Document:

EXHIBIT 10.14

 

 

SECURITY AGREEMENT

BY

HERBALIFE INTERNATIONAL, INC.,

 

WH HOLDINGS (CAYMAN ISLANDS) LTD.,

WH INTERMEDIATE HOLDINGS LTD.,

WH LUXEMBOURG HOLDINGS S.A.R.L.,

WH LUXEMBOURG INTERMEDIATE HOLDINGS
S.A.R.L.,

WH LUXEMBOURG CM S.A.R.L., and

THE SUBSIDIARY GUARANTORS,

AS PLEDGORS

 

IN FAVOR OF

 

UBS AG, STAMFORD BRANCH,

AS COLLATERAL AGENT

 

DATED AS OF JULY 31, 2002

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I Definitions and
  Interpretation; Perfection Certificate

  	
   

  
	
  SECTION 1.01. 

  	
  Definitions

  	
   

  
	
  SECTION 1.02. 

  	
  Interpretation

  	
   

  
	
  SECTION 1.03. 

  	
  Perfection
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II Grant of Security and
  Secured Obligations

  	
   

  
	
  SECTION 2.01. 

  	
  Pledge

  	
   

  
	
  SECTION 2.02. 

  	
  Certain
  Limited Exclusions

  	
   

  
	
  SECTION 2.03. 

  	
  Secured
  Obligations; Continuing Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III Perfection;
  Supplements; Further Assurances; Use of Security Agreement Collateral

  	
   

  
	
  SECTION 3.01. 

  	
  Delivery
  of Certificated Securities Collateral

  	
   

  
	
  SECTION 3.02. 

  	
  Perfection
  of Uncertificated Securities Collateral

  	
   

  
	
  SECTION 3.03. 

  	
  Financing
  Statements and Other Filings

  	
   

  
	
  SECTION 3.04. 

  	
  Other Actions

  	
   

  
	
  SECTION 3.05. 

  	
  Supplements;
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Representations,
  Warranties and Covenants

  	
   

  
	
  SECTION 4.01. 

  	
  Title

  	
   

  
	
  SECTION 4.02. 

  	
  Organization;
  Authority; Enforceability

  	
   

  
	
  SECTION 4.03. 

  	
  Authorizations
  and Approvals

  	
   

  
	
  SECTION 4.04. 

  	
  Perfected
  First-Priority Liens

  	
   

  
	
  SECTION 4.05. 

  	
  Limitation on
  Liens

  	
   

  
	
  SECTION 4.06. 

  	
  Other
  Financing Statements

  	
   

  
	
  SECTION 4.07. 

  	
  Chief
  Executive Office; Change of Name; Jurisdiction of Organization

  	
   

  
	
  SECTION 4.08. 

  	
  Certain
  Provisions Concerning Securities Collateral

  	
   

  
	
  SECTION 4.09. 

  	
  Certain
  Provisions Concerning Intellectual Property

  	
   

  
	
  SECTION 4.10. 

  	
  Inspection
  and Verification

  	
   

  
	
  SECTION 4.11. 

  	
  Payment of
  Taxes; Contesting Liens; Claims

  	
   

  
	
  SECTION 4.12. 

  	
  Transfers
  and Other Liens

  	
   

  
	
  SECTION 4.13. 

  	
  Insurance

  	
   

  
	
  SECTION 4.14. 

  	
  Legend

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V Remedies

  	
   

  
	
  SECTION 5.01. 

  	
  Remedies

  	
   

  
	
  SECTION 5.02. 

  	
  Notice of Sale

  	
   

  
	
  SECTION 5.03. 

  	
  Waiver
  of Notice and Claims

  	
   

  
	
  SECTION 5.04. 

  	
  Certain
  Sales of Security Agreement Collateral

  	
   

  
	
  SECTION 5.05. 

  	
  No
  Waiver; Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI Obligations Absolute;
  Waivers

  	
   

  
	
  SECTION 6.01. 

  	
  Liability
  of the Pledgors Absolute

  	
   

  
	
  SECTION 6.02. 

  	
  General Waivers

  	
   

  
	
  SECTION 6.03. 

  	
  California
  Waivers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Miscellaneous

  	
   

  
	
  SECTION 7.01. 

  	
  Concerning
  Collateral Agent

  	
   

  
	
  SECTION 7.02. 

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

  	
   

  
	
  SECTION 7.03.

  	
  Expenses

  	
   

  
	
  SECTION 7.04. 

  	
  Indemnity

  	
   

  
	
  SECTION 7.05. 

  	
  Continuing
  Security Interest; Assignment

  	
   

  
	
  SECTION 7.06. 

  	
  Termination;
  Release

  	
   

  
	
  SECTION 7.07. 

  	
  Modification
  in Writing

  	
   

  
	
  SECTION 7.08. 

  	
  Notices

  	
   

  
	
  SECTION 7.09. 

  	
  Governing
  Law; Jurisdiction; Consent to Service of Process

  	
   

  
	
  SECTION 7.10. 

  	
  WAIVER OF
  JURY TRIAL

  	
   

  
	
  SECTION 7.11. 

  	
  Severability
  of Provisions

  	
   

  
	
  SECTION 7.12. 

  	
  Execution
  in Counterparts

  	
   

  
	
  SECTION 7.13. 

  	
  Business Days

  	
   

  
	
  SECTION 7.14. 

  	
  No Credit
  for Payment of Taxes or Imposition

  	
   

  
	
  SECTION 7.15. 

  	
  No
  Claims Against Collateral Agent

  	
   

  
	
  SECTION 7.16. 

  	
  No
  Release Under Agreements; No Liability of Collateral Agent or Secured Parties

  	
   

  
	
  SECTION 7.17. 

  	
  Obligations
  Absolute

  	
   

  
	
  SECTION 7.18. 

  	
  Marshaling;
  Payments Set Aside

  	
   

  
	
  SECTION 7.19. 

  	
  Release of
  Pledgors

  	
   

  

 

EXHIBITS

Exhibit A Form of Issuer Acknowledgment

 

i

 

SECURITY AGREEMENT

 

This SECURITY
AGREEMENT (as amended, restated, supplemented or otherwise modified from time
to time, this “AGREEMENT”), dated as of July 31, 2002, is made by
HERBALIFE INTERNATIONAL, INC., a Nevada corporation (“BORROWER”); WH HOLDINGS
(CAYMAN ISLANDS) LTD., a Cayman Islands corporation (“HOLDINGS”); WH
INTERMEDIATE HOLDINGS LTD., a Cayman Islands corporation and a direct, wholly-owned
subsidiary of Holdings (“PARENT”); WH LUXEMBOURG HOLDINGS S.a.R.L., a
Luxembourg corporation and a direct, wholly-owned subsidiary of Parent
(“LUXEMBOURG HOLDINGS”); WH LUXEMBOURG INTERMEDIATE HOLDINGS S.a.R.L.
(“LUXEMBOURG INTERMEDIATE HOLDINGS”) and WH LUXEMBOURG CM S.a.R.L. (such
company, together with Luxembourg Holdings and Luxembourg Intermediate
Holdings, the “LUXCOS”), each a Luxembourg corporation and a direct,
wholly-owned subsidiary of Luxembourg Holdings; EACH OF THE SUBSIDIARY
GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME BECOMING A
PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (together with Holdings,
Parent and the LuxCos, the “GUARANTORS”), as pledgors and collateral assignors
(Borrower, together with the Guarantors, in such capacities and together with
any successors in such capacities, the “PLEDGORS”), in favor of UBS AG,
STAMFORD BRANCH (“UBS”), in its capacity as collateral agent for the lending
institutions from time to time party to the Credit Agreement (defined below)
(collectively, the “LENDERS”), as pledgee, collateral assignee and secured
party (in such capacities and together with any successors in such capacities,
“COLLATERAL AGENT”).

 

WITNESSETH:

 

WHEREAS,
simultaneously herewith, Borrower, certain of the Guarantors, the Lenders and
UBS, as Administrative Agent, have entered into that certain Credit Agreement,
dated as of the date hereof (as amended, restated, supplemented or otherwise
modified from time to time, the “CREDIT AGREEMENT”), whereby the Lenders have
agreed to make certain Loans and to issue certain Credit Agreement L/Cs
(defined below) to or for the account of Borrower;

 

WHEREAS, in
accordance with the Credit Agreement, it is contemplated that one or more of
the Pledgors may enter into one or more Hedging Agreements with one or more of
the Lenders or their respective Affiliates;

 

WHEREAS, in
accordance with the Credit Agreement, each Guarantor has, among other things,
guaranteed the obligations of Borrower under the Credit Agreement and the other
Loan Documents (the “GUARANTEES”);

 

WHEREAS, each
Guarantor will receive substantial benefits from the execution, delivery and
performance of the Loan Documents and each is, therefore, willing to enter into
this Agreement;

 

WHEREAS, each
Pledgor is or will be the legal or beneficial owner of the rights in the
Security Agreement Collateral (defined below) to be pledged by it hereunder;

 

WHEREAS, it is
a condition precedent to the obligations of the Lenders to make Loans under the
Credit Agreement or to enter into Hedging Agreements, and of the Issuing Bank
to issue Credit Agreement L/Cs thereunder, that each Pledgor execute and
deliver the applicable Loan Documents, including this Agreement; and

 

 

WHEREAS, this
Agreement is given by each Pledgor in favor of Collateral Agent for its benefit
and the benefit of the Lenders and any of their respective Affiliates party to
any Hedging Agreement (collectively, the “SECURED PARTIES”) to secure the
payment and performance of all of the Secured Obligations (defined below);

 

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

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION;
PERFECTION CERTIFICATE

 

SECTION 1.01.                 DEFINITIONS.

 

(a)                    The following
capitalized terms have the meanings assigned to them in the UCC:

 

“ACCOUNT,”
“BANK,” “CERTIFICATE OF TITLE,” “CHATTEL PAPER,” “COMMERCIAL TORT CLAIM,”
“COMMODITY ACCOUNT,” “COMMODITY CONTRACT,” “COMMODITY INTERMEDIARY,”
“CONTRACT,” “DOCUMENT,” “ELECTRONIC CHATTEL PAPER,” “ENTITLEMENT HOLDER,”
“ENTITLEMENT ORDER,” “EQUIPMENT,” “FINANCIAL ASSET,” “FIXTURES,” “GENERAL
INTANGIBLE,” “GOODS,” “INVENTORY,” “INVESTMENT PROPERTY,” “LETTER-OF-CREDIT
RIGHT,” “LETTER OF CREDIT,” “MONEY,” “PROCEEDS,” “RECORD,” “SECURITIES
ENTITLEMENT,” “SECURITIES INTERMEDIARY,” “SUPPORTING OBLIGATION,” and “TANGIBLE
CHATTEL PAPER.”

 

(b)                   Capitalized
terms used in this Agreement (including the preamble and recitals hereof) but
not otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement. In this Agreement:

 

“AGREEMENT” has
the meaning assigned to such term in the preamble hereof.

 

“BORROWER” has
the meaning assigned to such term in the preamble hereof.

 

“CHARGES” mean
any and all property and other taxes, assessments and special assessments,
levies, fees and all governmental charges imposed on or assessed against, and
all claims (including landlords’, carriers’, mechanics’, workmen’s,
repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and
other claims arising by operation of law) against, all or any portion of the
Security Agreement Collateral.

 

“COLLATERAL
ACCOUNT” means account number WA-258730.000 in the name of “Herbalife
International, Inc., Collateral Account” maintained at UBS, and any successor
or sub-account established and maintained at UBS (or a Lender that agrees to be
an administrative sub-agent for UBS) in accordance with Article IX of the
Credit Agreement, and all funds from time to time on deposit in such account,
including all Cash Equivalents, and all certificates and instruments from time
to time representing or evidencing such Cash Equivalents.

 

“COLLATERAL
AGENT” has the meaning assigned to such term in the preamble hereof.

 

2

 

“COLLATERAL
RECORDS” means books, records, ledger cards, files, correspondence, customer
lists, blueprints, technical specifications, manuals, computer software,
computer printouts, tapes, disks and related data processing software and
similar items that at any time evidence or contain information relating to any
of the Security Agreement Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon.

 

“COLLATERAL
SUPPORT” means all property (real or personal) assigned, hypothecated or
otherwise securing any Security Agreement Collateral, including any security
agreement or other agreement granting a lien or security interest in such real
or personal property.

 

“CONTROL
AGREEMENT” means an agreement in form and substance satisfactory to Collateral
Agent sufficient to establish control over any applicable Investment Property
(including any Securities Account or Commodity Account) or Deposit Account.

 

“COPYRIGHTS”
mean, collectively, with respect to each Pledgor, all copyrights (whether
statutory or common law and whether established or registered in the United
States or any other country) now owned or hereafter created or acquired by or
assigned to such Pledgor, whether published or unpublished, and all copyright
registrations and applications made by such Pledgor, including the copyrights,
registrations and applications listed in Section II.1 of the Perfection
Certificate, together with any and all (a) rights and privileges arising under
applicable law with respect to such Pledgor’s use of any copyrights, (b)
reissues, renewals, continuations and extensions thereof, (c) income, fees,
royalties, damages, claims and payments now or hereafter due or payable with
respect thereto, including damages and payments for past, present or future
infringements thereof, (d) rights corresponding thereto throughout the world
and (e) rights to sue for past, present or future infringements thereof.

 

“CREDIT
AGREEMENT” has the meaning assigned to such term in the recitals hereof.

 

“CREDIT
AGREEMENT L/C” has the meaning assigned to the term “Letter of Credit” in the
Credit Agreement.

 

“DEPOSIT
ACCOUNT” means, collectively, with respect to each Pledgor, (a) all “deposit
accounts” as such term is defined in the UCC and in any event shall include the
L/C Sub-Account and all accounts and sub-accounts relating to any of the
foregoing accounts, and (b) all cash, funds, checks, notes and any instruments from
time to time on deposit in any of the accounts or sub-accounts described in
clause (a) of this definition.

 

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

 

“DOCUMENTS
EVIDENCING GOODS” means all Documents evidencing, representing or issued in
connection with Goods.

 

“GUARANTEE” has
the meaning assigned to such term in the recitals hereof.

 

“GUARANTOR” has
the meaning assigned to such term in the preamble hereof.

 

3

 

“INDEMNIFIED
LIABILITIES” has the meaning assigned to such term in Section 7.04(a).

 

“INDEMNITEES”
has the meaning assigned to such term in Section 7.04(a).

 

“INSTRUMENTS”
mean, collectively, with respect to each Pledgor, all “instruments,” as such
term is defined in Article 9, rather than Article 3, of the UCC to
the extent such instruments evidence any amounts payable under or in connection
with any item of Security Agreement Collateral or Mortgaged Real Property or
such instruments constitute Proceeds of any item of Security Agreement Collateral
or Mortgaged Real Property, and in any event shall include all promissory
notes, drafts, bills of exchange or acceptances.

 

“INSURANCE”
means all insurance policies covering any or all of the Security Agreement
Collateral (regardless of whether Collateral Agent is the loss payee thereof),
and all key-man life insurance policies.

 

“INTELLECTUAL
PROPERTY” means, collectively, with respect to each Pledgor, (a) all Patents,
(b) all Trademarks, (c) all Copyrights, (d) all Licenses and (e) the goodwill
connected with such Pledgor’s business including (i) all goodwill connected
with the use of and symbolized by any of the Intellectual Property in which
such Pledgor has any interest and (ii) all know-how, trade secrets, customer
and supplier lists, proprietary information, inventions, methods, procedures,
formulae, descriptions, compositions, technical data, drawings, specifications,
name plates, catalogs, confidential information and the right to limit the use
or disclosure thereof by any person or entity, pricing and cost information,
business and marketing plans and proposals, consulting agreements, engineering
contracts and such other assets that relate to such goodwill.

 

“INTERCOMPANY
INDEBTEDNESS” means Indebtedness (whether or not evidenced by a writing) of any
Company (including any Pledgor) payable to a Pledgor.

 

“ISSUER” means
any issuer of any Pledged Equity Interests.

 

“LENDERS” has
the meaning assigned to such term in the preamble hereof.

 

“LICENSES”
mean, collectively, with respect to each Pledgor, all license and distribution
agreements and covenants not to sue with any other party with respect to any
Patent, Trademark or Copyright, whether such Pledgor is a licensor or licensee,
distributor or distributee under any such license or distribution agreement,
including the license and distribution agreements listed in Section II.1
of the Perfection Certificate, together with any and all (a) renewals,
extensions, supplements and continuations thereof; (b) income, fees, royalties,
damages, claims and payments now and hereafter due or payable thereunder and
with respect thereto, including damages and payments for past, present or
future infringements or violations thereof; (c) rights to sue for past, present
and future infringements or violations thereof; and (d) any other rights to
use, exploit or practice any or all of the Patents, Trademarks or Copyrights.

 

“MATERIAL
CONTRACT” means any Contract or other arrangement that any Pledgor is a party
to and for which breach, nonperformance, cancellation or failure to renew could
reasonably be expected to have a Material Adverse Effect. Notwithstanding the
foregoing, in the case of Borrower, that certain Agreement and Plan of Merger,
dated as of April 10, 2002, by and among Holdings, WH Acquisition Corp., and
Herbalife International, Inc., shall constitute a Material Contract.

 

4

 

“NON-PAYMENT
CONTRACT” means any Contract or agreement to which any Pledgor is a party other
than a contract whereby the account debtor’s principal obligation is a monetary
obligation; provided that, Non-payment Contracts shall not include Receivables.

 

“OPERATIVE
AGREEMENT” means (a) in the case of any limited liability company or
partnership or other noncorporate entity, any membership or partnership
agreement or other organizational agreement or document thereof and (b) in the
case of any corporation, any charter or certificate of incorporation and bylaws
thereof.

 

“PATENTS” mean,
collectively, with respect to each Pledgor, all patents issued or assigned to
and all patent applications and registrations made by such Pledgor (whether
established or registered or recorded in the United States or any other
country), including the patents, patent applications, registrations and
recordings listed in Section II.1 of the Perfection Certificate, together
with any and all (a) rights and privileges arising under applicable law with
respect to such Pledgor’s use of any patents; (b) inventions and improvements
described and claimed therein; (c) reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (d) income, fees,
royalties, damages, claims and payments now or hereafter due or payable
thereunder and with respect thereto including damages and payments for past,
present or future infringements thereof; (e) rights corresponding thereto
throughout the world; and (f) rights to sue for past, present or future
infringements thereof.

 

“PLEDGED EQUITY
INTERESTS” mean, collectively, with respect to each Pledgor, (a) the issued and
outstanding Equity Interests of each person, including all those listed in
Section II.D) of the Perfection Certificate; and (b) all rights,
privileges, authority and powers of such Pledgor in and to each such person or
under the Operative Agreements of each such person, and the certificates,
instruments and agreements representing the Pledged Equity Interests and any
and all interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Equity Interests, it being understood
that, subject to Section 5.11 of the Credit Agreement, Pledged Equity
Interests do not include any Equity Interests in excess of 65.0% of the Equity
Interests of any Non-Guarantor Subsidiary, provided that, such Non-Guarantor
Subsidiary is also a Foreign Subsidiary. 

 

“PLEDGED
INTERCOMPANY DEBT” means, with respect to each Pledgor, all Intercompany
Indebtedness payable to such Pledgor by any Company, including all Intercompany
Indebtedness described in Section II.H of the Perfection Certificate (and
each other intercompany note hereafter acquired by such Pledgor) and all
Intercompany Notes, certificates, Instruments or agreements evidencing such
Intercompany Indebtedness, and all assignments, amendments, restatements,
supplements, extensions, renewals, replacements or modifications thereof.

 

“PLEDGOR” has
the meaning assigned to such term in the preamble hereof.

 

“RECEIVABLES”
means all rights to payment, whether or not earned by performance, for Goods or
other property sold, leased, licensed, assigned or otherwise disposed of, or
services rendered or to be rendered, including all such rights constituting or
evidenced by any Account, Chattel Paper, Instrument, General Intangible or
Investment Related Property, together with all rights, if any, in any Goods or
other property giving rise to such right to payment and all Collateral Support
and Supporting Obligations related thereto and all Accounts, Chattel Paper,
General Intangibles, Instruments and Receivables Records.

 

“RECEIVABLES
RECORDS” means (i) all original copies of all documents, instruments or other
writings or electronic records or other Records evidencing the Receivables;

 

5

 

(ii)
all books, correspondence, credit or other files, Records, ledger sheets or
cards, invoices, and other papers relating to Receivables,
including all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems and other papers and documents relating to the
Receivables, whether in the possession or under the control of the Company or
any computer bureau or agent from time to time acting for the Company or
otherwise; (iii) all evidences of the filing of financing statements and the
registration of other instruments in connection therewith, and amendments,
supplements or other modifications thereto, notices to other creditors or
secured parties, and certificates, acknowledgments, or other writings,
including lien-search reports, from filing or other registration officers; (iv)
all credit information, reports and memoranda relating thereto; and (v) all
other written or nonwritten forms of information related in any way to the
foregoing.

 

“SECURED
OBLIGATIONS” mean all obligations (whether or not constituting future advances,
obligatory or otherwise) of Borrower and all of the Guarantors from time to
time arising under or in respect of this Agreement, the Credit Agreement, the
Notes (if any), the Guarantee, the Credit Agreement L/Cs, the other Loan
Documents and all Hedging Agreements entered into with any Lender (including
the obligations to pay principal, interest and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the obligations contained in this Agreement, the
Credit Agreement, the Notes (if any), the Guarantee, the Credit Agreement L/Cs,
the other Loan Documents and all Hedging Agreements entered into with any
Lender), in each case whether (a) such obligations are direct or indirect,
secured or unsecured, joint or several, absolute or contingent, reduced to
judgment or not, liquidated or unliquidated, disputed or undisputed, legal or
equitable, due or to become due whether at stated maturity, by acceleration or
otherwise; (b) arising in the regular course of business or otherwise; (c) for
payment or performance; (d) discharged, stayed or otherwise affected by any
bankruptcy, insolvency, reorganization or similar proceeding with respect to
any Loan Party or any other person; or (e) now existing or hereafter arising
(including interest and other obligations arising or accruing after the
commencement of any bankruptcy, insolvency, reorganization or similar
proceeding with respect to any Loan Party or any other person, or that would
have arisen or accrued but for the commencement of such proceeding, even if
such obligation or the claim therefor is not enforceable or allowable in such
proceeding).

 

“SECURED
PARTIES” has the meaning assigned to such term in the recitals hereof.

 

“SECURITIES
ACCOUNT” has the meaning assigned to such term in the UCC; provided that, the
Collateral Account shall be treated as a Securities Account.

 

“SECURITIES
COLLATERAL” means, collectively, the Pledged Equity Interests, the Pledged
Intercompany Debt and the Distributions.

 

“SECURITY AGREEMENT
COLLATERAL” has the meaning assigned to such term in Section 2.01.

 

“SOFTWARE
EMBEDDED IN GOODS” means, with respect to any Goods, any computer program
embedded in such Goods and any supporting information provided in connection
with a transaction relating to such program if (i) the program is customarily
considered part of such Goods or (ii) by becoming the owner of such Goods a
person acquires a right to use such program in connection therewith.

 

6

 

“TRADEMARKS”
mean, collectively, with respect to each Pledgor, all trademarks (including
service marks), slogans, logos, certification marks, trade dress, corporate
names and trade names, whether registered or unregistered, owned by or assigned
to such Pledgor and all registrations and applications for the foregoing
(whether statutory or common law and whether established or registered in the
United States or any other country) including the registrations and
applications listed in Section II.1 of the Perfection Certificate,
together with any and all (a) rights and privileges arising under applicable
law with respect to such Pledgor’s use of any trademarks; (b) reissues,
continuations, extensions and renewals thereof; (c) income, fees, royalties,
damages and payments now and hereafter due or payable thereunder and with
respect thereto, including damages, claims and payments for past, present or
future infringements thereof; (d) rights corresponding thereto throughout the
world; and (e) rights to sue for past, present and future infringements
thereof.

 

“UCC” means the
Uniform Commercial Code as in effect from time to time in the State of New
York; provided that, if by reason of mandatory provisions of law, the
perfection or the effect of perfection or nonperfection of the security
interest in any item or portion of the Security Agreement Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” also means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or nonperfection.

 

SECTION 1.02.                 INTERPRETATION.
The rules of interpretation specified in the Credit Agreement, including
Sections 1.03 and 11.11 thereof, shall be applicable to this Agreement. If any
conflict or inconsistency exists between this Agreement and the Credit
Agreement, the Credit Agreement shall govern.

 

SECTION 1.03.                 PERFECTION
CERTIFICATE. Collateral Agent and each Loan Party agree that the Perfection
Certificate and all descriptions of Security Agreement Collateral, schedules,
amendments and supplements thereto are and shall at all times remain a part of
this Agreement.

 

ARTICLE II

 

GRANT OF SECURITY AND SECURED
OBLIGATIONS

 

SECTION 2.01.                 PLEDGE.
As collateral security for the payment and performance in full of all the
Secured Obligations, each Pledgor hereby grants to Collateral Agent, for its
benefit and for the benefit of the Secured Parties, a security interest in and
continuing lien on all personal property of such Pledgor, including all of such
Pledgor’s right, title and interest in, to and under all of the following
property, wherever located, whether now owned or existing, or hereafter arising
or acquired from time to time (collectively, the “SECURITY AGREEMENT
COLLATERAL”):

 

(i)  Commercial Tort Claims;

 

(ii)  Deposit Accounts;

 

(iii)  Documents;

 

7

 

(iv)  Goods (including Equipment, Fixtures,
Inventory, Documents Evidencing Goods and Software Embedded in Goods);

 

(v)  Insurance;

 

(vi)  Intellectual Property;

 

(vii)  Investment Property and Financial Assets;

 

(viii) Letters of
Credit and Letter-of-Credit Rights;

 

(ix)  Material Contracts and Non-payment Contracts;

 

(x)  Money;

 

(xi)  Receivables;

 

(xii)  Securities Collateral;

 

(xiii)  all books and Records relating to the
Security Agreement Collateral;

 

(xiv)  to the extent not otherwise included above,
all Collateral Records, Collateral Support and Supporting Obligations relating
to any of the foregoing; and

 

(xv)  to the extent not otherwise included above,
all other personal property and all Proceeds and products of, accessions and
additions to, profits and rents from, and replacements for or in respect of any
of the foregoing;

 

it being understood that, subject to the
other provisions hereof and of the Credit Agreement, the foregoing grant of a
security interest shall not diminish any Pledgor’s exclusive right and license
to use, or grant to other persons license or sublicences in, the Intellectual
Property.

 

SECTION 2.02.                 CERTAIN
LIMITED EXCLUSIONS. Notwithstanding anything herein to the contrary, in no
event shall the security interest granted under Section 2.01 (a) attach
to, and the Security Agreement Collateral shall not include:

 

(a)                    any agreement
to which any Pledgor is a party to the extent that the collateral assignment
thereof or the creation of a security interest therein would constitute a
breach of the terms of such agreement, or would permit any party to such agreement
to terminate such agreement, in each case as entered into by the applicable
Pledgor; provided that, any of the agreements excluded in accordance with the
foregoing shall cease to be so excluded (x) to the extent such term is, or
would be (in the case of after-acquired property or changes to applicable law),
rendered ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of
any relevant jurisdiction (or any successor provision) or any other applicable
law (including the Bankruptcy Code) or principles of equity; or (y) if the
applicable Pledgor has obtained all of the consents of the other parties to
such agreement necessary for the collateral assignment of, or creation of a
security interest in, such agreement;

 

8

 

(b)                   any property or
asset hereafter acquired by any Pledgor that is subject to a Lien permitted to
be incurred pursuant to Sections 6.02(g), (h), (i) and (k) of the Credit
Agreement, solely to the extent that the documents evidencing such Lien
prohibit the grant of a security interest in or Lien on such property or asset;
provided that, upon such property or asset no longer being subject to such Lien
or prohibition, such property or asset shall (without any act or delivery by
any person) constitute Security Agreement Collateral hereunder;

 

(c)                    subject to
Section 5.11 of the Credit Agreement, no more than 65.0% of the Equity
Interests of any Non-Guarantor Subsidiary, provided that, such Non-Guarantor
Subsidiary is also a Foreign Subsidiary; or

 

(d)                   the Holdings
Senior Discount Note Escrow Account.

 

Collateral Agent agrees that, at any
Pledgor’s reasonable request and expense, it will provide such Pledgor
confirmation that the assets described in this Section 2.02 are in fact
excluded from the Security Agreement Collateral.

 

SECTION 2.03.                 SECURED
OBLIGATIONS; CONTINUING LIABILITY.

 

(a)                    SECURITY FOR
OBLIGATIONS. This Agreement secures, and the Security Agreement Collateral is
collateral security for, the payment and performance in full when due of all
the Secured Obligations.

 

(b)                   CONTINUING
LIABILITY UNDER SECURITY AGREEMENT COLLATERAL. Notwithstanding anything herein
to the contrary, (i) each Pledgor shall remain liable under each of the
obligations and agreements included in the Security Agreement Collateral,
including any obligations or agreements relating to any Pledged Equity
Interests, to perform all of the obligations undertaken by it thereunder, all
in accordance with the terms and provisions thereof, and neither Collateral
Agent nor any Secured Party shall have any obligation or liability (x) under
any of such agreements by reason of this Agreement or any other document
relating hereto, or (y) to make any inquiry regarding the nature or sufficiency
of any payment received by it, or have any obligation to take any action to
collect or enforce any rights under any agreement included in the Security
Agreement Collateral, including any agreements relating to any Pledged Equity
Interests; (ii) the exercise by Collateral Agent of any of its rights hereunder
shall not release any Pledgor from any of its duties or obligations under the
contracts and agreements included in the Security Agreement Collateral; and
(iii) nothing herein is intended to or shall be a delegation of duties to
Collateral Agent or any other Secured Party.

 

ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER
ASSURANCES; USE OF SECURITY AGREEMENT

COLLATERAL

 

SECTION 3.01.                 DELIVERY
OF CERTIFICATED SECURITIES COLLATERAL. All certificates, agreements or
instruments representing or evidencing the Securities Collateral, to the extent
not previously delivered to Collateral Agent, shall promptly upon receipt
thereof by any Pledgor be delivered to and held by or on behalf of Collateral
Agent pursuant hereto. All certificated Securities Collateral shall be in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Collateral Agent. Collateral Agent shall have the right, at any
time upon the occurrence and during the continuance of any Event of Default, to
endorse, assign or

 

9

 

otherwise transfer to or to register in the
name of Collateral Agent or any of its nominees or endorse for negotiation any
or all of the Securities Collateral, without any indication that such
Securities Collateral is subject to the security interest hereunder. In
addition, Collateral Agent shall have the right at any time to exchange
certificates representing or evidencing Securities Collateral for certificates
of smaller or larger denominations.

 

SECTION 3.02.                 PERFECTION
OF UNCERTIFICATED SECURITIES COLLATERAL. If any Issuer of Pledged Equity
Interests is organized in a jurisdiction that does not permit the use of
certificates to evidence equity ownership, or if any of the Pledged Equity
Interests are at any time not evidenced by certificates of ownership, then each
applicable Pledgor shall, to the extent permitted by applicable law, record
such pledge on the equityholder register or the books of the Issuer, cause the
Issuer to execute and deliver to Collateral Agent an acknowledgment of the
pledge of such Pledged Equity Interests substantially in the form of Exhibit A
annexed hereto, execute any customary pledge forms or other documents necessary
or appropriate to complete the pledge and give Collateral Agent the right to
transfer such Pledged Equity Interests under the terms hereof and provide to
Collateral Agent an opinion of counsel, in form and substance satisfactory to
Collateral Agent, confirming such pledge and perfection thereof.

 

SECTION 3.03.                 FINANCING
STATEMENTS AND OTHER FILINGS. Each Pledgor represents and warrants to
Collateral Agent that the only filings, registrations and recordings necessary
and appropriate to create, preserve, protect, publish notice of and perfect the
security interest granted by each Pledgor to Collateral Agent (for the benefit
of the Secured Parties) pursuant to this Agreement in respect of the Security
Agreement Collateral are listed in Section III.B of the Perfection
Certificate. Each Pledgor agrees that at any time and from time to time, at the
sole cost and expense of the Pledgors, it will execute and file and refile (in
accordance with Section 3.04), or permit Collateral Agent to file and
refile, such financing statements, continuation statements and other documents
(including this Agreement), in form acceptable to Collateral Agent, in such
offices (including the United States Patent and Trademark Office and the United
States Copyright Office) as Collateral Agent may deem necessary or appropriate,
wherever required by law to perfect, continue and maintain a valid,
enforceable, first-priority security interest in the Security Agreement
Collateral as provided herein and to preserve the other rights and interests
granted to Collateral Agent hereunder, as against third parties, with respect
to any Security Agreement Collateral. 

 

SECTION 3.04.                 OTHER
ACTIONS. To further ensure the attachment, perfection and priority of, and the ability
of Collateral Agent to enforce, Collateral Agent’s security interest in the
Security Agreement Collateral, each Pledgor acknowledges and agrees as follows:

 

(a)                    UCC FINANCING
STATEMENTS. Each Pledgor hereby irrevocably authorizes Collateral Agent at any
time and from time to time to file in any relevant jurisdiction any financing
statements (including fixture filings), continuation statements, and amendments
thereto that contain the information required by Article 9 of the UCC of
each applicable jurisdiction for the filing of any financing statement or
amendment, including (i) whether the Pledgor is an organization, the type of
organization and any organizational identification number issued to such
Pledgor and (ii) in the case of a financing statement filed as a fixture
filing, a sufficient description of the real property to which such Security
Agreement Collateral relates. The Pledgor agrees to provide such information to
Collateral Agent promptly upon request. Such financing statements or amendments
may describe the Security Agreement Collateral as “all assets” or “all personal
property, whether now owned or hereafter acquired,” or in any other manner that
Collateral Agent, in its sole discretion, deems necessary, advisable or prudent
to

 

10

 

ensure the perfection of the security
interests granted hereunder. Each Pledgor hereby ratifies its authorization for
Collateral Agent to file in any relevant jurisdiction any financing statements
or amendments thereto if filed prior to the date hereof.

 

(b)                   INTELLECTUAL
PROPERTY FILINGS. Each Pledgor hereby irrevocably authorizes Collateral Agent
to file documents with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any
other country) for the purpose of perfecting, confirming, continuing, enforcing
or protecting the security interest granted by each Pledgor hereunder and
naming any Pledgor or the Pledgors, as debtors, and Collateral Agent for its
benefit and the benefit of the Lenders, as secured party.

 

(c)                    INSTRUMENTS
AND TANGIBLE CHATTEL PAPER. If any amount payable under or in connection with
any of the Security Agreement Collateral shall be evidenced by any Instrument
or Tangible Chattel Paper, the Pledgor acquiring such Instrument or Tangible
Chattel Paper shall forthwith endorse, assign and deliver the same to
Collateral Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Collateral Agent may from time to time specify.

 

(d)                   DEPOSIT
ACCOUNTS. For each Deposit Account that any Pledgor at any time opens or
maintains, such Pledgor shall promptly notify Collateral Agent thereof and
either (i) pursuant to a Control Agreement cause the depository Bank to agree
to comply at any time with instructions from Collateral Agent to such
depository Bank directing the disposition of funds from time to time credited
to such Deposit Account, without further consent of such Pledgor or any other
person, or (ii) arrange for Collateral Agent to become the customer of the Bank
with respect to the Deposit Account, with the Pledgor being permitted, so long
as no Default or Event of Default exists and is continuing, to exercise rights
to withdraw funds from such Deposit Account pursuant to an agreement in form
and substance satisfactory to Collateral Agent. The preceding sentence shall
not apply to Deposit Accounts for which Collateral Agent is the depository.
Each Pledgor represents and warrants to Collateral Agent that, as of the date
hereof, it maintains no Deposit Accounts other than (i) those set forth in
Section II.F of the Perfection Certificate or (ii) those for which the
applicable Pledgor has provided notice thereof to Collateral Agent pursuant to
the preceding sentence. Except as otherwise permitted by Section 5.13 of
the Credit Agreement, each such Deposit Account is subject to a Control
Agreement that is in full force and effect.

 

(e)                    INVESTMENT
PROPERTY.

 

(i)  If any Pledgor shall at any time hold or
acquire any certificated securities constituting Investment Property, such
Pledgor shall promptly endorse, assign and deliver the same to Collateral
Agent, accompanied by such instruments of transfer or assignment duly executed
in blank, all in form and substance satisfactory to Collateral Agent. If any
securities now or hereafter acquired by any Pledgor constituting Investment
Property are uncertificated and are issued to such Pledgor or its nominee
directly by the issuer thereof, such Pledgor shall immediately notify
Collateral Agent thereof and such Pledgor shall either (A) pursuant to a
Control Agreement cause the issuer to agree to comply with instructions from
Collateral Agent as to such securities, without further consent of any Pledgor,
such nominee or any other person, or (B) arrange for Collateral Agent to become
the registered owner of the securities. If any securities constituting
Investment Property, whether certificated or uncertificated, or other
Investment Property now or hereafter acquired by any Pledgor is held by

 

11

 

such Pledgor or its nominee through a
Securities Intermediary or Commodity Intermediary, such Pledgor shall promptly
notify Collateral Agent thereof and, either (A) pursuant to a Control Agreement
cause such Securities Intermediary or Commodity Intermediary, as the case may
be, to agree to comply with Entitlement Orders or other instructions from
Collateral Agent to such Securities Intermediary as to such securities or other
Investment Property, or to apply any value distributed on account of any
Commodity Contract as directed by Collateral Agent to such Commodity
Intermediary, as the case may be, in each case without further consent of any
Pledgor, such nominee or any other person, or (B) in the case of Financial
Assets constituting Investment Property or other Investment Property held
through a Securities Intermediary, arrange for Collateral Agent to become the
Entitlement Holder with respect to such Investment Property, with the Pledgor being
permitted, so long as no Default or Event of Default has occurred and is
continuing, to exercise rights to withdraw or otherwise deal with such
Investment Property pursuant to an agreement in form and substance satisfactory
to Collateral Agent. The preceding sentence shall not apply to any Financial
Assets credited to a Securities Account for which Collateral Agent is the
Securities Intermediary. Each Pledgor represents and warrants to Collateral
Agent that, as of the date hereof, such Pledgor maintains no Securities
Accounts or Commodity Accounts with any Securities Intermediary or Commodity
Intermediary other than (i) as set forth in Section II.E of the Perfection
Certificate or (ii) those for which the applicable Pledgor has provided notice
thereof to Collateral Agent pursuant to the preceding sentence. Subject to the
provisions of this Section 3.04(e)(i), each such Securities Account or
Commodities Account is subject to a Control Agreement that is in full force and
effect. 

 

(ii)  As between Collateral Agent and the Pledgors,
the Pledgors shall bear the investment risk with respect to the Investment
Property, and the risk of loss of, damage to, or the destruction of the
Investment Property, whether in the possession of, or maintained as a Security Entitlement
by, or subject to the control of, Collateral Agent, a Securities Intermediary,
Commodities Intermediary, the Pledgor or any other person; provided that,
nothing contained in this Section 3.04(e)(ii) shall release or relieve any
Securities Intermediary or Commodities Intermediary of its duties and
obligations to the Pledgors or any other person under any Control Agreement or
under applicable law. Each Pledgor shall promptly pay all Charges and fees of
whatever kind or nature with respect to the Investment Property pledged by it
or this Agreement. In the event any Pledgor shall fail to make such payment
contemplated in the immediately preceding sentence, Collateral Agent may do so
for the account of such Pledgor and the Pledgors shall promptly reimburse and
indemnify Collateral Agent from all costs and expenses incurred by Collateral
Agent under this Section 3.04(e)(ii) in accordance with Section 7.03.

 

(f)                      ELECTRONIC
CHATTEL PAPER AND TRANSFERABLE RECORDS. If any amount payable under or in
connection with any of the Security Agreement Collateral shall be evidenced by
any Electronic Chattel Paper or any “transferable record,” as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act, or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, the Pledgor
acquiring such Electronic Chattel Paper or transferable record shall promptly
notify Collateral Agent thereof and, at the request of Collateral Agent, shall
take such action as

 

12

 

Collateral Agent may request to vest in
Collateral Agent control under UCC Section 9-105 of such Electronic
Chattel Paper or control under Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of
the Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record. Collateral Agent agrees with such Pledgor that
Collateral Agent will arrange, pursuant to procedures satisfactory to
Collateral Agent and so long as such procedures will not result in Collateral
Agent’s loss of control, for the Pledgor to make alterations to the Electronic
Chattel Paper or transferable record permitted under UCC Section 9-105 or,
as the case may be, Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act of Section 16 of the Uniform Electronic
Transactions Act for a party in control to allow without loss of control,
unless an Event of Default has occurred and is continuing or would occur after
taking into account any action by such Pledgor with respect to such Electronic
Chattel Paper or transferable record.

 

(g)                   LETTER-OF-CREDIT
RIGHTS. If any Pledgor is at any time a beneficiary under a Letter of Credit in
excess of $1.0 million now or hereafter issued in favor of such Pledgor, such
Pledgor shall promptly notify Collateral Agent thereof and, at the request of
Collateral Agent, such Pledgor shall, pursuant to an agreement in form and
substance satisfactory to Collateral Agent, either (i) arrange for the issuer
and any confirmer of such Letter of Credit to consent to an assignment to
Collateral Agent of the proceeds of any drawing under the Letter of Credit or
(ii) arrange for Collateral Agent to become the transferee beneficiary of the
Letter of Credit.

 

(h)                   COMMERCIAL TORT
CLAIMS. If any Pledgor shall at any time hold or acquire a Commercial Tort
Claim relating to any of the Security Agreement Collateral, such Pledgor shall
promptly notify Collateral Agent in writing signed by such Pledgor of the brief
details thereof and grant to Collateral Agent in such writing a security
interest therein and in the Proceeds thereof, all in accordance with this
Agreement, with such writing to be in form and substance satisfactory to
Collateral Agent.

 

(i)                       MOTOR
VEHICLES. Upon the request of Collateral Agent, each Pledgor shall deliver to
Collateral Agent originals of the Certificates of Title or certificates of
ownership for the motor vehicles (and any other Equipment covered by
Certificates of Title or ownership owned by it) with Collateral Agent listed as
lienholder therein.

 

SECTION 3.05.                 SUPPLEMENTS;
FURTHER ASSURANCES.

 

(a)                    The Pledgors
shall cause each person that, from time to time after the date hereof, shall be
required to pledge any assets to Collateral Agent for the benefit of the
Secured Parties pursuant to the provisions of the Credit Agreement, to execute
and deliver to Collateral Agent a Joinder Agreement and, upon such execution and
delivery, such person shall constitute a “Guarantor” and a “Pledgor” for all
purposes hereunder with the same force and effect as if originally named as a
Guarantor and Pledgor herein. The execution and delivery of such Joinder
Agreement shall not require the consent of any Pledgor hereunder. The rights
and obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor and Pledgor as a party to
this Agreement.

 

(b)                   Upon obtaining
any Pledged Equity Interests or Pledged Intercompany Debt of any person, each
Pledgor shall accept the same in trust for the benefit of Collateral Agent and
forthwith deliver to Collateral Agent a Perfection Certificate Supplement, and
the certificates and other documents required under this Article III in
respect of the additional Pledged Equity Interests, Pledged Intercompany Debt
or other possessory Security Agreement

 

13

 

Collateral that is to be pledged pursuant
to this Agreement, and confirming the attachment of the Lien hereby created on
and in respect of such additional Pledged Equity Interests or Pledged
Intercompany Debt.

 

(c)                    Each Pledgor
agrees to take such further actions, and to execute and deliver to Collateral
Agent such additional assignments, agreements, supplements, powers and
instruments, as Collateral Agent may in its reasonable judgment deem necessary
or appropriate, to perfect, preserve and protect the security interest in the
Security Agreement Collateral as provided herein and the rights and interests
granted to Collateral Agent hereunder, to carry into effect the purposes hereof
or to better assure and confirm unto Collateral Agent or permit Collateral
Agent to exercise and enforce its rights, powers and remedies hereunder with
respect to any Security Agreement Collateral. By way of example, such actions
may include appearing in and defending any action or proceeding, at Collateral
Agent’s request, that may affect such Pledgor’s title to or Collateral Agent’s
security interest in all or any part of the Security Agreement Collateral. Upon
the reasonable request of Collateral Agent, each Pledgor shall further make,
execute, endorse, acknowledge, file or refile or deliver to Collateral Agent
from time to time such lists, descriptions and designations of the Security
Agreement Collateral, copies of warehouse receipts, receipts in the nature of
warehouse receipts, bills of lading, documents of title, vouchers, invoices,
schedules, confirmatory assignments, supplements, additional security
agreements, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments. If a
Default has occurred and is continuing, Collateral Agent may institute and
maintain, in its own name or in the name of any Pledgor, such suits and
proceedings as Collateral Agent deems necessary or expedient to prevent any
impairment of the security interest in or the perfection thereof in the
Security Agreement Collateral. All of the foregoing shall be at the sole cost
and expense of the Pledgors.

 

(d)                   For the
avoidance of doubt, the Pledgors and Collateral Agent acknowledge that this
Agreement is intended to grant to Collateral Agent, for the benefit of the
Secured Parties, a security interest in and continuing Lien on the Security
Agreement Collateral, and does not constitute a present assignment of ownership
rights, a transfer of ownership or title to any Security Agreement Collateral,
except as otherwise provided herein following the occurrence and during the
continuance of an Event of Default. Unless an Event of Default shall have
occurred and be continuing, Collateral Agent agrees from time to time to
deliver, upon written request of any Pledgor and at such Pledgor’s sole cost
and expense (including reasonable expenses of counsel to, among other things,
review the effect thereof on Collateral Agent’s security interest granted
hereunder), any and all instruments, certificates or other documents, in a form
reasonably requested by such Pledgor, necessary or appropriate in the
reasonable judgment of such Pledgor to enable such Pledgor to continue to
exploit, license, use and protect the Security Agreement Collateral in
accordance with the terms hereof and of the Credit Agreement.

 

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND
COVENANTS

 

Each Pledgor
represents, warrants and covenants as follows:

 

SECTION 4.01.                 TITLE.
Except for the security interest granted to Collateral Agent for the ratable
benefit of the Secured Parties pursuant to this Agreement and Permitted Liens,
such Pledgor owns the rights in each item of Security Agreement Collateral
pledged by it hereunder, and with regard to each item of Security Agreement
Collateral. now

 

14

 

existing or hereafter acquired, will
continue to own or have such rights, in each case free and clear of any and all
Liens or claims of others. No effective financing statement or other public
notice with respect to all or any part of the Security Agreement Collateral is
on file or of record in any public office, except such as have been filed in
favor of Collateral Agent pursuant to this Agreement, are permitted by the
Credit Agreement, or for which proper termination statements have been delivered
to Collateral Agent for filing. No person other than Collateral Agent has
control or possession of all or any part of the Security Agreement Collateral,
except as permitted hereby or by the Credit Agreement.

 

SECTION 4.02.                 ORGANIZATION;
AUTHORITY; ENFORCEABILITY. Such Pledgor (a) is duly organized and validly
existing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority enter into this Agreement and to carry out the
obligations hereunder, and (c) has duly executed and delivered this Agreement.
This Agreement and each other document, statement, or instrument relating
hereto, when executed and delivered by such Pledgor, will constitute, a legal,
valid and binding obligation of such Pledgor, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

SECTION 4.03.                 AUTHORIZATIONS
AND APPROVALS. No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority is required for either (i) the
pledge or grant by such Pledgor of the Liens purported to be created in favor
of Collateral Agent hereunder, or (ii) the exercise by Collateral Agent of any
rights or remedies in respect of any Security Agreement Collateral, in each
case except for the filings contemplated hereunder, filings, registrations and
other actions listed on Schedule 5.13 to the Credit Agreement, and as may
be required in connection with the disposition of any Securities Collateral (by
laws generally affecting the offering and sale of securities) or by laws
pertaining to Intellectual Property.

 

SECTION 4.04.                 PERFECTED
FIRST-PRIORITY LIENS. The security interests granted pursuant to this Agreement
(a) upon completion of the filings specified in Section III.B of the
Perfection Certificate and completion of the actions described in
Article III and on Schedule 5.13 to the Credit Agreement, will
constitute valid perfected security interests in all of the Security Agreement
Collateral located in the United States in favor of Collateral Agent as
collateral security for the Secured Obligations, enforceable in accordance with
the terms hereof against all creditors of such Pledgor and any persons
purporting to purchase any Security Agreement Collateral from such Pledgor; and
(b) are prior to all other Liens on the Security Agreement Collateral in
existence on the date hereof except for Permitted Liens that have priority over
the Liens on the Security Agreement Collateral by operation of law.

 

SECTION 4.05.                 LIMITATION
ON LIENS. Such Pledgor shall, at its own cost and expense, defend title to the
Security Agreement Collateral pledged by it hereunder and the security interest
therein and Lien thereon granted to Collateral Agent and the priority thereof
against all claims and demands of all persons, at its own cost and expense, at
any time claiming (except to the extent related to a Permitted Lien) any
interest therein adverse to Collateral Agent or any other Secured Party.

 

SECTION 4.06.                 OTHER
FINANCING STATEMENTS. So long as any of the Secured Obligations remain unpaid,
or the Commitments of the Lenders to make any Loan or to issue any Credit
Agreement L/Cs shall not have expired or been sooner terminated, such Pledgor
shall not execute, authorize or permit to be filed in any public office any
financing statement (or

 

15

 

similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to any
Security Agreement Collateral, except, in each case, financing statements filed
or to be filed in respect of and covering the security interests granted by
such Pledgor to the holder of Permitted Liens.

 

SECTION 4.07.                 CHIEF
EXECUTIVE OFFICE; CHANGE OF NAME; JURISDICTION OF ORGANIZATION.

 

(a)                    Such Pledgor’s
exact legal name, type and jurisdiction of organization, federal taxpayer and
organizational identification numbers of such Pledgor (if applicable) is set
forth in Section I.A of the Perfection Certificate, and its chief
executive office is set forth in Section I.D of the Perfection
Certificate. Such Pledgor has not done in the last five years business under
any other name (including any trade name or fictitious business name) except
for those names set forth in Sections I.B and I.C of the Perfection
Certificate, and shall not (a) change its corporate name, (b) establish any
other location where Security Agreement Collateral is maintained, (c) change
its identity or type of organization or corporate structure, or (d) change its
federal taxpayer identification number or organizational identification number
(including by merging with or into any other entity, reorganizing, dissolving,
liquidating, reincorporating or incorporating in any other jurisdiction) unless
(A) it shall have given Collateral Agent not less than 30 days’ prior written
notice of its intention so to do, clearly describing such change and providing
such other information in connection therewith as Collateral Agent may request,
and (B) with respect to such change, such Pledgor shall have taken all action
that Collateral Agent deems necessary or desirable to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of the
Secured Parties in the Security Agreement Collateral intended to be granted
hereby, including using commercially reasonable efforts to obtain waivers of
landlord’s or warehousemen’s liens with respect to such new location, if
applicable. Each Pledgor agrees to promptly provide Collateral Agent with
certified organizational documents reflecting any of the changes described in
the preceding sentence.

 

(b)                   Such Pledgor
agrees to maintain, at its own cost and expense, such complete and accurate
records with respect to the Security Agreement Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Pledgor is engaged, but in any event to include complete
accounting records as required by the Credit Agreement, and, at such time or
times as Collateral Agent may request, promptly to prepare and deliver to
Collateral Agent a duly certified schedule or schedules in form and detail
satisfactory to Collateral Agent showing in summary form the identity, amount
and location of any and all Security Agreement Collateral (except Security
Agreement Collateral in the possession or control of Collateral Agent).

 

SECTION 4.08.                 CERTAIN
PROVISIONS CONCERNING SECURITIES COLLATERAL.

 

(a)                    Such Pledgor
has delivered to Collateral Agent true, correct and complete copies of the
Operative Agreements, which are in full force and effect and have not as of the
date hereof been amended or modified except as permitted by the Credit
Agreement. Such Pledgor shall deliver to Collateral Agent a copy of any notice
of default given or received by it under any Operative Agreement within ten
days after such Pledgor gives or receives such notice.

 

(b)                   Such Pledgor is
not in default in the payment of any portion of any mandatory capital
contribution, if any, required to be made under any agreement to which such
Pledgor is a party relating to the Pledged Equity Interests pledged by it, and
such Pledgor is not in

 

16

 

violation of any other provisions of any
such agreement to which such Pledgor is a party, or otherwise in default or
violation thereunder, except where such default or noncompliance, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. No Securities Collateral pledged by such Pledgor is subject to
any defense, offset or counterclaim, nor have any of the foregoing been
asserted or alleged against such Pledgor by any person with respect thereto,
and as of the date hereof, there are no certificates, instruments, documents or
other writings (other than the Operative Agreements and certificates, if any,
delivered to Collateral Agent) that evidence any Pledged Equity Interests of
such Pledgor.

 

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

 

(i)  Such Pledgor shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Securities
Collateral or any part thereof for any purpose not inconsistent with the terms
or purposes hereof, the Credit Agreement, or any other Loan Document evidencing
the Secured Obligations; provided that, such Pledgor shall not in any event
exercise such rights in any manner that would reasonably be expected to have an
adverse effect on the value of the Security Agreement Collateral or the Lien
and security interest intended to be granted to Collateral Agent hereunder;

 

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

 

(iii)  Without further action or formality,
Collateral Agent shall be deemed to have granted to such Pledgor all necessary
consents relating to voting rights and shall, if necessary, upon written
request of such Pledgor and at the sole cost and expense of the Pledgors, from
time to time execute and deliver (or cause to be executed and delivered) to
such Pledgor all such instruments as such Pledgor may reasonably request to
permit such Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to Section 4.08(c)(i) and to receive the
Distributions that it is authorized to receive and retain pursuant to
Section 4.08(c)(ii).

 

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

 

(i)  All rights of such Pledgor to exercise the
voting and other consensual rights it would otherwise be entitled to exercise
pursuant to Section 4.08(c)(i) without any action or the giving of any
notice shall cease, and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise such
voting and other consensual rights; and

 

17

 

(ii)  All rights of such Pledgor to receive
Distributions that it would otherwise be authorized to receive and retain
pursuant to Section 4.08(c)(ii) shall cease and all such rights shall
thereupon become vested in Collateral Agent, who shall thereupon have the sole
right to receive and hold as Security Agreement Collateral such Distributions;

 

provided that, the rights described in
clauses (i) and (ii) above shall revert back to such Pledgor following the cure
or waiver of such Event of Default.

 

(e)                    Such Pledgor
shall, at its sole cost and expense, from time to time execute and deliver to
Collateral Agent appropriate instruments as Collateral Agent may request to
permit Collateral Agent to exercise the voting and other rights that it may be
entitled to exercise pursuant to Section 4.08(d)(i) and to receive all
Distributions that it may be entitled to receive under Section 4.08(d)(ii).

 

(f)                      All
Distributions that are received by such Pledgor contrary to the provisions of
Section 4.08(d)(ii) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of such Pledgor and
shall promptly be paid over to Collateral Agent as Security Agreement
Collateral in the same form as so received (with any necessary endorsement).

 

SECTION 4.09.                 CERTAIN
PROVISIONS CONCERNING INTELLECTUAL PROPERTY.

 

(a)                    Such Pledgor
agrees that it will not, nor will it knowingly permit or authorize any of its
licensees to, do any act, or omit to do any act, whereby any issued Patent may
become invalidated, dedicated to the public, or unenforceable, and agrees that
it shall continue to mark any products covered by a Patent with the relevant
patent number as necessary and sufficient to establish and preserve its maximum
rights under applicable patent laws, except where the failure to so mark would
not be reasonably likely to result in a Material Adverse Effect.

 

(b)                   Such Pledgor
(either itself or through its licensees or its sublicensees) will, for each
material Trademark, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for nonuse, (ii) materially not diminish the
value of such Trademark or the goodwill associated therewith, (iii) display
such Trademark with notice of federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law, except where the failure to display with notice would not be
reasonably likely to result in a Material Adverse Effect, and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.

 

(c)                    Such Pledgor
(either itself or through licensees) will, for each work covered by a material
Copyright, continue to publish, reproduce, display, adopt and distribute the
work with appropriate copyright notice as necessary and sufficient to establish
and preserve its maximum rights under applicable copyright laws, except where
the failure to include notice would not be reasonably likely to result in a
Material Adverse Effect.

 

(d)                   Such Pledgor
shall notify Collateral Agent promptly if it knows or has reason to know that
any Intellectual Property may become, or knows of circumstances that would
cause any Intellectual Property to become: (i) abandoned, lost or dedicated to
the public; (ii) invalid or unenforceable; or (iii) subject to any adverse
determination or development regarding such Pledgor’s ownership of any
Intellectual Property, its right to register the same, or to keep and maintain
the same.

 

18

 

(e)                    Such Pledgor
will take all reasonable steps in the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States, Canada or in any other country, to maintain
and pursue each application relating to the Intellectual Property (and to
obtain the relevant grant or registration) and to maintain each issued Patent
and each registration of the Trademarks and Copyrights, including timely
filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and to initiate opposition,
interference and cancellation proceedings against third parties, in each case
where necessary for the operation of such Pledgor’s business as presently
conducted and as contemplated by the Credit Agreement.

 

(f)                      In the event
that such Pledgor knows that any Security Agreement Collateral consisting of
Intellectual Property material to the conduct of such Pledgor’s business has
been or is about to be infringed, misappropriated or diluted by a third party,
such Pledgor promptly shall notify Collateral Agent and shall promptly sue for
infringement, misappropriation or dilution and to recover any and all damages
for such infringement, misappropriation or dilution, or take such other actions
as are appropriate under the circumstances to protect such Security Agreement
Collateral, except where the failure to so notify or take such actions would
not be reasonably likely to result in a Material Adverse Effect.

 

(g)                   Upon the
occurrence of an Event of Default, such Pledgor shall use its commercially
reasonable efforts to obtain all requisite consents or approvals by the
licensor of each License to effect the assignment of all of such Pledgor’s
right, title and interest thereunder to the Security Agreement Collateral Agent
or its designee.

 

(h)                   Solely for the
purpose of enabling Collateral Agent to exercise its rights and remedies upon
the occurrence of an Event of Default, such Pledgor hereby grants to Collateral
Agent, to the extent assignable, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such Pledgor)
to use, license or sublicense any of the Intellectual Property now owned or
hereafter acquired by such Pledgor, wherever the same may be located, including
in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.

 

(i)                       It shall
promptly (but in no event more than 30 days after any Pledgor obtains knowledge
thereof) report to Collateral Agent (i) the filing of any application to
register any Intellectual Property with the United States Patent and Trademark
Office, the United States Copyright Office, or any state registry or foreign
counterpart of the foregoing (whether such application is filed by such Pledgor
or through any agent, employee, licensee, or designee thereof); and (ii) the
registration of any Intellectual Property by any such office.

 

(j)                       It shall,
promptly upon the reasonable request of Collateral Agent, execute and deliver
to Collateral Agent any document required to acknowledge, confirm, register,
record, or perfect Collateral Agent’s security interest granted hereunder in
any part of the Intellectual Property, whether now owned or hereafter acquired.

 

(k)                    Except with
the prior consent of Collateral Agent or as permitted under the Credit
Agreement, such Pledgor shall not execute any financing statement or other
document or instrument, and there will not be on file in any public office any
effective financing statement or other document or instruments, except
financing statements or other documents or instruments filed or to be filed in
favor of Collateral Agent, and such Pledgor shall not sell, assign, transfer,
license, grant any option in, or create any Lien, claim, security interest or
other

 

19

 

encumbrance on or with respect to the
Intellectual Property, or suffer to exist any effective Lien, claim, security
interest or other encumbrance on or with respect to the Intellectual Property, except
for the security interest created by and under this Security Agreement.

 

(l)                       It shall
hereafter use commercially reasonable efforts so as not to permit the inclusion
in any contract to which it hereafter becomes a party of any provision that
would materially impair or prevent the creation of a security interest in, or
the assignment of, such Pledgor’s rights and interests in any property included
within the definitions of any Intellectual Property acquired under such
contracts.

 

SECTION 4.10.                 INSPECTION
AND VERIFICATION. Collateral Agent or any representative designated by
Collateral Agent shall have the same access and inspection rights as granted to
the Administrative Agent by the Companies pursuant to Section 5.07 of the
Credit Agreement; provided that, upon the occurrence and during the continuance
of an Event of Default, Collateral Agent and its representatives shall at all
times have the right to enter any premises of such Pledgor and inspect any
property of such Pledgor where any of the Security Agreement Collateral of such
Pledgor is located for the purpose of inspecting the same, observing its use,
protecting its interests therein, or otherwise exercising the remedies provided
under Article V. For the avoidance of doubt, in respect of Accounts or
Security Agreement Collateral in the possession of any third person, upon the
occurrence and during the continuance of an Event of Default, Collateral Agent
or any designated representative shall have the right to contact such account
debtors or third persons in possession of such Security Agreement Collateral
for verification purposes. Collateral Agent shall have the absolute right to
share any information it gains from such inspection or verification with any
other Secured Party.

 

SECTION 4.11.                 PAYMENT
OF TAXES; CONTESTING LIENS; CLAIMS. Such Pledgor represents and warrants that
all Charges imposed on or assessed against the Security Agreement Collateral
have been paid and discharged except to the extent such Charges constitute a
Permitted Lien or a Lien not yet due and payable. Notwithstanding the
foregoing, such Pledgor may at its own expense contest the validity, amount or
applicability of any Charges so long as the contest thereof shall satisfy the
Contested Collateral Lien Conditions. Notwithstanding the foregoing provisions
of this Section 4.11, no contest of any such obligation may be pursued by
such Pledgor if such contest would expose Collateral Agent or any other Secured
Party to any possible criminal liability.

 

SECTION 4.12.                 TRANSFERS
AND OTHER LIENS. Such Pledgor shall not sell, convey, assign or otherwise
dispose of, or grant any option with respect to, any of the Security Agreement
Collateral pledged by it hereunder except as permitted by the Credit Agreement.
Such Pledgor shall not make or permit to be made an assignment for security,
pledge or hypothecation of the Security Agreement Collateral or shall grant any
other Lien in respect of the Security Agreement Collateral, except as permitted
by Section 6.02 of the Credit Agreement.

 

SECTION 4.13.                 INSURANCE.
Such Pledgor, at its own expense, shall maintain or cause to be maintained,
insurance covering physical loss or damage to the Inventory and Equipment in
accordance with Section 5.04 of the Credit Agreement. Such Pledgor
irrevocably makes, constitutes and appoints Collateral Agent (and all officers,
employees or agents designated by Collateral Agent) as such Pledgor’s true and
lawful agent (and attorney-in fact) for the purposes, during the continuance of
an Event of Default, of making, settling and adjusting claims in respect of
Security Agreement Collateral under policies of insurance, endorsing the name
of such Pledgor on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and for making all determinations
and decisions with

 

20

 

respect thereto. In the event that such
Pledgor at any time or times fails to obtain or maintain any of the policies of
insurance required hereby or to pay any premium in whole or in part relating
thereto, Collateral Agent may, without waiving or releasing any obligation or
liability of any Pledgor hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as Collateral Agent deems
advisable. All sums disbursed by Collateral Agent in connection with this
Section 4.13, including reasonable attorneys’ fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Pledgors to Collateral Agent and shall be additional Secured Obligations.

 

SECTION 4.14.                 LEGEND.
Such Pledgor shall legend, in form and manner satisfactory to Collateral Agent,
its Chattel Paper and its books, records, and documents evidencing or
pertaining thereto with an appropriate reference to the fact that such Chattel
Paper has been assigned to Collateral Agent for the benefit of the Secured
Parties and that Collateral Agent has a security interest therein.

 

ARTICLE V

 

REMEDIES

 

SECTION 5.01.                 REMEDIES.
Upon the occurrence and during the continuance of any Event of Default,
Collateral Agent may from time to time exercise in respect of the Security
Agreement Collateral, in addition to the other rights and remedies provided for
herein or otherwise available to it:

 

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

 

(b)                   Demand, sue
for, collect or receive any money or property at any time payable or receivable
in respect of the Security Agreement Collateral including instructing the
obligor or obligors on any agreement, instrument or other obligation
constituting part of the Security Agreement Collateral to make any payment
required by the terms of such agreement, instrument or other obligation
directly to Collateral Agent, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications
with respect thereto; provided that, in the event that any such payments are
made directly to any Pledgor, prior to receipt by any such obligor of such
instruction, such Pledgor shall segregate all amounts received pursuant thereto
in trust for the benefit of Collateral Agent and shall promptly (but in no
event later than one Business Day after receipt thereof) pay such amounts into
the Collateral Account;

 

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

 

21

 

(d)                   Take possession
of the Security Agreement Collateral or any part thereof by directing any
Pledgor in writing to deliver the same to Collateral Agent at any place or
places so designated by Collateral Agent, in which event such Pledgor shall at
its own expense: (i) forthwith cause the same to be moved to the place or
places designated by Collateral Agent and there delivered to Collateral Agent,
(ii) store and keep any Security Agreement Collateral so delivered to Collateral
Agent at such place or places pending further action by Collateral Agent and
(iii) while the Security Agreement Collateral shall be so stored and kept,
provide such security and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition. Each Pledgor’s
obligation to deliver the Security Agreement Collateral as contemplated in this
Section 5.01(d) is of the essence hereof. Upon application to a court of
equity having jurisdiction, Collateral Agent shall be entitled to a decree
requiring specific performance by any Pledgor of such obligation;

 

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

 

(f)                      Retain and
apply the Distributions to the Secured Obligations as provided in the Credit
Agreement;

 

(g)                   Exercise any
and all rights as beneficial and legal owner of the Security Agreement
Collateral, including perfecting assignment of and exercising any and all
voting, consensual and other rights and powers with respect to any Security
Agreement Collateral; and

 

(h)                   All the rights
and remedies of a secured party on default under the UCC, and Collateral Agent
may also in its sole discretion, without notice except as specified in
Section 5.02, sell, assign or grant a license to use the Security
Agreement Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker’s board or at any of Collateral Agent’s
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and on such other terms as Collateral Agent deems commercially
reasonable. Collateral Agent or any other Secured Party or any of their
respective Affiliates may be the purchaser, licensee, assignee or recipient of
any or all of the Security Agreement Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Security Agreement Collateral
sold, assigned or licensed at such sale, to use and apply any of the Secured
Obligations owed to such person as a credit on account of the purchase price of
any Security Agreement Collateral payable by such person at such sale. Each
purchaser, assignee, licensee or recipient at any such sale shall acquire the
property sold, assigned or licensed absolutely free from any claim or right on
the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and appraisal that it now has
or may at any time in the future have under any rule of law or statute now existing
or hereafter enacted. Collateral Agent shall not be obligated to make any sale
of Security Agreement Collateral regardless of notice of sale having been
given. Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law,
any claims against Collateral Agent arising by reason of the fact that the
price at which any Security Agreement Collateral may have been sold, assigned
or licensed at such a private sale was less than the price that might have been
obtained at a public sale, even if

 

22

 

Collateral Agent accepts the first offer
received and does not offer such Security Agreement Collateral to more than one
offeree.

 

(i)                       Upon the
written demand of Collateral Agent, each Pledgor shall execute and deliver to
Collateral Agent an assignment or assignments of the registered Intellectual
Property and such other documents as are necessary or appropriate to carry out
the intent and purposes hereof.

 

SECTION 5.02.                 NOTICE
OF SALE. Each Pledgor acknowledges and agrees that, to the extent notice of
sale shall be required by law, ten days’ notice to such Pledgor of the time and
place of any public sale or of the time after which any private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters. No notification need be given to any Pledgor if
it has signed, during the occurrence of an Event of Default, a statement
renouncing or modifying any right to notification of sale or other intended
disposition.

 

SECTION 5.03.                 WAIVER
OF NOTICE AND CLAIMS. Each Pledgor hereby waives, to the fullest extent
permitted by applicable law, notice or judicial hearing in connection with
Collateral Agent’s taking possession or Collateral Agent’s disposition of any
of the Security Agreement Collateral, including any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right that such
Pledgor would otherwise have under law, and each Pledgor hereby further waives,
to the fullest extent permitted by applicable law: (a) all damages occasioned
by such taking of possession, (b) all other requirements as to the time, place
and terms of sale or other requirements with respect to the enforcement of
Collateral Agent’s rights hereunder and (c) all rights of redemption,
appraisal, valuation, stay, extension and moratorium now or hereafter in force
under any applicable law. Collateral Agent shall not be liable for any
incorrect or improper payment made pursuant to this Article V in the
absence of gross negligence or willful misconduct. Any sale of, or the grant of
options to purchase, or any other realization on, any Security Agreement
Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the applicable Pledgor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Pledgor and against any and all persons claiming or attempting to claim the
Security Agreement Collateral so sold, optioned or realized on, or any part
thereof, from, through or under such Pledgor.

 

SECTION 5.04.                 CERTAIN
SALES OF SECURITY AGREEMENT COLLATERAL. Each Pledgor recognizes that, by reason
of certain prohibitions contained in the Securities Act, and applicable state
securities laws, Collateral Agent may be compelled, with respect to any sale of
all or any part of the Securities Collateral, to limit purchasers to persons
who will agree, among other things, to acquire such Securities Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Collateral Agent than those obtainable
through a public sale without such restrictions (including a public offering
made pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that
Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Securities Collateral for the period of
time necessary to permit the issuer thereof to register it for a form of public
sale requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would agree to do so.

 

23

 

SECTION 5.05.                 NO
WAIVER; CUMULATIVE REMEDIES.

 

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

 

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

 

ARTICLE VI

 

OBLIGATIONS ABSOLUTE; WAIVERS

 

SECTION 6.01.                 LIABILITY
OF THE PLEDGORS ABSOLUTE. Each Pledgor agrees that its obligations hereunder
are irrevocable, absolute, independent, unconditional, and shall not be
affected by any circumstance that constitutes a legal or equitable discharge of
a pledgor or surety, except for payment in full of the Secured Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Pledgor agrees as follows:

 

(a)                    the
obligations of each Pledgor hereunder are independent of the obligations of
each other Pledgor and each guarantor of the obligations of the Loan Parties,
and separate actions may be brought and prosecuted against such Pledgor whether
or not any action is brought against any other Pledgor or guarantor, and
whether or not such other Pledgor or guarantor is joined in any such actions;

 

(b)                   payment by any
Loan Party of a portion of the Secured Obligations shall in no way limit,
affect, modify or abridge such Pledgor’s grant hereunder securing any portion
of the Secured Obligations that has not been paid. By way of example and
without limiting the generality of the foregoing, if Collateral Agent is
awarded a judgment in any suit brought to enforce any Loan Party’s covenant to
pay a portion of the Secured Obligations, such judgment shall not be deemed to
release such Pledgor from its grant hereunder securing the portion of the
Secured Obligations that is not the subject of such suit, and such judgment
shall not, except to the extent satisfied by such Pledgor, limit, affect,
modify or abridge any other Pledgor’s grant hereunder securing the Secured
Obligations;

 

(c)                    upon such
terms as Collateral Agent deems appropriate, without obligation to give notice
or demand, without affecting the validity or enforceability hereof, and without
giving rise to any reduction, limitation, impairment, discharge or termination
of the security interests granted hereunder or such Pledgor’s liability
hereunder, Collateral Agent may, from time to time, (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise

 

24

 

change the time, place and manner or terms
of payment of any of the Secured Obligations in accordance with the terms of
the other Loan Documents; (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, any of the Secured Obligations or any agreement relating thereto, or
subordinate the payment of the same to the payment of any other obligations;
(iii) request and accept other pledges as security for any of the Secured
Obligations, and take and hold security for the payment hereof or any of the
Secured Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of any of the Secured Obligations, any
guarantees of any of the Secured Obligations, or any other obligation of any
person (including any other Pledgor) with respect to any of the Secured
Obligations; (v) enforce and apply any security now or hereafter held by it in
respect hereof or any of the Secured Obligations, and direct the order or
manner of sale thereof, or exercise any other right or remedy that it may have
against any such security, including foreclosure on any such security in
accordance with one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is economically reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of any Pledgor against any other Loan Party, or any
security for any of the Secured Obligations; and (vi) exercise any other rights
available to it under the Loan Documents; and

 

(d)                   this Agreement
and such Pledgor’s obligations hereunder shall be valid and enforceable, and
shall not be subject to any reduction, limitation, impairment, discharge or
termination for any reason (other than payment in full of all the Secured
Obligations), including the occurrence of any of the following (whether or not
such Pledgor shall have had notice or knowledge of any of them): (i) any
failure or omission to assert or enforce, any agreement or election not to
assert or enforce, or any stay or enjoining by order of any court, by operation
of law or otherwise, of the exercise or enforcement of any claim or demand, or
any right, power or remedy (whether arising under the Loan Documents, at law,
in equity, or otherwise) with respect to the Secured Obligations or any
agreement related thereto, or with respect to any other guarantee of or
security for the payment of the Secured Obligations; (ii) any rescission,
waiver, amendment or modification of, or any consent to departure from, any of
the terms or provisions (including provisions relating to events of default)
hereof, any of the other Loan Documents, any agreement or instrument executed
pursuant thereto, or any guarantee or other security for the Secured
Obligations or any agreement relating thereto at any time being found to be
illegal, invalid or unenforceable in any respect; (iv) the application of
payments received form any source (other than payments received pursuant to the
other Loan Documents or from the proceeds of any security for the Secured
Obligations, except to the extent such security also serves as collateral for
Indebtedness other than the Secured Obligations); (v) consent of Collateral
Agent or any other Secured Party to the change, reorganization or termination
of the corporate structure or existence of any Loan Party or any Subsidiary
thereof, and to any corresponding restructuring of the Secured Obligations;
(vi) any failure to perfect or continue perfection of a security interest in
any collateral that secures any of the Secured Obligations; (vii) any defenses,
set-offs or counterclaims that any Loan Party may allege or assert against
Collateral Agent or any other Secured Party in respect of the Secured
Obligations, including failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction, and usury;
and (viii) any other act, thing or omission, or delay to do any other act or
thing, that in any manner and to any extent may vary such Pledgor’s risk as a
grantor of security securing the Secured Obligations.

 

SECTION 6.02.                 GENERAL
WAIVERS. Each Pledgor hereby waives, for the benefit of Collateral Agent and
the Secured Parties: (a) all rights to require Collateral Agent or any other
Secured Party, as a condition to exercising Collateral Agent’s rights hereunder
against

 

25

 

the Security Agreement Collateral, to (i)
proceed against any other Loan Party, any other pledgor (including any other
Pledgor) of security securing any of the Secured Obligations, or any other
person, (ii) proceed against or exhaust any security held from any other Loan
Party, any such other pledgor or any other person, (iii) proceed against or
have resort to any balance of any Deposit Account or credit on the books of
Collateral Agent or any other Secured Party in favor of any other Loan Party or
any other person, or (iv) pursue any other remedy whatsoever in the capacity of
secured party; (b) any defense arising by reason of incapacity, lack of
authority, or any disability or other defenses of any other Loan Party,
including any defense based on or arising from the lack of validity or
enforceability of any of the Secured Obligations or any agreement or instrument
relating thereto, or by reason of the cessation of the liability of any other
Loan Party from any cause other than the payment in full of all the Secured
Obligations; (c) any defense based on any statute or rule of law that provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal; (d) any defense based on
errors or omissions by Collateral Agent or any other Secured Party in the
administration of any of the Secured Obligations, except behavior that amounts
to bad faith, gross negligence or willful misconduct; (e) any principles or
provisions of law, statutory or otherwise, that are or may be in conflict with
the terms hereof, and any legal or equitable discharge of such Pledgor’s
obligations hereunder; (f) the benefit of any statute of limitations affecting
such Pledgor’s counterclaims; (g) promptness, diligence and any requirement
that Collateral Agent or any other Secured Party protect, secure, perfect or
insure any security interest or Lien or any property subject thereto; (h)
notices, demands, presentments, protests, notices of protest, notices of
dishonor and notices of any action or inaction, including acceptance hereof,
notices of default hereunder, notices of any renewal, extension or modification
of any of the Secured Obligations or any agreement related thereto, notices of
any extension of credit to any other Loan party and notices of any of the
matters referred to in Section 6.01, and any right to consent to any
thereof; and (i) any defenses or benefits that may be derived from or afforded
by law that limit the liability of or exonerate pledgors or sureties, or that
may conflict with the terms hereof.

 

SECTION 6.03.                 CALIFORNIA
WAIVERS. For purposes of this Section 6.03 only, references to the
“principal” include each Loan Party and references to the “creditor” include
each Secured Party. In accordance with Section 2856 of the California
Civil Code, each Pledgor waives all rights and defenses (i) available to such
Pledgor by reason of Sections 2787 through 2855, 2899, and 3433 of the
California Civil Code, including all rights or defenses such Pledgor may have
by reason of protection afforded to the principal with respect to any of the
Secured Obligations, or to any other person liable for any of the Secured
Obligations, in either case in accordance with the antideficiency or other laws
of the State of California limiting or discharging the principal’s Indebtedness
or such person’s obligations, including Sections 580a, 580b, 580d and 726 of
the California Code of Civil Procedure; and (ii) arising out of an election of remedies
by the creditor, even though such election, such as a nonjudicial foreclosure
with respect to security for any Secured Obligation (or any obligation of any
other person of any of the Secured Obligations), has destroyed such Pledgor’s
right of subrogation and reimbursement against the principal (or such other
person), by operation of Section 580d of the California Code of Civil
Procedure or otherwise. No other provision of this Agreement shall be construed
as limiting the generality of any of the covenants and waivers set forth in
this Section 6.03. As provided below, this Agreement shall be governed by,
and shall be construed and enforced in accordance with the laws of the State of
New York. This Section 6.03 is included solely out of an abundance of caution,
and shall not be construed to mean that any of the above-referenced provisions
of California law are in any way applicable to this Agreement or to any of the
Secured Obligations.

 

26

 

ARTICLE VII

 

MISCELLANEOUS

 

SECTION 7.01.                 CONCERNING
COLLATERAL AGENT.

 

(a)                    Collateral
Agent has been appointed as Collateral Agent pursuant to Article X of the
Credit Agreement. The actions of Collateral Agent hereunder are subject to the
provisions of the Credit Agreement. Collateral Agent shall have the right
hereunder to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking action (including the
release or substitution of the Security Agreement Collateral), in accordance
with this Agreement and the Credit Agreement. Collateral Agent may employ
agents and attorneys-in-fact in connection herewith. Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Credit Agreement. Upon the acceptance of any appointment as Collateral
Agent by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent under this Agreement, and the
retiring Collateral Agent shall thereupon be discharged from its duties and
obligations under this Agreement. After any retiring Collateral Agent’s
resignation, the provisions hereof shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Collateral
Agent.

 

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

 

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

 

(d)                   With respect to
any of its rights and obligations as a Lender, Collateral Agent shall have and
may exercise the same rights and powers hereunder. The term “Lenders,” “Lender”
or any similar terms shall, unless the context clearly otherwise indicates,
include Collateral Agent in its individual capacity as a Lender. Collateral
Agent may accept deposits from, lend money to, and generally engage in any kind
of banking, trust or other business with such Pledgor or any Affiliate of such
Pledgor to the same extent as if Collateral Agent were not acting as Collateral
Agent.

 

(e)                    If any item of
Security Agreement Collateral also constitutes collateral granted to Collateral
Agent under any other deed of trust, mortgage, security agreement, pledge or
instrument of any type, in the event of any conflict between the provisions
hereof and the provisions of such other deed of trust, mortgage, security
agreement, pledge or instrument of

 

27

 

any type in respect of such collateral,
Collateral Agent, in its sole discretion, shall select which provision or
provisions shall control.

 

SECTION 7.02.                 COLLATERAL
AGENT MAY PERFORM; COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. If an Event of
Default shall have occurred and be continuing, Collateral Agent may (but shall
not be obligated to) remedy or cause to be remedied any such breach, and may
expend funds for such purpose; provided that, Collateral Agent shall in no
event be bound to inquire into the validity of any tax, lien, imposition or
other obligation that such Pledgor fails to pay or perform as and when required
hereby and that such Pledgor does not contest in accordance with the provision
of Section 6.02 of the Credit Agreement. Any and all amounts so expended
by Collateral Agent shall be paid by the Pledgors in accordance with the
provisions of Section 7.03. Neither the provisions of this
Section 7.02 nor any action taken by Collateral Agent pursuant to the
provisions of this Section 7.02 shall prevent any such failure by any
Pledgor to observe any covenant contained in this Agreement nor any breach of
warranty from constituting an Event of Default. Each Pledgor hereby appoints
Collateral Agent its attorney-in-fact, with full authority in the place and
stead of such Pledgor and in the name of such Pledgor, or otherwise, from time
to time during the continuance of an Event of Default in Collateral Agent’s
discretion to take any action and to execute any instrument consistent with the
terms hereof and the other Loan Documents that Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof. The foregoing grant
of authority is an irrevocable power of attorney coupled with an interest and such
appointment shall be irrevocable for the term hereof. Each Pledgor hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof.

 

SECTION 7.03.                 EXPENSES.
Each Pledgor will promptly pay to Collateral Agent the amount of any and all
costs and expenses, including the reasonable fees and expenses of its counsel
and the fees and expenses of any experts and agents, that Collateral Agent may
incur in connection with this Agreement, including all costs and expenses
relating to (a) any and all filings and other actions taken to ensure the
attachment, perfection and priority of, and the ability of Collateral Agent to
enforce, Collateral Agent’s security interest in the Security Agreement
Collateral; (b) any action, suit or other proceeding affecting the Security
Agreement Collateral or any part thereof commenced, in which action, suit or
proceeding Collateral Agent is made a party or participates or in which the
right to use the Security Agreement Collateral or any part thereof is threatened,
or in which it becomes necessary in the judgment of Collateral Agent to defend
or uphold the Lien hereof (including any action, suit or proceeding to
establish or uphold the compliance of the Security Agreement Collateral with
any requirements of any Governmental Authority or law); (c) the collection of
the Secured Obligations; (d) the enforcement and administration hereof; (e) the
custody or preservation of, or the sale of, collection from, or other
realization on, any of the Security Agreement Collateral; (f) the exercise or
enforcement of any of the rights of Collateral Agent or any Secured Party
hereunder; or (g) the failure by any Pledgor to perform or observe any of the
provisions hereof. All amounts expended by Collateral Agent and payable by any
Pledgor under this Section 7.03 shall be due upon demand therefor
(together with interest thereon accruing at the default rate during the period
from and including the date on which such funds were so expended to the date of
repayment) and shall be part of the Secured Obligations. Each Pledgor’s
obligations under this Section 7.03 shall survive the termination hereof
and the discharge of such Pledgor’s other obligations under this Agreement, the
Credit Agreement and the other Loan Documents.

 

28

 

SECTION 7.04.                 INDEMNITY.

 

(a)                    INDEMNITY.
Each Pledgor agrees to indemnify, defend and hold harmless Collateral Agent and
each of the other Secured Parties, and the officers, directors, employees,
agents and Affiliates of Collateral Agent and each of the other Secured Parties
(collectively, the “INDEMNITEES”) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs (including settlement costs), expenses or disbursements of any kind or
nature whatsoever (including the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or any other Loan Document (including any misrepresentation by any
Pledgor in this Agreement or any other Loan Document) (the “INDEMNIFIED
LIABILITIES”); provided that, no Pledgor shall have any obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities if it has been
determined by a final decision of a court of competent jurisdiction that such
Indemnified Liabilities arose from the gross negligence or willful misconduct
of that Indemnitee. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, each Pledgor shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.

 

(b)                   SURVIVAL. The
obligations of the Pledgors contained in this Section 7.04 shall survive
the termination hereof and the discharge of the Pledgors’ other obligations
under this Agreement, any Hedging Agreement and under the other Loan Documents.

 

(c)                    REIMBURSEMENT.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Secured Obligations secured by the Security
Agreement Collateral.

 

SECTION 7.05.                 CONTINUING
SECURITY INTEREST; ASSIGNMENT. This Agreement shall create a continuing
security interest in the Security Agreement Collateral and shall (a) remain in
full force and effect until the payment in full of all Secured Obligations, (b)
be binding on the Pledgors, their respective successors and assigns, and (b)
inure, together with the rights and remedies of the Lender hereunder, to the
benefit of Collateral Agent and the other Secured Parties and each of their
respective permitted successors, transferees and assigns. No other persons (including
any other creditor of any Pledgor) shall have any interest herein or any right
or benefit with respect hereto. Without limiting the generality of the
foregoing clause (b), any Secured Party may assign or otherwise transfer any
Indebtedness held by it that is secured by this Agreement to any other person,
and such other person shall thereupon become vested with all the benefits in
respect thereof granted to such Secured Party, herein or otherwise, subject
however, to the provisions of the other Loan Documents and any Hedging
Agreement to which such Secured Party is a party.

 

SECTION 7.06.                 TERMINATION;
RELEASE. Upon payment in full of all the Secured Obligations, or upon any
partial release of Security Agreement Collateral in accordance with the other Loan
Documents, the security interests granted hereby shall terminate hereunder and
of record, and all rights to the Security Agreement Collateral shall revert to
the Pledgors, it being understood that in the case any such partial release,
the security interests granted hereby shall terminate hereunder and of record
only with respect to such Security Agreement Collateral subject to such partial
release. Upon any such termination, Collateral Agent shall, at the

 

29

 

Pledgors’ expense, execute and deliver to
the Pledgors such documents, and take such other actions, as the Pledgors
reasonably request to evidence such termination.

 

SECTION 7.07.                 MODIFICATION
IN WRITING. No amendment, modification, supplement, termination or waiver of or
to any provision hereof, nor consent to any departure by any Pledgor therefrom,
shall be effective unless the same shall be made in accordance with the terms
of the Credit Agreement and unless in writing and signed by Collateral Agent.
Any amendment, modification or supplement of or to any provision hereof, any
waiver of any provision hereof and any consent to any departure by any Pledgor
from the terms of any provision hereof shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement or any other document
evidencing the Secured Obligations, no notice to or demand on any Pledgor in
any case shall entitle any Pledgor to any other or further notice or demand in
similar or other circumstances.

 

SECTION 7.08.                 NOTICES.
Unless otherwise provided herein or in the Credit Agreement, any notice or
other communication herein required or permitted to be given shall be given in
the manner and become effective as set forth in the Credit Agreement, if to any
Pledgor, addressed to it at the address of Borrower set forth in the Credit
Agreement, and if to Collateral Agent, addressed to it at the address set forth
in the Credit Agreement, or in each case at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 7.08.

 

SECTION 7.09.                 GOVERNING
LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

 

(a)                    THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT, IN ACCORDANCE WITH
CHOICE-OF-LAW PRINCIPLES, THAT THE PERFECTION OF THE SECURITY INTERESTS GRANTED
HEREUNDER, OR REMEDIES HEREUNDER IN RESPECT OF ANY ITEM OR TYPE OF SECURITY
AGREEMENT COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.

 

(b)                   Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement or any other
Loan Document shall affect any right that Collateral Agent or any other Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against any Pledgor or its properties in
the courts of any jurisdiction.

 

(c)                    Each Pledgor
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter

 

30

 

have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in Section 7.09(b). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(d)                   Each party to
this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.08. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

 

SECTION 7.10.                 WAIVER
OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

 

SECTION 7.11.                 SEVERABILITY
OF PROVISIONS. Any provision hereof that 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 or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

SECTION 7.12.                 EXECUTION
IN COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all such counterparts together
shall constitute one and the same agreement.

 

SECTION 7.13.                 BUSINESS
DAYS. In the event any time period or any date provided in this Agreement ends
or falls on a day other than a Business Day, then such time period shall be
deemed to end and such date shall be deemed to fall on the next succeeding
Business Day, and performance herein may be made on such Business Day, with the
same force and effect as if made on such other day.

 

SECTION 7.14.                 NO
CREDIT FOR PAYMENT OF TAXES OR IMPOSITION. Each Pledgor shall not be entitled
to any credit against the principal, premium (if any), or interest payable under
the Credit Agreement, and such Pledgor shall not be entitled to any credit
against any other sums that may become payable under the terms thereof or
hereof, by reason of the payment of any Tax on the Security Agreement
Collateral or any part thereof.

 

SECTION 7.15.                 NO
CLAIMS AGAINST COLLATERAL AGENT. Nothing contained in this Agreement shall
constitute any consent or request by Collateral Agent, express or implied, for
the performance of any labor or services or the furnishing of any materials or
other property in respect of the Security Agreement Collateral or any part
thereof, nor as giving any Pledgor any right, power or authority to contract
for or permit the performance of any labor or

 

31

 

services or the furnishing of any materials
or other property in such fashion as would permit the making of any claim
against Collateral Agent in respect thereof or any claim that any Lien based on
the performance of such labor or services or the furnishing of any such
materials or other property is prior to the Lien hereof.

 

SECTION 7.16.                 NO
RELEASE UNDER AGREEMENTS; NO LIABILITY OF COLLATERAL AGENT OR SECURED PARTIES.
Nothing set forth in this Agreement shall relieve the Pledgor from the
performance of any term, covenant, condition or agreement on the Pledgor’s part
to be performed or observed under or in respect of any of the Security
Agreement Collateral, or from any liability to any person under or in respect
of any of the Security Agreement Collateral, or shall impose any obligation on
Collateral Agent or any other Secured Party to perform or observe any such
term, covenant, condition or agreement on the Pledgor’s part to be so performed
or observed, or shall impose any liability on Collateral Agent or any other Secured
Party for any act or omission on the part of the Pledgor relating thereto or
for any breach of any Hedging Agreement, any representation or warranty on the
part of the Pledgor contained in this Agreement, Credit Agreement or the other
Security Documents, or under or in respect of the Security Agreement Collateral
or made in connection herewith or therewith. The obligations of the Pledgor
contained in this Section 7.16 shall survive the termination hereof and
the discharge of the Pledgor’s other obligations under this Agreement, the
Credit Agreement, any Hedging Agreement and the other Security Documents.

 

SECTION 7.17.                 OBLIGATIONS
ABSOLUTE. Subject to Section 7.09 of the Credit Agreement, all obligations
of each Pledgor hereunder shall be absolute and unconditional irrespective of:

 

(a)                    any
bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
liquidation or the like of any Pledgor or any other Loan Party;

 

(b)                   any lack of
validity or enforceability of the Credit Agreement, any Hedging Agreement or
any other Loan Document, or any other agreement or instrument relating thereto;

 

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

 

(d)                   any pledge,
exchange, release or nonperfection of any other collateral, or any release or
amendment or waiver of or consent to any departure from any guarantee, for all
or any of the Secured Obligations, except to the extent that any such
amendment, waiver or consent expressly relieves such Pledgor of any
obligations;

 

(e)                    any exercise,
nonexercise or waiver of any right, remedy, power or privilege under or in
respect hereof, the Credit Agreement, any Hedging Agreement or any other Loan
Document except as specifically set forth in a waiver granted pursuant to the
provisions of Section 5.03; or

 

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

 

32

 

SECTION 7.18.                 MARSHALING;
PAYMENTS SET ASIDE. Collateral Agent shall not be under any obligation to
marshal any assets in favor of any Pledgor or any other person or against or in
payment of any or all of the Secured Obligations.

 

SECTION 7.19.                 RELEASE
OF PLEDGORS. If any Pledgor is released from its Guarantee in accordance with
the provisions of the Credit Agreement, then Collateral Agent shall (at the
expense of Borrower) take all action necessary to release its security interest
in that portion of the Security Agreement Collateral owned by such Pledgor, and
shall release such Pledgor from its obligations hereunder (other than
obligations intended to survive the termination hereof), in each case subject
to and in accordance with Section 7.09 of the Credit Agreement.

 

{Signature Pages Follow}

 

33

 

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

 

	
   

  	
  HERBALIFE INTERNATIONAL, INC., a

  	
   

  
	
   

  	
  Nevada corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  WH HOLDINGS (CAYMAN ISLANDS) LTD.,

  	
   

  
	
   

  	
  a Cayman Islands corporation, as a
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  WH INTERMEDIATE HOLDINGS LTD., a

  	
   

  
	
   

  	
  Cayman Islands corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  WH LUXEMBOURG CM S.a.R.L., a

  	
   

  
	
   

  	
  Luxembourg corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

34

 

	
   

  	
  WH LUXEMBOURG HOLDINGS S.a.R.L.,

  	
   

  
	
   

  	
  a Luxembourg corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  WH LUXEMBOURG INTERMEDIATE HOLDINGS

  	
   

  
	
   

  	
  S.a.R.L., a Luxembourg corporation, as a
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

	
   

  	
  HERBALIFE INTERNATIONAL OF

  	
   

  
	
   

  	
  AMERICA, INC., a California corporation,
  as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

	
   

  	
  HERBALIFE INTERNATIONAL OF EUROPE,

  	
   

  
	
   

  	
  INC., a California corporation, as a
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

35

 

 

	
   

  	
  HERBALIFE INTERNATIONAL

  	
   

  
	
   

  	
  COMMUNICATIONS, INC., a California

  	
   

  
	
   

  	
  corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE INTERNATIONAL

  	
   

  
	
   

  	
  DISTRIBUTION, INC., a California
  corporation,

  	
   

  
	
   

  	
  as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE TAIWAN, INC., a California

  	
   

  
	
   

  	
  corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

	
   

  	
  HERBALIFE INTERNATIONAL

  	
   

  
	
   

  	
  (THAILAND), LTD., a California
  corporation,

  	
   

  
	
   

  	
  as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

36

 

	
   

  	
  HERBALIFE CHINA LLC, a Delaware limited

  	
   

  
	
   

  	
  liability company, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

	
   

  	
  HERBALIFE INTERNATIONAL DO BRASIL

  	
   

  
	
   

  	
  LTDA., a corporation dually incorporated
  in

  	
   

  
	
   

  	
  Brazil and Delaware, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE INTERNATIONAL OF ISRAEL

  	
   

  
	
   

  	
  (1990) LTD., an Israeli corporation, as a
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE OF JAPAN K.K., a corporation

  	
   

  
	
   

  	
  dually incorporated in Japan and
  Delaware, as a

  	
   

  
	
   

  	
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

37

 

	
   

  	
  HERBALIFE INTERNATIONAL FINLAND

  	
   

  
	
   

  	
  OY, a Finnish corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE INTERNACIONAL DE

  	
   

  
	
   

  	
  MEXICO, S.A. DE C.V., a Mexican
  corporation,

  	
   

  
	
   

  	
  as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE PRODUCTS DE MEXICO, S.A.

  	
   

  
	
   

  	
  DE C.V., a Mexican corporation, as a
  Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE SWEDEN AKTIEBOLAG, a

  	
   

  
	
   

  	
  Swedish corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

38

 

 

	
   

  	
  HERBALIFE EUROPE LIMITED, a United

  	
   

  
	
   

  	
  Kingdom corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  HERBALIFE (UK) LIMITED, a United

  	
   

  
	
   

  	
  Kingdom corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

 

	
   

  	
  UBS AG, STAMFORD BRANCH, as Collateral

  	
   

  
	
   

  	
  Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Security Agreement

  

 

39

 

EXHIBIT A

 

{Form of}

ISSUER ACKNOWLEDGMENT

 

The undersigned
hereby (a) acknowledges receipt of a copy of that certain security agreement
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the “SECURITY AGREEMENT”; capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Security
Agreement), dated as of July 31, 2002, among Herbalife International,
Inc., a Nevada corporation (“BORROWER”), the Guarantors (defined therein), and
UBS AG, Stamford Branch, as collateral agent (in such capacity and together
with any successors in such capacity, “COLLATERAL AGENT”); (b) agrees promptly
to note on its books the security interests granted to Collateral Agent and
confirmed under the Security Agreement; (c) agrees that it will comply with
Collateral Agent’s instructions with respect to the applicable Securities
Collateral without further consent by the applicable Pledgor; (d) agrees to
notify Collateral Agent upon obtaining knowledge of any interest in favor of
any person in the applicable Securities Collateral that is adverse to the
interest of Collateral Agent therein; and (e) waives any right or requirement
at any time hereafter to receive a copy of the Security Agreement in connection
with the registration of any Securities Collateral thereunder in the name of
Collateral Agent or its nominee or the exercise of voting rights by Collateral
Agent or its nominee.

 

 

	
   

  	
  {NAME OF ISSUER}

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

A-1EXHIBIT 10.15

 

NOTICE TO DISTRIBUTORS

 

Dated As Of July 18, 2002

 

Regarding

 

Amendment To
The Agreements Of Distributorship

 

Between

 

HERBALIFE INTERNATIONAL, INC.

 

And

 

EACH HERBALIFE DISTRIBUTOR

 

 

AMENDMENT TO AGREEMENTS OF
DISTRIBUTORSHIP

 

THIS AMENDMENT TO THE AGREEMENTS OF
DISTRIBUTORSHIP (“Amendment”) is made and entered into as of July 18, 2002
by HERBALIFE INTERNATIONAL, INC., a Nevada corporation (the “Company”), for the
benefit of all of the Company’s existing and future independent distributors
that meet (and continue to meet) the requirements to become (or remain) a
distributor according to Company policy (“Distributors”).

 

RECITALS

 

A.                                   Whereas the
Company distributes its products through individuals acting as independent
distributors.

 

B.                                     Whereas the
Company acknowledges the importance of its Distributors to the ongoing success
and growth of the Company.

 

C.                                     Whereas the
Company has operated for years based on paying its Distributors under the
Company Sales and Marketing Plan and utilizing its Distributors as its
exclusive means of distribution for the sale of Herbalife products.

 

D.                                    Whereas the
Distributors, to continue as Herbalife Distributors, desire assurances that no
material changes adverse to the Distributors will be made to the existing
Company Sales and Marketing Plan or the use of Distributors as the exclusive
means of distribution of Herbalife products.

 

E.                                      Whereas in
consideration for the Company giving assurances that no material changes
adverse to the Distributors will be made to the existing Company Marketing Plan
or to its use of Distributors as the exclusive means of distribution of
Herbalife products, the Distributors will continue to distribute Herbalife
products following the consummation of the proposed merger pursuant to the
Agreement and Plan of Merger by and among the Company, WH Acquisition Corp. and
WH Holdings (Cayman Islands) Ltd. dated as of April 10, 2002.

 

NOW, THEREFORE, in consideration of the
foregoing, the receipt and adequacy of which is hereby acknowledged, the
Company agrees as follows:

 

1.                                       Distribution
of Company Products by Independent Distributors. The Company agrees to continue
to distribute its products exclusively through individuals acting as
independent Distributors. Such Distributors will be encouraged both to sell
products directly to customers and (subject to compliance with any applicable
law) to develop their own networks of individuals acting as independent
Distributors. Subject to compliance with any applicable law (United States
federal, state or local, and the laws of any other governmental authority with
jurisdiction over the Company), the Company also agrees not to materially
change the existing requirements for becoming a Distributor, which will
continue to be minimal and non-burdensome.

 

In connection with the distribution of the
Company’s products, the Company shall therefore not (i) adopt any strategy
which would entail multiple distribution channels, (ii) enter into any
exclusive sales agreement, or (iii) enter into any exclusive license agreement
with respect to any geographic area or territory.

 

2.                                       Establishment
and Maintenance of Distributor Networks. The Company agrees to continue to
permit the development of Distributor networks without any geographic or
exclusive territory restrictions, subject to limitations on activities in
countries which have not been cleared by the Company for product sales and
subject to restrictions imposed on the development of such Distributor

 

1

 

networks by any
governmental authority, including but not limited to any applicable laws or
regulations. The Company will continue to develop and maintain rules and
regulations and other Company policies and procedures to assist the
Distributors in establishing networks and maintain and protect the integrity of
Distributor networks once established.

 

3.                                       Marketing
Plan. The Company may increase but not decrease the current discount
percentages available to Distributors for the purchase of products from the
Company and may increase but not decrease the applicable royalty override
percentages (including roll-ups) and production and other bonus percentages
available to Distributors at various qualification levels below the percentage
levels currently provided for in the Company’s Sales and Marketing Plan,
including the Rules of Conduct & Distributor Policies (the “Rules of
Conduct”), the Company’s Career Book and other Company promotional material and
literature regarding Distributors (collectively, “Company Distributor Material”),
in effect as of the date hereof.

 

The Company further agrees not to modify
the criteria for eligibility for such discounts and/or the qualification
criteria for royalty overrides and production and other bonuses, unless it does
so in a manner to make eligibility and/or qualification easier but not more
difficult than under the applicable criteria currently provided for in Company
Distributor Material in effect as of the date hereof.

 

The Company also agrees not to vary the
criteria for qualification for each distributor tier (including, without
limitation, the Chairman’s Club, 50K President, 30K President, 20K President,
President’s Team, Millionaire Team, Global Expansion Team, World Team,
Supervisor and Senior Consultant tiers) unless it does so in such a way so as
to make qualification easier but not more difficult.

 

Without limiting the foregoing, (i) the
Company may decrease but may not increase the royalty override qualification
thresholds of 1,000, 4,000, 10,000, 20,000, 30,000, and 50,000 royalty override
points for 2%, 4%, 6% 6.5%, 6.75% and 7% production bonuses, respectively, paid
to TAB Team Distributors and may increase but may not decrease such
percentages, (ii) the Company may increase but not decrease the aggregate
President’s Council bonus below its current level of 1% of retail product sales
and (iii) the Company may not, in countries where the Company is currently
operating, materially change the relative relationship between the volume
points, the adjusted retail price and/or the retail price of all products sold
by the Company in the markets in which such products are being sold, unless
such changes are made to convert adjusted retail prices up to a full retail
price basis (i.e., one volume point per US $1.00 in the United States) or unless
such changes are required by applicable law or are necessary in the Company’s
reasonable business judgment to account for specific local market conditions or
local currency conditions to achieve a reasonable profit on operations in such
respective market or markets.

 

4.                                       Herbalife
Products. The Company will continue to endeavor to provide Distributors with
high quality products for distribution, and will use reasonable commercial
efforts to meet the demand of Distributors for the Company’s products.

 

5.                                       Termination
of Distributors. The Company maintains the right to terminate any Distributor
of the Company who violates the Company Rules of Conduct and Distributor
Policies or other rules and regulations of the Company as adopted or amended,
consistent with Company policies and procedures as

 

2

 

published in the
Career Manual or other Company literature (the “Company Rules”). The Company
however does not have the right to terminate a Distributor who does not violate
the Company Rules.

 

A terminated Distributor must however be
provided an opportunity to appeal such decision in accordance with the Rules of
Conduct and Distributor policies and must be given an opportunity to present
evidence relevant to the termination decision.

 

Upon receipt of the appeal and other
evidence, the Company must review the terminated Distributor’s file and prepare
a summary of the evidence for and against such termination and submit such
summary without identifying the complaining party or parties, the terminated
Distributor or his or her upline or downline to a committee comprised of an
appointed representative from each of the Sales Department, the Distributor
Relations Department and the Legal Department (the “Review Committee”). If a
majority of the Review Committee determines that the terminated Distributor
should not have been terminated, the Distributor shall be reinstated, but the
Review Committee shall recommend an alternative penalty, if any, for the
alleged violations. In making a termination decision, however, the Review
Committee must consider whether the alleged violation was material.

 

6.                                       Death of A Distributor. Subject to applicable laws, a Distributorship
may, upon the death of the Distributor, be transferred to a spouse or heir who
is, or upon the transfer becomes, an active participant in the business,
subject to the prior written approval of Herbalife, which approval shall not be
unreasonably withheld, and subject to reasonable terms and conditions of
transfer (including, without limitation, demonstration to Herbalife’s
satisfaction that the proposed transferee has the ability to actively promote
the business and provide services as a distributor).

 

In the event of such a transfer, the
transferee shall succeed to the qualification level and earning status
generated by the Distributorship without any reduction based solely as a result
of the death of the decedent.

 

7.                                       Privacy.
The Company agrees that all Distributor records are confidential and will not
disclose any such information except (i) in the ordinary course of business,
(ii) as determined by the Board of Directors or senior management of the
Company to be necessary or appropriate so long as the recipient of any such
information is bound by a confidentiality agreement and as may be required by
law, legal process, regulation or other reasonable governmental or governmental
agency request.

 

8.                                       Term. The
term of this Amendment shall commence from the Effective Date hereof as set
forth in Section 11 of this Amendment and shall continue until terminated
or amended by the approval of (a) not less than fifty-one percent (51%) of the
Distributors then at the level of Presidents Team earning at the production
bonus level of 6% of the Company who respond to ballots sent to 100% of such
Distributors, provided however that at least 50% of those Distributors entitled
to vote return their ballots to the Company; and (b) a majority of the Board of
Directors of the Company.

 

9.                                       Future
Distributors.  The Company makes this
Amendment for the benefit of all future Distributors and agrees to include this
Amendment in the terms of the Agreement of Distributorship of each future
Distributor.

 

10.                                 Controlling
Effect. In the event of any inconsistency between this

 

3

 

Amendment, any Company Distributor Material
and any other document, instrument or agreement to which the Company is now or
hereafter becomes a party, the provisions of this Amendment, as amended (or
terminated) in accordance with Section 8 of this Amendment, shall prevail
and be given effect.

 

11.                                 Effective
Date. This Amendment is expressly conditioned upon and shall be effective only
upon the date of consummation of the proposed merger pursuant to the Agreement
and Plan of Merger by and among the Company, WH Acquisition Corp and WH
Holdings (Cayman Islands) Ltd. dated as of April 10, 2002.

 

12.                                 Governing
Law. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of California, without regard to
conflicts of law principles.

 

13.                                 Successors
and Assigns. All covenants and other agreements contained in this Amendment by
or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors (including, without limitation, any successor in
any merger, consolidation or other business combination in which the Company is
not the surviving entity) and assigns whether so expressed or not. This
Amendment may not be assigned by the Company; provided, however, that in the
event substantially all of the assets or substantially all of the business of
the Company or the Herbalife trade names or trademarks are to be disposed of by
the Company in one or a series of transactions, the Company shall assign this
Amendment to the Acquiror(s) of substantially all of the assets or
substantially all of the business of the Company or the Herbalife trade names
or trademarks in such transaction or transactions and such Acquiror(s) will
agree to assume the Company’s obligations hereunder. This Section 13 will
apply to successive successors (including, without limitation, any successor in
any merger, consolidation or other business combination in which the Company is
not the surviving entity) of the parties hereto and successive assigns of this
Amendment. In consideration of the provisions of this Section 13, each
Distributor accepting the benefits of this amendment agrees not to employ or
recruit any present, former or future employee or Distributor of the Company or
any of its subsidiaries to serve in any type of management capacity, as an
employee, consultant, advisor, distributor, member or otherwise, for any person
or entity, other than the Company or any of its subsidiaries, that engages in
the business of selling products through a multi-level or network marketing
system or the sale of weight management products, nutritional supplements or
personal care products anywhere in the United States or any other country in
which the Company or one of its subsidiaries operates.

 

14.                                 Severability
of Provisions. The provisions of this Amendment are severable, and the
invalidity or unenforceability of any provision or provisions of this Amendment
or portions thereof shall not affect the validity or enforceability of any
other provision, or portion of this Amendment, which shall remain in full force
and effect as if executed with the unenforceable or invalid provisions or
portion thereof eliminated.

 

4

 

IN WITNESS WHEREOF, the parties have
executed this Amendment as of the date first above written.

 

	
   

  	
  HERBALIFE INTERNATIONAL, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Francis X. Tirelli 

  
	
   

  	
  Name: 

  	
  Francis X. Tirelli

  
	
   

  	
  Title:

  	
  President & CEO

  

 

5

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