (ii) a refund or credit due as a result of
returned or damaged merchandise or improperly performed services or for other reasons which such
Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs
and expenses (including, without limitation, reasonable attorneys’ fees) of collection, whether
incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor.




          3.6 Instruments. If any Assignor owns or acquires any Instrument in excess of
$500,000 constituting Collateral (other than checks and other payment instruments received and
collected in the ordinary course of business), such Assignor will within 10 Business Days notify
the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such
Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as
further security hereunder.





8









 








          3.7 Assignors Remain Liable Under Accounts. Anything herein to the contrary
notwithstanding, the Assignors shall remain liable under each of the Accounts to observe and
perform all of the conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to such Accounts. Neither the Collateral
Agent nor any other Secured Creditor shall have any obligation or liability under any Account (or
any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by
the Collateral Agent or any other
Secured Creditor of any payment relating to such Account pursuant hereto, nor shall the
Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the
obligations of any Assignor under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by them or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto), to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may have been assigned to them or to
which they may be entitled at any time or times.




          3.8 Assignors Remain Liable Under Contracts. Anything herein to the contrary
notwithstanding, the Assignors shall remain liable under each of the Contracts to observe and
perform all of the conditions and obligations to be observed and performed by them thereunder, all
in accordance with and pursuant to the terms and provisions of each Contract. Neither the
Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or
any other Secured Creditor of any payment relating to such Contract pursuant hereto, nor shall the
Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the
obligations of any Assignor under or pursuant to any Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to
present or file any claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to them or to which they may be entitled at any time or
times.




          3.9 Deposit Accounts; Etc. (a) No Assignor maintains, or at any time after the date
of this Agreement shall establish or maintain, any demand, time, savings, passbook or similar
account, except for such accounts maintained with a bank (as defined in Section 9-102 of the UCC)
whose jurisdiction (determined in accordance with Section 9-304 of the UCC) is within a State of
the United States. Annex F-1 hereto accurately sets forth, as of the date of
this Agreement, for each Assignor, each Deposit Account maintained by such Assignor (including a
description thereof and the respective account number), the name of the respective bank with which
such Deposit Account is maintained, and the jurisdiction of the respective bank with respect to
such Deposit Account. Annex F-2 hereto accurately sets forth, as of the date of this
Agreement, for each Assignor, each Deposit Account maintained by such Assignor (including a
description thereof and the respective account number) for which a control agreement is required
pursuant to Section 9.14 of the Credit Agreement. For each Deposit Account listed on Annex
F-2 hereto, the respective Assignor shall use its commercially reasonable efforts to cause the
bank with which the Deposit Account is maintained to execute and deliver to the Collateral Agent,
within 30 days after the date of this Agreement or, if later, at the time of the establishment of
the respective Deposit Account, a “control agreement” substantially in the form of Annex G
hereto (appropriately completed), with such changes thereto, or other forms requested by any such




9









 







bank, in either case as may be reasonably acceptable to the Collateral Agent; provided,
however, the provisions of this sentence shall not apply to any Deposit Account maintained
with Deutsche Bank Trust Company Americas (whether in its capacity as Collateral Agent or in its
individual capacity) in which it otherwise has “control” over within the meaning of Section 9-104
of the UCC. Except as
otherwise provided in the proviso to the immediately preceding sentence, if any bank with
which a Deposit Account listed on Annex F-2 hereto is maintained refuses to, or does not,
enter into such a “control agreement”, then, at the request of the Collateral Agent or the Required
Lenders, the respective Assignor shall promptly close the respective Deposit Account and transfer
all balances therein to the Cash Collateral Account or another Deposit Account meeting the
requirements of this Section 3.9. If any bank with which a Deposit Account listed on
Annex F-2 hereto is maintained refuses to subordinate all its claims with respect to such Deposit
Account to the Collateral Agent’s security interest therein on terms satisfactory to the Collateral
Agent, then the Collateral Agent, at its option, may (x) require that such Deposit Account be
terminated in accordance with the immediately preceding sentence or (y) agree to a “control
agreement” without such subordination, provided that in such event the Collateral Agent may at any
time, at its option, subsequently require that such Deposit Account be terminated (within 30 days
after notice from the Collateral Agent) in accordance with the requirements of the immediately
preceding sentence.




          (b) After the date of this Agreement, no Assignor shall establish any new demand, time,
savings, passbook or similar account, except for Deposit Accounts established and maintained with
banks and meeting the requirements of preceding clause (a). At the time any such Deposit Account
is established for which a “control agreement” is required pursuant to Section 9.14 of the Credit
Agreement, the appropriate “control agreement” shall be entered into in accordance with the
requirements of preceding clause (a) and the respective Assignor shall furnish to the Collateral
Agent a supplement to Annex F-2 hereto containing the relevant information with respect to the
respective Deposit Account and the bank with which same is established.




          (c) Each Assignor, the Collateral Agent and Deutsche Bank Trust Company Americas in its
individual capacity hereby agree that after the occurrence and during the continuance of any Event
of Default, Deutsche Bank Trust Company Americas in its individual capacity shall only honor
instructions from the Collateral Agent with respect to Deposit Accounts, maintained with Deutsche
Bank Trust Company Americas following a notice from the Collateral Agent indicating that it is
exercising control over any such Deposit Account without the consent of any other Person (including
without the consent of any Assignor).




          3.10 Letter-of-Credit Rights. If any Assignor is at any time a beneficiary under a
letter of credit with a stated amount of $500,000 or more, such Assignor shall promptly notify the
Collateral Agent thereof and, at the request of the Collateral Agent, such Assignor shall, pursuant
to an agreement in form and substance reasonably satisfactory to the Collateral Agent, use its
reasonable best efforts to either (i) arrange for the issuer and any confirmer of such letter of
credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under
such letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary
of such letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of
any drawing under the letter of credit are to be applied as provided in this Agreement after the
occurrence and during the continuance of an Event of Default.





10









 








          3.11 Commercial Tort Claims. All Commercial Tort Claims of, and known to, each Assignor in existence on the date of this
Agreement are described in Annex H hereto. If any Assignor shall at any time after the
date of this Agreement acquire a Commercial Tort Claim in an amount (taking the greater of the
aggregate claimed damages thereunder or the reasonably estimated value thereof) of $1,000,000 or
more, such Assignor shall promptly notify the Collateral Agent thereof in a writing signed by such
Assignor and describing the details thereof and shall grant to the Collateral Agent in such writing
a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to the Collateral Agent.




          3.12 Chattel Paper. Upon the request of the Collateral Agent made at any time or from
time to time, each Assignor shall promptly furnish to the Collateral Agent a list of all Electronic
Chattel Paper held or owned by such Assignor. Furthermore, if requested by the Collateral Agent,
each Assignor shall promptly take all actions which are reasonably practicable so that the
Collateral Agent has “control” of all Electronic Chattel Paper in accordance with the requirements
of Section 9-105 of the UCC. Each Assignor will promptly (and in any event within 10 days)
following any request by the Collateral Agent, deliver all of its Tangible Chattel Paper to the
Collateral Agent.




          3.13 Further Actions. Each Assignor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements,
certificates, reports and other assurances or instruments and take such further steps, including
any and all actions as may be necessary or required under the Federal Assignment of Claims Act,
relating to its Accounts, Contracts, Instruments and other property or rights covered by the
security interest hereby granted, as the Collateral Agent may reasonably require.




ARTICLE IV




SPECIAL PROVISIONS CONCERNING TRADEMARKS AND DOMAIN NAMES




          4.1 Additional Representations and Warranties. Each Assignor represents and warrants
that it is the true and lawful owner of or otherwise has the right to use the registered Marks and
Domain Names listed in Annex I hereto for such Assignor and that said listed Marks and
Domain Names include all United States marks and applications for United States marks registered in
the United States Patent and Trademark Office and all Domain Names that such Assignor owns or uses
in connection with its business as of the date hereof. Each Assignor represents and warrants that
it owns, is licensed to use or otherwise has the right to use, all Marks and Domain Names that is
necessary for the conduct of its business. Each Assignor further warrants that it has no knowledge
of any third party claim received by it that any aspect of such Assignor’s present or contemplated
business operations infringe or will infringe any trademark, service mark or trade name of any
other Person other
than as could not, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each Assignor represents and warrants that it is the true and lawful
owner of or otherwise has the right to use all U.S. trademark registrations and applications and
Domain Name registrations listed in Annex I hereto and that said registrations are valid,
subsisting, have not been canceled and that such





11









 







Assignor is not aware of any third-party claim
that any of said registrations is invalid or unenforceable, and is not aware that there is any
reason that any of said registrations is invalid or unenforceable, and is not aware that there is
any reason that any of said applications will not mature into registrations. Each Assignor hereby
grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and
during the continuance of an Event of Default, any document which may be required by the United
States Patent and Trademark Office or similar registrar in order to effect an absolute assignment
of all right, title and interest in each Mark and/or Domain Name, and record the same.




          4.2 Licenses and Assignments. Except as otherwise permitted by the Secured Debt
Agreements, each Assignor hereby agrees not to divest itself of any right under any Mark or Domain
Name.




          4.3 Infringements. Each Assignor agrees, within 10 days of learning thereof, to
notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent
information that may be available with respect to, any party who such Assignor believes is, or may
be, infringing or diluting or otherwise violating any of such Assignor’s rights in and to any Mark
or Domain Name in any manner that could reasonably be expected to have a Material Adverse Effect,
or with respect to any party claiming that such Assignor’s use of any Mark or Domain Name material
to such Assignor’s business violates in any material respect any property right of that party.
Each Assignor further agrees to prosecute diligently in accordance with reasonable business
practices any Person infringing any Mark or Domain Name in any manner that could reasonably be
expected to have a Material Adverse Effect.




          4.4 Preservation of Marks and Domain Names. Each Assignor agrees to use its Marks and
Domain Names which are material to such Assignor’s business in interstate commerce during the time
in which this Agreement is in effect and to take all such other actions as are reasonably necessary
to preserve such Marks as trademarks or service marks under the laws of the United States (other
than any such Marks which are no longer used or useful in its business or operations).




          4.5 Maintenance of Registration. Each Assignor shall, at its own expense, diligently
process all documents reasonably required to maintain all Mark and/or Domain Name registrations,
including but not limited to affidavits of use and applications for renewals of registration in the
United States Patent and Trademark Office for all of its material registered Marks, and shall pay
all fees and disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Collateral Agent, which consent shall
not be
unreasonably withheld (other than with respect to registrations and applications deemed by
such Assignor in its reasonable business judgment to be no longer prudent to pursue).




          4.6 Future Registered Marks and Domain Names. If any Mark registration is issued
hereafter to any Assignor as a result of any application now or hereafter pending before the United
States Patent and Trademark Office or any Domain Name is registered by any Assignor, at the end of
the calendar quarter in which such certificate or similar indicia of ownership was received, such
Assignor shall deliver to the Collateral Agent a copy of such




12









 







registration certificate or similar
indicia of ownership, and a grant of a security interest in such Mark and/or Domain Name, to the
Collateral Agent and at the expense of such Assignor, confirming the grant of a security interest
in such Mark and/or Domain Name to the Collateral Agent hereunder, the form of such security to be
substantially in the form of Annex L hereto or in such other form as may be reasonably
satisfactory to the Collateral Agent.




          4.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral
Agent may, by written notice to the relevant Assignor, take any or all of the following actions:
(i) declare the entire right, title and interest of such Assignor in and to each of the Marks and
Domain Names, together with all trademark rights and rights of protection to the same, vested in
the Collateral Agent for the benefit of the Secured Creditors, in which event such rights, title
and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to
in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said
absolute assignment with the applicable agency or registrar; (ii) take and use or sell the Marks or
Domain Names and the goodwill of such Assignor’s business symbolized by the Marks or Domain Names
and the right to carry on the business and use the assets of such Assignor in connection with which
the Marks or Domain Names have been used; and (iii) direct such Assignor to refrain, in which event
such Assignor shall refrain, from using the Marks or Domain Names in any manner whatsoever,
directly or indirectly, and such Assignor shall execute such further documents that the Collateral
Agent may reasonably request to further confirm this and to transfer ownership of the Marks or
Domain Names and registrations and any pending trademark application in the United States Patent
and Trademark Office or applicable Domain Name registrar to the Collateral Agent.




ARTICLE V




SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS




          5.1 Additional Representations and Warranties. Each Assignor represents and warrants
that it is the true and lawful owner of (i) all rights in (x) the Patents listed in Annex J
hereto for such Assignor and that said Patents include all the United States patents and
applications for United States patents that such Assignor owns as of the date hereof and (y) the
Copyrights listed in Annex K hereto for such Assignor and
that said Copyrights constitute all the United States copyrights registered with the United
States Copyright Office and applications to United States copyrights that such Assignor owns as of
the date hereof and (ii) all rights in, or otherwise has the right to use, all Trade Secrets and
proprietary information necessary to operate the business of such Assignor (“Trade Secret Rights”).
Each Assignor further warrants that it has no knowledge of any third party claim that any aspect
of such Assignor’s present or contemplated business operations infringes or will infringe any
patent of any other Person or such Assignor has misappropriated any Trade Secret or other
proprietary information which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Each Assignor hereby grants to the Collateral Agent an
absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of
Default, any document which may be required by the United States Patent and Trademark Office or the
United States Copyright Office in order to effect an absolute assignment of all right, title and
interest in each Patent or Copyright, and to record the same.





13









 








          5.2 Licenses and Assignments. Except as otherwise permitted by the Secured Debt
Agreements, each Assignor hereby agrees not to divest itself of any right under any Patent or
Copyright.




          5.3 Infringements. Each Assignor agrees, within 10 days of learning thereof, to
furnish the Collateral Agent in writing with all pertinent information available to such Assignor
with respect to any infringement, contributing infringement or active inducement to infringe or
other violation of such Assignor’s rights in any Patent or Copyright or to any claim that the
practice of any Patent or use of any Copyright violates any property right of a third party, or
with respect to any misappropriation of any Trade Secret Right or any claim that practice of any
Trade Secret Right violates any property right of a third party, in each case, in any manner which,
either individually or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, to
diligently prosecute any Person infringing any Patent or Copyright or any Person misappropriating
any Trade Secret Right, in each case to the extent that such infringement or misappropriation,
either individually or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.




          5.4 Maintenance of Patents or Copyrights. At its own expense, each Assignor shall
make timely payment of all post-issuance fees required to maintain in force its rights under each
Patent or Copyright, absent prior written consent of the Collateral Agent, which consent shall not
be unreasonably withheld (other than any such Patents or Copyrights which are no longer used or are
deemed by such Assignor in its reasonable business judgment to no longer be useful in its business
or operations).




          5.5 Prosecution of Patent or Copyright Applications. At its own expense, each
Assignor shall diligently prosecute all material applications for (i) United States Patents listed
in Annex J hereto and (ii) Copyrights listed on Annex K hereto, in each case for
such Assignor and shall not abandon any such application prior to exhaustion of all administrative
and judicial remedies (other than applications deemed by such
Assignor in its reasonable business judgment to be no longer prudent to pursue), absent
written consent of the Collateral Agent.




          5.6 Other Patents and Copyrights. At the end of each calendar quarter following the
acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a
registered Copyright, or of filing of an application for a United States Patent or Copyright, the
relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or Patent, or
certificate or registration of, or application therefor, as the case may be, with a grant of a
security interest as to such Patent or Copyright, as the case may be, to the Collateral Agent and
at the expense of such Assignor, confirming the grant of a security interest, the form of such
grant of a security interest to be substantially in the form of Annex M or N
hereto, as appropriate, or in such other form as may be reasonably satisfactory to the Collateral
Agent.




          5.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral
Agent may, by written notice to the relevant Assignor, take any or all of the following actions:
(i) declare the entire right, title, and interest of such Assignor in each of the Patents and
Copyrights vested in the Collateral Agent for the benefit of the




14









 







Secured Creditors, in which event
such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of
the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power
of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency; (ii) take and practice
or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from practicing the Patents and using the Copyrights directly or
indirectly, and such Assignor shall execute such further documents as the Collateral Agent may
reasonably request further to confirm this and to transfer ownership of the Patents and Copyrights
to the Collateral Agent for the benefit of the Secured Creditors.




ARTICLE VI




PROVISIONS CONCERNING ALL COLLATERAL




          6.1 Protection of Collateral Agent’s Security. Except as otherwise permitted by the
Secured Debt Agreements, each Assignor will do nothing to impair the rights of the Collateral Agent
in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in
favor of the Collateral Agent, at such Assignor’s own expense to the extent and in the manner
provided in the Secured Debt Agreements. Except to the extent otherwise permitted to be retained
by such Assignor or applied by such Assignor pursuant to the terms of the Secured Debt Agreements,
the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the
Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each
Assignor assumes all liability and responsibility in connection with the Collateral acquired by it
and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished
by reason of the fact that such
Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to
such Assignor.




          6.2 Warehouse Receipts Non-Negotiable. To the extent practicable, each Assignor
agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its Inventory, such Assignor shall request that such warehouse receipt or receipt
in the nature thereof shall not be “negotiable” (as such term is used in Section 7-104 of the UCC
as in effect in any relevant jurisdiction or under other relevant law).




          6.3 Additional Information. Each Assignor will, at its own expense, from time to time
upon the reasonable request of the Collateral Agent, promptly (and in any event within 10 days
after its receipt of the respective request) furnish to the Collateral Agent such information with
respect to the Collateral (including with reasonable specificity and in summary form, the identity
of the Collateral or such components thereof as may have been reasonably requested by the
Collateral Agent, the value and location of such Collateral, etc.) as may be reasonably requested
by the Collateral Agent. Without limiting the forgoing, each Assignor agrees that it shall
promptly (and in any event within 10 Business Days after its receipt of the respective request)
furnish to the Collateral Agent such updated Annexes hereto as may from time to time be reasonably
requested by the Collateral Agent.




          6.4 Further Actions. Each Assignor will, at its own expense and upon the reasonable
request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of





15









 







title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements,
transfer endorsements, certificates, reports and other assurances or instruments and take such
further steps relating to the Collateral and other property or rights covered by the security
interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral.




     6.5 Financing Statements. Each Assignor agrees to authorize and deliver to the
Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent,
as the Collateral Agent may from time to time reasonably request or as are reasonably necessary or
desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable,
perfected security interest in the Collateral as provided herein and the other rights and security
contemplated hereby. Each Assignor will pay any applicable filing fees, recordation taxes and
related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent
to file any such financing statements without the signature of such Assignor where permitted by law
(and such authorization includes describing the Collateral as “all assets” of such Assignor).



ARTICLE VII




REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT




     7.1 Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if
any Event of Default shall have occurred and be continuing, then and in every such case, the
Collateral Agent, in addition to any rights now or hereafter existing under applicable law and
under the other provisions of this Agreement, shall have all rights as a secured creditor under any
UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws
in effect in all relevant jurisdictions and may:




     (i) personally, or by agents or attorneys, immediately take possession of the
Collateral or any part thereof, from such Assignor or any other Person who then has
possession of any part thereof with or without notice or process of law, and for that
purpose may enter upon such Assignor’s premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all services, supplies, aids
and other facilities of such Assignor;




     (ii) instruct the obligor or obligors on any agreement, instrument or other obligation
(including, without limitation, the Accounts and the Contracts) constituting the Collateral
to make any payment required by the terms of such agreement, instrument or other obligation
directly to the Collateral Agent and may exercise any and all remedies of such Assignor in
respect of such Collateral;




     (iii) instruct all depository banks which have entered into a control agreement with
the Collateral Agent to transfer all monies, securities and instruments held by such
depositary bank to the Cash Collateral Account in accordance with the terms of the
respective control agreement (including by issuing a “Notice of Exclusive Control” in
accordance with the terms thereof);



16









 






     (iv) withdraw all monies, securities and instruments in the Cash Collateral Account
and/or in any other Deposit Account maintained with the Collateral Agent (whether or not
such Deposit Accounts are maintained with the Collateral Agent in its capacity as such) for
application to the Obligations in accordance with Section 7.4 hereof;




     (v) sell, assign or otherwise liquidate any or all of the Collateral or any part
thereof in accordance with Section 7.2 hereof, or direct such Assignor to sell,
assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each
case, take possession of the proceeds of any such sale or liquidation;




     (vi) take possession of the Collateral or any part thereof, by directing such Assignor
in writing to deliver the same to the Collateral Agent at any reasonable place or places
designated by the Collateral Agent, in which event such Assignor shall at its own expense:




     (x) forthwith cause the same to be moved to the place or places so designated
by the Collateral Agent and there delivered to the Collateral Agent;




     (y) store and keep any Collateral so delivered to the Collateral Agent at such
place or places pending further action by the Collateral Agent as provided in
Section 7.2 hereof; and




     (z) while the Collateral shall be so stored and kept, provide such security and
maintenance services as shall be reasonably necessary to protect the same and to
preserve and maintain it in good condition;




     (vii) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks,
Domain Names, Patents or Copyrights included in the Collateral for such term and on such
conditions and in such manner as the Collateral Agent shall in its sole judgment determine;




     (viii) apply any monies constituting Collateral or proceeds thereof in accordance with
the provisions of Section 7.4; and




     (ix) take any other action as specified in clauses (1) through (5), inclusive, of
Section 9-607 of the UCC;


it being understood that each Assignor’s obligation so to deliver the Collateral is of the essence
of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction,
the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor
of said obligation. By accepting the benefits of this Agreement and each other Security Document,
the Secured Creditors expressly acknowledge and agree that this Agreement and each other Security
Document may be enforced only by the action of the Collateral Agent acting upon the instructions of
the Required Secured Creditors and that no other Secured Creditor shall have any right individually
to seek to enforce or to enforce this Agreement or to realize upon the security to be granted
hereby, it being understood and agreed that such rights and remedies may be exercised by the
Collateral Agent or the holders of at least a majority of the outstanding Other Obligations, as the
case may be, for the benefit of the Secured Creditors upon the terms of this





17









 







Agreement and the
other Security Documents.




          7.2 Remedies; Disposition of the Collateral. If any Event of Default shall have
occurred and be continuing, then any Collateral repossessed by the Collateral Agent under or
pursuant to Section 7.1 hereof and any other Collateral whether or not so repossessed by
the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at such place or places
and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased
or otherwise disposed of, in the condition in which the same existed when taken by the Collateral
Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral
Agent shall determine to be commercially reasonable. Any disposition which shall be a private sale
or other private proceedings permitted by such requirements shall be made upon not less than 10
days’ prior written notice to the relevant Assignor specifying the time at which such disposition
is to be
made and the intended sale price or other consideration therefor, and shall be subject, for
the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee
of such Assignor to acquire the Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so specified. Any such sale, lease
or other disposition may be effected by means of a public disposition or private disposition,
effected in accordance with the applicable requirements (in each case if and to the extent
applicable) of Sections 9-610 through 9-613 of the UCC and/or such other mandatory requirements of
applicable law as may apply to the respective disposition. The Collateral Agent may, without
notice or publication, adjourn any public or private disposition or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the disposition, and such
disposition may be made at any time or place to which the disposition may be so adjourned. To the
extent permitted by any such requirement of law, the Collateral Agent may bid for and become the
purchaser (and may pay all or any portion of the purchase price by crediting Obligations against
the purchase price) of the Collateral or any item thereof, offered for sale in accordance with this
Section 7.2 without accountability to the relevant Assignor. If, under applicable law, the
Collateral Agent shall be permitted to make disposition of the Collateral within a period of time
which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the
Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably
practicable in view of such applicable law. Each Assignor agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make such disposition or dispositions
of all or any portion of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any
such sale or sales, all at such Assignor’s expense.




          7.3 Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION
WITH THE COLLATERAL AGENT’S TAKING POSSESSION OR THE COLLATERAL AGENT’S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES,




18









 







and each Assignor hereby further waives, to the extent permitted by law:





     (i) all damages occasioned by such taking of possession or any such disposition except
any damages which are the direct result of the Collateral Agent’s gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a final and
non-appealable decision);




     (ii) except as otherwise expressly provided in this Agreement, all other requirements
as to the time, place and terms of sale or other requirements with respect to the
enforcement of the Collateral Agent’s rights hereunder; and




     (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium
now or hereafter in force under any applicable law in order to prevent or delay the
enforcement of this Agreement or the absolute sale of the Collateral or any
portion thereof, and each Assignor, for itself and all who may claim under it, insofar
as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws.


Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral
shall operate to divest all right, title, interest, claim and demand, either at law or in equity,
of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in
equity against such Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such
Assignor.




          7.4 Application of Proceeds. (a) All moneys collected by the Collateral Agent upon
any sale or other disposition of the Collateral (and, to the extent either Pledge Agreement or any
other Security Document requires proceeds of collateral under such other Security Document to be
applied in accordance with the provisions of this Agreement, all monies collected by the Pledgee or
collateral agent under such other Security Document upon any sale or other disposition of the
collateral under any such Security Document), together with all other moneys received by the
Collateral Agent hereunder and under each other Security Document, shall be applied as follows:





     (i) first, to the payment of all amounts owing the Collateral Agent of the type
described in clauses (iii), (iv) and (v) of the definition of “Obligations”;




     (ii) second, to the extent proceeds remain after the application pursuant to
preceding clause (i), an amount equal to the outstanding Primary Obligations shall be paid
to the Secured Creditors as provided in Section 7.4(e) hereof, with each Secured
Creditor receiving an amount equal to its outstanding Primary Obligations or, if the
proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of
such amount remaining to be distributed;




     (iii) third, to the extent proceeds remain after the application pursuant to
preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations
shall be paid to the Secured Creditors as provided in Section 7.4(e) hereof, with
each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or,
if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata



19









 







Share of such amount remaining to be distributed; and




     (iv) fourth, to the extent proceeds remain after the application pursuant to
preceding clauses (i) through (iii), inclusive, and following the termination of this
Agreement pursuant to Section 10.8(a) hereof, to the relevant Assignor or to
whomever may be lawfully entitled to receive such surplus.



     (b) For purposes of this Agreement, (x) “Pro Rata Share” shall mean, when calculating
a Secured Creditor’s portion of any distribution or amount, that amount (expressed as a percentage)
equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor’s
Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may
be, (y) “Primary Obligations” shall mean (i) in the case of the
Credit Document Obligations, all principal of, premium, fees and interest on, all Loans, all
Unpaid Drawings, all contingent reimbursement obligations equal to the Stated Amount of all
outstanding Letters of Credit and all Fees, and (ii) in the case of the Other Obligations, all
amounts due under each Interest Rate Protection Agreement and each Other Hedging Agreement with an
Other Creditor (other than indemnities, fees (including, without limitation, attorneys’ fees) and
similar obligations and liabilities) and (z) “Secondary Obligations” shall mean all
Obligations other than Primary Obligations.




     (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the
amounts received by such Secured Creditors hereunder shall be applied (for purposes of making
determinations under this Section 7.4 only) (i) first, to their Primary Obligations and
(ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose
Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to
receive an amount equal to such excess amount multiplied by a fraction the numerator of which is
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured
Creditor entitled to distribution and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution.



     (d) Each of the Secured Creditors, by their acceptance of the benefits hereof and of the other
Security Documents, agrees and acknowledges that if the Lender Creditors are to receive a
distribution on account of undrawn amounts with respect to Letters of Credit issued under the
Credit Agreement (which shall only occur after all outstanding Revolving Loans and Swingline Loans
under the Credit Agreement and Unpaid Drawings have been paid in full), such amounts shall be paid
to the Administrative Agent under the Credit Agreement and held by it, for the equal and ratable
benefit of the Lender Creditors, as cash security for the repayment of Obligations owing to the
Lender Creditors as such. If any amounts are held as cash security pursuant to the immediately
preceding sentence, then upon the termination of all outstanding Letters of Credit under the Credit
Agreement, and after the application of all such cash security to the repayment of all Obligations
owing to the Lender Creditors after giving effect to the termination of all such Letters of Credit,
if there remains any excess cash, such excess cash shall



20









 




be returned by the Administrative Agent to
the Collateral Agent for distribution in accordance with Section 7.4(a) hereof.




               (e) All payments required to be made hereunder shall be made (x) if to the Lender Creditors,
to the Administrative Agent for the account of the Lender Creditors, and (y) if to the Other
Creditors, to the trustee, paying agent or other similar representative (each, a
“Representative”) for the Other Creditors or, in the absence of such a Representative,
directly to the Other Creditors.



               (f) For purposes of applying payments received in accordance with this Section 7.4,
the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent and (ii) the
Representative or, in the absence of such a Representative, upon the Other Creditors for a
determination (which the Administrative Agent, each Representative and the Secured Creditors
agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding
Obligations owed to the Lender Creditors or the Other Creditors, as the case may be. Unless it has
received written notice from a Lender Creditor or an Other Creditor to the contrary, the
Administrative Agent and each Representative, in furnishing information pursuant to the preceding
sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no
Secondary Obligations are outstanding. Unless it has written notice from an Other Creditor to the
contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest
Rate Protection Agreements or Other Hedging Agreements are in existence.



               (g) This Agreement is made with full recourse to each Assignor and pursuant to and upon all
the warranties, representations, covenants and agreements on the part of such Assignor contained
herein, in the Secured Debt Agreements and otherwise in writing in connection herewith or
therewith. It is understood that each Assignor shall remain jointly and severally liable to the
extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate
amount of the Obligations.



               7.5 Remedies Cumulative. Each and every right, power and remedy hereby specifically
given to the Collateral Agent shall be in addition to every other right, power and remedy
specifically given to the Collateral Agent under this Agreement, the other Secured Debt Agreements
or now or hereafter existing at law, in equity or by statute and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised from time to time
or simultaneously and as often and in such order as may be deemed expedient by the Collateral
Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning
of the exercise of one shall not be deemed a waiver of the right to exercise any other or others.
No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and
no renewal or extension of any of the Obligations shall impair any such right, power or remedy or
shall be construed to be a waiver of any Default or Event of Default or an acquiescence thereof.
No notice to or demand on any Assignor in any case shall entitle it to any other or further notice
or demand in similar or other circumstances or constitute a waiver of any of the rights of the
Collateral Agent to any other or further action in any circumstances without notice or demand. In
the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and
shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable
expenses, including reasonable attorneys’ fees, and the amounts thereof shall be included in such
judgment.



21









 





          7.6 Discontinuance of Proceedings. In case the 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 the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored
to their former positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and powers of the
Collateral Agent shall continue as if no such proceeding had been instituted.




ARTICLE VIII




INDEMNITY




          8.1 Indemnity. (a) Without limiting the provisions of the other Secured Debt
Agreements, each Assignor jointly and severally agrees to indemnify, reimburse and hold the
Collateral Agent, each other Secured Creditor (in its capacity as such) and their respective
successors, assigns, employees, affiliates, advisors and agents (hereinafter in this Section
8.1 referred to individually as “Indemnitee,” and collectively as
“Indemnitees”) harmless from any and all liabilities, obligations, damages, injuries,
penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or
disbursements (including reasonable attorneys’ fees and expenses) (for the purposes of this
Section 8.1 the foregoing are collectively called “expenses”) of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement or the enforcement of any of the terms hereof, or the preservation of
any rights hereunder, or in any way relating to or arising out of the manufacture, ownership,
ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral (including, without
limitation, latent or other defects, whether or not discoverable), the violation of the laws of any
country, state or other governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account of injury to or the
death of any Person (including any Indemnitee), or property damage), or contract claim;
provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a)
for losses, damages or liabilities to the extent caused by the gross negligence or willful
misconduct of such Indemnitee (as determined by a court of competent jurisdiction in a final and
non-appealable decision). Each Assignor agrees that upon written notice by any Indemnitee of the
assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or
judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each
Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such
assertion of which such Indemnitee has knowledge.




          (b) Without limiting the application of Section 8.1(a) hereof, each Assignor agrees,
jointly and severally, to pay or reimburse the Collateral Agent for any and all reasonable fees,
costs and expenses of whatever kind or nature incurred in connection with the creation,
preservation or protection of the Collateral Agent’s Liens on, and security interest in, the
Collateral, including, without limitation, all fees and taxes in connection with the recording or
filing of instruments and documents in all applicable public offices, payment or discharge of any
taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with protecting, maintaining or





22









 







preserving the Collateral and the Collateral Agent’s interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising
out of or relating to the Collateral.




          (c) Without limiting the application of Section 8.1(a) or (b) hereof, each
Assignor agrees, jointly and severally, to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by any Assignor in
this Agreement or in any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement.




          (d) If and to the extent that the obligations of any Assignor under this Section 8.1
are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under applicable law.




          8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations
secured by the Collateral. The indemnity obligations of each Assignor contained in this
Article VIII shall continue in full force and effect notwithstanding the full payment of
all of the other Obligations and notwithstanding the full payment of all the Notes issued, and
Loans made, under the Credit Agreement, the termination of all Letters of Credit issued under the
Credit Agreement, the termination of all Interest Rate Protection Agreements and Other Hedging
Agreements entered into with the Other Creditors and the payment of all other Obligations and
notwithstanding the discharge thereof and the occurrence of the Termination Date.




ARTICLE IX




DEFINITIONS




          The following terms shall have the meanings herein specified. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.




          “Account” shall mean any “account” as such term is defined in the UCC as in effect on
the date hereof in the State of New York, and in any event shall include but shall not be limited
to, all rights to payment of any monetary obligation, whether or not earned by performance, (i) for
property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of, (ii)
for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued,
(iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be
provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out
of the use of a credit or charge card or information contained on or for use with the card, or
(viii) as winnings in a lottery or other game of chance operated or sponsored by a State,
governmental unit of a State, or person licensed or authorized to operate the game by a State or
governmental unit of a State. Without limiting the foregoing, the term “account” shall include all
Health-Care-Insurance Receivables.




          “Administrative Agent” shall have the meaning provided in the recitals of this




23









 







Agreement.




          “Agreement” shall mean this Security Agreement as the same may be amended, modified,
restated and/or supplemented from time to time in accordance with its terms.




          “As-Extracted Collateral” shall mean “as-extracted collateral” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.




          “Assignor” shall have the meaning provided in the first paragraph of this Agreement.




          “Borrower” shall have the meaning provided in the recitals of this Agreement.




          “Cash Collateral Account” shall mean a non-interest bearing cash collateral account
maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of
the Secured Creditors.




          “Chattel Paper” shall mean “chattel paper” as such term is defined in the UCC as in
effect on the date hereof in the State of New York. Without limiting the foregoing, the term
“Chattel Paper” shall in any event include all Tangible Chattel Paper and all Electronic Chattel
Paper.




          “Class” shall have the meaning provided in Section 10.2 of this Agreement.




          “Collateral” shall have the meaning provided in Section 1.1(a) of this
Agreement.




          “Collateral Agent” shall have the meaning provided in the first paragraph of this
Agreement.




          “Commercial Tort Claims” shall mean “commercial tort claims” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.




          “Contract Rights” shall mean all rights of any Assignor under each Contract,
including, without limitation, (i) any and all rights to receive and demand payments under any or
all Contracts, (ii) any and all rights to receive and compel performance under any or all
Contracts, and (iii) any and all other rights, interests and claims now existing or in the future
arising in connection with any or all Contracts.




          “Contracts” shall mean all contracts between any Assignor and one or more additional
parties (including, without limitation, any Interest Rate Protection Agreements, Other Hedging
Agreements, licensing agreements and any partnership agreements, joint venture agreements and
limited liability company agreements).




          “Copyrights” shall mean any United States or foreign copyright now or hereafter owned
by any Assignor, including any registrations of any copyrights, in the United States Copyright
Office or any foreign equivalent office, as well as any application for a copyright registration
now or hereafter made with the United States Copyright Office or any foreign equivalent office by
any Assignor.




24









 








          “Credit Agreement” shall have the meaning provided in the recitals of this Agreement.




          “Credit Document Obligations” shall have the meaning provided in the definition
of “Obligations” in this Article IX.




          “Deposit Accounts” shall mean all “deposit accounts” as such term is defined in the
UCC as in effect on the date hereof in the State of New York.




          “Documents” shall mean “documents” as such term is defined in the UCC as in effect on
the date hereof in the State of New York.




          “Domain Names” shall mean all Internet domain names and associated URL addresses in or
to which any Assignor now or hereafter has any right, title or interest.




          “Electronic Chattel Paper” shall mean “electronic chattel paper” as such term is
defined in the UCC as in effect on the date hereof in the State of New York.




          “Equipment” shall mean any “equipment” as such term is defined in the UCC as in effect
on the date hereof in the State of New York now or hereafter owned by any Assignor, and in any
event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures
and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and
replacements of any of the foregoing and all accessions thereto, wherever located, together with
all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.




          “Event of Default” shall mean any Event of Default (or similar term) under, and as
defined in, the Credit Agreement and any Interest Rate Protection Agreement or Other Hedging
Agreement entered into with an Other Creditor and shall in any event include, without limitation,
any payment default on any of the Obligations after the expiration of any applicable grace period.




          “General Intangibles” shall mean “general intangibles” as such term is defined in the
UCC as in effect on the date hereof in the State of New York.




          “Goods” shall mean “goods” as such term is defined in the UCC as in effect on the date
hereof in the State of New York.




          “Health-Care-Insurance Receivable” shall mean any “health-care-insurance receivable”
as such term is defined in the UCC as in effect on the date hereof in the State of New York.




          “Indemnitee” shall have the meaning provided in Section 8.1(a) of this
Agreement.




          “Instrument” shall mean “instruments” as such term is defined in the UCC as in effect
on the date hereof in the State of New York.





25









 








          “Inventory” shall mean merchandise, inventory and goods, and all additions,
substitutions and replacements thereof and all accessions thereto, wherever located, together with
all goods, supplies, incidentals, packaging materials, labels, materials and any other items used
or usable in manufacturing, processing, packaging or shipping same, in all stages of production
from raw materials through work in process to finished goods, and all products and proceeds of
whatever sort and wherever located any portion thereof which may be returned, rejected, reclaimed
or repossessed by the Collateral Agent from any Assignor’s customers, and shall specifically
include all “inventory” as such term is defined in the UCC as in effect on the date hereof in the
State of New York.




          “Investment Property” shall mean “investment property” as such term is defined in the
UCC as in effect on the date hereof in the State of New York.




          “Lender Creditors” shall have the meaning provided in the recitals of this Agreement.




          “Lenders” shall have the meaning provided in the recitals of this Agreement.




          “Letter-of-Credit Rights” shall mean “letter-of-credit rights” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.




          “Location” of any Assignor, shall mean such Assignor’s “location” as determined
pursuant to Section 9-307 of the UCC.




          “Marks” shall mean all right, title and interest in and to any trademarks, service
marks and trade names now held or hereafter acquired by any Assignor, including any registration or
application for registration of any trademarks and service marks now held or hereafter acquired by
any Assignor, which are registered or filed in the United States Patent and Trademark Office or the
equivalent thereof in any state of the United States or any equivalent foreign office or agency, as
well as any unregistered trademarks and service marks used by any Assignor and any trade dress
including logos, designs, fictitious business names and other business identifiers used by any
Assignor.




          “Obligations” shall mean and include, as to any Assignor, all of the following:





     (i) the full and prompt payment when due (whether at stated maturity, by acceleration
or otherwise) of all obligations, liabilities and indebtedness (including, without
limitation, principal, premium, interest, reimbursement obligations (both actual and
contingent) under Letters of Credit, fees, cost and indemnities (including, in each case,
without limitation, all interest that accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding
of any Assignor at the rate provided for in the respective documentation, whether or not a
claim for post-petition interest is allowed in any such proceeding) of such Assignor to the
Lender Creditors, whether now existing or hereafter incurred under, arising out of, or in
connection with, the Credit Agreement and the other Credit Documents to which such Assignor
is a party (including, without limitation, in the event such Assignor is a Subsidiary
Guarantor, all such obligations, liabilities and indebtedness of such Assignor under the
Subsidiaries Guaranty) and the due performance and



26









 







compliance by such Assignor with all of
the terms, conditions and agreements contained in the Credit Agreement and in such other
Credit Documents (all such obligations, liabilities and indebtedness under this clause (i),
except to the extent consisting of obligations or indebtedness with respect to Interest Rate
Protection Agreements or Other
Hedging Agreements, being herein collectively called the “Credit Document
Obligations”);




     (ii) the full and prompt payment when due (whether at stated maturity, by acceleration
or otherwise) of all obligations, liabilities and indebtedness (including, in each case,
without limitation, all interest that accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding
of any Assignor at the rate provided for in the respective documentation, whether or not a
claim for post-petition interest is allowed in any such proceeding) owing by each Assignor
to the Other Creditors, now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging Agreement, whether
such Interest Rate Protection Agreement or Other Hedging Agreement is now in existence or
hereinafter arising (including, without limitation, in the case of an Assignor that is a
Subsidiary Guarantor, all obligations, liabilities and indebtedness of such Assignor under
the Subsidiaries Guaranty in respect of the Interest Rate Protection Agreements and Other
Hedging Agreements), and the due performance and compliance by such Assignor with all of the
terms, conditions and agreements contained in each such Interest Rate Protection Agreement
and Other Hedging Agreement (all such obligations, liabilities and indebtedness under this
clause (ii) being herein collectively called the “Other Obligations”);




     (iii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral;




     (iv) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of such Assignor referred to in clauses (i) and
(ii) above, after an Event of Default shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights
hereunder, together with reasonable attorneys’ fees and court costs; and




     (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Section 8.1 of this Agreement;


it being acknowledged and agreed that the “Obligations” shall include extensions of credit of the
types described above, whether outstanding on the date of this Agreement or extended from time to
time after the date of this Agreement.




          “Other Creditors” shall have the meaning provided in the recitals of this Agreement.




          “Other Obligations” shall have the meaning provided in the definition of




27









 







“Obligations” in this Article IX.




          “Patents” shall mean any United States or foreign patent in or to which any Assignor
now or hereafter has any right, title or interest therein, and any divisions, continuations
(including, but not limited to, continuations-in-parts) and improvements thereof, as well as any
application for a United States or foreign patent now or hereafter made by any Assignor.




          “Permits” shall mean, to the extent permitted to be assigned by the terms thereof or
by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations
of or from any governmental authority or agency.




          “Primary Obligations” shall have the meaning provided in Section 7.4(b) of
this Agreement.




          “Pro Rata Share” shall have the meaning provided in Section 7.4(b) of this
Agreement.




          “Proceeds” shall mean all “proceeds” as such term is defined in the UCC as in effect
in the State of New York on the date hereof and, in any event, shall also include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to
time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental authority (or any person acting under color of
governmental authority) and (iii) any and all other amounts from time to time paid or payable under
or in connection with any of the Collateral.




          “Registered Organization” shall have the meaning provided in the UCC as in effect in
the State of New York.




          “Representative” shall have the meaning provided in Section 7.4(e) of this
Agreement.




          “Required Secured Creditors” shall mean (i) at any time when any Credit Document
Obligations are outstanding (other than contingent indemnity obligations that are not then due and
payable) or any Commitments or Letters of Credit under the Credit Agreement exist, the Required
Lenders (or, to the extent provided in Section 13.12 of the Credit Agreement, each of the Lenders)
and (ii) at any time after all of the Credit Document Obligations have been paid in full in cash
(other than contingent indemnity obligations that are not then due and payable) and all Commitments
and Letters of Credit under the Credit Agreement have been terminated and no further Commitments or
Letters of Credit may be provided thereunder, the holders of a majority of the Other Obligations.




          “Requisite Creditors” shall have the meaning provided in Section 10.2 of this
Agreement.




          “Secondary Obligations” shall have the meaning provided in Section 7.4(b) of
this Agreement.





28









 








          “Secured Creditors” shall have the meaning provided in the recitals of this Agreement.




          “Secured Debt Agreements” shall mean and include (i) this Agreement and the
other Credit Documents and (ii) the Interest Rate Protection Agreements and Other Hedging
Agreements entered into with an Other Creditor.




          “Software” shall mean “software” as such term is defined in the UCC as in effect on
the date hereof in the State of New York.




          “Supporting Obligations” shall mean any “supporting obligation” as such term is
defined in the UCC as in effect on the date hereof in the State of New York, now or hereafter owned
by any Assignor, or in which any Assignor has any rights, and, in any event, shall include, but
shall not be limited to, all of such Assignor’s rights in any Letter-of-Credit Right or secondary
obligation that supports the payment or performance of, and all security for, any Account, Chattel
Paper, Document, General Intangible, Instrument or Investment Property.




          “Tangible Chattel Paper” shall mean “tangible chattel paper” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.




          “Termination Date” shall have the meaning provided in Section 10.8(a) of this
Agreement.




          “Timber-to-be-Cut” shall mean “timber-to-be-cut” as such term is defined in the UCC as
in effect on the date hereof in the State of New York.




          “Trade Secret Rights” shall have the meaning provided in Section 5.1 of this
Agreement.




          “Trade Secrets” shall mean any secretly held existing engineering or other data,
information, production procedures and other know-how relating to the design manufacture, assembly,
installation, use, operation, marketing, sale and/or servicing of any products or business of an
Assignor worldwide whether written or not.




          “Transmitting Utility” shall have the meaning given such term in Section 9-102(a)(80)
of the UCC.




          “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the
relevant jurisdiction.




ARTICLE X




MISCELLANEOUS




          10.1 Notices. Except as otherwise specified herein, all notices, requests, demands or
other communications to or upon the respective parties hereto shall be sent or delivered by mail,
telegraph, telex, telecopy, cable or courier service and all such notices and communications shall,
when mailed, telegraphed, telexed, telecopied, or cabled or sent by




29









 







courier, be effective when
deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as
the case may be, or sent by telex or telecopier, except that notices and communications to the
Collateral Agent or any Assignor shall not be effective until received by the Collateral Agent
or such Assignor, as the case may be. All notices and other communications shall be in writing and
addressed as follows:




          (a) if to any Assignor, at:



c/o Town Sports International, LLC

888 Seventh Avenue

25th Floor

New York, New York 10106

Attention: Richard Pyle

Telephone No.: (212) 246-6700

Telecopier No.: (212) 664-8906




          (b) if to the Collateral Agent, at:



60 Wall Street

New York, New York 10005

Attention: Carin Keegan

Telephone No.: (212) 250-6083

Telecopier No.: (212) 250-5690





     (c) if to any Lender Creditor (other than the Collateral Agent), at such address as
such Lender Creditor shall have specified in the Credit Agreement;




     (d) if to any Other Creditor, at such address as such Other Creditor shall have
specified in writing to the Borrower and the Collateral Agent;


or at such other address or addressed to such other individual as shall have been furnished in
writing by any Person described above to the party required to give notice hereunder.




          10.2 Waiver; Amendment. Except as provided in Sections 10.8 and 10.12
hereof, none of the terms and conditions of this Agreement or any other Security Document may be
changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each
Assignor directly affected thereby or, in the case of the Holdings Pledge Agreement, Holdings (it
being understood that the addition or release of any Assignor hereunder shall not constitute a
change, waiver, discharge or termination affecting any Assignor other than the Assignor so added or
released) and (in each case) the Collateral Agent (with the written consent of the Required Secured
Creditors); provided, however, (i) that any change, waiver, modification or
variance affecting the rights and benefits of a single Class of Secured Creditors (and not all
Secured Creditors in a like or similar manner) also shall require the written consent of the
Requisite Creditors of such affected Class, (ii) supplements to the Annexes hereto and to the other
Security Documents may be made without the consent of any Secured Creditor, other than the
Collateral Agent, as provided herein or therein, and (iii) Assignors may be released from their
obligations hereunder and under the other Security Documents and new Assignors may be added hereto
and to the other Security Documents without the consent of any Secured Creditors




30









 







other than the
Collateral
Agent, as provided herein or therein. For the purpose of this Agreement and each other
Security Document, the term “Class” shall mean each class of Secured Creditors,
i.e., whether (x) the Lender Creditors as holders of the Credit Document Obligations or (y)
the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement,
the term “Requisite Creditors” of any Class shall mean each of (x) with respect to the
Credit Document Obligations, the Required Lenders (or, to the extent provided in Section 13.12 of
the Credit Agreement, each of the Lenders), and (y) with respect to the Other Obligations, the
holders of at least a majority of all Other Obligations outstanding from time to time.




          10.3 Obligations Absolute. The obligations of each Assignor hereunder shall remain in
full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such
Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege
under or in respect of this Agreement or any other Secured Debt Agreement; or (c) any amendment to
or modification of any Secured Debt Agreement or any security for any of the Obligations; whether
or not such Assignor shall have notice or knowledge of any of the foregoing.




          10.4 Successors and Assigns. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect, subject to release and/or
termination as set forth in Section 10.8 hereof, (ii) be binding upon each Assignor, its
successors and assigns; provided, however, that no Assignor shall assign any of its
rights or obligations hereunder or under the other Credit Documents without the prior written
consent of the Collateral Agent (with the prior written consent of the Required Secured Creditors),
and (iii) inure, together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Collateral Agent, the other Secured Creditors and their respective successors,
transferees and assigns. All agreements, statements, representations and warranties made by each
Assignor herein or in any certificate or other instrument delivered by such Assignor or on its
behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors
and shall survive the execution and delivery of this Agreement and the other Secured Debt
Agreements regardless of any investigation made by the Secured Creditors or on their behalf.




          10.5 Headings Descriptive. The headings of the several sections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or construction of any
provision of this Agreement.




          10.6 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH ASSIGNOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE




31









 







NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. EACH ASSIGNOR HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS
LACK PERSONAL JURISDICTION OVER SUCH ASSIGNOR, AND AGREES NOT TO PLEAD OR CLAIM IN ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE
AFORESAID COURTS THAT ANY SUCH COURT LACKS PERSONAL JURISDICTION OVER SUCH ASSIGNOR. EACH ASSIGNOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ANY SUCH ASSIGNOR AT ITS ADDRESS FOR NOTICES AS PROVIDED IN SECTION
10.1 ABOVE, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH ASSIGNOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SUCH SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT UNDER THIS AGREEMENT, OR ANY SECURED CREDITOR, TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANY ASSIGNOR IN ANY OTHER JURISDICTION.




          (b) EACH ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.




          (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.




          10.7 Assignor’s Duties. It is expressly agreed, anything herein contained to the
contrary notwithstanding, that, prior to the Termination Date, each Assignor shall remain liable to
perform all of the obligations, if any, assumed by it with respect to the Collateral and,
except as otherwise provided in Section 10.11 hereof, the Collateral Agent shall not have
any obligations or liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or
fulfill any of the obligations of any Assignor under or with respect to any Collateral.




          10.8 Termination; Release. (a) After the Termination Date, this Agreement shall
terminate (provided that all indemnities set forth herein including, without limitation in
Section 




32









 







8.1 hereof, shall survive such termination) and the Collateral Agent, at the
request and expense of the respective Assignor, will promptly execute and deliver to such Assignor
a proper instrument or instruments (including UCC termination statements on form UCC-3)
acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to such Assignor (without recourse and without any representation or warranty) such of
the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement,
“Termination Date” shall mean the date upon which the Total Commitment under the Credit
Agreement has been terminated and all Interest Rate Protection Agreements and Other Hedging
Agreements entered into with any Other Creditor have been terminated, no Note under the Credit
Agreement is outstanding and all Loans thereunder have been repaid in full, all Letters of Credit
issued under the Credit Agreement have been terminated and all other Obligations then due and
payable have been paid in full.




          (b) In the event that any part of the Collateral is sold or otherwise disposed of (to a Person
other than a Credit Party or a Subsidiary thereof) (x) at any time prior to the time at which all
Credit Document Obligations have been paid in full and all Commitments and Letters of Credit under
the Credit Agreement have been terminated, in connection with a sale or disposition permitted by
the Secured Debt Agreements or is otherwise released at the direction of the Required Lenders (or
all the Lenders if required by Section 13.12 of the Credit Agreement) or (y) at any time
thereafter, to the extent permitted by the other Secured Debt Agreements, and in the case of
clauses (x) and (y), the proceeds of such sale or other disposition (or from such release) are
applied in accordance with the terms of the Credit Agreement or such other Secured Debt Agreements,
as the case may be, to the extent required to be so applied, the Collateral Agent, at the request
and expense of such Assignor, will duly release from the security interest created hereby (and will
execute and deliver such documentation, including termination or partial release statements and the
like in connection therewith) and assign, transfer and deliver to such Assignor (without recourse
and without any representation or warranty) such of the Collateral as is then being (or has been)
so sold or otherwise disposed of, or released, and as may be in the possession of the Collateral
Agent and has not theretofore been released pursuant to this Agreement. Furthermore, upon the
release of any Subsidiary Guarantor from the Subsidiaries Guaranty in accordance with the
provisions thereof, such Assignor (and the Collateral at such time assigned by the respective
Assignor pursuant hereto) shall be released from this Agreement.




          (c) At any time that an Assignor desires that the Collateral Agent take any action to
acknowledge or give effect to any release of Collateral pursuant to the foregoing Section
10.8(a) or (b), such Assignor shall deliver to the Collateral Agent a certificate
signed by
a senior officer of such Assignor stating that the release of the respective Collateral is
permitted pursuant to such Section 10.8(a) or (b). At any time that the Borrower
or the respective Assignor desires that a Subsidiary of the Borrower which has been released from
the Subsidiaries Guaranty be released hereunder as provided in the last sentence of Section
10.8(b) hereof, it shall deliver to the Collateral Agent a certificate signed by a principal
executive officer of the Borrower and the respective Assignor stating that the release of the
respective Assignor (and its Collateral) is permitted pursuant to such Section 10.8(b).




          (d) The Collateral Agent shall have no liability whatsoever to any other Secured Creditor as
the result of any release of Collateral by it in accordance with (or which the





33









 







Collateral Agent in
the absence of gross negligence and willful misconduct believes to be in accordance with) this
Section 10.8.




          10.9 Counterparts. This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Collateral Agent.




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




          10.11 The Collateral Agent and the other Secured Creditors. The Collateral Agent will
hold in accordance with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as
holder of the Collateral and interests therein and with respect to the disposition thereof, and
otherwise under this Agreement, are only those expressly set forth in this Agreement and in Section
12 of the Credit Agreement. The Collateral Agent shall act hereunder on the terms and conditions
set forth herein and in Section 12 of the Credit Agreement.




          10.12 Additional Assignors. It is understood and agreed that any Subsidiary Guarantor
that desires to become an Assignor hereunder, or is required to execute a counterpart of this
Agreement after the date hereof pursuant to the respective Secured Debt Agreements, shall become an
Assignor hereunder by executing a counterpart hereof and delivering same to the Collateral Agent,
or by executing a Joinder Agreement, (y) delivering supplements to Annexes A through
F, inclusive, and H through K, inclusive, hereto as are necessary to cause
such Annexes to be complete and accurate with respect to such additional Assignor on such date, and
(z) taking all actions as
specified in this Agreement as would have been taken by such Assignor had it been an original
party to this Agreement, in each case with all documents required above to be delivered to the
Collateral Agent and with all documents and actions required above to be taken to the reasonable
satisfaction of the Collateral Agent.




[Remainder of this page intentionally left blank; signature page follows]




34









 





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




	 	 	 	 	 	 	 
	 	 	TOWN SPORTS INTERNATIONAL, LLC,

     as an Assignor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 






	 	 	 
	 

	 	TSI 217 BROADWAY, LLC
	 

	 	TSI ALEXANDRIA, LLC
	 

	 	TSI ALLSTON, LLC
	 

	 	TSI ANDOVER, LLC
	 

	 	TSI ARDMORE, LLC
	 

	 	TSI ARTHRO-FITNESS SERVICES, LLC
	 

	 	TSI ASTORIA, LLC
	 

	 	TSI BATTERY PARK, LLC
	 

	 	TSI BETHESDA, LLC
	 

	 	TSI BAY RIDGE 86TH STREET, LLC
	 

	 	TSI BAYRIDGE, LLC
	 

	 	TSI BOYLSTON, LLC
	 

	 	TSI BROADWAY, LLC
	 

	 	TSI BROOKLYN BELT, LLC
	 

	 	TSI BRUNSWICK, LLC
	 

	 	TSI BULFINCH, LLC
	 

	 	TSI BUTLER, LLC
	 

	 	TSI CARMEL, LLC
	 

	 	TSI CASH MANAGEMENT, LLC
	 

	 	TSI CENTRAL SQUARE, LLC
	 

	 	TSI CHERRY HILL, LLC
	 

	 	TSI CHEVY CHASE, LLC
	 

	 	TSI CLARENDON, LLC
	 

	 	TSI CLIFTON, LLC
	 

	 	TSI COBBLE HILL, LLC
	 

	 	TSI COLONIA, LLC
	 

	 	TSI COLUMBIA HEIGHTS, LLC
	 

	 	TSI COMMACK, LLC
	 

	 	TSI CONNECTICUT AVENUE, LLC
	 

	 	TSI COURT STREET, LLC,

      each as an Assignor






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
















 





	 	 	 
	 

	 	TSI CROTON, LLC
	 

	 	TSI DANBURY, LLC
	 

	 	TSI DOBBS FERRY, LLC
	 

	 	TSI DAVIS SQUARE, LLC
	 

	 	TSI DOWNTOWN CROSSING, LLC
	 

	 	TSI DUPONT CIRCLE, INC.
	 

	 	TSI DUPONT II, INC.
	 

	 	TSI EAST MEADOW, LLC
	 

	 	TSI EAST 23, LLC
	 

	 	TSI EAST 31, LLC
	 

	 	TSI EAST 34, LLC
	 

	 	TSI EAST 36, LLC
	 

	 	TSI EAST 41, LLC
	 

	 	TSI EAST 48, LLC
	 

	 	TSI EAST 51, LLC
	 

	 	TSI EAST 59, LLC
	 

	 	TSI EAST 76, LLC
	 

	 	TSI EAST 86, LLC
	 

	 	TSI EAST 91, LLC
	 

	 	TSI ENGLEWOOD, LLC
	 

	 	TSI F STREET, LLC
	 

	 	TSI FAIRFAX, LLC
	 

	 	TSI FENWAY, LLC
	 

	 	TSI FIFTH AVENUE, INC.
	 

	 	TSI FIRST AVENUE, LLC
	 

	 	TSI FOREST HILLS, LLC
	 

	 	TSI FORT LEE, LLC
	 

	 	TSI FRAMINGHAM, LLC
	 

	 	TSI FRANKLIN (MA), LLC
	 

	 	TSI FRANKLIN PARK, LLC
	 

	 	TSI FREEHOLD, LLC
	 

	 	TSI GALLERY PLACE, LLC
	 

	 	TSI GARDEN CITY, LLC
	 

	 	TSI GEORGETOWN, LLC
	 

	 	TSI GERMANTOWN, LLC
	 

	 	TSI GLENDALE, LLC
	 

	 	TSI GLOVER, LLC
	 

	 	TSI GRAND CENTRAL, LLC
	 

	 	TSI GREAT NECK, LLC
	 

	 	TSI GREENWICH, LLC,

      each as an Assignor






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 






(ii)









 






	 	 	 
	 

	 	TSI HARTSDALE, LLC
	 

	 	TSI HAWTHORNE, LLC
	 

	 	TSI HERALD, LLC
	 

	 	TSI HICKSVILLE, LLC
	 

	 	TSI HIGHPOINT, LLC
	 

	 	TSI HOBOKEN, LLC
	 

	 	TSI HOBOKEN NORTH, LLC
	 

	 	TSI HOLDINGS (CIP), LLC
	 

	 	TSI HOLDINGS (DC), LLC
	 

	 	TSI HOLDINGS (IP), LLC
	 

	 	TSI HOLDINGS (MA), LLC
	 

	 	TSI HOLDINGS (MD), LLC
	 

	 	TSI HOLDINGS (NJ), LLC
	 

	 	TSI HOLDINGS (PA), LLC
	 

	 	TSI HOLDINGS (VA), LLC
	 

	 	TSI HUNTINGTON, LLC
	 

	 	TSI INSURANCE, INC.
	 

	 	TSI INTERNATIONAL, INC.
	 

	 	TSI IRVING PLACE, LLC
	 

	 	TSI JERSEY CITY, LLC
	 

	 	TSI K STREET, LLC
	 

	 	TSI LARCHMONT, LLC
	 

	 	TSI LEXINGTON (MA), LLC
	 

	 	TSI LINCOLN, LLC
	 

	 	TSI LIVINGSTON, LLC
	 

	 	TSI LONG BEACH, LLC
	 

	 	TSI LYNNFIELD, LLC
	 

	 	TSI M STREET, LLC
	 

	 	TSI MADISON, INC.
	 

	 	TSI MAHWAH, LLC
	 

	 	TSI MAMARONECK, LLC
	 

	 	TSI MARKET STREET, LLC
	 

	 	TSI MARLBORO, LLC
	 

	 	TSI MATAWAN, LLC
	 

	 	TSI MERCER STREET, LLC
	 

	 	TSI MIDWOOD, LLC
	 

	 	TSI MONTCLAIR, LLC
	 

	 	TSI MORRIS PARK, LLC
	 

	 	TSI MURRAY HILL, LLC
	 

	 	TSI NANUET, LLC
	 

	 	TSI NATICK, LLC,

      each as an Assignor






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 






(iii)









 






	 	 	 
	 

	 	TSI NEW ROCHELLE, LLC
	 

	 	TSI NEWARK, LLC
	 

	 	TSI NEWBURY STREET, LLC
	 

	 	TSI NEWTON, LLC
	 

	 	TSI NO SWEAT, LLC
	 

	 	TSI NORTH BETHESDA, LLC
	 

	 	TSI NORWALK, LLC
	 

	 	TSI OCEANSIDE, LLC
	 

	 	TSI OLD BRIDGE, LLC
	 

	 	TSI PARSIPPANY, LLC
	 

	 	TSI PLAINSBORO, LLC
	 

	 	TSI PORT JEFFERSON, LLC
	 

	 	TSI PRINCETON, LLC
	 

	 	TSI PRINCETON NORTH, LLC
	 

	 	TSI RADNOR, LLC
	 

	 	TSI RAMSEY, LLC
	 

	 	TSI READE STREET, LLC
	 

	 	TSI REGO PARK, LLC
	 

	 	TSI RIDGEWOOD, LLC
	 

	 	TSI RODIN PLACE, LLC
	 

	 	TSI RYE, INC.
	 

	 	TSI SCARSDALE, LLC
	 

	 	TSI SEAPORT, LLC
	 

	 	TSI SHERIDAN, LLC
	 

	 	TSI SILVER SPRING, LLC
	 

	 	TSI SMITHTOWN, LLC
	 

	 	TSI SOCIETY HILL, LLC
	 

	 	TSI SOHO, LLC
	 

	 	TSI SOMERS, LLC
	 

	 	TSI SOMERSET, LLC
	 

	 	TSI SOUTH BETHESDA, LLC
	 

	 	TSI SOUTH END, LLC
	 

	 	TSI SOUTH PARK SLOPE, LLC
	 

	 	TSI SOUTH STATION, LLC
	 

	 	TSI SPRINGFIELD, LLC
	 

	 	TSI STAMFORD DOWNTOWN, LLC
	 

	 	TSI STAMFORD POST, LLC
	 

	 	TSI STAMFORD RINKS, LLC
	 

	 	TSI STATEN ISLAND, LLC
	 

	 	TSI STERLING, LLC
	 

	 	TSI SYOSSET, LLC,

      each as an Assignor






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 






(iv)









 






	 	 	 
	 

	 	TSI UNIVERSITY MANAGEMENT, LLC
	 

	 	TSI VARICK STREET, LLC
	 

	 	TSI WALL STREET, LLC
	 

	 	TSI WALTHAM, LLC
	 

	 	TSI WASHINGTON, INC.
	 

	 	TSI WATER STREET, LLC
	 

	 	TSI WATERTOWN, LLC
	 

	 	TSI WELLESLEY, LLC
	 

	 	TSI WELLINGTON CIRCLE, LLC
	 

	 	TSI WEST CALDWELL, LLC
	 

	 	TSI WEST NEWTON, LLC
	 

	 	TSI WEST NYACK, LLC
	 

	 	TSI WEST SPRINGFIELD, LLC
	 

	 	TSI WEST 14, LLC
	 

	 	TSI WEST 16, LLC
	 

	 	TSI WEST 23, LLC
	 

	 	TSI WEST 38, LLC
	 

	 	TSI WEST 41, LLC
	 

	 	TSI WEST 44, LLC
	 

	 	TSI WEST 48, LLC
	 

	 	TSI WEST 52, LLC
	 

	 	TSI WEST 73, LLC
	 

	 	TSI WEST 76, LLC
	 

	 	TSI WEST 80, LLC
	 

	 	TSI WEST 94, LLC
	 

	 	TSI WEST 115TH STREET, LLC
	 

	 	TSI WEST 125, LLC
	 

	 	TSI WEST 145TH STREET, LLC
	 

	 	TSI WESTPORT, LLC
	 

	 	TSI WESTWOOD, LLC
	 

	 	TSI WEYMOUTH, LLC
	 

	 	TSI WHITE PLAINS CITY CENTER, LLC
	 

	 	TSI WHITE PLAINS, LLC
	 

	 	TSI WHITESTONE, LLC
	 

	 	TSI WOODMERE, LLC,

      each as an Assignor






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Pyle
 

Name: Richard Pyle
	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 






(v)









 






Accepted and Agreed to:




DEUTSCHE BANK TRUST COMPANY

AMERICAS, as Collateral Agent




	 	 	 	 	 
	By:

	 	/s/ Carin Keegan
 

Name: Carin Keegan
	 	 
	 

	 	Title:   Vice President	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mary Kay Coyle	 	 
	 

	 	 	 	 
	 

	 	Name: Mary Kay Coyle	 	 
	 

	 	Title:   Managing Director	 	 
	 
	 	 	 	 
	DEUTSCHE BANK TRUST COMPANY AMERICAS, in its
individual capacity
for purposes of Section 3.9(c)	 	 
	 
	 	 	 	 
	By:

	 	Carin Keegan	 	 
	 

	 	 	 	 
	 

	 	Name: Carin Keegan	 	 
	 

	 	Title:   Vice President	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mary Kay Coyle	 	 
	 

	 	 	 	 
	 

	 	Name: Mary Kay Coyle	 	 
	 

	 	Title:   Managing Director	 	 







(vi)