Exhibit
10.1


 


EXECUTION
COPY


 




 







FIRST LIEN 

GUARANTEE AND COLLATERAL AGREEMENT


 


made by


 


NEW WORLD RESTAURANT GROUP,
INC.


 


and certain of its
Subsidiaries


 


in favor of


 


WELLS FARGO FOOTHILL, INC.,


as Administrative Agent


 


Dated as of February 28,
2006




 





 

















 


TABLE OF CONTENTS


	
   

  	
   

  	
  Page

  
	
  SECTION 1. DEFINED TERMS

  	
   

  
	
  1.1.

  	
  Definitions

  	
  1

  
	
  1.2.

  	
  Other Definitional Provisions

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 2. GUARANTEE

  	
  4

  
	
  2.1.

  	
  Guarantee

  	
  4

  
	
  2.2.

  	
  Right of Contribution

  	
  5

  
	
  2.3.

  	
  No Subrogation

  	
  5

  
	
  2.4.

  	
  Amendments, etc. with respect to the Borrower Obligations

  	
  5

  
	
  2.5.

  	
  Guarantee Absolute and Unconditional

  	
  6

  
	
  2.6.

  	
  Reinstatement

  	
  7

  
	
  2.7.

  	
  Payments

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 3. GRANT OF SECURITY INTEREST

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 4. REPRESENTATIONS AND WARRANTIES

  	
  8

  
	
  4.1.

  	
  Representations in Credit Agreement

  	
  8

  
	
  4.2.

  	
  Title; No Other Liens

  	
  8

  
	
  4.3.

  	
  Perfected First Priority Liens

  	
  9

  
	
  4.4.

  	
  Jurisdiction of Organization; Chief Executive Office

  	
  9

  
	
  4.5.

  	
  Inventory and Equipment

  	
  9

  
	
  4.6.

  	
  Farm Products

  	
  9

  
	
  4.7.

  	
  Pledged Securities

  	
  9

  
	
  4.8.

  	
  Receivables

  	
  10

  
	
  4.9.

  	
  Intellectual Property

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 5. COVENANTS

  	
  10

  
	
  5.1.

  	
  Covenants in Credit Agreement

  	
  10

  
	
  5.2.

  	
  Delivery of Instruments and Chattel Paper

  	
  11

  
	
  5.3.

  	
  Maintenance of Insurance

  	
  11

  
	
  5.4.

  	
  Payment of Obligations

  	
  11

  
	
  5.5.

  	
  Maintenance of Perfected Security Interest; Further Documentation

  	
  11

  
	
  5.6.

  	
  Changes in Name, etc.

  	
  12

  
	
  5.7.

  	
  Notices

  	
  12

  
	
  5.8.

  	
  Investment Property

  	
  12

  
	
  5.9.

  	
  Receivables

  	
  13

  
	
  5.10.

  	
  Intellectual Property

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 6. REMEDIAL PROVISIONS

  	
  15

  
	
  6.1.

  	
  Certain Matters Relating to Receivables

  	
  15

  
	
  6.2.

  	
  Communications with Obligors; Grantors Remain Liable

  	
  16

  
	
  6.3.

  	
  Pledged Stock

  	
  16

  
	
  6.4.

  	
  Proceeds to be Turned Over to the Administrative Agent

  	
  17

  



 


 


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  6.5.

  	
  Application of Proceeds

  	
  17

  
	
  6.6.

  	
  Code and Other Remedies

  	
  18

  
	
  6.7.

  	
  Private Sales

  	
  19

  
	
  6.8.

  	
  Deficiency

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 7. THE ADMINISTRATIVE AGENT

  	
  19

  
	
  7.1.

  	
  Administrative Agent’s Appointment as Attorney-in-Fact, etc.

  	
  19

  
	
  7.2.

  	
  Duty of Administrative Agent

  	
  21

  
	
  7.3.

  	
  Financing Statements

  	
  21

  
	
  7.4.

  	
  Authority of Administrative Agent

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 8. MISCELLANEOUS

  	
  22

  
	
  8.1.

  	
  Amendments in Writing

  	
  22

  
	
  8.2.

  	
  Notices

  	
  22

  
	
  8.3.

  	
  No Waiver by Course of Conduct; Cumulative Remedies

  	
  22

  
	
  8.4.

  	
  Enforcement Expenses; Indemnification

  	
  22

  
	
  8.5.

  	
  Successors and Assigns

  	
  23

  
	
  8.6.

  	
  Set-Off

  	
  23

  
	
  8.7.

  	
  Counterparts

  	
  23

  
	
  8.8.

  	
  Severability

  	
  23

  
	
  8.9.

  	
  Section Headings

  	
  23

  
	
  8.10.

  	
  Integration

  	
  24

  
	
  8.11.

  	
  GOVERNING LAW

  	
  24

  
	
  8.12.

  	
  Submission To Jurisdiction; Waivers

  	
  24

  
	
  8.13.

  	
  Acknowledgments

  	
  24

  
	
  8.14.

  	
  Additional Grantors

  	
  25

  
	
  8.15.

  	
  Releases

  	
  25

  
	
  8.16.

  	
  WAIVER OF JURY TRIAL

  	
  25

  
	
  8.17.

  	
  Intercreditor Agreement

  	
  26

  
	
  8.18.

  	
  First Lien Qualified Counterparties.

  	
  26

  



 


SCHEDULES


Schedule 1             Notice
Addresses

Schedule 2             Investment Property

Schedule 3             Perfection Matters

Schedule 4             Jurisdictions of
Organization and Chief Executive Offices

Schedule 5             Inventory and Equipment
Locations

Schedule 6             Intellectual
Property


 


 


ii

















FIRST LIEN GUARANTEE AND
COLLATERAL AGREEMENT, dated as of February 28, 2006, made by each of the
signatories hereto (together with any other entity that may become a party
hereto as provided herein, the “Grantors”), in favor of WELLS FARGO
FOOTHILL, INC., as administrative agent (in such capacity, the “Administrative
Agent”) for the Secured Parties (as hereinafter defined).


W
I T N E S S E T H:


WHEREAS, pursuant to the
First Lien Credit Agreement, dated as of January 26, 2006 (as amended,
supplemented, revised, replaced, restated or otherwise modified from time to
time, the “Credit Agreement”), among New World Restaurant Group, Inc., a
Delaware corporation (the “Borrower”), the Lenders, Bear, Stearns &
Co. Inc., as sole lead arranger and sole bookrunner (in such capacity, the “Lead
Arranger”) and the Administrative Agent, the Lenders have severally agreed
to make extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein;


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


WHEREAS, it is a condition
precedent to the obligation of the Lenders to make their respective extensions
of credit to the Borrower under the Credit Agreement and of First Lien
Qualified Counterparties to provide financial accommodation under Specified
Hedge Agreements and Specified Cash Management Agreements, as the case may be,
that the Grantors shall have executed and delivered this Agreement to the
Administrative Agents for the ratable benefit of the Secured Parties;


NOW, THEREFORE, in
consideration of the premises and to induce the Administrative Agent and the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the Borrower thereunder and to induce
First Lien Qualified Counterparties to enter into Specified Hedge Agreements or
Specified Cash Management Agreements, as the case may be, each Grantor hereby
agrees with the Administrative Agent, for the ratable benefit of the Secured
Parties, as follows:


SECTION 1.  DEFINED
TERMS


1.1.          Definitions.  (a)  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the New York UCC on the date hereof are used herein as so defined:  Accounts, Chattel Paper, Documents,
Equipment, Farm Products, General Intangibles, Goods, Instruments, Inventory
and Investment Property.


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


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


“Borrower Obligations”:  the First Lien Obligations of the Borrower.


 


1

















 


“Collateral”:  as defined in Section 3.


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


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


“Copyright Licenses”:  any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in Schedule 6),
granting any right under any Copyright, including, without limitation, the
grant of rights to manufacture, distribute, exploit and sell materials derived
from any Copyright.


“Deposit Account”:  as defined in the Uniform Commercial Code of
any applicable jurisdiction and, in any event, including, without limitation,
any demand, time, savings, passbook or like account maintained with a
depositary institution.


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


“Funding Office”:  the office of the Administrative Agent
specified in Section 11.2 of the Credit Agreement, or such other office as
the Administrative Agent may designate in writing.


 “Guarantor Obligations”:  with respect to any Guarantor, the First Lien
Obligations of such Guarantor.


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


“Intellectual Property”:  the collective reference to all rights,
priorities and privileges relating to any and all intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark
Licenses, and all rights to sue at law or in equity for any infringement or
other impairment thereof, including the right to receive all proceeds and
damages therefrom.


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


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


 


2

















 


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


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


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


“Patent License”:  all written agreements providing for the
grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without limitation,
any of the foregoing referred to in Schedule 6.


“Pledged Notes”:  all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory notes
issued in connection with extensions of trade credit by any Grantor in the
ordinary course of business or any promissory note evidencing Investments
permitted by Section 8.8(d) of the Credit Agreement).


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


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


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


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


“Second Lien Guarantee
and Collateral Agreement”: the “Guarantee and Collateral Agreement” as
defined under the Second Lien Credit Agreement.


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


 


3

















 


“Secured Parties”:  the collective reference to the
Administrative Agent, the Lenders and any First Lien Qualified
Counterparty.  The Secured Parties are
hereby designated as First Lien Claimholders for purposes of the Intercreditor
Agreement.


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


“Trademark License”:  any written agreement providing for the grant
by or to any Grantor of any right to use any Trademark, including, without
limitation, any of the foregoing referred to in Schedule 6.


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


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


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


SECTION 2.  GUARANTEE


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


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


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


 


4

















 


(d)           The guarantee contained in this Section 2 shall remain in
full force and effect until the conditions set forth in Section 8.15 shall have
been satisfied, notwithstanding that from time to time during the term of the
Credit Agreement the Borrower may be free from any Borrower Obligations.


(e)           No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by any Secured
Party from the Borrower, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until the conditions set forth in Section 8.15 shall have
been satisfied.


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


2.3.          No Subrogation. 
Notwithstanding any payment made by any Guarantor hereunder or any
set-off or application of funds of any Guarantor by any Secured Party, no
Guarantor shall be entitled to be subrogated to any of the rights of any
Secured Party against the Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by any Secured Party for the
payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, in
either case, until all amounts owing to the Secured Parties by the Borrower on
account of the Borrower Obligations are paid in full, no Letter of Credit shall
be outstanding and the Commitments under the Facilities are terminated.  If any amount shall be paid to any Guarantor
on account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Secured Parties, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured in
accordance with the provisions of Section 6.5 hereof.


2.4.          Amendments, etc. with respect to the Borrower
Obligations.  Each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of
rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Borrower Obligations made by
any Secured Party may be rescinded by such Secured 


 


5

















 


Party and any of the
Borrower Obligations continued, and the Borrower Obligations, or the liability
of any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Secured Party,
and the Credit Agreement and the other Loan Documents, any Specified Hedge
Agreement, any Specified Cash Management Agreement and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Borrower, the
Administrative Agent (or the Required Lenders or all Lenders, as the case may
be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or
any Secured Party for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. 
Neither the Administrative Agent nor any Secured Party shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Borrower Obligations or for the guarantee contained in
this Section 2 or any property subject thereto.


2.5.          Guarantee Absolute and Unconditional.  Each Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance by any Secured Party upon the guarantee
contained in this Section 2 or acceptance of the guarantee contained in this
Section 2; the Borrower Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Borrower and any of the Guarantors, on the one
hand, and the Secured Parties, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. 
To the extent permitted by applicable law, each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the Guarantors with respect to the
Borrower Obligations.  Each Guarantor
understands and agrees that, to the extent permitted by applicable law, the
guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (1) the
validity or enforceability of the Credit Agreement or any other Loan Document,
any of the Borrower Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by any Secured Party, (2) any defense, set-off or counterclaim (other
than a defense of payment or performance) which may at any time be available to
or be asserted by the Borrower or any other Person against any Secured Party,
or (3) any other circumstance whatsoever (other than a defense of performance)
(with or without notice to or knowledge of the Borrower or such Guarantor)
which constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance.  When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, any Secured Party may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against the Borrower, any other Guarantor or any other Person or against any
collateral security or guarantee for the Borrower Obligations or any right of
offset with respect thereto, and any failure by any Secured Party to make any
such demand, to pursue such other rights or remedies or to collect any payments
from the Borrower, any other Guarantor or any other Person or to realize 


 


6

















 


upon any such collateral
security or guarantee or to exercise any such right of offset, or any release
of the Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of any
Secured Party against any Guarantor.  For
the purposes hereof “demand” shall include the commencement and continuance of
any legal proceedings.


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


2.7.          Payments. 
Each Guarantor hereby guarantees that payments hereunder will be paid to
the Administrative Agent without set-off or counterclaim in Dollars at the
Funding Office.


SECTION 3.  GRANT OF SECURITY INTEREST


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


(a)           all Accounts;


(b)           all Chattel Paper;


(c)           all  Deposit
Accounts;


(d)           all Documents;


(e)           all Equipment;


(f)            all  General
Intangibles;


(g)           all Instruments;


(h)           all Intellectual Property;


(i)            all Inventory;


(j)            all Investment Property;


 


7

















 


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


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


(m)          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,
however, that notwithstanding any of the other provisions set forth in this
Section 3, this Agreement shall not constitute a grant of a security interest
in any property to the extent that such grant of a security interest is
prohibited by any Requirements of Law of a Governmental Authority, requires a
consent not obtained of any Governmental Authority pursuant to such Requirement
of Law or is prohibited by, or constitutes a breach or default under or results
in the termination of or requires any consent not obtained under, any contract,
license, agreement, instrument or other document evidencing or giving rise to
such property or, in the case of any Investment Property, Pledged Stock or
Pledged Note, any applicable shareholder or similar agreement, except to the
extent that such Requirement of Law or the term in such contract, license,
agreement, instrument or other document or shareholder or similar agreement
providing for such prohibition, breach, default or termination or requiring
such consent is ineffective under applicable law.


SECTION 4.  REPRESENTATIONS AND WARRANTIES


To induce the Administrative
Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective extensions of credit to the Borrower
thereunder and to induce the First Lien Qualified Counterparties to enter into
the Specified Hedge Agreements or the Specified Cash Management Agreements, as
the case may be, each Grantor hereby represents and warrants (in the case of
the Borrower, such representations and warranties being limited to itself and
its Subsidiaries) to the Administrative Agent and each Lender that:


4.1.          Representations in Credit Agreement.  In the case of each Guarantor, the
representations and warranties set forth in Section 5 of the Credit Agreement
as they relate to such Guarantor or to the Loan Documents to which such
Guarantor is a party, each of which is hereby incorporated herein by reference,
are true and correct in all material respects, and each Secured Party shall be
entitled to rely on each of them as if they were fully set forth herein,
provided that each reference in each such representation and warranty to the
Borrower’s or to any Loan Party’s knowledge shall, for the purposes of this
Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.


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


 


8

















 


Lien Administrative Agent
(as defined in the Interecreditor Agreement) with respect to the Second Lien
Security Documents).  For the avoidance
of doubt, it is understood and agreed that any Grantor may, as part of its
business, grant licenses to third parties to use Intellectual Property owned or
developed by a Grantor.  For purposes of
this Agreement and the other Loan Documents, such licensing activity shall not
constitute a “Lien” on such Intellectual Property.  Each Secured Party understands that any such
licenses may be exclusive to the applicable licensees, and such exclusivity
provisions may limit the ability of the Administrative Agent to utilize, sell,
Lease or transfer the related Intellectual Property or otherwise realize value
from such Intellectual Property pursuant hereto.


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


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


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


4.6.          Farm Products. 
None of such Grantor’s Collateral constitutes, or is the Proceeds of,
Farm Products.


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


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


(c)           To such Grantor’s knowledge, each of the Pledged Notes
constitutes the legal, valid and binding obligation of the obligor with respect
thereto, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, 


 


9

















 


moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.


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


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


4.9.          Intellectual Property.  (a) 
Schedule 6 lists all Intellectual Property that is registered or for
which registrations are pending owned by such Grantor in its own name on the
date hereof.


(b)           On the date hereof, all material Intellectual Property of
such Grantor described on Schedule 6 is valid, subsisting,
unexpired and enforceable (excepting for any pending applications), has not
been abandoned, and does not, to the knowledge of Grantor, infringe the
Intellectual Property rights of any other Person in any material respect.


(c)           Except as set forth in Schedule 6, on the date
hereof, none of the Intellectual Property is the subject of any licensing or
franchise agreement, other than licensing or franchise agreements entered into
by Grantor as part of its ordinary course of business, pursuant to which such
Grantor is the licensor or franchisor.


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


(e)           No action or proceeding is pending, or, to the knowledge
of such Grantor, threatened, on the date hereof (1) seeking to limit,
cancel or question the validity of any Intellectual Property or such Grantor’s
ownership interest therein, or (2) which, if adversely determined, would
have a Material Adverse Effect on the value of any Intellectual Property.


SECTION 5.  COVENANTS


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


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


 


10

















 


5.2.          Delivery of Instruments and Chattel Paper.  If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any Instrument,
Certificated Security or Chattel Paper, such Instrument, Certificated Security
or Chattel Paper shall be, immediately following the reasonable request of the
Administrative Agent, delivered to the Administrative Agent, duly indorsed in a
manner satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement, provided that, no Grantor will be required
to deliver any Instrument or Chattel Paper with a value of $75,000 or less
unless an Event of Default has occurred and is continuing and the
Administrative Agent has requested delivery of such Instrument or Chattel Paper.


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


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


(c)           If reasonably requested by the Administrative Agent, the
Borrower shall deliver to the Administrative Agent and the Lenders a
certificate of insurance of an insurance broker with respect to such insurance
substantially concurrently with the delivery by the Borrower to the
Administrative Agent of its audited financial statements for each fiscal year.


5.4.          Payment of Obligations.  Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all material taxes, assessments and governmental charges or
levies imposed upon such Grantor’s Collateral or in respect of income or
profits therefrom, as well as all material claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to such Grantor’s Collateral, except that no such charge need be paid
if the amount or validity thereof is currently being contested in good faith by
appropriate proceedings, reserves in conformity with GAAP with respect thereto
have been provided on the books of such Grantor.


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


 


11

















 


(b)           Such Grantor will furnish to the Administrative Agent and
the Lenders from time to time, unless a Default or an Event of Default shall
have occurred and be continuing, statements and schedules further identifying
and describing such Grantor’s Collateral and such other reports in connection
with such Grantor’s Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.


(c)           At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver, and have recorded,
such further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (1) the filing of any
financing or continuation statements under the Uniform Commercial Code (or
other similar laws) in effect in any jurisdiction with respect to the security
interests created hereby and (2) in the case of  Investment Property, Deposit Accounts and any
other relevant Collateral, taking any commercially reasonable actions to enable
the Administrative Agent to obtain “control” (within the meaning of the
applicable Uniform Commercial Code) with respect thereto.


5.6.          Changes in Name, etc.  Such Grantor will not, except upon
15 days’ prior written notice to the Administrative Agent, (I) change its
jurisdiction of organization or the location of its chief executive office or
sole place of business from that referred to in Section 4.4 or (II) change
its name, identity or corporate structure to such an extent that any financing
statement filed by the Administrative Agent in connection with this Agreement
would become misleading and shall deliver promptly to the Administrative Agent
(1) all additional financing statements and other documents reasonably
requested by the Administrative Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (2) if applicable, a
written supplement to Schedule 5 showing any additional location at which such
Grantor’s Inventory or Equipment shall be kept.


5.7.          Notices.  Such
Grantor will promptly give notice to the Administrative Agent, addressed to the
Administrative Agent and the Lenders, in reasonable detail, of:


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


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


5.8.          Investment Property. 
(a)  If such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Secured Parties, hold the same in trust for the
Secured Parties and deliver the same forthwith to the Administrative Agent in
the exact form received, duly 


 


12

















 


indorsed by such Grantor to
the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Grantor’s First Lien Obligations.  Other than any liquidation or dissolution
permitted by Section 8.4(b) of the Credit Agreement, any sums paid upon or in
respect of the Investment Property upon the liquidation or dissolution of any
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Grantor’s First Lien Obligations, and
in case any distribution of capital shall be made on or in respect of the
Investment Property or any property shall be distributed upon or with respect
to the Investment Property pursuant to the recapitalization or reclassification
of the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional collateral
security for such Grantor’s First Lien Obligations.  If any sums of money or property so paid or
distributed in respect of the Investment Property shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Administrative Agent, hold such money or property in trust for the
Secured Parties, segregated from other funds of such Grantor, as additional
collateral security for the Grantor’s First Lien Obligations.


(b)           Without the prior written consent of the Administrative
Agent, such Grantor will not (i) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer (except as otherwise permitted by the Credit Agreement), (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Investment Property or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Investment Property or Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement
and the Second Lien Guarantee and Collateral Agreement, as otherwise permitted
by the Credit Agreement or Liens arising by operation of law or (iv) enter into
any agreement or undertaking restricting the right or ability of such Grantor
or the Administrative Agent to sell, assign or transfer any of the Investment Property
or Proceeds thereof other than agreements permitted under Section 8.15 of the
Credit Agreement.


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


5.9.          Receivables. 
Other than in the ordinary course of business consistent with its past
practice, such Grantor will not (i) grant any extension of the time of
payment of any Receivable, (ii) compromise or settle any Receivable for
less than the full amount thereof, (iii) release, 


 


13

















 


wholly or partially, any
Person liable for the payment of any Receivable, (iv) allow any credit or
discount whatsoever on any Receivable or (v) amend, supplement or modify
any Receivable in any manner that could adversely affect the value thereof.


5.10.        Intellectual Property. 
(a)  Such Grantor (either itself
or through licensees) will (i) continue to use each Trademark that is
material to Grantor’s then current business in order to maintain such Trademark
in full force free from any claim of abandonment for non-use,
(ii) maintain as in the past the quality of products and services offered
under such Trademark, (iii) use such Trademark with the notices and
legends required by applicable Requirements of Law, (iv) not adopt or use
any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent, for the ratable benefit of the
Secured Parties, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any material way.


(b)           Such Grantor (either itself or through licensees) will not
do any act, or omit to do any act, whereby any Patent that is material to
Grantor’s then current business may become forfeited, abandoned or dedicated to
the public.


(c)           Such Grantor (either itself or through licensees) will not
(and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any portion of the Copyrights that is
material to Grantor’s then current business may become invalidated or otherwise
impaired.  Such Grantor will not (either
itself or through licensees) do any act whereby any portion of such Copyrights
that is material to Grantor’s then current business may fall into the public
domain.


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


(e)           Such Grantor will notify the Administrative Agent in
accordance with Section 5.7 immediately if it knows, or has reason to know,
that any application or registration relating to any Intellectual Property that
is material to Grantor’s then current business may become forfeited, abandoned
or dedicated to the public, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination
or development in, any adversarial proceeding with a third party in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor’s ownership of, or the
validity of, any Intellectual Property that is material to Grantor’s then
current business or such Grantor’s right to register the same or to own and
maintain the same.


(f)            Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, files an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such Grantor
shall report such filing to the Administrative Agent within 15 Business Days
after the last day of the fiscal quarter in which such filing occurs.  Such Grantor shall execute and deliver, and
have recorded, any and 


 


14

















 


all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the Secured
Parties’ security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or
represented thereby.


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


(h)           In the event that any Intellectual Property that is
material to Grantor’s then current business is infringed, misappropriated or
diluted by a third party, such Grantor shall take such actions as such Grantor
shall reasonably deem appropriate under the circumstances to protect such
Intellectual Property.


SECTION 6.  REMEDIAL
PROVISIONS


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


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


(c)           At the Administrative Agent’s request at any time after
the occurrence and during the continuance of a Default or an Event of Default,
each Grantor shall deliver to the Administrative Agent all existing original
and other documents evidencing, and relating to, the 


 


15

















 


agreements and transactions which gave rise to the
Receivables, including, without limitation, all original orders, invoices and
shipping receipts.


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


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


(c)           Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto.  No Secured Party shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by any
Secured Party of any payment relating thereto, nor shall any Secured Party be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto), to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


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


(b)           If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such
rights to the relevant Grantor or Grantors, (i) the Administrative Agent
shall have the right to receive any and all cash dividends, payments or other
Proceeds paid in respect of the Investment Property and make application
thereof to the First Lien Obligations in the order set forth in
Section 6.5, and (ii) any or all of the Investment Property shall be
registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (1) all
voting, corporate and other


 


16

















 


rights pertaining to such Investment Property at any
meeting of shareholders of the relevant Issuer or Issuers or otherwise and
(2) any and all rights of conversion, exchange and subscription and any
other rights, privileges or options pertaining to such Investment Property as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Investment Property upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by any
Grantor or the Administrative Agent of any right, privilege or option
pertaining to such Investment Property, and in connection therewith, the right
to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.


(c)           Each Grantor hereby authorizes and instructs each Issuer
of any Investment Property pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that
(1) states that an Event of Default has occurred and is continuing and (2) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Investment Property directly to the Administrative Agent.


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


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


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


 


17

















 


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


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


Fourth, any balance
of such Proceeds remaining after the First Lien Obligations shall have been
paid in full, no Letters of Credit shall be outstanding and the Commitments
under the Facilities shall have terminated and the net termination liability
under or in respect of any Specified Hedge Agreement shall have been cash
collateralized or paid in full shall be paid over to Second Lien Collateral
Agent for application in accordance with the Second Lien Guarantee and
Collateral Agreement.


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


 


18

















 


waives all claims, damages
and demands it may acquire against any Secured Party arising out of the
exercise by them of any rights hereunder. 
If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.


6.7.          Private Sales. 
Each Grantor recognizes that the Administrative Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner.  Each Grantor agrees
to use its best efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the Pledged Stock
pursuant to this Section 6.7 valid and binding and in compliance with any and
all other applicable Requirements of Law; it being understood that no Grantor
shall be required to cause any Issuer to become a reporting company or to
register any such securities for public sale under the Securities Act or under
any applicable state securities laws.


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


SECTION 7.  THE
ADMINISTRATIVE AGENT


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


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


 


19

















 


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


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


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


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


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


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


 


20

















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


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


7.2.          Duty of Administrative Agent.  The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Administrative Agent deals with
similar property for its own account.  No
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of any Grantor or
any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.  The
powers conferred on the Secured Parties hereunder are solely to protect the
Secured Parties’ interests in the Collateral and shall not impose any duty upon
any Secured Party to exercise any such powers. 
The Secured Parties shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.


7.3.          Financing Statements.  Pursuant to Section 9-509 of the New York UCC
and any other applicable law, each Grantor authorizes the Administrative Agent
to file or record financing statements and other filing or recording documents
or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Administrative Agent and such
Grantor reasonably determines appropriate to perfect the security interests of
the Administrative Agent under this Agreement. 
Each Grantor authorizes the Administrative Agent to use the collateral
description “all personal property” in any such financing statements.  Each Grantor hereby ratifies and authorizes
the filing by the Administrative Agent of any financing statement with respect
to the Collateral made prior to the date hereof.


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


 


21

















 


Grantor
shall be under any obligation, or entitlement, to make any inquiry respecting
such authority.


SECTION 8. 
MISCELLANEOUS


8.1.          Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 11.1 of the Credit Agreement and the Intercreditor
Agreement; provided, that no such waiver amendment, supplement or modification
shall require the consent of any First Lien Qualified Counterparty except as
expressly provided in Section 11.1 of the Credit Agreement.


8.2.          Notices.  All
notices, requests and demands to or upon the Administrative Agent or any
Grantor hereunder shall be effected in the manner provided for in
Section 11.2 of the Credit Agreement; provided that any such notice,
request or demand to or upon any Guarantor shall be addressed to such Guarantor
at its notice address set forth on Schedule 1 or to such other address for
notice, request or demand which a Grantor may designate by written notice to
the Administrative Agent.


8.3.          No Waiver by Course of Conduct; Cumulative Remedies.  No Secured Party shall by any act (except by
a written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. 
No failure to exercise, nor any delay in exercising, on the part of any
Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof.  No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  A waiver by any Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent or any such Lender
would otherwise have on any future occasion. 
The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies
provided by law.


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


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


(c)           Each Guarantor agrees to pay, and to save the Secured
Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 11.5 of the Credit Agreement.


 


22

















 


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


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


8.6.          Set-Off.  Each
Grantor hereby irrevocably authorizes the Administrative Agent and each Secured
Party at any time after the occurrence of and during the continuance of a
Default or an Event of Default under Section 9(a) of the Credit Agreement,
without prior notice to such Grantor or any other Grantor, any such notice
being expressly waived by each Grantor to the extent permitted by applicable
law, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Secured Party to or for the credit or the account of such
Grantor, or any part thereof in such amounts as such Agent or such Secured
Party may elect, against and on account of the obligations and liabilities of
such Grantor to such Agent or such Secured Party hereunder and claims of every
nature and description of such Agent or such Secured Party against such
Grantor, in any currency, whether arising hereunder, under the Credit Agreement
or any other Loan Document, as such Agent or such Secured Party may elect,
whether or not any Secured Party has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured.  The Administrative Agent and each Secured
Party shall notify such Grantor promptly of any such set-off and the
application made by the Administrative Agent or such Secured Party of the
proceeds thereof, provided that the failure to give such notice shall not
affect the validity of such set-off and application.  The rights of the Administrative Agent and
each Secured Party under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Administrative Agent or such Secured Party may have.


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


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


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


 


23

















 


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


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


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


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


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


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


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


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


8.13.        Acknowledgments. 
Each Grantor hereby acknowledges that:


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


(b)           no Secured Party has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Grantors, on the
one hand, and the Secured Parties, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and


 


24

















 


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


8.14.        Additional Grantors. 
Each Subsidiary of the Borrower that is required to become a party to
this Agreement pursuant to Section 7.10 of the Credit Agreement shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.


8.15.        Releases. 
(a)  At such time as the Loans,
the Reimbursement Obligations and the other First Lien Obligations under the
Loan Documents (other than First Lien Obligations under or in respect of
Specified Hedge Agreements or Specified Cash Management Agreements and
unasserted contingent indemnification obligations) shall have been paid in
full, the Commitments under the Facilities have been terminated and no Letters
of Credit shall be outstanding, the Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Grantor hereunder shall terminate, all without delivery of any instrument
or performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors (subject however, to the rights of the Second Lien
Administrative Agent under the Second Lien Guarantee and Collateral
Agreement).  At the request and sole
expense of any Grantor following any such termination, the Administrative Agent
shall deliver to such Grantor any Collateral held by the Administrative Agent
hereunder (subject however, to the obligations of the Administrative Agent
under the Intercreditor Agreement), and execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination.


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


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


 


25

















 


8.17.        Intercreditor Agreement.  Notwithstanding anything to the contrary
contained herein, the terms of this Agreement shall be subject to the terms of
the Intercreditor Agreement and in the event of any inconsistency between any
provision herein and therein, the terms of the Intercreditor Agreement shall
govern.


8.18.        First Lien Qualified Counterparties. By accepting the
applicable benefits of the Loan Documents, each First Lien Qualified
Counterparty shall be deemed to have agreed to, and be bound by, all of the
applicable provisions thereof.


 


26

















 


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


	
   

  	
  NEW
  WORLD RESTAURANT GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  



 


27

















 


	
   

  	
  MANHATTAN
  BAGEL COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  CHESAPEAKE
  BAGEL FRANCHISE CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  EINSTEIN
  AND NOAH CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  EINSTEIN/NOAH
  BAGEL PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  I.
  & J. BAGEL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul J.B. Murphy, III

  
	
   

  	
   

  	
  Paul
  J.B. Murphy, III

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  



 


28

















Annex I
 to

First Lien Guarantee and Collateral Agreement


ASSUMPTION AGREEMENT, dated
as of                       ,
200  , made by                                                ,
a                              
corporation (the “Additional Grantor”), in favor of Wells Fargo
Foothill, Inc., as administrative agent (in such capacity, the “Administrative
Agent”) for the Secured Parties.  All
capitalized terms not defined herein shall have the meaning ascribed to them in
such Credit Agreement.


W I T N E S S E T H :


WHEREAS, New World
Restaurant Group, Inc., a Delaware corporation (the “Borrower”), the
Lenders and the Administrative Agent and certain other parties have entered
into a First Lien Credit Agreement, dated as of January 26, 2006 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”);


WHEREAS, in connection with
the Credit Agreement, the Borrower and certain of their Affiliates (other than
the Additional Grantor) have entered into the (i) First Lien Guarantee and Collateral
Agreement, dated as of February 28 , 2006 (as amended, supplemented or
otherwise modified from time to time, the “Guarantee and Collateral
Agreement”) in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Secured Parties and (ii) the Intercreditor
Agreement referred to in the Credit Agreement;


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


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


NOW, THEREFORE, IT IS
AGREED:


1.  First Lien Guarantee and Collateral
Agreement.  By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a
party to the Guarantee and Collateral Agreement as a Grantor thereunder with
the same force and effect as if originally named therein as a Grantor and,
without limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder.  The information set forth in Annex 1-A
hereto is hereby added to the information set forth in the Schedules to the
Guarantee and Collateral Agreement.  The
Additional Grantor hereby represents and warrants that each of the
representations and warranties contained in Section 4 of the Guarantee and
Collateral Agreement is true and correct as to the Additional Grantor on and as
the date hereof (after giving effect to this Assumption Agreement) as if made
on and as of such date.


 

















 


2.  Intercreditor Agreement.  By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 9.11 of the
Intercreditor Agreement, hereby becomes a party to the Intercreditor Agreement
as a Loan Party (as defined therein) thereunder with the same force and effect
as if originally named therein as a Loan Party and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations of a Loan
Party thereunder.


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


 


2

















 


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


	
   

  	
  [ADDITIONAL
  GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


3

















 


Annex 1-A to

Assumption Agreement


Supplement
to Schedule 1


Supplement
to Schedule 2


Supplement
to Schedule 3


Supplement
to Schedule 4


Supplement
to Schedule 5


Supplement
to Schedule 6





















Annex II

to

First Lien Guarantee and Collateral Agreement


ACKNOWLEDGMENT AND CONSENT


The undersigned hereby
acknowledges receipt of a copy of the First Lien Guarantee and Collateral
Agreement dated as of  February 28, 2006
(the “Agreement”), made by the Grantors parties thereto for the benefit
of Wells Fargo Foothill, Inc., as Administrative Agent.  The undersigned agrees for the benefit of the
Administrative Agent and the Secured Parties as follows:


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


2.     The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.


3.     The terms of Sections 6.3(a) and 6.7 of the Agreement shall
apply to it, mutatis  mutandis, with respect to all actions that
may be required of it pursuant to Section 6.3(a) or 6.7 of the Agreement.


	
   

  	
  [NAME
  OF ISSUER]

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address
  for Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax: