EX-10.2



 





Exhibit 10.2



Execution
Version




 





GUARANTEE AND COLLATERAL AGREEMENT




dated as of




January 22, 2008,




among




BUFFETS, INC., a Debtor and Debtor in Possession,




BUFFETS HOLDINGS, INC., a Debtor and Debtor in Possession




the Subsidiaries of BUFFETS, INC.

from time to time party hereto,




and




CREDIT SUISSE,




as Collateral Agent




 






 









 








Table of Contents




	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I.

	 
	 	 	 	 	 	 
	DEFINITIONS

	 
	 	 	 	 	 	 
	SECTION 1.01

	 	Credit Agreement
	 	 	2	 
	SECTION 1.02

	 	Other Defined Terms
	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II.

	 
	 	 	 	 	 	 
	GUARANTEE

	 
	 	 	 	 	 	 
	SECTION 2.01

	 	Guarantee
	 	 	6	 
	SECTION 2.02

	 	Guarantee of Payment
	 	 	6	 
	SECTION 2.03

	 	No Limitations, Etc
	 	 	6	 
	SECTION 2.04

	 	Reinstatement
	 	 	7	 
	SECTION 2.05

	 	Agreement To Pay; Subrogation
	 	 	8	 
	SECTION 2.06

	 	Information
	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE III.

	 
	 	 	 	 	 	 
	PLEDGE OF SECURITIES

	 
	 	 	 	 	 	 
	SECTION 3.01

	 	Pledge
	 	 	8	 
	SECTION 3.02

	 	Delivery of the Pledged Collateral
	 	 	9	 
	SECTION 3.03

	 	Representations, Warranties and Covenants
	 	 	9	 
	SECTION 3.04

	 	Certification of Limited Liability Company and Limited
Partnership Interests
	 	 	11	 
	SECTION 3.05

	 	Registration in Nominee Name; Denominations
	 	 	11	 
	SECTION 3.06

	 	Voting Rights; Dividends and Interest, etc
	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE IV.

	 
	 	 	 	 	 	 
	SECURITY INTERESTS IN PERSONAL PROPERTY

	 
	 	 	 	 	 	 
	SECTION 4.01

	 	Security Interest
	 	 	14	 
	SECTION 4.02

	 	Representations and Warranties
	 	 	15	 
	SECTION 4.03

	 	Covenants
	 	 	18	 
	SECTION 4.04

	 	Other Actions
	 	 	21	 
	SECTION 4.05

	 	Covenants regarding Intellectual Property Collateral
	 	 	23	 






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	 	 	 	 	Page
	ARTICLE V.

	 
	 	 	 	 	 	 
	REMEDIES

	 
	 	 	 	 	 	 
	SECTION 5.01

	 	Remedies upon Default
	 	 	25	 
	SECTION 5.02

	 	Application of Proceeds
	 	 	27	 
	SECTION 5.03

	 	Grant of License to Use Intellectual Property
	 	 	27	 
	SECTION 5.04

	 	Securities Act, etc
	 	 	28	 
	 
	 	 	 	 	 	 
	ARTICLE VI.

	 
	 	 	 	 	 	 
	INDEMNITY, SUBROGATION AND SUBORDINATION

	 
	 	 	 	 	 	 
	SECTION 6.01

	 	Indemnity and Subrogation
	 	 	29	 
	SECTION 6.02

	 	Contribution and Subrogation
	 	 	29	 
	SECTION 6.03

	 	Subordination
	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE VII.

	 
	 	 	 	 	 	 
	MISCELLANEOUS

	 
	 	 	 	 	 	 
	SECTION 7.01

	 	Notices
	 	 	30	 
	SECTION 7.02

	 	Security Interest Absolute
	 	 	30	 
	SECTION 7.03

	 	Survival of Agreement
	 	 	30	 
	SECTION 7.04

	 	Binding Effect; Several Agreement
	 	 	30	 
	SECTION 7.05

	 	Successors and Assigns
	 	 	31	 
	SECTION 7.06

	 	Collateral Agent’s Fees and Expenses; Indemnification
	 	 	31	 
	SECTION 7.07

	 	Collateral Agent Appointed Attorney-in-Fact
	 	 	31	 
	SECTION 7.09

	 	Waivers; Amendment
	 	 	32	 
	SECTION 7.10

	 	WAIVER OF JURY TRIAL
	 	 	33	 
	SECTION 7.11

	 	Severability
	 	 	33	 
	SECTION 7.12

	 	Counterparts
	 	 	33	 
	SECTION 7.13

	 	Headings
	 	 	34	 
	SECTION 7.14

	 	Jurisdiction; Consent to Service of Process
	 	 	34	 
	SECTION 7.15

	 	Termination or Release
	 	 	34	 
	SECTION 7.16

	 	Additional Grantors
	 	 	35	 
	SECTION 7.17

	 	Right of Setoff
	 	 	35	 
	SECTION 7.18

	 	Collateral Delivered under the Existing Credit Agreement.
	 	 	36	 






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	Schedules
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Schedule I

	 	Subsidiary Guarantors	 	 	 	 
	Schedule II

	 	Equity Interests; Pledged Debt Securities	 	 	 	 
	Schedule III

	 	Intellectual Property	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibits
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit A

	 	Form of Supplement	 	 	 	 
	Exhibit B

	 	Form of Perfection Certificate	 	 	 	 






iv









 






     GUARANTEE AND COLLATERAL AGREEMENT dated as of January 22,
2008 (as amended, restated, supplemented or otherwise modified,
this “Agreement”), among BUFFETS, INC., a Minnesota corporation,
as a debtor and debtor in possession under Chapter 11 of the
Bankruptcy Code (the “Borrower”), BUFFETS HOLDINGS, INC., a
Delaware corporation, as a debtor and a debtor in possession under
Chapter 11 of the Bankruptcy Code (“Holdings”), the Subsidiaries
of the Borrower identified herein and CREDIT SUISSE (“Credit
Suisse”), as collateral agent (in such capacity, the “Collateral
Agent”).



     WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Borrower,
Holdings, the lenders from time to time party thereto (collectively, the “Lenders”) and Credit
Suisse, as administrative agent (in such capacity, the “Administrative Agent”) and Collateral
Agent, are entering into a Secured Super-Priority Debtor in Possession Credit Agreement (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”)
dated as of the date of this Agreement, to provide for the making of Loans to and for the benefit
of the Borrower;



     WHEREAS, the Lenders have agreed to extend credit to the Borrower pursuant to, and upon the
terms and conditions specified in, the Credit Agreement;



     WHEREAS, the obligations of the Lenders to extend credit to the Borrower are conditioned upon,
among other things, the execution and delivery of this Agreement by Holdings, the Borrower and the
Subsidiary Guarantors;



     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, in order to induce the Administrative Agent, the Collateral Agent and the Lenders to
enter into the Credit Agreement and the other Loan Documents and to induce the Lenders to make the
Loans as provided for in the Credit Agreement, each Subsidiary Guarantor has agreed to guarantee
the Obligations of the Borrower under the Credit Agreement and each Grantor has agreed to grant a
continuing Lien on the Collateral (as hereinafter defined) to secure the Obligations pursuant to
Sections 364(c) and 364(d) of the Bankruptcy Code;



     WHEREAS, the execution, delivery and performance of this Agreement and the grant of a security
interest, pledge and lien on all of the assets and properties of the



 









 




Grantors and the proceeds thereof to secure the Obligations have been authorized pursuant to
Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code by the Interim Order and, after
the entry thereof, will have been so authorized by the Final Order (collectively, the “Orders”);
and




     WHEREAS, to supplement the Orders without in any way diminishing or limiting the effect of the
Orders or the security interest, pledge and lien granted thereunder, the parties hereto desire to
more fully set forth their respective rights in connection with such security interest, pledge, and
lien;



     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:



ARTICLE I.




Definitions




          SECTION 1.01 Credit Agreement. (a)  Capitalized terms used in this Agreement and not
otherwise defined herein have the meanings specified in the Credit Agreement. All terms defined in
the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified
therein; all references to the Uniform Commercial Code shall mean the New York UCC; the term
“instrument” shall have the meaning specified in Article 9 of the New York UCC.




          (b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to
this Agreement.




          SECTION 1.02 Other Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:




          “Account Debtor” means any person who is or who may become obligated to any Grantor under,
with respect to or on account of an Account.




          “Accounts Receivable” shall mean all Accounts and all right, title and interest in any
returned goods, together with all rights, titles, securities and guarantees with respect thereto,
including any rights to stoppage in transit, replevin, reclamation and resales, and all related
security interests, liens and pledges, whether voluntary or involuntary, in each case whether now
existing or owned or hereafter arising or acquired.




          “Agreement” shall have the meaning assigned to such term in the preamble hereto.




          “Article 9 Collateral” has the meaning assigned to such term in Section 4.01.




          “Collateral” means Article 9 Collateral and Pledged Collateral.




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          “Copyright License” with respect to any Grantor, all agreements (whether or not in writing)
naming such Grantor as licensor or licensee (including those material agreements listed in Schedule
III), granting any right under any Copyright, including the grant of rights to print, publish,
copy, distribute, exploit and sell materials derived from any Copyright.




          “Copyrights” means all (a)  copyrights and copyrightable works, whether or not the underlying
works of authorship have been published or registered, subject to the copyright laws of the United
States or any other country, whether as author, assignee, transferee or otherwise, (b) all
registrations and applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office (or any successor office or any
similar office in any other country), including those listed on Schedule III, (c) the right to sue
or otherwise recover for any and all past, present and future infringements or other violations
thereof, (d) all income, royalties, damages and other payments now and hereafter due and/or payable
with respect thereto (including, without limitation, payments under all licenses entered into in
connection therewith, and damages and payments for past, present or future infringements thereof),
and (e) all other rights of any kind whatsoever accruing thereunder or pertaining thereto.




          “Credit Agreement” has the meaning assigned to such term in the preliminary statement of this
Agreement.




          “Equity Interests” means shares of capital stock, partnership interests, membership interests
in a limited liability company, beneficial interests in a trust or other equity interests in any
person, or any obligations convertible into or exchangeable for, or giving any person a right,
option or warrant to acquire such equity interests or such convertible or exchangeable obligations.




          “General Intangibles” means all choses in action and causes of action and all other intangible
personal property of any Grantor of every kind and nature (other than Accounts) now owned or
hereafter acquired by any Grantor, including all rights and interests in partnerships, limited
partnerships, limited liability companies and other unincorporated entities, corporate or other
business records, indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, hedging agreements and other agreements), Intellectual Property,
goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim,
security interest or other security held by or granted to any Grantor to secure payment by an
Account Debtor of any of the Accounts.




          “Grantors” means Holdings, the Borrower and the Subsidiary Guarantors.




          “Guarantors” means Holdings and the Subsidiary Guarantors.




          “Intellectual Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United




3









 







States, multinational or foreign laws or otherwise, including all Copyrights, Patents,
Trademarks, Trade Secrets, and Licenses and all rights to sue at law or in equity for any past,
present and future infringement, misappropriations, dilutions, or other violations thereof,
including the right to receive all proceeds and damages therefrom.




          “License” means any Patent License, Trademark License, Copyright License, Trade Secret
License, or other license or sublicense agreement to any Intellectual Property or to intellectual
property now owned or hereafter acquired by third parties to which any Grantor is a party,
including those material Licenses listed on Schedule III.




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




          “Obligations” means (a) the due and punctual payment of (i) the principal of and interest
(including interest accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and (ii) all other monetary obligations of the Borrower to any of the
Secured Parties under the Credit Agreement and each of the other Loan Documents, including fees,
costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable in such
proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or
pursuant to the Credit Agreement and each of the other Loan Documents and (c) the due and punctual
payment and performance of all the obligations of each other Loan Party under or pursuant to this
Agreement and each of the other Loan Documents.




          “Patent License” with respect to any Grantor, all agreements (whether or not in writing)
providing for the grant by or to such Grantor of any right to manufacture, use, import, export,
distribute, offer for sale or sell any invention covered in whole or in part by a Patent (including
those material agreements listed on Schedule III).




          “Patents” means (a) all letters patent of the United States or the equivalent thereof in any
other country, all registrations and recordings thereof, and all applications for letters patent of
the United States or the equivalent thereof in any other country, including registrations,
recordings and pending applications in the United States Patent and Trademark Office (or any
successor or any similar offices in any other country), including those listed on Schedule III,
(b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof,
and the inventions disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein, (c) the right to sue or otherwise recover for any and all
past, present and future infringements thereof, (d) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto (including payments under all
licenses entered into in connection therewith, and damages and payments for past, present




4









 







or future infringements thereof), and (e) and all other rights of any kind whatsoever accruing
thereunder or pertaining thereto.




          “Perfection Certificate” means a certificate substantially in the form of Exhibit B, completed
and supplemented with the schedules and attachments contemplated thereby, and duly executed by a
Responsible Officer of the Borrower.




          “Pledged Collateral” has the meaning assigned to such term in Section 3.01.




          “Pledged Debt Securities” has the meaning assigned to such term in Section 3.01.




          “Pledged Securities” means any promissory notes, stock certificates or other securities now or
hereafter included in the Pledged Collateral, including all certificates, instruments or other
documents representing or evidencing any Pledged Collateral.




          “Pledged Stock” has the meaning assigned to such term in Section 3.01.




          “Proceeds” has the meaning specified in Section 9-102 of the New York UCC.




          “Registered Intellectual Property” has the meaning assigned to such term in Section 4.02(e).




          “Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) the Collateral
Agent, (d) the beneficiaries of each indemnification obligation undertaken by any Loan Party under
any Loan Document and (e) the permitted successors and assigns of each of the foregoing.




          “Security Interest” has the meaning assigned to such term in Section 4.01.




          “Subsidiary Guarantors” means (a) the Subsidiaries identified on Schedule I and (b) each other
Subsidiary that becomes a party to this Agreement as a Subsidiary Guarantor after the Closing Date.




          “Trademarks” means all (a) trademarks, service marks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all registration and recording
applications filed in connection therewith, including registrations and registration applications
in the United States Patent and Trademark Office (or any successor office) or any similar offices
in any State of the United States or any other country or any political subdivision thereof, and
all extensions or renewals thereof, including those listed on Schedule III, (b) the right to sue or
otherwise recover for any and all past, present and future infringements and dilutions thereof,
(c) all income, royalties, damages and other payments now and hereafter due




5









 







and/or payable with respect thereto (including payments under all licenses entered into in
connection therewith, and damages and payments for past, present or future infringements and
dilutions thereof), and (d) all other rights of any kind whatsoever accruing thereunder or
pertaining thereto, together in each case with the goodwill of the business connected with the use
of, and symbolized by, each of the above.




          “Trademark License” with respect to any Grantor, any agreement (whether or not in writing)
providing for the grant by or to such Grantor of any right to use any Trademark (including those
material agreements listed on Schedule III).




          “Trade Secrets”: (i) all trade secrets and all confidential information, (ii) the right to sue
or otherwise recover for any and all past, present and future misappropriations thereof, (iii) all
income, royalties, damages and other payments now and hereafter due and/or payable with respect
thereto (including payments under all licenses entered into in connection therewith, and damages
and payments for past, present or future misappropriations thereof), and (iv) all other rights of
any kind whatsoever accruing thereunder or pertaining thereto.




          “Trade Secret License”: with respect to any Grantor, any agreement, whether written or oral,
providing for the grant by or to such Grantor of any right to use any Trade Secret, including any
of the foregoing agreements referred to in Schedule III.




ARTICLE II.




Guarantee




          SECTION 2.01 Guarantee. Each Guarantor unconditionally guarantees, jointly with the
other Guarantors and severally, as a primary obligor and not merely as a surety, the due and
punctual payment and performance of the Obligations. Each of the Guarantors further agrees that
the Obligations may be extended or renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation. Each of the Guarantors waives presentment to, demand of payment from
and protest to the Borrower or any other Loan Party of any of the Obligations, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment.




          SECTION 2.02 Guarantee of Payment. Each of the Guarantors further agrees that its
guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives
any right to require that any resort be had by the Collateral Agent or any other Secured Party to
any security held for the payment of the Obligations or to any balance of any deposit account or
credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or
any other person.




          SECTION 2.03 No Limitations, Etc. (a)  Except for termination of a Guarantor’s
obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or termination for any
reason, including any claim of waiver, release,




6









 







surrender, alteration or compromise, and shall not be subject to any defense (other than a
defense of payment) or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or
impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce any right or remedy under the provisions of any
Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Loan Document or any other agreement, including
with respect to any other Guarantor under this Agreement; (iii) the release of, or any impairment
of or failure to perfect any Lien on or security interest in, any security held by the Collateral
Agent or any other Secured Party for the Obligations or any of them; (iv) any default, failure or
delay, willful or otherwise, in the performance of the Obligations; or (v) any other act or
omission that may or might in any manner or to any extent vary the risk of any Guarantor or
otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the
payment in full in cash of all the Obligations). Each Guarantor expressly authorizes the
Collateral Agent to take and hold security for the payment and performance of the Obligations, to
exchange, waive or release any or all such security (with or without consideration), to enforce or
apply such security and direct the order and manner of any sale thereof in its sole discretion
(unless the Required Lenders direct otherwise) or to release or substitute any one or more other
guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations
of any Guarantor hereunder.




          (b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based
on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of
the Obligations or any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower or any other Loan Party, other than the payment in full in cash of all
the Obligations. The Collateral Agent and the other Secured Parties may, at their election,
foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales,
accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of
the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise
any other right or remedy available to them against the Borrower or any other Loan Party, without
affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the
Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted
by applicable law, each Guarantor waives any defense arising out of any such election even though
such election operates, pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any
other Loan Party, as the case may be, or any security.




          SECTION 2.04 Reinstatement. Each of the Guarantors agrees that its guarantee
hereunder shall continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the
Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower,
any other Loan Party or otherwise.




7









 








          SECTION 2.05 Agreement To Pay; Subrogation. In furtherance of the foregoing and not
in limitation of any other right that the Collateral Agent or any other Secured Party has at law or
in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other
Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will
forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable
Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any
sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower
or any other Guarantor arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.




          SECTION 2.06 Information.  Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and
assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and
the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and
agrees that neither the Collateral Agent nor any other Secured Party will have any duty to advise
such Guarantor of information known to it or any of them regarding such circumstances or risks.




ARTICLE III.




Pledge of Securities




          SECTION 3.01 Pledge. As security for the payment or performance, as the case may be,
in full of the Obligations, each Grantor hereby grants and pledges to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in, all of such Grantor’s right, title and interest in, to and under (a)(i)
the Equity Interests owned by it on the date hereof (including all such Equity Interests listed on
Schedule II) (other than the Equity Interests of any Inactive Subsidiary), (ii) any other Equity
Interests obtained in the future by such Grantor and (iii) the certificates representing all such
Equity Interests (all the foregoing collectively referred to herein as the “Pledged Stock”);
provided that the Pledged Stock shall not include (i) more than 65% of the issued and
outstanding voting Equity Interests and 100% of the issued and outstanding shares of nonvoting
Equity Interests (if any) of any Foreign Subsidiary or (ii) any Equity Interests of any Foreign
Subsidiary owned by a Foreign Subsidiary; (b)(i) the debt securities held by such Grantor on the
date hereof (including all such debt securities listed opposite the name of such Grantor on
Schedule II), (ii) any debt securities in the future issued to such Grantor and (iii) the
promissory notes and any other instruments evidencing such debt securities (all the foregoing
collectively referred to herein as the “Pledged Debt Securities”); (c) all other property that may
be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01;
(d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments
and other property from time to time received,




8









 







receivable or otherwise distributed in respect of, in exchange for or upon the conversion of,
and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b)
above; (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the
securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all
Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the “Pledged Collateral”).




          TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, forever; subject,
however, to the terms, covenants and conditions hereinafter set forth.




          SECTION 3.02 Delivery of the Pledged Collateral. (a)  Each Grantor agrees
concurrently with the delivery of this Agreement, or in the case of Pledged Securities acquired
after the date hereof, promptly after the date of acquisition to deliver or cause to be delivered
to the Collateral Agent any and all certificates, instruments or other documents representing or
evidencing Pledged Securities (other than certificates, instruments or other documents representing
or evidencing Pledged Debt Securities with a face amount less than $200,000 acquired after the date
hereof).




          (b) Each Grantor will cause any Indebtedness for borrowed money in excess of $200,000 owed to
such Grantor by the Borrower or any Subsidiary to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms hereof.




          (c) Upon delivery to the Collateral Agent, (i) any certificate, instrument or document
representing or evidencing Pledged Securities shall be accompanied by undated stock powers duly
executed in blank or other undated instruments of transfer reasonably satisfactory to the
Collateral Agent and duly executed in blank and by such other instruments and documents as the
Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged
Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable
Grantor and such other instruments or documents as the Collateral Agent may reasonably request.
Each delivery of Pledged Securities shall be accompanied by a schedule describing the applicable
securities, which schedule shall be attached hereto as Schedule II and made a part hereof;
provided that failure to attach any such schedule hereto shall not affect the validity of
such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior
schedules so delivered.




          SECTION 3.03 Representations, Warranties and Covenants. The Grantors jointly and
severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the
Secured Parties, that:





     (a) As of the date hereof, Schedule II correctly sets forth the percentage of the
issued and outstanding shares of each class of the Equity Interests of the issuer thereof
represented by such Pledged Stock and includes all



9









 






Equity Interests, debt securities and promissory notes required to be pledged
hereunder;




     (b) the Pledged Stock and, to the best of each Grantor’s knowledge, the Pledged Debt
Securities have been duly and validly authorized and issued by the issuers thereof and (i)
in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of
Pledged Debt Securities, to the best of each Grantor’s knowledge, are legal, valid and
binding obligations of the issuers thereof;




     (c) except for the security interests granted hereunder (or otherwise permitted under
the Credit Agreement), each of the Grantors (i) is and, subject to any transfers made in
compliance with the Credit Agreement, will continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor,
(ii) holds the same free and clear of all Liens (other than Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement), (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security interest in or
other Lien on, the Pledged Collateral, other than Liens created by this Agreement and
transfers made in compliance with the Credit Agreement, and Liens permitted pursuant to
Section 6.02 of the Credit Agreement, and (iv) subject to Section 3.06, will cause any and
all Pledged Collateral (other than Pledged Debt Securities with a face amount less than
$200,000 acquired after the date hereof), whether for value paid by the Grantor or
otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned
hereunder;




     (d) except for restrictions and limitations imposed by the Loan Documents, the Orders
or securities laws generally, as of the date hereof, the Pledged Collateral is and will
continue to be freely transferable and assignable, and none of the Pledged Collateral is or
will be subject to any option, right of first refusal, shareholders agreement, charter or
by-law provisions or contractual restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or
disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and
remedies hereunder;




     (e) upon entry of the Orders, each of the Grantors (i) has the power and authority to
pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or
contemplated and (ii) will defend its title or interest thereto or therein against any and
all Liens (other than the Lien created by this Agreement or Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement or any other Loan Document), however
arising, of all persons whomsoever;




     (f) except for the Orders, no consent or approval of any Governmental Authority, any
securities exchange or any other person was or is necessary to the




10











 






validity of the pledge
effected hereby (other than such as have been obtained and are in full force and effect);




          (g) upon entry of the Orders, by virtue of the execution and delivery by the Grantors
of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in
accordance with this Agreement, the Collateral Agent will obtain a legal, valid and
perfected first priority lien upon and security interest in such Pledged Securities as
security for the payment and performance of the Obligations; and




          (h) upon entry of the Orders, the pledge effected hereby is effective to vest in the
Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the
Collateral Agent in the Pledged Collateral as set forth herein.



          SECTION 3.04 Certification of Limited Liability Company and Limited Partnership Interests.
(a) Each Grantor acknowledges and agrees that (i) each interest in any limited liability company or
limited partnership controlled by such Grantor, pledged hereunder and represented by a certificate
shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by
Article 8 of the New York UCC and (ii) each such interest shall at all times hereafter be
represented by a certificate.




          (b) Each Grantor further acknowledges and agrees that (i) each interest in any limited
liability company or limited partnership controlled by such Grantor, pledged hereunder and not
represented by a certificate shall not be a “security” within the meaning of Article 8 of the New
York UCC and shall not be governed by Article 8 of the New York UCC, (ii) such Grantor has not
elected, and shall at no time elect, to treat any such interest as a “security” within the meaning
of Article 8 of the New York UCC or issue any certificate representing such interest and (iii) the
charter documents of any such limited liability company or limited partnership (A) do not, and
shall not, prohibit any such interest from being pledged and (B) shall not be amended, supplemented
or otherwise modified in a manner materially adverse to the Collateral Agent without the prior
written consent of the Collateral Agent, unless (y) such Grantor provides prior written
notification to the Collateral Agent of such election and immediately delivers any such certificate
to the Collateral Agent pursuant to the terms hereof or (z) the Collateral Agent has otherwise
perfected its Security Interest in such interest.




          SECTION 3.05 Registration in Nominee Name; Denominations. Upon the occurrence and continuance of
an Event of Default, the Collateral Agent, on behalf of the Secured Parties, shall have the right
(in its sole and absolute discretion (unless the Required Lenders direct otherwise)) to hold the
Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent)
or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral
Agent. Each Grantor will promptly give to the Collateral Agent copies of any material notices or
other communications received by it with respect to Pledged Securities registered in the name of
such Grantor. Upon the occurrence and continuance of an Event of Default, the Collateral Agent
shall at all times have the right to exchange the certificates representing




11









 







Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with this Agreement.




          SECTION 3.06 Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default
shall have occurred and be continuing and the Collateral Agent shall have given the Grantors notice
of its intent to exercise its rights under this Agreement (which notice shall be deemed to have
been given immediately upon the occurrence of an Event of Default under Article VII of the Credit
Agreement):





          (i) Each Grantor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any part thereof
for any purpose consistent with the terms of this Agreement, the Credit Agreement and the
other Loan Documents; provided that such rights and powers shall not be exercised
in any manner that could materially and adversely affect the rights inuring to a holder of
any Pledged Securities or the rights and remedies of any of the Collateral Agent or the
other Secured Parties under this
Agreement or the Credit Agreement or any other Loan Document or the ability of the
Secured Parties to exercise the same.




          (ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be
executed and delivered to such Grantor, all such proxies, powers of attorney and other
instruments as such Grantor may reasonably request for the purpose of enabling such Grantor
to exercise the voting and/or consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above.




          (iii) Each Grantor shall be entitled to receive and retain any and all dividends,
interest, principal and other distributions paid on or distributed in respect of the
Pledged Securities to the extent and only to the extent that such dividends, interest,
principal and other distributions are permitted by, and otherwise paid or distributed in
accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents
and applicable laws; provided that any noncash dividends, interest, principal or
other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether
resulting from a subdivision, combination or reclassification of the outstanding Equity
Interests of the issuer of any Pledged Securities or received in exchange for Pledged
Securities or any part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer may be a party
or otherwise, shall be and become part of the Pledged Collateral, and, if received by any
Grantor, shall not be commingled by such Grantor with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the ratable
benefit of the Secured Parties and shall be forthwith delivered to the Collateral Agent in
the same form as so received (with any necessary endorsement or instrument of assignment).
This paragraph (iii) shall not apply to dividends by or among the Borrower, the Guarantors
and any Subsidiaries only of property subject to a perfected security interest under this
Agreement; provided that the Borrower notifies the Collateral Agent in writing,
specifically referring to this Section 3.06 at the time of such



12









 






dividend and takes any
actions the Collateral Agent reasonably specifies to ensure the continuance of its
perfected security interest in such property under this Agreement.



          (b) Upon the occurrence and during the continuance of an Event of Default, after the
Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section
3.06(a)) the Grantors of its intent to exercise its rights under paragraph (a)(iii) of this
Section 3.06, then all rights of any Grantor to dividends, interest, principal or other
distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this
Section 3.06 shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to receive and retain such
dividends, interest, principal or other distributions. All dividends, interest, principal or other
distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held
in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds
of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same
form as so received
(with any necessary endorsement or instrument of assignment). Any and all money and other
property paid over to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be applied in accordance
with the provisions of Section 5.02. After all Events of Default have been cured or waived and the
applicable Grantor or Grantors have delivered to the Administrative Agent certificates to that
effect, the Collateral Agent shall, promptly after all such Events of Default have been cured or
waived, repay to each applicable Grantor (without interest) all dividends, interest, principal or
other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) of this Section 3.06 and that remain in such account.




          (c) Upon the occurrence and during the continuance of an Event of Default, after the
Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section
3.06(a)) the Grantors of its intent to exercise its rights under paragraph (a)(i) of this
Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole
and exclusive right and authority to exercise such voting and consensual rights and powers;
provided that, unless otherwise directed by the Required Lenders, the Collateral Agent
shall have the right from time to time following and during the continuance of an Event of Default
to permit the Grantors to exercise such rights.




          (d) Any notice given by the Collateral Agent to the Grantors exercising its rights under
paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing,
(ii) may be given to one or more of the Grantors at the same or different times and (iii) may
suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without
suspending all such rights (as specified by the Collateral Agent in its sole and absolute
discretion (unless the Required




13









 







Lenders direct otherwise)) and without waiving or otherwise
affecting the Collateral Agent’s rights to give additional notices from time to time suspending
other rights so long as an Event of Default has occurred and is continuing.




ARTICLE IV.




Security Interests in Personal Property




          SECTION 4.01 Security Interest. (a) As security for the payment or performance, as the case may
be, in full of the Obligations, each Grantor hereby grants and pledges to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest (the “Security Interest”), in all right, title or interest in or to
any and all of the following assets and properties 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 “Article 9 Collateral”):





          (i) all Accounts;




          (ii) all Chattel Paper;




          (iii) all Deposit Accounts;




          (iv) all Money;




          (v) all Documents;




          (vi) all Equipment;




          (vii) all General Intangibles; provided that the grant of the Security
Interest hereunder shall not include any application for a Trademark that would be deemed
invalidated, canceled or abandoned due to the grant and/or enforcement of such Security
Interest unless and until such time that the grant and/or enforcement of the Security
Interest will not affect the status or validity of such Trademark;




          (viii) all Instruments;




          (ix) all Inventory;




          (x) all Investment Property;




          (xi) all Letter-of-credit rights;




          (xii) all commercial tort claims;




          (xiii) all Goods;



14









 






          (xiv) all books and records pertaining to the Article 9 Collateral; and




          (xv) to the extent not otherwise included, all 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 that the foregoing shall not include any asset
that such Grantor now has or at any time in the future may acquire the right, title or
interest of which is (i) the subject of a capital lease (as determined in accordance with
GAAP) and (ii) legally or beneficially owned by a person other than a Grantor.



          (b) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time
to time to file in any relevant jurisdiction any initial financing
statements (including fixture filings) with respect to the Article 9 Collateral or any part
thereof and amendments thereto that (i) indicate the Article 9 Collateral as “all assets” of such
Grantor or words of similar effect, and (ii) contain the information required by Article 9 of the
Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement
or amendment, including (A) whether such Grantor is an organization, the type of organization and
any organizational identification number issued to such Grantor and (B) in the case of a financing
statement filed as a fixture filing, a sufficient description of the real property to which such
Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral
Agent promptly upon request.




               Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant
jurisdiction any initial financing statements or amendments thereto if filed prior to the date
hereof.



               The Collateral Agent is further authorized to file with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar office in any
other country) such documents or other instruments as may be necessary or advisable for the purpose
of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by
each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as
debtors and the Collateral Agent as secured party.




          (c) The Security Interest is granted as security only and shall not subject the Collateral
Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Article 9 Collateral.




          SECTION 4.02 Representations and Warranties. The Grantors jointly and severally represent and
warrant to the Collateral Agent and the Secured Parties that:





          (a) To the best of each Grantor’s knowledge, each Grantor has good and valid rights in
and title to the Article 9 Collateral with respect to which it has purported to grant a
Security Interest hereunder and upon entry of the Orders, has



15









 






full power and authority to
grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security
Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the consent or
approval of any other person other than the Orders and any consent or approval that has
been obtained.




          (b) The Perfection Certificate has been duly prepared, completed and executed and the
information set forth therein, including (x) the exact legal name of each Grantor and (y)
the jurisdiction of organization of each Grantor, is correct and complete in all material
respects (except that the information referred to in the preceding clauses (x) and (y)
shall not be subject to such materiality qualifier) as
of the Closing Date. Uniform Commercial Code financing statements (including fixture
filings, as applicable) or other appropriate filings, recordings or registrations
containing a description of the Article 9 Collateral (the “UCC Filings”) have been prepared
by the Collateral Agent based upon the information provided to the Administrative Agent and
the Secured Parties in the Perfection Certificate for filing in each governmental,
municipal or other office specified in Section 2 to the Perfection Certificate (or
specified by notice from the Borrower to the Administrative Agent after the Closing Date in
the case of filings, recordings or registrations required by Section 5.06 or 5.09 of the
Credit Agreement), which are all the filings, recordings and registrations (other than (i)
the Orders and (ii) filings that may be required or recommended to be made in the United
States Patent and Trademark Office or the United States Copyright Office in order to
perfect the Security Interest in Article 9 Collateral consisting of United States Patents,
Trademarks, and Copyrights) that are necessary as of the Closing Date to publish notice of
and protect the validity of and to establish a legal, valid and perfected security interest
in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in
respect of all Article 9 Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing of
continuation statements. Each Grantor represents and warrants that a fully executed
agreement in the form hereof (or a fully executed short form agreement in form and
substance reasonably satisfactory to the Collateral Agent), and containing a description of
all Article 9 Collateral consisting of Intellectual Property with respect to United States
Patents and United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights has been
delivered to the Collateral Agent for recording by the United States Patent and Trademark
Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060
or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to protect the validity
of and to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all
Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which



16









 






a security
interest may be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, or in any other
necessary jurisdiction, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than the UCC Filings and
such actions as are necessary to perfect the Security Interest with respect to any
Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or
application for registration thereof) acquired or developed after the date hereof).




          (c) Subject to the entry of the Orders, the Security Interest constitutes (i) a legal
and valid security interest in all the Article 9 Collateral securing the
payment and performance of the Obligations, (ii) subject to the filings described in
Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a
security interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political subdivision thereof)
and its territories and possessions pursuant to the Uniform Commercial Code or other
applicable law in such jurisdictions and (iii) a security interest that shall be perfected
in all Article 9 Collateral in which a security interest may be perfected upon the receipt
and recording of this Agreement, or a short form version thereof, with the United States
Patent and Trademark Office and the United States Copyright Office, as applicable. Subject
to the entry of the Orders, the Security Interest is and shall be prior to any other Lien
on any of the Article 9 Collateral.




          (d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien,
except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement.
None of the Grantors has filed or consented to the filing on or after the date hereof of
(i) any financing statement or analogous document under the Uniform Commercial Code or any
other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any
Grantor assigns any Collateral or any security agreement or similar instrument covering any
Article 9 Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (iii) any assignment in which any Grantor assigns any Article 9
Collateral or any security agreement or similar instrument covering any Article 9
Collateral with any foreign governmental, municipal or other office, which financing
statement or analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement. None of the Grantors hold any commercial tort claim
as of the date hereof except as indicated on the Perfection Certificate.




          (e) Schedule III lists all Patents, registrations and applications to register
Trademarks and registered Copyrights owned by each Grantor in its own name on the date
hereof (the “Registered Intellectual Property”). Except as set forth in Schedule III, such
Grantor is the exclusive owner of the entire right, title and interest in and to such
applications, registrations and issuances free and clear of any Lien, except for Liens
expressly permitted pursuant to Section 6.02 of the



17









 






Credit Agreement. On the date hereof,
all Registered Intellectual Property of such Grantor described on Schedule III is
subsisting and unexpired and, to the knowledge of such Grantor, has not been abandoned and
is valid and enforceable. To the knowledge of such Grantor, neither the operation of such
Grantor’s business as currently conducted nor the use of the Intellectual Property in
connection therewith infringes, misappropriates, dilutes, misuses or otherwise violates the
Intellectual Property rights of any other Person. To the knowledge of such Grantor, the
consummation of the transactions contemplated by this Agreement will not result in the
termination or impairment of any of the Intellectual Property owned or licensed by such
Grantor.



          SECTION 4.03 Covenants. (a) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Article 9 Collateral owned by it as is consistent
with its current practices and in accordance with such prudent and standard practices used in
industries that are the same as or similar to those in which such Grantor is engaged, but in any
event to include complete accounting records indicating all payments and proceeds received with
respect to any part of the Article 9 Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified
schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing
the identity, amount and location of any and all Article 9 Collateral.




          (b) Each Grantor shall, at its own expense, take any and all actions necessary to defend title
to the Article 9 Collateral (other than any Article 9 Collateral consisting of a Patent, Trademark
or Copyright which shall be governed by the provisions of Section 4.05(g) hereof or any other
immaterial Intellectual Property) against all persons and to defend the Security Interest of the
Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.




          (c) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be
duly filed all such further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, obtain, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby, including the payment of
any reasonable fees and Taxes required in connection with the execution and delivery of this
Agreement, the granting of the Security Interest and the filing of any financing or continuation
statements (including fixture filings) or other documents in connection herewith or therewith. If
any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall
be or become evidenced by any promissory note or other instrument in excess of $200,000, such note
or instrument shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent; provided that promissory notes or instruments
evidencing advances permitted under Section 6.04(d) of the Credit Agreement will not be required to
be so pledged.




          Without limiting the generality of the foregoing, each Grantor hereby authorizes the
Collateral Agent, with prompt notice thereof to the Grantors, to




18









 







supplement this Agreement by
supplementing Schedule III or adding additional schedules hereto to specifically identify any asset
or item that may constitute Copyrights, material Licenses, Patents or Trademarks; provided
that any Grantor shall have the right, exercisable within 10 days after it has been notified by the
Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent
in writing of any material inaccuracy of the representations and warranties made by such Grantor
hereunder with respect to such Collateral. Each Grantor agrees that it will use
commercially reasonable efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct in all material respects with
respect to such Collateral within 30 days after the date it has been notified by the Collateral
Agent of the specific identification of such Collateral.




          (d) The Collateral Agent and such persons as the Collateral Agent may reasonably designate
shall have the right, at the Grantors’ own cost and expense, to inspect the Article 9 Collateral,
all records related thereto (and to make extracts and copies from such records) and the premises
upon which any of the Article 9 Collateral is located, to discuss the Grantors’ affairs with the
officers of the Grantors and their independent accountants and to verify under reasonable
procedures, in accordance with Section 5.03 of the Credit Agreement, the existence, validity,
amount, quality, quantity, value, condition and status of, or any other matter relating to, the
Article 9 Collateral, including, in the case of Accounts or other Article 9 Collateral in the
possession of any third person (after the occurrence and continuation of a Default), by contacting
Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making
such a verification. The Collateral Agent shall have the absolute right to share any information
it gains from such inspection or verification with any Secured Party.




          (e) Subject to the Orders, at its option, the Collateral Agent may discharge past due Taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or
placed on the Article 9 Collateral and not expressly permitted pursuant to Section 6.02 of the
Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to
the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and
each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any
payment made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this paragraph shall be
interpreted as excusing any Grantor from the performance of, or imposing any obligation on the
Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other
encumbrances and maintenance as set forth herein or in the other Loan Documents.




          (f) If at any time any Grantor shall take a security interest in any material property of an
Account Debtor or any other person to secure payment and performance of an Account, such Grantor
shall promptly assign such security interest to the Collateral Agent for the ratable benefit of the
Secured Parties. Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and transferees from the Account
Debtor or other person granting the security interest.




19









 








          (g) Each Grantor shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument relating to the
Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor
jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such performance.




          (h) None of the Grantors shall make or permit to be made an assignment, pledge or
hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9
Collateral, except as expressly permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor
shall remain at all times in possession or otherwise in control of the Article 9 Collateral owned
by it, except that (i) Inventory may be sold in the ordinary course of business and (ii) unless and
until the Collateral Agent shall notify the Grantors that an Event of Default shall have occurred
and be continuing and that during the continuance thereof the Grantors shall not sell, convey,
lease, assign, transfer or otherwise dispose of any Article 9 Collateral (which notice may be given
by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Article 9
Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit
Agreement or any other Loan Document. Without limiting the generality of the foregoing, each
Grantor agrees that it shall not permit any Inventory in excess of $300,000 to be in the possession
or control of any warehouseman, bailee, agent or processor at any time unless such warehouseman,
bailee, agent or processor shall have been notified of the Security Interest and shall have
acknowledged in writing, in form and substance reasonably satisfactory to the Collateral Agent,
that such bailee or processor holds the Inventory for the benefit of the Collateral Agent subject
to the Security Interest and shall act upon the instructions of the Collateral Agent without
further consent from the Grantor, and that such warehouseman, agent, bailee or processor further
agrees to waive and release any Lien held by it with respect to such Inventory, whether arising by
operation of law or otherwise.




          (i) None of the Grantors will, without the Collateral Agent’s prior written consent, grant any
extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise,
compound or settle the same for less than the full amount thereof, release, wholly or partly, any
person liable for the payment thereof or allow any credit or discount whatsoever thereon, other
than extensions, credits, discounts, compromises, compoundings or settlements granted or made in
the ordinary course of business and consistent with its current practices and in accordance with
such prudent and standard practice used in industries that are the same as or similar to those in
which such Grantor is engaged.




          (j) The Grantors, at their own expense, shall maintain or cause to be maintained insurance
covering physical loss or damage to the Inventory and Equipment in accordance with the requirements
set forth in Section 5.02 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and
appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral
Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, upon the
occurrence and during




20









 







the continuance of an Event of Default, of making, settling and adjusting
claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such
Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies
of insurance and for making all determinations and decisions with respect thereto. In the event
that any Grantor at any time or times shall fail to obtain or maintain any of the policies of
insurance required hereby or under the Credit Agreement or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving
or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such premium and take
any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed
by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees,
court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured hereby.




          (k) Each Grantor shall maintain, in form and manner reasonably satisfactory to the Collateral
Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining
thereto.




          SECTION 4.04 Other Actions. In order to further insure the attachment, perfection and priority of,
and the ability of the Collateral Agent to enforce, the Security Interest in the Article 9
Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following
actions with respect to the following Article 9 Collateral:





          (a) Instruments. If any Grantor shall at any time hold or acquire any
Instruments with a value in excess of $200,000, such Grantor shall forthwith endorse,
assign and deliver the same to the Collateral Agent, accompanied by such undated
instruments of endorsement, transfer or assignment duly executed in blank as the Collateral
Agent may from time to time specify.




          (b) Deposit Accounts. For each deposit account that any Grantor at any time
opens or maintains, such Grantor shall comply with the requirements of Section 5.12 of the
Credit Agreement.




          (c) Investment Property. Except to the extent otherwise provided in
Article III, if any Grantor shall at any time hold or acquire any certificated securities,
such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such undated instruments of transfer or assignment duly executed in blank as
the Collateral Agent may from time to time specify. If any securities now or hereafter
acquired by any Grantor are uncertificated and are issued to such Grantor or its nominee
directly by the issuer thereof, such Grantor shall immediately notify the Collateral Agent
thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form
and substance reasonably satisfactory to the Collateral Agent, either (a) cause the issuer
to agree to comply with instructions from the Collateral Agent as to such securities,
without further consent of any Grantor or such nominee, or (b) arrange



21









 






for the Collateral
Agent to become the registered owner of the securities. If any securities, whether
certificated or uncertificated, or other investment property with a value in excess of
$200,000 now or hereafter acquired by any Grantor are held by such Grantor or its nominee
through a securities intermediary or commodity intermediary, such Grantor shall immediately
notify the Collateral Agent thereof and, at the Collateral Agent’s request and option,
pursuant to an
agreement in form and substance reasonably satisfactory to the Collateral Agent,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions from the
Collateral Agent to such securities intermediary as to such securities or other investment
property, or (as the case may be) to apply any value distributed on account of any
commodity contract as directed by the Collateral Agent to such commodity intermediary, in
each case without further consent of any Grantor or such nominee, or (ii) in the case of
“financial assets” (within the meaning of Article 8 of the New York UCC and governed by
Article 8 of the New York UCC) or other Investment Property held through a securities
intermediary, arrange for the Collateral Agent to become the entitlement holder with
respect to such investment property, with the Grantor being permitted, only with the
consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such
investment property. The Collateral Agent agrees with each of the Grantors that the
Collateral Agent shall not give any such entitlement orders or instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor,
unless an Event of Default has occurred and is continuing, or, after giving effect to any
such investment and withdrawal rights would occur. The provisions of this paragraph shall
not apply to any financial assets credited to a securities account for which the Collateral
Agent is the securities intermediary.




          (d) Electronic Chattel Paper and Transferable Records. If any Grantor at any
time holds or acquires an interest in any electronic chattel paper or any “transferable
record,” with a value in excess of $200,000 as that term is defined in Section 201 of the
Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor
shall promptly notify the Collateral Agent thereof and, at the request of the Collateral
Agent, shall take such action as the Collateral Agent may reasonably request to vest in the
Collateral Agent control under New York UCC Section 9-105 of such electronic chattel paper
or control under Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act,
as so in effect in such jurisdiction, of such transferable record. The Collateral Agent
agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures
reasonably satisfactory to the Collateral Agent and so long as such procedures will not
result in the Collateral Agent’s loss of control, for the Grantor to make alterations to
the electronic chattel paper or transferable record permitted under UCC Section 9-105 or,
as the case may be, Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or Section 16 of the Uniform Electronic



22









 






Transactions Act for a party in
control to allow without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Grantor with respect
to such electronic chattel paper or transferable record.




          (e) Letter-of-credit Rights. If any Grantor is at any time a beneficiary
under a letter of credit with a value in excess of $200,000 now or hereafter issued in
favor of such Grantor, such Grantor shall promptly notify the Collateral Agent thereof and,
at the request and option of the Collateral Agent, such Grantor shall, pursuant to an
agreement in form and substance reasonably satisfactory to the Collateral Agent, either
(i) arrange for the issuer and any confirmer of such letter of credit to consent to an
assignment to the Collateral Agent of the proceeds of any drawing under the letter of
credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the
letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of
any drawing under the letter of credit are to be paid to the applicable Grantor unless an
Event of Default has occurred or is continuing.




          (f) Commercial Tort Claims. If any Grantor shall at any time hold or acquire
a commercial tort claim in an amount reasonably estimated to exceed $400,000, the Grantor
shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor
including a summary description of such claim and grant to the Collateral Agent, for the
ratable benefit of the Secured Parties, in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to the Collateral Agent.



          SECTION 4.05 Covenants regarding Intellectual Property Collateral. (a) Each Grantor agrees that
it will not, and will use its commercially reasonable efforts to not permit any of its licensees
to, do any act, or omit to do any act, whereby any Patent that is material to the conduct of such
Grantor’s business may become invalidated or dedicated to the public domain, and agrees that it
shall continue to mark any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.




          (b) With respect to each material Trademark owned by such Grantor, such Grantor (either itself
or through licensees) will take all reasonably necessary steps to (i) continue to use such
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 and take all reasonably necessary steps to
ensure that all licensed users of such Trademark maintain as in the past such quality, (iii) not
adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark
unless the Collateral Agent, for the benefit of the Agents and the Lenders, shall obtain a
perfected security interest in such mark (if a United States mark) pursuant to this Agreement, and
(iv) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly




23









 







omit to do
any act whereby such Trademark may become invalidated or impaired in any material respect.




          (c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the
work with appropriate copyright notice as required under applicable copyright laws.




          (d) Each Grantor shall notify the Collateral Agent immediately if it knows or has reason to
know that any Patent, Trademark or Copyright material to the conduct of its business may become
abandoned, cancelled, lost or dedicated to the public, or of any material adverse determination or
development (including the institution of, or any such material determination or development in,
any proceeding in the United States Patent and Trademark Office, United States Copyright Office or
any court or similar office of any country) regarding such Grantor’s ownership of any material
Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain
the same.




          (e) In the event any Grantor, either itself or through any agent, employee, licensee or
designee, files an application for any Patent, Trademark or Copyright (or for the registration of
any Trademark or Copyright) with the United States Patent and Trademark Office, United States
Copyright Office or any office or agency in any political subdivision of the United States or in
any other country or any political subdivision thereof, it shall promptly inform the Collateral
Agent, and, upon request of the Collateral Agent, execute and deliver any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably request to evidence the
Security Interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable.




          (f) Each Grantor will take all necessary steps that it deems appropriate under the
circumstances and are consistent with such Grantor’s prior practice, if reasonable, in any
proceeding before the United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in any other country or
any political subdivision thereof, to maintain and pursue each material application relating to the
Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to
maintain each issued Patent and each registration of the Trademarks and Copyrights that is material
to the conduct of any Grantor’s business, including timely filings of applications for renewal,
affidavits of use and payment of maintenance fees, and, if consistent with good business judgment,
to initiate opposition, interference and cancellation proceedings against third parties.




          (g) In the event that any Grantor has reason to believe that any Article 9 Collateral
consisting of any Intellectual Property material to the conduct of any Grantor’s business has been
or is about to be infringed, misappropriated, diluted, or otherwise violated by a third party, such
Grantor promptly shall notify the Collateral




24









 







Agent and shall, if consistent with reasonable
business judgment, promptly sue for infringement, misappropriation, dilution, or other violation
and to recover any and all damages for such infringement, misappropriation or dilution, and take
such other actions
as are appropriate under the circumstances to protect such Article 9 Collateral. Such Grantor
may discontinue or settle any such suit or other action if the Grantor deems such discontinuance or
settlement to be appropriate in its reasonable business judgment.




          (h) Upon the occurrence and during the continuance of an Event of Default, each Grantor shall,
at the request of the Collateral Agent, use its reasonable best efforts to obtain all requisite
consents or approvals by the licensor of each Copyright License, Patent License or Trademark
License, and each other material License, to effect the assignment of all such Grantor’s right,
title and interest thereunder to the Collateral Agent, for the ratable benefit of the Secured
Parties, or its designee.




ARTICLE V.




Remedies




          SECTION 5.01 Remedies upon Default. Subject to the Orders, upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the
Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take
any of or all the following actions at the same or different times: (a) with respect to any
Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the
applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special
or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral
throughout the world on such terms and conditions and in such manner as the Collateral Agent shall
determine (other than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained), and (b) with or without legal process and with or without prior notice
or demand for performance (except as otherwise provided in the Credit Agreement), to take
possession of the Article 9 Collateral and without liability for trespass to enter any premises
where the Article 9 Collateral may be located for the purpose of taking possession of or removing
the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party
under the Uniform Commercial Code or other applicable law. Without limiting the generality of the
foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the
Collateral at a public or private sale or at any broker’s board or on any securities exchange, for
cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will represent and agree that they
are purchasing the Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each




25









 







such purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right on the part of any Grantor, and the Grantors hereby waive (to the
extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now
has or may at any time in the future have under any rule of law or statute now existing or
hereafter enacted.




          Subject to the Orders, the Collateral Agent shall give the applicable Grantors 10 days’
written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611
of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention
to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time
and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours and at such place or
places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may determine (in its sole and absolute discretion
(unless the Required Lenders direct otherwise)). The Collateral Agent shall not be obligated to
make any sale of any Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so adjourned. In case any sale of all
or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived and released to the
extent permitted by law), the Collateral or any part thereof offered for sale and may make payment
on account thereof by using any claim then due and payable to such Secured Party from any Grantor
as a credit against the purchase price, and such Secured Party may, upon compliance with the terms
of sale, hold, retain and dispose of such property without further accountability to any Grantor
therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such
sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this
Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or




26









 







pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to
the commercially
reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in
other jurisdictions.




          SECTION 5.02 Application of Proceeds. Subject to the Orders and the terms of the Credit Agreement,
the Collateral Agent shall apply the proceeds of any collection, sale, foreclosure or other
realization upon any Collateral, including any Collateral consisting of cash, as follows:





          FIRST, to the payment of all costs and expenses incurred by the Administrative Agent
or the Collateral Agent (in their respective capacities as such hereunder or under any
other Loan Document) in connection with such collection, sale, foreclosure or realization
or otherwise in connection with this Agreement, any other Loan Document or any of the
Obligations, including all court costs and the reasonable fees and expenses of its agents
and legal counsel, the repayment of all advances made by the Administrative Agent and/or
the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor
and any other reasonable costs or expenses incurred in connection with the exercise of any
right or remedy hereunder or under any other Loan Document;




          SECOND, to the payment in full of the Obligations (the amounts so applied to be
distributed among the Secured Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such distribution); and




          THIRD, to the Grantors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.


The Collateral Agent shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement, unless the Required Lenders direct
otherwise. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of
the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.




          SECTION 5.03 Grant of License to Use Intellectual Property. For the purpose of enabling the
Collateral Agent to exercise rights and remedies under this Agreement or under the Credit
Agreement, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, each Grantor hereby grants to the Collateral Agent a nonexclusive license
(exercisable without payment of royalty or other compensation to the Grantors) to use, license or
sublicense (provided that the quality and nature of the goods and/or services with which the
Collateral Agent and its sublicensees uses the Intellectual Property shall be of such standards and
quality such that the value,




27









 







reputation and goodwill and enforceability of the Intellectual
Property is not
diminished in any material respect) any of the Article 9 Collateral consisting of Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable 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 use of such license by the Collateral Agent shall be exercised, at the option of the
Collateral Agent, only upon the occurrence and during the continuation of an Event of Default;
provided that any license, sublicense or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an
Event of Default.




          SECTION 5.04 Securities Act, etc. In view of the position of the Grantors in relation to the
Pledged Collateral, or because of other current or future circumstances, a question may arise under
the U.S. Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter
enacted analogous in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the “Federal Securities Laws”) with respect to any disposition of the
Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal
Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the
Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee of any Pledged
Collateral could dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged
Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in
purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the
Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to
those who will agree, among other things, to acquire such Pledged Collateral for their own account,
for investment, and not with a view to the distribution or resale thereof. Each Grantor
acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion (unless the Required Lenders direct otherwise) (a) may proceed
to make such a sale whether or not a registration statement for the purpose of registering such
Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a limited number of potential purchasers (including a single
potential purchaser) to effect such sale. Each Grantor acknowledges and agrees that any such sale
might result in prices and other terms less favorable to the seller than if such sale were a public
sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no
responsibility or liability for selling all or any part of the Pledged Collateral at a price that
the Collateral Agent, in its sole and absolute discretion (unless the Required Lenders direct
otherwise), may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a limited number of purchasers (or a single
purchaser) were approached. The provisions of this Section 5.04 will apply notwithstanding the
existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.




28









 








ARTICLE VI.




Indemnity, Subrogation and Subordination




          SECTION 6.01 Indemnity and Subrogation. In addition to all such rights of indemnity and
subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the
Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this
Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made
to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold
pursuant to any Security Document to satisfy in whole or in part a claim of any Secured Party, the
Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the
fair market value of the assets so sold.




          SECTION 6.02 Contribution and Subrogation. Each Guarantor (a “Contributing Guarantor”) agrees
(subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor
hereunder in respect of any Obligation or assets of any other Guarantor shall be sold pursuant to
any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor
(the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in
Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal
to the amount of such payment or the greater of the book value or the fair market value of such
assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be
the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the
aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor
becoming a party hereto pursuant to Section 7.16, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming
Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming
Guarantor under Section 6.01 to the extent of such payment.




          SECTION 6.03 Subordination. (a) Notwithstanding any provision of this Agreement to the contrary,
all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity,
contribution or subrogation under applicable law or otherwise shall be fully subordinated to the
payment in full in cash of the Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required
under applicable law or otherwise) shall in any respect limit the
obligations and liabilities of any Guarantor with respect to its obligations hereunder, and
each Guarantor shall remain liable for the full amount of the obligations of such Guarantor
hereunder.




          (b) Each of the Borrower and the Subsidiary Guarantors hereby agrees that all Indebtedness and
other monetary obligations owed by it to the Borrower or any Subsidiary shall be fully subordinated
to the payment in full in cash of the Obligations.




29









 








ARTICLE VII.




Miscellaneous




          SECTION 7.01 Notices. All communications and notices hereunder shall (except as otherwise
expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit
Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to
it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.




          SECTION 7.02 Security Interest Absolute. All rights of the Collateral Agent hereunder, the
Security Interest, the grant of a security interest in the Pledged Collateral and all obligations
of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with
respect to any of the Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to any departure from
the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any
exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of
the Obligations, or (d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.




          SECTION 7.03 Survival of Agreement. All covenants, agreements, representations and warranties made
by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders and shall survive the execution and delivery of
the Loan Documents and the making of any Loans, regardless of any investigation made by any Lender
or on their behalf and notwithstanding that the Collateral Agent or any Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time any credit is
extended under the Credit Agreement, and shall continue in full force and effect as long as the
principal of or any
accrued interest on any Loan or any fee or any other amount payable under any Loan Document is
outstanding and unpaid and so long as the Commitments have not expired or terminated.




          SECTION 7.04 Binding Effect; Several Agreement. This Agreement shall become effective as to any
Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been
delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of
the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent
and their respective permitted successors and assigns, and shall inure to the benefit of such Loan
Party, the Collateral Agent and the other Secured Parties and their respective successors and
assigns, except that no Loan Party shall have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such





30












 





assignment or
transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement.
This Agreement shall be construed as a separate agreement with respect to each Loan Party and may
be amended, modified, supplemented, waived or released with respect to any Loan Party without the
approval of any other Loan Party and without affecting the obligations of any other Loan Party
hereunder.




          SECTION 7.05 Successors and Assigns. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the permitted successors and
assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or
the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns.




          SECTION 7.06 Collateral Agent’s Fees and Expenses; Indemnification. (a)  The parties
hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred
hereunder as provided in Section 9.05 of the Credit Agreement.




          (b) Without limitation of its indemnification obligations under the other Loan Documents, each
Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees
(as defined in Section 9.05 of the Credit Agreement) against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of, the execution, delivery or performance of this Agreement
or any agreement or instrument contemplated hereby or any claim, litigation, investigation or
proceeding relating to any of the foregoing agreement or instrument contemplated hereby, or to the
Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.




          (c) Any such amounts payable as provided hereunder shall be additional Obligations secured
hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain
operative and in full force and effect regardless of the termination of this Agreement or any other
Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any
other Secured Party. All amounts due under this Section 7.06 shall be payable on written demand
therefor and shall bear interest, on and from the date of demand, at the rate specified in
Section 2.06 of the Credit Agreement.




          SECTION 7.07 Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby
appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out
the provisions of this Agreement and taking any action and



31









 






executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in the Collateral
Agent’s name or in the name of such Grantor (but subject to the Orders) (a) to receive, endorse,
assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of
the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to
commence and prosecute any and all suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to
enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or
defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify,
or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to
carry out the purposes of the Credit Agreement, the Orders, this Agreement and the other Loan
Documents, as fully and completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided, that nothing herein contained shall be construed as
requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to
the nature or sufficiency of any payment received by the Collateral Agent, or to present or file
any claim or notice, or to take any action with respect to the Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property covered thereby. The Collateral
Agent and the other Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the
powers granted to them herein, and neither they nor 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. The Collateral Agent agrees not to exercise the
power of attorney provided for in this Section 7.07 unless an Event of Default shall have occurred
and be continuing.




          SECTION 7.08. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.




     
     SECTION 7.09 Waivers; Amendment. (a) No failure or delay by the Collateral
Agent, the Administrative Agent or any Lender in exercising any right or power hereunder, under any
other Loan Document or under the Orders shall operate as a waiver hereof or thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Collateral Agent, the
Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any
provision of any Loan Document or consent to any departure by any Loan Party



32









 






therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making of a Loan shall not be
construed as a waiver of any Default, regardless of whether the Collateral Agent or any Lender may
have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in
any case shall entitle any Loan Party to any other or further notice or demand in similar or other
circumstances.




          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan
Party or Loan Parties with respect to which such waiver, amendment or modification is to apply,
subject to any consent required in accordance with Section 9.08 of the Credit Agreement.




          SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 7.10.




          SECTION 7.11 Severability. In the event any one or more of the provisions contained
in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining provisions contained herein
and therein shall not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions..




          SECTION 7.12 Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall constitute an original but
all of which when taken together shall constitute a single contract, and shall become effective as
provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile or
e-mail transmission shall be as effective as delivery of a manually signed counterpart of this
Agreement.



33









 







          SECTION 7.13 Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this Agreement.




          SECTION 7.14 Jurisdiction; Consent to Service of Process. (a) Each of the Loan
Parties hereby irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Bankruptcy Court and any New York State court or Federal court of
the United States of America, sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any other Loan
Document, or for recognition or enforcement of any judgment, and each of the Loan Parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent permitted by law,
in such Federal court. Each of the Loan Parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral
Agent, the Administrative Agent or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement or any other Loan Document against any Loan Party or its properties in
the courts of any jurisdiction.




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




          (c) Each Loan Party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will
affect the right of any party to this Agreement to serve process in any other manner permitted by
law.




          SECTION 7.15 Termination or Release. (a)  This Agreement, the Guarantees, the
Security Interest, the pledge of the Pledged Collateral and all other security interests granted
hereby shall terminate when all the Loan Document Obligations (other than (i) wholly contingent
indemnification obligations or (ii) compensation obligations with respect to increased costs or
reductions in amounts received or receivable or reductions in return on capital pursuant to
Section 2.14(d) of the Credit Agreement) then due and owing have been paid in full in cash and the
Lenders have no further commitment to lend under the Credit Agreement.




          (b) A Subsidiary Guarantor shall automatically be released from its obligations hereunder and
the Security Interest in the Collateral of such Subsidiary Guarantor shall be automatically
released upon the consummation of any transaction



34









 






permitted by the Credit Agreement as a result of
which such Subsidiary Guarantor ceases to be a Subsidiary of the Borrower; provided that
the Required Lenders shall have consented to such transaction (to the extent required by the Credit
Agreement) and the terms of such consent did not provide otherwise.




          (c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under
the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the
effectiveness of any written consent to the release of the Security Interest granted hereby in any
Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such
Collateral shall be automatically released.




          (d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) the
Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents
that such Grantor shall reasonably request to
evidence such termination or release. Any execution and delivery of documents pursuant to
this Section 7.15 shall be without recourse to or representation or warranty by the Collateral
Agent or any Secured Party. Without limiting the provisions of Section 7.06, the Borrower shall
reimburse the Collateral Agent upon demand for all costs and expenses, including the fees, charges
and disbursements of counsel, incurred by it in connection with any action contemplated by this
Section 7.15.




          SECTION 7.16 Additional Grantors. Pursuant to Section 5.09 of the Credit Agreement,
each Domestic Subsidiary of a Loan Party (other than any Inactive Subsidiary) that was not in
existence or not a Subsidiary on the date of the Credit Agreement, that ceases to be an Inactive
Subsidiary after the date of this Agreement is required to enter in this Agreement as a Subsidiary
Guarantor and a Grantor upon becoming such a Subsidiary (or ceasing to be an Inactive Subsidiary).
Upon execution and delivery by the Collateral Agent and a Domestic Subsidiary of an instrument in
the form of Exhibit A hereto, such Domestic Subsidiary shall become a Subsidiary Guarantor and a
Grantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor
and a Grantor herein. The execution and delivery of any such instrument shall not require the
consent of any other Loan Party hereunder. The rights and obligations of each Subsidiary Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party
as a party to this Agreement.




          SECTION 7.17 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Secured Party is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all Collateral (including any
deposits (general or special, time or demand, provisional or final)) at any time held and other
obligations at any time owing by such Secured Party or Affiliate to or for the credit or the
account of any Grantor against any and all of the obligations of such Grantor now or hereafter
existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective
of whether or not such Secured Party shall have made any demand under this Agreement or any other
Loan Document and although such obligations may be unmatured. The rights of each Secured Party
under this Section are in addition to other rights and remedies (including other rights of setoff)
which such Secured Party may have.



35









 







          SECTION 7.18 Collateral Delivered under the Existing Credit Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any obligation of the
Grantors to deliver Collateral hereunder shall be deemed satisfied to the extent such Collateral
has been delivered under the Existing Credit Agreement.




36









 





          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.




	 	 	 	 	 	 	 
	 	 	BUFFETS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: EVP, Chief
Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BUFFETS HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: EVP, Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HOMETOWN BUFFET, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: EVP, Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	OCB PURCHASING CO.	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: EVP, Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	OCB RESTAURANT COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: EVP, Chief
Financial Officer, Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	BUFFETS FRANCHISE HOLDINGS, LLC
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 






 









 






	 	 	 	 	 	 	 
	 	 	BUFFETS LEASING COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance
Manager	 	 
	 
	 	 	 	 	 	 
	 	 	RYAN’S RESTAURANT GROUP, INC.
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Officer	 	 
	 
	 	 	 	 	 	 
	 	 	RYAN’S RESTAURANT LEASING COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief
Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	RYAN’S RESTAURANT
 MANAGEMENT GROUP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	HOMETOWN LEASING COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	OCB LEASING COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 






 









 






	 	 	 	 	 	 	 
	 	 	FIRE MOUNTAIN RESTAURANTS, LLC
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	FIRE MOUNTAIN LEASING COMPANY,
 LLC
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	FIRE MOUNTAIN MANAGEMENT
 GROUP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	BIG R PROCUREMENT COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 
	 
	 	 	 	 	 	 
	 	 	TAHOE JOE’S, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	TAHOE JOE’S LEASING COMPANY,
 LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ A. Keith Wall	 	 
	 

	 	 	 	 	 	 
	 	 	Name: A. Keith Wall	 	 
	 	 	Title: Chief Finance Manager	 	 






 









 






	 	 	 	 	 	 	 
	 	 	CREDIT SUISSE, CAYMAN ISLANDS

BRANCH, as Collateral Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ Robert Hetu	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Robert Hetu	 	 
	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	by:
	 	/s/ Denise Alvarez	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Denise Alvarez	 	 
	 	 	Title: Vice President	 	 







 











 






     SUPPLEMENT NO. [•] (this “Supplement”)dated as of [•], to the
Guarantee and Collateral Agreement dated as of January 22, 2008
(the “Guarantee and Collateral Agreement”), among BUFFETS, INC., a
Minnesota corporation, a debtor and debtor in possession under
Chapter 11 of the Bankruptcy Code (the “Borrower”), BUFFETS
HOLDINGS, INC., a Delaware corporation (“Holdings”), as a debtor
and debtor in possession under Chapter 11 of the Bankruptcy Code,
each Subsidiary of the Borrower from time to time party thereto
(each such subsidiary individually a “Subsidiary Guarantor” and
collectively, the “Subsidiary Guarantors”; the Subsidiary
Guarantors, Holdings and the Borrower are referred to collectively
herein as the “Grantors”) and CREDIT SUISSE, (together with its
affiliates, “Credit Suisse”), as collateral agent (in such
capacity, the “Collateral Agent”) for the Secured Parties (as
defined therein).



     A. Reference is made to the Credit Agreement dated as of January 22, 2008 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower,
Holdings, the lenders from time to time party thereto (the “Lenders”) and Credit Suisse, as
administrative agent for the Lenders and as Collateral Agent.



     B. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement or the Guarantee and Collateral Agreement referred
to therein, as applicable.



     C. The Grantors have entered into the Guarantee and Collateral Agreement in order to induce
the Lenders to make Loans. Section 7.16 of the Guarantee and Collateral Agreement provides that
additional Domestic Subsidiaries of the Loan Parties may become Subsidiary Guarantors and Grantors
under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form
of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this



 









 




Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary
Guarantor and a Grantor under the Guarantee and Collateral Agreement in order to induce the Lenders
to make additional Loans and as consideration for Loans previously made.




     Accordingly, the Collateral Agent and the New Subsidiary agree as follows:



     SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, the New
Subsidiary by its signature below becomes a Grantor and Subsidiary Guarantor under the Guarantee
and Collateral Agreement with the same force and effect as if originally named therein as a Grantor
and Subsidiary Guarantor and the New Subsidiary hereby (a) agrees to all the terms and provisions
of the Guarantee and Collateral Agreement applicable to it as a Grantor and Subsidiary Guarantor
thereunder and (b) represents and warrants that the representations and warranties made by it as a
Grantor and Subsidiary Guarantor thereunder are true and correct in all material respects on and as
of the date hereof. In furtherance of the foregoing, the New Subsidiary, (a) unconditionally
guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as
a surety, the due and punctual payment and performance of the Obligations and (b) as security for
the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral
Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for
the ratable benefit of the Secured Parties, their successors and assigns, a security interest in
and lien on all of the New Subsidiary’s right, title and interest in and to the Collateral (as
defined in the Guarantee and Collateral Agreement) of the New Subsidiary. Each reference to a



 









 




“Grantor” or a “Subsidiary Guarantor” in the Guarantee and Collateral Agreement shall be
deemed to include the New Subsidiary. The Guarantee and Collateral Agreement is hereby
incorporated herein by reference.




     SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other
Secured Parties that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in accordance with its
terms.



     SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when taken together,
bear the signatures of the New Subsidiary and the Collateral Agent. Delivery of an executed
signature page to this Supplement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Supplement.



     SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I
attached hereto is a true and correct schedule of the information, with respect to such New
Subsidiary, required by the Perfection Certificate attached as Exhibit B to the Guarantee and
Collateral Agreement and (b) set forth under its signature hereto, is the true and correct legal
name of the New Subsidiary and its jurisdiction of organization.



     SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement
shall remain in full force and effect.



 









 




SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.




     SECTION 7. In case any one or more of the provisions contained in this Supplement should be
held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not
in any way be affected or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or unenforceable
provisions.



     SECTION 8. All communications and notices hereunder shall (except as otherwise expressly
permitted by the Guarantee and Collateral Agreement) be in writing and given as provided in
Section 7.01 of the Guarantee and Collateral Agreement. All communications and notices hereunder to
the New Subsidiary shall be given to it in care of the Borrower as provided in Section 9.01 of the
Credit Agreement.



     SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other
charges and disbursements of counsel for the Collateral Agent.



[Remainder of page intentionally left blank]




 









 





     IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this
Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	[NAME OF NEW SUBSIDIARY]
	 
	 	 	 	 	 	 
	 

	 	 	 	by	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 

	 	 	 	 	 	Title:
	 

	 	 	 	 	 	Address:
	 

	 	 	 	 	 	Legal Name:
	 

	 	 	 	 	 	Jurisdiction of Formation:
	 
	 	 	 	 	 	 
	 	 	CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as
	 	 	Collateral Agent
	 
	 	 	 	 	 	 
	 

	 	 	 	by	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 

	 	 	 	 	 	Title:
	 

	 	 	 	 	 	Address:
	 

	 	 	 	 	 	Legal Name:
	 

	 	 	 	 	 	Jurisdiction of Formation:
	 
	 	 	 	 	 	 
	 

	 	 	 	by	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 

	 	 	 	 	 	Title:
	 

	 	 	 	 	 	Address:
	 

	 	 	 	 	 	Legal Name:
	 

	 	 	 	 	 	Jurisdiction of Formation:






 









 






Schedule I to

Supplement No. [•] to the

Guarantee and

Collateral Agreement




Collateral of the New Subsidiary




[Follow format of Perfection Certificate attached as

Exhibit B to the Guarantee and Collateral Agreement.]




 









 





Exhibit B to the Guarantee

and Collateral Agreement




FORM OF PERFECTION CERTIFICATE




[To be provided under separate cover.]