Document:

Exhibit 10.2

 

EXECUTION COPY

 

AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT

 

made by

 

NBTY, INC.

 

and the other Grantors party hereto

 

in favor of

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

Dated as of July 25, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  SECTION 1. DEFINED TERMS

  	
  2

  
	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  Other Definitional
  Provisions

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 2. GUARANTEE

  	
  6

  
	
   

  	
   

  
	
  2.1

  	
  Guarantee

  	
  6

  
	
  2.2

  	
  Right of Contribution

  	
  7

  
	
  2.3

  	
  No Subrogation

  	
  7

  
	
  2.4

  	
  Amendments, etc. with
  respect to the Borrower Obligations

  	
  7

  
	
  2.5

  	
  Guarantee Absolute,
  Irrevocable and Unconditional

  	
  8

  
	
  2.6

  	
  Reinstatement

  	
  8

  
	
  2.7

  	
  Payment

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 3. GRANT OF SECURITY INTEREST

  	
  9

  
	
   

  	
   

  
	
  SECTION 4. REPRESENTATIONS AND WARRANTIES

  	
  10

  
	
   

  	
   

  
	
  4.1

  	
  Representations in Credit
  Agreement

  	
  10

  
	
  4.2

  	
  Title; No Other Liens

  	
  10

  
	
  4.3

  	
  Perfected First Priority
  Lien

  	
  10

  
	
  4.4

  	
  Chief Executive Office

  	
  11

  
	
  4.5

  	
  Inventory and Equipment

  	
  11

  
	
  4.6

  	
  Farm Products

  	
  11

  
	
  4.7

  	
  Pledged Securities

  	
  11

  
	
  4.8

  	
  Receivables

  	
  11

  
	
  4.9

  	
  Intellectual Property

  	
  11

  
	
  4.10

  	
  Deposit Accounts; Security
  Accounts; Commodity Accounts

  	
  12

  
	
  4.11

  	
  Commercial Tort Claims

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 5. COVENANTS

  	
  12

  
	
   

  	
   

  
	
  5.1

  	
  Covenants in Credit
  Agreement

  	
  12

  
	
  5.2

  	
  Delivery of Instruments
  and Chattel Paper

  	
  12

  
	
  5.3

  	
  Maintenance of Insurance

  	
  13

  
	
  5.4

  	
  Payment of Obligations

  	
  13

  
	
  5.5

  	
  Maintenance of Perfected
  Security Interest; Further Documentation

  	
  13

  
	
  5.6

  	
  Changes in Jurisdiction of
  Organization, Locations, Name, etc

  	
  14

  
	
  5.7

  	
  Notices

  	
  14

  
	
  5.8

  	
  Pledged Securities

  	
  14

  
	
  5.9

  	
  Receivables

  	
  15

  
	
  5.10

  	
  Intellectual Property

  	
  16

  
				

 

i

 

	
  5.11

  	
  Jurisdiction of
  Organization

  	
  17

  
	
  5.12

  	
  Commercial Tort Claims

  	
  17

  
	
  5.13

  	
  Additional Accounts

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 6. REMEDIAL PROVISIONS

  	
  18

  
	
   

  	
   

  
	
  6.1

  	
  Certain Matters Relating
  to Receivables

  	
  18

  
	
  6.2

  	
  Communications with
  Obligors; Grantors Remain Liable

  	
  18

  
	
  6.3

  	
  Pledged Stock

  	
  19

  
	
  6.4

  	
  Proceeds To Be Turned Over
  to Administrative Agent

  	
  19

  
	
  6.5

  	
  Application of Proceeds

  	
  20

  
	
  6.6

  	
  Code and Other Remedies

  	
  20

  
	
  6.7

  	
  Private Sales

  	
  21

  
	
  6.8

  	
  Deficiency

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION 7. THE ADMINISTRATIVE AGENT

  	
  22

  
	
   

  	
   

  
	
  7.1

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

  	
  22

  
	
  7.2

  	
  Duty of Administrative
  Agent

  	
  23

  
	
  7.3

  	
  Execution of Financing
  Statement

  	
  23

  
	
  7.4

  	
  Authority of
  Administrative Agent

  	
  24

  
	
   

  	
   

  	
   

  
	
  SECTION 8. MISCELLANEOUS

  	
  24

  
	
   

  	
   

  
	
  8.1

  	
  Amendments in Writing

  	
  24

  
	
  8.2

  	
  Notices

  	
  24

  
	
  8.3

  	
  No Waiver by Course of
  Conduct; Cumulative Remedies

  	
  24

  
	
  8.4

  	
  Enforcement Expenses;
  Indemnification

  	
  25

  
	
  8.5

  	
  Successors and Assigns

  	
  25

  
	
  8.6

  	
  Set-Off

  	
  25

  
	
  8.7

  	
  Counterparts

  	
  26

  
	
  8.8

  	
  Severability

  	
  26

  
	
  8.9

  	
  Section Headings

  	
  26

  
	
  8.10

  	
  Integration

  	
  26

  
	
  8.11

  	
  GOVERNING LAW

  	
  26

  
	
  8.12

  	
  Submission to
  Jurisdiction; Waivers

  	
  26

  
	
  8.13

  	
  Acknowledgements

  	
  27

  
	
  8.14

  	
  WAIVER OF JURY TRIAL

  	
  27

  
	
  8.15

  	
  Additional Grantors

  	
  27

  
	
  8.16

  	
  Releases

  	
  27

  
	
   

  	
   

  	
   

  
	
  SECTION 9. REAFFIRMATION

  	
  28

  
	
   

  	
   

  
	
  9.1

  	
  Reaffirmation

  	
  28

  

 

ii

 

SCHEDULES

 

	
  Schedule 1

  	
   

  	
  Notice Addresses of
  Guarantors

  
	
  Schedule
  2

  	
   

  	
  Description
  of Pledged Securities

  
	
  Schedule
  3

  	
   

  	
  Filings
  and Other Actions Required to Perfect Security Interests

  
	
  Schedule
  4

  	
   

  	
  Jurisdictions
  of Organization; Identification Numbers and Locations of Chief Executive Offices

  
	
  Schedule
  5

  	
   

  	
  Locations
  of Inventory and Equipment

  
	
  Schedule 6

  	
   

  	
  Copyrights and Copyright
  Licenses; Patents and Patent Licenses; Trademark and Trademark Licenses

  
	
  Schedule
  7

  	
   

  	
  Existing
  Prior Liens

  
	
  Schedule
  8

  	
   

  	
  Commercial
  Tort Claims

  
	
  Schedule
  9

  	
   

  	
  Deposit
  Accounts; Securities Accounts; Commodities Accounts

  
	
   

  	
   

  	
   

  
	
  ANNEXES

  	
   

  
	
   

  	
   

  
	
  Annex
  1

  	
   

  	
  Form of
  Assumption Agreement

  
	
  Annex
  2

  	
   

  	
  Issuer’s
  Acknowledgement

  
				

 

iii

 

AMENDED AND RESTATED GUARANTEE AND COLLATERAL
AGREEMENT, dated as of July 25, 2008, made by each of the signatories
hereto other than the Administrative Agent (together with any other entity that
may become a party hereto as a Grantor as provided herein, the “Grantors”),
in favor of JPMORGAN CHASE BANK, N.A. as Administrative Agent (in such
capacity, the “Administrative Agent”) for the banks and other financial
institutions (the “Lenders”) from time to time party to the Amended and
Restated Credit Agreement, dated as of July 25, 2008 (as amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”), among
NBTY, INC., a Delaware corporation (the “Borrower”), BANK OF AMERICA,
N.A., CITIBANK, N.A., HSBC BANK USA, NATIONAL ASSOCIATION, and WACHOVIA BANK,
NATIONAL ASSOCIATION, as Co-Syndication Agents (in such capacity, collectively
the “Co-Syndication Agents”), the Lenders and JPMORGAN CHASE BANK, N.A.
as Collateral Agent and as the Administrative Agent.

 

W I T N E S S E T H :

 

WHEREAS, the Borrower is party to that certain
Credit Agreement dated as of November 3, 2006, as amended from time to
time to the date hereof, among the Borrower, the several lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and
Bank of America, N.A., BNP Paribas, Citibank, N.A. and HSBC Bank USA, National
Association, as co-syndication agents (the “Existing Credit Agreement”);

 

WHEREAS, pursuant to the Existing Credit Agreement,
the Borrower and certain other Grantors entered into a Guarantee and Collateral
Agreement dated as of November 3, 2006 (the “Existing Guarantee and
Collateral Agreement”), in favor of the Administrative Agent for the
benefit of the lenders party to the Existing Credit Agreement in order to
guarantee and secure the extensions of credit made to the Borrower thereunder;

 

WHEREAS, the Borrower entered into an Amended and
Restated Asset Purchase Agreement, dated as of June 9, 2008 (the “Leiner
Acquisition Agreement”), pursuant to which NBTY Acquisition, LLC, a
wholly-owned subsidiary of the Borrower, has acquired substantially all of the
assets (the “Transaction”) of Leiner Health Products, Inc., Leiner
Health Services Corp. and Leiner Health Products, LLC for approximately
$371,000,000 (subject to adjustment based on working capital and cure costs as
set forth in the Leiner Acquisition Agreement) plus the assumption of certain
liabilities;

 

WHEREAS, the Borrower has initially financed the
Transaction and the related fees and expenses with a combination of cash on
hand and borrowings under the Existing Credit Agreement;

 

WHEREAS, pursuant to the Credit Agreement, the
Borrower and the Lenders have agreed to amend and restate the Existing Credit
Agreement in its entirety to, among other things, provide for a $300,000,000
term loan facility and to amend certain other provisions of the Existing Credit
Agreement for the purpose of (x) repaying borrowings outstanding under the
Existing Credit Agreement on the Effective Date and paying any fees,
commissions and expenses in connection therewith, (y) for working capital
and other general corporate purposes of the Borrower and its Subsidiaries and (z) any
Acquisitions consummated after the Effective Date;

 

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

 

 

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

 

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

 

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

 

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

 

NOW, THEREFORE, in consideration of the premises and
to induce the Agents and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrower under the Credit Agreement, each Grantor agrees that the Existing
Guarantee and Collateral Agreement is hereby amended and restated as of the
Effective Date to read in its entirety as follows:

 

SECTION 1.  DEFINED TERMS

 

1.1        Definitions.  (a)  Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms which are
defined in the Uniform Commercial Code in effect in the State of New York on
the date hereof are used herein as so defined: 
Account, Certificated Security, Chattel Paper, Commercial Tort Claim,
Commodity Account, Document, Equipment, Farm Product, General Intangibles,
Instrument, Inventory, Letter of Credit Right, Proceeds, Securities Account and
Supporting Obligations.

 

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

 

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

 

“Borrower Obligations”:  the collective reference to the unpaid
principal of and interest on the Loans, the Reimbursement Obligations and all
other obligations and liabilities of the Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit Agreement
after the maturity of such Loans and Reimbursement Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to any Agent or any Lender (or, in the case of any Hedge Agreement or Cash
Management Obligations referred to below, any Affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, this Agreement, the other Loan Documents, any Letter of
Credit, any Hedge Agreement (including any guar antees of the Borrower of any
Hedge Agreements made by any Grantor) or Cash Management Obligation 

 

2

 

entered into by the Borrower
with any Lender (or any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Borrower pursuant to the terms of any of the foregoing
agreements).

 

“Cash Management Obligation”:  any obligation of the Borrower or any of its
Subsidiaries in respect of overdrafts and related liabilities owed to any
Lender (or any Affiliate of a Lender) that arise from treasury, depositary or
cash management services including in connection with any automated clearing
house transfers of funds or any similar transactions.

 

“Collateral”: 
as defined in Section 3.

 

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

 

“Control Agreement”: shall mean an agreement
in form and substance reasonably acceptable to the Administrative Agent
sufficient to establish the Administrative Agent’s control (within the meaning
of the applicable Uniform Commercial Code as in effect in the applicable
jurisdiction) over any applicable Investment Property (including, without
limitation, any Securities Account or Commodities Account) or Deposit Account, for the
benefit of the Administrative Agent and the benefit of the Secured Parties.

 

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

 

“Copyright Licenses”:  any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in Schedule
6), granting any right under any Copyright, including, without limitation,
the grant of rights to manufacture, distribute, exploit and sell materials
derived from any Copyright, to the extent (after giving effect to the
provisions of 9-408(a) of the New York UCC and similar provisions of a
Uniform Commercial Code of any other applicable jurisdiction) the grant by such
Grantor of a security interest pursuant to this Agreement in its right, title
and interest in such Copyright License is not prohibited by such Copyright
License without the consent of any other party thereto, would not give any
other party to such Copyright License the right to terminate its obligations
thereunder, or is permitted with consent if all necessary consents to such
grant of a security interest have been obtained from the other parties thereto
(it being understood that the foregoing shall not be deemed to obligate such
Grantor to obtain such consents); provided that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such Grantor of a
security interest pursuant to this Agreement in any money or other amounts due
or to become due under any such Copyright License.

 

“Deposit Account”:  the “deposit accounts” as such term is defined
in Section 9-102(a)(29) of the New York UCC listed on Schedule 9
hereto under the heading “Deposit Accounts” or required to be disclosed to the
Administrative Agent pursuant to Section 5.13 hereof.

 

3

 

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

 

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

 

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

 

“Intercompany Note”:  any promissory note evidencing loans made by
any Grantor to the Borrower or any of its Subsidiaries (other than the
promissory note dated May 12, 2003, evidencing the  loan made by the Borrower to Holland &
Barrett Europe Limited in the amount of £200,000,000 and any Refinancing
Indebtedness in respect thereof permitted by the Credit Agreement).

 

“Investment Property”: the collective
reference to all “investment property” as such term is defined in Section 9-102(a)(49)
of the New York UCC (other than Capital Stock of a Foreign Subsidiary which is
not required to be pledged to the Administrative Agent pursuant to the terms of
this Agreement and the Credit Agreement).

 

“Issuers”: 
the collective reference to each issuer of any Pledged Security.

 

“material”: as the context may reasonably
permit or require, material in relation to the Borrower and its Subsidiaries,
taken as a whole.

 

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

 

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

 

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

 

“Patent License”:  all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, use
or sell any invention covered in whole or in part by a Patent, 

 

4

 

including, without
limitation, any of the foregoing referred to in Schedule 6, to the
extent (after giving effect to the provisions of 9-408(a) of the New York
UCC and similar provisions of a Uniform Commercial Code of any other applicable
jurisdiction) the grant by such Grantor of a security interest pursuant to this
Agreement in its right, title and interest in such Patent License is not
prohibited by such Patent License without the consent of any other party
thereto, would not give any other party to such Patent License the right to
terminate its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided that the
foregoing limitation shall not affect, limit, restrict or impair the grant by
such Grantor of a security interest pursuant to this Agreement in any money or
other amounts due or to become due under any such Patent License.

 

“Pledged Note”:  all Intercompany Notes at any time issued to
any Grantor and all other promissory notes issued to or held by any Grantor
(other than promissory notes issued in connection with extensions of trade
credit by any Grantor in the ordinary course of business and other than the
promissory note dated May 12, 2003, evidencing the loan made by the
Borrower to Holland & Barrett Europe Limited in the amount of £200,000,000
and any Refinancing Indebtedness in respect thereof permitted by the Credit
Agreement.).

 

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

 

“Pledged Stock”:  the shares of Capital Stock listed on Schedule
2 together with any other shares, stock certificates, options or rights of
any nature whatsoever pledged pursuant to subsection 7.9 of the Credit
Agreement.

 

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

 

“Secured Parties”:  as defined in Section 2.1

 

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

 

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

 

“Trademark License”:  any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in Schedule
6, to the extent (after giving effect to the provisions of 9-408(a) of
the New York UCC and similar provisions of a Uniform Commercial Code of any
other applicable jurisdiction) the 

 

5

 

grant by such Grantor of a
security interest pursuant to this Agreement in its right, title and interest
in such Trademark License is not prohibited by such Trademark License without
the consent of any other party thereto, would not give any other party to such
Trademark License the right to terminate its obligations thereunder, or is
permitted with consent if all necessary consents to such grant of a security
interest have been obtained from the other parties thereto (it being understood
that the foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security interest pursuant
to this Agreement in any money or other amounts due or to become due under any
such Trademark License.

 

“Vehicles”: 
all cars, trucks, trailers, construction and earth moving equipment and
other vehicles covered by a certificate of title law of any state.

 

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

 

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

 

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

 

SECTION 2.  GUARANTEE

 

2.1                       Guarantee.  (a)  Each of the Guarantors hereby,
jointly and severally, absolutely, unconditionally and irrevocably, guarantees
to the Administrative Agent, for the benefit of the Lenders and, in the case of
any Hedge Agreement or Cash Management Obligations, between the Borrower and
any Affiliate of a Lender, such Affiliate of a Lender and any person that was a
lender or an Affiliate of a lender at the time it entered into a Hedge
Agreement or a Cash Management Obligation (any such person, lender or Affiliate
of a lender, together with the Agents and the Lenders, the “Secured Parties”)
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Borrower Obligations.

 

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

 

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

 

(d)                                 Subject to
reinstatement as provided in Section 2.6, the guarantee contained in this Section 2
shall remain in full force and effect until all the Borrower Obligations and
the obligations of 

 

6

 

each Guarantor under the guarantee contained in this
Section 2 shall have been satisfied by payment in full, no Letter of
Credit shall be outstanding and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from the Borrower Obligations.

 

(e)                                  No payment made
by the Borrower, any of the Guarantors, any other guarantor or any other Person
or received or collected by the Administrative Agent or any other Secured Party
from the Borrower, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Borrower Obligations or any payment received or collected
from such Guarantor in respect of the Borrower Obligations), remain liable for
the Borrower Obligations up to the maximum liability of such Guarantor
hereunder until (subject to reinstatement as provided in Section 2.6) all
Borrower Obligations are paid in full, no Letter of Credit shall be outstanding
and the Commitments are terminated.

 

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

 

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

 

2.4                       Amendments,
etc. with respect to the Borrower Obligations.  Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by any Secured Party may be
rescinded by the Administrative Agent or such Secured Party and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, 

 

7

 

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

 

2.5                       Guarantee
Absolute, Irrevocable and Unconditional.  Each Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance any Secured Party upon the guarantee
contained in this Section 2 or acceptance of the guarantee contained in
this Section 2; the Borrower Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guarantee contained
in this Section 2; and all dealings between the Borrower and any of the
Guarantors, on the one hand, and the Secured Parties, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2.  Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Borrower Obligations.  Each Guarantor understands and agrees that
the guarantee contained in this Section 2 shall be construed as a
continuing, absolute, irrevocable and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Credit
Agreement or any other Loan Document, any of the Borrower Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by any Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or performance)
which may at any time be available to or be asserted by the Borrower or any
other Person against any Secured Party, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower or such
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrower for the Borrower Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy
or in any other instance (other than payment or performance in full).  When making any demand hereunder or otherwise
pursuing its rights and remedies hereunder against any Guarantor, the Administrative
Agent or any other Secured Party may, but shall be under no obligation to, make
a similar demand on or otherwise pursue such rights and remedies as it may have
against the Borrower, any other Guarantor or any other Person or against any
collateral security or guarantee for the Borrower Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent or any
other Secured Party to make any such demand, to pursue such other rights or
remedies or to collect any payments from the Borrower, any other Guarantor or
any other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Borrower, any
other Guarantor or any other Person or any such collateral security, guarantee
or right of offset, shall not relieve any Guarantor of any obligation or
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Administrative
Agent or any other Secured Party against any Guarantor.  For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.

 

2.6                       Reinstatement.  The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent

 

8

 

or any Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

 

2.7                       Payment.  Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars pursuant to the Credit Agreement at the relevant
payment office specified in the Credit Agreement.

 

SECTION 3.  GRANT OF SECURITY INTEREST

 

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

 

(a)                                  all Accounts;

 

(b)                                 all Chattel
Paper;

 

(c)                                  all Commercial
Tort Claims, in which any Grantor has rights, in excess of $1,000,000,
including all Commercial Tort Claims listed on Schedule 8 hereto (as such
Schedule may be amended and/or supplemented from time to time);

 

(d)                                 all Deposit
Accounts;

 

(e)                                  all Documents;

 

(f)                                    all Equipment;

 

(g)                                 all General
Intangibles;

 

(h)                                 all
Instruments;

 

(i)                                     all
Intellectual Property;

 

(j)                                     all Inventory;

 

(k)                                  all Investment
Property;

 

(l)                                     all Letter of
Credit Rights;

 

(m)                               all Pledged
Securities;

 

9

 

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

 

(o)                                 to the extent
not otherwise included, all Proceeds, Supporting Obligations and products of
any and all of the foregoing and all collateral security and guarantees given
by any Person with respect to any of the foregoing.

 

SECTION 4.  REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

4.2                       Title; No Other
Liens.  Except for the security
interest granted to the Administrative Agent for the benefit of the Secured
Parties pursuant to this Agreement and the other Liens permitted to exist on
the Collateral by the Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others.  No financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except (a) such as have been filed in favor of the
Administrative Agent, for the benefit of the Secured Parties, pursuant to this
Agreement, (b) as are permitted by the Credit Agreement, (c) as filed
in favor of the Administrative Agent pursuant to the Existing Credit Agreement
for the ratable benefit of the lenders (and certain of their affiliates)
thereunder (and arrangements for the release of which have been made to the
satisfaction of the Administrative Agent), or (d) as previously identified
in writing to the Administrative Agent, arrangements for the release of which
satisfactory to the Administrative Agent have been made.

 

4.3                       Perfected First
Priority Lien.  The
security interests granted pursuant to this Agreement (a) upon completion
of the filings and other actions specified on Schedule 3 (which, in the
case of all filings and other documents referred to on said Schedule, have been
delivered to the Administrative Agent in completed and (to the extent required)
duly executed form) will constitute or will continue to constitute valid
perfected security interests in all of the Collateral in favor of the
Administrative Agent, for its benefit and the benefit of the Secured Parties,
as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any
Persons purporting to purchase any Collateral from such Grantor and (b) are
prior to all other Liens on the Collateral in existence on the date hereof
except for (i) unrecorded Liens permitted by the Credit Agreement which
have priority over the Liens on the Collateral by operation of law, (ii) Liens
described on Schedule 7, and (ii) Liens previously identified in
writing to the Administrative Agent, arrangements for the release of which
satisfactory to the Administrative Agent have been made, and except to the
extent that filings outside the United States might be required to perfect such
security interest in non-U.S. intellectual property.

 

10

 

4.4                       Chief Executive
Office.  On the date hereof, such
Grantor’s jurisdiction of organization, identification number from such
jurisdiction of organization (if any) and the location of such Grantor’s chief
executive office or principal place of business are specified on Schedule 4.

 

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

 

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

 

4.7                       Pledged
Securities.  (a) 
The shares of Pledged Stock pledged by such Grantor hereunder constitute all
the issued and outstanding shares of all classes of the Capital Stock of each
Issuer owned by such Grantor, except that the shares of Pledged Stock of any
Issuer which is a Foreign Subsidiary constitute no more than 65% of all the
issued and outstanding Capital Stock of such Issuer and no shares of any Issuer
that are owned by a Foreign Subsidiary shall constitute Pledged Stock.

 

(b)                                 All the shares
of the Pledged Stock have been duly and validly issued and, to the extent the
same are shares of Capital Stock of a corporation, are fully paid and nonassessable.

 

(c)                                  Each of the
Pledged Notes that is an Intercompany Note constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.  No obligor with respect to any such Pledged Note
has any defense or counterclaim with respect to such Pledged Note or any
payment thereunder.  All Pledged Notes
with a principal amount in excess of $100,000 are listed on Schedule 2.

 

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

 

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

 

(b)                                 Receivables in
respect of which a Governmental Authority is the obligor do not constitute more
than 5%, in face amount, of all Receivables.

 

(c)                                  The amounts
represented by such Grantor to the Lenders from time to time as owing to such
Grantor in respect of the Receivables will at such times be accurate in all
material respects.

 

4.9                       Intellectual
Property.  (a)  Schedule
6 lists all material Intellectual Property owned by such Grantor in its own
name on the date hereof and all applications to register any such Intellectual
Property.

 

11

 

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

 

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

 

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

 

(e)                                  No action or
proceeding is pending, or, to the knowledge of such Grantor, threatened, on the
date hereof (i) seeking to limit, cancel or question the validity of any
material Intellectual Property or such Grantor’s ownership therein, or to the
best of Grantor’s knowledge, any other Intellectual Property or such Grantor’s
ownership interest therein, or (ii) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.

 

4.10                 Deposit Accounts; Security
Accounts; Commodity Accounts.  Schedule 9 lists all (i) deposit
accounts that are owned by such Grantor in its own name on the date hereof (as such term is
defined in Section 9-102(a)(29) of the New York UCC) (a) that
have had an average daily balance in excess of $500,000, or such other amount
to be agreed by the Borrower and the Administrative Agent, for twelve months
prior to the date hereof and (b) in which the amounts held therein are not
transferred to another Deposit Account listed on Schedule 9 at the end of each
Business Day and (ii) all Securities Accounts or Commodities Accounts
maintained by such Grantor.

 

4.11                 Commercial Tort Claims.  Schedule 8 lists all Commercial Tort
Claims in which any Grantor has any rights in excess of $1,000,000.

 

SECTION 5.  COVENANTS

 

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

 

5.1                       Covenants in
Credit Agreement.  In the case
of each Guarantor, such Guarantor shall comply with and perform each covenant
set forth in the Credit Agreement applicable thereto as if such Guarantor were
a party to the Credit Agreement.

 

5.2                       Delivery of
Instruments and Chattel Paper.  If any amount payable under or in connection
with any of the Collateral in excess of $1,000,000 shall be or become evidenced
by any Instrument, Certificated Security or Chattel Paper, such Instrument,
Certificated Security (unless such Certificated Security is in a Securities
Account subject to a Control Agreement) or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly indorsed in a manner satisfactory
to the Administrative Agent, to be held as Collateral pursuant to this
Agreement.

 

12

 

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

 

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

 

(c)                                  The Borrower
shall deliver to the Administrative Agent and the Lenders a report of a
reputable insurance broker with respect to such insurance during the month of February in
each calendar year and such supplemental reports with respect thereto as the
Administrative Agent may from time to time reasonably request.

 

5.4                       Payment of
Obligations.  Such
Grantor will pay and discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of
income or profits therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to the Collateral, except that no such charge need be paid if the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings, reserves in conformity with GAAP with respect thereto
have been provided on the books of such Grantor and such proceedings could not
reasonably be expected to result in the sale, forfeiture or loss of any
material portion of the Collateral or any interest therein.

 

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

 

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

 

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

 

13

 

to enable the Administrative Agent to obtain “control”
(within the meaning of the applicable Uniform Commercial Code) with respect
thereto, provided that each Grantor (A) shall deliver to the Administrative
Agent or shall continue to maintain in full force and effect a Control
Agreement with respect to each Deposit Account, Securities Account and
Commodity Account listed on Schedule 7.10 to the Existing Credit
Agreement and (B) shall not maintain any assets in any new Deposit
Account, Securities Account or Commodity Account unless it has delivered to the
Administrative Agent a Control Agreement with respect to such new Deposit
Account, Securities Account or Commodity Account.

 

5.6                       Changes in
Jurisdiction of Organization, Locations, Name, etc.  Such Grantor will not, except upon 15 days’
prior written notice to the Administrative Agent and delivery to the Administrative
Agent of all additional executed financing statements and other documents (in
each case executed to the extent required) reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for herein:

 

(i)                                     change its
jurisdiction of organization, or if such Grantor does not have a jurisdiction
of organization for purposes of the New York UCC, the location of its chief
executive office or principal place of business from that referred to in Section 4.4;
or

 

(ii)                                  change its
name, identity or corporate structure to such an extent that any financing
statement filed by the Administrative Agent in connection with this Agreement
would become misleading.

 

5.7                       Notices.  Such Grantor will advise the Administrative
Agent and the Lenders promptly, in reasonable detail, of:

 

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

 

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

 

5.8                       Pledged
Securities.  (a) 
If such Grantor shall become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection with
any reorganization), option or rights in respect of the Capital Stock of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in respect thereof such
Grantor shall accept the same as the agent of the Administrative Agent and the
other Secured Parties, hold the same in trust for the Administrative Agent and
the other Secured Parties and deliver the same forthwith to the Administrative
Agent in the exact form received, duly indorsed by such Grantor to the
Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations, provided that the foregoing shall not
require any Grantor to so deliver any such Capital Stock of any Issuer which is
a Foreign Subsidiary if, as a result thereof, the Capital Stock of such Foreign
Subsidiary pledged hereunder would exceed 65% of all 

 

14

 

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

 

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

 

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

 

(d)                                 Such Grantor
hereby agrees that if any Issuer of Pledged Stock is organized in a
jurisdiction which does not permit the use of certificates to evidence equity
ownership, or if any of the Pledged Stock is at any time not evidenced by
certificates of ownership, then such applicable Grantor 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 Administrative Agent an acknowledgment of the pledge of such Pledged
Stock substantially in the form of Annex 2 annexed
hereto, execute any customary pledge forms or other documents necessary or
appropriate to complete the pledge and give the Administrative Agent the
right to transfer such Pledged Stock under the terms hereof.

 

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

 

15

 

on any Receivable or (v) amend,
supplement or modify any Receivable in any manner that could adversely affect
the value thereof.

 

(b)                                 Such Grantor
will deliver to the Administrative Agent a copy of each material demand, notice
or document received by it that questions or calls into doubt the validity or
enforceability of more than 5% of the aggregate amount of the then outstanding
Receivables of the Borrower and its Subsidiaries.

 

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

 

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

 

(c)                                  Such Grantor
(either itself or through licensees) (i) will employ each material
Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of such Copyrights may become invalidated or otherwise
impaired.  Such Grantor will not (either
itself or through licensees) do any act whereby any material portion of such
Copyrights may fall into the public domain.

 

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

 

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

 

(f)                                    Whenever such
Grantor, either by itself or through any agent, employee, licensee or designee,
shall file an application for the registration of any Intellectual Property
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in any State of the United States, such
Grantor shall report such filing to the Administrative Agent within five
Business Days after the last day of the fiscal quarter in which such filing
occurs.  Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, 

 

16

 

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

 

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

 

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

 

5.11                 Jurisdiction of Organization.  At the Administrative Agent’s request, each
Grantor will provide its jurisdiction of organization, identification number
from the jurisdiction of organization (if any), and the location of such
Grantor’s chief executive office or sole place of business.  In addition, the Administrative Agent may
request, and such Grantor shall provide upon such request, a certified charter,
certificate of incorporation, or other organizational document and long form
good standing certificate from each Grantor.

 

5.12                 Commercial Tort Claims.  Such Grantor will advise the Administrative
Agent of such Grantor’s interest in any Commercial Tort Claim in an amount in
excess of $1,000,000 in which such Grantor believes it has rights, and such
Grantor shall promptly provide the Administrative Agent with an updated Schedule 8
or a supplement to Schedule 8 (which, in each case shall become a part hereof)
describing such Commercial Tort Claim or such information with respect thereto
as the Administrative Agent may reasonably request in order to attach and
perfect a security interest therein in accordance with applicable law.

 

5.13                 Additional Accounts.  Such Grantor will advise the Administrative
Agent of the creation of any new (i) deposit account (as such term is
defined in Section 9-102(a)(29) of the New York UCC) which (a) has
had an average daily balance in excess of $500,000 for the four most recent
fiscal quarters for which financial information is available (measured at the
end of each fiscal quarter) and (b) in which the amounts held therein are
not transferred to a Deposit Account listed on Schedule 9 at the end of each
Business Day (any such deposit account will be a “Deposit Account” with respect
to the definition of such term heron), (ii) Securities Account or (iii) Commodity
Account, and such Grantor shall promptly provide the Administrative Agent with
an updated Schedule 9 describing such deposit account, Securities
Account or Commodities Account, as the case may be or such information with
respect thereto as the Administrative Agent may reasonably request.

 

17

 

SECTION 6.  REMEDIAL PROVISIONS

 

6.1                       Certain Matters
Relating to Receivables.  (a) 
The Administrative Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information
as the Administrative Agent may require in connection with such test verifications.  At any time and from time to time (but not
more frequently than once per fiscal quarter), upon the Administrative Agent’s
request and at the expense of the relevant Grantor, such Grantor shall cause
independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Receivables.

 

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

 

(c)                                  At the
Administrative Agent’s request, at any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts.

 

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

 

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

 

(c)                                  Anything herein
to the contrary notwithstanding, each Grantor shall remain liable under each of
the Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise thereto. 
Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any Lender of any payment relating thereto, nor shall
the Administrative Agent or any Lender be obligated in any manner to perform
any of the obligations of any Grantor under or pursuant to any Receivable (or
any agreement giving rise thereto), to make any payment, to make any 

 

18

 

inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any performance
or to collect the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

 

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

 

(b)                                 If an Event of
Default shall occur and be continuing and the Administrative Agent shall give
notice of its intent to exercise such rights to the relevant Grantor or
Grantors, (i) the Administrative Agent shall have the right to receive any
and all cash dividends, payments or other Proceeds paid in respect of the
Pledged Securities and make application thereof to the Obligations in such
order as the Credit Agreement shall prescribe, and (ii) any or all of the
Pledged Securities shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such
Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange
and subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.

 

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

 

6.4                       Proceeds To Be
Turned Over to Administrative Agent.  In addition to the rights of the
Administrative Agent and the Lenders specified in Section 6.1 with respect
to payments of Receivables, if an Event of Default shall occur and be
continuing, and the Administrative Agent has so requested, all Proceeds
received by any Grantor in respect of Collateral consisting of cash, checks and
other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated 

 

19

 

from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required).  All Proceeds received by the Administrative
Agent hereunder shall be held by the Administrative Agent in a Collateral
Account maintained under its sole dominion and control.  All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 6.5.

 

6.5                       Application of
Proceeds.  At such
intervals as may be agreed upon by the Borrower and the Administrative Agent,
or, if an Event of Default shall have occurred and be continuing, at any time
at the Administrative Agent’s election, the Administrative Agent may apply all
or any part of Proceeds held in any Collateral Account in payment of the
Obligations:

 

(a)                                  first, to the
payment of the costs and expenses of such collection, sale or other realization,
including out-of-pocket costs and expenses of the Administrative Agent and the
fees and expenses of its agents and counsel, and all expenses incurred and
advances made by the Administrative Agent in connection therewith; and

 

(b)                                 next, to the
payment in full of the Obligations, in each case equally and ratably in
accordance with the respective amounts thereof then due and owing or as the
Lenders holding the same may otherwise agree,

 

and any part of such funds
which are not required to be applied in payment of the Obligations in accordance
with the foregoing provisions and which Administrative Agent deems not required
as collateral security for the Obligations shall be paid over from time to time
by the Administrative Agent to the Borrower or to whomsoever may be lawfully
entitled to receive the same.  Any
balance of such Proceeds remaining after the Obligations shall have been paid
in full, no Letters of Credit shall be outstanding and the Commitments shall
have terminated shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive the same.

 

6.6                       Code and Other
Remedies.  If an Event
of Default shall occur and be continuing, the Administrative Agent, on behalf
of the Lenders, may exercise, in addition to all other rights and remedies granted
to them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
parry under the New York UCC or any other applicable law.  Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, protests, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk.  The
Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral 

 

20

 

so sold, free of any right
or equity of redemption in any Grantor, which right or equity is hereby waived
and released.  Each Grantor further
agrees, at the Administrative Agent’s request, to assemble the Collateral and
make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor’s
premises or elsewhere.  The
Administrative Agent shall apply the proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral
or the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys’ fees and disbursements, to the
payment in whole or in part of the Obligations, in the manner set forth in
paragraphs (a) and (b) of Section 6.5, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of
the New York UCC, need the Administrative Agent account for the surplus, if
any, to any Grantor.  To the extent
permitted by applicable law, each Grantor waives all claims, damages and
demands it may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 Business Days before such sale or
other disposition.

 

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

 

(b)                                 Each Grantor
agrees to use its best efforts to do or cause to be done all such other acts as
may be necessary to make such sale or sales of all or any portion of the
Pledged Stock pursuant to this Section 6.7 valid and binding and in
compliance with any and all other applicable Requirements of Law.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause irreparable
injury to the Administrative Agent and the other Secured Parties, that the Administrative
Agent and the other Secured Parties have no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant contained in
this Section 6.7 shall be specifically enforceable against such Grantor,
and such Grantor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred and is continuing under the Credit Agreement.

 

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

 

21

 

SECTION 7.  THE ADMINISTRATIVE AGENT

 

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

 

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

 

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

 

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

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

 

(v)              (i) direct any party liable for any
payment under any of the Collateral to make payment of any and all moneys due
or to become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (ii) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (iii) sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect of
any Collateral; (v) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (vi) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Administrative Agent may deem appropriate; (vii) assign
any Copyright, Patent or Trademark (along with the goodwill of the business to
which any such Copyright, Patent or Trademark pertains), throughout

 

22

 

the world for such term or terms, on such conditions, and in such
manner, as the Administrative Agent shall in its sole discretion determine; and
(viii) generally, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Administrative Agent were the absolute owner thereof for all
purposes, and do, at the Administrative Agent’s option and such Grantor’s
expense, at any time, or from time to time, all acts and things which the
Administrative Agent reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Administrative Agent’s and the other Secured
Parties’ security interests therein and to effect the intent of this Agreement,
all as fully and effectively as such Grantor might do.

 

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

 

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

 

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

 

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

 

7.2                       Duty of
Administrative Agent.  The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. 
Neither the Administrative Agent, any Lender nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof, except in each
case as regards the disposition of any Collateral permitted under the Credit
Agreement.  The powers conferred on the
Administrative Agent and the Lenders hereunder are solely to protect the
Administrative Agent’s and the Lenders’ interests in the Collateral and shall
not impose any duty upon the Administrative Agent or any Lender to exercise any
such powers.  The Administrative Agent
and the Lenders shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.

 

7.3                       Execution
of Financing Statement.  Pursuant to applicable law, each Grantor authorizes
the Administrative Agent to file or record financing statements and other
filing or recording

 

23

 

documents or instruments
with respect to the Collateral without the signature of such Grantor in such
form and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement.  Each Grantor authorizes
the Administrative Agent to use the collateral description of “all assets,
whether now owned or hereafter acquired” in any such financing statements.  A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.

 

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

 

SECTION 8.  MISCELLANEOUS

 

8.1                       Amendments
in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by each affected Grantor and the Administrative
Agent (acting with the required consent, if any, of the Lenders as provided in
the Credit Agreement), provided that any provision of this Agreement
imposing obligations on any Grantor may be waived by the Administrative Agent
in a written instrument executed by the Administrative Agent (acting with the
required consent, if any, of the Lenders as provided in the Credit Agreement)
of the Credit Agreement, subject to the terms of the Credit Agreement.

 

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

 

8.3                       No
Waiver by Course of Conduct; Cumulative Remedies.  Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument pursuant
to Section 8.1), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default.  No failure to
exercise, nor any delay in exercising, on the part of the Administrative Agent
or any Lender, any right, power or privilege hereunder shall operate as a
waiver thereof.  No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or any
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such Lender would otherwise have on any future occasion.  The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.

 

24

 

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

 

(b)                                 Each
Guarantor agrees to pay, and to save the Administrative Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement to the extent the Borrower would be required to do so pursuant
to subsection 11.5 of the Credit Agreement.

 

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

 

(d)                                 The
agreements in this Section 8.4 shall survive termination of the Loan Documents
and repayment of the Obligations and all other amounts payable under the Credit
Agreement and the other Loan Documents.

 

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

 

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

 

25

 

Lender under this Section 8.6
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Administrative Agent or such Lender may
have.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

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

 

(e)                                  waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section 8.12
any consequential damages.

 

8.13                 Acknowledgements.  Each
Grantor hereby acknowledges that:

 

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

 

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

 

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

 

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

 

8.15                 Additional
Grantors.  Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to subsection 7.9 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the
form of Annex 1 hereto.

 

8.16                 Releases.  (a) 
At such time as the Loans, the Reimbursement Obligations and the other
Obligations shall have been paid in full, the Commitments have been terminated
and no Letters of Credit shall be outstanding, the Collateral shall be released
from the Liens created hereby, and this Agreement and all obligations (other
than those expressly stated to survive such termination) of the Administrative Agent
and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. 
At the request and sole expense of any Grantor following any such
termination, the Administrative Agent shall deliver to such Grantor any
Collateral held by the Administrative Agent hereunder, and execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence such termination.

 

(b)                                 If
any of the Collateral shall be sold, transferred or otherwise disposed of by
any Grantor in a transaction permitted by the Credit Agreement, then the
Administrative Agent, at the request and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral.  At

 

27

 

the request and sole expense of the Borrower,
a Subsidiary Guarantor shall be released from its obligations hereunder in the
event that all the Capital Stock of such Subsidiary Guarantor shall be sold,
transferred or otherwise disposed of, or such Subsidiary Guarantor shall be
liquidated or dissolved, in each case in a transaction permitted by the Credit
Agreement, provided that the Borrower shall have delivered to the
Administrative Agent, at least ten Business Days prior to the date of the
proposed release, a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Credit Agreement and the other Loan Documents.

 

SECTION 9.  REAFFIRMATION

 

9.1                       Reaffirmation.
Each Grantor hereby confirms that all Collateral encumbered by the Existing
Guarantee and Collateral Agreement will continue to guarantee or secure, as the
case may be, the payment and performance of all the Obligations pursuant to the
terms of this Agreement, and hereby pledges and assigns to the Administrative
Agent, and grants to the Administrative Agent a continuing lien on and security
interest in and to all Collateral as collateral security for the performance in
full of such Grantor’s Obligations.  Each
of the Grantors further confirms that each Loan Document to which it is a party
is and shall continue to be in full force and effect as amended by this
Agreement, the Credit Agreement or any other Loan Document.

 

 

[Signature Page Follows]

 

28

 

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

 

	
   

  	
  NBTY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hans
  Lindgren

  
	
   

  	
   

  	
  Name: Hans
  Lindgren

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  

 

S-1

 

	
   

  	
  5100
  NEW HORIZONS BOULEVARD, LLC,

  
	
   

  	
  AMERICAN
  HEALTH, INC.,

  
	
   

  	
  ARCO
  PHARMACEUTICALS, INC.,

  
	
   

  	
  ARTHRITIS
  RESEARCH CORP.,

  
	
   

  	
  DE
  TUINEN LTD.,

  
	
   

  	
  DIABETES
  AMERICAN RESEARCH CORP.,

  
	
   

  	
  DT
  ACQUISITION INC.,

  
	
   

  	
  FOOD
  SYSTEMS, INC.,

  
	
   

  	
  GOOD
  N’ NATURAL MANUFACTURING CORP.,

  
	
   

  	
  HEALTHWATCHERS
  (DE), INC.,

  
	
   

  	
  HOLLAND &
  BARRETT LTD.,

  
	
   

  	
  MET-RX
  NUTRITION, INC.,

  
	
   

  	
  MET-RX
  SUBSTRATE TECHNOLOGY, INC.,

  
	
   

  	
  MET-RX
  USA, INC.,

  
	
   

  	
  NABARCO
  ADVERTISING ASSOCIATES, INC.,

  
	
   

  	
  NATURE’S
  BOUNTY INC.,

  
	
   

  	
  NATURE’S
  BOUNTY MANUFACTURING CORP.,

  
	
   

  	
  NATURE’S
  BOUNTY, INC.,

  
	
   

  	
  NATURESMART,
  LLC,

  
	
   

  	
  NBTY
  ACQUISITION, LLC,

  
	
   

  	
  NBTY
  LENDCO, LLC,

  
	
   

  	
  NBTY
  CAH COMPANY,

  
	
   

  	
  NBTY
  CAM COMPANY,

  
	
   

  	
  NBTY
  CHINA HOLDINGS, INC.,

  
	
   

  	
  NBTY
  CHINA, INC.,

  
	
   

  	
  NBTY
  DISTRIBUTION, INC.,

  
	
   

  	
  NBTY
  FLIGHT SERVICES, LLC,

  
	
   

  	
  NBTY
  GLOBAL, INC.

  
	
   

  	
  NBTY
  GLOBAL DISTRIBUTION, INC.

  
	
   

  	
  NBTY
  MANUFACTURING, LLC,

  
	
   

  	
  NBTY
  PAH, LLC,

  
	
   

  	
  NBTY
  TRANSPORTATION, INC.,

  
	
   

  	
  NBTY
  UKRAINE 1, LLC,

  
	
   

  	
  NBTY
  UKRAINE 2, LLC,

  
	
   

  	
  NBTY
  UKRAINE, INC.,

  
	
   

  	
  NUTRITION
  HEADQUARTERS (DE), INC.,

  
	
   

  	
  PHYSIOLOGICS,
  LLC,

  
	
   

  	
  PRECISION
  ENGINEERED LIMITED (USA),

  
	
   

  	
  PURITAN’S
  PRIDE, INC.,

  
	
   

  	
  PURITAN’S
  PRIDE OF JAPAN,

  
	
   

  	
  PURITAN’S
  PRIDE RETAIL STORES, INC.,

  
	
   

  	
  REXALL
  SUNDOWN, INC.,

  
	
   

  	
  REXALL,
  INC.,

  
	
   

  	
  RICHARDSON
  LABS, INC.,

  
	
   

  	
  SOLGAR
  HOLDINGS, INC.,

  
	
   

  	
  SOLGAR
  MEXICO HOLDINGS, LLC,

  
	
   

  	
  SOLGAR,
  INC.,

  
	
   

  	
  THE
  ESTER C COMPANY,

  
	
   

  	
  THE
  HEALTH SHOPPE (CHINA) LTD.

  
	
   

  	
  THE NON-IRRADIATED HERBAL MANUFACTURERS GROUP, LLC,

  
	
   

  	
  UNITED
  STATES NUTRITION, INC.,

  
	
   

  	
  VITAMIN
  WORLD (BOCA), LLC,

  
	
   

  	
  VITAMIN
  WORLD (VI), INC.

  
	
   

  	
  VITAMIN
  WORLD OF GUAM, LLC,

  
	
   

  	
  VITAMIN
  WORLD ONLINE, INC.,

  
	
   

  	
  VITAMIN
  WORLD OUTLET STORES, INC.,

  
	
   

  	
  VITAMIN
  WORLD, INC.,

  
	
   

  	
  WORLDWIDE
  SPORT NUTRITIONAL SUPPLEMENTS, INC.,

  

 

S-2

 

	
   

  	
  By:

  	
  /s/ Hans
  Lindgren

  
	
   

  	
   

  	
  Name: Hans
  Lindgren

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alicia
  T. Schreibstein

  
	
   

  	
   

  	
  Name: Alicia
  T. Schreibstein

  
	
   

  	
   

  	
  Title: Vice
  President

  

 

S-3

 

ANNEX 1

 

[FORM OF ASSUMPTION AGREEMENT]

 

ASSUMPTION AGREEMENT, dated as of
[                           ].
made by [                    
                                          ],
a [         ] corporation (the “Additional
Grantor”), in favor of JPMorgan Chase Bank, N.A. as administrative agent
(in such capacity, the “Administrative Agent”), for the banks and other
financial institutions (the “Lenders”) parties to the Credit Agreement
referred to below.  Unless otherwise
indicated, all capitalized terms not defined herein shall have the meaning
ascribed to them in such Credit Agreement.

 

W I T N E S S E T H
:

 

WHEREAS, NBTY, Inc. (the “Borrower”),
the Lenders, JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral
Agent, and Bank of America, N.A., Citibank, N.A., HSBC Bank USA, National
Association and Wachovia Bank, N.A., as Co-Syndication Agents, have entered
into an Amended and Restated Credit Agreement, dated as of July 25, 2008
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”);

 

WHEREAS, in connection with the Credit
Agreement, the Borrower and certain of its Subsidiaries (other than the
Additional Grantor) have entered into the Amended and Restated Guarantee and
Collateral Agreement, dated as of July 25, 2008 (as amended, supplemented
or otherwise modified from time to time, the “Amended and Restated Guarantee
and Collateral Agreement”) in favor of the Administrative Agent for the
benefit of the Lenders;

 

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

 

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

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                       Amended and
Restated  Guarantee and Collateral Agreement.  By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 8.15 of the
Amended and Restated Guarantee and Collateral Agreement, hereby becomes a party
to the Amended and Restated Guarantee and Collateral Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder. In furtherance
of the foregoing, the Additional Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in, all of the Collateral
(as defined in the Amended and Restated Guarantee and Collateral Agreement) now
owned or at any time hereafter acquired by the Additional Grantor or in which
the Additional Grantor now has or at any time in the future may acquire any
right, title or interest, as collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the 

 

 

Additional
Grantor’s Obligations (as defined in the Amended and Restated Guarantee and
Collateral Agreement). The information set forth in Annexes 2 and 4 [and
[    ]] hereto is hereby added to the information set forth
in Schedules 2 and 4 [and [     ]] to the Amended and
Restated Guarantee and Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 4 of the Amended and Restated Guarantee and
Collateral Agreement is true and correct on and as the date hereof (after giving
effect to this Assumption Agreement) as if made on and as of such date.

 

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

 

2

 

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

 

	
   

  	
  [                                            ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

ANNEX 2

 

FORM OF ISSUER’S ACKNOWLEDGMENT

 

The undersigned hereby (i) acknowledges
receipt of a copy of that certain Amended and Restated Guarantee and Collateral
Agreement, dated as of July 25, 2008 made by NBTY, Inc., a Delaware
corporation (the “Borrower”) and the other signatories thereto, other
than the Administrative Agent (together with any entity that may become a party
thereto as a Grantor as provided therein (collectively, with the Borrower, and
together with any successors in such capacities, the “Grantors”), as
pledgors, assignors and debtors, in favor of JPMorgan Chase Bank, N.A., a New
York banking corporation, in its capacity as administrative agent pursuant to
the Credit Agreement, as pledgee, assignee and secured party (in such
capacities and together with any successors in such capacities, the “Administrative
Agent”) (and as further amended, amended and restated, supplemented or
otherwise modified from time to time, the “Amended and Restated Guarantee
and Collateral Agreement”; capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Amended and
Restated Guarantee and Collateral Agreement), (ii) agrees promptly to note
on its books the security interests granted to the Administrative Agent in
respect of the Pledged Stock of the undersigned and confirmed under the Amended
and Restated Guarantee and Collateral Agreement, (iii) agrees that it will
comply with instructions of the Administrative Agent with respect to such
Pledged Stock without further consent by the applicable Grantor, (iv) agrees
to notify the Administrative Agent upon obtaining knowledge of any interest in
favor of any Person in the such Pledged Stock that is adverse to the interest
of the Administrative Agent therein and (v) waives any right or
requirement at any time hereafter to receive a copy of the Amended and Restated
Guarantee and Collateral Agreement in connection with the exercise of voting
rights by the Administrative Agent or its nominee.

 

	
   

  	
  [                          ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:ex10-1.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    EMPLOYMENT
AGREEMENT

     

     

     

    This
EMPLOYMENT AGREEMENT (the "Agreement") is made as of August 1, 2008 by and
between PEPCO HOLDINGS, INC. (the "Company") and JOSEPH M. RIGBY (the
"Executive").

     

    RECITALS:

     

    The Board
of Directors of the Company (the "Board of Directors") recognizes that
outstanding management of the Company is essential to advancing the best
interests of the Company, its shareholders and its subsidiaries.  The
Board of Directors believes that it is particularly important to have stable,
excellent management at the present time.  The Board of Directors
believes that this objective may be achieved by giving key management employees
assurances of financial security for a period of time, so that they will not be
distracted by personal risks and will continue to devote their full time and
best efforts to the performance of their duties.

     

    The
Company and the Executive had entered into an employment agreement as of
August 1, 2002, which will expire by its terms July 31, 2008 (the "Prior
Agreement").  In order to achieve the objectives stated above, the
Human Resources Committee of the Board of Directors (the "Committee") has
recommended, and the Board of Directors has approved, entering into this
employment agreement with the Executive.  The Executive is a key
management executive of the Company and is a valuable member of the Company's
management team.  The Company acknowledges that the Executive's
contributions to the past and future growth and success of the Company have been
and will continue to be substantial.  The Company and the Executive
are entering into this Agreement to induce the Executive to remain an employee
of the Company and to continue to devote his full energy to the Company's
affairs.  The Executive has agreed to continue to be employed by the
Company under the terms and conditions hereinafter set
forth.

     

    NOW,
THEREFORE, in consideration of the foregoing and the mutual undertakings
contained in this Agreement, the parties agree as follows:

     

    1. Term of
this Agreement.  The term of this Agreement shall begin on
August 1, 2008 (the "Effective Date") and shall end on the third anniversary
thereof; provided, however, that, on the second anniversary of the Effective
Date and each anniversary thereafter, the term of this Agreement shall be
automatically renewed for an additional year unless either party gives notice to
the other at least 3 months prior to such anniversary that the term of this
Agreement shall not be renewed (the initial 3 year term of this Agreement and,
if extended, the extension thereof, shall hereinafter be referred to as the
"Term of this Agreement").  Notwithstanding the foregoing, if the
Executive's employment is terminated during the Term of this Agreement and all
of the Company's and the Executive's obligations hereunder have been satisfied
prior to the end of the Term of this Agreement, this Agreement shall expire upon
satisfaction of all such obligations.

     

    2. Duties.  The
Company and the Executive agree that, while employed during the Term of this
Agreement, the Executive will serve in a senior management position with the
Company.  The Executive (a) will devote his knowledge, skill and best
efforts on a full-time

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3. basis to
performing his duties and obligations to the Company (with the exception of
absences on account of illness or vacation in accordance with the Company's
policies and civic and charitable commitments not involving a conflict with the
Company's business), and (b) will comply with the directions and orders of the
Chief Executive Officer of the Company (if the Executive is not the Chief
Executive Officer of the Company) and Board of Directors (or any designee
thereof) with respect to the performance of his duties.

     

    4. Affiliates.
Employment by an Affiliate of the Company or a successor to the Company will be
considered employment by the Company for purposes of this Agreement, and the
Executive's employment with the Company shall be considered terminated only if
the Executive is no longer employed by the Company or any of its Affiliates or
successors. The term "Company" as used in this Agreement will be deemed to
include Affiliates and successors. For purposes of this Agreement, the term
"Affiliate" means the subsidiaries of the Company and other entities under
common control with the Company.

     

    5. Compensation
and Benefits.

     

    (a)           During
the Term of this Agreement, while the Executive is employed by the Company, the
Company will pay to the Executive the following salary and incentive awards for
services rendered to the Company:

     

    (i)           The
Company will pay to the Executive an annual salary in an amount not less than
the base salary in effect for the Executive as of the date on which this
Agreement is executed (in the event the Executive's rate of annual base salary
is increased, such increased rate shall not be decreased during the Term of this
Agreement); and

     

    (ii)           The
Executive will be entitled to receive incentive awards if and to the extent that
the Board of Directors determines in good faith that the Executive's performance
merits payment of an award according to the terms of the incentive compensation
plans applicable to senior executives of the Company.

     

    If the
Executive is employed by an Affiliate or a successor (as described in Section
3), the term "Board of Directors" as used in this Section 4(a) and in
Section 5(a) means the Board of Directors of the Executive's
employer.

     

    (b)           During
the Term of this Agreement, while the Executive is employed by the Company, the
Executive will be eligible to participate in a similar manner as other senior
executives of the Company in retirement plans, fringe benefit plans,
supplemental benefit plans and other plans and programs provided by the Company
for its executives or employees from time to time.

     

    5.           Termination
of Employment.

     

    (a)           If,
during the Term of this Agreement, the Company terminates the Executive's
employment other than for Cause (as defined in Section 7), the Company will pay
to the Executive in cash within 30 days after the Executive's termination of
employment

     

    
      
         
2

      

      
         

        
          

        

      

      
         

      

    

    (i)           a lump sum payment equal to three (3)
times the sum of: (A) the highest annual base salary rate in effect for
the Executive at any time during the three- year period preceding employment
termination, plus (B) the highest of (1) the annual bonus for the year in which
the termination of employment occurs, or (2) the highest annual bonus received
by the Executive during the three calendar years preceding the calendar year in
which the termination of employment occurs; and

     

    (ii)           any
unpaid salary through the date of employment termination, unpaid annual bonus
for the prior year and a pro-rated portion of the annual bonus for the year in
which termination of employment occurs.

     

    For
purposes of Sections 5(a)(i)(B)(1) and 5(a)(ii), the annual bonus for the year
in which termination of employment occurs will be the "target" annual bonus for
such year unless, before the Executive's termination of employment, the Board of
Directors made a good faith final determination of the amount of the Executive's
actual annual bonus for such year. If the Board of Directors made such a
determination, the applicable award will be computed based on the Board of
Directors' determination, rather than on the "target" amount for such
year.

     

    (b)           If,
during the Term of this Agreement, the Company terminates the Executive's
employment other than f'or Cause (as defined in Section 7), the Executive will
be entitled to receive the following additional benefits determined as of the
date of his termination of employment:

     

    (i)           Any
outstanding service based restricted stock that would become vested (that is,
transferable and nonforfeitable) if the Executive remained an employee through
the Term of this Agreement will become vested as of the date of the Executive's
termination of employment. In addition, with respect to any outstanding
performance based restricted stock and any restricted stock the Company has
agreed to award the Executive at the end of a performance period subject to the
Company's achievement of performance goals, if the date as of which the
restricted stock is to become vested falls within the Term of this Agreement,
the stock will become vested, at the end of the performance period if and to the
extent that the performance goals are met.

     

    (ii)           A
supplemental retirement benefit payable in cash in a lump sum equal to the
difference between (A) the present value of the vested retirement benefits that
the Executive had accrued at the time of termination of employment under the
Company's qualified defined benefit retirement plan (the "Retirement Plan"), any
excess or supplemental retirement plans in which the Executive participates
and/or other supplemental retirement benefits to which the Executive is entitled
under any contract or agreement (together, the "SERPs"), assuming for this
purpose that the Executive would begin receiving benefits at the first early
retirement date provided under the applicable plan or, if the Executive is
eligible to receive retirement benefits upon termination of employment under the
applicable plan, assuming the Executive will begin receiving benefits at the
time of termination of employment, and (B) the benefit the Executive would be
entitled to receive under the Retirement Plan and the SERPs assuming for all
such benefit determinations that the Executive was three years older than the
Executive's actual age and had three additional years of service. For purposes
of the calculations

     

    
      
         
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    required
under this Section 5(b)(ii), the same actuarial assumptions that are used under
the Company's qualified retirement plan shall be used.

     

    (c)           If
the Executive voluntarily terminates employment with the Company during the Term
of this Agreement under circumstances described in this subsection (c), the
Executive will be entitled to receive the benefits described in subsections (a)
and (b) above as if the Company had terminated the Executive's employment other
than for Cause. Subject to the provisions of this subsection (c), these benefits
will be provided if the Executive voluntarily terminates employment after (i)
the Company reduces the Executive's base salary (except a reduction consistent
and proportional with an overall reduction, due to extraordinary business
conditions, in the compensation of all other senior executives of the Company),
(ii) the Executive is not in good faith considered for incentive awards as
described in Section 4(a)(ii), (iii) the Company fails to provide benefits as
required by Section 4(b), (iv) the Company relocates the Executive's primary
place of employment to a location, other than either the Washington, D.C. or
Wilmington, Delaware metropolitan areas, further than 50 miles from the
Executive's primary place of employment on the first day of the Term of this
Agreement, or (v) the Company demotes the Executive to a position that is not a
senior management position (other than on account of the Executive's disability,
as defined in Section 6 below). In order for this subsection (c) to be
effective: (1) the Executive must give written notice to the Company indicating
that the Executive intends to terminate employment under this subsection (c),
(2) the Executive' s voluntary termination under this subsection must occur
within 60 days after the Executive knows or reasonably should know of an event
described in clause (i), (ii), (iii), (iv), or (v) above, or within 60 days
after the last in a series of such events, and (3) the Company must have failed
to remedy the event described in clause (i), (ii), (iii), (iv), or (v), as the
case may be, within 30 days after receiving the Executive's written notice. If
the Company remedies the event described in clause (i), (ii), (iii), (iv), or
(v), as the case may be, within 30 days after receiving the Executive's written
notice, the Executive may not terminate employment under this subsection (c) on
account of the event specified in the Executive's notice. Termination under the
circumstances above shall be deemed an involuntary termination without Cause for
purposes of non-qualified benefit plans.

     

    (d)           Notwithstanding
subsection (a), (b), and (c) of this Section 5, if the independent public
accountants for the Company (the "Accountants") determine that if the payments
and/or benefits to be provided under subsections (a), (b), and (c) of this
Section 5 (and/or any other payments and/or benefits provided or to be provided
to the Executive under any applicable plan, program, agreement or arrangement
maintained, contributed to or entered into by the Company or any group or entity
whose actions result in a change of ownership or effective control (as those
terms are defined in Code Section 280G and regulations promulgated thereunder)
or any affiliate of the Company) (a "Payment" or collectively "Payments") were
provided to the Executive (x) the Executive would incur an excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (such
excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), and (y) the net after tax
benefits to the Executive attributable to the Payments would not be at least
$10,000 greater than the net after tax benefits that would accrue to the
Executive if the Payments that would otherwise cause the Executive to be subject
to the Excise Tax were not provided, the Payments shall be reduced so that the
Payments provided to the Executive are the greatest (as determined by the
Accountants) that may be provided without any such Payment being subject to the
Excise Tax. If the Payments are to be reduced under this subsection 5(d), the
Executive shall

     

    
      
         
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    be given
the opportunity to designate which Payments shall be reduced and in what order
of priority.

     

    (i)           If
the Executive receives reduced Payments pursuant to subsection 5(d), or if it
had been determined that no such reduction was required, but it nonetheless is
established pursuant to the final determination of a court or an Internal
Revenue Service proceeding that, notwithstanding the good faith of the Executive
and the Company in applying the terms of subsection 5(d), the aggregate Payments
to the Executive would result in any Payment being subject to the Excise Tax,
and that a reduction pursuant to subsection 5(d) should have occurred, then the
Executive shall be deemed for all purposes to have received a loan made on the
date of the receipt of the Payments in an amount such that, after taking into
consideration such loan, no portion of the aggregate Payments would be subject
to the Excise Tax. The Executive shall have an obligation to repay such loan to
the Company on demand, together with interest on such amount at the applicable
Federal rate (as defined in Section 1274(d) of the Code) from the date of the
Executive's receipt of such loan until the date of such
repayment.

     

    (ii)           If
the Executive's Payments are reduced or are to be reduced pursuant to subsection
5(d), and it is determined that the Payments were or are to be reduced pursuant
to subsection 5(d) to a greater extent than was or is necessary to avoid the
Excise Tax or it is determined that the Executive's Payments should not be or
should not have been reduced pursuant to subsection 5(d), then the Company shall
promptly pay to the Executive the amount necessary so that, after such
adjustment, the Executive will have received or be entitled to receive the
maximum payments payable under this subsection 5(d), together with interest at
the applicable Federal rate (as defined in Section 1274(d) of the Code) on
amounts that were incorrectly reduced pursuant to subsection
5(d).

     

    (iii)           Gross-Up
Payment.

     

    (A)           Anything
in this Agreement to the contrary notwithstanding, if it shall be determined
that any Payments would be subject to the Excise Tax or any interest or
penalties are incurred, and it is determined that the Payments should not be
reduced pursuant to subsection 5(d), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes, employment taxes (and any interest and penalties imposed with respect
thereto) and Excise Taxes imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.

     

    (B)           All
determinations required to be made under this subsection 5(d)(iii), including
whether and when a Gross-Up Payment is required and the amount of such Gross-up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the

     

    
      
         
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    Accountants,
who shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accountants shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this subsection
5(d)(iii), shall be paid by the Company to the Executive within five days of the
receipt of the Accountants' determination. Any determination made independently
and in good faith by the Accountants shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Sections 280G
and 4999 of the Code, at the time of the initial determination by the
Accountants hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made consistent with the calculations
required to be made hereunder ("Underpayment"). In the event that the Company
exhausts its remedies pursuant to subsection 5(d)(iii)(C) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accountants
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

     

    (C)           The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than thirty business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:

     

    (1)  give the Company any information
reasonably requested by the Company relating to such claim,

     

    (2)  take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,

     

    (3)  cooperate with the Company in good faith
in order effectively to contest such claim, and

     

    (4)  permit the Company to participate in any
proceedings relating to such claim;

     

    
      
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    provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this subsection
5(d)(iii), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, further, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

     

    (D)           If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to subsection 5(d)(iii)(C), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of subsection 5(d)(iii)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt by the Executive
of an amount advanced by the Company pursuant to subsection 5(d)(iii), a
determination is made that the Executive shall not be entitled to any refund
with respect to

     

    
      
         
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    such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

     

    (iv)           Any Gross-Up Payment shall be made not
later than the end of the Executive's taxable year next following the
taxable year in which the Executive remits the excise tax under Code Section
4999 and any taxes related thereto.

     

    6.           Disability
or Death..  Upon the Executive's death or disability, the
provisions of Sections 1, 2, 4, and 5 of this Agreement will terminate. This
contract provides no benefits due to disability or death in addition to any
death, disability and other benefit provided under the Company benefit plans in
which the executive participates. The Executive shall be considered disabled if
the Executive is entitled to long-term disability benefits under the Company's
disability plan or policy.

     

    7.           Cause.  For
purposes of this Agreement, the term "Cause" means (i) intentional fraud or
material misappropriation with respect to the business or assets of the Company,
(ii) persistent refusal or willful failure of the Executive to perform
substantially his duties and responsibilities to the Company, other than an
asserted responsibility which would give rise under Section 5(c) above to a
right to terminate and have such termination considered an involuntary
termination without Cause, which continues after the Executive receives notice
of such refusal or failure, (iii) conduct that constitutes disloyalty to the
Company, and that materially damages the property, business or reputation of the
Company, or (iv) conviction of a felony involving moral
turpitude.

     

    8.           Termination.  This
Agreement shall terminate upon the successful completion of the Term of this
Agreement; provided, however, that if the Executive's employment is terminated
during the Term of this Agreement and the Company's and the Executive's
obligations under Sections 5, 9 or 10 hereof have not been satisfied as of the
last day of the Term of this Agreement, such obligations shall survive the
expiration of the Term of this Agreement and shall remain in effect until such
time as all such obligations have been satisfied. No additional payments are
required by the termination of this Agreement.

     

    9.           Fees and
Expenses.  The Company will pay all reasonable fees and
expenses, if any, (including, without limitation, legal fees and expenses) that
are incurred by the Executive to enforce this Agreement and that result from a
breach of this Agreement by the Company, unless such fees and expenses result
from a claim made by the Executive that is deemed by an arbitrator, mediator, or
court, as applicable, to be frivolous or made in bad faith, in which case each
party shall pay its own fees and expenses.

     

    
      
         
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    10.           Tax
Withholding.  The Company may withhold from all amounts payable
under this Agreement an amount necessary to satisfy its income and payroll tax
withholding obligations.

     

    11.           Assignment.  The
rights and obligations of the Company under this Agreement will inure to the
benefit of and will be binding upon the successors and assigns of the Company.
If the Company is consolidated or merged with or into another corporation, or if
another entity purchases all or substantially all of the Company's assets, the
surviving or acquiring corporation will succeed to the Company's rights and
obligations under this Agreement. The Executive's rights under this Agreement
may not be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive.

     

    12.           Rights
Under this Agreement.  The right to receive benefits under the
Agreement will not give the Executive any proprietary interest in the Company or
any of its assets. Benefits under the Agreement will be payable from the general
assets of the Company, and there will be no required funding of amounts that may
become payable under the Agreement. The Executive will for all purposes be a
general creditor of the Company. The interest of the Executive under the
Agreement cannot be assigned, anticipated, sold, encumbered or pledged and will
not be subject to the claims of the Executive's creditors.

     

    13.           Notice.  For
purposes of this Agreement, notices and all other communications to the
Executive must be in writing addressed to the Executive or his personal
representative at his last known address. All notices to the Company must be
directed to the attention of the Chief Executive Officer. Such other addresses
may be used as either party may have furnished to the other in writing. Notices
are effective when mailed if sent by United States registered mail, return
receipt requested, postage prepaid. Notices sent otherwise are effective when
received. Notwithstanding the forgoing, notices of change of address are
effective only upon receipt.

     

    14.           Miscellaneous.  To
the extent not governed by federal law, this Agreement will be construed in
accordance with the law of the State of Maryland without reference to its
conflict of laws rules. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and the writing is signed by the Executive and the Company. A waiver of
any breach of or compliance with any provision or condition of this Agreement is
not a waiver of similar or dissimilar provisions or conditions. The invalidity
or unenforceability of any provision of this Agreement will not affect the
validity or enforceability of any other provision of this Agreement, which will
remain in full force and effect. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement. As of
the date first above written, the Prior Agreement shall be superceded in its
entirety and shall no longer be of any force or effect.

     

    (a)           Notwithstanding
any provision herein or in any other agreement with the Company to the contrary,
if the Executive qualifies as a "specified employee" (as that term is defined in
Code Section 409A(2)(B)(i)) at the time of the Executive's separation from
service for any reason other than death, any benefits otherwise provided or
payable which are subject to

     

    
      
         
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    Code
Section 409A(a)(2)(B) shall be subject to a six month deferral in payment and
will not be otherwise payable, or provided to the Executive, until the earlier
of the date of the Employee's death or six months after the date of such
separation from service. Any amounts that are deferred in respect of this six
month restriction shall be paid to Executive as soon as practicable after the
end of the six-month period (or date of death if earlier), but in no event later
than 5 business days after the end of such six month period, at which time any
remaining payments and benefits will continue to be paid and provided for in the
normal form described in herein.

     

    (b)           Notwithstanding
any provision herein, any payment or benefit under this Agreement which is
considered a reimbursement under Code Section 409A, must be made no later than
the last day of the Executive's taxable year following the Executive's taxable
year in which the expense subject to the reimbursement was
incurred.

     

    WITNESS the
following signatures.

     

    
      	
              PEPCO
      HOLDINGS, INC.

               

               

            	
              EXECUTIVE

               

               

            
	
              By:

              Its

            	
              /s/
      D. R.
      Wraase                 

              Chairman
      of the Board and

                Chief
      Executive Officer

            	
              /s/ Joseph M.
      Rigby            

            

    

     

     

    
      
         
10

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