Document:

exv10w3

 

Exhibit 10.3

 

INTERCREDITOR AGREEMENT

among

AMERICAN PACIFIC CORPORATION,

as the Company,

THE DOMESTIC SUBSIDIARIES OF THE COMPANY

FROM TIME TO TIME PARTY HERETO,

as Guarantors,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the First Lien Administrative Agent,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Second Lien Administrative Agent

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Control Agent

Dated
as of November 30, 2005

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	SECTION 1 Definitions
	 	 	2	 
	1.1 Defined Terms
	 	 	2	 
	1.2 Terms Generally
	 	 	11	 
	 
	 	 	 	 
	SECTION 2 Lien Priorities
	 	 	11	 
	2.1 Relative Priorities
	 	 	11	 
	2.2 Failure to Perfect
	 	 	11	 
	2.3 Nature of First Lien Obligations
	 	 	12	 
	2.4 Prohibition on Contesting Liens
	 	 	12	 
	2.5 No New Liens
	 	 	12	 
	2.6 Similar Liens and Agreements
	 	 	13	 
	 
	 	 	 	 
	SECTION 3 Enforcement
	 	 	14	 
	3.1 Exercise of Remedies
	 	 	14	 
	3.2 Actions Upon Breach
	 	 	16	 
	 
	 	 	 	 
	SECTION 4 Payments
	 	 	17	 
	4.1 Application of Proceeds
	 	 	17	 
	4.2 Payment Turnover
	 	 	17	 
	4.3 Permitted Mandatory Prepayments of Second Lien Obligations
	 	 	17	 
	 
	 	 	 	 
	SECTION 5 Other Agreements
	 	 	18	 
	5.1 Releases
	 	 	18	 
	5.2 Insurance
	 	 	19	 
	5.3 Amendments to Credit Documents
	 	 	20	 
	5.4 Rights As Unsecured Creditors
	 	 	22	 
	5.5 Control Agent for Perfection
	 	 	22	 
	5.6 [RESERVED]
	 	 	24	 
	5.7 Purchase Right
	 	 	24	 
	 
	 	 	 	 
	SECTION 6 Insolvency or Liquidation Proceedings
	 	 	25	 
	6.1 Use of Cash Collateral and Financing Issues
	 	 	25	 
	6.2 Sale Issues
	 	 	25	 
	6.3 Relief from the Automatic Stay
	 	 	26	 
	6.4 Adequate Protection
	 	 	26	 
	6.5 No Waiver
	 	 	27	 
	6.6 Avoidance Issues
	 	 	27	 
	6.7 Separate Grants of Security and Separate Classification
	 	 	27	 
	6.8 Reorganization Securities
	 	 	28	 
	6.9 Post-Petition Claims
	 	 	28	 
	6.10 Waiver
	 	 	28	 
	6.11 Expense Claims
	 	 	29	 
	6.12 [RESERVED]
	 	 	29	 
	6.13 Effectiveness in Insolvency or Liquidation Proceedings
	 	 	29	 

 

 

	 	 	 	 	 
	SECTION 7 Reliance; Waivers; Etc
	 	 	29	 
	7.1 Non-Reliance
	 	 	29	 
	7.2 No Warranties or Liability
	 	 	30	 
	7.3 No Waiver of Lien Priorities
	 	 	30	 
	7.4 Obligations Unconditional
	 	 	32	 
	7.5 Certain Notices
	 	 	33	 
	 
	 	 	 	 
	SECTION 8 Miscellaneous
	 	 	34	 
	8.1 Conflicts
	 	 	34	 
	8.2 Effectiveness; Continuing Nature of this Agreement; Severability
	 	 	34	 
	8.3 Amendments; Waivers
	 	 	34	 
	8.4 Information Concerning Financial Condition of Company and its Subsidiaries
	 	 	35	 
	8.5 Subrogation
	 	 	35	 
	8.6 Application of Payments
	 	 	36	 
	8.7 SUBMISSION TO JURISDICTION;WAIVER OF JURY TRIAL
	 	 	36	 
	8.8 Notices
	 	 	37	 
	8.9 Further Assurances
	 	 	37	 
	8.10 APPLICABLE LAW
	 	 	37	 
	8.11 Binding on Successors and Assigns
	 	 	37	 
	8.12 Specific Performance
	 	 	37	 
	8.13 Headings
	 	 	38	 
	8.14 Counterparts
	 	 	38	 
	8.15 Authorization
	 	 	38	 
	8.16 No Third Party Beneficiaries
	 	 	38	 
	8.17 Provisions Solely to Define Relative Rights
	 	 	38	 

 

 

INTERCREDITOR AGREEMENT

     This
Intercreditor Agreement, is dated as of November 30, 2005, and entered into by and
among AMERICAN PACIFIC CORPORATION, a Delaware corporation (the “Company”), the domestic
subsidiaries of the Company as may time to time party become a party hereto (the
“Guarantors”) and WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as administrative
agent for the First Lien Obligations (as defined below), including its successors and assigns from
time to time (the “First Lien Administrative Agent”), WACHOVIA BANK, NATIONAL ASSOCIATION,
in its capacity as administrative agent for the Second Lien Obligations under the Second Lien
Credit Agreement (as defined below), including its successors and assigns from time to time (the
“Second Lien Administrative Agent”) and WACHOVIA BANK, NATIONAL ASSOCIATION, in its
capacity as control agent for the First Lien Administrative Agent and the Second Lien
Administrative Agent, including its successor and assigns from time to time (the “Control
Agent”). Capitalized terms used herein but not otherwise defined herein have the meanings set
forth in Section 1 below.

RECITALS

     WHEREAS, the Company, as Borrower, the Guarantors, the lenders party thereto and Wachovia
Bank, National Association, as Administrative Agent, have entered into that certain First Lien
Credit Agreement dated as of the date hereof providing for a revolving credit and term loan
facility to the Company (as amended, restated, supplemented, modified or Refinanced from time to
time as permitted hereunder, the “Initial First Lien Credit Agreement”);

     WHEREAS, the Company, as Borrower, the Guarantors, the lenders party thereto and Wachovia
Bank, National Association, as Administrative Agent have entered into that certain Second Lien
Credit Agreement dated as of the date hereof providing for a term loan to the Company (as amended,
restated, supplemented, modified or Refinanced from time to time as permitted hereunder, the
“Initial Second Lien Credit Agreement”);

     WHEREAS, the obligations of the Company and the Guarantors under the Initial First Lien Credit
Agreement and any Hedge Agreements provided by any of the First Lien Claimholders (or their
affiliates) will be secured by substantially all of the assets of the Company, and the Guarantors
pursuant to the terms of the First Lien Collateral Documents;

     WHEREAS, the obligations of the Company and the Guarantors under the Initial Second Lien
Credit Agreement and any Hedge Agreements provided by any of the Second Lien Claimholders (or their
affiliates) will be secured by substantially all of the assets of the Company and the Guarantors
pursuant to the terms of the Second Lien Collateral Documents;

     WHEREAS, the First Lien Credit Documents and the Second Lien Credit Documents provide, among
other things, that the parties thereto shall set forth in this Agreement their respective rights
and remedies with respect to the Collateral; and

     WHEREAS, in order to induce the First Lien Administrative Agent and the First Lien
Claimholders to consent to the Grantors’ incurring the Second Lien Obligations and to induce the

 

 

First Lien Claimholders to extend credit and other financial accommodations to or for the
benefit of the Company, or any other Grantor, the Second Lien Administrative Agent on behalf of the
Second Lien Claimholders has agreed to the lien subordination, intercreditor and other provisions
set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and obligations herein
set forth and for other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

     SECTION 1 Definitions.

     1.1 Defined Terms. As used in the Agreement, the following terms shall have the
following meanings:

     “Affiliate” means as to any Person, any other Person that, directly or indirectly, is
in control of, is controlled by, or is under common control with, such Person. For purposes of
this definition, a Person shall be deemed to be “controlled by” a Person if such Person possesses,
directly or indirectly, power either (a) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person or (b) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.

     “Agreement” means this Intercreditor Agreement, as amended, renewed, extended,
supplemented or otherwise modified from time to time in accordance with the terms hereof.

     “Bankruptcy Code” means title 11 of the United States Code entitled “Bankruptcy,” as
now and hereafter in effect, or any successor statute.

     “Bankruptcy Law” means the Bankruptcy Code and all other liquidation, receivership,
moratorium, conservatorship, assignment for the benefit of creditors, insolvency or similar
federal, state or foreign law for the relief of debtors.

     “Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by
law to close.

     “Capital Lease” means any lease of property, real or personal, the obligations with
respect to which are required to be capitalized on a balance sheet of the lessee in accordance with
generally accepted accounting principles in effect in the United States of America applied on a
consistent basis.

     “Capital Lease Obligations” means the capitalized lease obligations relating to a
Capital Lease determined in accordance with generally accepted accounting principles in effect in
the United States of America applied on a consistent basis.

2

 

     “Capital Stock” means (i) in the case of a corporation, capital stock, (ii) in the
case of an association or business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of capital stock, (iii) in the case of a partnership,
partnership interests (whether general or limited), (iv) in the case of a limited liability
company, membership interests and (v) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.

     “Collateral” means all of the assets and property of any Grantor, whether tangible or
intangible, constituting both First Lien Collateral and Second Lien Collateral.

     “Control Agent” has the meaning set forth in Section in Section 5.5(a).

     “Control Collateral” means any Collateral consisting of any Certificated Security,
Instrument, Investment Property, Deposit Account (each as defined in the Uniform Commercial Code),
cash and any other Collateral as to which a first priority Lien shall or may be perfected through
possession or control by the secured party or any agent therefor.

     “Controlled Account” means those certain Deposit Accounts (as defined in the Uniform
Commercial Code) of any Grantor subject to Liens under the terms of the First Lien Collateral
Documents and the Second Lien Collateral Documents.

     “DIP Financing” has the meaning set forth in Section 6.1.

     “Discharge of First Lien Obligations” means, except to the extent otherwise provided
in Section 5.6, (i) payment in full in cash or other consideration acceptable to the First Lien
Lenders in their sole discretion of the principal of and interest (including interest accruing on
or after the commencement of any Insolvency or Liquidation Proceeding, whether or not a claim for
such interest is, or would be, allowed in such Insolvency or Liquidation Proceeding) and premium,
if any, on all Indebtedness outstanding under the First Lien Credit Documents and termination of
all commitments to lend or otherwise extend credit under the First Lien Credit Documents, (ii)
payment in full in cash or other consideration acceptable to the First Lien Lenders in their sole
discretion of all other First Lien Obligations that are due and payable or otherwise accrued and
owing at or prior to the time such principal and interest are paid (including legal fees and other
expenses, costs or charges accruing on or after the commencement of any Insolvency or Liquidation
Proceeding, whether or not a claim for such fees, expenses, costs or charges is, or would be,
allowed in such Insolvency or Liquidation Proceeding), (iii) termination, cancellation or cash
collateralization (in an amount reasonably satisfactory to the First Lien Administrative Agent, but
in no event more than 105% of the face amount thereof) of, all letters of credit issued under the
First Lien Credit Documents and (iv) termination of any Hedge Agreement provided by a First Lien
Claimholder (or an affiliate thereof) and the payment in full in cash or other consideration
acceptable to the First Lien Lenders in their sole discretion (or cash collateralization in an
amount reasonably satisfactory to the First Lien Administrative Agent) of all Hedging Obligations;
provided, however, that a Discharge of First Lien Obligations shall be deemed to have
occurred when the First Lien Claimholders receive proceeds from Collateral in an amount equal to
the Maximum First Lien Indebtedness plus any amount required under clause (iv) above (it being
understood that nothing in this Agreement is intended to obligate the First

3

 

Lien Claimholders to release their Liens on the Collateral except in connection with
satisfaction in full of all Obligations outstanding under (i) the First Lien Credit Agreement, (ii)
the other First Lien Credit Documents, and (iii) any Hedge Agreements of the type described in the
definition of First Lien Obligations).

     “Disposition” has the meaning set forth in Section 5.1(a)(ii).

     “Enforcement Action” means the exercise of any rights or remedies against any
Collateral, including, without limitation, any right to take possession or control of any
Collateral under any lockbox agreement, account control agreement, landlord waiver or bailee’s
letter or similar agreement or arrangement to which the Second Lien Administrative Agent or any
Second Lien Claimholder is a party, any right of set-off or recoupment with respect to the First
Lien Obligations, and any enforcement, collection, execution, levy or foreclosure action or
proceeding taken against the Collateral.

     “Excluded First Lien Obligations” mean, collectively, (a) the aggregate outstanding
principal amount of loans and letter of credit accommodations made, issued or incurred pursuant to
the First Lien Credit Agreement that exceeds the Maximum First Lien Indebtedness, (b) any interest
and fees payable on account of such excess principal amount under the First Lien Credit Agreement
or in respect thereof, and (c) any prepayment premium, make-whole obligation, or early termination
fee payable pursuant to the terms of the First Lien Credit Agreement.

     “Excluded Second Lien Obligations” means, collectively, (a) the aggregate outstanding
principal amount of loans made, issued or incurred pursuant to the Second Lien Credit Agreement
after the closing of the Second Lien Credit Agreement, (b) any interest and fees, payable on
account of such principal amount under the Second Lien Credit Agreement or in respect thereof, and
(c) any prepayment premium, make-whole obligation, or early termination fee payable pursuant to the
terms of the Second Lien Credit Agreement.

     “Exercise of Remedies” has the meaning set forth in Section 5.1(a)(i).

     “First Lien Administrative Agent” has the meaning set forth in the preamble hereto.

     “First Lien Claimholders” means, at any relevant time, the holders of First Lien
Obligations at such time, including without limitation the First Lien Lenders and any agent under
the First Lien Credit Agreement.

     “First Lien Collateral” means all of the assets and property of any Grantor, whether
real, personal or mixed, with respect to which a Lien is granted as security for any First Lien
Obligations.

     “First Lien Collateral Documents” means the Security Documents (as defined in the
First Lien Credit Agreement as amended from time to time in accordance herewith) and any other
agreement, document or instrument pursuant to which a Lien is granted securing any First Lien
Obligations or under which rights or remedies with respect to such Liens are governed.

4

 

     “First Lien Credit Agreement” means (i) the Initial First Lien Credit Agreement and
(ii) any other credit agreement, loan agreement, note agreement, promissory note, indenture or
other agreement or instrument evidencing or governing the terms of any indebtedness or other
financial accommodation that has been incurred to extend, increase, Refinance (each subject to the
limitations set forth herein) in whole or in part the indebtedness and other obligations
outstanding under (x) the Initial First Lien Credit Agreement or (y) any subsequent First Lien
Credit Agreement, unless such agreement or instrument expressly provides that it is not intended to
be and is not a First Lien Credit Agreement hereunder; provided that if and to the extent
that any amendment, modification, increase or Refinancing of the Initial First Lien Credit
Agreement or any other agreement referred to in this clause (ii) provides for revolving credit
commitments, revolving credit loans, term loans, bonds, debentures, notes or similar instruments
having a principal amount in excess of the Maximum First Lien Indebtedness, then that portion of
such principal amount in excess of the Maximum First Lien Indebtedness (and all interest, fees and
amounts accruing thereon) shall not constitute First Lien Obligations for purposes of this
Agreement. Any reference to the First Lien Credit Agreement hereunder shall be deemed a reference
to any First Lien Credit Agreement then in existence if entered into in compliance with the terms
of this Agreement.

     “First Lien Credit Documents” means the First Lien Credit Agreement and the Credit
Documents (as defined in the First Lien Credit Agreement as amended from time to time in accordance
herewith) and each of the other agreements, documents and instruments providing for or evidencing
any other First Lien Obligation, and any other document or instrument executed or delivered at any
time in connection with any First Lien Obligations, including any intercreditor or joinder
agreement among holders of First Lien Obligations, to the extent such are effective at the relevant
time, as each may be modified from time to time in accordance with this Agreement.

     “First Lien Lenders” means the “Lenders” under and as defined in the First Lien Credit
Agreement.

     “First Lien Obligations” means all Obligations outstanding under (i) the First Lien
Credit Agreement, (ii) the other First Lien Credit Documents, and (iii) any Hedge Agreements
entered into by Company or any Guarantor with any counterparty that is or was a First Lien
Claimholder (or any of their affiliates) at the time such Hedge Agreement was entered into (it
being understood, for avoidance of doubt, that Hedging Obligations of a Person that is both a First
Lien Claimholder and a Second Lien Claimholder at the time such Hedge Agreement was entered into by
Company or any Guarantor shall be considered First Lien Obligations); provided that the
aggregate principal amount, without duplication, of any revolving credit commitments, revolving
credit loans, letters of credit, term loans, bonds, debentures, notes or similar instruments or
other obligations provided for under the First Lien Credit Agreement or any other First Lien Credit
Document (or any Refinancing thereof) in excess of the sum of (i) $95,000,000 plus (ii) any
interest and fees payable under the First Lien Credit Agreement in respect thereof and any
attorneys fees, costs, expenses or indemnities payable under the First Lien Credit Agreement,
minus (iii) the aggregate amount of all payments and prepayments of term loans under the
First Lien Credit Agreement and the aggregate amount of all payments and prepayments of revolving
loans under the First Lien Credit Agreement (to the extent accompanied by a permanent

5

 

commitment reduction (excluding reduction in sub-facility commitments not accompanied by a
corresponding reduction in the facility commitment amount)) made from and after the date hereof
(such sum, the “Maximum First Lien Indebtedness”), shall constitute Excluded First Lien
Obligations for purposes of this Agreement. “First Lien Obligations” shall include (x) all
interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation
Proceeding, accrue) in accordance with the rate specified in the relevant First Lien Credit
Document and (y) all fees, costs and charges incurred in connection with the First Lien Credit
Documents and provided for thereunder, in the case of each of clause (x) and clause (y) whether
before or after commencement of an Insolvency or Liquidation Proceeding, irrespective of whether
any claim for such interest, fees, costs or charges is allowed as a claim in such Insolvency or
Liquidation Proceeding.

     “Governmental Authority” means any federal, state, municipal, national or other
government, governmental department, commission, board, bureau, court, agency or instrumentality or
political subdivision thereof or any entity or officer exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to any government or any court, in each
case whether associated with a state of the United States, the United States, or a foreign entity
or government.

     “Grantors” means Company, Holdings and each of the Guarantor Subsidiaries that have
executed and delivered, or may from time to time hereafter execute and deliver, a First Lien
Collateral Document or a Second Lien Collateral Document.

     “Guarantor Subsidiaries” has the meaning set forth in the recitals hereto.

     “Guaranty Obligations” means, with respect to any Person, without duplication, any
obligations of such Person (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any
Indebtedness of any other Person in any manner, whether direct or indirect, and including without
limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any
property constituting security therefor, (ii) to advance or provide funds or other support for the
payment or purchase of any such Indebtedness or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of
any holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or
services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to
otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof.

     “Hedge Agreements” means with respect to any Person, any agreement entered into to
protect such Person against fluctuations in interest rates, or currency or raw materials values,
including, without limitation, any interest rate swap, cap or collar agreement or similar
arrangement between such Person and one or more counterparties, any foreign currency exchange
agreement, currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate hedging agreements.

6

 

     “Hedging Obligation” means, with respect to any Person, any obligation of such Person
pursuant to any Hedge Agreements; provided that such Hedging Obligations are permitted
pursuant to both the First Lien Credit Documents and the Second Lien Credit Documents on the date
such Obligation is incurred.

     “Holdings” has the meaning set forth in the recitals hereto.

     “Improper Act” means, with respect to the avoidance, invalidation or subordination of
any Lien, an act by the First Lien Administrative Agent or the First Lien Claimholders that is
determined by a final, non-appealable judgment of a court of competent jurisdiction to have
constituted an act of actual fraud (it being understood that receipt of an allegedly fraudulent
conveyance shall not constitute actual fraud) or other egregious conduct justifying equitable
subordination of such Lien pursuant to Section 510(c) of the Bankruptcy Code.

     “Indebtedness” means and includes, with respect to any Person, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are
customarily made, (iii) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered into in the ordinary
course of business), (iv) all obligations (including, without limitation, the reasonably
anticipated amount of any earnout obligations) of such Person incurred, issued or assumed as the
deferred purchase price of property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months of the incurrence thereof)
which would appear as liabilities on a balance sheet of such Person, (v) all obligations of such
Person under take-or-pay or similar arrangements or under commodities agreements, (vi) all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, property owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (vii) all Guaranty Obligations of such Person with respect to
Indebtedness of another Person, (viii) the principal portion of all Capital Lease Obligations of
such Person, (ix) all obligations of such Person under Hedge Agreements, excluding any portion
thereof which would be accounted for as interest expense under generally accepted accounting
principles in effect in the United States of America applied on a consistent basis, (x) the maximum
amount of all letters of credit issued or bankers’ acceptances facilities created for the account
of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(xi) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at
the request of the holders thereof or otherwise) subject to mandatory sinking fund payments,
redemption or other acceleration, (xii) the principal balance outstanding under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing
product, (xiii) the Indebtedness of any partnership or unincorporated joint venture in which such
Person is a general partner or a joint venturer and (xiv) obligations of such Person under
non-compete agreements.

     “Initial First Lien Credit Agreement” has the meaning set forth in the recitals
hereto.

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     “Initial Second Lien Credit Agreement” has the meaning set forth in the recitals
hereto.

     “Insolvency or Liquidation Proceeding” means (i) any voluntary or involuntary case or
proceeding under the Bankruptcy Code or any other Bankruptcy Law with respect to any Grantor, (ii)
any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or proceeding with respect to
any Grantor or with respect to a material portion of their respective assets, (iii) any
liquidation, dissolution, reorganization or winding up of any Grantor whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy or (iv) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of any Grantor.

     “Lien” means any lien, mortgage, pledge, assignment, security interest, charge or
encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement, and any lease in the nature thereof) and any option, trust or
other preferential arrangement having the practical effect of any of the foregoing.

     “Maximum First Lien Indebtedness” has the meaning as set forth in the definition of
First Lien Obligations.

     “Obligations” means any and all obligations, liquidated or contingent, with respect to
the payment of (i) any principal of or interest or premium on any Indebtedness, including any
reimbursement obligation in respect of any letter of credit, or any other liability, including,
without limitation, interest and premiums accruing after the filing of a petition initiating any
proceeding under the Bankruptcy Laws irrespective of whether a claim for such interest or premium
is allowed or allowable in such proceeding, (ii) any fees, indemnification obligations, expense
reimbursement obligations or other liabilities payable under the documentation governing any
Indebtedness, including, without limitation, fees, costs, premiums and other charges accruing or
incurred after the filing of a petition initiating any proceeding under the Bankruptcy Laws
irrespective of whether a claim for such fees, costs, premiums and other charges is allowed or
allowable in such proceeding, (iii) any obligation to provide cash collateral in respect of letters
of credit or any other Indebtedness or (iv) any Hedging Obligations.

     “Permitted Refinancing Documents” shall mean any financing documentation which
replaces (i) the Initial First Lien Credit Agreement and the other First Lien Credit Documents and
pursuant to which the outstanding First Lien Obligations are refinanced in their entirety, as such
financing documentation may be amended, supplemented, restated, refinanced or otherwise modified
from time to time in compliance with this Agreement, but specifically excluding any such financing
documentation to the extent that it contains, either initially or by amendment or other
modification, any terms, conditions, covenants or defaults other than those which (a) then exist in
the Initial First Lien Credit Agreement and the other First Lien Credit Documents or (b) could be
included in the Initial First Lien Credit Agreement and the other First Lien Credit Documents by an
amendment or other modification that would not be prohibited by the terms of this Agreement.

     “Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability partnerships, joint stock
companies,

8

 

joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and Governmental Authorities.

     “Recovery” has the meaning set forth in Section 6.5.

     “Refinance” means, in respect of any Indebtedness, to refinance, replace or repay, or
to issue other Indebtedness, in exchange or replacement for, such indebtedness.
“Refinanced” and “Refinancing” shall have correlative meanings, provided that the
Company and Guarantors shall not be permitted to Refinance the First Lien Obligations unless the
financing documentation entered into by the Company and the Guarantors in connection with any such
Refinancing constitutes Permitted Refinancing Documents.

     “Requisite Lenders” means with respect to the First Lien Credit Agreement or the
Second Lien Credit Agreement, as applicable, those First Lien Lenders or Second Lien Lenders, as
applicable, the approval of which is required to approve an amendment or modification of,
termination or waiver of any provision of or consent to any departure from the First Lien Credit
Agreement or the Second Lien Credit Agreement (or would be required to effect such consent under
this Agreement if such consent were treated as an amendment of the First Lien Credit Agreement or
the Second Lien Credit Agreement) as applicable.

     “Second Lien Administrative Agent” has the meaning set forth in the preamble hereof.

     “Second Lien Claimholders” means, at any relevant time, the holders of Second Lien
Obligations at such time, including without limitation the Second Lien Lenders and any agent under
the Second Lien Credit Agreement.

     “Second Lien Collateral” means all of the assets and property of any Grantor, whether
real, personal or mixed, with respect to which a Lien is granted as security for any Second Lien
Obligations.

     “Second Lien Collateral Documents” means the Security Documents (as defined in the
Second Lien Credit Agreement as amended from time to time in accordance herewith) and any other
agreement, document or instrument pursuant to which a Lien is granted securing any Second Lien
Obligations or under which rights or remedies with respect to such Liens are governed.

     “Second Lien Credit Agreement” means (i) the Initial Second Lien Credit Agreement,
(ii) any other credit agreement, loan agreement, note agreement, promissory note, indenture, or
other agreement or instrument evidencing or governing the terms of any indebtedness or other
financial accommodation that has been incurred to extend, increase or Refinance in whole or in part
the indebtedness and other obligations outstanding under the Initial Second Lien Credit Agreement
or other agreement or instrument referred to in this clause (ii), subject to the limitations set
forth herein and only to the extent permitted hereby. Any reference to the Second Lien Credit
Agreement hereunder shall be deemed a reference to any Second Lien Credit Agreement then in
existence.

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     “Second Lien Credit Documents” means the Second Lien Credit Agreement and the Credit
Documents (as defined in the Second Lien Credit Agreement) and each of the other agreements,
documents and instruments providing for or evidencing any other Second Lien Obligation, and any
other document or instrument executed or delivered at any time in connection with any Second Lien
Obligations, as the same may be modified from time to time, including any intercreditor or joinder
agreement among holders of Second Lien Obligations, to the extent such are effective at the
relevant time, as each may be modified from time to time in accordance with this Agreement.

     “Second Lien Enforcement Date” means the date which is 180 days after the occurrence
of (i) an Event of Default (under and as defined in the Second Lien Credit Agreement) and
(ii) the First Lien Administrative Agent’s receipt of written notice from the Second Lien
Administrative Agent certifying that an Event of Default (under and as defined in the Second Lien
Credit Agreement) has occurred and is continuing; provided that the Second Lien Enforcement
Date shall be stayed and shall not occur and shall be deemed not to have occurred (1) at any time
the First Lien Administrative Agent or the First Lien Claimholders have commenced and are
diligently pursuing any Enforcement Action against all or a material portion of the Collateral,
(2) at any time any Grantor is then a debtor under or with respect to (or otherwise subject to) any
Insolvency or Liquidation Proceeding or (3) if the Event of Default described in such written
notice is waived by the Second Lien Claimholders or such written notice is otherwise rescinded by
the Second Lien Claimholders.

     “Second Lien Lenders” means the “Lenders” under and as defined in the Second Lien
Credit Agreement.

     “Second Lien Obligations” means all Obligations outstanding under the Second Lien
Credit Agreement, the other Second Lien Credit Documents and Hedge Agreements entered into by
Company or any Guarantor with any counterparty that is a Second Lien Claimholder (or any of their
affiliates) at the time such Hedge Agreement was entered into (it being understood, for avoidance
of doubt, that Hedging Obligations of a Person that is both a First Lien Claimholder and a Second
Lien Claimholder at the time such Hedge Agreement was entered into by Company or any Guarantor
shall be considered First Lien Obligations). “Second Lien Obligations” shall include (i) all
interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation
Proceeding, accrue) in accordance with the rate specified in the relevant Second Lien Credit
Document and (ii) all fees, costs and charges incurred in connection with the Second Lien Credit
Documents and provided for thereunder, in each case whether before or after commencement of an
Insolvency or Liquidation Proceeding irrespective of whether any claim for such interest, fees,
costs or charges is allowed as a claim in such Insolvency or Liquidation Proceeding.

     “Subsidiary” means, with respect to any Person, any corporation, partnership, limited
liability company, association, joint venture or other business entity of which more than 50% of
the total voting power of shares of stock or other ownership interests entitled (without regard to
the occurrence of any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the time owned or

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controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of
that Person or a combination thereof; provided, in determining the percentage of ownership
interests of any Person controlled by another Person, no ownership interest in the nature of a
“qualifying share” of the former Person shall be deemed to be outstanding.

     “Uniform Commercial Code” or “UCC” means the Uniform Commercial Code (or any
similar or equivalent legislation) as in effect in any applicable jurisdiction.

     1.2 Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified in accordance with the provisions
hereof, (b) any reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Exhibits or Sections shall be construed to refer to
Exhibits or Sections of this Agreement and (e) the words “asset” and “property” shall be construed
to have the same meaning and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

     SECTION 2 Lien Priorities.

     2.1 Relative Priorities. Notwithstanding the date, manner or order of grant,
attachment or perfection of any Liens securing the Second Lien Obligations granted on the
Collateral or of any Liens securing the First Lien Obligations granted on the Collateral and
notwithstanding any provision of the UCC, or any applicable law or the Second Lien Credit
Documents, the Second Lien Administrative Agent, on behalf of itself and the Second Lien
Claimholders, hereby agrees that: (a) any Lien on the Collateral securing any First Lien
Obligations now or hereafter held by or on behalf of the First Lien Administrative Agent or any
First Lien Claimholders or any agent or trustee therefor, regardless of how acquired, whether by
grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all
respects and prior to any Lien on the Collateral securing any of the Second Lien Obligations; and
(b) any Lien on the Collateral now or hereafter held by or on behalf of the Second Lien
Administrative Agent, any Second Lien Claimholders or any agent or trustee therefor regardless of
how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise,
shall be junior and subordinate in all respects to all Liens on the Collateral securing any First
Lien Obligations.

     2.2 Failure to Perfect. All Liens on the Collateral securing any First Lien
Obligations shall be and remain senior in all respects and prior to all Liens on the Collateral
securing any Second Lien Obligations for all purposes, notwithstanding any failure of the First

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Lien Administrative Agent or the First Lien Claimholders to adequately perfect its security
interests in the Collateral, the subordination of any Lien on the Collateral securing any First
Lien Obligations to any Lien securing any other obligation of any Grantor, or the avoidance,
invalidation or lapse of any Lien on the Collateral securing any First Lien Obligations (other than
as a result of a final non-appealable judgment of a court of competent jurisdiction avoiding,
invalidating or subordinating any such Lien as a result of an Improper Act of the First Lien
Claimholders).

     2.3 Nature of First Lien Obligations. The Second Lien Administrative Agent, for itself
and on behalf of the other Second Lien Claimholders, acknowledges that (a) a portion of the First
Lien Obligations are revolving in nature, (b) the amount thereof that may be outstanding at any
time or from time to time may be increased or reduced and subsequently reborrowed subject to the
limitations set forth in this Agreement, (c) the terms of the First Lien Obligations may be
modified, extended or amended from time to time subject to the limitations set forth in this
Agreement, and (d), subject to the limitations on the aggregate principal amount of First Lien
Obligations set forth in the definition of “First Lien Obligations” or in Section 5.3, the
aggregate amount of the First Lien Obligations may be increased or Refinanced, in either event,
without notice to or consent by the Second Lien Claimholders and without affecting the provisions
hereof. The lien priorities provided in Sections 2.1 and 2.2 shall not be altered or otherwise
affected by any such amendment, modification, supplement, extension, repayment, reborrowing,
increase, replacement, renewal, restatement or Refinancing of either the First Lien Obligations or
the Second Lien Obligations, or any portion thereof to the extent made in compliance with the terms
of this Agreement.

     2.4 Prohibition on Contesting Liens. Each of the Second Lien Administrative Agent,
for itself and on behalf of each Second Lien Claimholder, and the First Lien Administrative Agent,
for itself and on behalf of each First Lien Claimholder, agrees that it shall not (and hereby
waives any right to) contest or support any other Person in contesting, in any proceeding
(including any Insolvency or Liquidation Proceeding), the priority, validity or enforceability of a
Lien held by or on behalf of any of the First Lien Claimholders in the First Lien Collateral or by
or on behalf of any of the Second Lien Claimholders in the Second Lien Collateral, as the case may
be; provided that nothing in this Agreement shall be construed to prevent or impair the
rights of the First Lien Administrative Agent or any First Lien Claimholder to enforce this
Agreement, including the priority of the Liens securing the First Lien Obligations as provided in
Sections 2.1 and 3.1.

     2.5 No New Liens.

     (a) Limitation on other Collateral for First Lien Claimholders. So long as any
Second Lien Obligations remain outstanding, and subject to Section 6, (i) the First Lien
Administrative Agent agrees that, after the date hereof, neither the First Lien
Administrative Agent nor any First Lien Claimholder shall acquire or hold any Lien on any
assets of any Grantor securing any First Lien Obligations which assets are not also subject
to the Lien of the Second Lien Administrative Agent under the Second Lien Collateral
Documents, and (ii) each Grantor agrees not to grant any Lien on any of its assets, or
permit any of its Subsidiaries to grant a Lien on any of its assets, in favor of the

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First Lien Administrative Agent or the First Lien Claimholders unless it, or such
Subsidiary, has granted an identical but subordinated Lien on such assets in favor of the
Second Lien Administrative Agent or the Second Lien Claimholders. If the First Lien
Administrative Agent or any First Lien Claimholder shall (nonetheless and in breach hereof)
acquire any Lien on any assets of any Grantor or any of their respective Subsidiaries
securing any First Lien Obligations which assets are not also subject to the Lien of the
Second Lien Administrative Agent under the Second Lien Collateral Documents, then the First
Lien Administrative Agent (or the relevant First Lien Claimholder), shall, without the need
for any further consent of any other Person and notwithstanding anything to the contrary in
any other First Lien Document hold and be deemed to have held such Lien for the benefit of
the Second Lien Administrative Agent as security for the Second Lien Obligations subject to
the priorities set forth herein with any amounts received in respect thereof subject to
distribution and turnover under Section 4.

     (b) Limitation on other Collateral for Second Lien Claimholders. Until the
date upon which the Discharge of First Lien Obligations shall have occurred, (i) the Second
Lien Administrative Agent agrees that, after the date hereof, neither the Second Lien
Administrative Agent nor any Second Lien Claimholder shall acquire or hold any Lien on any
assets of any Company, any Guarantor or any of their respective Subsidiaries securing any
Second Lien Obligations which assets are not also subject to the senior priority Lien of the
First Lien Administrative Agent under the First Lien Collateral Documents, and (ii) each
Grantor agrees not to grant any Lien (other than a Permitted Lien) on any of its assets, or
permit any of its Subsidiaries to grant a Lien (other than a Permitted Lien) on any of its
assets, in favor of the Second Lien Administrative Agent or the Second Lien Claimholders
unless it, or such Subsidiary, has granted an identical Lien on such assets in favor of the
First Lien Administrative Agent or the First Lien Claimholders. If the Second Lien
Administrative Agent or any Second Lien Claimholder shall (nonetheless and in breach hereof)
acquire any Lien on any assets of any Grantor or any of their respective Subsidiaries
securing any Second Lien Obligations which assets are not also subject to the Lien of the
First Lien Administrative Agent under the First Lien Collateral Documents, then the Second
Lien Administrative Agent (or the relevant Second Lien Claimholder), shall, without the need
for any further consent of any other Person and notwithstanding anything to the contrary in
any other Second Lien Document hold and be deemed to have held such Lien and security
interest for the benefit of the First Lien Administrative Agent as security for the First
Lien Obligations.

     2.6 Similar Liens and Agreements. The parties hereto agree that it is their intention
that the First Lien Collateral and the Second Lien Collateral be identical. In furtherance of the
foregoing and of Section 8.9, the parties hereto agree, subject to the other provisions of this
Agreement:

     (a) upon request by the First Lien Administrative Agent or the Second Lien
Administrative Agent, to cooperate in good faith (and to direct their counsel to cooperate
in good faith) from time to time in order to determine the specific items included in the
First Lien Collateral and the Second Lien Collateral and the steps taken to perfect their

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respective Liens thereon and the identity of the respective parties obligated under the
First Lien Credit Documents and the Second Lien Credit Documents; and

     (b) that the documents and agreements creating or evidencing the First Lien Collateral
and the Second Lien Collateral and guarantees for the First Lien Obligations and the Second
Lien Obligations shall be in all material respects the same forms of documents other than
with respect to the senior and subordinate nature of the security interest in the Collateral
securing the respective Obligations thereunder.

     SECTION
3 Enforcement.

     
3.1 Exercise of Remedies.

     (a) Except as set forth in Section 5.4, so long as the Discharge of First Lien
Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has
been commenced by or against Borrower or any other Grantor:

     (i) the Second Lien Administrative Agent and the Second Lien Claimholders:

     (A) from the date hereof until the occurrence of the Second Lien
Enforcement Date, will not take any Enforcement Action with respect to any
Lien held by it under the Second Lien Collateral Documents or any other
Second Lien Credit Document or otherwise; and

     (B) will not contest, protest or object to, or otherwise interfere
with, hinder, or delay, any Enforcement Action by the First Lien
Administrative Agent or any First Lien Claimholder, provided that the
respective interests of the Second Lien Claimholders attach to the proceeds
thereof, subject to the relative priorities described in Section 2 and
Section 4; and

     (C) subject to the rights of the Second Lien Administrative Agent under
clause (i)(A) above, will not contest, protest or object to the forbearance
by the First Lien Administrative Agent or the First Lien Claimholders from
bringing or pursuing any Enforcement Action; and

     (ii) subject to Section 5.1, the First Lien Administrative Agent and the First
Lien Claimholders shall have the exclusive right to commence and, if applicable,
maintain an Enforcement Action and make determinations regarding the release,
disposition, or restrictions with respect to the Collateral without any consultation
with or the consent of the Second Lien Administrative Agent or any Second Lien
Claimholder;

     provided, that:

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     (A) in any Insolvency or Liquidation Proceeding commenced by or against Company or any
other Grantor, the Second Lien Administrative Agent may file a claim or statement of
interest with respect to the Second Lien Obligations,

     (B) the Second Lien Administrative Agent may take any action (not adverse to the Liens
on the Collateral securing the First Lien Obligations, or the rights of any First Lien
Administrative Agent or the First Lien Claimholders to exercise remedies in respect thereof)
in order to preserve or protect its Lien on the Collateral,

     (C) the Second Lien Claimholders shall be entitled to file any necessary responsive or
defensive pleadings in opposition to any motion, claim, adversary proceeding or other
pleading made by any person objecting to or otherwise seeking the disallowance of the claims
of the Second Lien Claimholders, including without limitation any claims secured by the
Collateral, if any, in each case in accordance with the terms of this Agreement,

     (D) in any Insolvency or Liquidation Proceeding, the Second Lien Claimholders shall be
entitled to file any pleadings, objections, motions or agreements which assert rights or
interests available to unsecured creditors of the Grantors arising under either Bankruptcy
Law or applicable non-bankruptcy law, in each case in accordance with the terms of this
Agreement,

     (E) in any Insolvency or Liquidation Proceeding, the Second Lien Claimholders shall be
entitled to file any proof of claim and other filings and make any arguments and motions
that are, in each case, in accordance with the terms of this Agreement, with respect to the
Second Lien Obligations and the Collateral,

     (F) the Second Lien Claimholders shall be entitled, in any Insolvency or Liquidation
Proceeding, to vote on any plan of reorganization (including without limitation the right to
vote to accept or reject any plan of partial or complete liquidation), provided, it is
understood and agreed that nothing in a plan of reorganization is meant to supersede the
priorities set forth herein with respect to liens on and rights against the Collateral,
which priorities and rights shall survive any such plan of reorganization,

     (G) the Second Lien Administrative Agent or any Second Lien Claimholder may exercise
any of its rights or remedies with respect to the Collateral upon the occurrence and during
the effective continuation of the Second Lien Enforcement Date; and

     (I) the Second Lien Claimholders may bid for and purchase Collateral at any private or
judicial foreclosure sale of such Collateral initiated by the First Lien Claimholders (the
actions described in this proviso being referred to herein as “Permitted Second Lien
Actions”).

In exercising rights and remedies with respect to the Collateral, the First Lien
Administrative Agent and the First Lien Claimholders may enforce the provisions of the First
Lien Credit Documents and exercise remedies thereunder, all in such order and in

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 such manner as they may determine in the exercise of their sole discretion. Such exercise
and enforcement shall include the rights of an agent appointed by the First Lien
Administrative Agent and the First Lien Claimholders to sell or otherwise dispose of
Collateral upon foreclosure, to incur expenses in connection with such sale or disposition,
and to exercise all the rights and remedies of a secured creditor under the Uniform
Commercial Code of any applicable jurisdiction and of a secured creditor under Bankruptcy
Laws of any applicable jurisdiction.

     (b) The Second Lien Administrative Agent, on behalf of itself and the Second Lien
Claimholders, agrees that it will not retain any Collateral or any proceeds of Collateral in
connection with any Enforcement Action against any Collateral, and that any Collateral or
proceeds taken or received by it will be paid over to the First Lien Administrative Agent
pursuant to Section 4.2 unless and until the Discharge of First Lien Obligations has
occurred, except as expressly provided in Section 6.8.

     (c) Except for Permitted Second Lien Actions, the Second Lien Administrative Agent, for
itself and on behalf of the Second Lien Claimholders, agrees that (i) the Second Lien
Administrative Agent and the Second Lien Claimholders will not take any action that would
hinder, delay or impede any exercise of remedies under the First Lien Credit Documents,
including any sale, lease, exchange, transfer or other disposition of the Collateral,
whether by foreclosure or otherwise, and (ii) the Second Lien Administrative Agent, for
itself and on behalf of the Second Lien Claimholders, hereby waives any and all rights it or
the Second Lien Claimholders may have as a junior lien creditor to object to the manner or
order in which the First Lien Administrative Agent or the First Lien Claimholders seek to
enforce or collect the First Lien Obligations or the Liens granted in any of the First Lien
Collateral.

3.2 Actions Upon Breach.

     (a) If any Second Lien Claimholder, contrary to this Agreement, commences or
participates in any Enforcement Action against Company, any other Grantor or the Collateral,
the First Lien Administrative Agent may intervene and may interpose in the name of the First
Lien Claimholders or in the name of Company or such Grantor the making of this Agreement as
a defense or dilatory plea.

     (b) Should any Second Lien Claimholder, contrary to this Agreement, in any way take, or
attempt or threaten to take, any Enforcement Action against the Collateral (including,
without limitation, any attempt to realize upon or enforce any remedy with respect to this
Agreement), or fail to take any action required by this Agreement, the First Lien
Administrative Agent (in its own name or in the name of a Grantor) or Company may obtain
relief against such Second Lien Claimholder by injunction, specific performance and/or other
appropriate equitable relief, it being understood and agreed by the Second Lien
Administrative Agent on behalf of each Second Lien Claimholder that (i) the First Lien
Claimholders’ damages from such actions may be difficult to ascertain and may be
irreparable, and (ii) the Second Lien Administrative Agent on behalf of each

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Second Lien Claimholder waives any defense that the First Lien Claimholders cannot
demonstrate damage or be made whole by the awarding of damages.

     SECTION 4 Payments.

     4.1 Application of Proceeds. So long as the Discharge of First Lien Obligations has
not occurred, any proceeds of Collateral received in connection with the sale or other disposition
of such Collateral, or collection on such Collateral upon an Enforcement Action, shall be applied
first, to the payment of the First Lien Obligations (other than Excluded First Lien Obligations) in
accordance with the First Lien Credit Agreement (with a corresponding reduction in the revolving
credit commitment thereunder, to the extent such a reduction is contemplated under the First Lien
Credit Agreement as in effect on the date hereof to occur in connection with such payment), second,
to the payment of the Second Lien Obligations (other than Excluded Second Lien Obligations) in
accordance with the Second Lien Documents, third to the payment of the Excluded First Lien
Obligations in accordance with the First Lien Documents, and fourth, to the payment of the Excluded
Second Lien Obligations in accordance with the Second Lien Loan Documents. Upon the Discharge of
the First Lien Obligations, the First Lien Administrative Agent shall deliver to the Second Lien
Administrative Agent any proceeds of Collateral held by it in the same form as received, with any
necessary endorsements or as a court of competent jurisdiction may otherwise direct to be applied
by the Second Lien Administrative Agent to the Second Lien Obligations in such order as specified
in the Second Lien Collateral Documents.

     4.2 Payment Turnover. So long as the Discharge of First Lien Obligations has not
occurred and except as specifically permitted by Section 4.3, any Collateral or proceeds thereof
(together with assets or proceeds subject to Liens referred to in the final sentence of Section
2.3) received by the Second Lien Administrative Agent or any Second Lien Claimholders in connection
with an Enforcement Action against the Collateral shall be held in trust and forthwith paid over to
the First Lien Administrative Agent for the benefit of the First Lien Claimholders in the same form
as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise
direct. The First Lien Administrative Agent is hereby authorized to make any such endorsements as
agent for the Second Lien Administrative Agent or any such Second Lien Claimholders. This
authorization is coupled with an interest and is irrevocable until such time as this Agreement is
terminated in accordance with its terms.

     4.3 Permitted Mandatory Prepayments of Second Lien Obligations. Notwithstanding the
foregoing provisions of this Section 4, mandatory prepayments required under Section 2.3(b) of the
Second Lien Credit Agreement shall be made and applied to the Second Lien Obligations (A) if (i)
the payment to the Second Lien Claimholders is permitted by the First Lien Credit Agreement or (ii)
the corresponding mandatory prepayment of the First Lien Credit Documents is waived by the
Requisite Lenders under the First Lien Credit Agreement) or (B) at all times following the
Discharge of the First Lien Obligations.

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     SECTION 5 Other Agreements.

     5.1 Releases.

     (a) If, in connection with:

     (i) the exercise of any First Lien Administrative Agent’s remedies in respect
of the Collateral, including any sale, lease, exchange, transfer or other
disposition of any such Collateral (an “Exercise of Remedies”); or

     (ii) any sale, lease, exchange, transfer or other disposition of any Collateral
permitted under the terms of the First Lien Credit Documents (whether or not an
event of default thereunder, and as defined therein, has occurred and is continuing)
(a “Disposition”), or

     (iii) any release of Liens on the assets of any Grantor, all of the Capital
Stock of which is being released pursuant to any other provision of this Section
5.1(a);

the First Lien Administrative Agent, for itself or on behalf of any of the First Lien
Claimholders, releases any of its Liens on any part of the Collateral, or releases any
Grantor from its obligations under its guaranty of the First Lien Obligations, in each case
other than in connection with the Discharge of the First Lien Obligations, then the Liens,
if any, of the Second Lien Administrative Agent, for itself or for the benefit of the Second
Lien Claimholders, on such Collateral, and the obligations of such Grantor under its
guaranty of the Second Lien Obligations, shall be automatically, unconditionally and
simultaneously released (the “Second Lien Release”) and the Second Lien
Administrative Agent, for itself or on behalf of any such Second Lien Claimholders, promptly
shall execute and deliver to the First Lien Administrative Agent or such Grantor such
customary termination statements, releases and other documents as the First Lien
Administrative Agent or such Grantor may reasonably request to effectively confirm such
release; provided, however, that the Second Lien Release shall not occur
without the consent of the Second Lien Administrative Agent (x) in the case of an Exercise
of Remedies, (i) as to any Collateral the net proceeds of the disposition of which will not
be applied to permanently repay and reduce (and, to the extent applicable, to reduce
permanently commitments with respect to) the First Lien Obligations, and (ii) (other than in
connection with a setoff or recoupment by any First Lien Claimholder) unless the First Lien
Administrative Agent has provided at least 20 days notice of its intent to dispose of such
Collateral, except that to the extent applicable law requires a shorter notice period in
such circumstance, delivery of the notice in compliance with applicable law shall be
sufficient, or (y), in the case of a Disposition, if the Disposition is prohibited by any
provision of the Second Lien Credit Agreement.

     (b) Until the Discharge of First Lien Obligations occurs, the Second Lien
Administrative Agent, for itself and on behalf of the Second Lien Claimholders, hereby
irrevocably constitutes and appoints the First Lien Administrative Agent and any officer

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or agent of the First Lien Administrative Agent, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Second Lien Administrative Agent or such holder or in the First Lien
Administrative Agent’s own name, from time to time in the First Lien Administrative Agent’s
discretion, for the limited purpose of carrying out the terms of this Section 5.1, to take
any and all reasonable and appropriate action and to execute any and all documents and
instruments which may be necessary to accomplish the purposes of this Section 5.1, including
any endorsements or other instruments of transfer or release. This authorization is coupled
with an interest and is irrevocable until such time as this Agreement is terminated in
accordance with its terms.

     (c) Until the Discharge of First Lien Obligations occurs, to the extent that the First
Lien Administrative Agent for itself and on behalf of the First Lien Claimholders (i) has
released any Lien on Collateral or any Grantor from its obligation under its guaranty and
any such Liens or guaranty are later reinstated or (ii) obtains any new Liens or additional
guaranties from Grantors, then the Second Lien Administrative Agent for itself and on behalf
of the Second Lien Claimholders shall be granted a Lien on any such Collateral and an
additional guaranty, as the case may be, subject to the priorities set forth in Section 2.

     5.2 Insurance. The First Lien Administrative Agent and the Second Lien Administrative
Agent shall be named as additional insureds and the Control Agent shall be named as loss payee (on
behalf of the First Lien Administrative Agent, the other First Lien Claimholders, the Second Lien
Administrative Agent and the other Second Lien Claimholders) under any insurance policies
maintained from time to time by any Grantor. Until the earlier of (x) the Second Lien Enforcement
Date (it being understood that such Second Lien Enforcement Date shall be stayed if and for so long
as the First Lien Administrative Agent is diligently pursuing the settlement of the applicable
insurance policy or claim) and (y) the date upon which the Discharge of First Lien Obligations
shall have occurred as between the First Lien Administrative Agent and the other First Lien
Claimholders, on the one hand, and the Second Lien Administrative Agent and the other Second Lien
Claimholders on the other, the First Lien Administrative Agent and the other First Lien
Claimholders shall have the sole and exclusive right (a) to adjust or settle any insurance policy
or claim covering any Collateral in the event of any loss thereunder and (b) to approve any award
granted in any condemnation or similar proceeding affecting any Collateral. Until the date upon
which the Discharge of First Lien Obligations shall have occurred, all proceeds of any such policy
and any such award in respect of any Collateral that are payable to the First Lien Administrative
Agent and the Second Lien Administrative Agent shall be paid in accordance with Section 4.2. If
the Second Lien Administrative Agent or any Second Lien Claimholder shall, at any time, receive any
proceeds of any such insurance policy or any such award in contravention of this Agreement, it
shall pay such proceeds over to the First Lien Administrative Agent in accordance with the terms of
Section 4.2.

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     5.3 Amendments to First Lien Credit Documents and Second Lien Credit Documents.

     (a) The First Lien Credit Documents may be amended, supplemented or otherwise modified
in accordance with their terms and the First Lien Credit Agreement may be Refinanced, in
each case without the consent of the Second Lien Administrative Agent or the Second Lien
Claimholders; provided, however, that the holders of such Refinancing debt
bind themselves in writing to the terms of this Agreement and any such amendment,
supplement, modification or Refinancing shall not: (i) provide for a principal amount of,
without duplication, term loans, revolving loan commitments and letters of credit, bonds,
debentures, notes or similar instruments (but excluding Hedging Obligations) in excess of
Maximum First Lien Indebtedness in the aggregate; (ii) increase the “Applicable Margin” or
similar component of the interest rate or yield provisions applicable to the First Lien
Obligations or scheduled recurring fees by more than 2% per annum in the aggregate
(excluding increases (A) resulting from application of the pricing grid set forth in the
First Lien Credit Agreement as in effect on the date hereof or (B) resulting from the
accrual of interest at the default rate); (iii) modify (or have the effect of a modification
of) the repayment, prepayment, amortization, amendment or refinancing provisions of the
First Lien Credit Agreement in a manner materially adverse to the Company; (iv) increase (or
have the effect of increasing) the amount of, or the type of, dispositions of Collateral,
the proceeds of which are not required to be used to prepay the First Lien Obligations and
which may be retained by the Credit Parties for use as working capital to an amount greater
than that permitted under the Second Lien Credit Agreement; (v) extend the final scheduled
maturity of the First Lien Obligations; or (vi) subordinate in right of payment any of the
First Lien Obligations, or subordinate the lien on any of the Collateral securing the First
Lien Obligations.

     (b) Until the Discharge of First Lien Obligations occurs, the Second Lien Credit
Documents may be amended, supplemented or otherwise modified in accordance with their terms
and the Second Lien Credit Agreement may be Refinanced in each case, without the consent of
the First Lien Administrative Agent or the First Lien Claimholders provided, however, that
the holders of such Refinancing debt bind themselves in writing to the terms of this
Agreement and any such amendment, supplement, modification or Refinancing shall not: (i)
increase the maximum principal amount of the Second Lien Obligations owing on closing of the
Second Lien Credit Agreement, (ii) increase the “Applicable Margin” or similar component of
the interest rate or yield provisions applicable to the Second Lien Obligations or scheduled
recurring fees by more than 2% per annum in the aggregate (excluding increases resulting
from the accrual of interest at the default rate); (iii) modify (or have the effect of a
modification of) the repayment, prepayment, amortization, amendment or refinancing
provisions of the Second Lien Credit Agreement in a manner materially adverse to the
Company; provided, that the Maturity Date (as defined in the Second Lien Credit
Agreement) may be extended; (iv) shorten the final scheduled maturity of the Second Lien
Obligations; (v) subordinate in right of payment any of the Second Lien Obligations, or
subordinate the lien on any of the Collateral securing the Second Lien Obligations, or (vi)
change or amend any other term of the Second Lien Credit Documents if such change or
amendment would result in

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a default under the First Lien Credit Agreement, increase the obligations of any
Grantor or confer additional material rights on any Second Lien Claimholder in a manner
adverse in any material respect to any Grantor; provided, however, that if
any of the First Lien Credit Documents are amended or otherwise modified in a manner adverse
in any material respect to any Grantor, then the Second Lien Credit Documents may be
similarly amended or otherwise modified, so long as, in each such case, (i) any cushion (if
applicable) is maintained (determined, for example, with respect to financial covenants and
basket amounts, on a percentage basis based on the relevant levels under the First Lien
Credit Documents and the Second Lien Credit Documents as in effect on the date hereof), and
(ii) no such amendments, additions or modifications to any of the Second Lien Credit
Documents shall have the effect of making any such event of default or covenant in the
Second Lien Credit Documents more restrictive than those set forth in the First Lien Credit
Documents as so amended or otherwise modified

     (c) Notwithstanding the foregoing clauses (a) and (b) of this Section 5.3, (i) until
the date upon which the Discharge of First Lien Obligations shall have occurred, without the
prior written consent of the First Lien Administrative Agent, no Second Lien Collateral
Document may be amended, supplemented or otherwise modified or entered into to the extent
such amendment, supplement or modification, or the terms of any new Second Lien Credit
Agreement or Second Lien Collateral Document, would contravene any of the terms of this
Agreement, and (ii) so long as any Second Lien Obligations remain outstanding, without the
prior written consent of the Second Lien Administrative Agent, no First Lien Collateral
Document may be amended, supplemented or otherwise modified or entered into to the extent
such amendment, supplement or modification, or the terms of any new First Lien Credit
Agreement or First Lien Collateral Document, would contravene any of the terms of this
Agreement.

     (d) The Second Lien Administrative Agent agrees that each Second Lien Collateral
Document shall include the following language:

“Notwithstanding anything herein to the contrary, the lien and security interest
granted to the administrative agent pursuant to this Agreement are subject to the
provisions of the Intercreditor Agreement, dated as of [___], 2005 as the same
may be amended, supplemented, modified or replaced from time to time (the
“Intercreditor Agreement”) among Wachovia Bank, National Association, as
First Lien Administrative Agent, Wachovia Bank, National Association, as Second Lien
Administrative Agent, Wachovia Bank, National Association, as Control Agent and the
Grantors (as defined therein) from time to time a party thereto. In the event of
any conflict between the terms of the Intercreditor Agreement and this Agreement,
the terms of the Intercreditor Agreement shall govern.”

     In addition, the Second Lien Administrative Agent agrees that each Second Lien
Collateral Document under which any Lien on real property owned by any Credit Party is
granted to secure the Second Lien Obligations covering any Collateral shall contain such
other language as the First Lien Administrative Agent may reasonably request to reflect

21

 

the priority of the First Lien Collateral Document covering such Collateral over such
Second Lien Collateral Document.

     5.4 Rights As Unsecured Creditors. Except as otherwise expressly set forth in this
Agreement, the Second Lien Administrative Agent and the Second Lien Claimholders may exercise
rights and remedies available to unsecured creditors against any Grantor in accordance with the
terms of the Second Lien Credit Documents and applicable law. Except as otherwise set forth in
Section 2.1 and Section 4, nothing in this Agreement shall prohibit the receipt by the Second Lien
Administrative Agent or any Second Lien Claimholders of the required payments of interest and
principal so long as such receipt is not the direct or indirect result of the exercise by the
Second Lien Administrative Agent or any Second Lien Claimholders of rights or remedies as a secured
creditor (including set-off or recoupment) or enforcement of any Lien held by any of them. Nothing
in this Agreement impairs or otherwise adversely affects any rights or remedies the First Lien
Administrative Agent or the First Lien Claimholders may have with respect to the Collateral. In
the event that any Second Lien Claimholder becomes a judgment Lien creditor as a result of its
enforcement of its rights as an unsecured creditor, such judgment Lien shall be subject to the
terms of this Agreement for all purposes to the same extent as all other Liens securing the Second
Lien Obligations subject to this Agreement.

     5.5 Control Agent for Perfection.

     (a) The First Lien Administrative Agent, on behalf of itself and the First Lien
Claimholders, and the Second Lien Administrative Agent, on behalf of itself and the Second
Lien Claimholders, each hereby appoint Wachovia Bank, National Association as its collateral
agent (in such capacity, together with any successor in such capacity appointed by the First
Lien Administrative Agent and the Second Lien Administrative Agent, the “Control
Agent”) for the limited purpose of acting as the agent on behalf of the First Lien
Administrative Agent (on behalf of itself and the First Lien Claimholders) and the Second
Lien Administrative Agent (on behalf of itself and the Second Lien Claimholders) with
respect to the Control Collateral for purposes perfecting the Liens of such parties on the
Control Collateral. The Control Agent accepts such appointment and agrees to hold the
Control Collateral in its possession or control (or in the possession or control of its
agents or bailees) as Control Agent for the benefit of the First Lien Administrative Agent
(on behalf of itself and the First Lien Claimholders) and the Second Lien Administrative
Agent (on behalf of itself and the Second Lien Claimholders) and any permitted assignee of
any thereof solely for the purpose of perfecting the security interest granted to such
parties in such Control Collateral, subject to the terms and conditions of this Section 5.5.
The First Lien Administrative Agent and the Second Lien Administrative Agent hereby
acknowledge that the Control Agent will obtain “control” under the UCC over each Controlled
Account as contemplated by the First Lien Collateral Documents and the Second Lien
Collateral Documents for the benefit of both the First Lien Administrative Agent (on behalf
of itself and the First Lien Claimholders) and the Second Lien Administrative Agent (on
behalf of itself and the Second Lien Claimholders) pursuant to the control agreements
relating to each respective Controlled Account. The First Lien Administrative Agent and the
Second Lien Administrative Agent hereby also acknowledge and agree that the Control Agent
will

22

 

obtain landlord lien waivers as contemplated by the First Lien Collateral Documents and
the Second Lien Collateral Documents for the benefit of (i) the First Lien Administrative
Agent for the benefit of the First Lien Claimholders and (ii) the Second Lien Administrative
Agent for the benefit of Second Lien Claimholders.

     (b) The Control Agent, the First Lien Administrative Agent, on behalf of itself and the
First Lien Claimholders, and the Second Lien Administrative Agent, on behalf of itself and
the Second Lien Claimholders, each hereby agrees that the First Lien Administrative Agent
shall have the sole and exclusive right and authority to give instructions to, and otherwise
direct, the Control Agent in respect of the Control Collateral or any control agreement with
respect to any Control Collateral until the earlier of (i) the date upon which the Discharge
of First Lien Obligations shall have occurred and (ii) the Second Lien Enforcement Date and
neither the Second Lien Administrative Agent nor any Second Lien Claimholder will impede,
hinder, delay or interfere with the exercise of such rights by the First Lien Administrative
Agent in any respect, other than by taking Permitted Second Lien Actions. The Grantors
hereby jointly and severally agree to pay, reimburse, indemnify and hold harmless the
Control Agent to the same extent and on the same terms that the Grantors are required to do
so for the First Lien Administrative Agent in accordance with the First Lien Credit
Agreement as in effect on the date hereof. The First Lien Claimholders and the Second Lien
Claimholders hereby jointly and severally agree to pay, reimburse, indemnify and hold
harmless the Control Agent to the same extent and on the same terms that the First Lien
Claimholders are required to do so for the First Lien Administrative Agent in accordance
with the First Lien Credit Agreement and the Second Lien Claimholders are required to do so
for the Second Lien Administrative Agent in accordance with the Second Lien Credit
Agreement.

     (c) Except as set forth below, the Control Agent shall have no obligation whatsoever to
the Second Lien Administrative Agent or any Second Lien Claimholder including, without
limitation, any obligation to assure that the Control Collateral is genuine or owned by any
Grantor or one of their respective Subsidiaries or to preserve rights or benefits of any
Person except as expressly set forth in this Section 5.5. In acting on behalf of the Second
Lien Administrative Agent and the Second Lien Claimholders and the First Lien Administrative
Agent and the First Lien Claimholders, the duties or responsibilities of the Control Agent
under this Section 5.5 shall be limited solely (i) to physically holding the Control
Collateral delivered to the Control Agent by any Grantor as agent for the First Lien
Administrative Agent (on behalf of itself and the First Lien Claimholders) and the Second
Lien Administrative Agent (on behalf of itself and the Second Lien Claimholders) for
purposes of perfecting the Lien held by the First Lien Administrative Agent and the Second
Lien Administrative Agent and (ii) delivering such collateral as set forth in Section
5.5(d).

     (d) Neither the Control Agent nor the First Lien Administrative Agent shall have by
reason of the Second Lien Credit Documents or this Agreement or any other document a
fiduciary relationship in respect of the Second Lien Administrative Agent or any Second Lien
Claimholder.

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     (e) Upon the Discharge of First Lien Obligations (other than in connection with a
Refinancing of the First Lien Obligations), the Control Agent shall deliver to the Second
Lien Administrative Agent the Control Collateral together with any necessary endorsements
(or otherwise allow the Second Lien Administrative Agent to obtain control of such Control
Collateral) or as a court of competent jurisdiction may otherwise direct and the Second Lien
Administrative Agent shall accept and succeed to the role of the Control Agent as the agent
for perfection on the Control Collateral.

     (f) The Control Agent shall have an unfettered right to resign as Control Agent upon 30
days notice to the First Lien Administrative Agent and the Second Lien Administrative Agent.
If upon the effective date of such resignation no successor control agent has been
appointed by the First Lien Administrative Agent and the Second Lien Administrative Agent,
the Control Agent shall deliver to the First Lien Administrative Agent the Control
Collateral together with any necessary endorsements (or otherwise allow the First Lien
Administrative Agent to obtain control of such Control Collateral) or as a court of
competent jurisdiction may otherwise direct and the First Lien Administrative Agent shall
accept and succeed to the role of the Control Agent as the agent for perfection on the
Control Collateral.

     5.6 [RESERVED]

     5.7 Purchase Right. Without prejudice to the enforcement of the First Lien
Claimholders’ remedies, the First Lien Claimholders agree that at any time during the 60 day period
following (a) acceleration of the First Lien Obligations in accordance with the terms of the First
Lien Credit Agreement, (b) a payment default under the First Lien Credit Agreement that has not
been cured or waived by the First Lien Claimholders within sixty (60) days of the occurrence
thereof, (c) the commencement of any Enforcement Action by the First Lien Claimholder against all
or a material portion of the Collateral following an event of default under the First Lien Credit
Agreement, or (d) the commencement of an Insolvency or Liquidation Proceeding (each, a
“Purchase Event”), one or more of the Second Lien Claimholders may request, and the First
Lien Claimholders hereby offer the Second Lien Claimholders the option, to purchase all, but not
less than all, of the aggregate amount of outstanding First Lien Obligations outstanding at the
time of purchase at par (excluding any prepayment or similar yield maintenance provisions), without
warranty or representation or recourse (except for representations and warranties required to be
made by assigning lenders pursuant to the Assignment Agreement (as such term is defined in the
First Lien Credit Agreement)). If such right is exercised within the aforementioned 60 day period,
the parties shall endeavor to close promptly thereafter but in any event within ten (10) Business
Days of the request. If one or more of the Second Lien Claimholders exercise such purchase right,
such purchase shall be effectuated through the assignment provisions set forth in Section ___of the
First Lien Credit Agreement. If none of the Second Lien Claimholders exercise such right, the
First Lien Claimholders shall have no further obligations pursuant to this Section 5.7 for such
Purchase Event and may take any further actions in their sole discretion in accordance with the
First Lien Credit Documents and this Agreement. For avoidance of doubt, prior to the consummation
of any such assignment of the First Lien Obligations as contemplated hereunder, the First Lien
Claimholders shall not be

24

 

restricted from taking any Enforcement Action or other action otherwise available to them in
accordance with the First Lien Credit Documents and applicable law.

     SECTION 6 Insolvency or Liquidation Proceedings.

     6.1 Use of Cash Collateral and Financing Issues. Until the Discharge of First Lien
Obligations has occurred, if Company or any other Grantor shall be subject to any Insolvency or
Liquidation Proceeding and the First Lien Administrative Agent shall desire to permit the use of
cash collateral on which the First Lien Administrative Agent or any other creditor has a Lien or to
permit Company or any other Grantor to obtain financing, from one of more of the First Lien
Claimholders under Section 363 or Section 364 of the Bankruptcy Code or any similar Bankruptcy Law
(each, a “DIP Financing”), then, so long as the maximum principal amount of Indebtedness
that may be outstanding from time to time in connection with such DIP Financing, together with the
principal amount of First Lien Obligations outstanding at such time (such combined amount, the
“Total Debt”) shall not exceed the Maximum First Lien Obligations, the Second Lien
Administrative Agent, on behalf of itself and the Second Lien Claimholders, (A) agrees that it will
raise no objection to, or otherwise contest or interfere with, such use of cash collateral or DIP
Financing on the grounds of adequate protection nor support any other Person objecting to, or
otherwise contest or interfere with, such sale, use, or lease of cash collateral or DIP Financing
and will not request any form of adequate protection (except as agreed by the First Lien
Administrative Agent or to the extent expressly permitted by Section 6.4) and, to the extent the
Liens securing the First Lien Obligations are subordinated to or pari passu with such DIP
Financing, the Second Lien Administrative Agent will subordinate its Liens in the Collateral to (x)
the Liens securing such DIP Financing (and all Obligations relating thereto), (y) any adequate
protection Liens provided to the First Lien Claimholders and (z) any “carve-out” for professional
and United States Trustee fees agreed to by the First Lien Administrative Agent, provided that the
amount of such “carve-out”, together with the Total Debt shall not exceed the Maximum First Lien
Obligations; provided that the foregoing shall not prohibit the Second Lien Administrative
Agent or the Second Lien Claimholders from objecting solely to any provisions in any DIP Financing
relating to, describing or requiring any provision or content of a plan of reorganization other
than any provisions requiring that the DIP Financing be paid in full in cash. Nothing set forth in
this Agreement shall restrict the Second Lien Claimholders from proposing debtor-in-possession
financing, or the First Lien Claimholders from objecting thereto on any grounds.

     6.2 Sale Issues. The Second Lien Agent, on behalf of itself and the Second Lien
Claimholders, agrees that it will raise no objection to or otherwise contest or oppose a sale or
other disposition of any Collateral (and any post-petition assets subject to adequate protection
Liens in favor of the First Lien Collateral Agent) free and clear of its Liens or other claims
under Section 363 of the Bankruptcy Code if the Requisite Lenders under the First Lien Credit
Agreement have consented to such sale or disposition of such assets so long as the interests of the
Second Lien Claimholders in the Collateral (and any post-petition assets subject to adequate
protection Liens, if any, in favor of the Second Lien Collateral Agent) attach to the proceeds
thereof, subject to the priorities set forth in Section 4.2 of this Agreement, and such proceeds
are applied to permanently reduce the amount of First Lien Obligations outstanding to the extent
required under the First Lien Credit Agreement. Upon request by the First Lien Administrative

25

 

Agent, the Second Lien Administrative Agent shall consent to the release of its lien in
connection with such a sale or disposition.

     6.3 Relief from the Automatic Stay. Until the Discharge of First Lien Obligations has
occurred, the Second Lien Administrative Agent, on behalf of itself and the Second Lien
Claimholders, agrees that none of them shall (i) seek relief from the automatic stay or any other
stay in any Insolvency or Liquidation Proceeding in respect of the Collateral, without the prior
written consent of the First Lien Administrative Agent, or (ii) oppose any request by the First
Lien Administrative Agent or any First Lien Claimholder to seek relief from the automatic stay or
any other stay in any Insolvency or Liquidation Proceeding in respect of the Collateral.

     6.4 Adequate Protection. (a) The Second Lien Administrative Agent, on behalf of
itself and the Second Lien Claimholders, agrees that none of them shall contest or object to, (or
support any other person contesting or objecting to) (i) any request by the First Lien
Administrative Agent or the First Lien Claimholders for adequate protection or (ii) any objection
by the First Lien Administrative Agent or the First Lien Claimholders to any motion, relief, action
or proceeding based on the First Lien Administrative Agent or the First Lien Claimholders claiming
a lack of adequate protection. In any Insolvency or Liquidation Proceeding, the Second Lien
Administrative Agent, on behalf of itself and the Second Lien Claimholders, may seek adequate
protection in respect of the Second Lien Obligations, subject to the provisions of this Agreement,
only if (A) the First Lien Claimholders (or any subset thereof) are granted adequate protection in
the form of additional collateral including replacement liens on post-petition collateral, and (B)
such additional protection requested by the Second Lien Collateral Agent is in the form of a Lien
on such additional collateral, which Lien, if granted, will be subordinated to the adequate
protection Liens securing the First Lien Obligations and the Liens securing any DIP Financing (and
all Obligations relating thereto) on the same basis as the other Liens securing the Second Lien
Obligations are so subordinated to the Liens securing the First Lien Obligations under this
Agreement and the Liens securing any such DIP Financing. In the event the Second Lien
Administrative Agent, on behalf of itself or any of the Second Lien Claimholders, seeks or requests
adequate protection in respect of Second Lien Obligations and such adequate protection is granted
in the form of additional collateral, then the Second Lien Administrative Agent, on behalf of
itself and the Second Lien Claimholders, agrees that the First Lien Administrative Agent shall
also be granted a Lien on such additional collateral as security for the First Lien Obligations and
for any DIP Financing and that any Lien on such additional collateral securing the Second Lien
Obligations shall be subordinated to the Liens on such collateral securing the First Lien
Obligations and any DIP Financing (and all Obligations relating thereto) and to any other Liens
granted to the First Lien Claimholders as adequate protection on the same basis as the other Liens
securing the Second Lien Obligations are so subordinated to the Liens securing the First Lien
Obligations under this Agreement and the Liens securing DIP Financing.

     (b) Similarly, if the First Lien Claimholders (or any subject thereof) are granted adequate
protection in the form of a superpriority claim, then the Second Lien Administrative Agent, on
behalf of itself or any of the Second Lien Claimholders, may seek or request a superpriority claim,
which superpriority claim will be junior in all respects to the superpriority claim granted to the
First Lien Administrative Agent and the First Lien Claimholders, and, in the event that the Second
Lien Administrative Agent, on behalf of itself or any of the Second Lien

26

 

Claimholders, seeks or requests adequate protection in respect of Second Lien Obligations and
such adequate protection is granted in the form of a superpriority claim, then the Second Lien
Administrative Agent, on behalf of itself and the Second Lien Claimholders, agrees that the First
Lien Administrative Agent and the providers of any DIP Financing also shall be granted a
superpriority claim, which superpriority claim will be senior in all respects to the superpriority
claim granted to the Second Lien Administrative Agent and the Second Lien Claimholders.

     (c) Notwithstanding the foregoing, if the First Lien Claimholders are deemed by a court of
competent jurisdiction to be fully secured on the petition date of any Insolvency or Liquidation
Proceeding, then the Second Lien Collateral Agent and the Second Lien Claimholders shall not be
prohibited from seeking adequate protection in the form of payments in the amount of current
post-petition interest, incurred fees and expenses of other cash payment.

     6.5 No Waiver. Nothing contained herein shall prohibit or in any way limit the First
Lien Administrative Agent or any First Lien Claimholder from objecting in any Insolvency or
Liquidation Proceeding or otherwise to any action taken by the Second Lien Administrative Agent or
any of the Second Lien Claimholders, including the seeking by the Second Lien Administrative Agent
or any Second Lien Claimholders of adequate protection or the asserting by the Second Lien
Administrative Agent or any Second Lien Claimholders of any of its rights and remedies under the
Second Lien Credit Documents or otherwise; provided, however, that this Section 6.5
shall not limit the rights of the Second Lien Claimholders under the proviso in Section 3.1(a)(ii)
or under Section 6.4 or Section 6.9.

     6.6 Avoidance Issues. If any First Lien Claimholder is required in any Insolvency or
Liquidation Proceeding, or otherwise, to turn over or otherwise pay to the estate of Company or any
other Grantor any amount in respect of a First Lien Obligation (a “Recovery”), then such First Lien
Claimholders shall be entitled to a reinstatement of First Lien Obligations with respect to all
such recovered amounts. If this Agreement shall have been terminated prior to such Recovery, this
Agreement shall be reinstated in full force and effect, and such prior termination shall not
diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto from
such date of reinstatement. Collateral or proceeds thereof received by the Second Lien
Administrative Agent or any Second Lien Claimholder after a Discharge of First Lien Obligations and
prior to the reinstatement of such First Lien Obligations shall be delivered to the First Lien
Administrative Agent upon such reinstatement in accordance with Section 4.2.

     6.7 Separate Grants of Security and Separate Classification. Each of the Grantors,
the First Lien Claimholders and the Second Lien Claimholders acknowledges and agrees that (i) the
grants of Liens pursuant to the First Lien Collateral Documents and the Second Lien Collateral
Documents constitute two separate and distinct grants of Liens and (ii) because of, among other
things, their differing rights in the Collateral, the Second Lien Obligations are fundamentally
different from the First Lien Obligations and must be separately classified in any plan of
reorganization proposed or adopted in an Insolvency or Liquidation Proceeding. To further
effectuate the intent of the parties as provided in the immediately preceding sentence, if it is
held that the claims of the First Lien Claimholders and Second Lien Claimholders in respect of the
Collateral constitute only one secured claim (rather than separate classes of senior and junior
secured claims), then the First Lien Claimholders shall be entitled to receive, in addition to

27

 

amounts distributed to them from, or in respect of, the Collateral in respect of principal,
pre-petition interest and other claims, all amounts owing in respect of post-petition interest,
fees, costs and other charges, irrespective of whether a claim for such amounts is allowed or
allowable in such Insolvency or Liquidation Proceeding, until the occurrence of the Discharge of
First Lien Obligations, before any distribution from, or in respect of, any Collateral is made in
respect of the claims held by the Second Lien Claimholders), with the Second Lien Claimholders
hereby acknowledging and agreeing to turn over to the First Lien Claimholders amounts otherwise
received or receivable by them to the extent necessary to effectuate the intent of this sentence,
even if such turnover has the effect of reducing the claim or recovery of the Second Lien
Claimholders.

     6.8 Reorganization Securities. If, in any Insolvency or Liquidation Proceeding, debt
obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor
are distributed pursuant to a plan of reorganization or similar dispositive restructuring plan,
both on account of First Lien Obligations and on account of Second Lien Obligations, then, to the
extent the debt obligations distributed on account of the First Lien Obligations and on account of
the Second Lien Obligations are secured by Liens upon the same property, the provisions of this
Agreement will survive the distribution of such debt obligations pursuant to such plan and will
apply with like effect to the Liens securing such debt obligations.

     6.9 Post-Petition Claims.

     (a) Neither the Second Lien Administrative Agent nor any other Second Lien Claimholder
shall oppose or seek to challenge any claim by the First Lien Administrative Agent or any
First Lien Claimholder for allowance in any Insolvency or Liquidation Proceeding of First
Lien Obligations consisting of post-petition interest, fees, costs, charges or expenses to
the extent of the value of the lien of the First Lien Administrative Agents held for the
benefit of the First Lien Claimholders, without regard to the existence of the Lien of the
Second Lien Administrative Agent on behalf of the Second Lien Claimholders on the
Collateral.

     (b) Neither the First Lien Administrative Agent nor any other First Lien Claimholder
shall oppose or seek to challenge any claim by the Second Lien Administrative Agent or any
Second Lien Claimholder for allowance in any Insolvency or Liquidation Proceeding of Second
Lien Obligations consisting of post-petition interest, fees, costs, charges or expenses to
the extent of the value of the Lien of the Second Lien Administrative Agent on behalf of the
Second Lien Claimholders on the Collateral (after taking into account the First Lien
Obligations).

     6.10 Waiver. The Second Lien Administrative Agent, for itself and on behalf of the
Second Lien Claimholders, waives any claim it or they may hereafter have against the First Lien
Administrative Agent or any First Lien Claimholder arising out of the election of the First Lien
Administrative Agent or any First Lien Claimholder of the application of Section 1111(b)(2) of the
Bankruptcy Code, or out of any cash collateral or financing arrangement in accordance with Section
6.1 hereof or out of any grant of a security interest in connection with the Collateral in any
Insolvency or Liquidation Proceeding.

28

 

     6.11 Expense Claims. Neither Second Lien Administrative Agent nor any Second Lien
Claimholder will (i) contest the payment of fees, expenses or other amounts to the First Lien
Administrative Agent or any First Lien Claimholder under Section 506(b) of the Bankruptcy Code or
otherwise to the extent provided for in the First Lien Credit Agreement or (ii) assert or enforce,
at any time prior to the Discharge of First Lien Obligations, any claim under Section 506(c) of the
Bankruptcy Code senior to or on parity with the First Lien Obligations for costs or expenses of
preserving or disposing of any Collateral.

     6.12 [Reserved]

     6.13 Effectiveness in Insolvency or Liquidation Proceedings. This Agreement, which
the parties hereto expressly acknowledge is a “subordination agreement” under Section 510(a) of the
Bankruptcy Code, shall be effective before, during and after the commencement of an Insolvency or
Liquidation Proceeding. All references in this Agreement to any Grantor shall include such Person
as a debtor-in-possession and any receiver or trustee for such Person in any Insolvency or
Liquidation Proceeding.

     SECTION 7 Reliance; Waivers; Etc.

     7.1 Non-Reliance

     (a) The consent by the First Lien Claimholders to the execution and delivery of the
Second Lien Credit Documents and the grant to the Second Lien Administrative Agent on behalf
of the Second Lien Claimholders of a Lien on the Collateral and all loans and other
extensions of credit made or deemed made on and after the date hereof by the First Lien
Claimholders to the Grantors shall be deemed to have been given and made in reliance upon
this Agreement. The Second Lien Administrative Agent, on behalf of itself and the Second
Lien Claimholders, acknowledges that it and the Second Lien Claimholders have, independently
and without reliance on the First Lien Administrative Agent or any First Lien Claimholder,
and based on documents and information deemed by them appropriate, made their own credit
analysis and decision to enter into the Second Lien Credit Agreement, the other Second Lien
Credit Documents, this Agreement and the transactions contemplated hereby and thereby and
they will continue to make their own credit decision in taking or not taking any action
under the Second Lien Credit Agreement, the other Second Lien Credit Documents or this
Agreement.

     (b) The consent by the Second Lien Claimholders to the execution and delivery of the
First Lien Credit Documents and the grant to the First Lien Administrative Agent on behalf
of the First Lien Claimholders of a Lien on the Collateral and all loans and other
extensions of credit made or deemed made on and after the date hereof by the Second Lien
Claimholders to the Grantors shall be deemed to have been given and made in reliance upon
this Agreement. The First Lien Administrative Agent, on behalf of itself and the First Lien
Claimholders, acknowledges that it and the First Lien Claimholders have, independently and
without reliance on the Second Lien Administrative Agent or any Second Lien Claimholder, and
based on documents and information deemed by them

29

 

appropriate, made their own credit analysis and decision to enter into the First Lien
Credit Agreement, the other First Lien Credit Documents, this Agreement and the transactions
contemplated hereby and thereby and they will continue to make their own credit decision in
taking or not taking any action under the First Lien Credit Agreement, the other First Lien
Credit Documents or this Agreement.

     7.2 No Warranties or Liability. The First Lien Administrative Agent, on behalf of
itself and the First Lien Claimholders under its First Lien Credit Documents, acknowledges and
agrees that each of the Second Lien Administrative Agent and the Second Lien Claimholders have made
no express or implied representation or warranty, including with respect to the execution,
validity, legality, completeness, collectibility or enforceability of any of the Second Lien Credit
Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. The
Second Lien Claimholders will be entitled to manage and supervise their respective loans and
extensions of credit under the Second Lien Credit Documents in accordance with law and as they may
otherwise, in their sole discretion, deem appropriate. The Second Lien Administrative Agent, on
behalf of itself and the Second Lien Obligations, acknowledges and agrees that the First Lien
Administrative Agent and the First Lien Claimholders have made no express or implied representation
or warranty, including with respect to the execution, validity, legality, completeness,
collectibility or enforceability of any of the First Lien Credit Documents, the ownership of any
Collateral or the perfection or priority of any Liens thereon. The First Lien Claimholders will be
entitled to manage and supervise their respective loans and extensions of credit under their
respective First Lien Credit Documents in accordance with law and as they may otherwise, in their
sole discretion, deem appropriate. The Second Lien Administrative Agent and the Second Lien
Claimholders shall have no duty to the First Lien Administrative Agent or any of the First Lien
Claimholders, and the First Lien Administrative Agent and the First Lien Claimholders shall have no
duty to the Second Lien Administrative Agent or any of the Second Lien Claimholders, to act or
refrain from acting in a manner which allows, or results in, the occurrence or continuance of an
event of default or default under any agreements with Company or any Guarantor Subsidiary
(including the First Lien Credit Documents and the Second Lien Credit Documents), regardless of any
knowledge thereof which they may have or be charged with.

     7.3 No Waiver of Lien Priorities.

     (a) No right of the First Lien Claimholders, the Control Agent, the First Lien
Administrative Agent, the Second Lien Administrative Agent, the Second Lien Claimholders or
any of them to enforce any provision of this Agreement, any First Lien Credit Document or
any Second Lien Credit Document, as applicable shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Company or any other Grantor or by any
act or failure to act by the Control Agent, any First Lien Claimholder or any Second Lien
Claimholder, or by any noncompliance by any Person with the terms, provisions and covenants
of this Agreement, any of the First Lien Credit Documents or any of the Second Lien Credit
Documents, regardless of any knowledge thereof which the Control Agent, any First Lien
Claimholder, any Second Lien Claimholder, or any of them, may have or be otherwise charged
with.

30

 

     (b) Without in any way limiting the generality of the foregoing paragraph (but subject
to the rights of Company and the other Grantors under the First Lien Credit Documents and
subject to the provisions of Section 5.3(b)), the First Lien Claimholders, the First Lien
Administrative Agent and any of them may, at any time and from time to time in accordance
with the First Lien Credit Documents or applicable law, without the consent of, or notice
to, the Second Lien Administrative Agent or any Second Lien Claimholders, without incurring
any liabilities to the Second Lien Administrative Agent or any Second Lien Claimholders and
without impairing or releasing the Lien priorities and other benefits provided in this
Agreement (even if any right of subrogation or other right or remedy of the Second Lien
Administrative Agent or any Second Lien Claimholders is affected, impaired or extinguished
thereby) do any one or more of the following:

     (i) make loans and advances to any Grantor or issue, guaranty or obtain letters
of credit for account of any Grantor or otherwise extend credit to any Grantor, in
any amount and on any terms, whether pursuant to a commitment or as a discretionary
advance and whether or not any default or event of default or failure of condition
is then continuing (subject, in each case, to the limits set forth in the definition
of “First Lien Obligations” and Section 5.3);

     (ii) change the manner, place or terms of payment or change or extend the time
of payment of, or amend, renew, exchange, increase or alter, the terms of any of the
First Lien Obligations or any Lien on any First Lien Collateral or guaranty thereof
or any liability of Company or any other Grantor, or any liability incurred directly
or indirectly in respect thereof (including any increase in or extension of the
First Lien Obligations, without any restriction as to the amount, tenor or terms of
any such increase or extension, subject to the limits set forth in the definition of
“First Lien Obligations”) or, subject to the provisions of this Agreement, otherwise
amend, renew, exchange, extend, modify or supplement in any manner any Liens held by
the First Lien Administrative Agent or any of the First Lien Claimholders, the First
Lien Obligations or any of the First Lien Credit Documents; provided,
however, the foregoing shall not prohibit the Second Lien Administrative Agent and
Second Lien Claimholders from enforcing, consistent with the other terms of this
Agreement, any right arising under the Second Lien Credit Agreement as a result of
any Grantor’s violation of the terms thereof.

     (iii) subject to the provisions of this Agreement, sell, exchange, release,
surrender, realize upon, enforce or otherwise deal with in any manner and in any
order any part of the Collateral or any liability of Company or any other Grantor to
the First Lien Claimholders or the First Lien Administrative Agent, or any liability
incurred directly or indirectly in respect thereof;

     (iv) settle or compromise any First Lien Obligation or any other liability of
Company or any other Grantor or any security therefor or any liability incurred
directly or indirectly in respect thereof and apply any sums by

31

 

whomsoever paid and however realized to any liability (including the First Lien
Obligations) in any manner or order;

     (v) exercise or delay in or refrain from exercising any right or remedy against
Company or any security or any other Grantor or any other Person, elect any remedy
and otherwise deal freely with Company, any other Grantor or any First Lien
Collateral and any security and any guarantor or any liability of Company or any
other Grantor to the First Lien Claimholders or any liability incurred directly or
indirectly in respect thereof;

     (vi) take or fail to take any Lien securing the First Lien Obligations or any
other collateral security for any First Lien Obligations or take or fail to take any
action which may be necessary or appropriate to ensure that any Lien securing First
Lien Obligations or any other Lien upon any property is duly enforceable or
perfected or entitled to priority as against any other Lien or to ensure that any
proceeds of any property subject to any Lien are applied to the payment of any First
Lien Obligation or any Obligation secured thereby; or

     (vii) otherwise release, discharge or permit the lapse of any or all Liens
securing the First Lien Obligations or any other Liens upon any property at any time
securing any First Lien Obligations.

     (c) The Second Lien Administrative Agent, on behalf of itself and the Second Lien
Claimholders, also agrees that the Control Agent, the First Lien Claimholders and the First
Lien Administrative Agent shall have no liability to the Second Lien Administrative Agent or
any Second Lien Claimholders, and the Second Lien Administrative Agent, on behalf of itself
and the Second Lien Claimholders, hereby waives all claims against the Control Agent, any
First Lien Claimholder or the First Lien Administrative Agent, arising out of any and all
actions which the Control Agent, the First Lien Claimholders or the First Lien
Administrative Agent may take or permit or omit to take with respect to: (i) the First Lien
Credit Documents, (ii) the collection of the First Lien Obligations or (iii) the foreclosure
upon, or sale, liquidation or other disposition of, any Collateral (including, without
limitation, the Control Collateral, as applicable). The Second Lien Administrative Agent,
on behalf of itself and the Second Lien Claimholders, agrees that the First Lien
Claimholders and the First Lien Administrative Agent have no duty to them in respect of the
maintenance or preservation of the Collateral, the First Lien Obligations or otherwise.

     (d) Subject to Section 5.4, the Second Lien Administrative Agent, on behalf of itself
and the Second Lien Claimholders, agrees not to assert and hereby waives, to the fullest
extent permitted by law, any right to demand, request, plead or otherwise assert or
otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right
that may otherwise be available under applicable law with respect to the Collateral.

     7.4 Obligations Unconditional. All rights, interests, agreements and obligations of
the First Lien Administrative Agent and the First Lien Claimholders and the Second Lien

32

 

Administrative Agent and the Second Lien Claimholders, respectively, hereunder shall remain in
full force and effect irrespective of:

     (a) any lack of validity or enforceability of any First Lien Credit Documents or any
Second Lien Credit Documents or any setting aside or avoidance of any Lien (other than as a
result of a final non-appealable judgment of a court of competent jurisdiction setting aside
or avoiding any such Lien as a result of an Improper Act of the First Lien Claimholders);

     (b) except as otherwise set forth in the Agreement, any change in the time, manner or
place of payment of, or in any other terms of, all or any of the First Lien Obligations or
Second Lien Obligations made in accordance herewith, or any amendment or waiver or other
modification made in accordance herewith, including any increase in the amount thereof,
whether by course of conduct or otherwise, of the terms of any First Lien Credit Document or
any Second Lien Credit Document;

     (c) subject to Section 2.5 and Section 2.6, any exchange of any security interest in
any Collateral or any other collateral, or any amendment, waiver or other modification made
in accordance herewith, whether in writing or by course of conduct or otherwise, of all or
any of the First Lien Obligations or Second Lien Obligations or any guarantee thereof;

     (d) the commencement of any Insolvency or Liquidation Proceeding in respect of Company
or any other Grantor; or

     (e) any other circumstances which otherwise might constitute a defense available to, or
a discharge of, Company or any other Grantor in respect of the First Lien Obligations (other
than as a result of a final non-appealable judgment of a court of competent jurisdiction
setting aside or avoiding a Lien of the First Lien Claimholders as a result of an Improper
Act of the First Lien Claimholders).

     7.5 Certain Notices.

     (a) Promptly upon the satisfaction of the conditions set forth in clauses (a), (b), (c)
and (d) of the definition of Discharge of First Lien Obligations, the First Lien
Administrative Agent shall deliver written notice confirming same to the Second Lien
Administrative Agent; provided that the failure to give any such notice shall not
result in any liability of the First Lien Administrative Agent or the First Lien
Claimholders hereunder or in the modification, alteration, impairment, or waiver of the
rights of any party hereunder.

     (b) Promptly upon (or as soon as practicable following) the commencement by the First
Lien Administrative Agent of any Enforcement Action with respect to any Collateral
(including by way of a public or private sale of Collateral), the First Lien Administrative
Agent shall notify the Second Lien Administrative Agent of such action; provided
that the failure to give any such notice shall not result in any liability of the First

33

 

Lien Administrative Agent or the First Lien Claimholders hereunder or in the
modification, alteration, impairment, or waiver of the rights of any party hereunder.

     SECTION 8 Miscellaneous.

     8.1 Conflicts. As between the First Lien Administrative Agent, the First Lien
Claimholders, the Second Lien Administrative Agent and the Second Lien Claimholders, in the event
of any conflict between the provisions of this Agreement and the provisions of the First Lien
Credit Documents or the Second Lien Credit Documents, the provisions of this Agreement shall govern
and control. The parties hereto acknowledge that the terms of this Agreement are not intended to
negate any specific rights granted to Company in the First Lien Credit Documents and the Second
Lien Credit Documents.

     8.2 Effectiveness; Continuing Nature of this Agreement; Severability. This Agreement
shall become effective when executed and delivered by the parties hereto. This is a continuing
agreement of lien subordination and the First Lien Claimholders may continue, at any time and
without notice to the Second Lien Administrative Agent or any Second Lien Claimholder subject to
the Second Lien Credit Documents, to extend credit and other financial accommodations and lend
monies to or for the benefit of Company or any Grantor constituting First Lien Obligations in
reliance but subject to the terms hereof. The Second Lien Administrative Agent, on behalf of
itself and the Second Lien Claimholders, and First Lien Administrative Agent, on behalf of itself
and the First Lien Claimholders, each hereby waives any right it may have under applicable law to
revoke this Agreement or any of the provisions of this Agreement. The terms of this Agreement
shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation
Proceeding. Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. All references to Company or any other Grantor shall include Company or
such Grantor as debtor and debtor-in-possession and any receiver or trustee for Company or any
other Grantor (as the case may be) in any Insolvency or Liquidation Proceeding. This Agreement
shall terminate and be of no further force and effect, (i) with respect to the Second Lien
Administrative Agent, the Second Lien Claimholders and the Second Lien Obligations, upon the later
of (1) the date upon which the obligations under the Second Lien Credit Agreement terminate and
payment has been made in full in cash of all other Second Lien Obligations outstanding on such date
and (2) if there are other Second Lien Obligations outstanding on such date, the date upon which
such Second Lien Obligations terminate and (ii) with respect to the First Lien Administrative
Agent, the First Lien Claimholders and the First Lien Obligations, the date of Discharge of First
Lien Obligations, subject to the rights of the First Lien Claimholders under Section 5.6 and
Section 6.5.

     8.3 Amendments; Waivers. No amendment, modification or waiver of any of the
provisions of this Agreement by the Second Lien Administrative Agent or the First Lien
Administrative Agent shall be deemed to be made unless the same shall be in writing signed on
behalf of each party hereto or its authorized agent and each waiver, if any, shall be a waiver only
with respect to the specific instance involved and shall in no way impair the rights of the parties
making such waiver or the obligations of the other parties to such party in any other respect or at

34

 

any other time. Notwithstanding the foregoing, Company shall not have any right to consent to
or approve any amendment, modification or waiver of any provision of this Agreement except to the
extent its rights or obligations are directly and affected.

     8.4 Information Concerning Financial Condition of Company and its Subsidiaries.

     (a) The First Lien Administrative Agent and the First Lien Claimholders, on the one
hand, and the Second Lien Claimholders and the Second Lien Administrative Agent, on the
other hand, shall each be responsible for keeping themselves informed of (a) the financial
condition of Company and its Subsidiaries and all endorsers and/or guarantors of the First
Lien Obligations or the Second Lien Obligations and (b) all other circumstances bearing upon
the risk of nonpayment of the First Lien Obligations or the Second Lien Obligations. The
First Lien Administrative Agent and the First Lien Claimholders shall have no duty to advise
the Second Lien Administrative Agent or any Second Lien Claimholder and the Second Lien
Administrative Agent and the Second Lien Claimholders shall have no duty to advise to the
First Lien Administrative Agent or any First Lien Claimholders, of information known to it
or them regarding such condition or any such circumstances or otherwise. In the event that
any First Lien Claimholder, in its sole discretion, undertakes at any time or from time to
time to provide any such information to any Second Lien Claimholder, or any Second Lien
Claimholder, in its sole discretion, undertakes at any time or from time to time to provide
any such information to any First Lien Claimholder, it or they shall be under no obligation
(w) to make, and the providing party shall not make, any express or implied representation
or warranty, including with respect to the accuracy, completeness, truthfulness or validity
of any such information so provided, (x) to provide any additional information or to provide
any such information on any subsequent occasion, (y) to undertake any investigation or (z)
to disclose any information which, pursuant to accepted or reasonable commercial finance
practices, such party wishes to maintain confidential or is otherwise required to maintain
confidential.

     (b) The Grantors agree that any information provided to the First Lien Administrative
Agent, the Second Lien Administrative Agent, the Control Agent, any First Lien Claimholder
or any Second Lien Claimholder may be shared by such Person with any First Lien Claimholder,
any Second Lien Claimholder, the Control Agent, the First Lien Administrative Agent or the
Second Lien Administrative Agent not withstanding any request or demand by such Grantor that
such information be kept confidential; provided that such shared information shall
otherwise be subject to the respective confidentiality provisions in the First Lien Credit
Agreement and the Second Lien Credit Agreement, as applicable.

     8.5 Subrogation. The Second Lien Administrative Agent, on behalf of itself and the
Second Lien Claimholders, hereby agrees not to assert any rights of subrogation it may acquire as a
result of any payment hereunder until the Discharge of First Lien Obligations has occurred.

35

 

     8.6 Application of Payments. All payments received by the First Lien Administrative
Agent or the First Lien Claimholders may be applied, reversed and reapplied, in whole or in part,
to such part of the First Lien Obligations provided for in the First Lien Credit Documents. The
Second Lien Administrative Agent, on behalf of itself and the Second Lien Claimholders, assents to
(a) subject to Section 5.3, any extension or postponement of the time of payment of the First Lien
Obligations or any part thereof and to any other indulgence with respect thereto and (b) subject to
Section 2 hereof, (i) any substitution, exchange or release of any security which may at any time
secure any part of the First Lien Obligations and (ii) the addition or release of any other Person
primarily or secondarily liable therefor.

     8.7 SUBMISSION TO JURISDICTION;WAIVER OF JURY TRIAL.

     (a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING
HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK TO THE EXTENT PERMITTED BY APPLICABLE LAW. BY EXECUTING AND
DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW (i) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (ii) WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS; (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 8.8;
AND (iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER
PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT,
AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

     (b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER HEREOF, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT,
AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH
PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND

36

 

VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.7(b) AND
EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     8.8 Notices. All notices to the Control Agent, the Second Lien Claimholders and the
First Lien Claimholders permitted or required under this Agreement shall also be sent to the Second
Lien Administrative Agent and the First Lien Administrative Agent, respectively. Unless otherwise
specifically provided herein, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, electronically mailed or sent by courier
service or U.S. mail and shall be deemed to have been given when delivered in person or by courier
service, upon receipt of electronic mail or four Business Days after deposit in the U.S. mail
(registered or certified, with postage prepaid and properly addressed). For the purposes hereof,
the addresses of the parties hereto shall be as set forth below each party’s name on the signature
pages hereto, or, as to each party, at such other address as may be designated by such party in a
written notice to all of the other parties.

     8.9 Further Assurances. The First Lien Administrative Agent, on behalf of itself and
the First Lien Claimholders under the First Lien Credit Documents, and the Second Lien
Administrative Agent, on behalf of itself and the Second Lien Claimholders under the Second Lien
Credit Documents, and Company, agrees that each of them shall take such further action and shall
execute and deliver such additional documents and instruments (in recordable form, if requested) as
the First Lien Administrative Agent or the Second Lien Administrative Agent may reasonably request
to effectuate the terms of and the lien priorities contemplated by this Agreement.

     8.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES THEREOF (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

     8.11 Binding on Successors and Assigns. This Agreement shall be binding upon the
First Lien Administrative Agent, the First Lien Claimholders, the Second Lien Administrative Agent,
the Second Lien Claimholders, the Control Agent and their respective successors and assigns.

     8.12 Specific Performance. Each of the First Lien Administrative Agent and the Second
Lien Administrative Agent may demand specific performance of this Agreement. The First Lien
Administrative Agent, on behalf of itself and the First Lien Claimholders under its

37

 

First Lien Credit Documents, and the Second Lien Administrative Agent, on behalf of itself and
the Second Lien Claimholders, hereby irrevocably waives any defense based on the adequacy of a
remedy at law and any other defense which might be asserted to bar the remedy of specific
performance in any action which may be brought by any First Lien Administrative Agent or the Second
Lien Administrative Agent, as the case may be.

     8.13 Headings. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any other purpose or be
given any substantive effect.

     8.14 Counterparts. This Agreement may be executed in counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. Delivery of an executed counterpart
of a signature page of this Agreement or any document or instrument delivered in connection
herewith by telecopy shall be effective as delivery of a manually executed counterpart of this
Agreement or such other document or instrument, as applicable.

     8.15 Authorization. By its signature, each Person executing this Agreement on behalf
of a party hereto represents and warrants to the other parties hereto that it is duly authorized to
execute this Agreement.

     8.16 No Third Party Beneficiaries. This Agreement and the rights and benefits hereof
shall inure to the benefit of each of the parties hereto and its respective successors and assigns
and shall inure to the benefit of each of the First Lien Administrative Agent, the First Lien
Claimholders, the Second Lien Administrative Agent, the Second Lien Claimholders, the Control
Agent, the Company. No other Person shall have or be entitled to assert rights or benefits
hereunder.

     8.17 Provisions Solely to Define Relative Rights. The provisions of this Agreement
are and are intended solely for the purpose of defining the relative rights of the First Lien
Claimholders on the one hand and the Second Lien Claimholders on the other hand. Nothing in this
Agreement is intended to or shall impair the rights of Company or any other Grantor, or the
obligations of Company or any other Grantor, which are absolute and unconditional, to pay the First
Lien Obligations and the Second Lien Obligations as and when the same shall become due and payable
in accordance with their terms.

[remainder of this page left blank intentionally]

38

 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

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

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as First Lien Administrative Agent,

 	 
	 	By:  	/s/  William
F. Fox	 
	 	 	Name:  	William F. Fox	 
	 	 	Title:  	Director	 
	 

Notice Address:

Principal Office:

Wachovia Bank, National Association

Charlotte Plaza

201 South College Street, CP8

Charlotte, North Carolina 28288-0680

Attention: Syndication Agency Services

Telecopier: (704) 383-0288

Telephone: (704) 374-2698

with a copy to:

Wachovia Bank, National Association

1339 Chestnut Street

Mailcode            PA4152

Philadelphia, Pennsylvania 19107

Attention: James M. Travagline

Telecopier: 267-321-6702

Telephone: 267-321-6711

 

 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as Second Lien Administrative Agent,

 	 
	 	By:  	 /s/ John Linker	 
	 	 	Name: John Linker	 	 
	 	 	Title: Officer	 	 
	 

Notice Address:

Principal Office:

Wachovia Bank, National Association

Charlotte Plaza

201 South College Street, CP8

Charlotte, North Carolina 28288-0680

Attention: Syndication Agency Services

Telecopier: (704) 383-0288

Telephone: (704) 374-2698

with a copy to:

Wachovia Bank, National Association

1339 Chestnut Street

Mailcode            PA4152

Philadelphia, Pennsylvania 19107

Attention: James M. Travagline

Telecopier: 267-321-6702

Telephone: 267-321-6711

 

 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as Control Agent,

 	 
	 	By:  	/s/
William F. Fox	 
	 	 	Name:  	William F. Fox	 
	 	 	Title:  	Director	 
	 

Notice Address:

Principal Office:

Wachovia Bank, National Association

Charlotte Plaza

201 South College Street, CP8

Charlotte, North Carolina 28288-0680

Attention: Syndication Agency Services

Telecopier: (704) 383-0288

Telephone: (704) 374-2698

with a copy to:

Wachovia Bank, National Association

1339 Chestnut Street

Mailcode            PA4152

Philadelphia, Pennsylvania 19107

Attention: James M. Travagline

Telecopier: 267-321-6702

Telephone: 267-321-6711

 

 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

	 	 	 	 	 
	 	AMERICAN PACIFIC CORPORATION,

as Company

 	 
	 	By:  	/s/
Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Vice President, Chief Financial Officer	 
	 

Notice Address:

American Pacific Corporation

3770 Howard Hughes Parkway #300

Las Vegas, Nevada 89109

Attention: Seth L. Van Voorhees,

Vice President, Chief Financial Officer and Treasurer

Telecopier: (702) 699-4181

Telephone: (702) 699-4166

 

 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

	 	 	 	 	 
	GUARANTORS: 	AMERICAN PACIFIC CORPORATION,

a Nevada corporation

 	 
	 	By:  	/s/ Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Treasurer	 
	 
	 	AMPAC FINE CHEMICALS LLC,

a California limited liability company

 	 
	 	By:  	/s/ Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Chief Financial Officer	 
	 
	 	ENERGETIC ADDITIVES INC., LLC,

a Nevada limited liability company

 	 
	 	By:  	/s/ Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Manager	 
	 
	 	AMPAC-ISP CORP.,

a Delaware corporation

 	 
	 	By:  	/s/ Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Treasurer	 
	 
	 	AMERICAN AZIDE CORPORATION,

a Nevada corporation

 	 
	 	By:  	/s/ Seth L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Treasurer	 

 

 

	 	 	 	 	 

AMERICAN PACIFIC CORPORATION

INTERCREDITOR AGREEMENT

	 	 	 	 	 
	 	AMPAC FARMS, INC.,

a Nevada corporation

 	 
	 	By:  	/s/  Seth
L. Van Voorhees	 
	 	Name:  	Seth L. Van Voorhees	 
	 	Title:  	Treasurerexv10w4

 

Exhibit 10.4

PAYMENT WITH RESPECT TO THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION
PROVISIONS SET FORTH IN SECTION 3 HEREIN. THIS NOTE WAS ORIGINALLY ISSUED ON
NOVEMBER 30, 2005 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. EACH OF THE FIRST LIEN CREDIT
AGREEMENT DATED AS OF NOVEMBER 30, 2005, BY AND AMONG AMERICAN PACIFIC CORPORATION,
CERTAIN SUBSIDIARIES OF AMERICAN PACIFIC CORPORATION FROM TIME TO TIME PARTIES
THERETO, THE LENDERS FROM TIME TO TIME PARTIES THERETO, AND WACHOVIA BANK, NATIONAL
ASSOCIATION, AS ADMINISTRATIVE AGENT, AND THE SECOND LIEN CREDIT AGREEMENT DATED AS
OF NOVEMBER 30, 2005, BY AND AMONG AMERICAN PACIFIC CORPORATION, CERTAIN
SUBSIDIARIES OF AMERICAN PACIFIC CORPORATION FROM TIME TO TIME PARTIES THERETO, THE
LENDERS FROM TIME TO TIME PARTY THERETO, AND WACHOVIA BANK, NATIONAL ASSOCIATION, AS
ADMINISTRATIVE AGENT, CONTAIN TERMS GOVERNING THE RIGHTS OF THE HOLDER OF THIS NOTE.
A COPY OF EACH CREDIT AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT AMERICAN
PACIFIC CORPORATION’S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.

THIS NOTE MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNDER
CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW.

AMERICAN PACIFIC CORPORATION

SUBORDINATED PROMISSORY NOTE

			
	November 30, 2005
	 	$25,500,000
	 	 	 

     AMERICAN PACIFIC CORPORATION, a Delaware corporation (the “Company”) hereby promises
to pay to AEROJET–GENERAL CORPORATION, a Ohio corporation, or its registered assigns (but only
if such assignment is permitted by and is in compliance with the terms hereof), the principal
amount of $25,500,000, or such increased or decreased principal sum, as the case may be, as shall
result from any increase of the principal hereof permitted hereby or any prepayments contemplated
hereby, together with interest thereon calculated from the date hereof in accordance with the
provisions of this Note.

 

 

     This Subordinated Promissory Note (this “Note”) is issued to Aerojet–General
Corporation, in connection with the consummation of the transactions contemplated by the Purchase
Agreement, dated as of July 12, 2005 by and among the Company, Aerojet Fine Chemicals LLC and
Aerojet–General Corporation, as amended by the First Amendment
thereto dated as of November 30,
2005.

     The Company will maintain a register in which it will record the initial ownership of this
Note and any changes in ownership of this Note which occur as permitted by and in compliance with
the terms hereof. Aerojet–General Corporation or any subsequent holder of this Note as indicated
at any time in such register shall be hereinafter referred to as the “holder” of this Note.

     1. Interest. Interest shall accrue on the sum of (a) the unpaid principal amount of
this Note then outstanding and (b) all interest which was accrued and unpaid as of the immediately
preceding Interest Reference Date at a per annum rate equal to (i) the aggregate of three–month
U.S. dollar LIBOR as from time to time in effect (as determined as provided below) plus
(ii) a margin equal to the lesser of (A) the initial interest rate margin payable on outstanding
Loans, including the Revolving Loans (as defined in the First Lien Credit Agreement), under the
Credit Agreements as of the date hereof, as set forth on the attached Schedule 1 and (B) the
interest rate margin payable on outstanding Loans, including the Revolving Loans, under the Credit
Agreements as of the date of any amendment or refinancing of the either Credit Agreement which
includes a reduction in interest cost (after giving effect to such amendment or refinancing)
(assuming in the case of sub-clause (A) or (B) for purposes of such determination full utilization
of all lending commitments); provided, however, that upon the occurrence and during
the continuation of an Event of Default under the terms of this Note, the interest rate owing
hereunder shall be increased by an additional 200 basis points (2%) (the “Default Rate”).
For purposes of this Note, the last day of each calendar quarter, beginning December 31, 2005,
shall be an “Interest Reference Date.” Any accrued interest which for any reason has not
theretofore been paid shall be paid in full on the date on which the final principal payment on
this Note is made. Notwithstanding the foregoing, interest shall be paid only if, and to the
extent, such payment is permitted by Section 3 hereof. Interest shall be calculated on the
basis of actual number of days elapsed and a 360-day year. Three–month U.S. dollar LIBOR shall be
determined by the Company on the date of issuance of this Note and thereafter on each successive
Interest Reference Date and shall be the quotation of “London Interbank Offered Rates (Libor)” on
any such date appearing in the “Money Rates” section of the western edition of the Wall Street
Journal. If the Wall Street Journal is not published on any Interest Reference Date, such
determination shall be made on the first publication date thereafter. If not available therein on
any such determination date, an equivalent quotation shall be obtained from such other publication
as the Company reasonably shall select. Three–month U.S. dollar LIBOR as so determined on any such
determination date shall remain in effect for purposes of interest accrual hereunder until the next
determination date. Except as otherwise expressly provided herein, in lieu of payment in cash of
any interest due hereunder prior to maturity, any and all such interest on the outstanding
principal amount hereof shall be added to, and become a part of, the principal amount of this Note
on each Interest Reference Date and at maturity.

 

 

     2. Payment of Principal on Note.

     (a) Scheduled Payments. The Company shall pay the principal amount of
$25,500,000, or such increased or decreased principal sum, as the case may be, as shall
result from any increase of the principal hereof permitted hereby or any prepayments
contemplated hereby, to the holder of this Note on November 30, 2012, together with all
accrued and unpaid interest on the principal amount being repaid.

     (b) Prepayments. The Company may, at any time and from time to time without
premium or penalty, prepay all or any portion of the outstanding principal amount of, or
interest on, this Note; provided that such prepayment is not prohibited by the
provisions of Section 3 hereof. In connection with each prepayment of principal
hereunder, the Company shall also pay all accrued and unpaid interest on the principal
amount of this Note being repaid. Notwithstanding the foregoing and notwithstanding
anything in Section 3 hereof, to the extent then permitted by Section
6.10(i) of the First Lien Credit Agreement and Section 6.10(h) of the Second
Lien Credit Agreement, as in effect from time to time (provided that the terms of
said Sections as in effect as of the Closing Date shall not be amended without the prior
written consent of the holder of this Note), the Company shall pay, on the earliest
permitted date, the principal amount of $6,500,000 (or such lesser principal amount of this
Note then outstanding) together with any accrued and unpaid interest on the principal amount
being paid to the holder of this Note. With respect to the immediately preceding sentence,
to the extent the Company is permitted to make such payment but fails to do so as provided
above, such unpaid principal amount shall bear interest, after as well as before judgment,
from the date such principal payment should have been made by the Company at a rate per
annum equal to the Default Rate until such principal payment is made.

     3. Subordination: Restrictions on Payment.

     (a) Anything in this Note to the contrary notwithstanding, the obligations of the
Company in respect of the principal, interest, fees and charges on this Note shall be
subordinate and junior in right of payment, to the extent and in the manner hereinafter set
forth, to all Senior Debt.

     (b) In the event that the Company makes a general assignment for the benefit of
creditors; or an order, judgment or decree is entered adjudicating the Company bankrupt or
insolvent; or any order for relief with respect to the Company is entered under the Federal
Bankruptcy Code; or the Company petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator of the Company or of any substantial part of
the assets of the Company, or commences any proceeding relating to the Company under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is filed, or any
such proceeding is commenced, against the Company (collectively referred to as an
“Insolvency Event”), or upon any acceleration of Senior Debt, then:

 

 

     (i) the holders of the Senior Debt shall be entitled to receive payment in full
in cash of all principal, premium, interest, fees, charges and other amounts then
due on all Senior Debt (including interest, fees, charges and other amounts accruing
thereon after the commencement of any such Insolvency Event at the rate provided in
the documentation for such Senior Debt (irrespective of whether such interest, fees,
charges or other amounts are allowed as a claim in such proceedings)) before the
holder of this Note is entitled to receive any payment of any kind or character on
account of principal, interest or other amounts due (or past due) upon this Note,
and the holders of other Senior Debt shall be entitled to receive for application in
payment thereof any payment or distribution of any kind or character, whether in
cash, property or securities or by set-off or otherwise, which may be payable or
deliverable in any such proceedings in respect of this Note; and

     (ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the holder of this Note
would be entitled except for the provisions of this Section 3(b) shall be
paid or delivered by the Company (or any receiver or trustee in such proceedings)
directly to the holders of the Senior Debt or their duly appointed agents for
application of payment according to the priorities of the Senior Debt and ratably
among the holders of any class of Senior Debt until all Senior Debt (including
interest, fees, charges and other amounts accrued thereon after the date of
commencement of such proceedings at the rate provided in the documentation for such
Senior Debt (irrespective of whether such interest, fees, charges or other amounts
are allowed as a claim in such proceedings)) shall have been paid in full in cash.

     (c) In any proceedings with respect to any Insolvency Event, or the application of the
assets of the Company to the payment or liquidation thereof, or upon the dissolution or
other winding up of the business of the Company or upon any other event resulting in the
termination or acceleration of the Senior Debt, then, and in any such event, (A) each holder
of the Senior Debt shall be entitled to receive full and indefeasible payment and
satisfaction in cash of the Senior Debt prior to the payment of all or any part of the
Subordinated Debt by the Company, and (B) any payment or distribution of any kind or
character from the Company, or either, of its assets, whether in cash, securities or other
property, which shall be payable or deliverable upon or with respect to any or all of the
Subordinated Debt, shall be paid or delivered directly to holders of the Senior Debt for
application to the Senior Debt, due or not due, until such Senior Debt shall have first been
fully and indefeasibly paid in cash and satisfied and all financing arrangements terminated.
The holder of this Note irrevocably authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and others having authority in the premises
to effect all such payments and distributions. The holder of this Note agrees not to
initiate or prosecute or participate in the initiation of prosecution of any claim, action
or other proceeding challenging the enforceability of the Senior Debt or any liens and
security interests securing the Senior Debt. The holder of this Note agrees to execute,
verify, deliver and file any proofs of claim in respect of the

 

 

Subordinated Debt requested by the Administrative Agent or other representative of the
holders of the Senior Debt in connection with any such proceeding, it being understood that
the holder of this Note retains such holder’s right to vote such claims in any such
proceeding. The Senior Debt shall continue to be treated as Senior Debt and the provisions
of this Note shall continue to cover the relative rights and priorities of Lenders and the
holder of this Note even if all or part of the Senior Debt or the security interests
securing the Senior Debt are subordinated, set aside, avoided or disallowed in connection
with any such proceeding and this Note shall be reinstated if at any time any payment of any
of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt
or any representative of such holder.

     (d) After the prior payment in full in cash of all obligations of the Company in
respect of the Senior Debt under the Credit Agreements and all other Senior Debt then due,
upon the occurrence of any Liquidity Event, the Company shall make mandatory prepayments of
its obligations under this Note as the holder of this Note may direct.

     (e) No payment or prepayment of principal, interest or other amounts on this Note shall
be made by or on behalf of the Company if any Senior Debt remains outstanding or any
commitment to fund Senior Debt is still in effect and the payment blockage provisions of the
Senior Debt Documents in effect as of the Closing Date, or any substantially similar
blockage provisions of the Senior Debt Documents in effect thereafter, prohibit such payment
or prepayment (collectively, the “Blockage Events”). Upon termination of the
Blockage Events, the Company shall resume making payments pursuant to the terms and
conditions of this Note.

     (f) Except as permitted under the Credit Agreements, no holder of the Subordinated Debt
will, except as otherwise agreed to by the Required Lenders under each of the Credit
Agreements and the other holders of the Senior Debt, ask, demand, sue for, take or receive
from the Company, by set off or in any other manner, the whole or any part of the
Subordinated Debt (whether such amounts represent principal or interest, or obligations
which are due or not due, including costs, fees and expenses with respect to the Notes,
direct or indirect, absolute or contingent), including, without limitation, the taking of
any negotiable instruments evidencing such Subordinated Debt nor any security for any
Subordinated Debt, unless and until all Senior Debt, whether now existing or hereafter
arising directly between the Company and any holder of the Senior Debt, or acquired
outright, conditionally or as collateral security from another by any holder the Senior
Debt, shall have been fully and indefeasibly paid in full in cash and satisfied and all
financing arrangements between the Company and all holders of the Senior Debt have been
terminated.

     (g) The holders of Senior Debt may, at any time, in their discretion, renew, amend,
extend or otherwise modify the terms and provisions of Senior Debt so held or exercise any
of their rights under the Senior Debt including, without limitation, the waiver of defaults
thereunder and the amendment of any of the terms or provisions thereof (or any notice
evidencing or creating the same), and the Senior Debt may be refinanced, all without notice
to or assent from the holder of this Note. No compromise,

 

 

alteration, amendment, renewal or other change of; or waiver, consent or other action
in respect of any liability or obligation under or in respect of; any terms, covenants or
conditions of the Senior Debt (or any instrument evidencing or creating the same), whether
or not such release is in accordance with the provisions of the Senior Debt (or any
instrument evidencing or creating the same), shall in any way alter or affect any of the
subordination provisions of this Note.

     (h) If, notwithstanding the provisions of Section 3 of this Note, any payment
or distribution of any kind or character (whether in cash, securities or other property) or
any security shall be received by the holder of this Note in contravention of this
Section 3 and before all the Senior Debt shall have been paid in full in cash, such
payment, distribution or security shall be held in trust for the benefit of; and shall be
immediately paid over or delivered or transferred to, the Administrative Agent under the
First Lien Credit Agreement for distribution in accordance with the provisions of the
Intercreditor Agreement to the other holders of the Senior Debt. Any such payments received
by the holder of this Note and delivered to the Administrative Agent under the First Lien
Credit Agreement shall be deemed not to be a payment on this Note for any reason whatsoever
and the indebtedness under this Note shall remain as if such erroneous payment had never
been paid by the Company or received by the holder of this Note. In the event of the
failure of any holder of this Note to endorse or assign any such payment, distribution or
security, each holder of any Senior Debt is hereby irrevocably authorized to endorse or
assign the same.

     (i) No present or future holder of Senior Debt shall be prejudiced in its right to
enforce the provisions of Section 3 of this Note by any act or failure to act on the
part of the Company.

     (j) If there shall exist (i) any Blockage Event, or (ii) any Event of Default under
this Note, the holder of this Note shall not take or continue any action, or exercise or
continue to exercise any rights, remedies or powers under the terms of this Note, or
exercise or continue to exercise any other right or remedy at law or equity that such holder
might otherwise possess, to collect any amount due and payable in respect of this Note,
including, without limitation, the acceleration of this Note, the filing of any petition in
bankruptcy or the taking advantage of any other insolvency law of any jurisdiction, unless
and until the Senior Debt shall have been fully and finally paid, in cash, and satisfied,
unless one or more of the holders of the Senior Debt shall have accelerated the maturity of
the Senior Debt, in which case the holder of this Note shall be entitled to accelerate the
maturity hereof (if then permitted hereby) but shall not be entitled to take any other
action described above. Notwithstanding the foregoing or any permissible action taken by
the holder of this Note, the holder of this Note shall not be entitled to receive any
payment in contravention of the other provisions of this Section 3, including
without limitation Sections 3(b), 3(e) and 3(h).

     (k) If any payment or distribution to which any holder of this Note would otherwise
have been entitled but for the provisions of this Section 3 shall have been applied,
pursuant to the provisions of this Section 3, to the payment of Senior Debt, then

 

 

and in such case and to such extent, the holder of this Note (A) following payment in
full of the Senior Debt in cash, shall be entitled to receive any and all further payments
or distributions applicable to Senior Debt, and (B) following payment in full of the Senior
Debt in cash, shall be subrogated to the rights of the holders of the Senior Debt to receive
distributions applicable to the Senior Debt, in each case until this Note shall have been
paid in full in cash or such other consideration acceptable to the Holder of this Note in
its sole discretion. If any holder of this Note has been subrogated to the rights of the
holders of Senior Debt due to the operation of this Section 3(k), the Company agrees
to take all such reasonable actions as are requested by such holder of this Note in order to
cause such holder to be able to obtain payments from the Company with respect to such
subrogation rights as soon as possible.

     (l) Until payment in full in cash of the Senior Debt, the holder of this Note will not
ask, demand, accept, receive or retain any guarantee of this Note, or any collateral
security for the payment of this Note, or any other form of payment assurance as to this
Note, from the Company or any Subsidiary of the Company, except only the obligation of the
Company evidenced by this Note, and will not initiate or prosecute, or encourage any other
person to initiate or prosecute any claim or other proceeding.

     (m) The provisions of this Section 3 are solely for the purpose of defining the
relative rights of the holders of Senior Debt, on the one hand, and the holder of this Note
on the other, against the Company and its assets, and nothing herein is intended to or shall
impair, as between the Company and the holder of this Note, the obligations of the Company
which are absolute and unconditional, to pay to the holder of this Note the principal and
interest on this Note as and when they become due and payable in accordance with their
terms, or is intended to or will affect the relative rights of the holder of this Note and
creditors of the Company other than the holders of the Senior Debt, nor, except as provided
in this Section 3, will anything herein or therein prevent the holder of this Note
from exercising all remedies otherwise permitted by applicable law upon default under this
Note subject to the rights, if any, under this Section 3 of the holders of Senior
Debt in respect of cash, property or securities of the Company received upon the exercise of
any such remedy.

     (n) The holders of Senior Debt have made and will make loans, and have extended and
will extend credit, to the Company in reliance on this Section 3 and Section
7 and are entitled to the benefits of the provisions thereof. The holder of this Note
acknowledges and agrees that each holder of the Senior Debt and any representative of the
Senior Debt holders (including, without limitation, the Administrative Agent) are, and the
Company and the holder of this Note hereby name such parties as, third party beneficiaries
of the covenants and agreements of the holder of this Note set forth in this Section
3. Accordingly, any holder of Senior Debt (or any representative thereof) shall be
entitled to enforce any provisions of such Sections against the holder and/or the Company.

     (o) No failure prior to maturity to make any payment of interest or other amount in
cash hereunder by reason of the provisions of this Section 3 shall constitute an

 

 

Event of Default hereunder. Any payment in cash of principal, interest or other amount
which has not theretofore been paid when originally due because of the prohibitions set
forth in this Section 3 shall be paid in full in cash on the first date that is
permitted thereafter.

     4. Events of Default.

     (a) Definition. For purposes of this Note, an Event of Default shall be deemed
to have occurred if:

     (i)
subject to Section 3(o) hereof, the Company fails to pay when due
and payable (whether at maturity or otherwise) the full amount of interest then
accrued on any Note or the full amount of any principal payment on this Note, and
such failure to pay is not cured within thirty business days after the occurrence
thereof; or

     (ii) the Company makes an assignment for the benefit of creditors or admits in
writing its inability to pay its debts generally as they become due; or an order,
judgment or decree is entered adjudicating the Company bankrupt or insolvent; or any
order for relief with respect to the Company is entered under the Federal Bankruptcy
Code; or the Company petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company, or of any substantial
part of the assets of the Company, or commences any proceeding relating to the
Company under any bankruptcy reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the Company and
either (A) the Company by any act indicates its approval thereof; consent thereto or
acquiescence therein or (B) such petition, application or proceeding is not
dismissed within 60 days.

The foregoing shall constitute Events of Default whatever the reason or cause for any such Event of
Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body.

     (b) Consequences of Events of Default. Subject to Section 3:

     (i) Subject to Section 3 hereof, if any Event of Default of the type described
in Section 4(a)(i) has occurred and is continuing, the holder or holders of this
Note may declare all or any portion of the outstanding principal amount of this Note
(together with all accrued but unpaid interest thereon and all other amounts due in
connection therewith) due and payable and demand immediate payment thereof;
provided, however, that in the event that the holder of this Note then
outstanding declares less than all of the outstanding principal amount of this Note
(together with all accrued but unpaid interest thereon and all other amounts due in
connection therewith) due and payable, then such

 

 

holder shall state the aggregate principal amount of this Note to be declared due and
payable.

     (ii) Subject to Section 3 hereof, if an Event of Default of the type described
in Section 4(a)(ii) has occurred, the aggregate principal amount of this Note
(together with all accrued interest thereon and all other amounts due and payable with
respect thereto) shall become immediately due and payable without any action on the part of
the holders of this Note, and the Company shall immediately pay to the holders of this Note
all amounts due and payable with respect to this Note.

     (iii) Subject to Section 3 hereof, the holder of this Note shall also have any
other rights which the holder may have been afforded under any contract or agreement at any
time and any other rights which such holder may have pursuant to applicable law.

     (iv) The Company hereby waives diligence, presentment, protest and demand and notice of
protest and demand, dishonor and nonpayment of this Note (other than any notices expressly
provided for herein), and expressly agrees that this Note, or any payment hereunder, may be
extended from time to time, all without in any way affecting the liability of the Company
hereunder.

     5. Definitions. For purposes of the Notes, the following capitalized terms have the
following meanings:

     “Affiliate” shall mean, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with, such Person. A
Person shall be deemed to control another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities, membership interests, by contract, or
otherwise.

     “Credit Agreements” shall mean a collective reference to the First Lien Credit
Agreement and the Second Lien Credit Agreement.

     “Eligible Assignee” shall mean (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having a combined capital and surplus of at least
$50,000,000; (b) a commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development, or a political subdivision of any
such country, and having a combined capital and surplus of at least $50,000,000, provided
that such bank is acting through a branch or agency located in the United States; or (c) an
insurance company which is an “accredited investor” (as defined in Section 501 of Regulation D of
the Securities and Exchange Commission); provided, that, under no circumstances shall a competitor
or an Affiliate of a competitor of the Company constitute an Eligible Assignee.

     “First Lien Credit Agreement” means that certain First Lien Credit Agreement, dated as
of the date hereof, by and among the Company, certain subsidiaries of the Company from time to

 

 

time parties thereto, the lenders from time to time parties thereto and Wachovia Bank,
National Association, or its successor, as administrative agent for such lenders (in such capacity,
the “Administrative Agent”), as such Credit Agreement may be amended, restated, amended and
restated, supplemented, modified, extended or replaced from time to time, and for the avoidance of
doubt means and includes any successor loan or credit agreement after any refinancing of such First
Lien Credit Agreement.

     “Liquidity Event” means a sale of all or substantially all (and in no case less than
75%) of the assets or stock of the Company.

     “Loans” means any and all Revolving Loans, Term Loans, or Swingline Loans, as defined
in the First Lien Credit Agreement.

     “Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political subdivision thereof.

     “Second Lien Credit Agreement” means that certain Second Lien Credit Agreement, dated
as of the date hereof, by and among the Company, certain subsidiaries of the Company from time to
time parties thereto, the lenders from time to time parties thereto and Wachovia Bank, National
Association, as administrative agent for such lenders (in such capacity, the “Administrative
Agent”), or its successor, as such Credit Agreement may be amended, restated, amended and
restated, supplemented, modified, extended or replaced from time to time, and for the avoidance of
doubt means and includes any successor loan or credit agreement after any refinancing of such
Second Lien Credit Agreement.

     “Senior Debt” means (i) Credit Party Obligations as defined in the Credit Agreements,
(ii) all other indebtedness under or in connection with the Credit Agreements, including, without
limitation, principal, reimbursement obligations under letters of credit, bankers acceptances,
interest rate protection agreements, and similar obligations, interest accruing before and after
any Insolvency Event at the rate provided in the documentation with respect thereto (irrespective
of whether such interest is allowed as a claim in any such proceeding), premiums, penalties, fees,
indemnities or expenses, and regardless of whether direct or indirect, now existing or hereafter
arising, absolute or contingent, secured or unsecured, or long or short term, (iii) (A) all
indebtedness, liabilities and other obligations of the Company and its Subsidiaries to any Person
with respect to any working capital, revolving credit or other line of credit facility, any term
loan facility, or any other extension of credit by a bank, insurance company or financial
institution engaged in the business of lending money or other institutional lender, including
reimbursement obligations under letters of credit (or guaranties, as applicable) and obligations in
respect of bankers’ acceptances and Hedging Agreements (as defined in the First Lien Credit
Agreement), and (B) any other indebtedness, liabilities and other obligations of the Company and
its Subsidiaries (1) for borrowed money or evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (2) under leases which are capitalized under GAAP, and (3) in
respect of the principal balance outstanding under any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product, (iv) obligations

 

 

arising under guarantees executed by the Company or any of its Subsidiaries of items described
in clauses (i), (ii) and (iii) above, and (v) renewals, extensions, refinancings, deferrals,
amendments and modifications of the items described in clauses (i), (ii), (iii) and/or (iv) above,
except for (x) any of the foregoing described in clauses (i) through (v) above constituting an
intercompany transaction between the Company or any Subsidiary thereof or between a Subsidiary and
another Subsidiary, and (y) indebtedness or other obligations which are specifically designated not
to be Senior Debt for purposes of this Note in the instruments evidencing such indebtedness or
obligations at the time of the issuance thereof or which by their terms are subordinated to any
other category or class of indebtedness of the Company and its Subsidiaries; provided that
the aggregate principal amount of obligations of the Company or any of its Subsidiaries described
in clauses (i) through (v) above, both before and after any refundings, refinancings or increases
in the principal amount thereof, shall not exceed the Senior Debt Limit.

     “Senior Debt Documents” means the Credit Agreements, the other Credit Documents as
defined in the Credit Agreements and any other document, agreement or instrument evidencing the
Senior Debt or executed pursuant to or in connection therewith, as each such document, agreement or
instrument may be amended, restated, amended and restated, supplemented, modified, extended or
replaced from time to time.

     “Senior Debt Limit” means an aggregate principal balance of the Senior Debt equal to
the greater of (i) sum of (A) the aggregate principal amount of the outstanding First Lien Obligations (as such term is defined in the Intercreditor Agreement referred to in the Credit Agreements) not in excess of $95,000,000 plus (B) the aggregate principal amount of the outstanding Second Lien Obligations (as defined in the Intercreditor Agreement) not in excess of $20,000,000 and (ii) an aggregate principal balance of Senior Debt which would not cause
the Company to exceed as of the end of any fiscal quarter a Total Leverage Ratio of 4.50 to 1.00
(as such term is defined in, and as such ratio is determined under, the First Lien Credit
Agreement); provided that (1) any obligations in respect of Hedging Agreements (as defined in the First Lien Credit Agreement) constituting First Lien Obligations or Second Lien Obligations and (2) any increase in the amount of the Senior Debt resulting from any
payment-in-kind interest added to principal shall each be disregarded in calculating the Senior Debt
Limit. The definition of such Total Leverage Ratio (and all related definitions) as defined in the
First Lien Credit Agreement shall be incorporated herein by reference as if set forth in full
herein and shall survive any termination, cancellation or discharge of the First Lien Credit
Agreement, and any modification, continuation or refinancing of the First Lien Credit Agreement
which does not include such a ratio.

     “Subordinated Debt” means (i) indebtedness under this Note, including, without
limitation, principal, premium, interest and other liabilities payable from time to time and
similar obligations, premiums, penalties, fees, indemnities or expenses, and regardless of whether
direct or indirect, now existing or hereafter arising, absolute or contingent, secured or
unsecured, or long or short term, (ii) obligations arising under guarantees executed by the Company
or any of its Subsidiaries of items described in (i) above, and (iii) renewals, extensions,
refinancings, deferrals, restructurings, amendments and modifications of the items described in (i)
and/or (ii) above.

     “Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership, association or other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees thereof is at the time

 

 

owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof; or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof For purposes hereof; a
Person or Persons shall be deemed to have a majority ownership interest in a limited liability
company, partnership, association or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association or other business
entity gains or losses or shall be or control any managing director or general partner of such
limited liability company, partnership, association or other business entity.

     6. Transfer Restrictions. Except in connection with the transfer this Note to an
Eligible Assignee, the holder of this Note agrees not to sell, transfer, assign, pledge or
otherwise dispose of any interest in this Note (i) without the prior written consent of the Company
(not to be unreasonably withheld in the case of a transfer to a Subsidiary or Affiliate) or (ii) to
any Person who or which is not an “accredited investor” within the meaning of Rule 501 of
Regulation D of the Securities and Exchange Commission. The holder of this Note shall in each case
give 10 days’ prior written notice of any transfer to the Company. Any transfer or attempted
transfer of this Note in violation of any provision of this Section 6 shall be void, and
the Company shall not record such transfer on its books or treat any purported transferee of this
Note as the owner of this Note for any purpose. The holder of this Note represents and warrants to
the Company that such holder: (i) will acquire this Note for its own account for investment and
(subject to the disposition of its property being at all times within its control) not with a view
to any resale or other distribution of this Note in a transaction constituting a public offering or
otherwise requiring registration under the Securities Act of 1933 (the “Securities Act”) or
in a transaction that would result in noncompliance with applicable state securities laws; (ii) has
such knowledge and experience in financial and business matters as to be capable of evaluating the
merits and the risks of its acquisition of this Note and credit extensions to the Company, (iii) is
an accredited investor as such term is defined in said Rule 501 of Regulation D, and (iv)
understands that this Note has not been, and will not be, registered under the Securities Act or
any state securities laws. The Company shall be permitted to assign its obligations under this Note
to a Subsidiary thereof, provided that (i) such Subsidiary shall agree to be bound hereby
pursuant to an assumption agreement in form reasonably satisfactory to the holder of this Note, and
(ii) the Company shall provide a guaranty of the payment obligations of such Subsidiary hereunder
in form reasonably satisfactory to the holder of this Note (it being understood and agreed that the
Company’s Unconditional Guaranty dated as of November ___2005 in favor of Aerojet-General
Corporation is in a form satisfactory to the holder of this Note).

     7. Amendment and Waiver. Except as otherwise expressly provided herein, the
provisions of this Note may be amended and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the Company has obtained the
written consent of the holder of this Note. No amendment, modification, termination or waiver
shall, unless consented to by the holders of a majority in aggregate principal amount of the Senior
Debt and, do any of the following: (a) increase the interest rate or modify Section 1
hereof in any other respect; (b) change the dates upon which payments of principal or interest are
due on this Note to an earlier date; (c) change any Event of Default or

 

 

add or make more restrictive any covenant with respect to this Note; (d) change the prepayment
provisions of this Note to an earlier date; (e) change the subordination provisions of this Note
(or the subordination terms of any guaranty thereof); or (f) change or amend any other term if such
change or amendment would materially increase the obligations of the Company or confer additional
material rights upon the holders of this Note in a manner adverse to the Company.

     8. Cancellation.  After all principal and accrued interest at any time owed on
this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and
shall not be reissued.

     9. Payments. All payments to be made to the holders of the Notes shall be made in the
lawful money of the United States of America in immediately available funds.

     10. Place of Payment. Payments of principal and interest shall be delivered to the
holder of this Note at such address as is specified by prior written notice by the holder to the
Company.

     11. Governing Law. All questions concerning the construction, validity and
interpretation of this Note will be governed by and construed in accordance with the domestic laws
of the State of New York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.

     12. Waiver of Presentment. Demand and Dishonor. The Company hereby waives
presentment for payment, protest, demand, notice of protest, notice of nonpayment and diligence
with respect to this Note, and waives and renounces all rights to the benefits of any statute of
limitations or any moratorium, appraisement, exemption, or homestead now provided or that hereafter
may be provided by any federal or applicable state statute, including but not limited to exemptions
provided by or allowed under the Federal Bankruptcy Code, both as to itself and as to all of its
property, whether real or personal, against the enforcement and collection of the obligations
evidenced by this Note and any and all extensions, renewals, and modifications hereof.

     13. Business Days. If any payment is due, or any time period for giving notice or
taking action expires, on a day which is a Saturday, Sunday or legal holiday in the State of
California, the State of Nevada or the State of New York, the payment shall be due and payable on,
and the time period shall automatically be extended to, the next business day immediately following
such Saturday, Sunday or legal holiday, and interest shall continue to accrue at the required rate
hereunder until any such payment is made.

     14. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the mutilation, destruction, loss or theft of this Note and the ownership thereof; and, in the case
of any such mutilation, upon surrender and cancellation of this Note, the Company shall, upon the
written request of the holder of this Note, execute and deliver in replacement thereof a new Note
in the same form, in the same original principal amount and dated the same date as the

 

 

Note so mutilated, destroyed, lost or stolen, and such Note so mutilated, destroyed, lost or
stolen shall then be deemed no longer outstanding hereunder.

     15. Remedies. No remedy herein conferred upon the holder of this Note is intended to
be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.

     16. Usury Laws. It is the intention of the Company and the holder of this Note to
conform strictly to all applicable usury laws now or hereafter in force, and any interest payable
under this Note shall be subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by reason of an
election by the holder hereof resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more than the maximum amount permitted
by law, computed from the date hereof until payment, and any interest in excess of the maximum
amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on the principal amount of
this Note, or if this Note has been paid, then the excess shall be rebated to the Company. The
aggregate of all interest (whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to
time. In the event that, contrary to the intent of the Company and the holder of this Note, the
Company pays interest hereunder and it is determined that such interest rate was in excess of the
then legal maximum rate, then that portion of the interest payment representing an amount in excess
of the then legal maximum rate shall be deemed a payment of principal and applied against the
principal then due hereunder.

     17. Confidentiality. The holder of this Note shall hold and keep confidential all
nonpublic information relating to the Company and its Subsidiaries and Affiliates obtained by it
under or in connection with this Note, except for: (i) disclosure to the holder’s Subsidiaries and
Affiliates and their respective directors, officers, employees, agents and representatives in
connection with the negotiation, execution or performance of this Note; (ii) disclosure as
reasonably required in connection with a permitted transfer to a prospective assignee or
participant of all or part of this Note, as provided in Section 6 (subject to execution and
delivery by prospective assignee or participant of an agreement containing confidentiality
obligations substantially similar to those contained herein prior to any disclosure to such
prospective assignee or participant of any such nonpublic information); (iii) disclosure as may be
required or requested by any governmental agency or authority or representative thereof or pursuant
to legal process; (iv) disclosure to any Person and in any proceeding necessary in the judgment of
the holder of this Note to protect its interests in connection with any claim or dispute involving
the holder of this Note; and (v) any other disclosure with the prior written consent of the
Company. Prior to any disclosure by the holder of this Note of such nonpublic information
permitted under clause (iii), it shall, if permitted by applicable laws or judicial order, notify
the Company of such pending disclosure. Notwithstanding the foregoing, such obligation of
confidentiality shall not apply if the information or substantially similar information (A) is
rightfully received by the

 

 

holder of this Note from a Person other than the Company or any of its Subsidiaries or
Affiliates without the holder of this Note being under an obligation to such Person not to disclose
such information, or (B) is or becomes part of the public domain.

     18. Notices. All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including by facsimile) and mailed, sent or
delivered to the respective parties hereto at or to the following addresses or facsimile numbers
(or at or to such other address or facsimile number as shall be designated by any party in a
written notice to the other parties hereto):

	 	 	 	 	 
	 

	 	If to the
	 	American Pacific Corporation
	 

	 	Company:
	 	3770 Howard Hughes Parkway #300
	 

	 	 	 	Las Vegas, Nevada 89109
	 
	 	 	 	 
	 

	 	 	 	Attention: Seth L. Van Voorhees, Vice President, Chief
	 

	 	 	 	Financial Officer and Treasurer

	 

	 	 	 	Facsimile: (702) 699-4181
	 
	 	 	 	 
	 

	 	If to the
	 	Aerojet Fine Chemicals LLC
	 

	 	holder of:
	 	c/o GenCorp Inc.
	 

	 	this Note:
	 	Highway 50 and Aerojet Road
	 

	 	 	 	Rancho Cordova, California 95670
	 
	 	 	 	 
	 

	 	 	 	Attention: Chief Financial
Officer

Facsimile: (916) 351-8668
	 
	 	 	 	 
	 

	 	With a copy to:
	 	 GenCorp Inc.
	 

	 	 	 	Highway 50 and Aerojet Road
	 

	 	 	 	Rancho Cordova, California 95670
	 

	 	 	 	Attention: Deputy General Counsel
	 

	 	 	 	Facsimile: (916) 351-8665

All such notices and communications shall be effective (i) if delivered by hand, upon delivery;
(ii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit
in the mail, first class, postage prepaid; and (iii) if sent by facsimile, when sent.

[signature page immediately follows]

 

 

     IN WITNESS WHEREOF, the Company has executed and delivered this Subordinated Promissory Note
on the date first above written.

	 	 	 	 	 
	 	 	AMERICAN PACIFIC CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	/s/ Seth L. Van Voorhees
	 
	 	 	 	 
	 

	 	Its:	 	Chief Financial Officer
	 

	 	 	 	 

 

 

Schedule 1

Interest Rate Calculation

	 	 	 	 	 	 	 	 	 
	Calculation of Seller Note Spread at Issuance	 
	Debt Instrument	 	Amount ($MM)	 	 	Spread over Libor	 
	First Lien Credit Facility
	 	 	75	 	 	400 bps
	Second Lien Credit Facility
	 	 	20	 	 	900 bps
	Weighted Average Spread over Libor
	 	 	 	 	 	505 bps

 

	 	 	 	 	 
	Calculation of Interest Rate at Issuance	 
	Current 3-Month Libor
	 	 	4.41	%
	Spread over Libor
	 	 	5.05	%
	 
	 	 	 
	Interest rate at Issuance
	 	 	9.46	%

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