Exhibit 10.26


 




 





FIRST AMENDED AND RESTATED INVENTORY AND
ACCOUNTS SECURITY AGREEMENT


 


By


 


TRANSMONTAIGNE INC.

as Borrower


 


and


 


THE GUARANTORS PARTY HERETO


 


and


 


UBS AG, STAMFORD BRANCH


as Collateral Agent


 












 


Dated as of June 25, 2003




 





 

















 


TABLE OF CONTENTS


 


	
  P
  R E A M B L E

  
	
   

  
	
  R
  E C I T A L S:

  
	
   

  
	
  A G R E E M E N T:

  
	
   

  
	
  ARTICLE
  I

  
	
   

  
	
  DEFINITIONS AND INTERPRETATION

  
	
  SECTION
  1.1.

  	
  Definitions.

  
	
  SECTION
  1.2.

  	
  Interpretation

  
	
   

  	
   

  
	
  ARTICLE
  II

  
	
  GRANT OF SECURITY AND SECURED OBLIGATIONS

  
	
   

  
	
  SECTION
  2.1.

  	
  Pledge

  
	
  SECTION
  2.2.

  	
  Secured Obligations

  
	
  SECTION
  2.3.

  	
  Security
  Interest

  
	
  SECTION
  2.4.

  	
  No
  Release

  
	
   

  	
   

  
	
  ARTICLE
  III

  
	
   

  	
   

  
	
  PERFECTION;
  SUPPLEMENTS; FURTHER ASSURANCES;

  USE OF PLEDGED COLLATERAL

  
	
   

  
	
  SECTION
  3.1.

  	
  Delivery of Certificated Securities
  Collateral

  
	
  SECTION
  3.2.

  	
  Perfection of Uncertificated Securities
  Collateral

  
	
  SECTION
  3.3.

  	
  Financing Statements and Other Filings;
  Maintenance of Perfected Security Interest

  
	
  SECTION
  3.4.

  	
  Other
  Actions

  
	
  SECTION
  3.5.

  	
  Joinder of Additional Guarantors

  
	
  SECTION
  3.6.

  	
  Use and Pledge of Pledged Collateral

  
	
   

  	
   

  
	
  ARTICLE
  IV

  
	
   

  	
   

  
	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  
	
   

  
	
  SECTION
  4.1.

  	
  Title, Authority and Validity; Preservation
  of Corporate Existence

  
	
  SECTION
  4.2.

  	
  Validity of Security Interest

  
	
  SECTION
  4.3.

  	
  Limitation on Liens

  



 


i

















 


	
  SECTION
  4.4.

  	
  Other Financing Statements

  
	
  SECTION
  4.5.

  	
  Chief Executive Office; Change of Name;
  Jurisdiction of Organization

  
	
  SECTION
  4.6.

  	
  [Reserved]

  
	
  SECTION
  4.7.

  	
  [Reserved]

  
	
  SECTION
  4.8.

  	
  Corporate Names; Prior Transactions

  
	
  SECTION
  4.9.

  	
  Due Authorization and Issuance

  
	
  SECTION
  4.10.

  	
  No Violations, etc.

  
	
  SECTION
  4.11.

  	
  No Options, Warrants, etc.

  
	
  SECTION
  4.12.

  	
  No Claims

  
	
  SECTION
  4.13.

  	
  No Conflicts, Consents, etc.

  
	
  SECTION
  4.14.

  	
  Pledged Collateral

  
	
  SECTION
  4.15.

  	
  Insurance

  
	
  SECTION
  4.16.

  	
  Payment of Taxes; Compliance with Laws;
  Contesting Liens; Claims

  
	
  SECTION
  4.17.

  	
  Access to Pledged Collateral, Books and
  Records; Other Information

  
	
  SECTION
  4.18.

  	
  Benefit to Guarantors

  
	
   

  	
   

  
	
  ARTICLE
  V

  
	
   

  	
   

  
	
  CERTAIN PROVISIONS CONCERNING SECURITIES
  COLLATERAL

  
	
   

  
	
  SECTION
  5.1.

  	
  Pledge of Additional Securities Collateral

  
	
  SECTION
  5.2.

  	
  Voting Rights; Distributions; etc.

  
	
  SECTION
  5.3.

  	
  Operative Agreements

  
	
  SECTION
  5.4.

  	
  Defaults,
  etc.

  
	
  SECTION
  5.5.

  	
  Certain Agreements of Pledgors as Issuers
  and Holders of Equity Interests

  
	
   

  	
   

  
	
  ARTICLE
  VI

  
	
   

  	
   

  
	
  CERTAIN PROVISIONS CONCERNING ACCOUNTS

  
	
   

  
	
  SECTION
  6.1.

  	
  [Reserved]

  
	
  SECTION
  6.2.

  	
  Maintenance of Records

  
	
  SECTION
  6.3.

  	
  Legend

  
	
  SECTION
  6.4.

  	
  Allowances

  
	
  SECTION
  6.5.

  	
  Collection

  



 


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  ARTICLE
  VII

  
	
   

  	
   

  
	
  TRANSFERS AND OTHER LIENS

  
	
   

  
	
  SECTION
  7.1.

  	
  Transfers of and other Liens on Pledged
  Collateral

  
	
   

  	
   

  
	
  ARTICLE
  VIII

  
	
   

  	
   

  
	
  REMEDIES

  
	
   

  
	
  SECTION
  8.1.

  	
  Remedies

  
	
  SECTION
  8.2.

  	
  Notice
  of Sale

  
	
  SECTION
  8.3.

  	
  Waiver of Notice and Claims

  
	
  SECTION
  8.4.

  	
  Certain Sales of Pledged Collateral

  
	
  SECTION
  8.5.

  	
  No Waiver; Cumulative Remedies

  
	
   

  	
   

  
	
  ARTICLE
  IX

  
	
   

  	
   

  
	
  PROCEEDS
  OF CASUALTY EVENTS AND COLLATERAL 

  DISPOSITIONS/APPLICATION OF PROCEEDS

  
	
   

  
	
  SECTION
  9.1.

  	
  Proceeds of Casualty Events and Collateral
  Dispositions

  
	
  SECTION
  9.2.

  	
  Application of Proceeds

  
	
   

  	
   

  
	
  ARTICLE
  X

  
	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  
	
  SECTION
  10.1.

  	
  Concerning Collateral Agent

  
	
  SECTION
  10.2.

  	
  Collateral Agent May Perform; Collateral
  Agent Appointed Attorney-in-Fact

  
	
  SECTION
  10.3.

  	
  Expenses

  
	
  SECTION
  10.4.

  	
  Indemnity

  
	
  SECTION
  10.5.

  	
  Continuing Security Interest; Assignment

  
	
  SECTION
  10.6.

  	
  Termination; Release

  
	
  SECTION
  10.7.

  	
  Modification in Writing

  
	
  SECTION
  10.8.

  	
  Notices

  
	
  SECTION
  10.9.

  	
  GOVERNING
  LAW

  
	
  SECTION
  10.10.

  	
  CONSENT TO JURISDICTION AND SERVICE OF
  PROCESS; WAIVER OF JURY TRIAL

  
	
  SECTION
  10.11.

  	
  Severability of Provisions

  
	
  SECTION
  10.12.

  	
  Execution in Counterparts

  
	
  SECTION
  10.13.

  	
  Business
  Days

  



 


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  SECTION
  10.14.

  	
  Waiver
  of Stay

  
	
  SECTION
  10.15.

  	
  No Credit for Payment of Taxes or
  Imposition

  
	
  SECTION
  10.16.

  	
  No Claims Against Collateral Agent

  
	
  SECTION
  10.17.

  	
  Obligations Absolute

  
	
   

  	
   

  
	
  SIGNATURES

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 4.13

  	
  Required Consents

  
	
  EXHIBIT 1

  	
  Form of Issuers Acknowledgment

  
	
  EXHIBIT 2

  	
  Form of Security Amendment

  
	
  EXHIBIT 3

  	
  Form of Joinder Agreement

  
	
  EXHIBIT 4

  	
  Form of Control Agreement (Deposit Accounts)

  
	
  EXHIBIT 5

  	
  Form of Control Agreement (Securities Accounts)

  



 


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FIRST AMENDED AND RESTATED INVENTORY AND

ACCOUNTS SECURITY AGREEMENT


 


P R E A M B L
E


 


FIRST AMENDED AND RESTATED INVENTORY AND ACCOUNTS SECURITY AGREEMENT
(the “Agreement”), dated as of June 25, 2003, made
by TRANSMONTAIGNE INC., a Delaware corporation (the “Borrower”), and THE
GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO (the “Original Guarantors”)
OR FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the “Additional
Guarantors” and, together with the “Original Guarantors”, the “Guarantors”),
as pledgors, assignors and debtors (the Borrower, together with the Guarantors
in such capacities and together with any successors in such capacities, the “Pledgors,”
and each, a “Pledgor”), in favor of UBS AG, STAMFORD BRANCH, in its
capacity as collateral agent pursuant to the Credit Agreement (as hereinafter
defined), as pledgee, assignee and secured party (in such capacities and
together with any successors in such capacities, the “Collateral Agent”).


 


R E C I T A L
S:


 


A.                                   The
Company, the Guarantors and UBS AG, Stamford Branch, as Collateral Agent,
entered into an inventory and accounts security agreement dated as of February
28, 2003 (the “Original Inventory and Accounts Security Agreement”).


 


B.                                     The
Company, the Guarantors and UBS AG, Stamford Branch, as Collateral Agent,
desire to amend and restate the Original Inventory and Accounts Security
Agreement in the form in this Agreement


 


C.                                     The
Borrower, the Guarantors from time to time party thereto, UBS AG, Stamford
Branch, as administrative agent (in such capacity and together with any successors
in such capacity, the “Administrative Agent”), UBS Warburg, LLC, in its
capacity as Sole Lead Arranger, the Collateral Agent and the lending
institutions listed therein (together with the Collateral Agent in its capacity
as a lender, the “Lenders”), in connection with the execution and delivery
of this Agreement, entered into that certain credit agreement, dated as of
February 28, 2003 (as amended and restated as of June 25, 2003 and as
further amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”) pursuant to which the Lenders
agreed to make certain Loans (as defined in the Credit Agreement) and issue
certain Letters of Credit (as defined in the Credit Agreement) to or for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Credit Agreement.


 


D.                                    Pursuant
to Section 6.4.11 of the Credit Agreement, each of Coastal Fuels Marketing,
Inc. and Coastal Tug & Barge, Inc. entered into a Joinder Agreement dated
as of March 14, 2003, whereby each became party to, and agreed to be bound by
the terms and conditions of, this Agreement and the Credit Agreement as a Guarantor.


 

















 


E.                                      The
Guarantors have, or will have, as the case may be, among other things, fully
and unconditionally guaranteed the obligations of Borrower under the Credit
Agreement.


 


F.                                      Each
Guarantor will receive substantial benefits from the execution, delivery and
performance of the obligations under the Credit Agreement and is, therefore,
willing to enter into this Agreement.


 


G.                                     It
is contemplated that one or more of the Pledgors may enter into one or more
agreements with one or more of the Lenders or their respective Affiliates with
respect to the Loans (“Interest Rate Protection Agreements”) fixing the
interest rates with respect to Loans under the Credit Agreement (all
obligations of the Pledgors now existing or hereafter arising under such
Interest Rate Protection Agreements, collectively, the “Interest Rate Obligations”).


 


H.                                    It
is contemplated that one or more of the Pledgors may enter into one or more
agreements with one or more of the Lenders or their respective Affiliates with
respect to the Loans (“Hedging Agreements”) designed to alter the risks
arising from the fluctuations in interest rates, currency values or commodity
prices with respect to Loans under the Credit Agreement (all obligations of the
Pledgors now existing or hereafter arising under such Hedging Agreements,
collectively, the “Hedging Obligations”).


 


I.                                         The
Collateral Agent has been authorized and directed to enter into this Agreement
pursuant to the Credit Agreement.


 


J.                                        It
is a condition precedent to the obligations of the Lenders to make the Loans
that Borrower and the Guarantors shall have executed and delivered this
Agreement to the Collateral Agent for its benefit and for the benefit of the
Lenders, the Administrative Agent, the Sole Lead Arranger and each party to an
Interest Rate Protection Agreement or Hedging Agreement relating to the Loans
if at the date of entering into such Interest Rate Protection Agreement or
Hedging Agreement, such person was a Lender or an Affiliate of a Lender and
such person executes and delivers to the Collateral Agent a letter agreement in
form and substance acceptable to the Collateral Agent pursuant to which such
person (x) appoints the Collateral Agent as its agent under the applicable
Credit Documents and (y) agrees to be bound by the provisions of the Credit
Agreement (the parties described in this recital, collectively, the “Secured
Parties”).


 


K.                                    Each
Pledgor is or, as to Pledged Collateral (as hereinafter defined) acquired by
such Pledgor after the date hereof will be, the legal and/or beneficial owner of
the Pledged Collateral pledged by it hereunder.


 


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L.                                      This
Agreement is given by each Pledgor in favor of the Collateral Agent for the
benefit of the Secured Parties to secure the payment and performance of all of
the Secured Obligations (as hereinafter defined) on a first priority basis.


 


A G R E E M E N T:


 


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


 


ARTICLE I


 


DEFINITIONS AND INTERPRETATION


 


SECTION 1.1.                       Definitions.


 


(a)                                  Unless
otherwise defined herein, terms used herein that are defined in the UCC shall
have the meanings assigned to them in the UCC, including the following which
are capitalized herein:


 


“Bank”; “Chattel Paper”; “Commodity Account”; “Commodity
Contract”; “Commodity Intermediary”; “Documents”; “Electronic
Chattel Paper”; “Entitlement Order”; “Equipment”; “Financial
Asset”; “Fixtures”; “Goods”; “Instruments” (as defined
in Article 9 rather than Article 3); “Inventory”; “Letter of credit”;
“Letter-of-credit right”; “Proceeds”; “Securities Account”;
“Security Entitlement”; “Securities Intermediary”; “State”;
“Supporting Obligations”; and “Tangible Chattel Paper”.


 


(b)                                 Capitalized
terms used but not otherwise defined herein that are defined in the Credit
Agreement shall have the meanings given to them in the Credit Agreement.


 


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


 


“Account”, except as used in “account for”, means a right to
payment of a monetary obligation, whether or not earned by performance, (i) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for
a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred
or to be incurred, (v) for energy provided or to be provided, (vi) for the use
or hire of a vessel under a charter or other contract, (vii) arising out of the
use of a credit or charge card or information contained on or for use with the
card, or (viii) as winnings in a lottery or other game of chance operated or
sponsored by a state, governmental unit of a State, or person licensed or
authorized to operate the game by a State or governmental unit of a State.  The term includes health-care-insurance
receivables.  The term does not include
(i) rights to 


 


3

















 


payment evidenced by chattel
paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts,
(iv) investment property, (v) letter-of-credit rights or letters of credit, or
(vi) rights to payment for money or funds advanced or sold, other than rights arising
out of the use of a credit or charge card or information contained on or for
use with the card.  The term does not
include Proceeds of any (i) Equipment, Fixtures, Goods not constituting
Inventory or Intellectual Property Collateral, or (ii) Documents, Instruments,
letter-of-credit rights or Supporting Obligations relating to any of the assets
described in the immediately preceding clause (i).


 


“Additional Guarantors” shall have the meaning assigned to such
term in the Preamble hereof.


 


“Additional Pledged Interests” shall mean, collectively, with
respect to each Pledgor, (i) all options, warrants, rights, agreements,
additional membership or partnership interests or other interests of whatever
class of any issuer of Initial Pledged Interests or any interest in any such
issuer, including, without limitation, all rights, privileges, authority and
powers of such Pledgor relating to the equity or membership or partnership
interests in any such issuer or under the Operative Agreement of any such
issuer, from time to time acquired by such Pledgor in any manner and (ii) all
the membership, partnership or other interests, as applicable, of each limited
liability company, partnership or other entity (other than a corporation)
hereafter acquired or formed by such Pledgor that are required to be pledged
pursuant to Section 6.4.11 of the Credit Agreement or Article V
hereof and all options, warrants, rights, agreements, additional membership or
partnership interests or other interests of whatever class of such limited
liability company, partnership or other entity including, without limitation,
all rights, privileges, authority and powers of such Pledgor relating to such
equity or membership or partnership interests or under the Operative Agreement
of such limited liability company, partnership or other entity, from time to
time acquired by such Pledgor in any manner, in each case, including the
certificates, instruments and agreements representing such additional interests
and any and all interest of such Pledgor in the entries on the books of any
financial intermediary pertaining to such additional interests.


 


“Additional Pledged Shares” shall mean, collectively, with
respect to each Pledgor, (i) all options, warrants, rights, agreements,
additional shares of capital stock of whatever class of any issuer of the
Initial Pledged Shares or any interest in any such issuer, including, without
limitation, all rights, privileges, authority and powers of such Pledgor
relating to such additional shares issued by any such issuer under the
Operative Agreement of any such issuer, from time to time acquired by such
Pledgor in any manner and (ii) all the issued and outstanding shares of capital
stock of each corporation hereafter acquired or formed by such Pledgor that are
required to be pledged pursuant to Section 6.4.11 of the Credit
Agreement or Article V hereof and all options, warrants, rights, agreements
or additional shares of capital stock of whatever class of such corporation
including, without limitation, all rights, privileges, authority and powers of
such Pledgor relating to such shares or under the Operative Agreement of such
corporation, from time to time acquired by such Pledgor in any manner, in each
case, including the certificates representing such additional shares and any
and all 


 


4

















 


interest of such Pledgor in the
entries on the books of any financial intermediary pertaining to such
additional shares.


 


“Agreement” shall mean this Agreement, as amended, amended and
restated, supplemented or otherwise modified from time to time in accordance
with the provisions hereof.


 


“Bailee Letter” shall have the meaning assigned to such term in Section
3.4(f) hereof.


 


“Borrower” shall have the meaning assigned to such term in the
Preamble hereof.


 


“Charges” shall mean any and all property and other taxes,
assessments and special assessments, levies, fees and all governmental charges
imposed upon or assessed against, and all claims (including, without
limitation, landlords’, carriers’, mechanics’, workmen’s, repairmen’s,
laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and other claims
arising by operation of law) against, all or any portion of the Pledged
Collateral.


 


“Collateral Agent” shall have the meaning assigned to such term
in the Preamble hereof.


 


“Contested Liens” shall mean, collectively, any Liens incurred
in respect of any Charges (including any Liens described in Sections 6.8.2,
6.8.3 and 6.8.4 of the Credit Agreement) to the extent that the
amounts owing in respect thereof are not yet delinquent or are being contested
and otherwise comply with the provisions of Section 4.16 hereof; provided,
however, that such Liens shall in all respects be subject and
subordinate in priority to the Lien and security interest created and evidenced
by this Agreement, except if and to the extent that the law or regulation
creating, permitting or authorizing such Lien provides that such Lien must be superior
to the Lien and security interest created and evidenced hereby.


 


“Contracts” shall mean, collectively, with respect to each
Pledgor, all sale, service, performance, equipment or property lease contracts,
agreements and grants and all other contracts, agreements or grants (in each
case, whether written or oral, or third party or intercompany), between such
Pledgor and third parties, and all assignments, amendments, restatements,
supplements, extensions, renewals, replacements or modifications thereof.


 


“Control” shall mean (i) in the case of each Deposit
Account, “control,” as such term is defined in Section 9-104 of the UCC,
(ii) in the case of any Security Entitlement, “control,” as such term is
defined in Section 8-106 of the UCC, and (iii) in the case of any Commodity
Contract, “control,” as such term is defined in Section 9-106 of the UCC.


 


5

















 


“Control Agreement” shall mean an agreement substantially in the
form annexed hereto as Exhibit 4 or Exhibit 5, as applicable, or
such other agreement in form and substance acceptable to the Collateral Agent.


 


“Controlled Account” shall mean any Account subject to a Control
Agreement.


 


“Copyrights” shall mean, collectively,
with respect to each Pledgor, all copyrights (whether statutory or common law,
whether established or registered in the United States or any other country or
any political subdivision thereof whether registered or unregistered and
whether published or unpublished) and all copyright registrations and
applications made by such Pledgor, including, without limitation, the
copyrights, registrations and applications listed in Schedule 11(b) of
the Perfection Certificate, together with any and all (i) rights and
privileges arising under applicable law with respect to such Pledgor’s use of
such copyrights, (ii) reissues, renewals, continuations and extensions
thereof, (iii) income, fees, royalties, damages, claims and payments now or hereafter
due and/or payable with respect thereto, including, without limitation, damages
and payments for past, present or future infringements thereof,
(iv) rights corresponding thereto throughout the world and (v) rights to
sue for past, present or future infringements thereof.


 


“Credit Agreement” shall have the meaning assigned to such term
in Recital C hereof.


 


“Deposit Accounts” shall mean, collectively, with respect to
each Pledgor, (i) all “deposit accounts” as such term is defined in the UCC and
(ii) all cash, funds, checks, notes and instruments from time to time on
deposit in any of the accounts described in clause (i) of this definition.


 


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


 


“Excluded Property” shall mean Special Property other than the
following:


 


(a)                                  the
right to receive any payment of money (including, without limitation, Accounts,
General Intangibles and Payment Intangibles) or any other rights referred to in
Section 9-406(f), 9-407(a) or 9-408(a) of the UCC; and


 


(b)                                 any
Proceeds, substitutions or replacements of any Special Property (unless such
Proceeds, substitutions or replacements would constitute Special Property).


 


6

















 


“General Intangibles” shall mean, collectively, with respect to
each Pledgor, all “general intangibles,” as such term is defined in the UCC, of
such Pledgor and, in any event, shall include, without limitation, (i) all
of such Pledgor’s rights, title and interest in, to and under all insurance
policies (to the extent relating to the assets described in clauses (i), (ii),
(iii), (iv) and (v) of Section 2.1) and Contracts,
(ii) [intentionally omitted], (iii) any and all other rights, claims,
choses-in-action and causes of action of such Pledgor against any other Person
and the benefits of any and all collateral or other security given by any other
Person in connection therewith, (iv) all guarantees, endorsements and indemnifications
on, or of, any of the Pledged Collateral, (v) all lists, books, records,
correspondence, ledgers, print-outs, files (whether in printed form or stored
electronically), tapes and other papers or materials containing information
relating to any of the Pledged Collateral, including, without limitation, all
customer lists, identification of suppliers, data, plans, recorded knowledge,
studies, test reports, standards, performance standards, research data,
accounting information pertaining to any of the Pledged Collateral and all
media in which or on which any of the information or knowledge or data or
records may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data and (vi) all
rights to reserves, deferred payments, deposits, refunds, indemnification of
claims to the extent the foregoing relate to any Pledged Collateral and claims
for tax or other refunds against any Governmental Authority relating to any
Pledged Collateral.  Notwithstanding
anything to the contrary set forth in this Agreement, “General Intangibles”
shall not include any Intellectual Property Collateral.


 


“Goodwill” shall mean, collectively,
with respect to each Pledgor, the goodwill connected with such Pledgor’s business
including, without limitation, (i) all goodwill connected with the use of
and symbolized by any of the Intellectual Property Collateral in which such
Pledgor has any interest, (ii) all know-how, trade secrets, customer and
supplier lists, proprietary information, inventions, methods, procedures,
formulae, descriptions, compositions, technical data, drawings, specifications,
name plates, catalogs, confidential information and the right to limit the use
or disclosure thereof by any Person, pricing and cost information, business and
marketing plans and proposals, consulting agreements, engineering contracts and
such other assets which relate to such goodwill and (iii) all product lines of
such Pledgor’s business.


 


“Governmental Authority” shall mean any Federal, state, local,
foreign or other governmental, quasi-governmental or administrative (including
self-regulatory) body, instrumentality, department, agency, authority, board,
bureau, commission, office of any nature whatsoever or other subdivision
thereof, or any court, tribunal, administrative hearing body, arbitration panel
or other similar dispute-resolving body, whether now or hereafter in existence,
or any officer or official thereof, having jurisdiction over any Pledgor or the
Pledged Collateral or any portion thereof.


 


“Guarantors” shall have the meaning assigned to such term in the
Preamble hereof.


 


7

















 


“Hedging Agreements” shall have the meaning assigned to such
term in Recital G hereof.


 


“Hedging Obligations” shall have the meaning assigned to such
term in Recital G hereof.


 


“Indemnified Liabilities” shall have the meaning assigned to
such term in Section 10.4(i) hereof.


 


“Indemnitees” shall have the meaning assigned to such term in Section
10.4(i) hereof.


 


“Initial Perfection Certificate” shall mean that certain final
Perfection Certificate delivered to the Administrative Agent on March 31, 2003,
dated as of February 28, 2003, executed by the Borrower.


 


“Initial Pledged Interests” shall mean, with respect to each
Pledgor, all membership, partnership or other equity interests (other than in a
corporation), as applicable, of each issuer described in Schedule 5
annexed to the Perfection Certificate, together with all rights, privileges, authority
and powers of such Pledgor in and to each such issuer or under the Operative
Agreement of each such issuer, and the certificates, instruments and agreements
representing such membership, partnership or other interests and any and all
interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to such membership, partnership or other interests.


 


“Initial Pledged Shares” shall mean, collectively, with respect
to each Pledgor, the issued and outstanding shares of capital stock of each
issuer described in Schedule 5 annexed to the Perfection
Certificate together with all rights, privileges, authority and powers of such
Pledgor in and to each such issuer or under the Operative Agreement of each
such issuer, and the certificates, instruments and agreements representing such
shares of capital stock and any and all interest of such Pledgor in the entries
on the books of any financial intermediary pertaining to the Initial Pledged
Shares.


 


“Intellectual Property Collateral” shall
mean, collectively, the Patents, Trademarks, Copyrights, Licenses and Goodwill.


 


“Intercompany Notes” shall mean, with respect to each Pledgor,
all intercompany notes listed on Schedule 9 to the Perfection
Certificate and owned by such Pledgor and all intercompany notes hereafter
acquired by such Pledgor and all certificates, instruments or agreements
evidencing such intercompany notes, and all assignments, amendments,
restatements, supplements, extensions, renewals, replacements or modifications
thereof to the extent permitted pursuant to the terms hereof.


 


8

















 


“Interest Rate Obligations” shall have the meaning assigned to
such term in Recital F hereof.


 


“Interest Rate Protection Agreements” shall have the meaning
assigned to such term in Recital F hereof.


 


“Investment Property” shall mean a security, whether
certificated or uncertificated, security entitlement, securities account,
commodity contract or commodity account, excluding Securities Collateral and
any Investment Property specifically excluded from the definition of Pledged
Shares, Pledged Interests or Successor Interests.


 


“Joinder Agreement” shall mean the form of joinder agreement
attached hereto as Exhibit 3.


 


“Lenders” shall have the meaning assigned to such term in Recital C
hereof.


 


“Loans” shall have the meaning assigned to such term in the
Credit Agreement.


 


“Licenses” shall mean, collectively,
with respect to each Pledgor, all license and distribution agreements with, and
covenants not to sue, any other party with respect to any Patent, Trademark or
Copyright or any other patent, trademark or copyright, whether such Pledgor is
a licensor or licensee, distributor or distributee under any such license or
distribution agreement, including, without limitation, the license and
distribution agreements listed in Schedules 11(a) and 11(b)
annexed to the Perfection Certificate, together with any and all
(i) renewals, extensions, supplements and continuations thereof,
(ii) income, fees, royalties, damages, claims and payments now and
hereafter due and/or payable thereunder and with respect thereto including, without
limitation, damages and payments for past, present or future infringements or
violations thereof, (iii) rights to sue for past, present and future
infringements or violations thereof and (iv) other rights to use, exploit or
practice any or all of the Patents, Trademarks or Copyrights or any other patent,
trademark or copyright.


 


“Operative Agreement” shall mean (i) in the case of any limited liability
company or partnership or other non-corporate entity, any membership or
partnership agreement or other organizational agreement or document thereof and
(ii) in the case of any corporation, any charter or certificate of incorporation
and by-laws thereof.


 


“Original Inventory and Accounts Security Agreement” shall have
the meaning assigned to such term in Recital A hereof.


 


“Patents” shall mean, collectively,
with respect to each Pledgor, all patents issued or assigned to and all patent
applications and registrations made by such Pledgor (whether established or
registered or recorded in the United States or any other country or any
political subdivision thereof), including, without limitation, those listed in Schedule
11(a) annexed


 


9

















 


to the Perfection Certificate,
together with any and all (i) rights and privileges arising under
applicable law with respect to such Pledgor’s use of any patents, (ii)
inventions and improvements described and claimed therein, (iii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) income, fees, royalties, damages, claims and payments now or
hereafter due and/or payable thereunder and with respect thereto including,
without limitation, damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the
world and (vi) rights to sue for past, present or future infringements thereof.


 


“Perfection Certificate” shall mean the Initial Perfection
Certificate, and each other Perfection Certificate (which shall be in form and
substance reasonably acceptable to the Collateral Agent) executed and delivered
by the applicable Guarantor in favor of the Collateral Agent for the benefit of
the Secured Parties contemporaneously with the execution and delivery of each
Joinder Agreement executed in accordance with Section 3.5 hereof, in
each case, as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time upon the request of the Collateral Agent.


 


“Permitted Collateral Liens” shall have the meaning assigned to
such term in Section 4.3 hereof.


 


“Pledged Collateral” shall have the meaning assigned to such
term in Section 2.1 hereof.


 


“Pledged Interests” shall mean, collectively, the Initial
Pledged Interests and the Additional Pledged Interests; provided, however,
that to the extent applicable, such Pledgor shall not be required to pledge any
interest possessing more than 66% of the voting power or control of all classes
of interests entitled to vote of any Subsidiary which is a first-tier
controlled foreign corporation (as defined in Section 957(a) of the Tax Code)
and, in any event, shall not be required to pledge the interests of any
Subsidiary otherwise required to be pledged pursuant to this Agreement to the
extent that such pledge would constitute an investment of earnings in United
States property under Section 956 (or a successor provision) of the Tax Code,
which investment would trigger an increase in the gross income of a United
States shareholder of such Subsidiary pursuant to Section 951 (or a successor
provision) of the Tax Code.


 


“Pledged Securities” shall mean, collectively, the Pledged
Interests, the Pledged Shares and the Successor Interests.


 


“Pledged Shares” shall mean, collectively, the Initial Pledged
Shares and the Additional Pledged Shares; provided, however, that
each Pledgor shall not be required to pledge shares possessing more than 66% of
the voting power of all classes of capital stock entitled to vote of any
Subsidiary which is a first tier controlled foreign corporation (as defined in
Section 957(a) of the Tax Code) and, in any event, shall not be required to
pledge the


 


10

















 


shares of stock of any
Subsidiary otherwise required to be pledged pursuant to this Agreement to the
extent that such pledge would constitute an investment of earnings in United
States property under Section 956 (or a successor provision) of the Tax Code,
which investment would trigger an increase in the gross income of a United
States shareholder of such Subsidiary pursuant to Section 951 (or a successor
provision) of the Tax Code.


 


“Pledgor” shall have the meaning assigned to such term in the
Preamble hereof.


 


“Prior Liens” shall mean, collectively, the Liens identified in
a Schedule to the Perfection Certificate relating to the items of Pledged
Collateral identified in such Schedule.


 


“Requirements of Law” shall mean, collectively, any and all
requirements of any Governmental Authority including, without limitation, any
and all laws, ordinances, rules, regulations or similar statutes or case law.


 


“Secured Obligations” shall mean all obligations (whether or not
constituting future advances, obligatory or otherwise) of the Borrower and any
and all of the Guarantors from time to time arising under or in respect of this
Agreement, the Credit Agreement and the other Credit Documents (with respect to
the Loans and the Letters of Credit), the other Security Documents as they
relate to the Loans, the Interest Rate Obligations and the Hedging Obligations
(including, without limitation, the obligations to pay principal, interest and
all other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the obligations
contained in this Agreement, the Credit Agreement and the other Credit
Documents (with respect to the Loans and the Letters of Credit), the other
Security Documents as they relate to the Loans, the Interest Rate Obligations
and the Hedging Obligations), in each case whether (i) such obligations are
direct or indirect, secured or unsecured, joint or several, absolute or
contingent, due or to become due whether at stated maturity, by acceleration or
otherwise, (ii) arising in the regular course of business or otherwise, (iii)
for payment or performance and/or (iv) now existing or hereafter arising
(including, without limitation, interest and other obligations arising or
accruing after the commencement of any bankruptcy, insolvency, reorganization
or similar proceeding with respect to any Pledgor or any other Person, or which
would have arisen or accrued but for the commencement of such proceeding, even
if such obligation or the claim therefor is not enforceable or allowable in
such proceeding).


 


“Secured Parties” shall have the meaning assigned to such term
in Recital I hereof.


 


“Securities Act” shall have the meaning assigned to such term in
Section 8.4(ii) hereof.


 


11

















 


“Securities Collateral” shall mean, collectively, the Pledged
Securities, the Intercompany Notes and the Distributions.


 


“Security Amendment” shall have the meaning assigned to such
term in Section 5.1 hereof.


 


“Sole Lead Arranger” shall have the meaning assigned to such
term in the Credit Agreement.


 


“Special Property” shall mean:


 


(a)                                  any
permit, lease, license, contract or other agreement held by any Pledgor that
validly prohibits the creation by such Pledgor of a security interest therein;


 


(b)                                 any
permit, lease or license held by any Pledgor to the extent that any Requirement
of Law applicable thereto prohibits the creation of a security interest
therein;


 


(c)                                  Equipment
owned by any Pledgor on the date hereof or hereafter acquired that is subject
to a Lien securing a purchase money obligation or Capitalized Lease Obligation
permitted to be incurred pursuant to the provisions of the Credit Agreement if
the contract or other agreement in which such Lien is granted (or the
documentation providing for such purchase money obligation or Capitalized Lease
Obligation) validly prohibits the creation of any other Lien on such Equipment;
and


 


(d)                                 the
First Reserve Common Stock retained by Borrower as treasury stock;


 


provided, however, that in each case described
in clauses (a), (b) and (c) of this definition, such property shall constitute
“Special Property” only to the extent and for so long as such permit, lease,
license, contract or other agreement or Requirement of Law applicable thereto
validly prohibits the creation of a Lien on such property in favor of the
Collateral Agent and, upon the termination of such prohibition (howsoever occurring),
such property shall cease to constitute “Special Property”.


 


“Successor Interests” shall mean, collectively, with respect to
each Pledgor, all shares of each class of the capital stock of the successor
corporation or interests or certificates of the successor limited liability
company, partnership or other entity owned by such Pledgor (unless such
successor is such Pledgor itself) formed by or resulting from any consolidation
or merger in which any Person listed in Schedule 1 annexed to the
Perfection Certificate is not the surviving entity; provided, however,
that the pledge of the Successor Interests affected hereby shall in no event
affect the obligations of such Pledgor under any provision prohibiting such action
hereunder or under the Credit Agreement; provided, further, however,
that each


 


12

















 


Pledgor shall
not be required to pledge shares or interests possessing more than 66% of the
voting power or control of all classes of capital stock or interests entitled
to vote of any Subsidiary which is a first-tier controlled foreign corporation
(as defined in Section 957(a) of the Tax Code) and, in any event, shall
not be required to pledge the shares of stock or interests of any Subsidiary
otherwise required to be pledged pursuant to this Agreement to the extent that
such pledge would constitute an investment of earnings in United States
property under Section 956 (or a successor provision) of the Tax Code, which
investment would trigger an increase in the gross income of a United States
shareholder of such Pledgor pursuant to Section 951 (or a successor provision)
of the Tax Code.


 


“Tax Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.


 


“Trademarks” shall mean, collectively,
with respect to each Pledgor, all trademarks (including service marks), logos,
slogans, certification marks, trade dress, uniform resource locations (URL’s),
domain names, corporate names and trade names, whether registered or
unregistered, owned by or assigned to such Pledgor and all registrations and
applications for the foregoing (whether statutory or common law and whether
established or registered in the United States or any other country or any
political subdivision thereof), including, without limitation, the
registrations and applications listed in Schedule 11(a) annexed to the
Perfection Certificate, together with any and all (i) rights and
privileges arising under applicable law with respect to such Pledgor’s use of
any trademarks, (ii) reissues, continuations, extensions and renewals
thereof, (iii) income, fees, royalties, damages and payments now and
hereafter due and/or payable thereunder and with respect thereto, including,
without limitation, damages, claims and payments for past, present or future
infringements thereof, (iv) rights corresponding thereto throughout the
world and (v) rights to sue for past, present and future infringements thereof.


 


“UCC” shall mean the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided, however, that if
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Collateral Agent’s and the Secured Parties’
security interest in any item or portion of the Pledged Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of New York, the term “UCC” shall mean the Uniform Commercial Code as in
effect on the date hereof in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions relating to such provisions.


 


SECTION 1.2.                       Interpretation.  The rules of construction set forth in Section 19 of
the Credit Agreement shall be applicable to this Agreement.


 


13

















 


ARTICLE II

GRANT OF SECURITY AND SECURED
OBLIGATIONS


 


SECTION 2.1.                       Pledge.  (a) 
As collateral security for the payment and performance in full of all
the Secured Obligations, each Pledgor hereby pledges and grants to the
Collateral Agent for the benefit of the Secured Parties, a lien on and first priority
security interest in and to all of the right, title and interest of such
Pledgor in, to and under the following property, wherever located, whether now
existing or hereafter arising or acquired from time to time (the “Pledged
Collateral”):


 


(i)                                     all
Accounts;


 


(ii)                                  all
Inventory;


 


(iii)                               all
letter-of-credit rights to the extent relating to any assets described in
clauses (i) and (ii) of this Section 2.1;


 


(iv)                              all
Investment Property;


 


(v)                                 all
Securities Collateral;


 


(vi)                              
all Documents, Instruments and Chattel Paper to the extent relating to any of
the assets described in clauses (i), (ii), (iii), (iv) and (v) of this Section
2.1;


 


(vii)                           all
General Intangibles relating to any of the assets described in clauses (i),
(ii), (iii), (iv) and (v) of this Section 2.1;


 


(viii)                        all
Supporting Obligations to the extent relating to any of the assets described in
clauses (i), (ii), (iii), (iv) and (v) of this Section 2.1;


 


(ix)                                all
Deposit Accounts


 


(x)                                   all
books and records relating to any of the assets described in clauses (i), (ii),
(iii), (iv) and (v) of this Section 2.1; and


 


(xi)                                all
Proceeds and products of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing and any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to such Pledgor from time to time with respect to any of the
foregoing.


 


(b)                                 Notwithstanding
anything to the contrary contained in clause (a) above, the security interest
created by this Agreement shall not extend to, and the term “Pledged
Collateral” shall not include, any Excluded Property or any (i) Equipment, Fixtures,
Goods not


 


14

















 


constituting Inventory or Intellectual
Property Collateral, or (ii) Documents, Instruments, letter-of-credit rights,
Supporting Obligations or Proceeds relating to any of the assets described in
the immediately preceding clause (i) and (x) the Pledgors shall from time to
time at the request of the Collateral Agent give written notice to the
Collateral Agent identifying in reasonable detail the Special Property (and
stating in such notice that such Special Property constitutes “Excluded
Property”) and shall provide to the Collateral Agent such other information
regarding the Special Property as the Collateral Agent may reasonably request
and (y) from and after the incurrence of the Loans, no Pledgor shall permit to
become effective in any document creating, governing or providing for any
permit, lease or license, a provision that would prohibit the creation of a
Lien on such permit, lease or license in favor of the Collateral Agent unless
such Pledgor believes, in its reasonable judgment, that such prohibition is
usual and customary in transactions of such type.


 


SECTION 2.2.                       Secured Obligations.  This Agreement secures, and the Pledged
Collateral is collateral security for, the payment and performance in full when
due of the Secured Obligations.


 


SECTION 2.3.                       Security Interest.  (a)  Each Pledgor hereby
irrevocably authorizes the Collateral Agent at any time and from time to time
to file in any relevant jurisdiction any initial financing statements
(including fixture filings) and amendments thereto that contain the information
required by Article 9 of the UCC of each applicable jurisdiction for the filing
of any financing statement or amendment relating to the Pledged Collateral,
including, without limitation, (i) whether such Pledgor is an organization, the
type of organization and any organizational identification number issued to such
Pledgor and (ii) in the case of a financing statement covering Pledged
Collateral constituting minerals or the like to be extracted or timber to be
cut, a sufficient description of the real property to which such Pledged
Collateral relates.  Each Pledgor agrees
to provide all information described in the immediately preceding sentence to
the Collateral Agent promptly upon request.


 


(b)                                 Each
Pledgor hereby ratifies its authorization for the Collateral Agent to file in
any relevant jurisdiction any initial financing statements or amendments
thereto relating to the Pledged Collateral if filed prior to the date hereof.


 


SECTION 2.4.                       No Release. 
Nothing set forth in this Agreement shall relieve any Pledgor from the
performance of any term, covenant, condition or agreement on such Pledgor’s
part to be performed or observed under or in respect of any of the Pledged
Collateral or from any liability to any Person under or in respect of any of
the Pledged Collateral or shall impose any obligation on the Collateral Agent
or any other Secured Party to perform or observe any such term, covenant,
condition or agreement on such Pledgor’s part to be so performed or observed or
shall impose any liability on the Collateral Agent or any other Secured Party
for any act or omission on the part of such Pledgor relating thereto or for any
breach of any representation or warranty on the part of such Pledgor contained
in this Agreement, the Credit Agreement or the other Security Documents, or
under or in respect of the


 


15

















 


Pledged
Collateral or made in connection herewith or therewith.  The obligations of each Pledgor contained in
this Section 2.4 shall survive the termination hereof and the
discharge of such Pledgor’s other obligations under this Agreement and the
Credit Agreement and the other Security Documents.


 


ARTICLE III


 


PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF PLEDGED COLLATERAL


 


SECTION 3.1.                       Delivery of Certificated
Securities Collateral. 
Except as set forth in the Perfection Certificate, all certificates,
agreements or instruments representing or evidencing the Securities Collateral
in existence on the date of the Original Inventory and Accounts Security
Agreement have been delivered to the Collateral Agent in suitable form for
transfer by delivery or accompanied by duly executed instruments of transfer or
assignment in blank.  Each Pledgor
hereby agrees that all certificates, agreements or instruments representing or
evidencing Securities Collateral acquired by such Pledgor after the date
hereof, shall promptly upon receipt thereof by such Pledgor be delivered to and
held by or on behalf of the Collateral Agent pursuant hereto.  All certificated Securities Collateral shall
be in suitable form for transfer by delivery or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent.  The Collateral Agent shall have the right, at any time upon the
occurrence and during the continuance of any Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Collateral
Agent or any of its nominees or endorse for negotiation any or all of the
Securities Collateral, without any indication that such Securities Collateral
is subject to the security interest hereunder. 
In addition, upon the occurrence and continuation of an Event of
Default, the Collateral Agent shall have the right at any time to exchange
certificates representing or evidencing Securities Collateral for certificates
of smaller or larger denominations.


 


SECTION 3.2.                       Perfection of Uncertificated
Securities Collateral. 
Each Pledgor represents and warrants that the Collateral Agent has a
perfected first priority security interest in all uncertificated Pledged
Securities pledged by it hereunder that is in existence on the date of the
Original Inventory and Accounts Security Agreement.  Each Pledgor hereby agrees that if any issuer of Pledged
Securities is organized in a jurisdiction which does not permit the use of
certificates to evidence equity ownership, or if any of the Pledged Securities
are at any time not evidenced by certificates of ownership, then each
applicable Pledgor shall, to the extent permitted by applicable law, record
such pledge on the equityholder register or the books of the issuer, cause the
issuer to execute and deliver to the Collateral Agent an acknowledgment of the
pledge of such Pledged Securities substantially in the form of Exhibit 1
annexed hereto, execute any customary pledge forms or other documents necessary
or appropriate


 


16

















 


to complete
the pledge and give the Collateral Agent the right to transfer such Pledged
Securities under the terms hereof.


 


SECTION 3.3.                       Financing Statements and Other
Filings; Maintenance of Perfected Security Interest.  The only filings, registrations and
recordings necessary to create, preserve, protect, publish notice of and
perfect the security interest granted by each Pledgor to the Collateral Agent
(for the benefit of the Secured Parties) pursuant to this Agreement in respect
of the Pledged Collateral are the UCC financing statements listed in Schedule
7 of the Perfection Certificate. 
All such filings, registrations and recordings have been delivered to
the Collateral Agent in completed and, to the extent necessary or appropriate,
duly executed form for filing in each governmental, municipal or other office
specified in Schedule 7 of the Perfection Certificate and shall be
filed, registered and recorded immediately after the date thereof.  Each Pledgor agrees that at the sole cost
and expense of the Pledgors, (i) such Pledgor will maintain the security
interest created by this Agreement in the Pledged Collateral as a perfected
security interest to the extent required by the Credit Documents having at
least the priority required under the Credit Documents and shall defend such
security interest against the claims and demands of all Persons, (ii) such
Pledgor will furnish to the Collateral Agent from time to time statements and
schedules further identifying and describing the Pledged Collateral and such
other reports in connection with the Pledged Collateral as the Collateral Agent
may reasonably request, all in reasonable detail and (iii) at any time and
from time to time, upon the written request of the Collateral Agent, such
Pledgor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further action as the
Collateral 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 the filing of any financing or continuation statement
under the UCC (or other similar laws) in effect in any jurisdiction with
respect to the security interest created hereby and the execution and delivery
of Control Agreements.


 


SECTION 3.4.                       Other Actions. 
In order to further insure the attachment, perfection and priority of,
and the ability of the Collateral Agent to enforce, the Collateral Agent’s security
interest in the Pledged Collateral, each Pledgor agrees, in each case at such
Pledgor’s own expense, to take the following actions with respect to the
following Pledged Collateral:


 


(a)                                  Instruments and
Tangible Chattel Paper.  As of the
date of the Original Inventory and Accounts Security Agreement, each Pledgor
hereby represents and warrants that no amount in excess of $500,000
payable to such Pledgor under or in connection with any of the Pledged
Collateral is evidenced by any individual Instrument or individual item of
Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper
listed in Schedule 9 of the Perfection Certificate.  On each date on which reports are required
to be delivered to the Collateral Agent pursuant to Section 6.4.2 of the
Credit Agreement, each Pledgor shall give notice to the Collateral Agent of
each amount in excess of $500,000 payable to such Pledgor under or in
connection


 


17

















 


with any of the Pledged Collateral evidenced
by any individual Instrument or individual item of Tangible Chattel Paper other
than any such Instrument or Tangible Chattel Paper listed in Schedule 9
of the Perfection Certificate or otherwise previously reported to the
Collateral Agent in writing.  Upon
request of the Collateral Agent, if any amount in excess of $1,000,000 payable
to any Pledgor under or in connection with any of the Pledged Collateral shall
be evidenced by any individual Instrument or individual item of Tangible
Chattel Paper, the Pledgor acquiring such Instrument or Tangible Chattel Paper
shall forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Collateral Agent may from time to time specify; provided, however,
that so long as no Event of Default shall have occurred and be continuing, the
Collateral Agent shall return such Instrument or Tangible Chattel Paper to such
Pledgor from time to time, to the extent necessary for collection in the
ordinary course of such Pledgor’s business.


 


(b)                                 Deposit Accounts.  Each Pledgor hereby represents and warrants
that (i) it has neither opened nor maintains any Deposit Accounts other
than the accounts listed in Schedule 12 of the Perfection
Certificate and (ii) upon completion of the actions contemplated under Section
6.4.12 of the Credit Agreement, the Collateral Agent will have a perfected
first priority security interest in each Deposit Account listed in Schedule 12
of the Perfection Certificate by Control. 
No Pledgor shall hereafter establish and maintain any Deposit Account
unless the Bank and such Pledgor shall have duly executed and delivered to the
Collateral Agent a Control Agreement with respect to such Deposit Account.  The Collateral Agent agrees with each
Pledgor that the Collateral Agent shall not give any instructions directing the
disposition of funds from time to time credited to any Deposit Account or
withhold any withdrawal rights from such Pledgor with respect to funds from
time to time credited to any Deposit Account unless an Event of Default has
occurred and is continuing or, after giving effect to any withdrawal, that
would occur.  The provisions of this Section 3.4(b)
shall not apply to such Deposit Accounts for which the Collateral Agent is the
Bank.  No Pledgor shall grant Control of
any Deposit Account to any Person other than the Collateral Agent.


 


(c)                                  Investment
Property; Securities Accounts and Commodity Accounts.  (i) 
Each Pledgor hereby represents and warrants that it (1) has neither
opened nor maintains any Securities Accounts or Commodity Accounts in excess of
$1,000,000 individually or $3,000,000 in the aggregate other than those listed
in Schedule 12 of the Perfection Certificate and, upon completion
of the actions contemplated under Section 6.4.12 of the Credit
Agreement, the Collateral Agent will have a perfected first priority security
interest in such Securities Accounts and Commodity Accounts by Control and
(2) it does not hold, own or have any interest in any certificated
securities or uncertificated securities other than those excluded from the
definition of Investment Property and those maintained in Securities Accounts
or Commodity Accounts listed in Schedule 12 of the Perfection
Certificate.


 


18

















 


(ii)               If
any Pledgor shall at any time hold or acquire any certificated securities
constituting Investment Property, such Pledgor shall promptly (a) endorse,
assign and deliver the same to the Collateral Agent, accompanied by such instruments
of transfer or assignment duly executed in blank, all in form and substance
reasonably satisfactory to the Collateral Agent or (b) deliver such securities
into a Securities Account with respect to which a Control Agreement is in
effect in favor of the Collateral Agent. 
If any securities now or hereafter acquired by any Pledgor constituting
Investment Property are uncertificated and are issued to such Pledgor or its
nominee directly by the issuer thereof, such Pledgor shall promptly notify the
Collateral Agent thereof and pursuant to an agreement in form and substance
satisfactory to the Collateral Agent, either (a) cause the issuer to agree
to comply with instructions from the Collateral Agent as to such securities,
without further consent of any Pledgor or such nominee, (b) cause a Security
Entitlement with respect to such uncertificated securities to be held in a
Securities Account with respect to which a Control Agreement is in effect in
favor of the Collateral Agent or (c) arrange for the Collateral Agent to
become the registered owner of the securities. 
Pledgor shall not hereafter establish and maintain any Securities
Account or Commodity Accounts with any Securities Intermediary or Commodity
Intermediary unless such Securities Intermediary or Commodity Intermediary, as
the case may be, and such Pledgor shall have duly executed and delivered a
Control Agreement with respect to such Securities Account or Commodity Account,
as the case may be.  Each Pledgor shall
accept any Distribution of cash and Investment Property in trust for the
benefit of the Collateral Agent and within three (3) Business Days of actual
receipt thereof, deposit any cash or Investment Property and any new securities,
instruments, documents or other property by reason of ownership of Investment
Property (other than payments of a kind described in Section 6.5
hereof) received by it into a Controlled Account.  The Collateral Agent agrees with each Pledgor that the Collateral
Agent shall not give any Entitlement Orders or instructions or directions to
any issuer of uncertificated securities, Securities Intermediary or Commodity Intermediary,
and shall not withhold its consent to the exercise of any withdrawal or dealing
rights by such Pledgor, unless an Event of Default has occurred and is continuing,
or after giving effect to any such investment and withdrawal rights, would
occur.  The provisions of this Section 3.4(c)
shall not apply to any Financial Assets credited to a Securities Account for
which the Collateral Agent is the Securities Intermediary.  No Pledgor shall grant control over any
Investment Property to any Person other than the Collateral Agent.


 


(iii)            As
between the Collateral Agent and the Pledgors, the Pledgors shall bear the
investment risk with respect to Investment Property, and the risk of loss of,
damage to or the destruction of Investment Property, whether in the possession
of, or maintained as a security entitlement or deposit by, or subject to the
control of, the Collateral Agent, a Securities Intermediary, Commodity
Intermediary, any Pledgor or any other Person; provided, however,
that nothing contained in this Section 3.4(c) shall


 


19

















 


release or
relieve any Securities Intermediary or Commodity Intermediary of its duties and
obligations to the Pledgors or any other Person under any Control Agreement or
under applicable law.  Each Pledgor
shall promptly pay all Charges and fees of whatever kind or nature with respect
to the Investment Property pledged by it under this Agreement.  In the event any Pledgor shall fail to make
such payment contemplated in the immediately preceding sentence, the Collateral
Agent may do so for the account of such Pledgor and the Pledgors shall promptly
reimburse and indemnify the Collateral Agent from all costs and expenses
incurred by the Collateral Agent under this Section 3.4(c) in
accordance with Section 10.3 hereof.


 


(d)                                 Electronic Chattel
Paper.  As of the date of the
Original Inventory and Accounts Security Agreement, each Pledgor hereby
represents and warrants that no amount in excess of $500,000 payable to
such Pledgor under or in connection with any of the Pledged Collateral is
evidenced by any individual item of Electronic Chattel Paper other than such
Electronic Chattel Paper listed in Schedule 9 of the Perfection
Certificate.  On each date on which
reports are required to be delivered to the Collateral Agent pursuant to Section
6.4.2 of the Credit Agreement, each Pledgor shall give notice to the
Collateral Agent of each amount in excess of $500,000 payable to such Pledgor
under or in connection with any of the Pledged Collateral evidenced by any
individual item of Electronic Chattel Paper other than any such Electronic
Chattel Paper listed in Schedule 9 of the Perfection Certificate or
otherwise previously reported to the Collateral Agent in writing.  Upon request of the Collateral Agent, if any
amount in excess of $1,000,000 payable to any Pledgor under or in connection
with any of the Pledged Collateral shall be evidenced by any individual item of
Electronic Chattel Paper, the Pledgor acquiring such Electronic Chattel Paper
shall promptly notify the Collateral Agent thereof and shall take such action
as the Collateral Agent may reasonably request to vest in the Collateral Agent
control under UCC Section 9-105 of such Electronic Chattel Paper.  The Collateral Agent agrees with such
Pledgor that the Collateral Agent will arrange, pursuant to procedures satisfactory
to the Collateral Agent and so long as such procedures will not result in the
Collateral Agent’s loss of control, for the Pledgor to make alterations to the
Electronic Chattel Paper permitted under UCC Section 9-105 for a party in
control to allow without loss of control, unless an Event of Default has
occurred and is continuing or would occur after taking into account any action
by such Pledgor with respect to such Electronic Chattel Paper.


 


(e)                                  Letter-of-credit
Rights.  If any Pledgor is at any
time a beneficiary under a letter of credit, the rights under which constitute
Pledged Collateral, now or hereafter issued in favor of such Pledgor, other
than a letter of credit issued pursuant to the Credit Agreement, with an expiration
date in excess of 30 days from the issue date and in an amount in excess of
$5,000,000, such Pledgor shall promptly notify the Collateral Agent thereof and
such Pledgor shall, upon request of the Collateral Agent, pursuant to an
agreement in form and substance satisfactory to the Collateral Agent, either
(i) arrange for the issuer and any confirmer of such letter of credit to
consent to


 


20

















 


an assignment to the Collateral Agent of the
proceeds of any drawing under the letter of credit or (ii) arrange for the
Collateral Agent to become the transferee beneficiary of such letter of credit.


 


(f)                                    Bailee Letters.  Each Pledgor shall use its commercially
reasonable efforts to obtain as soon as practicable after the date of the
Original Inventory and Accounts Security Agreement with respect to each bailee
with respect to any Pledged Collateral, a waiver of bailee’s lien in form and
substance satisfactory to the Collateral Agent (each a “Bailee Letter”)
and use commercially reasonable efforts to obtain a Bailee Letter from all such
bailees who from time to time have possession of Pledged Collateral in the
ordinary course of such Pledgor’s business.


 


SECTION 3.5.                       Joinder of Additional Guarantors.  The Pledgors shall cause each Subsidiary of
the Borrower which, from time to time, after the date hereof shall be required
to pledge any assets to the Collateral Agent for the benefit of the Secured
Parties pursuant to Section 6.4.11 of the Credit Agreement, to
execute and deliver to the Collateral Agent (i) a joinder agreement
substantially in the form of Exhibit 3 annexed hereto within the
time period set forth in the Credit Agreement and (ii) a Perfection Certificate
within 30 Business Days of the date on which it was acquired or created and,
upon the execution and delivery of the joinder agreement, such Subsidiary shall
constitute a “Guarantor” and a “Pledgor” for all purposes hereunder with the
same force and effect as if originally named as a Guarantor and Pledgor
herein.  The execution and delivery of
such joinder agreement shall not require the consent of any Pledgor
hereunder.  The rights and obligations
of each Pledgor hereunder shall remain in full force and effect notwithstanding
the addition of any new Guarantor and Pledgor as a party to this Agreement.


 


SECTION 3.6.                       Use and Pledge of Pledged Collateral.  Unless an Event of Default shall have
occurred and be continuing, the Collateral Agent shall from time to time execute
and deliver, upon written request of any Pledgor and at the sole cost and
expense of the Pledgors, any and all instruments, certificates or other
documents, in a form reasonably requested by such Pledgor, necessary or
appropriate in the reasonable judgment of such Pledgor to enable such Pledgor
to continue to exploit, license, use, enjoy and protect the Pledged Collateral
in accordance with the terms hereof and of the Credit Agreement.  The Pledgors and the Collateral Agent
acknowledge that this Agreement is intended to grant to the Collateral Agent
for the benefit of the Secured Parties a security interest in and Lien upon the
Pledged Collateral and shall not constitute or create a present assignment of
any of the Pledged Collateral.


 


21

















 


ARTICLE IV


 


REPRESENTATIONS, WARRANTIES AND COVENANTS


 


Each Pledgor represents and warrants, as of the date of the Original
Inventory and Accounts Security Agreement, and covenants as follows:


 


SECTION 4.1.                       Title, Authority and Validity;
Preservation of Corporate Existence.  (i)  Such Pledgor (A) has good and valid rights in and
title to the Pledged Collateral with respect to which it has purported to grant
a security interest and Lien hereunder, (B) has full power and authority to
grant to the Collateral Agent the security interest in and Lien on such Pledged
Collateral pursuant hereto and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any other Person other than any consent or approval that has been obtained,
(C) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, except for failure to be so organized,
authorized or licensed which would not in the aggregate result, or create a
material risk of resulting, in any Material Adverse Effect and (D) is duly
qualified to transact business and is in good standing in each state in which
the Pledged Collateral is located, except for failures to be so qualified which
would not in the aggregate result, or create a material risk of resulting, in
any Material Adverse Effect; (ii) this Agreement is a legal, valid and
binding obligation of such Pledgor, enforceable against such Pledgor in
accordance with its terms and (iii) except for failures to be so qualified
which would not in the aggregate result, or create a material risk of
resulting, in any Material Adverse Effect, such Pledgor shall (A) preserve and
maintain in full force and effect its existence and good standing under the
laws of the jurisdiction of its organization, (B) preserve and maintain in full
force and effect its qualification to transact business and good standing in
the state in which the Pledged Collateral is located and (C) preserve and
maintain in full force and effect all consents, authorizations and approvals
necessary or required of any Governmental Authority or any other Person
relating to the execution, delivery and performance hereof.


 


SECTION 4.2.                       Validity of Security Interest.  The security interest in and Lien on the
Pledged Collateral granted to the Collateral Agent for the benefit of the Secured
Parties hereunder constitutes (a) a legal and valid security interest in
all the Pledged Collateral securing the payment and performance of the Secured
Obligations and (b) subject to the completion of the filings described in Schedule
7 of the Perfection Certificate and the execution of the Control Agreements
contemplated by Sections 3.4(b) and 3.4(c), a perfected security
interest in all the Pledged Collateral to the extent required by the Credit Documents.  The security interest and Lien granted to
the Collateral Agent for the benefit of the Secured Parties pursuant to this
Agreement in and on the Pledged Collateral will at all times, to the extent
required hereunder, constitute a perfected, continuing first priority security
interest therein, superior and prior to the rights of all other Persons therein
other than in the case of any Pledged


 


22

















 


Collateral
(other than Securities Collateral) with respect to the holders of Permitted Collateral
Liens.


 


SECTION 4.3.                       Limitation on Liens.  Such Pledgor is as of the date hereof, and,
as to Pledged Collateral acquired by it from time to time after the date
hereof, such Pledgor will be, the sole direct and beneficial owner of all
Pledged Collateral pledged by it hereunder free from any Lien or other right,
title or interest of any Person other than (except in the case of any
Securities Collateral) (i) Prior Liens, (ii) the Lien and security
interest created by this Agreement, (iii) Contested Liens and
(iv) the Liens described in Sections 6.8.2, 6.8.5, 6.8.6,
6.8.7, 6.8.8, 6.8.9 and 6.8.10 of the Credit
Agreement (the Liens described in clauses (i) through (iv) of this sentence,
collectively, “Permitted Collateral Liens”).  Such Pledgor shall, at its own cost and expense, defend title to
the Pledged Collateral pledged by it hereunder and the security interest
therein and Lien thereon granted to the Collateral Agent and the priority
thereof against all claims and demands of all Persons, at its own cost and expense,
at any time claiming any interest therein adverse to the Collateral Agent or
any other Secured Party.  There is no
agreement, and no Pledgor shall enter into any agreement or take any other
action, that would result in the imposition of any other Lien (other than
Permitted Collateral Liens), restrict the transferability of any of the Pledged
Collateral or otherwise impair or conflict with such Pledgors’ obligations or
the rights of the Collateral Agent hereunder.


 


SECTION 4.4.                       Other Financing Statements.  There is no (nor will there be any) valid or
effective financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering or purporting to cover
any interest of any kind in the Pledged Collateral other than in the case of
Pledged Collateral (other than the Securities Collateral) financing statements
relating to Permitted Collateral Liens. 
So long as any of the Secured Obligations remain unpaid, no Pledgor shall
execute, authorize or permit to be filed in any public office any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction) or statements relating to any Pledged Collateral, except, in
the case of any Pledged Collateral (other than the Securities Collateral),
financing statements filed or to be filed in respect of and covering the
security interests granted by such Pledgor to the holder of the Permitted Collateral
Liens.


 


SECTION 4.5.                       Chief Executive Office; Change of
Name; Jurisdiction of Organization.  (a)  The exact legal name,
type of organization, jurisdiction of organization, Federal Taxpayer
Identification Number and organizational identification number of such Pledgor
is indicated next to its name in Schedule 1 of the Perfection
Certificate.  Such Pledgor shall not
change (i) its corporate name, (ii) with respect to any Pledgor which does
not constitute a “registered organization” (as defined in Section 9-102
of the UCC), the location of its chief executive office, its principal place of
business, any office in which it maintains books or records relating to Pledged
Collateral owned by it or any office or facility at which Pledged Collateral
owned by it is located (including the establishment of any such new office or
facility), (iii) its legal form of organization, (iv) its Federal Taxpayer
Identification Number or


 


23

















 


organizational
identification number or (v) its jurisdiction of organization (in each case,
including, without limitation, by merging with or into any other entity,
reorganizing, dissolving, liquidating, reincorporating or incorporating in any
other jurisdiction) until (A) it shall have given the Collateral Agent
prior written notice (in the form of an Officers’ Certificate) of its intention
so to do, clearly describing such change and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (B)
with respect to such change, such Pledgor shall have taken all action
reasonably satisfactory to the Collateral Agent to maintain the perfection and
priority of the security interest of the Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted hereunder,
including, without limitation, using commercially reasonable efforts to obtain
waivers of landlord’s or warehousemen’s liens with respect to such new
location, if applicable.  Each Pledgor
agrees to promptly provide the Collateral Agent with certified organizational
documents reflecting any of the changes described in the preceding sentence.


 


(b)                                 The
Collateral Agent may rely on opinions of counsel as to whether any or all UCC
financing statements of the Pledgors need to be amended as a result of any of
the changes described in Section 4.5(a).  If any Pledgor fails to provide information to the Collateral
Agent about such changes on a timely basis, the Collateral Agent shall not be
liable or responsible to any party for any failure to maintain a perfected
security interest in such Pledgor’s property constituting Pledged Collateral,
for which the Collateral Agent needed to have information relating to such
changes.  The Collateral Agent shall
have no duty to inquire about such changes if any Pledgor does not inform the
Collateral Agent of such changes, the parties acknowledging and agreeing that
it would not be feasible or practical for the Collateral Agent to search for
information on such changes if such information is not provided by any Pledgor.


 


SECTION 4.6.                       [Reserved]


 


SECTION 4.7.                       [Reserved]


 


SECTION 4.8.                       Corporate Names; Prior Transactions.  Such Pledgor has not, during the past five
years, been known by or used any other corporate or fictitious name or been a
party to any merger or consolidation, or acquired all or substantially all of
the assets of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth in Schedules 1 and 4 of
the Perfection Certificate.


 


SECTION 4.9.                       Due Authorization and Issuance.  All of the Initial Pledged Shares have been,
and to the extent any Pledged Shares are hereafter issued, such shares will be,
upon such issuance, duly authorized, validly issued and fully paid and
non-assessable.  All of the Initial
Pledged Interests have been fully paid for, and there is no amount or other
obligation owing by any Pledgor to any issuer of the Initial Pledged Interests
in exchange for or in connection with the issuance of the Initial Pledged
Interests or any Pledgor’s status as a partner or a member of any issuer of the
Initial Pledged Interests.


 


24

















 


SECTION 4.10.                 No Violations, etc.  The pledge of the Pledged Securities pursuant to this Agreement
does not violate Regulation T, U or X of the Federal Reserve Board.


 


SECTION 4.11.                 No Options, Warrants, etc.  There are no options, warrants, calls,
rights, commitments or agreements of any character affecting any Pledged
Security to which such Pledgor is a party or by which it is bound obligating
such Pledgor to issue, deliver or sell or cause to be issued, delivered or sold
additional Pledged Securities or obligating such Pledgor to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.  There are no voting trusts or other
agreements or understandings to which such Pledgor is a party with respect to
the transfer, voting or exercise of any other right of the equity interests of
any issuer of the Pledged Securities.


 


SECTION 4.12.                 No Claims. 
Such Pledgor owns or has rights to use all of the Pledged Collateral
pledged by it hereunder and all rights with respect to any of the foregoing
used in, necessary for or material to such Pledgor’s business as currently
conducted.  The use by such Pledgor of
such Pledged Collateral and all such rights with respect to the foregoing do
not infringe on the rights of any Person other than such infringement which
would not, individually or in the aggregate, result in a Material Adverse Effect.  No claim has been made and remains
outstanding that such Pledgor’s use of any Pledged Collateral does or may violate
the rights of any third Person that would individually, or in the aggregate,
have a Material Adverse Effect.


 


SECTION 4.13.                 No Conflicts, Consents, etc.  Neither the execution and delivery hereof by
each Pledgor nor the consummation of the transactions herein contemplated nor
the fulfillment of the terms hereof (i) violates any Operative Agreement of
such Pledgor or any issuer of Pledged Securities, (ii) violates the terms of
any agreement, indenture, mortgage, deed of trust, equipment lease, instrument
or other document to which such Pledgor is a party, or by which it may be bound
or to which any of its properties or assets may be subject, which violation
would, individually or in the aggregate, have a Material Adverse Effect, (iii)
conflicts with any Requirement of Law applicable to any such Pledgor or its
property, which conflict would, individually or in the aggregate, have a
Material Adverse Effect, or (iv) results in or requires the creation or
imposition of any Lien (other than the Lien contemplated hereby) upon or with respect
to any of the property now owned or hereafter acquired by such Pledgor.  Except as set forth in Schedule 4.13
annexed hereto or indicated on Schedule 7 of the Perfection Certificate,
no consent of any party (including, without limitation, equityholders or
creditors of such Pledgor) and no consent, authorization, approval, license or
other action by, and no notice to or filing with, any Governmental Authority or
regulatory body or other Person is required for the pledge by such Pledgor of
the Pledged Collateral pledged by it pursuant to this Agreement or for the
execution, delivery or performance hereof by such Pledgor and no consent,
authorization, approval or license by any Governmental Authority or regulatory
body or other Person is required (A) for the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or
(B) for the exercise by the Collateral 


 


25

















 


Agent of the
remedies in respect of the Pledged Collateral pursuant to this Agreement.  In the event that the Collateral Agent desires
to exercise any remedies, voting or consensual rights or attorney-in-fact powers
set forth in this Agreement following the occurrence and during the continuance
of an Event of Default and determines it necessary to obtain any approvals or
consents of any Governmental Authority or any other Person therefor, then, upon
the reasonable request of the Collateral Agent, such Pledgor agrees to use its
commercially reasonable efforts to assist and aid the Collateral Agent to
obtain as soon as practicable any necessary approvals or consents for the
exercise of any such remedies, rights and powers.


 


SECTION 4.14.                 Pledged Collateral.  All information set forth herein, including
the schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Secured Party in connection
with this Agreement, in each case, relating to the Pledged Collateral, is
accurate and complete in all material respects.


 


SECTION 4.15.                 Insurance.  (a) 
The Pledgors, at their own expense, shall maintain or cause to be
maintained the insurance policies and coverages required under Section 6.3
of the Credit Agreement with respect to the Pledged Collateral.


 


(b)                                 In
the event that the proceeds of any insurance claim are paid after the
Collateral Agent has exercised its right to foreclose after an Event of Default
such Net Cash Proceeds shall be paid to the Collateral Agent to satisfy any
deficiency remaining after such foreclosure. 
The Collateral Agent shall retain its interest in the insurance policies
required to be maintained pursuant to this Agreement during any redemption
period.


 


SECTION 4.16.                 Payment of Taxes; Compliance with
Laws; Contesting Liens; Claims. 
Each Pledgor represents and warrants that all Charges imposed upon or assessed
against the Pledged Collateral have been paid and discharged except to the
extent such Charges constitute a Lien not yet due and payable or a Permitted
Collateral Lien.  Each Pledgor shall
comply with all Requirements of Law applicable to the Pledged Collateral the
failure to comply with which would, individually or in the aggregate, have a
Material Adverse Effect.  Each Pledgor
may at its own expense contest the validity, amount or applicability of any
Charges so long as the contest thereof shall be conducted in accordance with,
and permitted pursuant to the provisions of, the Credit Agreement.  Notwithstanding the foregoing provisions of
this Section 4.16, (i) no contest of any such obligation may be
pursued by such Pledgor if such contest would expose the Collateral Agent or
any other Secured Party to (A) any possible criminal liability or
(B) any additional civil liability for failure to comply with such
obligations unless such Pledgor shall have furnished a bond or other security
therefor satisfactory to the Collateral Agent, or such Secured Party, as the
case may be,  and (ii) if at any
time payment or performance of any obligation contested by such Pledgor
pursuant to this Section 4.16 shall become necessary to prevent the
imposition of remedies because of non-payment, such Pledgor shall pay or perform
the same, in sufficient time to prevent the imposition of remedies in respect
of such default or prospective default.


 


26

















 


SECTION 4.17.                 Access to Pledged Collateral, Books
and Records; Other Information. 
Upon reasonable request to each Pledgor, the Collateral Agent, its
agents, accountants and attorneys shall have full and free access to visit and
inspect, as applicable, during normal business hours and such other reasonable
times as may be requested by the Collateral Agent all of the Pledged Collateral
including, without limitation, all of the books, correspondence and records of
such Pledgor relating thereto; provided, however, that so long as no
Default or Event of Default shall have occurred and be continuing, such visits
and inspections shall be limited to not more than one time per calendar
year.  The Collateral Agent and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and such Pledgor agrees to render to the Collateral Agent,
at such Pledgor’s cost and expense, such clerical and other assistance as may
be reasonably requested by the Collateral Agent with regard thereto.  Such Pledgor shall, at any and all times,
within a reasonable time after written request by the Collateral Agent, furnish
or cause to be furnished to the Collateral Agent, in such manner and in such
detail as may be reasonably requested by the Collateral Agent, additional
information with respect to the Pledged Collateral.


 


SECTION 4.18.                 Benefit to Guarantors.  Each Guarantor will receive substantial
benefit as a result of the execution, delivery and performance of the Credit
Agreement and other documents evidencing the Secured Obligations.


 


ARTICLE V


 


CERTAIN PROVISIONS CONCERNING SECURITIES
COLLATERAL


 


SECTION 5.1.                       Pledge of Additional Securities
Collateral.  Each Pledgor
shall, upon obtaining any Pledged Securities or Intercompany Notes of any
Person, accept the same in trust for the benefit of the Collateral Agent and
forthwith deliver to the Collateral Agent a pledge amendment, duly executed by
such Pledgor, in substantially the form of Exhibit 2 annexed hereto
(each, a “Security Amendment”), and the certificates and other documents
required under Section 3.1 and Section 3.2 in respect of the
additional Pledged Securities or Intercompany Notes which are to be pledged
pursuant to this Agreement, and confirming the attachment of the Lien hereby
created on and in respect of such additional Pledged Securities or Intercompany
Notes.  Each Pledgor hereby authorizes
the Collateral Agent to attach each Security Amendment to this Agreement and
agrees that all Pledged Interests or Intercompany Notes listed on any Security
Amendment delivered to the Collateral Agent shall for all purposes hereunder be
considered Pledged Collateral.


 


27

















 


SECTION 5.2.                       Voting Rights; Distributions; etc.


 


(i)                                     So
long as no Event of Default shall have occurred and be continuing:


 


(A)                              Each
Pledgor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Securities Collateral or any part thereof for any purpose
not inconsistent with the terms or purposes hereof, the Credit Agreement or any
other document evidencing the Secured Obligations; provided, however,
that no Pledgor shall in any event exercise such rights in any manner which may
have a Material Adverse Effect.


 


(B)                                Each
Pledgor shall be entitled to receive and retain, and to utilize free and clear
of the Lien hereof, any and all Distributions, but only if and to the extent
made in accordance with the provisions of the Credit Agreement; provided,
however, that any and all such Distributions consisting of rights or
interests in the form of securities shall be forthwith delivered to the
Collateral Agent to hold as Pledged Collateral and shall, if received by any
Pledgor, be received in trust for the benefit of the Collateral Agent, be
segregated from the other property or funds of such Pledgor and be forthwith
delivered to the Collateral Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement in accordance with Section 5.1
hereof).


 


(C)                                The
Collateral Agent shall be deemed without further action or formality to have
granted to each Pledgor all necessary consents relating to voting rights and
shall, if necessary, upon written request of any Pledgor and at the sole
cost and expense of the Pledgors, from time to time execute and deliver (or
cause to be executed and delivered) to such Pledgor all such instruments as
such Pledgor may reasonably request in order to permit such Pledgor to exercise
the voting and other rights which it is entitled to exercise pursuant to Section
5.2(i)(A) hereof and to receive the Distributions which it is authorized to
receive and retain pursuant to Section 5.2(i)(B) hereof.


 


(ii)                                  Upon
the occurrence and during the continuance of any Event of Default:


 


(A)                              All
rights of each Pledgor to exercise the voting and other consensual rights it
would otherwise be entitled to exercise pursuant to Section 5.2(i)(A)
hereof without any action, other than, in the case of any Securities Collateral,
or the giving of any notice shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall thereupon have the sole
right to exercise such voting and other consensual rights.


 


(B)                                All
rights of each Pledgor to receive Distributions which it would otherwise be
authorized to receive and retain pursuant to Section 5.2(i)(B) hereof
shall cease and all such rights shall thereupon become vested in the Collateral
Agent, which


 


28

















 


shall thereupon have the sole right to receive and hold as Pledged
Collateral such Distributions.


 


(C)                                Each
Pledgor shall, at its sole cost and expense, from time to time execute and deliver
to the Collateral Agent appropriate instruments as the Collateral Agent may
request in order to permit the Collateral Agent to exercise the voting and
other rights which it may be entitled to exercise pursuant to Section
5.2(ii)(A) hereof and to receive all Distributions which it may be entitled
to receive under Section 5.2(ii)(B) hereof.


 


(D)                               All
Distributions which are received by any Pledgor contrary to the provisions of Section
5.2(ii)(B) hereof shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of such Pledgor and
shall immediately be paid over to the Collateral Agent as Pledged Collateral in
the same form as so received (with any necessary endorsement).


 


SECTION 5.3.                       Operative Agreements.  Each Pledgor has delivered to the Collateral
Agent true, correct and complete copies of its Operative Agreements.  Such Operative Agreements are in full force
and effect, have not, as of the date of the Original Inventory and Accounts
Security Agreement, been amended or modified except as disclosed to the Collateral
Agent, and there is no existing default by any party thereunder or any event
which, with the giving of notice of passage of time or both, would constitute a
default by any party thereunder.  Each
Pledgor shall deliver to the Collateral Agent a copy of any notice of default
given or received by it under any Operative Agreement within ten days after
such Pledgor gives or receives such notice. 
No Pledgor will terminate or agree to terminate any Operative Agreement
or make any amendment or modification to any Operative Agreement which could be
reasonably expected to have a Material Adverse Effect including electing to
treat any Pledged Interests of such Pledgor as a security under Section 8-103
of the UCC.


 


SECTION 5.4.                       Defaults, etc. 
Each Pledgor is not in default in the payment of any portion of any
mandatory capital contribution, if any, required to be made under any agreement
to which such Pledgor is a party relating to the Pledged Securities pledged by
it, and such Pledgor is not in violation of any other provisions of any such
agreement to which such Pledgor is a party, or otherwise in default or
violation thereunder.  No Securities
Collateral pledged by such Pledgor is subject to any defense, offset or
counterclaim, nor have any of the foregoing been asserted or alleged against
such Pledgor by any Person with respect thereto, and, as of the date of the
Original Inventory and Accounts Security Agreement, there are no certificates,
instruments, documents or other writings (other than the Operative Agreements
and certificates, instruments, documents or other writings, if any, delivered
to the Collateral Agent) which evidence any Pledged Securities of such Pledgor.


 


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SECTION 5.5.                       Certain Agreements of Pledgors as
Issuers and Holders of Equity Interests.


 


(i)                                     In
the case of each Pledgor which is an issuer of Securities Collateral, such
Pledgor agrees to be bound by the terms of this Agreement relating to the
Securities Collateral issued by it and will comply with such terms insofar as
such terms are applicable to it.


 


(ii)                                  In
the case of each Pledgor which is a partner in a partnership, limited liability
company or other entity, such Pledgor hereby consents to the extent required by
the applicable Operative Agreement to the pledge by each other Pledgor, pursuant
to the terms hereof, of the Pledged Interests in such partnership, limited
liability company or other entity and, upon the occurrence and during the
continuance of an Event of Default, to the transfer of such Pledged Interests
to the Collateral Agent or its nominee and to the substitution of the
Collateral Agent or its nominee as a substituted partner or member in such
partnership, limited liability company or other entity with all the rights,
powers and duties of a general partner or a limited partner or member, as the
case may be.


 


ARTICLE VI


 


CERTAIN PROVISIONS CONCERNING ACCOUNTS


 


SECTION 6.1.                       [Reserved].


 


SECTION 6.2.                       Maintenance of Records.  Each Pledgor shall keep and maintain at its
own cost and expense complete records of each Account, in a manner consistent
with prudent business practice, including, without limitation, records of all
payments received, all credits granted thereon, all merchandise returned and
all other documentation relating thereto. 
Each Pledgor shall, at such Pledgor’s sole cost and expense, upon the
Collateral Agent’s demand made at any time after the occurrence and during the
continuance of any Event of Default, deliver all tangible evidence of Accounts,
including, without limitation, all documents evidencing Accounts and any books
and records relating thereto to the Collateral Agent or to its representatives
(copies of which evidence and books and records may be retained by such
Pledgor).  Upon the occurrence and
during the continuance of any Event of Default, the Collateral Agent may
transfer a full and complete copy of any Pledgor’s books, records, credit
information, reports, memoranda and all other writings relating to the Accounts
to and for the use by any Person that has acquired or is contemplating
acquisition of an interest in the Accounts or the Collateral Agent’s security
interest therein without the consent of any Pledgor.


 


SECTION 6.3.                       Legend.  Each
Pledgor shall legend, at the request of the Collateral Agent made at any time
after the occurrence of any Event of Default and in form


 


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and manner
satisfactory to the Collateral Agent, the Accounts and the other books, records
and documents of such Pledgor evidencing or pertaining to the Accounts with an
appropriate reference to the fact that the Accounts have been assigned to the
Collateral Agent for the benefit of the Secured Parties and that the Collateral
Agent has a security interest therein.


 


SECTION 6.4.                       Allowances. 
Without the prior written consent of the Collateral Agent, no Pledgor
shall rescind or cancel any indebtedness evidenced by any Account or modify any
term thereof or make any adjustment with respect thereto except in the exercise
of its business judgment consistent with prudent business practice, or extend
or renew any such indebtedness except in the exercise of its business judgment
consistent with prudent business practice or compromise or settle any dispute,
claim, suit or legal proceeding relating thereto or sell any Account or
interest therein except in the exercise of its business judgment consistent
with prudent business practice.


 


SECTION 6.5.                       Collection. 
Each Pledgor shall cause to be collected from the account debtor of each
of the Accounts, as and when due in the ordinary course of business consistent
with the Pledgor’s prudent business practice, any and all amounts owing under
or on account of such Account, and apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such Account,
except that any Pledgor may, with respect to an Account, (a) allow in the
exercise of its commercially reasonable judgment (i) a refund or credit
due as a result of returned or damaged or defective merchandise, and
(ii) such extensions of time to pay amounts due in respect of Accounts and
such other modifications of payment terms or settlements in respect of Accounts
and (b) take such actions as permitted by Section 6.4.  The costs and expenses (including, without
limitation, attorneys’ fees) of collection, in any case, whether incurred by
any Pledgor, the Collateral Agent or any Secured Party, shall be paid by the
Pledgors.


 


ARTICLE VII


 


TRANSFERS AND OTHER LIENS


 


SECTION 7.1.                       Transfers of and other Liens on
Pledged Collateral.  No
Pledgor shall (i) sell, convey, assign or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral pledged by it hereunder
other than sales of Inventory in the ordinary course of business or as
permitted by the Credit Agreement or (ii) create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral pledged by it hereunder
other than in the case of Pledged Collateral (other than Securities Collateral)
and Permitted Collateral Liens.


 


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ARTICLE VIII


 


REMEDIES


 


SECTION 8.1.                       Remedies. 
(a)  Upon the occurrence and
during the continuance of any Event of Default the Collateral Agent may from
time to time exercise in respect of the Pledged Collateral, in addition to the
other rights and remedies provided for herein or otherwise available to it to
the extent the terms and conditions associated with any laws governing the
Pledged Collateral permit the exercise of such rights and:


 


(i)                                     Personally,
or by agents or attorneys, immediately take possession of the Pledged
Collateral or any part thereof, from any Pledgor or any other Person who then
has possession of any part thereof with or without notice or process of law,
and for that purpose may enter upon any Pledgor’s premises where any of the
Pledged Collateral is located, remove such Pledged Collateral, remain present
at such premises to receive copies of all communications and remittances relating
to the Pledged Collateral and use in connection with such removal and
possession any and all services, supplies, aids and other facilities of any
Pledgor;


 


(ii)                                  Demand,
sue for, collect or receive any money or property at any time payable or
receivable in respect of the Pledged Collateral including, without limitation,
instructing the obligor or obligors on any agreement, instrument or other
obligation constituting part of the Pledged Collateral to make any payment
required by the terms of such agreement, instrument or other obligation
directly to the Collateral Agent, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications
with respect thereto; provided, however, that in the event that any
such payments are made directly to any Pledgor, prior to receipt by any such
obligor of such instruction, such Pledgor shall segregate all amounts received
pursuant thereto in trust for the benefit of the Collateral Agent and shall
promptly (but in no event later than one Business Day after receipt thereof)
pay such amounts to the Collateral Agent;


 


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


 


(iv)                              Take
possession of the Pledged Collateral or any part thereof, by directing any
Pledgor in writing to deliver the same to the Collateral Agent at any place or
places so designated by the Collateral Agent, in which event such Pledgor shall
at its own expense:  (A) forthwith
cause the same to be moved to the place or places designated


 


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by the Collateral Agent and there delivered to the Collateral Agent,
(B) store and keep any Pledged Collateral so delivered to the Collateral Agent
at such place or places pending further action by the Collateral Agent and (C)
while the Pledged Collateral shall be so stored and kept, provide such security
and maintenance services as shall be necessary to protect the same and to
preserve and maintain them in good condition. 
Each Pledgor’s obligation to deliver the Pledged Collateral as contemplated
in this Section 8.1(iv) is of the essence hereof.  Upon application to a court of equity having
jurisdiction, the Collateral Agent shall be entitled to a decree requiring
specific performance by any Pledgor of such obligation;


 


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


 


(vi)                              Retain
and apply the Distributions to the Secured Obligations;


 


(vii)                           Exercise
any and all rights as beneficial and legal owner of the Pledged Collateral,
including, without limitation, perfecting assignment of and exercising any and
all voting, consensual and other rights and powers with respect to any Pledged
Collateral; and


 


(viii)                        All
the rights and remedies of a secured party on default under the UCC, and the
Collateral Agent may also in its sole discretion, without notice except as
specified in Section 8.2 hereof, sell, assign or grant a license to
use the Pledged Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Collateral
Agent’s offices or elsewhere, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as the Collateral Agent may
deem commercially reasonable.  The
Collateral Agent or any other Secured Party or any of their respective
Affiliates may be the purchaser, licensee, assignee or recipient of any or all
of the Pledged Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged Collateral sold, assigned or licensed at such
sale, to use and apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of any Pledged Collateral payable by
such Person at such sale.  Each
purchaser, assignee, licensee or recipient at any such sale shall acquire the
property sold, assigned or licensed absolutely free from any claim or right on
the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.  The
Collateral Agent shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given.  The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be


 


33

















 


made at the
time and place to which it was so adjourned. 
Each Pledgor hereby waives, to the fullest extent permitted by law, any
claims against the Collateral Agent arising by reason of the fact that the
price at which any Pledged Collateral may have been sold, assigned or licensed
at such a private sale was less than the price which might have been obtained
at a public sale, even if the Collateral Agent accepts the first offer received
and does not offer such Pledged Collateral to more than one offeree.


 


SECTION 8.2.                       Notice of Sale. 
Each Pledgor acknowledges and agrees that, to the extent notice of sale
or other disposition of Pledged Collateral shall be required by law, 10 days’
prior notice to such Pledgor of the time and place of any public sale or of the
time after which any private sale or other intended disposition is to take
place shall be commercially reasonable notification of such matters.  No notification need be given to any Pledgor
if it has signed, after the occurrence of an Event of Default, a statement
renouncing or modifying any right to notification of sale or other intended
disposition.


 


SECTION 8.3.                       Waiver of Notice and Claims.  Each Pledgor hereby waives, to the fullest
extent permitted by applicable law, notice or judicial hearing in connection
with the Collateral Agent’s taking possession or the Collateral Agent’s disposition
of any of the Pledged Collateral, including, without limitation, any and all
prior notice and hearing for any prejudgment remedy or remedies and any such
right which such Pledgor would otherwise have under law, and each Pledgor
hereby further waives, to the fullest extent permitted by applicable law:  (i) all damages occasioned by such
taking of possession, (ii) all other requirements as to the time, place
and terms of sale or other requirements with respect to the enforcement of the
Collateral Agent’s rights hereunder and (iii) all rights of redemption,
appraisal, valuation, stay, extension or moratorium now or hereafter in force
under any applicable law.  The Collateral
Agent shall not be liable for any incorrect or improper payment made pursuant
to this Article VIII in the absence of gross negligence or willful
misconduct.  Any sale of, or the grant
of options to purchase, or any other realization upon, any Pledged Collateral
shall operate to divest all right, title, interest, claim and demand, either at
law or in equity, of the applicable Pledgor therein and thereto, and shall be a
perpetual bar both at law and in equity against such Pledgor and against any
and all Persons claiming or attempting to claim the Pledged Collateral so sold,
optioned or realized upon, or any part thereof, from, through or under such
Pledgor.


 


SECTION 8.4.                       Certain Sales of Pledged Collateral.


 


(i)                                     Each
Pledgor recognizes that, by reason of certain prohibitions contained in law,
rules, regulations or orders of any Governmental Authority, the Collateral
Agent may be compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those who meet the requirements of
such Governmental Authority.  Each
Pledgor acknowledges that any such sales may be at prices and on terms less
favorable to the Collateral Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agrees that
any such restricted sale shall be deemed


 


34

















 


to have been made in a
commercially reasonable manner and that, except as may be required by
applicable law, the Collateral Agent shall have no obligation to engage in public
sales.


 


(ii)                                  Each
Pledgor recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the “Securities Act”), and
applicable state securities laws, the Collateral Agent may be compelled, with
respect to any sale of all or any part of the Investment Property, to limit
purchasers to Persons who will agree, among other things, to acquire such Investment
Property for their own account, for investment and not with a view to the distribution
or resale thereof.  Each Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Collateral Agent than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Collateral Agent shall
have no obligation to engage in public sales and no obligation to delay the
sale of any Investment Property for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities laws, even if
such issuer would agree to do so.


 


(iii)                               Notwithstanding
the foregoing, each Pledgor shall, upon the occurrence and during the
continuance of any Event of Default, at the reasonable request of the Collateral
Agent, for the benefit of the Collateral Agent, cause any registration,
qualification under or compliance with any Federal or state securities law or
laws to be effected with respect to all or any part of the Investment Property
in respect of which such Pledgor has registration rights or control of the
issuer as soon as practicable and at the sole cost and expense of the
Pledgors.  Each Pledgor will use its
commercially reasonable efforts to cause such registration to be effected (and
be kept effective) and will use its commercially reasonable efforts to cause
such qualification and compliance to be effected (and be kept effective) as may
be so requested and as would permit or facilitate the sale and distribution of
such Investment Property including, without limitation, registration under the
Securities Act (or any similar statute then in effect), appropriate qualifications
under applicable blue sky or other state securities laws and appropriate
compliance with all other requirements of any Governmental Authority.  Each Pledgor shall use its commercially
reasonable efforts to cause the Collateral Agent to be kept advised in writing
as to the progress of each such registration, qualification or compliance and
as to the completion thereof, shall furnish to the Collateral Agent such number
of prospectuses, offering circulars or other documents incident thereto as the
Collateral Agent from time to time may request, and shall indemnify and shall
cause the issuer of the Investment Property to indemnify the Collateral Agent
and all others participating in the distribution of such Investment Property
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein
(or in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading.


 


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(iv)                              If
the Collateral Agent determines to exercise its right to sell any or all of the
Investment Property, upon written request, the applicable Pledgor shall from
time to time furnish to the Collateral Agent all such information as the
Collateral Agent may request in order to determine the number of securities
included in the Investment Property which may be sold by the Collateral Agent
as exempt transactions under the Securities Act and the rules of the Securities
and Exchange Commission thereunder, as the same are from time to time in effect.


 


(v)                                 Each
Pledgor further agrees that a breach of any of the covenants contained in this Section
8.4 will cause irreparable injury to the Collateral Agent and other Secured
Parties, that the Collateral Agent and the other Secured Parties have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 8.4 shall be specifically
enforceable against such Pledgor, and such Pledgor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is continuing.


 


SECTION 8.5.                       No Waiver; Cumulative Remedies.


 


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


 


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


 


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ARTICLE IX


 


PROCEEDS OF CASUALTY EVENTS AND COLLATERAL

DISPOSITIONS/APPLICATION OF PROCEEDS


 


SECTION 9.1.                       Proceeds of Casualty Events and
Collateral Dispositions. 
The Pledgors shall take the actions required by the Credit Agreement
with respect to any Net Cash Proceeds of any Casualty Event or from the sale or
disposition of any Pledged Collateral.


 


SECTION 9.2.                       Application of Proceeds.  Any and all amounts actually received by the
Collateral Agent in connection with the enforcement of this Agreement,
including any Proceeds, shall be applied promptly by the Collateral Agent as follows:


 


First, to the payment of the costs and
expenses of such sale, collection or other realization, including reasonable
compensation to the Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by the Collateral Agent in
connection therewith and all amounts for which Collateral Agent is entitled to
indemnification  hereunder, and to the
payment of all costs and expenses paid or incurred by Collateral Agent in
connection with the exercise of any right or remedy hereunder;


 


Second, to the payment of the Secured
Obligations for the ratable benefit of the holders thereof;


 


Third, only after payment in full of all
Secured Obligations, to the indefeasible payment in full in cash, pro rata, of
the principal amount of Reimbursement Obligations; and


 


Fourth, after payment in full of all Secured
Obligations and Reimbursement Obligations, to the respective Pledgor of such
Collateral, or its successors or assigns, or to whosoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct, of any surplus then remaining from such Proceeds.


 


Until Proceeds are so applied, such Proceeds shall be held in a
Controlled Account in accordance with the regular procedures of the applicable
depository bank for handling deposited funds and with the applicable Control
Agreement.


 


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ARTICLE X


 


MISCELLANEOUS


 


SECTION 10.1.                 Concerning Collateral Agent.


 


(i)                                     The
Collateral Agent has been appointed as collateral agent pursuant to the Credit
Agreement.  The actions of the
Collateral Agent hereunder are subject to the provisions of the Credit
Agreement.  The Collateral Agent shall
have the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking action
(including, without limitation, the release or substitution of the Pledged
Collateral), in accordance with this Agreement and the Credit Agreement.  The Collateral Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be liable for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it in good
faith.  The Collateral Agent may resign
and a successor Collateral Agent may be appointed in the manner provided in the
Credit Agreement.  Upon the acceptance
of any appointment as the Collateral Agent by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Collateral
Agent under this Agreement, and the retiring Collateral Agent shall thereupon
be discharged from its duties and obligations under this Agreement.  After any retiring Collateral Agent’s resignation,
the provisions hereof shall inure to its benefit as to any actions taken or
omitted to be taken by it under this Agreement while it was the Collateral
Agent.


 


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


 


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


 


38

















 


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


 


SECTION 10.2.                 Collateral Agent May Perform;
Collateral Agent Appointed Attorney-in-Fact.  If any Pledgor shall fail to perform any
covenants contained in this Agreement (including, without limitation, such
Pledgor’s covenants to (i) pay the premiums in respect of all required
insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge
Liens or (v) pay or perform any obligations of such Pledgor under any Pledged
Collateral) or if any warranty on the part of any Pledgor contained herein
shall be breached, the Collateral Agent may (but shall not be obligated to) do
the same or cause it to be done or remedy any such breach, and may expend funds
for such purpose; provided, however, that Collateral Agent shall in no event be
bound to inquire into the validity of any tax, lien, imposition or other
obligation which such Pledgor fails to pay or perform as and when required
hereby and which such Pledgor does not contest in accordance in accordance with
the provisions of Section 4.16 hereof. 
Any and all amounts so expended by the Collateral Agent shall be paid by
the Pledgors in accordance with the provisions of Section 10.3
hereof.  Neither the provisions of this Section
10.2 nor any action taken by Collateral Agent pursuant to the provisions of
this Section 10.2 shall prevent any such failure to observe any covenant
contained in this Agreement nor any breach of warranty form constituting an
Event of Default.  Each Pledgor hereby
appoints the Collateral Agent its attorney-in-fact, with full authority in the
place and stead of such Pledgor and in the name of such Pledgor, or otherwise,
from time to time in the Collateral Agent’s discretion to take any action and
to execute any instrument consistent with the terms of the Credit Agreement and
the other Security Documents which the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof. 
The foregoing grant of authority is a power of attorney coupled with an
interest and such appointment shall be irrevocable for the term hereof.  Each Pledgor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.


 


SECTION 10.3.                 Expenses. 
Each Pledgor will upon demand pay to the Collateral Agent the amount of
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and the reasonable fees and expenses of any experts and agents
which the Collateral Agent may incur in connection with (i) any action, suit or
other proceeding affecting the Pledged Collateral or any part thereof
commenced, in which action, suit or proceeding the Collateral Agent is made a
party or participates or in which the right to use the Pledged Collateral or
any part thereof is threatened, or in which it becomes necessary in the
judgment of the Collateral Agent to defend or uphold the Lien hereof
(including, without limitation, any action, suit or proceeding to establish or uphold
the compliance of the Pledged Collateral with any requirements of any
Governmental Authority or law), (ii) the collection of the Secured
Obligations, (iii) the enforcement and administration hereof, (iv) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the


 


39

















 


Pledged
Collateral, (v) the exercise or enforcement of any of the rights of the
Collateral Agent or any Secured Party hereunder or (vi) the failure by any
Pledgor to perform or observe any of the provisions hereof.  All amounts expended by the Collateral Agent
and payable by any Pledgor under this Section 10.3 shall be due upon
demand therefor (together with interest thereon accruing at the highest rate
then in effect under the Credit Agreement during the period from and including
the date on which such funds were so expended to the date of repayment) and
shall be part of the Secured Obligations. 
Each Pledgor’s obligations under this Section 10.3 shall
survive the termination hereof and the discharge of such Pledgor’s other
obligations under this Agreement, the Credit Agreement and the other Security
Documents.


 


SECTION 10.4.                 Indemnity.


 


(i)                                     Indemnity.  Each Pledgor agrees to indemnify, pay and
hold harmless the Collateral Agent and each of the other Secured Parties and
the officers, directors, employees, agents and Affiliates of the Collateral
Agent and each of the other Secured Parties (collectively, the “Indemnitees”)
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs (including, without
limitation, settlement costs), reasonable expenses or disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) which may
be imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement, the Credit Agreement, any other
Security Document or any other document evidencing the Secured Obligations
(including, without limitation, any misrepresentation by any Pledgor in this
Agreement, the Credit Agreement, other Security Document or any other document
evidencing the Secured Obligations) (the “Indemnified Liabilities”); provided,
however, that no Pledgor shall have any obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities if (i) it has been determined
by a final decision (after all appeals and the expiration of time to appeal) of
a court of competent jurisdiction that such Indemnified Liabilities arose from
the gross negligence or willful misconduct of that Indemnitee or (ii) such
Indemnified Liabilities result from litigation commenced by any Pledgor against
the Collateral Agent or any other Secured Party which seeks enforcement of any
of the rights of such Pledgor hereunder or under any other Credit Document and
is determined adversely to any Indemnitee in a final non-appealable
judgment.  To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding sentence
may be unenforceable because it is violative of any law or public policy, each
Pledgor shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.


 


40

















 


(ii)                                  Survival.  The obligations of the Pledgors contained in
this Section 10.4 shall survive the termination hereof and the
discharge of the Pledgors’ other obligations under this Agreement, the Credit
Agreement and under the other Security Documents.


 


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


 


SECTION 10.5.                 Continuing Security Interest;
Assignment.  This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon the Pledgors, their respective successors and assigns
and (ii) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and the other Secured
Parties and each of their respective successors, transferees and assigns.  No other Persons (including, without
limitation, any other creditor of any Pledgor) shall have any interest herein
or any right or benefit with respect hereto. 
Without limiting the generality of the foregoing clause (ii), any
Secured Party may assign or otherwise transfer any indebtedness held by it
secured by this Agreement to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Secured
Party, herein or otherwise, subject however, to the provisions of the Credit
Agreement.


 


SECTION 10.6.                 Termination; Release.  The Pledged Collateral shall be released
from the Lien of this Agreement in accordance with Section 6.4.11(g)
of the Credit Agreement.  Upon
termination hereof or any release of Pledged Collateral in accordance with the
provisions of the Credit Agreement, the Collateral Agent shall, upon the
request and at the sole cost and expense of the Pledgors, assign, transfer and
deliver to Pledgor, against receipt and without recourse to or warranty by the
Collateral Agent, such of the Pledged Collateral to be released (in the case of
a release) as may be in possession of the Collateral Agent and as shall not
have been sold or otherwise applied pursuant to the terms hereof, and, with
respect to any other Pledged Collateral, proper documents and instruments
(including UCC-3 termination statements or releases) acknowledging the
termination hereof or the release of such Pledged Collateral, as the case may
be.


 


SECTION 10.7.                 Modification in Writing.  No amendment, modification, supplement,
termination or waiver of or to any provision hereof, nor consent to any
departure by any Pledgor therefrom, shall be effective unless the same shall be
made in accordance with the terms of the Credit Agreement and unless in writing
and signed by the Collateral Agent.  Any
amendment, modification or supplement of or to any provision hereof, any waiver
of any provision hereof and any consent to any departure by any Pledgor from
the terms of any provision hereof shall be effective only in the specific
instance and for the specific purpose for which made or given.  Except where notice is specifically required
by this Agreement or any other document evidencing the Secured Obligations, no
notice to or demand on any Pledgor in any case shall entitle any Pledgor to any
other or further notice or demand in similar or other circumstances.


 


41

















 


SECTION 10.8.                 Notices. 
Unless otherwise provided herein or in the Credit Agreement, any notice
or other communication herein required or permitted to be given shall be given
in the manner and become effective as set forth in the Credit Agreement, as to
any Pledgor, addressed to it at the address of the Borrower set forth in the
Credit Agreement and as to the Collateral Agent, addressed to it at the address
set forth in the Credit Agreement, or in each case at such other address as
shall be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section 10.8.


 


SECTION 10.9.                 GOVERNING LAW. 
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


 


SECTION 10.10.           CONSENT TO JURISDICTION AND
SERVICE OF PROCESS; WAIVER OF JURY TRIAL.  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE SUPREME COURT OF
THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS OF
ANY THEREOF, AND BY EXECUTION AND DELIVERY HEREOF, EACH PLEDGOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT.  EACH PLEDGOR AGREES THAT
SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF
BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN THE CREDIT
AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH THE COLLATERAL AGENT SHALL HAVE
BEEN NOTIFIED PURSUANT THERETO.  IF ANY
AGENT APPOINTED BY ANY PLEDGOR REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.  NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN THE COURTS OF
ANY OTHER JURISDICTION.  THE PLEDGORS
HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


SECTION 10.11.           Severability of Provisions.  Any provision hereof 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


 


42

















 


hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.


 


SECTION 10.12.           Execution in Counterparts.  This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same agreement.


 


SECTION 10.13.           Business Days. 
In the event any time period or any date provided in this Agreement ends
or falls on a day other than a Business Day, then such time period shall be
deemed to end and such date shall be deemed to fall on the next succeeding Business
Day, and performance herein may be made on such Business Day, with the same
force and effect as if made on such other day.


 


SECTION 10.14.           Waiver of Stay. 
Each Pledgor agrees that in the event that such Pledgor or any property
or assets of such Pledgor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or such Pledgor shall
otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium
or similar proceeding to which the provisions relating to the automatic stay
under Section 362 of the Bankruptcy Code or any similar provision in any such
law is applicable, then, in any such case, whether or not the Collateral Agent
has commenced foreclosure proceedings under this Agreement, the Collateral Agent
shall be entitled to relief from any such automatic stay as it relates to the
exercise of any of the rights and remedies (including, without limitation, any
foreclosure proceedings) available to the Collateral Agent as provided in this
Agreement, in any other Security Document or any other document evidencing the
Secured Obligations.


 


SECTION 10.15.           No Credit for Payment of Taxes or
Imposition.  Such Pledgor
shall not be entitled to any credit against the principal, premium, if any, or
interest payable under the Credit Agreement, and such Pledgor shall not be entitled
to any credit against any other sums which may become payable under the terms
thereof or hereof, by reason of the payment of any Tax on the Pledged
Collateral or any part thereof.


 


SECTION 10.16.           No Claims Against Collateral Agent.  Nothing contained in this Agreement shall
constitute any consent or request by the Collateral Agent, express or implied,
for the performance of any labor or services or the furnishing of any materials
or other property in respect of the Pledged Collateral or any part thereof, nor
as giving any Pledgor any right, power or authority to contract for or permit
the performance of any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim against
the Collateral Agent in respect thereof or any claim that any Lien based on the
performance of such labor or services or the furnishing of any such materials
or other property is prior to the Lien hereof.


 


43

















 


SECTION 10.17.           Obligations Absolute.  All obligations of each Pledgor hereunder
shall be absolute and unconditional irrespective of:


 


(i)                  any
bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
liquidation or the like of any Pledgor;


 


(ii)               any
lack of validity or enforceability of the Credit Agreement or any other
Security Document, or any other agreement or instrument relating thereto;


 


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


 


(iv)           any
pledge, exchange, release or non-perfection of any other collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;


 


(v)              any
exercise, non-exercise or waiver of any right, remedy, power or privilege under
or in respect hereof, the Credit Agreement or any other Security Document
except as specifically set forth in a waiver granted pursuant to the provisions
of Section 10.7 hereof; or


 


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


 


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BLANK]


 


44

















 


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


 


	
   

  	
  TRANSMONTAIGNE INC.,

  as Pledgor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald
  H. Anderson

  
	
   

  	
   

  	
  Name: Donald
  H. Anderson

  
	
   

  	
   

  	
  Title:
  President

  



 

















 


	
   

  	
  TRANSMONTAIGNE PRODUCT SERVICES

  INC., as Pledgor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randall
  J. Larson

  
	
   

  	
   

  	
  Name:
  Randall J. Larson

  
	
   

  	
   

  	
  Title:
  Executive Vice President

  



 

















 


	
   

  	
  TRANSMONTAIGNE TRANSPORT INC.,

  as Pledgor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald
  H. Anderson

  
	
   

  	
   

  	
  Name: Donald
  H. Anderson

  
	
   

  	
   

  	
  Title:
  President

  



 

















 


	
   

  	
  COASTAL FUELS MARKETING, INC.,

  as Pledgor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randall
  J. Larson

  
	
   

  	
   

  	
  Name:
  Randall J. Larson

  
	
   

  	
   

  	
  Title:
  Executive Vice President

  



 

















 


	
   

  	
  COASTAL TUG & BARGE, INC.,

  as Pledgor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randall
  J. Larson

  
	
   

  	
   

  	
  Name:
  Randall J. Larson

  
	
   

  	
   

  	
  Title:
  Executive Vice President

  



 

















 


	
   

  	
  UBS AG, STAMFORD BRANCH, as Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wilfred
  V. Saint

  
	
   

  	
   

  	
  Name:
  Wilfred V. Saint

  
	
   

  	
   

  	
  Title:
  Associate Director, Banking Products Services, US

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Oliver
  O. Trumbo II

  
	
   

  	
   

  	
  Name: Oliver
  O. Trumbo II

  
	
   

  	
   

  	
  Title:
  Director

  



 

















 


Schedules and Exhibits


to be furnished upon request