Exhibit 10.2





Exhibit
10.2

 




FIRST LIEN

AMENDED AND RESTATED

GUARANTEE AND COLLATERAL AGREEMENT



made by


NBC HOLDINGS CORP.,


NBC ACQUISITION CORP.,


NEBRASKA BOOK COMPANY, INC.


and


CERTAIN OF THEIR SUBSIDIARIES


in favor of


JPMORGAN CHASE BANK, N.A.,

as Administrative Agent



Dated as of February 13, 1998,



as amended and restated as of December 10, 2003 and as further amended


and restated as of March 4, 2004 and as of October 2, 2009


 









 



 




TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	 
	 	 	 	 
	SECTION 1. DEFINED TERMS
	 	 	2	 
	1.1   Definitions
	 	 	2	 
	1.2   Other Definitional Provisions
	 	 	7	 
	 
	 	 	 	 
	SECTION 2. GUARANTEE
	 	 	7	 
	2.1   Guarantee
	 	 	7	 
	2.2   Right of Contribution
	 	 	8	 
	2.3   No Subrogation
	 	 	8	 
	2.4   Amendments, etc. with respect to the Borrower Obligations
	 	 	9	 
	2.5   Guarantee Absolute and Unconditional
	 	 	9	 
	2.6   Reinstatement
	 	 	10	 
	2.7   Payments
	 	 	10	 
	 
	 	 	 	 
	SECTION 3. GRANT OF SECURITY INTEREST
	 	 	10	 
	 
	 	 	 	 
	SECTION 4. REPRESENTATIONS AND WARRANTIES
	 	 	12	 
	4.1   Representations in Credit Agreement
	 	 	12	 
	4.2   Title; No Other Liens
	 	 	12	 
	4.3   Perfected First Priority Liens
	 	 	12	 
	4.4   Jurisdiction of Organization; Chief Executive Office
	 	 	13	 
	4.5   Collateral Locations
	 	 	13	 
	4.6   Farm Products
	 	 	13	 
	4.7   Investment Property
	 	 	13	 
	4.8   Accounts and Chattel Paper
	 	 	14	 
	4.9   Intellectual Property
	 	 	14	 
	4.10   Deposit Accounts
	 	 	15	 
	4.11   Letter-of-Credit Rights and Chattel Paper
	 	 	15	 
	4.12   Inventory
	 	 	15	 
	4.13   Commercial Tort Claims
	 	 	15	 
	4.14   Vehicles
	 	 	16	 
	 
	 	 	 	 
	SECTION 5. COVENANTS
	 	 	16	 
	5.1   Covenants in Credit Agreement
	 	 	16	 
	5.2   Delivery of Instruments, Certificated Securities and Chattel Paper
	 	 	16	 
	5.3   Maintenance of Perfected Security Interest; Further Documentation
	 	 	16	 
	5.4   Changes in Locations, Name, etc.
	 	 	17	 
	5.5   Notices
	 	 	17	 
	5.6   Investment Property
	 	 	17	 
	5.7   Receivables
	 	 	18	 
	5.8   Intellectual Property
	 	 	19	 
	5.9   Maintenance of Inventory
	 	 	20	 
	5.10   Insurance
	 	 	21	 
	5.11   Commercial Tort Claims
	 	 	21	 












 



ii


	 	 	 	 	 
	 	 	Page
	5.12   Letter-of-Credit Rights
	 	 	21	 
	5.13   Collateral Access Agreements
	 	 	22	 
	5.14   Vehicles
	 	 	22	 
	 
	 	 	 	 
	SECTION 6.
COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; 
DEPOSIT ACCOUNTS
	 	 	22	 
	6.1   Collection of Receivables
	 	 	22	 
	6.2   Covenant Regarding New Deposit Accounts; Lock Boxes
	 	 	23	 
	6.3   Application of Proceeds; Deficiency
	 	 	24	 
	6.4   Local Store Accounts
	 	 	24	 
	 
	 	 	 	 
	SECTION 7. REMEDIAL PROVISIONS
	 	 	26	 
	7.1   Certain Matters Relating to Receivables
	 	 	26	 
	7.2   Communications with Obligors; Grantors Remain Liable
	 	 	27	 
	7.3   Pledged Stock
	 	 	28	 
	7.4   Proceeds to be Turned Over To Administrative Agent
	 	 	29	 
	7.5   Application of Proceeds
	 	 	29	 
	7.6   Code and Other Remedies
	 	 	29	 
	7.7   Registration Rights
	 	 	31	 
	7.8   Grantor’s Obligations Upon Default
	 	 	32	 
	7.9   Grant of Intellectual Property License
	 	 	32	 
	7.10   Subordination
	 	 	33	 
	7.11   Deficiency
	 	 	33	 
	 
	 	 	 	 
	SECTION 8. THE ADMINISTRATIVE AGENT
	 	 	33	 
	8.1   Administrative Agent’s Appointment as Attorney-in-Fact, etc.
	 	 	33	 
	8.2   Duty of Administrative Agent
	 	 	35	 
	8.3   Execution of Financing Statements and Other Documents
	 	 	36	 
	8.4   Secured Party Performance of Debtor Obligations
	 	 	36	 
	8.5   Specific Performance of Certain Covenants
	 	 	37	 
	8.6   Authority of Administrative Agent
	 	 	37	 
	 
	 	 	 	 
	SECTION 9. MISCELLANEOUS
	 	 	37	 
	9.1   Amendments in Writing
	 	 	37	 
	9.2   Notices
	 	 	37	 
	9.3   Waivers
	 	 	37	 
	9.4   No Waiver by Course of Conduct; Cumulative Remedies
	 	 	38	 
	9.5   Enforcement Expenses; Indemnification
	 	 	38	 
	9.6   Successors and Assigns
	 	 	39	 
	9.7   Set-Off
	 	 	39	 
	9.8   Counterparts
	 	 	39	 
	9.9   Severability
	 	 	39	 
	9.10   Section Headings
	 	 	39	 
	9.11   Integration
	 	 	39	 
	9.12   Reinstatement
	 	 	40	 
	9.13   GOVERNING LAW
	 	 	40	 
	9.14   Submission To Jurisdiction; Waivers
	 	 	40	 












 



iii


	 	 	 	 	 
	 	 	Page
	9.15   Acknowledgements
	 	 	40	 
	9.16   WAIVER OF JURY TRIAL
	 	 	41	 
	9.17   Additional Grantors
	 	 	41	 
	9.18   Releases
	 	 	41	 
	9.19   Effect of Amendment and Restatement of the Existing Guarantee and Collateral Agreement
	 	 	41	 













 



 




SCHEDULES




	 	 	 
	Schedule 1

	 	Notice Addresses
	Schedule 2

	 	Investment Property
	Schedule 3

	 	Perfection Matters
	Schedule 4

	 	Jurisdictions of Organization and Chief Executive Offices
	Schedule 5

	 	Inventory and Equipment Locations
	Schedule 6

	 	Intellectual Property
	Schedule 7

	 	Existing Prior Liens
	Schedule 8

	 	Vehicles
	Schedule 9

	 	Commercial Tort Claims
	Schedule 10

	 	Deposit Accounts; Lock Boxes
	Schedule 11

	 	Letter-of-Credit Rights; Chattel Paper
	Schedule 12

	 	Local Store Accounts
	 
	 	 
	ANNEXES
	 	 
	Annex 1

	 	Assumption Agreement






EXHIBITS




			
	A

	 	Form of DDA Notification












 



 


FIRST LIEN AMENDED AND RESTATED

GUARANTEE AND COLLATERAL AGREEMENT




          FIRST LIEN AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT, dated as of February 13,
1998, as amended and restated as of December 10, 2003, as further amended and restated as of March
4, 2004 and as of October 2, 2009, made by each of the signatories hereto (together with any other
entity that may become a party hereto as provided herein, the “Grantors”), in favor of
JPMORGAN CHASE BANK, N.A., as collateral agent and administrative agent (in such capacity, the
“Administrative Agent”) for the banks and other financial institutions (the
“Lenders”) from time to time parties to the Credit Agreement, dated as of February 13,
1998, as amended and restated as of December 10, 2003, as further amended and restated as of March
4, 2004 and as of October 2, 2009 (as further amended, supplemented or otherwise modified from time
to time, the “Credit Agreement”), among NBC Holdings Corp. (“SuperHoldings”), NBC
Acquisition Corp. (“Holdings”), Nebraska Book Company, Inc. (the “Borrower”), the
Lenders, the Administrative Agent and the other agents party thereto and the other Secured Parties
(as hereinafter defined).




W I T N E S S E T H:




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




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




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




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




          WHEREAS, the Borrower and certain of the other Grantors and the Administrative Agent are
parties to the Guarantee and Collateral Agreement, dated as of February 13, 1998, as amended and
restated as of December 10, 2003 and as further amended and restated as of March 4, 2004 (the
“Existing Guarantee and Collateral Agreement”), and executed in connection with the
Existing Credit Agreement (as such term is defined in the Credit Agreement); and




          WHEREAS, it is a condition precedent to the effectiveness of the amendment and restatement of
the Existing Credit Agreement and the obligation of the Lenders to make their respective extensions
of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties;










 



2




          NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and
certain of the other Secured Parties to enter into the amendment and restatement of the Existing
Credit Agreement and to induce the Lenders to make their respective extensions of credit to the
Borrower under the Credit Agreement, each Grantor hereby agrees with the Administrative Agent, for
the ratable benefit of the Secured Parties, that, upon the effectiveness of this Agreement, the
Existing Guarantee and Collateral Agreement is hereby amended and restated in its entirety as
follows:




SECTION
1.    DEFINED TERMS




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




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





     “Account Debtor”: any obligor with respect to an Account.




     “ACH”: automated clearing house transfers.




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




     “Borrower Obligations”: the collective reference to (i) the unpaid principal
of and interest on the Loans and Reimbursement Obligations, (ii) all other obligations and
liabilities of the Borrower (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable rate provided in the
Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) to the
Administrative Agent or any Lender (or, in the case of any Swap Obligations, any Affiliate
of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or
now existing or hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, this Agreement, the other Loan Documents, any Letter of Credit or any
Swap Agreement entered into by the Borrower with any Lender (or any Affiliate of any Lender)
or any other document made, delivered or given in connection therewith, (iii) all Swap
Obligations of each Loan Party and (iv) all Banking Service Obligations of each Loan Party,
in each case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by the Borrower pursuant to the
terms of any of the foregoing agreements).









 



3





     “Collateral”: as defined in Section 3.




     “Collateral Deposit Account”: as defined in Section 6.1(a).




     “Collateral Report”: any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the Administrative Agent
or any Secured Party with respect to the Collateral pursuant to any Loan Document.




     “Collection Account”: as defined in Section 6.1(b).




     “Concentration Account”: as defined in Section 6.4 (e).




     “Contingent Obligations”: any contingent indemnification obligations for which
no claim has been made, it being understood the following and similar obligations shall not
constitute Contingent Obligations: (a) the principal of, and interest and premium (if any)
on, and fees and expenses relating to, any Obligation and (b) contingent reimbursement
obligations in respect of amounts that may be drawn under outstanding Letters of Credit.




     “Control”: has the meaning set forth in Article 8 of the UCC or, if
applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.




     “Copyrights”: (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished (including, without limitation, those listed in
Schedule 6), all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and applications in
the United States Copyright Office, and (ii) the right to obtain all renewals thereof.




     “Copyright Licenses”: all agreements, whether written or oral, naming any
Grantor as licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without limitation
(a) the grant of rights to manufacture, distribute, exploit and sell materials derived from
any Copyright, (b) all rights to income, royalties, Proceeds, damages, claims, and payments
now or hereafter due or payable under and with respect thereto, including, without
limitation, damages and payments for past, present and future breaches thereof, and (c) all
rights to sue for past, present, and future breaches thereof.




     “DDA”: means each checking, savings or other Deposit Account maintained by any
of the Grantors. All funds in each DDA shall be presumed to be Collateral and proceeds of
Collateral, and the Administrative Agent and the other Secured Parties shall have no duty to
inquire as to the source of the amounts on deposit in any DDA.




     “DDA Notification”: as defined in Section 6.4(a)(i).









 



4



     “Deposit Account”: as defined in the UCC and, in any event, including without
limitation, any demand, time, savings, passbook or like account maintained with a depository
institution.




     “Deposit Account Control Agreement”: an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among any Loan Party, a banking
institution holding such Loan Party’s funds, and the Administrative Agent with respect to
collection and control of all deposits and balances held in a deposit account maintained by
any Loan Party with such banking institution.




     “Excluded Property”: as defined in Section 3.




     “Guarantor Obligations”: with respect to any Guarantor, the collective
reference to (i) the Borrower Obligations, (ii) all obligations and liabilities of such
Guarantor which may arise under or in connection with this Agreement or any other Loan
Document to which such Guarantor is a party, (iii) all Banking Service Obligations of such
Guarantor and (iv) all Swap Obligations of such Guarantor, in each case whether on account
of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Loan Document).




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




     “Intellectual Property”: the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including, without limitation, the Copyrights,
the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark
Licenses, trade secrets, confidential or proprietary technical and business information,
know-how, show-how or other data or information and all related documentation, and all
rights to sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.




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




     “Investment Property”: the collective reference to (i) all “investment
property” as such term is defined in Section 9-102(a)(49) of the New York UCC and (ii)
whether or not constituting “investment property” as so defined, all Pledged Notes and all
Pledged Stock.




     “Issuers”: the collective reference to each issuer of a Pledged Stock.




     “Local Blocked Account Agreement”: with respect to an account established by a
Grantor, an
agreement, in form and substance reasonably satisfactory to the Administrative Agent,
establishing Control of such account by the Administrative Agent and whereby the bank
maintaining such account agrees, during any Trigger Period, to comply only
with the instructions originated by the Administrative Agent without the further
consent of any Grantor.









 



5





     “Local Blocked Account Bank”: each bank with whom Deposit Accounts are
maintained in which any funds of any of the Grantors from one or more DDAs are concentrated
and with whom a Local Blocked Account Agreement has been, or is required to be, executed in
accordance with the terms hereof.




     “Local Blocked Accounts”: as defined in Section 6.4(a)(iii).




     “Lock Boxes”: as defined in Section 6.1(a).




     “Lock Box Agreements”: as defined in Section 6.1(a).




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




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




     “Patents”: (i) all letters patent of the United States, any other country or
any political subdivision thereof, all reissues and extensions thereof and all goodwill
associated therewith, including, without limitation, any of the foregoing referred to in
Schedule 6, (ii) all applications for letters patent of the United States or any
other country and all divisions, continuations and continuations-in-part thereof, including,
without limitation, any of the foregoing referred to in Schedule 6, and (iii) all
rights to obtain any reissues or extensions of the foregoing.




     “Patent License”: (a) all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent, including, without limitation, any of the foregoing
referred to in Schedule 6, (b) all income, royalties, Proceeds, damages, claims, and
payments now or hereafter due or payable under and with respect thereto, including, without
limitation, damages and payments for past, present and future breaches thereof, and (c) all
rights to sue for past, present, and future breaches thereof.




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




     “Pledged Stock”: the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or granted to,
or held by, any Grantor while this Agreement is in effect.




     “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the Uniform Commercial Code in effect in the State of New York and, in any event, shall
include, without limitation, all dividends or other income from the Investment
Property, collections thereon or distributions or payments with respect thereto.










 



6





     “Receivable”: any Account, Chattel Paper, Document, Instrument or other right
to payment for goods sold or leased or for services rendered, whether or not such right is
evidenced by an Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).




     “Secured Parties”: the collective reference to (i) the Administrative Agent,
(ii) the Lenders (including, without limitation, any Issuing Lender and any Swing Line
Lender), (iii) any other holder from time to time of any of the Obligations and Guarantor
Obligations and (iv) the permitted successors and assigns of any of the foregoing.




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




     “Standstill Period”: any Buy-Fund Availability Period during which (a) a Cash
Dominion Period has occurred and is continuing and (b) Availability is equal to or greater
than the greater of (i) 20.0% of the Total Revolving Credit Commitments and (ii)
$15,000,000, in each case for the relevant portion of such Cash Dominion Period.




     “Store”: any retail store (which may include any real property, fixtures,
equipment, inventory and other property related thereto) operated, or to be operated, by any
Grantor.




     “Trademarks”: (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos, domain names
and other source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, or otherwise, and all common law rights
related thereto, including, without limitation, any of the foregoing referred to in
Schedule 6, and (ii) the right to obtain all renewals thereof.




     “Trademark License”: (a) any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including, without
limitation, any of the foregoing referred to in Schedule 6, (b) all income,
royalties, Proceeds, damages, claims, and payments now or hereafter due or payable under and
with respect thereto, including, without limitation, damages and payments for past, present
and future breaches thereof, and (c) all rights to sue for past, present, and future
breaches thereof.




     “Trigger Event”: (a) the occurrence and continuance of an Event of Default or
(b) the failure of the Borrower to maintain Availability at least equal to the greater of
(i) 20.0% of the Total Revolving Credit Commitments and (ii) $15,000,000, in each case for
the relevant portion of such Cash Dominion Period. The failure under clause (b) hereof is
referred to herein as an “Availability Event”.









 



7



     “Trigger Period”: the period beginning upon the occurrence of a Trigger Event
and ending on (a) if such Trigger Event arises as a result of an Event of Default, the date
such Event of Default is waived in accordance with the Credit Agreement, or (b) if such
Trigger Event arises as a result of an Availability Event, the date Availability has equaled
or exceeded the greater of (i) 25% of the Total Revolving Credit Commitments and (ii)
$18,750,000, in each case for a period of 60 consecutive days; provided, however, that if
any Trigger Event shall have occurred and the resulting Trigger Period ended for any reason
hereunder on three (3) occasions, the Trigger Period for any subsequent (fourth) Trigger
Event shall be unlimited in duration and such Trigger Period shall continue for the
remainder of the term of this Agreement.




     “Trigger Period Accounts”: as defined in Section 6.4(d).




     “UCC”: the Uniform Commercial Code, as in effect from time to time, of the
State of New York or of any other state the laws of which are required as a result thereof
to be applied in connection with the attachment, perfection or priority of, or remedies with
respect to, Administrative Agent’s Lien on any Collateral.




     “Vehicles”: all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state and, in any
event including, without limitation, the vehicles listed on Schedule 8 and all tires and
other appurtenances to any of the foregoing.



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




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




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




SECTION 2.    GUARANTEE




          2.1   Guarantee. (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties and their
respective successors, indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise)
of the Borrower Obligations.




          (b)   Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum
liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed
the amount which can be guaranteed by such Guarantor
under









 



8



applicable federal and state laws relating to the insolvency of debtors (after giving
effect to the right of contribution established in Section 2.2).




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




          (d)   The guarantee contained in this Section 2 shall remain in full force and effect until (i)
all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in
this Section 2 shall have been satisfied by payment in full, (ii) no Letter of Credit shall be
outstanding (except to the extent such Letter of Credit shall have been cash collateralized to the
reasonable satisfaction of the Issuing Lender) and (iii) the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be
free from any Borrower Obligations.




          (e)   No payment made by the Borrower, any of the Guarantors, any other guarantor or any other
Person or received or collected by the Administrative Agent or any other Secured Party from the
Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release
or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or
any payment received or collected from such Guarantor in respect of the Borrower Obligations),
remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder
until the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding (except
to the extent such Letter of Credit shall have been cash collateralized to the reasonable
satisfaction of the Issuing Lender) and the Commitments are terminated.




          2.2   Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to
the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect
limit the obligations and liabilities of any Guarantor to the Administrative Agent and the other
Secured Parties, and each Guarantor shall remain liable to the Administrative Agent and other
Secured Parties for the full amount guaranteed by such Guarantor hereunder.




          2.3   No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of
funds of any Guarantor by the Administrative Agent or any other Secured Party, no Guarantor shall
be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured
Party against the Borrower or any other Guarantor or any collateral security or guarantee or right
of offset held by the Administrative Agent or any other Secured Party for the payment of the
Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower or
any other Guarantor in respect of payments made by such








 



9



Guarantor hereunder, until all amounts
owing to the Administrative Agent and the other Secured Parties by the Borrower on account of the
Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments
are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Borrower Obligations shall not have been paid in full (other than the
Contingent Obligations), such amount shall be held by such Guarantor in trust for the
Administrative Agent and the other Secured Parties, segregated from other funds of such Guarantor,
and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative
Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured,
in such order as the Administrative Agent may determine.




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




          2.5   Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by the Administrative Agent or any
other Secured Party upon the guarantee contained in this Section 2 or acceptance of the guarantee
contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the other Secured Parties,
on the other hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or
enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or








 



10



any other
collateral security therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any other Secured Party, (b) any defense,
set-off or counterclaim (other than a defense of payment or performance) which may at any time be
available to or be asserted by the Borrower or any other Person against the Administrative Agent or
any other Secured Party, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of
such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent or any other Secured Party may, but shall be under
no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against any collateral
security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from the Borrower, any other
Guarantor or any other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other
Person or any such collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the Administrative Agent or
any other Secured Party against any Guarantor. For the purposes hereof “demand” shall include the
commencement and continuance of any legal proceedings.




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




          2.7   Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative
Agent without set-off or counterclaim in Dollars at the office of the Administrative Agent located
at 270 Park Avenue, New York, New York 10017.




SECTION 3.    GRANT OF SECURITY INTEREST




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










 



11




          (a)   all Accounts;




          (b)   all Chattel Paper;




          (c)   all Commercial Tort Claims with respect to matters listed on Schedule 8;




          (d)   all Deposit Accounts (including all cash and other items deposited therein or credited
thereto);




          (e)   all Documents;




          (f)   all Equipment;




          (g)   all Fixtures;




          (h)   all General Intangibles;




          (i)   all Goods;




          (j)   all Instruments;




          (k)   all Intellectual Property;




          (l)   all Inventory;




          (m)   all Investment Property;




          (n)   all letters of credit, Letter-of-Credit Rights and Supporting Obligations;




          (o)   all Pledged Collateral;




          (p)   upon the making of a reasonable request by the Administrative Agent, all Vehicles and
title documents with respect to Vehicles;




          (q)   all cash or cash equivalents;




          (r)   all other property not otherwise described above;




          (s)   all books and records, customer lists, credit files, computer files, programs, printouts
and other computer materials and records related thereto pertaining to the Collateral; and




          (t)   to the extent not otherwise included, all accessions to, substitutions for and
replacements, Proceeds and products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing;




          provided, however, that notwithstanding any of the other provisions set forth
in this Section 3, this Agreement shall not constitute a grant of a security interest in (a) any
property to the extent that such grant of a security interest (i) is prohibited by any Requirements
of Law of








 



12



a Governmental Authority, (ii) requires a consent not obtained of any Governmental
Authority pursuant to such Requirement of Law or (iii) is prohibited by, or constitutes a breach or
default under or results in the termination of or requires any consent not obtained under, any
contract, license, agreement, instrument or other document evidencing or giving rise to such
property or, in the case of any Investment Property, Pledged Stock or Pledged Note, any applicable
shareholder or similar agreement, except to the extent that such Requirement of Law or the term in
such contract, license, agreement, instrument or other document or shareholder or similar agreement
providing for such prohibition, breach, default or termination or requiring such consent is
ineffective under applicable law and (b) more than 65% of the voting Capital Stock of any Foreign
Subsidiary directly owned by any Grantor (any property described in this proviso clause being
referred to herein as “Excluded Property”); provided that Excluded Property shall not
include Proceeds, substitutions or replacements of any Excluded Property (unless such Proceeds,
substitutions or replacements would constitute Excluded Property).




SECTION 4.    REPRESENTATIONS AND WARRANTIES




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




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




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




          4.3   Perfected First Priority Liens. The security interests granted pursuant to this Agreement upon completion of the filings and
other actions specified on Schedule 3 (which, in the case of all filings and other
documents referred to on said schedule, have been delivered to the Administrative Agent in
completed and, where applicable, duly executed form) constitute valid perfected security interests
in all of the Collateral (excluding items 3(d) (until the
agreements set forth in Section 6.1(a) are satisfied), 3(p) (until the agreements set forth in
Section 5.14 are satisfied) and 3(r)) in favor of the Administrative Agent, for the ratable benefit
of the Secured Parties, as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any Persons purporting








 



13




to purchase any Collateral from such Grantor and are prior to all other Liens on the Collateral in
existence on the date hereof except for (i) unrecorded Liens permitted by the Credit Agreement
which have priority over the Liens on the Collateral by operation of law and (ii) Liens described
on Schedule 7.




          4.4   Jurisdiction of Organization; Chief Executive Office. On the date hereof, such Grantor’s jurisdiction of organization, identification number from the
jurisdiction of organization (if any), federal employer identification number and the location and
mailing address of such Grantor’s chief executive office or sole place of business or principal
residence, as the case may be, are specified on Schedule 4. Such Grantor has furnished to
the Administrative Agent a certified charter, certificate of incorporation or other organization
document and long form good standing certificate as of a date which is recent to the date hereof.
The name in which it has executed this Agreement is the exact name as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization.
Such Grantor has not, during the past year, (i) except as described on Schedule 4, been a
party to any acquisition, merger or consolidation or (ii) other than as set forth in Schedule
4, had any other legal name.




          4.5   Collateral Locations. On the date hereof, the Inventory, the Equipment (other than mobile goods) and all other
material Collateral are kept at the locations listed on Schedule 5. All of said locations are
owned by such Grantor except for locations (i) which are leased by the Grantor as lessee and
designated as such in Schedule 5 and (ii) at which Inventory is held in a public warehouse or is
otherwise held by a bailee or on consignment as designated as such in Schedule 5.




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




          4.7   Investment Property. (a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and
outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor.




          (b)   All the shares of the Pledged Stock have been duly and validly issued and are fully paid
and nonassessable.




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




          (d)   Such Grantor is the record and beneficial owner of, and has good and marketable title to,
the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of,
or claims of, any other Person, except the security interest created by this Agreement and Liens
permitted by Section 7.3(m) of the Credit Agreement.










 



14




          4.8   Accounts and Chattel Paper. (a)  The names of the obligors, amounts owing, due dates and other information with respect to
such Grantor’s Accounts and Chattel Paper are and will be correctly stated in all material
respects, at the time furnished, in all records of such Grantor relating thereto and, to the extent
created, in all invoices and Collateral Reports with respect thereto furnished to the
Administrative Agent by such Grantor from time to time. As of the time when each Account or each
item of Chattel Paper arises, such Grantor shall be deemed to have represented and warranted that
such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine
and in all respects what they purport to be.





          (b)   With respect to such Grantor’s Accounts, except (A) as disclosed on the most recent
Collateral Report or (B) with respect to Accounts which were generated or came into existence after
the date of the information of the latest Borrowing Base Certificate required to be delivered to
the Administrative Agent under the Credit Agreement, (i) all such Accounts are Eligible Accounts
Receivable; (ii) all such Accounts represent bona fide sales of Inventory or rendering of services
to Account Debtors in the ordinary course of such Grantor’s business; and (iii) to such Grantor’s
knowledge, there are no facts, events or occurrences that have not been disclosed to the
Administrative Agent which in any way impair the validity or enforceability thereof or would reduce
the amount payable thereunder as shown on such Grantor’s books and records and any invoices,
statements and Collateral Reports with respect thereto.




          (c)   In addition, with respect to its Accounts represented as being Eligible Accounts
Receivable, (i) the amounts shown on all invoices, statements and Collateral Reports with respect
thereto are actually and absolutely owing to such Grantor as indicated thereon and are not in any
way contingent; (ii) no payments have been or shall be made thereon except payments promptly
delivered to a Lock Box or a Collateral Deposit Account to the extent required pursuant to Section
6.1(b); and (iii) to such Grantor’s knowledge, all Account Debtors have the capacity to contract.




          4.9   Intellectual Property. (a)   Schedule 6 lists all applications for federal registration and federally
registered Intellectual Property owned by such Grantor in its own name on the date hereof.




          (b)   On the date hereof, all material Intellectual Property is valid, subsisting, unexpired and
enforceable, has not been abandoned and does not infringe the intellectual property rights of any
other Person.




          (c)   Except as set forth in Schedule 6, on the date hereof, none of the Intellectual
Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is
the licensor or franchisor.




          (d)   No holding, decision or judgment has been rendered by any Governmental Authority which
would limit, cancel or question the validity of, or such Grantor’s rights in, any
Intellectual Property in any respect that could reasonably be expected to have a Material
Adverse Effect.




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









 



15






          4.10   Deposit Accounts. On the date hereof, all of such Grantor’s Deposit Accounts are listed on Schedule 10.




          4.11   Letter-of-Credit Rights and Chattel Paper. On the date hereof, Schedule 11 lists all Letter-of-Credit Rights and Chattel Paper of
such Grantor. All action by such Grantor necessary to protect and perfect the Administrative
Agent’s Lien under the laws of the United States on each item listed on Schedule 11 has
been or, promptly following the Closing Date shall be, duly taken (including the delivery of all
originals and the placement of a legend on all Chattel Paper as required hereunder).




          4.12   Inventory. With respect to any of such Grantor’s Inventory (a) such Inventory (other than Inventory in
transit) is located at one of such Grantor’s locations set forth on Schedule 5, (b) no
Inventory (other than Inventory in transit) is now, or shall at any time or times hereafter be
stored at any other location except as permitted by Sections 5.3(d) and 5.4, (c) such Grantor has
good and marketable title to such Inventory and such Inventory is not subject to any Lien except
for the Lien granted to the Administrative Agent, for the benefit of the Administrative Agent and
Secured Parties, and except for Liens permitted under the Loan Documents, (d) except (A) as
disclosed in the most recent Collateral Report, such Inventory is of good and merchantable quality,
free from any defects or (B) with respect to Inventory which was produced or came into existence
after the date of the information of the latest Borrowing Base Certificate required to be delivered
to the Administrative Agent under the Credit Agreement, (e) such Inventory that constitutes
Collateral is not subject to any licensing, patent, royalty, trademark, trade name or copyright
agreements with any third parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies (other than royalties incurred pursuant
to sale of such Inventory under the licensing agreement related thereto) to any third party upon
such sale or other disposition, (f) such Inventory has been produced in all material respects in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder and (g) the completion of manufacture, sale or other disposition
of such Inventory that constitutes Collateral by the Administrative Agent after the occurrence and
during the continuance of an Event of Default shall not require the consent of any Person (except
as required by applicable law) and shall not constitute a breach or default under any contract or
agreement to which such Grantor is a party or to which such property is subject.




          4.13   Commercial Tort Claims(a) On the date hereof, except to the extent listed in Schedule 9, no Grantor has rights in
any Commercial Tort Claim with potential value in excess of $100,000.




          (b)   Upon the filing of a financing statement covering any Commercial Tort Claim referred to in
paragraph (a) above and Section 5.11 hereof against such Grantor in the jurisdiction specified in
Schedule 3 hereto, the security interest granted in such Commercial Tort Claim will constitute a
valid perfected security interest in favor of the Administrative Agent, for the ratable benefit of
the Secured Parties, as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any
Persons








 



16



purporting
to purchase such Collateral from Grantor, which security interest shall be prior to all other Liens
on such Collateral except for unrecorded liens permitted by the Credit Agreement which have
priority over the Liens on such Collateral by operation of law.




          4.14    Vehicles. Schedule 8 is a complete and correct list of all Vehicles owned by such Grantor on the date
hereof.




SECTION 5.    COVENANTS




          Each Grantor covenants and agrees with the Administrative Agent and the other Secured Parties
that, from and after the date of this Agreement until the Obligations (other than the Contingent
Obligations) shall have been paid in full, no Letter of Credit shall be outstanding (except to the
extent such Letter of Credit shall have been cash collateralized to the reasonable satisfaction of
the Issuing Lender) and the Commitments shall have terminated:




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




          5.2   Delivery of Instruments, Certificated Securities and Chattel Paper. If any amount payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated
Security or Chattel Paper shall be immediately delivered to the Administrative Agent, duly indorsed
in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this
Agreement.




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




          (b)   Such Grantor will furnish to the Administrative Agent and the other Secured Parties from
time to time statements and schedules further identifying and describing the Collateral and other
property of such Grantor and such other reports in connection therewith as the Administrative Agent
may reasonably request, all in reasonable detail.




          (c)   At any time and from time to time, upon the written request of the Administrative Agent,
and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver,
and have recorded, such further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing or continuation statements
under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with
respect to the security interests created hereby and (ii) in the case of Investment Property,
Letter-of-Credit Rights and any other relevant Collateral, taking any actions necessary to enable
the Administrative Agent to obtain Control with respect thereto.











 



17




          (d)   Locations. Such Grantor will deliver an update to Schedule 5 within 15
days after each June 30 and December 31 that will specify each location not set forth on the prior
Schedule 5 such that no material portion of the Collateral (except for Equipment or
Inventory in transit, that has been sold (including sales on consignment or approval in the
ordinary course of business), that is out for repair, that is at other locations for the purpose of
onsite maintenance or repair or any Collateral that is at locations with Collateral less than
$100,000 in aggregate value) owned by it is at any location other than those in such updated
Schedule 5 as of June 30 or December 31, as applicable.




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





     (i)   change its jurisdiction of organization or the location of its chief executive
office or sole place of business or principal residence, as the case may be, or mailing
address from that referred to in Section 4.4;




     (ii)   change its name or organization identification number issued by its state of
organization or type of entity or federal employer identification number; or




     (iii)   change its warehouses or locations at which Collateral is held or stored.



          5.5   Notices. Such Grantor will advise the Administrative Agent and the other Secured Parties promptly, in
reasonable detail, of:




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




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




          5.6   Investment Property. (a)  If such Grantor shall become entitled to receive or shall receive any certificate
(including, without limitation, any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital Stock of any
Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any
shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Administrative Agent and the other Secured Parties, hold the same in
trust for the Administrative Agent and the other Secured Parties and deliver the same forthwith to
the Administrative Agent in the exact form received, duly indorsed by such Grantor to the
Administrative Agent, if required, together with an undated stock power covering such certificate
duly executed in blank by such Grantor and with, if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligations. Any sums paid upon or in respect of the
Investment
Property upon the liquidation or








 



18



dissolution of any Issuer shall be paid over to the Administrative
Agent to be held by it hereunder as additional collateral security for the Obligations, and in case
any distribution of capital shall be made on or in respect of the Investment Property or any
property shall be distributed upon or with respect to the Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held
by it hereunder as additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Investment Property shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the Administrative Agent and the
other Secured Parties, segregated from other funds of such Grantor, as additional collateral
security for the Obligations.




     
     (b)   Without the prior written consent of the Administrative Agent (except pursuant to a
transaction expressly permitted by the Credit Agreement), such Grantor will not (i) vote to enable,
or take any other action to permit, any Issuer to issue any Capital Stock of any nature or to issue
any other securities convertible into or granting the right to purchase or exchange for any Capital
Stock of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of,
or grant any option with respect to, the Investment Property or Proceeds thereof, (iii) create,
incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the
security interests created by this Agreement and Liens permitted by Section 7.3(m) of the Credit
Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the Investment Property or
Proceeds thereof.






     (i)   In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will
be bound by the terms of this Agreement relating to the Investment Property issued by it and
will comply with such terms insofar as such terms are applicable to it, (ii) it will notify
the Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.6(a) with respect to the Investment Property issued by it and (iii)
the terms of Sections 7.3(c) and 7.7 shall apply to it,
mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 7.3(c) or 7.7 with respect to the
Investment Property issued by it.




          5.7   Receivables. (a)  Certain Agreements on Receivables. Other than in the ordinary course of business
consistent with its past practice, such Grantor will not make or agree to make any discount,
credit, rebate or other reduction in the original amount owing on a Receivable or accept in
satisfaction of a Receivable less than the original amount thereof.




  
        (b)   Collection of Receivables. Except as otherwise provided in this Agreement, such
Grantor will collect and enforce, in accordance with its policies in effect from time to time and
in the ordinary course of business, all amounts due or hereafter due to such Grantor under the
Accounts owned by it.










 



19





          (c)   Delivery of Invoices. Such Grantor will deliver to the Administrative Agent
promptly upon its reasonable request after the occurrence and during the continuation of an Event
of Default duplicate invoices with respect to each Account owned by it bearing such language of
assignment as the Administrative Agent shall specify.




 
         (d)   Disclosure of Counterclaims on Receivables. If (i) any material discount, credit
or agreement to make a rebate or to otherwise reduce the amount owing on a material amount of
Eligible Accounts Receivable or (ii) to the knowledge of such Grantor, any material dispute,
setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to
any such Eligible Account Receivable, such Grantor will timely disclose such fact to the
Administrative Agent. After the occurrence and during the continuance of an Event of Default, such
Grantor shall send the Administrative Agent a copy of each credit memorandum in excess of $100,000
as soon as issued, and such Grantor shall timely report each credit memorandum and each of the
facts required to be disclosed to the Administrative Agent in accordance with this Section 5.7(d)
on the Borrowing Base Certificates submitted by it.





          (e)   Electronic Chattel Paper. In the event such Grantor is or becomes the owner of
any electronic chattel paper such Grantor shall promptly notify the Administrative Agent and, if
requested by the Administrative Agent, shall use commercially reasonable efforts to grant the
Administrative Agent Control of such electronic chattel paper in accordance with the UCC.





          5.8    Intellectual Property. (a)  Such Grantor (either itself or through licensees) will (i) continue to use each material
Trademark on each and every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such Trademark in full force
free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) use such Trademark with the appropriate
notice of registration and all other notices and legends required by applicable Requirements of
Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and use
commercially reasonable efforts to not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way.





          (b)   Such Grantor (either itself or through licensees) will not do any act, or omit to do any
act, whereby any material Patent may become prematurely invalidated, forfeited, abandoned or
dedicated to the public.





          (c)   Such Grantor (either itself or through licensees) (i) will employ each material Copyright
and (ii) will, for each work covered by a material copyright, use copyright notices as required
under applicable copyright laws. Such Grantor will not (either itself or
through licensees) do any act whereby any material portion of the Copyrights may fall into the
public domain.




   
       (d)   Such Grantor (either itself or through licensees) will not do any act that knowingly
infringes the intellectual property rights of any other Person.











 



20





          (e)   Such Grantor will notify the Administrative Agent and the other Secured Parties
immediately if it knows, or has reason to know, that any application or registration relating to
any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or
of any adverse determination or development (including, without limitation, the institution of, or
any such determination or development in, any proceeding in the United States Patent and Trademark
Office, the United States Copyright Office or any court or tribunal in any country) regarding such
Grantor’s ownership of, or the validity of, any material Intellectual Property or such Grantor’s
right to register the same or to own and maintain the same.





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




  
        (g)   Such Grantor will take all reasonable and necessary steps, including, without limitation,
in any proceeding before the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in any other country or any political subdivision thereof,
to maintain and pursue each application (and to obtain the relevant registration) and to maintain
each registration of the material Intellectual Property, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability and payment of
maintenance fees.





          (h)   In the event that any material Intellectual Property is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the Administrative Agent after
it learns thereof and sue for infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such infringement, misappropriation or
dilution.





          (i)   Upon the occurrence and during the continuance of an Event of Default, upon the written
request of the Administrative Agent, each Grantor will use its commercially reasonable efforts to
obtain all consents and approvals necessary for the assignment to the Administrative Agent or its
designee of any license held by such Grantor and to enable the Administrative Agent or its designee
to enforce the security interests granted hereunder.




    
      5.9   Maintenance of Inventory. (a) Returned Inventory. Such Grantor shall promptly report to the Administrative Agent
any return involving an amount in excess of $500,000. Each such report shall indicate the reasons
for the returns and the locations and condition of the returned Inventory. In the event any
Account Debtor returns Inventory to such Grantor when an Event of Default exists, such Grantor,
upon the reasonable request of the
Administrative Agent, shall: (i) hold the returned Inventory intrust for the Administrative Agent; (ii) segregate all








 



21



returned Inventory from all of its other
property; (iii) dispose of the returned Inventory solely according to the Administrative Agent’s
written instructions; and (iv) not issue any credits or allowances with respect thereto without the
Administrative Agent’s prior written consent. All returned Inventory shall be subject to the
Administrative Agent’s Liens thereon.




     
     (b)   Inventory Count. Such Grantor will conduct a physical count of its Inventory
consistent with past practice at least once per fiscal year, and after the occurrence and during
the continuation of an Event of Default, at such other times as the Administrative Agent reasonably
requests. Such Grantor, at its own expense, shall deliver to the Administrative Agent the results
of each physical verification, which such Grantor has made, or has caused any other Person to make
on its behalf, of all or any portion of its Inventory.





          5.10   Insurance. (a) All insurance policies required hereunder and under Section 6.5 of the Credit Agreement in
respect of property or casualty shall name the Administrative Agent (for the benefit of the Secured
Parties) as an additional insured or as loss payee, as applicable, and shall contain loss payable
clauses or mortgagee clauses, through endorsements in form and substance reasonably satisfactory to
the Administrative Agent (i) all proceeds thereunder with respect to any Collateral shall be
applied in accordance with Section 2.9 of the Credit Agreement; (ii) providing that no such
insurance shall be affected by any act or neglect of the insured or owner of the property described
in such policy; and (iii) such policy and loss payable or mortgagee clauses may be canceled,
amended, or terminated only upon at least thirty days prior written notice given to the
Administrative Agent.




 
         (b)   All premiums on any such insurance shall be paid when due by such Grantor, and, if
reasonably requested by the Administrative Agent, copies of the policies shall be delivered to the
Administrative Agent. If such Grantor fails to obtain any insurance as required by this Section,
the Administrative Agent may obtain such insurance at such Grantor’s expense. By purchasing such
insurance, the Administrative Agent shall not be deemed to have waived any Default arising from the
Grantor’s failure to maintain such insurance or pay any premiums therefor. If such Grantor fails
to obtain any insurance as required by this Section, the Administrative Agent may obtain such
insurance at the applicable Grantor’s expense.




  
        5.11   Commercial Tort Claims. Such Grantor shall promptly notify the Administrative Agent of any Commercial Tort Claim with
potential value in excess of $100,000 acquired by it and, unless the Administrative Agent otherwise
consents, such Grantor shall within 30 days of obtaining such interest sign and deliver
documentation reasonably acceptable to the Administrative Agent granting to the Administrative
Agent a first priority security interest in such Commercial Tort Claim (subject to the Liens
permitted under the Loan Documents).





          5.12   Letter-of-Credit Rights. If such Grantor is or becomes the beneficiary of a letter of credit with a value in excess of
250,000, it shall promptly after becoming a beneficiary
notify the Administrative Agent thereof and, at the request of the Administrative Agent (a) use
commercially reasonable efforts to cause the issuer and/or confirmation bank to consent to the
assignment of any Letter-of-Credit Rights in connection with such letter of credit to the
Administrative Agent and (b) agree to direct all payment thereunder to a Deposit Account (which
payments shall then be applied as required by the Credit Agreement).











 



22




          5.13   Collateral Access Agreements Such Grantor shall use commercially reasonable efforts to obtain a Collateral Access Agreement
from the lessor of each leased property, mortgagee of owned property or bailee or consignee with
respect to any warehouse, processor or converter facility or other location where Collateral
consisting of Inventory is stored or located or which is the location of the Borrower’s principal
place of business, which agreement or letter shall provide access rights, contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee, bailee or consignee may assert
against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and
substance to the Administrative Agent. Such Grantor shall timely and fully pay and perform its
obligations in all material respects under all leases and other agreements with respect to each
leased location or third party warehouse where any Collateral is or may be located.




          5.14   Vehicles. To the extent the aggregate value of the Vehicles of the Loan Parties at such time exceeds
$100,000, such Grantor will give the Administrative Agent notice of its acquisition of any Vehicle
and deliver to the Administrative Agent, upon reasonable request, the original of any vehicle title
certificate and provide and/or file all other documents or instruments necessary to have the Lien
of the Administrative Agent noted on any such certificate or with the appropriate state office.
Notwithstanding any other provisions of this Agreement and the other Loan Documents, the Loan
Parties shall not be required to cause Vehicles to be pledged as Collateral if the aggregate value
of the Vehicles of the Loan Parties is less than $100,000 unless an Event of Default has occurred
and is continuing.




SECTION 6.    COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS




          6.1   Collection of Receivables. (a) On or before the 90th day after the Closing Date (or such later date as agreed by the
Administrative Agent in its sole discretion), each Grantor shall (i) execute and deliver to the
Administrative Agent Deposit Account Control Agreements for each Deposit Account (other than (i)
each Deposit Account, the funds in which are used, in the ordinary course of business, solely for
the payment of salaries and wages, workers’ compensation, pension benefits and similar expenses or
taxes related thereto, (ii) each Deposit Account used, in the ordinary course of business, solely
for daily accounts payable and that has an ending daily balance of zero; provided that the
aggregate balance excluded in this clause (ii) shall not exceed $1,000,000 and (iii) each Deposit
Account used in the ordinary course of business for local store accounts (which shall comply with
the provisions of Section 6.4 below)) maintained by such Grantor into which all cash, checks or
other similar payments relating to or constituting payments made in respect of Receivables will be
deposited (a “Collateral Deposit Account”), which Collateral Deposit Accounts as of the
Closing Date are identified as such on Schedule 10, and (ii) establish lock box service
(the “Lock Boxes”) with the banks set forth in Schedule 10, which Lock Boxes shall
be subject to irrevocable lockbox agreements in the form provided by or otherwise reasonably
acceptable to the Administrative
Agent and shall be accompanied by an acknowledgment by the bank where the Lock Box is located of
the Lien of the Administrative Agent granted hereunder and of irrevocable instructions to wire all
amounts collected during any Cash Dominion Period therein to the Collection Account (a “Lock
Box Agreement”). After the Closing Date, each Grantor will comply with the terms of Section
6.2. During any Cash Dominion Period, the Administrative Agent shall have sole access to the Lock
Boxes, and each Grantor shall take all action necessary to grant the Administrative Agent such sole
access. For the avoidance of








 



23



doubt, the
parties hereto hereby agree that so long as a Cash
Dominion Period is not in effect, the applicable Grantor shall have free access to all assets in
any Collateral Deposit Account or other Deposit Account or any securities account and shall be
permitted to withdraw any and all such amounts without any consent from the Administrative Agent or
any other Secured Party.




          (b)   During any Cash Dominion Period, each Grantor shall direct all of its Account Debtors to
forward payments directly to Lock Boxes subject to Lock Box Agreements or a Collateral Deposit
Account. During any Cash Dominion Period, the Administrative Agent shall be authorized to exercise
exclusive control over any Collateral Deposit Account. The Administrative Agent hereby agrees that
it will not deliver a notice exercising exclusive control over a Collateral Deposit Account unless
a Cash Dominion Period has commenced and is continuing and, in addition, will provide any required
notices necessary to any bank or other depository institution reversing any automatic wire
instructions or access limitation instructions at the end of any Cash Dominion Period. At no time
during a Cash Dominion Period shall any Grantor remove any item from a Lock Box or a Collateral
Deposit Account without the Administrative Agent’s prior written consent. If any Grantor should
refuse or neglect to notify any Account Debtor to forward payments directly to a Lock Box subject
to a Lock Box Agreement or Collateral Deposit Account after notice from the Administrative Agent,
the Administrative Agent shall, notwithstanding the language set forth in Section 6.2(b) be
entitled to make such notification directly to Account Debtor. If notwithstanding the foregoing
instructions during any Cash Dominion Period, any Grantor receives any proceeds of any Receivables,
such Grantor shall receive such payments as the Administrative Agent’s trustee, and shall promptly
deposit all cash, checks or other similar payments related to or constituting payments made in
respect of Receivables received by it to a Collateral Deposit Account. During any Cash Dominion
Period, all funds deposited into any Lock Box subject to a Lock Box Agreement or a Collateral
Deposit Account may be swept on a daily basis into a collection account maintained by the Borrower
with the Administrative Agent (the “Collection Account”). During any Cash Dominion Period,
with respect to any Collateral Deposit Account for which a Deposit Account Control Agreement is not
in place or any Lock Boxes for which lock box service has not been established, the applicable
Grantor shall direct all funds deposited in such accounts to be swept on a daily basis into the
Collection Account. The Administrative Agent shall hold and apply funds received into the
Collection Account as provided by the terms of Section 6.3.




          6.2   Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or replacing any Collateral Deposit Account, other Deposit Account (other than
(i) each Deposit Account, the funds in which are used, in the ordinary course of business, solely
for the payment of salaries and wages, workers’ compensation, pension benefits and similar expenses
or taxes related thereto, (ii) each Deposit Account used, in the ordinary course of business,
solely for daily accounts payable and that has an ending daily balance of zero; provided
that the aggregate
balance excluded in this clause (ii) shall not exceed $1,000,000 and (iii) each Deposit Account
used in the ordinary course of business for local store accounts (which shall comply with the
provisions of Section 6.4 below)) or establishing a new Lock Box, each Grantor shall (a) obtain the
consent of the Administrative Agent in writing to the opening of such Collateral Deposit Account,
other Deposit Account or Lock Box and (b) cause each bank or financial institution in which it
seeks to open (i) such Deposit Account, to enter into a Deposit Account Control








 



24



Agreement with the
Administrative Agent in order to give the Administrative Agent Control of such Collateral Deposit
Account, or (ii) such Lock Box, to enter into a Lock Box Agreement with the Administrative Agent in
order to give the Administrative Agent Control of the Lock Box. In the case of Deposit Accounts or
Lock Boxes maintained with Lenders, the terms of such agreement shall be subject to the provisions
of the Credit Agreement regarding setoffs.




          6.3   Application of Proceeds; Deficiency. During any Cash Dominion Period, all amounts deposited in the Collection Account shall be deemed
received by the Administrative Agent in accordance with Section 2.15 of the Credit Agreement and
shall, after having been credited to the Collection Account, be applied (and allocated) by
Administrative Agent in accordance with Section 2.5(b) of the Credit Agreement if no Event of
Default has occurred and is continuing or in accordance with Section 2.15 otherwise; provided that,
so long as no Cash Dominion Period is in effect, collections which are received into the Collection
Account shall be returned promptly to the Borrower. During a Cash Dominion Period triggered as a
result of the occurrence and continuance of an Event of Default, the Administrative Agent shall
require all other cash proceeds of the Collateral, which are not required to be applied to the
Obligations pursuant to Section 2.9 of the Credit Agreement, to be deposited in a special
non-interest bearing cash collateral account with the Administrative Agent and held there as
security for the Secured Obligations. No Grantor shall have any control whatsoever over said cash
collateral account. Any such proceeds of the Collateral shall be applied in the order set forth in
Section 2.15 of the Credit Agreement unless a court of competent jurisdiction shall otherwise
direct. The balance, if any, after all of the Secured Obligations have been satisfied, shall be
deposited by the Administrative Agent into the Borrower’s general operating account with the
Administrative Agent.




          6.4   Local Store Accounts. (a)  each Grantor shall deliver to the Administrative Agent:





     (i)   on or before the 30th day after the Closing Date (or such later date as
agreed by the Administrative Agent in its sole discretion), copies of notifications (each a
“DDA Notification”) substantially in the form of Exhibit A hereto which have been
executed on behalf of such Grantor with respect to each depository institution having a
local store account and listed on Schedule 12 (it being understood that such Schedule shall
be delivered to the Administrative Agent on or before the 10th day after the
Closing Date);




     (ii)   on or before the 90th day after the Closing Date (or such later date as
agreed by the Administrative Agent in its sole discretion), a fully executed Local Blocked
Account Agreement with respect to the Concentration Account identified to the Administrative
Agent on or before the 10th day after the Closing Date; and




     (iii)   on or before the 90th day after the Closing Date (or such later date
as agreed by the Administrative Agent in its sole discretion), a fully executed Local
Blocked Account Agreement satisfactory in form and substance to the Administrative Agent
with each Local Blocked Account Bank (collectively, the “Local Blocked Accounts”)
identified by the Administrative Agent. Each DDA Notification shall be held











 



25



by the Administrative Agent until the occurrence of a Trigger
Event. After the occurrence and continuance of a Trigger Event, the Administrative Agent may (and,
at the request of the Required Lenders, shall) deliver each such DDA Notification to the applicable
depository institution.




          (b)   During any Cash Dominion Period that is not a Standstill Period, the Grantors shall
transfer by ACH or wire transfer no less frequently than daily (and whether or not there are then
any outstanding Obligations) to a Local Blocked Account all amounts on deposit in each such DDA
(provided that such covenant shall not apply to (i) minimum balances as may be required to be kept
in the subject DDA by the depository institution at which such DDA is maintained or (ii) any
amounts maintained by the Grantors in such DDAs (and other DDAs, with the consent of the
Administrative Agent, not to be unreasonably withheld) in the ordinary course of business
consistent with their past practice).




          (c)   During any Standstill Period, (i) the Local Blocked Account Agreement shall not require
any transfer of any cash receipts or collections, and (ii) each Grantor covenants and agrees to
transfer to a Concentration Account by ACH or wire transfer no less frequently than daily all
amounts on deposit in each such DDA Account in excess of amounts that the Borrower
reasonably deems to be necessary to satisfy projected buy-back obligations at each Store during a
Buy-Fund Availability Period and ordinary course operating expenses consistent with past practice.
In addition to inspection rights permitted under Section 6.6 of the Credit Agreement, the
Administrative Agent shall have the right, upon reasonable prior notice to the Borrower, to audit
and or evaluate, or to cause professionals retained by the Administrative Agent to audit and/or
evaluate, the Borrower’s compliance with this Section 6.4(c), and the Borrower shall pay the
reasonable and documented expenses of the Administrative Agent or such professionals for such
audits and evaluations.




          (d)   Promptly after the first Cash Dominion Period occurs, the Borrower covenants and agrees
that the Grantors will establish one or more special operating accounts (“Trigger Period
Accounts”) that can only be funded with Borrowings of Loans in accordance with clause (f) of
this Section 6.4.




          (e)   During any Trigger Period, each Local Blocked Account Agreement shall require the transfer
by ACH or wire transfer no less frequently than daily (and whether or not there are then any
outstanding Obligations) to one of the concentration accounts designated by the Administrative
Agent (collectively, the “Concentration Accounts”), of all cash receipts and collections,
including, without limitation, the following:





     (i)   all available cash receipts from the sale of Inventory and other Collateral;




     (ii)   all proceeds of collections of Accounts;




     (iii)   all Net Cash Proceeds, and all other cash payments received by a Loan Party;









 



26



     (iv)   from any Person or from any source or on account of any sale or other transaction
or event, including, without limitation, any mandatory prepayment pursuant to Section 2.9 of
the Credit Agreement;




     (v)   the then contents of each DDA (net of any minimum balance, not to exceed $1,000,000
in the aggregate, as may be required to be kept in the subject DDA by the depository
institution at which such DDA is maintained).



          (f)   During any Trigger Period, proceeds of Borrowings may be deposited in Trigger Period
Accounts and the amounts on deposit in such Trigger Period Accounts may only be applied to fund buy
back programs if such Trigger Period occurs during a Buy-Fund Availability Period or, upon the
expiration of the Buy-Fund Availability Period or the occurrence of an Event of Default, to the
prepayment of the Obligations then outstanding under and in accordance with the Credit Agreement;
provided, that, except as otherwise provided in Section 2.15(f) of the Credit Agreement, upon
payment in full of such outstanding Obligations, any remaining amounts will be released and
transferred to a deposit account of the Loan Parties as the Borrower shall direct.




          (g)   The Concentration Account shall at all times be under the sole dominion and control of the
Administrative Agent. The Grantors hereby acknowledge and agree that (i) the Grantors have no right
of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration
Account shall at all times be collateral security for all of the Obligations and (iii) the funds on
deposit in the Concentration Account shall be applied as provided in the Credit Agreement. In the
event that, notwithstanding the provisions of this Section 6.4, any Grantor receives or otherwise
has dominion and control of any such proceeds or collections, such proceeds and collections shall
be held in trust by such Grantor for the Administrative Agent, shall not be commingled with any of
such Grantor’s other funds or deposited in any account of such Grantor and shall, not later than
the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with
in such other fashion as such Grantor may be instructed by the Administrative Agent. During the
continuation of a Trigger Event, the amounts deposited into the Concentration Account shall be
applied to the prepayment of the Obligations then outstanding; provided, that, except as
otherwise provided in Section 2.15(f) of the Credit Agreement, upon payment in full of such
outstanding Obligations, any remaining amounts will be released and transferred to a deposit
account of the Grantors as the Borrower shall direct and the existence of a Trigger Event (other
than as a result of the occurrence of an Event of Default) shall not, in and of itself, impair the
right of the Borrower to Loans in accordance with the terms hereof.




          (h)   Upon the request of the Administrative Agent, the Loan Parties shall cause bank statements
and/or other reports to be delivered to the Administrative Agent not less often than monthly,
accurately setting forth all amounts deposited in each Local Blocked Account to ensure the proper
transfer of funds as set forth above.




SECTION 7.    REMEDIAL PROVISIONS




          7.1   Certain Matters Relating to Receivables. (a)  The Administrative Agent shall have the right to make test verifications of the Receivables
in any
manner and through any medium that it reasonably considers advisable, and each Grantor shall
furnish all such








 



27



assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time, upon the Administrative Agent’s
request and at the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the
Receivables.




          (b)   The Administrative Agent hereby authorizes each Grantor to collect such Grantor’s
Receivables, subject to the Administrative Agent’s direction and control, and the Administrative
Agent may curtail or terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of Receivables, when
collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent if required, in a Collateral Deposit Account maintained under the sole
dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties only as provided in Section 7.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and the other Secured
Parties, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables
shall be accompanied by a report identifying in reasonable detail the nature and source of the
payments included in the deposit. The Grantors and the Administrative Agent recognize that
setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to
certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole
or in part and that the expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In
view of the foregoing, each Grantor agrees that the Administrative Agent may at any time and from
time to time, if an Event of Default has occurred and is continuing, compromise with the obligor on
any Receivable, accept in full payment of any Receivable such amount as the Administrative Agent in
its sole discretion shall determine or abandon any Receivable, and any such action by the
Administrative Agent may be commercially reasonable so long as the Administrative Agent acts in
good faith based on information known to it at the time it takes any such action.




          (c)   At the Administrative Agent’s request, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the agreements and transactions
which gave rise to the Receivables, including, without limitation, all original orders, invoices
and shipping receipts.




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




          (b)   Upon the request of the Administrative Agent at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that
the Receivables have been assigned to the Administrative Agent for
the








 



28



ratable benefit of the
Secured Parties and that payments in respect thereof shall be made directly to the Administrative
Agent.




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




          7.3   Pledged Stock. (a)  Unless an Event of Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the relevant Grantor of the Administrative Agent’s intent to
exercise its corresponding rights pursuant to Section 7.3(b), each Grantor shall be permitted to
receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of
the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and
consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all
voting and corporate or other organizational rights with respect to the Investment Property;
provided, however, that no vote shall be cast or corporate or other organizational right exercised
or other action taken which, in the Administrative Agent’s reasonable judgment, would impair the
Collateral or which would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.




          (b)   If an Event of Default shall occur and be continuing and the Administrative Agent shall
give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the
Administrative Agent shall have the right to receive any and all cash dividends, payments or other
Proceeds paid in respect of the Investment Property and make application thereof to the Obligations
in the order set forth in Section 2.15 of the Credit Agreement, and (ii) any or all of the
Investment Property shall be registered in the name of the Administrative Agent or its nominee, and
the Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other
rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer
or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any
other rights, privileges or options pertaining to such Investment Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at its discretion any
and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate or other organizational structure of any Issuer, or
upon the exercise by any Grantor
or the Administrative Agent of any right, privilege or option pertaining to such Investment
Property, and in connection therewith, the right to deposit and deliver any and all of the
Investment Property with any committee, depositary, transfer








 



29



agent,
registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without
liability except to account for property actually received by it, but the Administrative Agent
shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.




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




          7.4   Proceeds to be Turned Over To Administrative Agent. In addition to the rights of the Administrative Agent and the other Secured Parties specified in
Section 7.1 with respect to payments of Receivables, if an Event of Default shall occur and be
continuing, all Proceeds received by any Grantor consisting of cash, checks and other near-cash
items shall be held by such Grantor in trust for the Administrative Agent and the other Secured
Parties, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by
the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral
Deposit Account maintained under its sole dominion and control. All Proceeds while held by the
Administrative Agent in a Collateral Deposit Account (or by such Grantor in trust for the
Administrative Agent and the other Secured Parties) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until applied as provided
in Section 7.5.




          7.5   Application of Proceeds. At such intervals as may be agreed upon by the Borrower and the Administrative Agent, or, if an
Event of Default shall have occurred and be continuing, at any time at the Administrative Agent’s
election, the Administrative Agent may apply all or any part of Proceeds constituting Collateral,
whether or not held in any Collateral Deposit Account, and any proceeds of the guarantee set forth
in Section 2, in payment of the Obligations in the order set forth in Section 2.15 of the Credit
Agreement.




          7.6   Code and Other Remedies. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the
Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC or any other
applicable law. Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest, advertisement or notice of any
kind (except any notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such circumstances (a)
forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels








 



30



at public or private sale or sales, at any exchange, broker’s board or office of
the Administrative Agent or any other Secured Party or elsewhere upon such terms and conditions as
it may deem advisable and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk, (b) give notice of sole control or any other
instruction under any Deposit Account Control Agreement or other control agreement with any
securities intermediary and take any action therein with respect to such Collateral, (c) with
respect to any Collateral consisting of Intellectual Property, on demand, to cause the security
interest granted herein to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Administrative Agent or to license or sublicense,
whether general, special or otherwise, and whether on an exclusive or a nonexclusive basis, any
such Collateral throughout the world on such terms and conditions and in such manner as the
Administrative Agent shall reasonably determine (other than in violation of any then-existing
licensing arrangements to the extent that waivers thereunder cannot be obtained), and (d)
concurrently with written notice to the applicable Grantor, transfer and register in its name or in
the name of its nominee the whole or any part of the Investment Property, to exchange certificates
or instruments representing or evidencing Investment Property for certificates or instruments of
smaller or larger denominations, and subject to the notice requirements of Section 7.3, to exercise
the voting and all other rights as a holder with respect thereto, to collect and receive all cash
dividends, interest, principal and other distributions made thereon and to otherwise act with
respect to the Investment Property as though the Administrative Agent was the outright owner
thereof. The Administrative Agent or any other Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption
in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees,
at the Administrative Agent’s request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably select, whether at
such Grantor’s premises or
elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 7.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent
and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees
and disbursements, to the payment in whole or in part of the Obligations, in such order as the
Administrative Agent may elect, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law, including, without
limitation, Section 9-615(a)(3) of the New York UCC, need the Administrative Agent account for the
surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives
all claims, damages and demands it may acquire against the Administrative Agent or any other
Secured Party arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other disposition.
Until the Administrative Agent is able to effect a sale, lease, or other disposition of Collateral,
the Administrative Agent shall have the
right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for
the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by
the Administrative Agent. The Administrative Agent may, if it so elects, seek the appointment of a








 



31



receiver or keeper to take possession of Collateral and to enforce any of the Administrative
Agent’s remedies (for the benefit of the Administrative Agent and the Lenders), with respect to
such appointment without prior notice or hearing as to such appointment. Notwithstanding the
foregoing, neither the Administrative Agent nor the Lenders shall be required to (i) make any
demand upon, or pursue or exhaust any of their rights or remedies against, any Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of the Secured
Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral
therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or any guarantee
of the Secured Obligations or to resort to the Collateral or any such guarantee in any particular
order, or (iii) effect a public sale of any Collateral.




          7.7   Registration Rights. (a)  If the Administrative Agent shall determine to exercise its right to sell any or all of the
Pledged Stock pursuant to Section 7.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered
under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to
(i) execute and deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to register the Pledged
Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its
best efforts to cause the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of the Pledged Stock,
or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or “Blue Sky” laws of any and all jurisdictions which
the Administrative Agent shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.




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




          (c)   Each Grantor agrees to use its best efforts to do or cause to be done all such other acts
as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant
to this Section 7.7 valid and binding and in compliance with any and all








 



32



other applicable
Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained
in this Section 7.7 will cause irreparable injury to the Administrative Agent and the other Secured
Parties, that the Administrative Agent and the other Secured Parties have no adequate remedy at law
in respect of such breach and, as a consequence, that each and every covenant contained in this
Section 7.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred under the Credit Agreement.




          7.8   Grantor’s Obligations Upon Default. Upon the request of the Administrative Agent after the occurrence and during the continuance of
an Event of Default, each Grantor will:




          (a)   assemble and make available to the Administrative Agent the Collateral and all books and
records relating thereto at any place or places specified by the Administrative Agent, whether at a
Grantor’s premises or elsewhere; and




          (b)   subject in all cases to any lease or sub-lease agreements and any collateral access
agreements, permit the Administrative Agent, by the Administrative Agent’s representatives and
agents, to enter, occupy and use any premises where all or any part of the Collateral, or the
books and records relating thereto, or both, are located, to take possession of all or any part of
the Collateral or the books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct sales of the
Collateral, without any obligation to pay the Grantor for such use and occupancy.




          7.9   Grant of Intellectual Property License. For the purpose of enabling the Administrative Agent to exercise the rights and remedies under
this Agreement at such time as the Administrative Agent shall be lawfully entitled to exercise such
rights and remedies, each Grantor hereby (a) grants to the Administrative Agent, for the benefit of
the Administrative Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to any Grantor) to use, license or sublicense, on
such terms and conditions as the Administrative Agent shall reasonably determine, any Intellectual
Property rights now owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license access to all media in which any of the licensed items may
be recorded or stored and to all computer software and programs used for the compilation or
printout thereof, the right to prosecute and maintain all Intellectual Property and the right to
sue for past infringement of the Intellectual Property and (b) irrevocably agrees that, at any time
and from time to time following the occurrence and during the continuance of an Event of Default,
the Administrative Agent may sell any of such Grantor’s Inventory directly to any person, including
without limitation persons who have previously purchased the Grantor’s Inventory from such Grantor
and in connection with any such sale or other enforcement of the Administrative Agent’s rights
under this Agreement, may (subject to any restrictions contained in applicable third-party licenses
entered into by a Grantor) sell Inventory which bears any Trademark owned by or licensed to such
Grantor and any Inventory that is covered by any Copyright owned by or licensed to such Grantor and
the Administrative Agent may finish any
work in process and affix any Trademark owned by or licensed to such Grantor and sell such
Inventory as provided herein. The use of the license granted pursuant to clause (a) of the
preceding sentence to the Administrative Agent may be exercised only
upon the occurrence and, at
the option of the Administrative Agent, during the continuance of an
Event of Default; provided, however,








 



33



that any license, sublicense or other transaction entered into
by the Administrative Agent in accordance herewith shall be binding upon each Grantor
notwithstanding any subsequent cure of an Event of Default.




          7.10   Subordination Each Grantor hereby agrees that, upon the occurrence and during the continuance of an Event of
Default, unless otherwise agreed by the Administrative Agent, all Indebtedness owing by it to any
Subsidiary of the Borrower shall be fully subordinated to the indefeasible payment in full in cash
of such Grantor’s Obligations.




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




SECTION
8.    THE ADMINISTRATIVE AGENT




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





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




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




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









 



34



     (iv)   execute, in connection with any sale provided for in Section 7.6 or 7.7, any
indorsements, assignments or other instruments of conveyance or transfer with respect to the
Collateral;




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




     (vi)   TO ACT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 8.1 ABOVE) WITH
RESPECT TO ITS INVESTMENT PROPERTY, INCLUDING THE RIGHT TO VOTE SUCH INVESTMENT PROPERTY,
WITH FULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT TO VOTE ANY SUCH
INVESTMENT PROPERTY, THE APPOINTMENT OF THE ADMINISTRATIVE AGENT AS PROXY AND
ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES
AND REMEDIES TO WHICH A HOLDER OF SUCH INVESTMENT PROPERTY WOULD BE ENTITLED (INCLUDING
GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND
WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SUCH
INVESTMENT PROPERTY ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING
THE ISSUER OF SUCH INVESTMENT PROPERTY OR ANY OFFICER OR AGENT THEREOF), ONLY









 



35



UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT 
OF A DEFAULT AND UPON PRIOR WRITTEN NOTICE
TO THE GRANTORS.



     Anything in this Section 8.1(a) to the contrary notwithstanding, the Administrative Agent
agrees that it will not exercise any rights under the power of attorney provided for in this
Section 8.1(a) unless an Event of Default shall have occurred and be continuing.



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




          (c)   The expenses of the Administrative Agent incurred in connection with actions undertaken as
provided in this Section 8.1, together with interest thereon at a rate per annum equal to the rate
per annum at which interest would then be payable on past due Revolving Credit Loans that are Base
Rate Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative
Agent on demand.




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




          8.2
  Duty of Administrative Agent. The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9.207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with
similar property for its own account. Neither the Administrative Agent, any other Secured Party
nor any of their respective officers, directors, employees or agents shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor
or any other Person or to take any other action whatsoever with regard to the Collateral or any
part thereof. The powers conferred on the Administrative Agent and the other Secured Parties
hereunder are solely to protect the Administrative Agent’s and the other Secured Parties’ interests
in the Collateral and shall not impose any duty upon the Administrative Agent or any other Secured
Party to exercise any such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall be responsible to
any Grantor for any act or failure to act hereunder, except for their own gross negligence or
willful misconduct. To the extent that applicable law imposes duties on the Administrative Agent
to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that
it may be commercially reasonable for the Administrative Agent (i) to fail to incur expenses deemed
significant by the Administrative Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by applicable law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail








 



36



 to exercise collection remedies against Account Debtors or other Persons obligated on
Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise
collection remedies against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same
business as such Grantor, for expressions of interest in acquiring all or any portion of such
Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capacity of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase
insurance or credit enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate
by the Administrative Agent, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section
8.1 is to provide non-exhaustive indications of what actions or omissions by the Administrative
Agent may be commercially reasonable in the Administrative Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this Section 8.1. Without
limitation upon the foregoing, nothing contained in this Section 8.1 shall be construed to grant
any rights to any Grantor or to impose any duties on the Administrative Agent that would not have
been granted or imposed by this Agreement or by applicable law in the absence of this Section 8.1.




          8.3
  Execution of Financing Statements and Other Documents. Pursuant to any applicable law, each Grantor authorizes the Administrative Agent to file or
record financing statements and other filing or recording documents or instruments with respect to
the Collateral without the signature of such Grantor in such form and in such offices as the
Administrative Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement and, if applicable, to maintain Control of Collateral.
Each Grantor authorizes the Administrative Agent to use the collateral description “all personal
property” in any such financing statements. Each Grantor hereby ratifies and authorizes the filing
by the Administrative Agent of any financing statement with respect to the Collateral made prior to
the date hereof.




          8.4
  Secured Party Performance of Debtor Obligations. Without having any obligation to do so, the Administrative Agent may, after the occurrence and
during the continuance of an Event of Default, or, in respect of any Protective Advance only, as
permitted by Section 2.23 of the Credit Agreement, perform or pay any obligation which any Grantor
has agreed to perform or pay in this Agreement and the Grantors shall reimburse the Administrative
Agent for any amounts paid by the Administrative Agent pursuant to this Section 8.4. The
Grantors’ obligation to reimburse the Administrative Agent pursuant to the preceding sentence shall
be a Secured Obligation payable on demand.










 



37




          8.5
  Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections
5, 6, 7.1, 7.2, 7.3 and 7.4 will cause irreparable injury to the Administrative Agent and the
Lenders, that the Administrative Agent and Lenders have no adequate remedy at law in respect of
such breaches and therefore agrees, without limiting the right of the Administrative Agent or the
Lenders to seek and obtain specific performance of other obligations of the Grantors contained in
this Agreement, that the covenants of the Grantors contained in the Sections referred to in this
Section 8.5 shall, to the extent permitted under applicable law, be specifically enforceable
against the Grantors.




          8.6
  Authority of Administrative Agent. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under
this Agreement with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this Agreement shall, as between
the Administrative Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among them, but, as
between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid authority so to act or
refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.




SECTION 9.    MISCELLANEOUS




          9.1
  Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except in accordance with subsection 10.1 of the Credit Agreement.




          9.2
  Notices. All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder
shall be effected in the manner provided for in subsection 10.2 of the Credit Agreement; provided
that any such notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.




          9.3
  Waivers. To the extent permitted under applicable law, each Grantor hereby waives notice of the time and
place of any public sale or the time after which any private sale or other disposition of all or
any part of the Collateral may be made. To the extent such notice may not be waived under
applicable law, any notice made shall be deemed reasonable if sent to the Grantors, addressed as
set forth in Section 9.2, at least ten days prior to (i) the date of any such public sale or (ii)
the time after which any such private sale or other disposition may be made. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and demands against the
Administrative Agent or any Secured Party arising out of the repossession, retention or sale of the
Collateral, except such as arise out of the gross negligence or willful misconduct of the
Administrative Agent or such Lender as finally determined by a court of competent jurisdiction. To
the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes
the benefit and advantage of, and covenants not to assert
against the Administrative Agent or any Lender, any valuation, stay, appraisal, extension,
moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety
now or hereafter existing which, but for this provision, might be applicable to the sale of any








 



38



Collateral made under the judgment, order or decree of any court, or privately under the power of
sale conferred by this Agreement, or otherwise. Except as otherwise specifically provided herein,
each Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Agreement or any Collateral.




          9.4
  No Waiver by Course of Conduct; Cumulative Remedies. Neither the Administrative Agent nor any other Secured Party shall by any act (except by a
written instrument pursuant to Section 9.1), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.
No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or
any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof.
No single or partial exercise of any right, power or privilege hereunder shall preclude any other
or further exercise thereof or the exercise of any other right, power or privilege. A waiver by
the Administrative Agent or any other Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or
such other Secured Party would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.




          9.5   Enforcement Expenses; Indemnification. (a)  Each Guarantor agrees to pay or reimburse each Secured Party, including the Administrative
Agent, for all its reasonable out-of-pocket costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the reasonable fees and disbursements of one counsel (including the
allocated fees and expenses of in-house counsel) to each Secured Party (other than the
Administrative Agent) and of counsel to the Administrative Agent.




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




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




          (d)   The agreements in this Section 9.5 shall survive repayment of the Obligations and all
other amounts payable under the Credit Agreement and the other Loan Documents.










 



39




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




          9.7   Set-Off. Each Grantor hereby irrevocably authorizes the Administrative Agent and each other Secured Party
at any time and from time to time while an Event of Default shall have occurred and be continuing,
without notice to such Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent or such other Secured Party to or
for the credit or the account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such other Secured Party may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such other Secured Party
hereunder and claims of every nature and description of the Administrative Agent or such other
Secured Party against such Grantor, in any currency, whether arising hereunder, under the Credit
Agreement, any other Loan Document or otherwise, as the Administrative Agent or such other Secured
Party may elect, whether or not the Administrative Agent or any other Secured Party has made any
demand for payment and although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each other Secured Party shall notify such Grantor
promptly of any such set-off and the application made by the Administrative Agent or such other
Secured Party of the proceeds thereof, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the Administrative Agent
and each other Secured Party under this Section 9.7 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Administrative Agent or such
other Secured Party may have.




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




          9.9   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.




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




          9.11   Integration. This Agreement and the other Loan Documents represent the agreement of the Grantors, the
Administrative Agent and the other Secured Parties with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations








 



40



or warranties by the
Administrative Agent or any other Secured Party relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the other Loan Documents.




          9.12   Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any
petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor
become insolvent or make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or
returned.




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




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




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




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




          (c)   agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 9.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;




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




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




          9.15   Acknowledgements. Each Grantor hereby acknowledges that:










 



41




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




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




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




          9.16   WAIVER OF JURY TRIAL. EACH OF THE GRANTORS AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.




          9.17   Additional Grantors. Each Subsidiary of the Borrower, Holdings and SuperHoldings that is required to become a party
to this Agreement pursuant to subsection 6.9(c) of the Credit Agreement shall become a Grantor for
all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.




          9.18   Releases. Collateral shall be released from the Lien created by this Agreement to the extent provided in
Section 10.19 of the Credit Agreement.




          9.19   Effect of Amendment and Restatement of the Existing Guarantee and Collateral
Agreement. This Agreement shall be deemed to be an amendment to and restatement of the Existing Guarantee
and Collateral Agreement and the Existing Guarantee and Collateral Agreement as amended and
restated hereby shall remain in full force and effect and is hereby ratified and confirmed in all
respects. All references to the Existing Guarantee and Collateral Agreement in any other agreement
or document shall, on and after the Closing Date, be deemed to refer to the Existing Guarantee and
Collateral Agreement as amended and restated hereby. Each Grantor agrees, acknowledges and affirms
that:





     (i)   each of this Agreement and the other Security Documents to which it is a party
shall remain in full force and effect and shall constitute security for all extensions of
credit pursuant to the Existing Credit Agreement as amended and restated by the Credit
Agreement;




     (ii)   all of its obligations, liabilities and indebtedness under this Agreement and the
other Security Documents to which it is a party remain in full force and effect on a
continuous basis, unpaid, unimpaired, uninterrupted and undischarged, after giving effect to
the amendment and restatement of the Existing Credit Agreement pursuant to the
Credit Agreement and the amendment and restatement of the Existing Guarantee and
Collateral Agreement pursuant to this Agreement;









 



42



     (iii)   all of the Liens and security interests created and arising under this Agreement
and the other Security Documents to which it is a party remain in full force and effect on a
continuous basis, unpaid, unimpaired, uninterrupted and undischarged, and having the same
perfected status and priority, after giving effect to the amendment and restatement of the
Existing Credit Agreement pursuant to the Credit Agreement and the amendment and restatement
of the Existing Guarantee and Collateral Agreement pursuant to this Agreement, as collateral
security for the Obligations; and




     (iv)   any reference to the Existing Guarantee and Collateral Agreement appearing in any Loan
Document shall on and after the Closing Date be deemed to refer to the Existing Guarantee and
Collateral Agreement as amended and restated hereby.









 



43


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




	 	 	 	 	 
	 	NBC HOLDINGS CORP.
NBC ACQUISITION CORP.
NEBRASKA BOOK COMPANY, INC.
NBC TEXTBOOKS LLC
NET TEXTSTORE LLC
COLLEGE BOOKSTORES OF AMERICA, INC.
CAMPUS AUTHENTIC LLC
SPECIALTY BOOKS, INC.

 	 
	 	By:  	/s/
Barry S. Major 
 	 
	 	 	Name:  	Barry S. Major 	 
	 	 	Title:  	President 	 



	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

 	 
	 	By:  	/s/
Eric H. Pratt
 	 
	 	 	Name:  	Eric H. Pratt	 
	 	 	Title:  	Vice President	 
	 










 



 




Schedule 1




NOTICE ADDRESSES OF GUARANTORS











 



 




Schedule 2




DESCRIPTION OF INVESTMENT PROPERTY




Pledged Stock:




	 	 	 	 	 	 	 
	Issuer
	 	Class of Stock
	 	Stock Certificate No.
	 	No. of Shares
	 
	 	 
	 	 
	 	 





Pledged Notes:




	 	 	 	 	 
	Issuer
	 	Payee
	 	Principal Amount
	 
	 	 
	 	 
















 



 




Schedule 3




FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS











 



 




Schedule 4




LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE




	 	 	 
	Grantor
	 	Location
	 
	 	 













 



 




Schedule 5




LOCATION OF INVENTORY AND EQUIPMENT




	 	 	 
	Grantor
	 	Locations
	 
	 	 













 



 




Schedule 6




COPYRIGHTS AND COPYRIGHT LICENSES




PATENTS AND PATENT LICENSES




TRADEMARKS AND TRADEMARK LICENSES










 



 




Schedule 7




EXISTING PRIOR LIENS










 



 




Schedule 8




VEHICLES










 



 




Schedule 9




COMMERCIAL TORT CLAIMS










 



 




Schedule 10




DEPOSIT ACCOUNTS; LOCK BOXES










 



 




Schedule 11




LETTER-OF-CREDIT RIGHTS; CHATTEL PAPER











 



 




ACKNOWLEDGEMENT AND CONSENT1




     The undersigned hereby acknowledges receipt of a copy of the First Lien Amended and Restated
Guarantee and Collateral Agreement, dated as of February 13, 1998, as amended and restated as of
December 10, 2003 and March 4, 2004, and as further amended and restated as of October 2, 2009 (the
“Agreement”; capitalized terms defined in the Agreement and used herein shall have the
meanings given to them in the Agreement), made by the Grantors parties thereto for the benefit of
JPMORGAN CHASE BANK, N.A., as Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the other Secured Parties as follows:



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



     2. The undersigned will notify the Administrative Agent promptly in writing of the occurrence
of any of the events described in Section 5.6(a) of the Agreement.



     3. The
terms of Sections 7.3(a) and 7.7 of the Agreement shall apply to
it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section 7.3(a) or 7.7 of the
Agreement.



	 	 	 	 	 
	 	[NAME OF ISSUER]

 	 
	 	By:  	
 	 
	 	 	Title: 	 
	 
	 	Address for Notices:


Attention:

Fax: 	 





 




			
	1	 	This consent is necessary only with respect to any
Issuer which is not also a Grantor. This consent may be modified or eliminated
with respect to any Issuer that is not controlled by a Grantor. If a consent
is required, its execution and delivery should be included among the conditions
to the initial borrowing specified in the Credit Agreement.










 



 






Annex 1 to

Guarantee and Collateral Agreement




          ASSUMPTION AGREEMENT, dated as of ________________________, 200_, made by
_____________________,
a ________________________ corporation (the “Additional Grantor”), in
favor of JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the
“Administrative Agent”) for the banks and other financial institutions (the
“Lenders”) parties to the Credit Agreement referred to below. All capitalized terms not
defined herein shall have the meaning ascribed to them in such Credit Agreement.




W
I T N E S S E T H :




          WHEREAS, NBC Holdings Corp. (“SuperHoldings”), NBC Acquisition Corp.
(“Holdings”), Nebraska Book Company, Inc. (the “Borrower”), the Lenders and the
Administrative Agent have entered into a Credit Agreement, dated as of February 13, 1998, as
amended and restated as of December 10, 2003 and March 4, 2004, and as further amended and restated
as of October 2, 2009 (as further amended, supplemented or otherwise modified from time to time,
the “Credit Agreement”);




          WHEREAS, in connection with the Credit Agreement, SuperHoldings, Holdings, the Borrower and
certain of their Affiliates (other than the Additional Grantor) have entered into the First Lien
Amended and Restated Guarantee and Collateral Agreement, dated as of February 13, 1998, as amended
and restated as of December 10, 2003 and March 4, 2004, and as further amended and restated as of
October 2, 2009 (as further amended, supplemented or otherwise modified from time to time, the
“Guarantee and Collateral Agreement”) in favor of the Administrative Agent for the benefit
of the Secured Parties;




          WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the
Guarantee and Collateral Agreement; and




          WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in
order to become a party to the Guarantee and Collateral Agreement;




          NOW, THEREFORE, IT IS AGREED:




          1. Guarantee and Collateral Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 9.17 of the Guarantee and Collateral
Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder
with the same force and effect as if originally named therein as a Grantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in Schedules _____________________1 to the Guarantee and Collateral
Agreement. The Additional Grantor hereby represents and warrants that each of the representations
and warranties contained in Section 4 of the Guarantee and Collateral Agreement






 




			
	1	 	Refer to each Schedule which needs to be supplemented.











 



 



is true and correct on and as the date hereof (after giving effect to this Assumption
Agreement) as if made on and as of such date.




          2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.




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




	 	 	 	 	 
	 	[ADDITIONAL GRANTOR]

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title: