Document:

Exhibit
10.2

AMENDED
AND RESTATED

PLEDGE AND SECURITY AGREEMENT

 

 

This
AMENDED AND RESTATED PLEDGE AND SECURITY
AGREEMENT (this “Agreement”) is dated as of November 12,
2003 and entered into by and among La Quinta Properties, Inc., a Delaware
corporation (“Borrower”), La
Quinta Corporation, a Delaware corporation (“Holdings”), each of THE
UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of Borrower and Holdings  (each
of such undersigned Subsidiaries being a “Subsidiary Grantor” and collectively “Subsidiary
Grantors”) and each ADDITIONAL GRANTOR that may become a party
hereto after the date hereof in accordance with Section 18 hereof (Borrower, Holdings, each Subsidiary
Grantor, and each Additional Grantor being a “Grantor” and collectively the
“Grantors”)
and Canadian Imperial Bank of Commerce, as collateral agent for and
representative of Lenders (in such capacity herein called “Collateral Agent”) the
Lenders (as hereinafter defined) party to the Credit Agreement referred to
below, any Hedge Exchangers (as hereinafter defined) and any holders of the
Senior Notes (as hereinafter defined) (individually, a “Senior Note Holder” and
collectively, the “Senior Note Holders”).

 

PRELIMINARY STATEMENTS

 

A.            Pursuant to the Amended and Restated
Credit Agreement dated as of November 12, 2003 (said Amended and Restated
Credit Agreement, as amended to the date hereof, and as it may hereafter be
further amended, restated, supplemented or otherwise modified from time to
time, being the “Credit Agreement”; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Borrower, Holdings, as guarantor, the financial institutions party thereto from
time to time as lenders (“Lenders”), Canadian Imperial Bank of
Commerce, acting through one or more of its agencies, branches or affiliates a
administrative agent (“Administrative Agent”), Fleet Securities
Inc., acting through one or more of its branches or affiliates as syndication
agent (“Syndication
Agent”) and Credit Lyonnais New York Branch, as documentation agent,
which Credit Agreement amends and restates in its entirety the Credit Agreement
dated as of June 6, 2001, by and among Borrower, Holdings, Lenders,
Administrative Agent, and Syndication Agent, as amended to the date hereof (the
“Existing
Credit Agreement”), Lenders have made certain commitments, subject
to the terms and conditions set forth in the Credit Agreement, to extend
certain credit facilities to Borrower.

 

B.            The obligations under the Existing
Credit Agreement are secured pursuant to a Pledge and Security Agreement dated
as of  June 6, 2001 (the “Existing
Pledge and Security Agreement”)
and each of the parties hereto desires to enter into this Agreement as an
amendment and restatement of the Existing Pledge and Security Agreement, to
which they are a party.

 

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C.            Each of Borrower, Holdings and each
other Grantor herby confirms that the security interests granted and perfected
under the Existing Pledge and Security Agreement will continue to secure their
Obligations under the Credit Agreement and the other Loan Documents to which
they are a party.

 

D.            Each of Borrower, Holdings  and each other Grantor from time to time
becoming a party to this Agreement desires to further secure their Obligations
under the Credit Agreement and the other Loan Documents to which they are a
party by entering into this Agreement and granting the security interests
provided for herein.

 

E.             Borrower and Holdings may from time
to time enter, or may from time to time have entered, into one or more Hedge
Agreements (collectively, the “Lender Hedge Agreements”) with one or more
Persons that are Lenders or Affiliates of Lenders at the time such Lender Hedge Agreements are entered into (in
such capacity, collectively, “Hedge Exchangers”) in accordance with the
terms of the Credit Agreement, and it is desired that the obligations of
Borrower and Holdings under the Lender Hedge Agreements, including without
limitation the obligation of Borrower and Holdings to make payments thereunder
in the event of early termination thereof, together with all obligations of
Borrower and Holdings under the Credit Agreement and the other Loan Documents,
be secured by certain of the Collateral hereunder.

 

F.             Subsidiary Grantors have executed
and delivered that certain Subsidiary Guaranty dated as of the date hereof
(said Subsidiary Guaranty, as amended to the date hereof, and as it may
hereafter be further amended, restated, supplemented or otherwise modified from
time to time, being the “Subsidiary Guaranty”) in favor of
Collateral Agent for the benefit of Lenders, pursuant to which each Subsidiary
Grantor has guarantied the prompt payment and performance when due of all
obligations of Borrower under the Credit Agreement.

 

G.            It is a condition precedent to the
continuation of credit by Lenders under the Credit Agreement that Grantors
listed on the signature pages hereof shall have granted the security interest
and undertaken the obligations contemplated by this Agreement.

 

H.            Borrower has issued certain
indebtedness evidenced by the Senior Notes described on Schedule A
attached hereto (the “Senior Notes”).  Pursuant to the indentures and the
supplements thereto described on Schedule A (collectively, the “Senior Indentures”) between the trustees
(individually, a “Trustee” and
collectively, the “Trustees”) for
the Senior Notes and Borrower, the obligations thereunder (the “Note Obligations”) are required to be
equally and ratably secured with the Obligations under the Credit Agreement and
other Loan Documents so long as such Obligations are secured by the Collateral
(as defined in Section 1).

 

NOW, THEREFORE,
in consideration of the premises and in order to induce Lenders to continue the
extension of credit under the Credit Agreement and to induce Hedge Exchangers
to enter into the Lender Hedge Agreements, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, each
Grantor hereby agrees with Collateral Agent as follows:

 

Section 1.                                          Grant
of Security.

 

Each
Grantor hereby acknowledges and reaffirms the security interest granted by each
such Grantor pursuant to the Existing Pledge and Security Agreement, which
Existing Pledge and Security Agreement is being amended and restated it its entirety
by this Agreement.  Each Grantor hereby
assigns to Collateral Agent and hereby grants to Collateral Agent as security
for the Secured Obligations (as defined in Section 2) equally and ratably, a
First Priority security interest in, all of such Grantor’s right, title and
interest in and to the following, in each case whether now or hereafter
existing, whether tangible or intangible, or in which such Grantor now has or
hereafter acquires an interest and wherever the same may be located (the “Collateral”):

 

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(a)           the “Securities Collateral”, which term means:

 

(i)            all
shares of stock, partnership interests, interests in joint ventures, limited
liability company interests and all other equity interests now or hereafter
owned by such Grantor in any Meditrust Subsidiary set forth, or required to be
set forth, on Schedule 1(a)(i) from time to time, including all
securities convertible into, and rights, warrants, options and other rights to
purchase or otherwise acquire, any of the foregoing now or hereafter owned by
such Grantor, including those owned on the date hereof and described on Schedule 1(a)(i)
from time to time, and the certificates or other instruments representing any
of the foregoing and any interest of such Grantor in the entries on the books
of any securities intermediary pertaining thereto (the “Pledged Interests”), and all
dividends, distributions, returns of capital, cash, warrants, option, rights,
instruments, rights to vote or manage the business of such Meditrust Subsidiary
pursuant to organizational documents governing the rights and obligations of
the stockholders, partners, members or other owners thereof and other property
or proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Interests; provided,
that if the issuer of any of such Pledged Interests is a controlled foreign
corporation (used hereinafter as such term is defined in Section 957(a) or
a successor provision of the Internal Revenue Code), the Pledged Interests
shall not include any shares of stock of such issuer in excess of the number of
Securities of such issuer possessing up to but not exceeding 65% of the voting
power of all classes of Securities entitled to vote of such issuer, and all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of such Pledged Interests (as used herein, “Meditrust Subsidiary” shall mean each
Person and successor thereof as set forth on Schedule 1(a)(i) from time
to time, together with any Person or Persons that may be direct or indirect
Subsidiaries of the Borrower and Holdings from time to time); and

 

(ii)           all
indebtedness from time to time owed to such Grantor by any obligor that is, or
becomes, a direct or indirect Subsidiary of such Grantor, including the
indebtedness described on Schedule 1(a)(ii) and issued by the obligors
named therein, and the instruments evidencing such indebtedness (the “Pledged
Debt”), and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Debt;

 

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(b)           the
mortgage loans listed in Schedule 1(b), as each such mortgage loan
may be amended, restated, supplemented or otherwise modified from time to time
(said mortgage loans, as so amended, restated, supplemented or otherwise
modified, being referred to herein individually as a “Mortgage Loan” and
collectively as the “Mortgage Loans”), including, without
limitation, (i) all rights of such Grantor to receive moneys due or to
become due under or pursuant to the Mortgage Loans, including, interest,
principal and late charges and other payments, if any, due or to become due to
Grantor whether as contractual obligations, damages, condemnation rights or
otherwise, (ii) all documents, notes, instruments and other agreements
executed in connection with the Mortgage Loans (collectively, the “Mortgage Loan Documents”), (iii) all
rights of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Mortgage Loans and Mortgage Loan
Documents, (iv) all claims of such Grantor for damages arising out of any
breach of or default under the Mortgage Loans and Mortgage Loan Documents, and
(v) all rights of such Grantor to terminate, amend, supplement, modify or
exercise rights or options under the Mortgage Loans or Mortgage Loan Documents,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder; and

 

(c)           all
proceeds, products, rents and profits of or from any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not Collateral Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.  For purposes of this Agreement, the term “proceeds”
includes whatever is receivable or received when Collateral or proceeds are
sold, exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary.

 

Section 2.                                          Security
for Obligations.

 

This
Agreement secures, and the Collateral assigned by each Grantor is collateral
security for, on an equal and ratable basis, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including without limitation
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured
Obligations of such Grantor.  The
Obligations described in subsection 2(a) are referred to as the “Loan Obligations.”  “Secured Obligations” means:

 

(a)           with
respect to Borrower, Holdings, each Subsidiary Grantor and each Additional
Grantor, all obligations and liabilities of every nature of each of them now or
hereafter existing under or arising out of or in connection with the Credit
Agreement and the other Loan Documents in each case together with all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Borrower and Holdings or any other Grantor, would
accrue on such obligations, whether or not a claim is allowed against Borrower
and Holdings or such Grantor for such interest in the related bankruptcy
proceeding), reimbursement of amounts drawn under Letters of Credit, cash
collateralization of outstanding Letters of Credit in an amount equal to the
aggregate undrawn amount of such Letters of Credit, fees, expenses, indemnities
or otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from Collateral Agent as
a preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement;

 

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(b)           with
respect to Borrower, the obligations of Borrower under the Senior Notes (the “Note Obligations”); and

 

(c)           with
respect to Borrower and Holdings only, the obligations of Borrower and Holdings
under any Lender Hedge Agreements (the “Hedge Obligations”).

 

In
no event shall this Agreement be construed to constitute a guarantee of, or
grant of a security interest or lien to secure, any Hedge Obligations by any
Grantor other than Borrower and Holdings.

 

Section 3.                                          Grantors
Remain Liable.

 

Anything
contained herein to the contrary notwithstanding, (a) each Grantor shall
remain liable under any contracts and agreements included in the Collateral, to
the extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by Collateral Agent of any of its rights hereunder shall
not (except as provided in Section 15) release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral, and (c) Collateral Agent shall not have any obligation or liability
under any contracts, licenses, and agreements included in the Collateral by
reason of this Agreement, nor shall Collateral Agent be obligated to perform
any of the obligations or duties of any Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.

 

Section 4.                                          Representations
and Warranties.

 

Each
Grantor represents and warrants as follows:

(a)           Ownership of
Collateral.  Except as
expressly permitted by the Credit Agreement (including subsection 5.5 thereof)
and for the security interest created by this Agreement, such Grantor owns the
Collateral owned by such Grantor free and clear of any Lien other than Liens
permitted under Section 7.2 of the Credit Agreement.  Except as permitted by the Credit Agreement and such as may have
been filed in favor of Collateral Agent relating to this Agreement, no
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any filing or recording office.

 

(b)           Office
Locations.  The chief place
of business, the chief executive office and the office where such Grantor keeps
its records regarding the Collateral and all originals of all chattel paper
that evidence Collateral are, as of the date hereof, and, have been for the
four month period preceding the date hereof, or, in the case of an Additional
Grantor, the date of the applicable Counterpart (defined in Section 17),
located at the locations set forth on Schedule 4(b);

 

(c)           Names.  No Grantor (or predecessor by merger or
otherwise of such Grantor) has, within the four month period preceding the date
hereof, or, in the case of an Additional Grantor, the date of the applicable
Counterpart, had a different name from the name of such Grantor listed or the
signature pages hereof.

 

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(d)           Delivery of
Certain Collateral.  All
certificates or instruments (excluding checks) evidencing, comprising or
representing the Collateral, to the extent required by Collateral Agent, have
been delivered to Collateral Agent duly endorsed or accompanied by duly
executed instruments of transfer or assignment in blank.

 

(e)           Securities
Collateral.  (i) All of the
Pledged Interests described on Schedule 1(a)(i) have been duly
authorized and validly issued and are fully paid and non-assessable; (ii) all
of the Pledged Debt described on Schedule 1(a)(ii) has been duly
authorized, authenticated or issued, and delivered and is the legal, valid and
binding obligation of the issuers thereof and is not in default; (iii) the
Pledged Interests constitute all of the issued and outstanding shares of stock
or other equity interests of each issuer thereof held by the Grantors (subject
to the proviso to Section 1(a)(i) with respect to shares of a foreign controlled
corporation), and, except as disclosed on Schedule 4(e) attached hereto,
there are no outstanding warrants, options or other rights to purchase, or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any
Pledged Interests; (iv) the Pledged Debt constitutes all of the issued and
outstanding intercompany indebtedness evidenced by a promissory note of the
respective issuers thereof owing to such Grantor; (v) Schedule 1(a)(i)
sets forth all of the Pledged Interests owned by each Grantor on the date
hereof; and (vi) Schedule 1(a)(ii) sets forth all of the Pledged Debt in
existence on the date hereof.

 

(f)            Perfection.  The security interests in the Collateral
granted to Collateral Agent hereunder constitute valid security interests in
the Collateral, securing the payment of the Secured Obligations of such Grantor
upon (i) the filing of UCC financing statements naming each Grantor as “debtor”, naming Collateral Agent as “secured party” and
describing the Collateral in the filing offices with respect to such Grantor
set forth on Schedule 4(f), (ii) in the case of the Securities
Collateral consisting of certificated securities or evidenced by instruments,
delivery of the certificates representing such certificated securities and
delivery of such instruments to Collateral Agent, in each case duly endorsed or
accompanied by duly executed instruments of assignment or transfer in blank,
and (iii) in the case of the Mortgage Loans, delivery of the original
promissory notes evidencing the Mortgage Loans, in each case duly endorsed or
accompanied by duly executed instruments of assignment or transfer in blank,
together with original Mortgage Loan Documents and other instruments evidencing
such Collateral, to the extent required by Collateral Agent, all of which
filings and actions have been made or taken and the security interests in the
Collateral granted to Collateral Agent for the ratable benefit of Lenders and
Hedge Exchangers will continue to constitute, with respect to any such filing
or action taken in the future, valid security interests therein.

 

(g)           Mortgage Loans.  To the best of Grantor’s knowledge, (i) the Mortgage Loan
Documents have been duly executed and delivered, and constitute the legal,
valid and binding obligations of the mortgagors thereunder, enforceable in
accordance with their terms, except as enforceability may be limited by
applicable insolvency, bankruptcy or other laws affecting creditors rights generally,
or general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law and (ii) the promissory notes delivered to
Collateral Agent in connection with the Mortgage Loans are true, correct and
complete originals of all such promissory notes in effect on the date hereof
and have not, as of the date hereof, been further modified or amended.

 

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Section 5.                                          Further
Assurances.

 

(a)           Generally.  Each Grantor agrees that from time to time,
at the expense of Grantors, such Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or that Collateral Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. 
Without limiting the generality of the foregoing, each Grantor will:  (i) at the reasonable request of
Collateral Agent, mark conspicuously each of its records pertaining to the
Collateral, with a legend, in form and substance satisfactory to Collateral
Agent, indicating that such Collateral is subject to the security interest
granted hereby, (ii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or as Collateral Agent may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby, (iii) furnish to Collateral Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Collateral Agent may reasonably
request, all in reasonable detail, (iv) at any reasonable time, upon
request by Collateral Agent, exhibit the Collateral to and allow inspection of
the Collateral by Collateral Agent, or persons designated by Collateral Agent,
(v) at Collateral Agent’s reasonable request, appear in and defend any
action or proceeding that may affect such Grantor’s title to or Collateral
Agent’s security interest in all or any part of the Collateral, and (vi) use
commercially reasonable efforts to obtain any necessary consents of third
parties to the assignment and perfection of a security interest to Collateral
Agent with respect to any Collateral. Each Grantor hereby authorizes Collateral
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
any Grantor.  Each Grantor agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by such Grantor shall be sufficient as a financing statement
and may be filed as a financing statement in any and all jurisdictions.

 

(b)           Securities Collateral.  Without limiting the generality of the
foregoing Section 5(a), each Grantor agrees that it will, upon obtaining
any additional shares of stock or other securities required to be pledged
hereunder, promptly (and in any event within five Business Days) deliver to
Collateral Agent a Pledge Supplement, duly executed by such Grantor, in
substantially the form of Exhibit I (a “Pledge Supplement”), in
respect of the additional Pledged Interests or Pledged Debt to be pledged
pursuant to this Agreement.  Upon each
delivery of a Pledge Supplement to Collateral Agent,  the representations
and warranties contained in clauses (i)-(vi) of Section 4(e) hereof shall be
deemed to have been made by such Grantor as to the Securities Collateral
described in such Pledge Supplement as of the date thereof subject to the
matters disclosed in Schedule 4(e), as such Schedule 4(e) may be
amended or modified by Grantor (as reasonably approved by Collateral Agent) in
connection with the delivery of any such Pledge Supplement.  Each Grantor hereby authorizes Collateral
Agent to attach each Pledge Supplement to this Agreement and agrees that all
Pledged Interests or Pledged Debt of such Grantor listed on any Pledge
Supplement shall for all purposes hereunder be considered Collateral of such
Grantor; provided that the failure of any Grantor to execute a Pledge
Supplement with respect to any additional Pledged Interests or Pledged Debt
pledged pursuant to this Agreement shall not impair the security interest of
Collateral Agent therein or otherwise adversely affect the rights and remedies
of Collateral Agent hereunder with respect thereto.

 

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(c)           Mortgage Loans.  Without limiting the generality of the
foregoing subsection 5(a), each Grantor agrees that it will, upon
providing any mortgage loans or financing to any Person (other than Pledged
Debt which is subject to subsection 5(b)), promptly (and in any event within
five Business Days) deliver to Collateral Agent a Pledge Supplement, duly
executed by such Grantor, in substantially the form of Exhibit II
(a “Mortgage
Pledge Supplement”), in respect of the additional Mortgage Loan and
Mortgage Loan Documents to be pledged pursuant to this Agreement.  Each Grantor hereby authorizes Collateral
Agent to attach each Pledge Supplement to this Agreement and agrees that all
Mortgage Loan and Mortgage Loan Documents of such Grantor listed on any Pledge
Supplement shall for all purposes hereunder be considered Collateral of such
Grantor; provided that the failure of any Grantor to execute a Pledge
Supplement with respect to any additional Mortgage Loan and Mortgage Loan Documents
pledged pursuant to this Agreement shall not impair the security interest of
Collateral Agent therein or otherwise adversely affect the rights and remedies
of Collateral Agent hereunder with respect thereto.

 

Section 6.                                          Certain
Covenants of Grantors.

 

Each Grantor shall:

 

(a)           not
use or permit any Collateral to be used unlawfully or in violation of any
provision of this Agreement or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral;

 

(b)           notify
Collateral Agent of any change in such Grantor’s name, identity or corporate
structure within 15 days of such change;

 

(c)           if
Collateral Agent gives value to enable such Grantor to acquire rights in or the
use of any Collateral, use such value for such purposes; and

 

(d)           except
as expressly permitted by the Credit Agreement, pay or cause to be paid
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith; provided that such
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than one day prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against such Grantor
or any of the Collateral as a result of the failure to make such payment.

 

Section 7.                                          Special
Covenants With Respect to the Securities Collateral
and Mortgage Loans.

 

(a)           Delivery.  Each Grantor agrees that all certificates or
instruments representing or evidencing the Securities Collateral and Mortgage
Loans to the extent required by Collateral Agent shall be delivered to and held
by or on behalf of Collateral Agent pursuant hereto and shall be in suitable
form for transfer by delivery or, as applicable, shall be accompanied by such
Grantor’s endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent.  Collateral Agent
shall have the right at any time to exchange certificates or instruments
representing or evidencing Securities Collateral for certificates or instruments
of smaller or larger denominations.

 

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(b)           Covenants.  Each Grantor shall, except as permitted by
the Credit Agreement, to the extent such Grantor controls such issuer, (i) not
permit any issuer of Pledged Interests to merge or consolidate unless all the
outstanding capital stock or other equity interests of the surviving or
resulting Person owned by such Grantor are, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation;
provided, if the surviving or resulting Person upon any such merger or
consolidation involving an issuer of Pledged Interests which is a controlled
foreign corporation is a controlled foreign corporation, then such Grantor
shall only be required to pledge outstanding capital stock of such surviving or
resulting Person possessing up to but not exceeding 65% of the voting power of
all classes of capital stock of such issuer entitled to vote; (ii) cause
each issuer of Pledged Interests not to issue any stock, other equity interests
or other securities in addition to or in substitution for the Pledged Interests
issued by such issuer, except to such Grantor; (iii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
additional shares of stock, other equity interests or other securities of each
issuer of Pledged Interests; (iv) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock or
other equity interests of any Person that, after the date of this Agreement,
becomes, as a result of any occurrence, a direct Subsidiary of such Grantor;
provided, notwithstanding anything contained in this clause (iv) to the
contrary, such Grantor shall only be required to pledge the outstanding capital
stock of a controlled foreign corporation possessing up to but not exceeding
65% of the voting power of all classes of capital stock of such controlled
foreign corporation entitled to vote; (v) pledge hereunder, immediately upon
their issuance, any and all instruments or other evidences of additional
indebtedness from time to time owed to such Grantor by any obligor on the
Pledged Debt; (vi) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of indebtedness from time to time owed to
such Grantor by any Person that after the date of this Agreement becomes, as a
result of any occurrence, a direct or indirect Subsidiary of such Grantor; and
(vii), at the request of Collateral Agent, promptly execute and deliver to
Collateral Agent an agreement providing for the control, as that term is
defined in the UCC, by Collateral Agent of all securities entitlements and
securities accounts of such Grantor.

 

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(c)           Voting and
Distributions.  So long as no
Event of Default shall have occurred and be continuing, (i) each Grantor shall
be entitled to exercise any and all voting and other consensual rights
pertaining to the Securities Collateral and Mortgage Loans or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the Credit
Agreement; provided, no Grantor shall exercise or refrain from
exercising any such right if Collateral Agent shall have notified such Grantor
that, in Collateral Agent’s reasonable judgment, such action would have a
Material Adverse Effect on the value of the Securities Collateral or Mortgage
Loans (it being understood, however, that neither (A) the voting by such
Grantor of any Pledged Interests for or such Grantor’s consent to the election
of directors or other members of a governing body of an issuer of Pledged
Interests at a regularly scheduled annual or other meeting of stockholders or
holders of equity interests or with respect to incidental matters at any such
meeting, nor (B) such Grantor’s consent to or approval of any action otherwise
permitted under this Agreement and the Credit Agreement shall be deemed
inconsistent with the terms of this Agreement or the Credit Agreement within
the meaning of this Section, and no notice of any such voting or consent need
be given to Collateral Agent); (ii) each Grantor shall be entitled to receive
and retain, and to utilize free and clear of the lien of this Agreement, any
and all dividends, other distributions and interest paid in respect of the
Securities Collateral and Mortgage Loans; provided, upon the occurrence and
during the continuation of an Event of Default, any and all (A) dividends,
distributions and interest paid or payable other than in cash in respect of,
and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Securities Collateral,
(B) dividends and other distributions paid or payable in cash in respect
of any Securities Collateral in connection with a partial or total liquidation
or dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect
of principal or in redemption of or in exchange for any Securities Collateral,
shall be, and shall forthwith be delivered to Collateral Agent to hold as,
Securities Collateral and shall, if received by such Grantor, be received in
trust for the benefit of Collateral Agent, be segregated from the other
property or funds of such Grantor and be forthwith delivered to Collateral
Agent as Securities Collateral in the same form as so received (with all
necessary endorsements); and (iii) Collateral Agent shall promptly execute and
deliver (or cause to be executed and delivered) to such Grantor all such
proxies, dividend payment orders and other instruments as such Grantor may from
time to time reasonably request for the purpose of enabling such Grantor to exercise
the voting and other consensual rights which it is entitled to exercise
pursuant to clause (i) above and to receive the dividends, distributions,
principal or interest payments which it is authorized to receive and retain
pursuant to clause (ii) above.

 

Upon
the occurrence and during the continuation of an Event of Default, upon written
notice from Collateral Agent to any Grantor, (x) all rights of such Grantor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant hereto shall cease, and all such rights shall
thereupon become vested in Collateral Agent who shall thereupon have the sole
right to exercise such voting and other consensual rights during such
continuation; (y) all rights of such Grantor to receive the dividends, other
distributions and interest payments which it would otherwise be authorized to
receive and retain pursuant hereto shall cease, and all such rights shall
thereupon become vested in Collateral Agent who shall thereupon have the sole
right to receive and hold as Securities Collateral such dividends, other
distributions and interest payments during such continuation; and (z) all
dividends, principal, interest payments and other distributions which are
received by such Grantor contrary to the provisions of clause (ii) of the
immediately preceding paragraph or clause (y) above shall be received in trust
for the benefit of Collateral Agent as provided herein, shall be segregated
from other funds of such Grantor, and shall forthwith be paid over to
Collateral Agent as Securities Collateral in the same form as so received (with
any necessary endorsements).

 

10

 

In
order to permit Collateral Agent to exercise the voting and other consensual
rights which it may be entitled to exercise pursuant hereto and to receive all
dividends and other distributions which it may be entitled to receive
hereunder, (I) each Grantor shall promptly execute and deliver (or cause to be
executed and delivered) to Collateral Agent all such proxies, dividend payment
orders and other instruments as Collateral Agent may from time to time
reasonably request, and (II) without limiting the effect of clause (I) above,
each Grantor hereby grants to Collateral Agent an irrevocable proxy to vote the
Pledged Interests and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Interests would be entitled
(including giving or withholding written consents of shareholders or other
holders of equity interests, calling special meetings of shareholders or other
holders of equity interests and voting at such meetings), which proxy shall be
effective, automatically and without the necessity of any action (including any
transfer of any Pledged Interests on the record books of the issuer thereof) by
any other Person (including the issuer of the Pledged Interests or any officer
or agent thereof), upon the occurrence and during the continuation of an Event
of Default, and only upon such occurrence and during the continuation thereof,
and which proxy shall only terminate upon the payment in full of the Secured Obligations.

 

Section 8.                                          Special
Covenants With Respect to the Mortgage
Loan Documents.

 

(a)           Each Grantor shall at its expense:

 

(i)            if
consistent with sound business practices, perform and observe all terms and
provisions of the Mortgage Loan Documents to be performed or observed by it,
maintain the Mortgage Loan Documents in full force and effect, modify or amend
such Mortgage Loan Documents or otherwise enforce the Mortgage Loan Documents
in accordance with their terms as and to the extent that the failure to so
perform and observe could constitute an Event of Default; and

 

(ii)           upon
the reasonable request of Collateral Agent, furnish to Collateral Agent,
promptly upon receipt thereof, copies of all notices, requests and other
documents received by such Grantor under or pursuant to the Mortgage Loan
Documents, and from time to time (A) furnish to Collateral Agent such
information and reports regarding the Mortgage Loan Documents as Collateral
Agent may reasonably request and (B) upon request of Collateral Agent make
to the parties to such Mortgage Loan Documents such demands and requests for
information and reports or for action as such Grantor is entitled to make under
the Mortgage Loan Documents.

 

(b)           Upon
the occurrence and during the continuance of an Event of Default, no Grantor
shall:

 

(i)            cancel
or terminate any of the Mortgage Loan Documents or consent to or accept any
cancellation or termination thereof, except in accordance with its terms;

 

(ii)           amend
or otherwise modify the Mortgage Loan Documents or give any consent, waiver or
approval thereunder;

 

(iii)          waive
any default under or breach of the Mortgage Loan Documents;

 

 

11

 

(iv)          consent
to or permit or accept any prepayment of amounts to become due under or in
connection with the Mortgage Loan Documents, except as expressly provided
therein; or

 

(v)           take
any other action in connection with the Mortgage Loan Documents that could
reasonably be expected to materially impair the value of the interest or rights
of such Grantor thereunder or that could reasonably be expected to materially
impair the interest or rights of Collateral Agent.

 

Section 9.                                          Collateral
Agent Appointed Attorney-in-Fact.

 

Each
Grantor hereby irrevocably appoints Collateral Agent as such Grantor’s
attorney-in-fact, with full authority in the place and stead of such Grantor
and in the name of such Grantor, Collateral Agent or otherwise, from time to
time in Collateral Agent’s discretion, effective upon the occurrence and during
the continuation of an Event of Default, and only at such time, to take any
action and to execute any instrument that Collateral Agent may deem necessary
or advisable to accomplish the purposes of this Agreement, including without
limitation:

 

(a)           to
obtain and adjust insurance required to be maintained by such Grantor or paid
to Collateral Agent pursuant to the Credit Agreement;

 

(b)           to
ask for, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral;

 

(c)           to
receive, endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clauses (a) and (b) above;

 

(d)           to
file any claims or take any action or institute any proceedings that Collateral
Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Collateral Agent with respect
to any of the Collateral;

 

(e)           to
pay or discharge taxes or Liens (other than Liens permitted under this
Agreement or the Credit Agreement) levied or placed upon or threatened against
the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by Collateral Agent in its sole discretion,
any such payments made by Collateral Agent to become obligations of such
Grantor to Collateral Agent, due and payable immediately without demand; and

 

(f)            generally
to sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Collateral Agent
were the absolute owner thereof for all purposes, and to do, at Collateral Agent’s
option and Grantors’ expense, at any time or from time to time, all acts and
things that Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and Collateral Agent’s security interest therein in order
to effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.

 

12

 

Section 10.                                   Collateral
Agent May Perform.

 

Upon the occurrence and during the continuation of any
Event of Default, if any Grantor fails to perform any agreement contained
herein, Collateral Agent may
itself perform, or cause performance of, such agreement, and the expenses of
Collateral Agent incurred in connection therewith shall be payable by Grantors
under Section 14(b).

 

Section 11.                                   Standard
of Care.

 

The
powers conferred on Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise
any such powers.  Except for the
exercise of reasonable care in the custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. 
Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Collateral Agent
accords its own property.

 

Section 12.                                   Remedies.

 

(a)           Generally.  If (i) any Event of Default (as defined in
the Credit Agreement), (ii) with respect to Borrower and Holdings only, the
occurrence of an Early Termination Date (as defined in a Master Agreement in
the form prepared by the International Swap and Derivatives Association, Inc.
or a similar event under any similar swap agreement) under any Lender Hedge
Agreement, or (iii) an “Event of Default” under the Senior Notes and Senior
Indentures (each such occurrence being an “Event of Default” for purposes of this
Agreement) shall have occurred and be continuing, Collateral Agent may exercise
in respect of the Collateral of the relevant Grantors (which, in case of an
Event of Default described in clause (ii) above shall be limited to Borrower
and Holdings), in addition to all other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a Collateral Agent
on default under the UCC (whether or not the UCC applies to the affected
Collateral), and also may (i) enter onto the property where any Collateral
is located and take possession thereof with or without judicial process,
(ii) prior to the disposition of the Collateral, store, process, repair or
recondition the Collateral or otherwise prepare the Collateral for disposition
in any manner to the extent Collateral Agent deems appropriate, (iii) take
possession of any relevant Grantor’s premises or place custodians in exclusive
control thereof, remain on such premises and use the same and any of such
Grantor’s equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (ii) and collecting any Secured
Obligation, (iv) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of Collateral Agent’s offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Collateral Agent may deem commercially reasonable, and (v)
without notice to any Grantor, transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Securities
Collateral, Mortgage Loans and Mortgage Loan Documents.  Collateral Agent, any Lender or Hedge
Exchanger or any Senior Note Holder or Trustee may be the purchaser of any or
all of the Collateral at any such sale and Collateral Agent, as 

 

13

 

agent
for and representative of Lenders, Hedge Exchangers and Senior Note Holders
(but not any Lender, Hedge Exchanger or Senior Note Holder in its individual
capacity unless Requisite Obligees (as defined in Section 16(a)) shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Collateral Agent at such sale.  Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted.  Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days’ notice to
such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.  Collateral Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given.  Collateral Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. 
Each Grantor hereby waives any claims against Collateral Agent arising
by reason of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been obtained
at a public sale, even if Collateral Agent accepts the first offer received and
does not offer such Collateral to more than one offeree.  If the proceeds of any sale or other
disposition of the Collateral (after equal and ratable application of such proceeds
to the Secured Obligations to the extent then due and payable) are insufficient
to pay in full all of the Secured Obligations, Grantors shall be jointly and
severally liable for the deficiency and the fees of any attorneys employed by
Collateral Agent to collect such deficiency. 
Each Grantor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to Collateral Agent,
that Collateral Agent has no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section
shall be specifically enforceable against such Grantor, and each Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities.

 

(b)           Securities Collateral.

 

(i)            Each
Grantor recognizes that, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Securities
Collateral conducted without prior registration or qualification of such
Securities Collateral under the Securities Act and/or such state securities
laws, to limit purchasers to those who will agree, among other things, to
acquire the Securities Collateral for their own account, for investment and not
with a view to the distribution or resale thereof.  Each Grantor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including a public offering made pursuant to a
registration statement under the Securities Act) and, notwithstanding such
circumstances and the registration rights granted to Collateral Agent by such
Grantor pursuant hereto, each Grantor agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner and that 

 

14

 

Collateral Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Securities Collateral
for the period of time necessary to permit the issuer thereof to register it
for a form of public sale requiring registration under the Securities Act or
under applicable state securities laws, even if such issuer would, or should,
agree to so register it.  If Collateral
Agent determines to exercise its right to sell any or all of the Securities
Collateral, upon written request, each Grantor shall and shall cause each
issuer of any Pledged Interests to be sold hereunder from time to time to
furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Securities Collateral which may be sold by Collateral Agent in
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.

 

(ii)           If
Collateral Agent shall determine to exercise its right to sell all or any of
the Securities Collateral pursuant to this Section, each Grantor agrees that,
upon request of Collateral Agent (which request may be made by Collateral Agent
in its sole discretion), such Grantor will, at its own expense (A) execute and
deliver, and cause each issuer of the Securities Collateral contemplated to be
sold and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of Collateral Agent, advisable
to register such Securities Collateral under the provisions of the Securities
Act and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements thereto and
to the related prospectus which, in the opinion of Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto; (B) use its best efforts to qualify the
Securities Collateral under all applicable state securities or “Blue Sky” laws
and to obtain all necessary governmental approvals for the sale of the
Securities Collateral, as requested by Collateral Agent; (C) cause each such issuer
to make available to its security holders, as soon as practicable, an earnings
statement which will satisfy the provisions of Section 11(a) of the
Securities Act; (D) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Securities Collateral or any part
thereof valid and binding and in compliance with applicable law; and (E) bear
all costs and expenses, including reasonable attorneys’ fees, of carrying out
its obligations under this Section.

 

(iii)          Without
limiting the generality of subsections 11.2 and 11.3 of the Credit
Agreement, in the event of any public sale described herein, each Grantor
agrees to indemnify and hold harmless Collateral Agent, each Lender, each Hedge
Exchanger and each Senior Note Holder and each of their respective directors,
officers, employees and agents from and against any loss, fee, cost, expense,
damage, liability or claim, joint or several, to which any such Persons may
become subject or for which any of them may be liable, under the Securities Act
or otherwise, insofar as such losses, fees, costs, expenses, damages (excluding
consequential damages), liabilities or claims (or any litigation commenced or
threatened in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus, registration 

 

15

 

statement, prospectus or other such document published
or filed in connection with such public sale, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse Collateral Agent
and such other Persons for any legal or other expenses reasonably incurred by
Collateral Agent and such other Persons in connection with any litigation, of
any nature whatsoever, commenced or threatened in respect thereof (including
any and all fees, costs and expenses whatsoever reasonably incurred by
Collateral Agent and such other Persons and counsel for Collateral Agent and
such other Persons in investigating, preparing for, defending against or
providing evidence, producing documents or taking any other action in respect
of, any such commenced or threatened litigation or any claims asserted).  This indemnity shall be in addition to any
liability which any Grantor may otherwise have and shall extend upon the same
terms and conditions to each Person, if any, that controls Collateral Agent or
such Persons within the meaning of the Securities Act.

 

Section 13.                                   Application
of Proceeds.

 

Except
as expressly provided elsewhere in this Agreement, all proceeds received by
Collateral Agent after an Event of Default and an acceleration of the Loan
Obligations, the Note Obligations and /or the Hedge Obligations in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral shall be applied by Collateral Agent first, to the payment of
all costs and expenses of such sale, collection or other realization, including
reasonable out-of-pocket costs and expenses to Collateral Agent and its agents
and counsel, and all other expenses, liabilities and advances made or incurred
by Collateral Agent in connection therewith, and all amounts for which
Collateral Agent is entitled to indemnification hereunder, and to the payment
of all costs and expenses paid or incurred by Collateral Agent in connection
with the exercise of any right or remedy hereunder, all in accordance with the
terms of this Agreement; second, equally and ratably to the payment of
the Secured Obligations (it being understood that (a) in the event of an Event
of Default under the Senior Notes and Senior Indentures and the acceleration
thereof, Collateral Agent shall deliver that portion of any proceeds allocable
to the Senior Notes to the Trustees for the Senior Note Holders and (b) no
proceeds received in respect of Collateral owned by a Grantor other than Borrower
and Holdings may be applied to the payment of any Hedge Obligations); and third,
after all of the Secured Obligations shall have been paid in full, any surplus
then remaining shall be paid to Grantor.

 

Section 14.                                   Indemnity
and Expenses.

 

(a)           Grantors
jointly and severally agree to indemnify Collateral Agent, each Lender and each
Senior Note Holder, and Borrower and Holdings agree to indemnify each Hedge
Exchanger, from and against any and all claims, losses and liabilities in any
way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including without limitation enforcement of
this Agreement).

 

16

 

(b)           The foregoing
indemnification shall apply whether or not such indemnified liabilities are in
any way or to any extent owed, in whole or in part, under any claim or theory
of strict liability, or are caused, in whole or in part, by any negligent act
or omission of any kind by Collateral Agent or any Lender, Hedge Exchanger or
Senior Note Holder (each, an “Indemnitee”);  provided that
Grantors shall not have any obligation to any Indemnitee hereunder with respect
to (i) any indemnified liabilities to the extent they arise solely from the
gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction and (ii) disputes solely
between Indemnitees which do not arise out of or as a result of any such
indemnified liabilities.

 

(c)           Grantors
jointly and severally agree to pay to Collateral Agent upon demand the amount
of any and all out-of-pocket costs and expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, that Collateral
Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of Collateral Agent
hereunder, or (iv) the failure by any Grantor to perform or observe any of
the provisions hereof.

 

(d)           The
obligations of Grantors in this Section 14 shall survive the termination
of this Agreement and the discharge of Grantors’ other obligations under this
Agreement, the Lender Hedge Agreements, the Credit Agreement, the other Loan
Documents, Senior Notes and the Senior Indenture.

 

Section 15.                                   Continuing
Security Interest; Transfer of Loans; Termination and Release.

 

(a)           This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of the
Loan Obligations and the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit under the
Credit Agreement, (ii) be binding upon Grantors and their respective
successors and assigns, and (iii) inure, together with the rights and
remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and
its successors, transferees and assigns. 
Without limiting the generality of the foregoing clause (iii), (A) but
subject to the provisions of subsection 11.1 of the Credit Agreement, any
Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise and (B) any
Hedge Exchanger may assign or otherwise transfer any Lender Hedge Agreement to
which it is a party to any other Person in accordance with the terms of such
Lender Hedge Agreement, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Hedge Exchangers herein or
otherwise.

 

(b)           Upon
the payment in full of all Loan Obligations and the cancellation or termination
of the Commitments and the cancellation or expiration of all outstanding
Letters of Credit under the Credit Agreement, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
applicable Grantors.  Upon any such
termination Collateral Agent will, at Grantors’ expense, execute and deliver to
Grantors such documents as Grantors shall reasonably request to evidence such
termination.  In addition, upon the
proposed sale, transfer or other disposition of any Collateral by a Grantor in
accordance with the Credit Agreement for which such Grantor desires to obtain a
security interest release from Collateral Agent, such 

 

17

 

Grantor
shall deliver an Officers’ Certificate (i) stating that the Collateral subject
to such disposition is being sold, transferred or otherwise disposed of in
compliance with the terms of the Credit Agreement, (ii) specifying the
Collateral being sold, transferred or otherwise disposed of in the proposed
transaction and (iii) stating that at the time of and after giving effect to
such sale, transfer or other disposition of the Collateral and application of
proceeds thereof, there is and shall be no Event of Default under the Senior
Notes or the Senior Indentures.  Upon
the receipt of such Officers’ Certificate, Collateral Agent shall, at such
Grantor’s expense, so long as Collateral Agent has no reason to believe that
the Officers’ Certificate delivered by such Grantor with respect to such sale
is not true and correct, promptly execute and deliver such releases of its
security interest in such Collateral which is to be so sold, transferred or
disposed of, as may be reasonably requested by such Grantor.

 

Section 16.                                   Collateral
Agent as Agent.

 

(a)           Collateral
Agent has been appointed to act as Collateral Agent hereunder by Lenders and,
by their acceptance of the benefits hereof, Hedge Exchangers and the Senior
Note Holders and Trustees.  Collateral
Agent shall be obligated, and shall have the right hereunder, to make demands,
to give notices, to exercise or refrain from exercising any rights, and to take
or refrain from taking any action (including without limitation the release or
substitution of Collateral), solely in accordance with this Agreement and the
Credit Agreement; provided that Collateral Agent shall exercise, or refrain
from exercising, any remedies provided for in Section 12 in accordance
with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the cancellation or
expiration of all Letters of Credit under the Credit Agreement and the
termination of the Commitments, (A) the holders of a majority of the aggregate
notional amount under all Lender Hedge Agreements (including Lender Hedge
Agreements that have been terminated) or (B) if all Lender Hedge Agreements
have been terminated in accordance with their terms, the aggregate amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Hedge Agreements
(Requisite Lenders or, if applicable, such holders being referred to herein as “Requisite
Obligees”).  In furtherance
of the foregoing provisions of this Section 16(a), each Hedge Exchanger
and the Senior Note Holders and Trustees, by acceptance of the benefits hereof,
agrees that each of them shall have no right individually to realize upon any
of the Collateral hereunder, it being understood and agreed by such Hedge
Exchanger and Senior Note Holders and Trustees, that all rights and remedies
hereunder may be exercised solely by Collateral Agent for the benefit of
Lenders, Hedge Exchangers and the Senior Note Holders and Trustees in
accordance with the terms of this Section 16(a).

 

(b)           Collateral
Agent shall at all times be the same Person that is Administrative Agent under
the Credit Agreement.  Written notice of
resignation by Administrative Agent pursuant to subsection 10.5 of the Credit
Agreement shall also constitute notice of resignation as Collateral Agent under
this Agreement; removal of Administrative Agent pursuant to subsection 10.5 of
the Credit Agreement shall also constitute removal as Collateral Agent under
this Agreement; and appointment of a successor Administrative Agent pursuant to
subsection 10.5 of the Credit Agreement shall also constitute appointment of a
successor Collateral Agent under this Agreement.  Upon the acceptance of any appointment as Administrative Agent
under subsection 10.5 of the Credit Agreement by a successor Administrative
Agent, that successor Administrative Agent shall 

 

18

 

thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Collateral Agent under this Agreement, and the
retiring or removed Collateral Agent under this Agreement shall promptly
(i) transfer to such successor Collateral Agent all sums, securities and
other items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Collateral Agent under this Agreement, and
(ii) execute and deliver to such successor Collateral Agent such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and
obligations under this Agreement.  After
any retiring or removed Collateral Agent’s resignation or removal hereunder as
Collateral Agent, the provisions of this Agreement shall inure to its benefit
as to any actions taken or omitted to be taken by it under this Agreement while
it was Collateral Agent hereunder.

 

(c)           Collateral
Agent shall not be deemed to have any duty whatsoever with respect to any Hedge
Exchanger until it shall have received written notice in form and substance
satisfactory to Collateral Agent from a Grantor or the Hedge Exchanger as to
the existence and terms of the applicable Lender Hedge Agreement.

 

Section 17.                                   Additional
Grantors.

 

The
initial Subsidiary Grantors hereunder shall be such of the Subsidiaries of
Borrower and Holdings as are signatories hereto on the date hereof.  From time to time subsequent to the date
hereof, additional Subsidiaries of Borrower and Holdings may become parties
hereto as additional Grantors (each an “Additional Grantor”), by executing a
Counterpart substantially in the form of Exhibit III annexed hereto
(each, a “Counterpart”).  Upon delivery of any such Counterpart to
Collateral Agent, notice of which is hereby waived by Grantors, each such
Additional Grantor shall be a Grantor and shall be as fully a party hereto as
if such Additional Grantor were an original signatory hereto.  Each Grantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of
Collateral Agent not to cause any Subsidiary of Borrower and Holdings to become
an Additional Grantor hereunder.  This
Agreement shall be fully effective as to any Grantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Grantor hereunder.

 

Section 18.                                   Amendments;
Etc.

 

No
amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Grantors; provided this Agreement may be modified by the execution of a
Counterpart by an Additional Grantor in accordance with Section 18 and Grantors
hereby waive any requirement of notice of or consent to any such
amendment.  Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.

 

19

 

Section 19.                                   Notices.

 

Any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile, or
three Business Days after depositing it in the United States mail with postage
prepaid and properly addressed; provided that notices to Collateral
Agent shall not be effective until received. 
For the purposes hereof, the address of each party hereto shall be as
provided in subsection 11.8 of the Credit Agreement or as set forth under
such party’s name on the signature pages hereof or such other address as shall
be designated by such party in a written notice delivered to the other parties
hereto.

 

Section 20.                                   Failure
or Indulgence Not Waiver; Remedies Cumulative.

 

No
failure or delay on the part of Collateral Agent in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.

 

Section 21.                                   Severability.

 

In case
any provision in or obligation under this Agreement shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired
thereby.

 

Section 22.                                   Headings.

 

Section
and subsection 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.

 

Section 23.                                   Governing
Law; Terms; Rules of Construction.

 

THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC  PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. 
Unless otherwise defined herein or in the Credit Agreement, terms used
in Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined.  The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.

 

20

 

Section 24.                                   Consent
to Jurisdiction and Service of Process.

 

ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE , COUNTY AND CITY OF NEW
YORK.  BY EXECUTING AND DELIVERING THIS
AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY (I) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE 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 SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SECTION 19; (IV) AGREES THAT SERVICE
AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SECTION 24 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

 

Section 25.                                   Waiver
of Jury Trial.

 

GRANTORS
AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT.  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 of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. 
Each Grantor and Collateral Agent acknowledge that this waiver is a
material inducement for Grantors and Collateral Agent to enter into a business
relationship, that Grantors and Collateral Agent have already relied on this
waiver in entering into this Agreement and that each will continue to rely on this
waiver in their related future dealings. 
Each Grantor and Collateral Agent further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and 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 25 AND
EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.  In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.

 

21

 

Section 26.                                   Counterparts.

 

This
Agreement may be executed in one or more counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same document.

 

 [Remainder of page intentionally left blank]

 

22

 

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

 

	
   

  	
  LA QUINTA INVESTMENTS, INC.

  
	
   

  	
   

  
	
   

  	
  LA QUINTA REALTY CORP.

  
	
   

  	
   

  
	
   

  	
  LQI ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
  LA QUINTA LEASING COMPANY

  
	
   

  	
   

  
	
   

  	
  LQ-WB, LLC

  
	
   

  	
   

  
	
   

  	
  MOC HOLDING COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven J. Flowers

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  On
  behalf of each of the entities

  immediately preceding this signature block

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven
  J. Flowers

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LA QUINTA INNS, INC.

  
	
   

  	
   

  
	
   

  	
  LA QUINTA CORPORATION

  
	
   

  	
   

  
	
   

  	
  LA QUINTA PROPERTIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven J. Flowers

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  On
  behalf of each of the entities 

  immediately preceding this signature block

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven
  J. Flowers

  
	
   

  	
  Title:

  	
  Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LA QUINTA LODGING INVESTMENTS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven J. Flowers

  	
   

  
	
   

  	
  Name:

  	
  Steven
  J. Flowers

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEDITRUST HEALTH CORPORATION

  
	
   

  	
   

  
	
   

  	
  MEDITRUST MORTGAGE INVESTMENTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David L. Rea

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  On
  behalf of each of the entities 

  immediately preceding this signature block

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David
  L. Rea

  
	
   

  	
  Title:

  	
  Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LA QUINTA BEVERAGE SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Wayne B. Goldberg

  	
   

  
	
   

  	
  Name:

  	
  Wayne
  B. Goldberg

  
	
   

  	
  Title:

  	
  President
  and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CANADIAN
  IMPERIAL BANK OF 

  COMMERCE, as
  Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dean J. Decker

  
	
   

  	
  Name:

  	
  Dean
  J. Decker

  
	
   

  	
  Title:

  	
  Managing
  Director,

  
	
   

  	
   

  	
  CIBC
  World Markets Corp., As Agent

  
	
   

  	
   

  	
   

  
											

 

 

23EXHIBIT 10.1

 

AMENDMENT
NUMBER NINE TO

LOAN AND SECURITY AGREEMENT

 

THIS AMENDMENT NUMBER NINE TO LOAN AND SECURITY AGREEMENT
(this “Amendment”), dated as of September      ,
2003, between WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation), a California
corporation (“Foothill”), with a place of business located at 2450 Colorado
Avenue, Suite 3000 West, Santa Monica, California 90404, and IMAGE
ENTERTAINMENT, INC., a California corporation (“Borrower”), with its
chief executive office located at 9333 Oso Avenue, Chatsworth, California
91311, with reference to the following facts:

 

WHEREAS,
Borrower has requested that Foothill amend that certain Loan
and Security Agreement dated as of December 28, 1998, between Foothill and
Borrower (as amended, restated or otherwise modified from time to time, the
“Agreement”) as set forth herein;

 

WHEREAS, Borrower
has requested that Foothill consent to the sale of the Assets (as defined in
the Asset Purchase Agreement, defined herein) of DVDPlanet, Inc., a California
corporation (“Guarantor”) pursuant to that certain Asset Purchase Agreement (in
the form previously provided to Agent, the “Asset Purchase Agreement”) to be
effective as of September 23, 2003 by and between Planet Entertainment, Inc.,
a wholly-owned subsidiary of Infinity Resources, Inc., an Illinois corporation,
as buyer, and Guarantor, as seller, and the release of certain liens in
connection therewith; and

 

WHEREAS,
Foothill is willing to so amend the Agreement, consent to such sale and release
such liens in accordance with the terms and conditions hereof.

 

NOW,
THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, effective on the Ninth Amendment Effective
Date (as defined below), Foothill and Borrower hereby agree as follows:

 

SECTION  1.     DEFINED TERMS.

 

Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Agreement.

 

SECTION  2.     AMENDMENTS TO
THE AGREEMENT.

 

(a)          Section 1.1 of the Agreement is hereby amended by deleting in its
entirety each of the following definitions: (i) “Exclusive Guarantor DVD
Inventory” and (ii) “Guarantor Inventory”.

 

(b)          Section 1.1 of the Agreement is hereby amended by adding the
following new definitions in alphabetical order:

 

“Ninth Amendment”
means that certain Amendment Number Nine to Loan and Security Agreement, dated
as of September      , 2003, between Foothill and
Borrower.

 

 

“Ninth Amendment
Effective Date” means the date on which all of the conditions precedent set
forth in Section 6 of the Ninth Amendment shall have been
satisfied.

 

(c)           Section 1.1 of the Agreement is hereby amended
by deleting the following definitions therein in their entirety and the
following is hereby substituted in lieu thereof:

 

“Eligible Inventory”
means Inventory consisting of first quality DVD finished goods held for sale in
the ordinary course of Borrower’s business, net of any variance between the
amounts thereof as determined by Borrower’s perpetual inventory as compared to
the amounts thereof recorded in Borrower’s general ledger, that are located at
Borrower’s premises identified on Schedule E-1, are acceptable to
Foothill in the exercise of its reasonable credit judgment, and strictly comply
with all of Borrower’s representations and warranties to Foothill.  Eligible Inventory shall not include
Exclusive DVD Inventory, Inventory consisting of laserdiscs or any other format
other than DVD, slow moving or obsolete items, restrictive or custom items,
work-in-process, components, packaging (including DVD “jewel cases”) and
shipping materials, supplies used or consumed in Borrower’s business, Inventory
at any location other than those set forth on Schedule E-1,
Inventory subject to a security interest or lien in favor of any third Person,
bill and hold goods, Inventory that is not subject to Foothill’s perfected
security interests, defective goods, “seconds,” and Inventory acquired on
consignment.  Eligible Inventory shall
be valued at the lower of Borrower’s cost (computed on an average cost basis
according to GAAP) or market value.

 

“OLV” shall mean,
as of the date of determination thereof, the appraised orderly liquidation
value (expressed as a percentage of the value of the Inventory (the lower of
cost, computed on an average cost basis according to GAAP, or market value), as
determined by an appraisal firm acceptable to Foothill in its discretion, on
such basis and applying such criteria as Foothill shall require, such
appraisals to be conducted with such frequency as determined by Foothill in its
reasonable credit judgment.

 

“Vendor Reserve”
means, as of the date of any determination, (A) if Excess Availability is less
than $2,500,000 (provided, however, that solely for the purposes
of determining whether Excess Availability is less than $2,500,000 in this
definition, the amount of the Vendor Reserve shall not be included in the
“availability reserves” referenced in subsection (a) of the definition of
Excess Availability), an amount equal to the sum of:  (i) the result of (a) the amount of accounts payable or
Indebtedness owed by Borrower to a creditor pursuant to the terms of a License
Agreement or other product purchase or acquisition arrangement, where such
creditor holds a lien or other security interest in the Eligible Accounts of
Borrower (a “Lien Creditor”), minus (b) the undrawn amount
available to be drawn under one or more letters of credit obtained by Borrower,
if any, for the benefit of such Lien Creditor with respect to the repayment of
sums due and owing under such License Agreement or other product purchase or
acquisition arrangement included in clause (A)(i)(a) of this definition minus
fifty percent (50%) of the value of Borrower’s DVD Inventory composed of a Lien
Creditor’s products that would otherwise be Eligible Inventory if it were not
Exclusive DVD Inventory or encumbered by a Lien or other security interest in
favor of such Lien Creditor (a) above; plus (ii) the amount of royalties
and accounts payable owed by Borrower to creditors under License Agreements or
other product 

 

2

 

 

purchase or acquisition arrangements that are not Lien
Creditors but then only to the extent that such accounts payable are
outstanding more than sixty (60) days from their due date; or (B) if Excess
Availability is equal to or greater than $2,500,000 (provided, however,
that solely for the purposes of determining whether Excess Availability is
equal to or greater than $2,500,000 in this definition, the amount of the
Vendor Reserve shall not be included in the “availability reserves” referenced
in subsection (a) of the definition of Excess Availability), Vendor
Reserve shall mean, as of any date of determination, an amount equal to the sum
of: (i) the result of (a) the amount of accounts payable or Indebtedness owed
by Borrower to a Lien Creditor pursuant to the terms of a License Agreement or
other product purchase or acquisition arrangement, where such Lien Creditor
holds a lien or other security interest in the Eligible Accounts of Borrower, minus
(b) the undrawn amount available to be drawn under one or more letters of
credit obtained by Borrower, if any, for the benefit of such Lien Creditor with
respect to the repayment of sums due and owing under such License Agreement or
other product purchase or acquisition arrangement included in clause (B)(i)(a)
of this definition minus fifty percent (50%) of the value of Borrower’s
DVD Inventory composed of a Lien Creditor’s products that would otherwise be
Eligible Inventory if it were not Exclusive DVD Inventory or encumbered by a
lien or other security interest in favor of such Lien Creditor; plus
(ii) the amount of royalties and accounts payable owed by Borrower to creditors
under License Agreements or other product purchase or acquisition arrangements
that are not Lien Creditors but then only to the extent that (x) such accounts
payable are outstanding more than sixty (60) days from their due date, and (y)
the aggregate amount of such accounts is greater than $500,000.

 

SECTION 3.      CONSENT AND RELEASE.

 

Notwithstanding anything to the contrary contained in
any Loan Document, Foothill hereby consents to (a) the sale of the Assets (as
defined in the Asset Purchase Agreement) of Guarantor pursuant to the Asset
Purchase Agreement, (b) the release of its lien on the Assets (as defined in
the Asset Purchase Agreement) of Guarantor arising under the Loan Documents and
(c) the filing by Planet Entertainment, Inc. or Infinity Resources, Inc. of the
UCC-3 termination statement attached hereto as Exhibit A after the Ninth
Amendment Effective Date.  Upon the
Ninth Amendment Effective Date, (y) the Assets (as defined in the Asset
Purchase Agreement) of Guarantor shall not for any purpose be deemed Collateral
(as defined in the Guarantor Security Agreement) under the Guarantor Security
Agreement or any other Loan Document, and (z) each of Borrower and Guarantor
shall release Foothill from any duty, liability or obligation under the Loan
Documents in respect of the Assets (as defined in the Asset Purchase Agreement).

 

SECTION 4.      DISPOSITION OF
PROCEEDS.

 

Borrower hereby covenants and agrees that it will
immediately remit, or cause the Guarantor to remit, to Foothill 100% of the net
proceeds received by Borrower or Guarantor or any of their Affiliates pursuant
to the Asset Purchase Agreement, to be applied by Foothill in accordance with
the terms of the Agreement.

 

3

 

SECTION 5.      REPRESENTATIONS
AND WARRANTIES.

 

Borrower hereby represents and warrants to Foothill
that (a) the execution, delivery, and performance of this Amendment and of the
Agreement, as amended by this Amendment, are within its corporate powers, have
been duly authorized by all necessary corporate action, and are not in
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or affected,
(b) this Amendment and the Agreement, as amended by this Amendment, constitute
Borrower’s legal, valid, and binding obligation, enforceable against Borrower
in accordance with its terms, and (c) each of the representations and
warranties in this Amendment, the Agreement as amended by this Amendment, and
the other Loan Documents are true and correct in all respects on and as of the
date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date).

 

SECTION 6.      CONDITIONS
PRECEDENT TO AMENDMENT.

 

The satisfaction of each of the following, unless
waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment:

 

(a)           The consummation of the
transactions contemplated by the Asset Purchase Agreement will occur
simultaneously with the Ninth Amendment Effective Date;

 

(b)           The representations and warranties
in this Amendment, the Agreement as amended by this Amendment, and the other
Loan Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);

 

(c)           No Event of Default or event which
with the giving of notice or passage of time would constitute an Event of
Default shall have occurred and be continuing on the date hereof, nor shall
result from the consummation of the transactions contemplated herein;

 

(d)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued and
remain in force by any governmental authority against Borrower or Foothill;

 

(e)           All other documents, agreements,
instruments, and legal matters in connection with the transactions contemplated
by this Amendment shall have been delivered or executed or recorded and shall
be in form and substance satisfactory to Foothill and its counsel;

 

(f)            Foothill shall have
received the reaffirmation and consent attached hereto as Exhibit B,
duly executed and delivered by an authorized officer of Guarantor, and the same
shall be in full force and effect; and

 

4

 

(g)           Foothill shall have
received a copy of the fully executed Asset Purchase Agreement and fully
executed copies of all other documents related to the transactions contemplated
by the Asset Purchase Agreement.

 

SECTION 7.      FURTHER ASSURANCES.

 

Borrower shall execute and deliver all agreements,
documents, and instruments, in form and substance satisfactory to Foothill, and
take all actions as Foothill may reasonably request from time to time fully to
consummate the transactions contemplated under this Amendment and the
Agreement, as amended by this Amendment.

 

SECTION 8.      MISCELLANEOUS.

 

(a)           Upon the effectiveness of this
Amendment, each reference in the Agreement to “this Agreement”, “hereunder”,
“herein”, “hereof” or words of like import referring to the Agreement shall
mean and refer to the Agreement as amended by this Amendment.

 

(b)           Upon the effectiveness of this
Amendment, each reference in the Loan Documents to the “Loan Agreement”,
“thereunder”, “therein”, “thereof” or words of like import referring to the
Agreement shall mean and refer to the Agreement as amended by this Amendment.

 

(c)           This Amendment shall be governed by
and construed in accordance with the laws of the State of California.

 

(d)           This Amendment can only be amended by
a writing signed by both Foothill and Borrower.

 

(e)           This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Amendment.  Delivery of an executed
counterpart of this Amendment by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by telefacsimile also shall deliver an original executed
counterpart of this Amendment but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.

 

(f)            This Amendment reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.

 

[Signature page follows.]

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first written above.

 

	
   

  	
  IMAGE ENTERTAINMENT, INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, INC. (formerly

  known as Foothill Capital Corporation),

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

6

 

Exhibit
A

 

FORM OF UCC-3
TERMINATION STATEMENT

 

7

 

Exhibit
B

 

REAFFIRMATION AND CONSENT

 

Dated as of September      , 2003

 

Reference is made hereby to that certain Amendment
Number Nine to Loan and Security Agreement, dated as of the date hereof (the
“Amendment”), between Image Entertainment, Inc., a California corporation
(“Borrower”) and Wells Fargo Foothill, Inc. (formerly known as Foothill Capital
Corporation), a California corporation (“Foothill”).  Capitalized terms used herein shall have the meanings ascribed to
them in that certain Loan and Security Agreement, dated as of December 28,
1998 (as amended, supplemented, or otherwise modified from time to time, the
“Agreement”), between Borrower and Foothill. 
The undersigned  hereby (a)
represents and warrants to Foothill that the execution, delivery, and
performance of this Reaffirmation and Consent (this “Reaffirmation”) are within
its corporate powers, have been duly authorized by all necessary corporate
action, and are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court,
or governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its
properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms all its obligations
owing to Foothill under the Guaranty and each other Loan Document to which it
is a party; and (d) agrees that each Loan Document to which it is a party is
and shall remain in full force and effect. 
Although the undersigned has been informed of the matters set forth
herein and has acknowledged and agreed to same, it understands that Foothill
shall have no obligation to inform it of such matters in the future or to seek
its acknowledgement or agreement to future amendments or modifications, and
nothing herein shall create such a duty.

 

IN
WITNESS WHEREOF, the undersigned has executed this Reaffirmation as of the date
first set forth above.

 

	
   

  	
  DVD PLANET, INC.,

  	 

	
   

  	
  a
  California corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

8

 

REAFFIRMATION AND CONSENT

 

Dated as of September   , 2003

 

Reference is made hereby to that certain Amendment
Number Nine to Loan and Security Agreement, dated as of the date hereof (the
“Amendment”), between Image Entertainment, Inc., a California corporation
(“Borrower”) and Wells Fargo Foothill, Inc. (formerly known as Foothill Capital
Corporation), a California corporation (“Foothill”).  Capitalized terms used herein shall have the meanings ascribed to
them in that certain Loan and Security Agreement, dated as of December 28,
1998 (as amended, supplemented, or otherwise modified from time to time, the
“Agreement”), between Borrower and Foothill. 
The undersigned  hereby (a)
represents and warrants to Foothill that the execution, delivery, and
performance of this Reaffirmation and Consent (this “Reaffirmation”) are within
its corporate powers, have been duly authorized by all necessary corporate
action, and are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court,
or governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its
properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms all its obligations
owing to Foothill under the Guaranty and each other Loan Document to which it
is a party; and (d) agrees that each Loan Document to which it is a party is
and shall remain in full force and effect. 
Although the undersigned has been informed of the matters set forth
herein and has acknowledged and agreed to same, it understands that Foothill
shall have no obligation to inform it of such matters in the future or to seek
its acknowledgement or agreement to future amendments or modifications, and nothing
herein shall create such a duty.

 

IN
WITNESS WHEREOF, the undersigned has executed this Reaffirmation as of the date
first set forth above.

 

 

	
   

  	
  DVD PLANET, INC.,

  	 

	
   

  	
  a
  California corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

9

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