Document:

exv10w6

 

Exhibit 10.6

THIRD AMENDMENT

TO THE 1996 LONG-TERM INCENTIVE PLAN

OF

BALLY TOTAL FITNESS HOLDING CORPORATION

	1.	 	Section 3 of the Plan is hereby amended by changing the number of the aggregate Shares
subject to the Plan from three million six hundred thousand (3,600,000) Shares to four million
six hundred thousand (4,600,000) Shares.
	 
	2.	 	This Third Amendment shall be effective as of June 10, 1999.exv10w7

 

Exhibit 10.7

FOURTH AMENDMENT

TO THE 1996 LONG-TERM INCENTIVE PLAN

OF

BALLY TOTAL FITNESS HOLDING CORPORATION

	1.	 	Section 3 of the Plan is hereby amended by changing the number of aggregate Shares subject to
the Plan from four million six hundred thousand (4,600,000) Shares to six million one hundred
thousand (6,100,000) Shares.
	 
	2.	 	This Fourth Amendment shall be effective as of December 5, 2000.exv10w8

 

Exhibit 10.8

FIFTH AMENDMENT

TO THE 1996 LONG-TERM INCENTIVE PLAN OF

BALLY TOTAL FITNESS HOLDING CORPORATION

	1.	 	Section 3 of the Plan is hereby amended by changing the number of aggregate Shares subject to
the Plan from six million one hundred thousand (6,100,000) Shares to eight million six hundred
thousand (8,600,000) Shares.
	 
	2.	 	This Fifth Amendment shall be effective as of June 6, 2002.exv10w18

 

Exhibit 10.18

Amendment to Employment Agreement

     This Amendment to Employment Agreement (the “Amendment”), dated November 30, 2005, is between
Bally Total Fitness Holding Corporation (“Bally”), a Delaware corporation, and ___
(“Executive”).

W I T N E S S E T H

     WHEREAS, Bally and Executive have entered into that certain Employment Agreement dated
as of ___, 200___(the “Agreement”);

     WHEREAS, Bally and Executive desire to amend the Agreement on the terms and conditions
described herein.

     NOW, THEREFORE, for valuable consideration, the receipt of which is hereby
acknowledged, Bally and Executive hereby agree as follows:

	 	1.	 	Capitalized terms not defined herein shall have the meanings
ascribed to them in the Agreement;
	 
	 	2.	 	Subparagraph (i) of the definition of “Change in Control” in
Section 1 of the Agreement is amended to read in its entirety as follows:
	 
	 	 	 	An acquisition by any individual, entity, or group (within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (an “Entity”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either (A) the then-outstanding shares of
common stock of the Company (the “Outstanding Company Common Stock”), or (B)
the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); excluding, however, the following:
(1) any acquisition by the Company, (2) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by, or under common control with, the Company, or
(3) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B), and (C) of subsection (iii) of this Section
(i);
	 
	 	3.	 	Section 4(i) of the Agreement is amended to read in its
entirety as follows:
	 
	 	 	 	Life Insurance; Long-Term Disability Insurance. The Company shall
obtain at its expense (A) life insurance coverage on the life of the
Executive for each calendar year during the Term of Employment, providing a
death benefit to the Executive’s designated beneficiary or beneficiaries in
an amount equal to three (3) times the sum of the Executive’s annual Base
Salary rate in effect as of the last day of the immediately preceding
calendar year plus the amount of the Executive’s Annual Bonus paid in such
preceding calendar year and (B) long-term

 

 

	 	 	 	disability insurance in excess of the benefit provided by the Company’s
Group Insurance Plan for the Executive for each calendar year during the
Term of Employment, such that the Executive’s long-term disability benefit
totals an amount equal to 60% of the Executive’s annual Base Salary rate in
effect as of the last day of the immediately preceding calendar year. The
Executive is responsible for enrolling in the Company’s Group Insurance
Long-Term Disability Insurance Plan.

     Except as amended hereby, the Agreement shall remain in full force and effect, and as amended
the same is hereby affirmed and ratified.

     Bally and Executive have duly executed this Amendment as of the date written below.

	 	 	 	 	 
	Executive:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 

	 	 	 	Date
	 
	 	 	 	 
	 
	 	 	 	 
	Bally Total Fitness Holding Corporation:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Date
	 
	 	 	 	 
	 
	 	 	 	 
	Its:
	 	 	 	 
	 

	 	 	 	 

 2exv10w25

 

Exhibit 10.25

CONFORMED COPY

 

 

GUARANTEE AND COLLATERAL AGREEMENT

made by

BALLY TOTAL FITNESS HOLDING CORPORATION

and certain of its Subsidiaries

in favor of

JPMORGAN CHASE BANK (formerly The Chase Manhattan Bank),

as Collateral Agent

Dated as of November 18, 1997, as amended and restated as of October 14, 2004

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	1.1

	 	Definitions
	 	 	2	 
	 	1.2

	 	Other Definitional Provisions
	 	 	8	 
	SECTION 2.

	 	GUARANTEE
	 	 	8	 
	 	2.1

	 	Guarantee
	 	 	8	 
	 	2.2

	 	Right of Contribution
	 	 	9	 
	 	2.3

	 	No Subrogation
	 	 	9	 
	 	2.4

	 	Amendments, etc. with respect to the Borrower Obligations
	 	 	9	 
	 	2.5

	 	Guarantee Absolute and Unconditional
	 	 	10	 
	 	2.6

	 	Reinstatement
	 	 	11	 
	 	2.7

	 	Payments
	 	 	11	 
	SECTION 3.

	 	GRANT OF SECURITY INTEREST
	 	 	11	 
	 	3.1

	 	Grant of Security Interest
	 	 	11	 
	 	3.2

	 	Formalities
	 	 	12	 
	SECTION 4.

	 	REPRESENTATIONS AND WARRANTIES
	 	 	12	 
	 	4.1

	 	Representations in Credit Agreement
	 	 	12	 
	 	4.2

	 	Title; No Other Liens
	 	 	13	 
	 	4.3

	 	Perfected First Priority Liens
	 	 	13	 
	 	4.4

	 	Chief Executive Office
	 	 	13	 
	 	4.5

	 	Inventory and Equipment
	 	 	13	 
	 	4.6

	 	Farm Products
	 	 	13	 
	 	4.7

	 	Pledged Securities
	 	 	13	 
	 	4.8

	 	Receivables
	 	 	14	 
	 	4.9

	 	Contracts
	 	 	14	 
	 	4.10

	 	Intellectual Property
	 	 	14	 
	 	4.11

	 	Leasehold Mortgages
	 	 	15	 
	 	4.12

	 	Commercial Tort Claims
	 	 	15	 
	SECTION 5.

	 	COVENANTS
	 	 	15	 
	 	5.1

	 	Covenants in Credit Agreement
	 	 	15	 
	 	5.2

	 	Delivery of Instruments and Chattel Paper
	 	 	15	 
	 	5.3

	 	Maintenance of Insurance
	 	 	16	 
	 	5.4

	 	Payment of Obligations
	 	 	16	 
	 	5.5

	 	Maintenance of Perfected Security Interest; Further Documentation
	 	 	16	 
	 	5.6

	 	Changes in Locations, Name, etc.
	 	 	16	 
	 	5.7

	 	Notices
	 	 	17	 
	 	5.8

	 	Pledged Securities
	 	 	17	 
	 	5.9

	 	[Reserved]
	 	 	18	 
	 	5.10

	 	Intellectual Property
	 	 	18	 
	 	5.11

	 	Receivables
	 	 	19	 
	 	5.12

	 	Commercial Tort Claims
	 	 	20	 

i

 

	 	 	 	 	 	 	 	 
	 	 	 	 	Page
	SECTION 6.

	 	REMEDIAL PROVISIONS
	 	 	20	 
	 	6.1

	 	Certain Matters Relating to Receivables
	 	 	20	 
	 	6.2

	 	Communications with Obligors; Grantors Remain Liable
	 	 	20	 
	 	6.3

	 	Pledged Securities
	 	 	21	 
	 	6.4

	 	Proceeds to be Turned Over To Collateral Agent
	 	 	22	 
	 	6.5

	 	Application of Proceeds
	 	 	22	 
	 	6.6

	 	Code and Other Remedies
	 	 	22	 
	 	6.7

	 	Registration Rights
	 	 	23	 
	 	6.8

	 	Waiver; Deficiency
	 	 	24	 
	SECTION 7.

	 	THE COLLATERAL AGENT
	 	 	24	 
	 	7.1

	 	Collateral Agent’s Appointment as Attorney-in-Fact, etc.
	 	 	24	 
	 	7.2

	 	Duty of Collateral Agent
	 	 	26	 
	 	7.3

	 	Execution of Financing Statements
	 	 	26	 
	 	7.4

	 	Authority of Collateral Agent
	 	 	26	 
	SECTION 8.

	 	MISCELLANEOUS
	 	 	27	 
	 	8.1

	 	Amendments in Writing
	 	 	27	 
	 	8.2

	 	Notices
	 	 	27	 
	 	8.3

	 	No Waiver by Course of Conduct; Cumulative Remedies
	 	 	27	 
	 	8.4

	 	Enforcement Expenses; Indemnification
	 	 	27	 
	 	8.5

	 	Successors and Assigns
	 	 	28	 
	 	8.6

	 	Set-Off
	 	 	28	 
	 	8.7

	 	Counterparts
	 	 	28	 
	 	8.8

	 	Severability
	 	 	28	 
	 	8.9

	 	Section Headings
	 	 	29	 
	 	8.10

	 	Integration
	 	 	29	 
	 	8.11

	 	GOVERNING LAW
	 	 	29	 
	 	8.12

	 	Submission To Jurisdiction; Waivers
	 	 	29	 
	 	8.13

	 	Acknowledgements
	 	 	30	 
	 	8.14

	 	WAIVER OF JURY TRIAL
	 	 	30	 
	 	8.15

	 	Additional Grantors
	 	 	30	 
	 	8.16

	 	Releases; Exercise of Remedies
	 	 	30	 
	 	8.17

	 	Operating Bank Obligations
	 	 	31	 
	 	8.18

	 	Confirmation; Supplement to Operating Bank Guaranty
	 	 	31	 

ii

 

GUARANTEE AND COLLATERAL AGREEMENT

     GUARANTEE AND COLLATERAL AGREEMENT (as amended, supplemented or otherwise modified from time
to time, the “Agreement”), dated as of November 18, 1997, as amended and restated as of
October 14, 2004, made by BALLY TOTAL FITNESS HOLDING CORPORATION (the “Borrower”) and each
of the other signatories hereto (together with any other entity that may become a party hereto as
provided herein, the “Grantors”), in favor of JPMORGAN CHASE BANK (formerly The Chase
Manhattan Bank), as Collateral Agent (in such capacity, the “Collateral Agent”) pursuant to
the Intercreditor Agreement (as defined below).

W I T N E S S E T H:

     WHEREAS, the Borrower, the several lenders from time to time parties thereto (the
“Existing Lenders”) and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank),
as agent for the Existing Lenders (in such capacity, the “Revolving Credit Agent”), are
parties to the Credit Agreement, dated as of November 18, 1997, as amended and restated as November
10, 1999, as further amended and restated as of December 21, 2001 and as further amended and
restated as of July 2, 2003 (as further amended, supplemented or otherwise modified prior to the
date hereof, the “Existing Credit Agreement”);

     WHEREAS, in connection with the Existing Credit Agreement, the Borrower and certain of its
Subsidiaries have entered into (i) the Guarantee and Collateral Agreement, dated as of November 18,
1997 (as amended prior to the date hereof, the “Existing Guarantee and Collateral
Agreement”), in favor of JPMorgan Chase Bank, as collateral agent for the Existing Lenders,
(ii) the Operating Banks Guaranty Agreement, dated as of November 18, 1997, made by certain
Subsidiaries of the Borrower in favor of the Operating Banks (as defined in the Credit Agreements
referred to below), (iii) the Mortgages (in each case, as defined in the Credit Agreements referred
to below) and (iv) certain other documents and agreements evidencing or creating security interests
and liens (each as further amended, supplemented, waived or otherwise modified from time to time
prior to the date hereof, and collectively, the “Existing Guarantees and Collateral
Documents” and, as further amended, supplemented, waived or otherwise modified from time to
time, including by this Agreement, and collectively, the “Guarantees and Collateral
Documents”);

     WHEREAS, the Borrower, the requisite lenders parties thereto and the Agent will amend and
restate the Existing Credit Agreement as of October 14, 2004 (as further amended, restated,
supplemented and modified from time to time, the “Credit Agreement”), in order to, among
other things (i) add a $175,000,000 term loan facility (the “Term Loan Facility”)
thereunder and (ii) otherwise amend the Existing Credit Agreement, including to increase the
applicable interest rate margin for Revolving Advances and Letters of Credit (as such terms are
defined in the Credit Agreement);

     WHEREAS, all obligations of the Borrower under the Existing Credit Agreement shall continue in
full force and effect under the Credit Agreement and the notes delivered thereunder;

 

2

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

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

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

     WHEREAS, the Operating Banks (as defined in the Credit Agreement) have provided, and may from
time to time provide, independently of the Lenders and the Credit Agreement, customary banking
deposit and disbursement services to the Borrower and/or its Subsidiaries in connection with the
Demand Deposit Accounts (as defined in the Credit Agreement) established by the Borrower and/or its
Subsidiaries with such Operating Banks;

     WHEREAS, under the Credit Agreement it is a condition precedent to the obligation of the
respective Lenders to make their respective extensions of credit thereunder to the Borrower that
the Grantors shall have amended and restated the Existing Guarantee and Collateral Agreement as set
forth herein by executing and delivering this Agreement to the Collateral Agent for the benefit of
the Lenders and the Operating Banks;

     WHEREAS, the Existing Guarantee and Collateral Agreement is being amended and restated
pursuant to this Agreement to, among other things, provide guarantees of and Collateral for the
obligations of the Borrower and its Subsidiaries under the Term Loan Facility and related
agreements; and

     WHEREAS, all obligations, liabilities and indebtedness of the Borrower and its Subsidiaries
under the Existing Guarantee and Collateral Agreement shall continue in full force and effect under
this Agreement, without impairment, interruption, novation or discharge;

     NOW, THEREFORE, in consideration of the premises and to induce the Collateral Agent and the
Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement,
each Grantor hereby agrees with the Collateral Agent, for the benefit of the Lenders and the
Operating Banks, to amend and restate the Existing Guarantee and Collateral Agreement as follows:

SECTION 1. DEFINED TERMS

     1.1 Definitions. (a) Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit
Agreement, and the following terms which are defined in the New York UCC are used herein as so
defined: Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents,
Equipment, Farm Products, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit
Rights and Supporting Obligations.

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

 

3

     “Accounts”: as defined in the New York UCC including accounts, accounts
receivable and other rights of any Grantor to payment for goods sold or leased or for
services rendered, whether now existing or hereafter arising and wherever arising, and
whether or not they have been earned by performance.

     “Agreement”: as defined in the recitals.

     “Borrower Obligations”: the collective reference to the unpaid principal of
and interest on the Advances and reimbursement obligations in respect of Letters of Credit
and all other obligations and liabilities of the Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit Agreement after the
maturity of the Advances and reimbursement obligations in respect of Letters of Credit and
interest accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Agent, the Collateral Agent or
any Lender (or, in the case of any Hedge Agreement referred to below, any Affiliate of any
Lender), whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection with, the
Credit Agreement, this Agreement, the other Credit Documents, any Letter of Credit or any
Hedge Agreement entered into by the Borrower with any Lender (or any Affiliate of any
Lender) or any other document made, delivered or given in connection with any of the
foregoing, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Collateral Agent, the Agent or to the Lenders
that are required to be paid by the Borrower pursuant to the terms of any of the foregoing
agreements).

     “Collateral”: as defined in Section 3.

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

     “Collateral Agent”: as defined in the recitals.

     “Contracts”: all contracts and agreements to which the Grantor is a party on
the date hereof or becomes a party subsequent to the date hereof, as the same may be
amended, supplemented or otherwise modified from time to time, including, without
limitation, (i) all rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of any Grantor to damages arising
thereunder and (iii) all rights of any Grantor to perform and to exercise all remedies
thereunder.

     “Contractual Obligation”: as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its property is bound.

 

4

     “Copyright Licenses”: any written agreement naming any Grantor as licensor or
licensee (including, without limitation, those listed in Schedule 6), granting any
right under any Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright.

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

     “Credit Agreement”: as defined in the recitals.

     “Existing Credit Agreement”: as defined in the recitals.

     “Existing Guarantee and Collateral Agreement”: as defined in the recitals.

     “Existing Guarantees and Collateral Documents”: as defined in the recitals.

     “Existing Lenders”: as defined in the recitals.

     “General Intangibles”: all “general intangibles” as such term is defined in
Section 9-102(a)(42) of the New York UCC and, in any event, including, without limitation,
with respect to any Grantor, all contracts, agreements, instruments and indentures in any
form, and portions thereof, to which such Grantor is a party or under which such Grantor has
any right, title or interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or otherwise modified,
including, without limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in such contract,
agreement, instrument or indenture is not prohibited by such contract, agreement, instrument
or indenture without the consent of any other party thereto, would not give any other party
to such contract, agreement, instrument or indenture the right to terminate its obligations
thereunder, or is permitted with consent if all necessary consents to such grant of a
security interest have been obtained from the other parties thereto (it being understood
that the foregoing shall not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit, restrict or impair
the grant by such Grantor of a security interest pursuant to this Agreement (x) in any
Receivable or any money or other amounts due or to become due under any such contract,
agreement, instrument or indenture or (y) to the extent any such prohibition, termination right or requirement to obtain consent is ineffective under
applicable law.

     “Grantor”: as defined in the recitals.

 

5

     “Guarantees and Collateral Documents”: as defined in the recitals.

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

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

     “Hedge Agreements”: as to any Person, all interest rate swaps, caps or collar
agreements or similar arrangements entered into by such Person providing for protection
against fluctuations in interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific contingencies.

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

     “Intercompany Note”: any promissory note evidencing loans made by any Grantor
to the Borrower or any of its Subsidiaries.

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

     “Lenders”: the lenders from time to time under the Credit Agreement including
“Lenders” as defined in the Credit Agreement.

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

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

     “Operating Bank Obligations”: as defined in the Credit Agreement.

     “Patent License”: all agreements, whether written or oral, providing for the
grant by or to any Grantor of any right to manufacture, use or sell any invention covered in
whole or in part by a Patent, including, without limitation, any of the foregoing referred
to in Schedule 6.

 

6

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

     “Pledged Notes”: all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory notes issued
to or held by any Grantor (other than promissory notes issued in connection with extensions
of trade credit by any Grantor in the ordinary course of business).

     “Pledged Partnership Interests”: in each case, whether now existing or
hereafter acquired, all of each Grantor’s right, title and interest in and to:

   (i) any Issuer listed on Schedule 2 that is a partnership, but not any of such
Grantor’s obligations from time to time as a general or limited partner, as the case
may be, in any such Issuer (unless the Collateral Agent or its designee, on behalf
of the Collateral Agent, the Lenders and the Operating Banks, shall elect to become
a general or limited partner, as the case may be, in any such Issuer in connection
with its exercise of remedies pursuant to the terms hereof);

   (ii) any and all moneys due and to become due to such Grantor now or in the
future by way of a distribution made to such Grantor in its capacity as a general
partner or limited partner, as the case may be, in any such Issuer or otherwise in
respect of such Grantor’s interest as a general partner or limited partner, as the
case may be, in any such Issuer;

   (iii) any other Property of any such Issuer to which such Grantor now or in the
future may be entitled in respect of its interests as a general partner or limited
partner, as the case may be, in any such Issuer by way of distribution, return of
capital or otherwise;

   (iv) any other claim or right which such Grantor now has or may in the future
acquire in respect of its general or limited partnership interests in any such
Issuer;

   (v) the partnership agreement or other organizational documents of any such
Issuer;

   (vi) all certificates, options or rights of any nature whatsoever that may be
issued or granted by any such Issuer to such Grantor while this Agreement is in
effect; and

   (vii) to the extent not otherwise included, all Proceeds of any or all of the
foregoing.

 

7

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

     “Pledged Stock”: the shares of Capital Stock listed on Schedule 2
(which, in the case of Foreign Subsidiaries, shall not exceed 65% of the Capital Stock of
such Foreign Subsidiaries and which shall not include Lincoln Indemnity Company), together
with any other shares, stock certificates, options or rights of any nature whatsoever in
respect of the Capital Stock of any Person that may be issued or granted to, or held by, any
Grantor prior to or after the date hereof, while this Agreement is in effect (which, in the
case of a Foreign Subsidiary, shall not exceed 65% of the voting Capital Stock of such
Foreign Subsidiary and which shall not include Lincoln Indemnity Company).

     “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the Uniform Commercial Code in effect in the State of New York and, in any event, shall
include, without limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.

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

     “Secured Creditors”: the collective reference to (i) each of the Lenders and
their respective successors, indorsees, transferees and assigns under the Credit Agreement;
(ii) the Agent and its successors and assigns in such capacity; (iii) any Affiliate of any
Lender party to any Hedge Agreement; (iv) the Operating Banks in their separate financial
arrangements with the Borrower and its Subsidiaries; and (v) the Collateral Agent and its
successors and assigns in such capacity.

     “Secured Obligations”: the collective reference to (i) the Borrower
Obligations, (ii) the Operating Bank Obligations and (iii) the Guarantor Obligations of all
Guarantors.

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

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

     “Trademark License”: any agreement, whether written or oral, providing for the
grant by or to any Grantor of any right to use any Trademark, including, without

 

8

limitation,
any of the foregoing referred to in Schedule 6; excluding “Intent to Use” filings.

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

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

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

     (d) The phrase “on the date hereof” and similar phrases shall mean October 14, 2004.

SECTION 2. GUARANTEE

     2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Collateral Agent, for the benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt and complete
payment and performance by the Borrower when due (whether at the stated maturity, by acceleration
or otherwise) of the Borrower Obligations.

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

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

     (d) The guarantee contained in this Section 2 shall remain in full force and effect until all
the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in
this Section 2 shall have been satisfied by payment in full, no Letter of Credit shall be
outstanding and the Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower Obligations.

     (e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other
Person or received or collected by the Collateral Agent or any Lender from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of

 

9

any action or proceeding or any
set-off or appropriation or application at any time or from time to time in reduction of or in
payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any payment received
or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the
Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are
terminated.

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

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

     2.4 Amendments, etc. with respect to the Borrower Obligations. Each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any
of the Borrower Obligations made by the Collateral Agent or any Lender may be rescinded by the
Collateral Agent or such Lender and any of the Borrower Obligations continued, and the Borrower
Obligations or the liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Collateral Agent or any Lender, and the Credit Agreement, any other
Credit Documents and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or

 

10

terminated, in whole or in part, as the Collateral Agent (or the
Majority Lenders under the Credit Agreement or all Lenders, as the case may be) may deem advisable
from time to time, and any collateral security, guarantee or right of offset at any time held by
the Collateral Agent or any Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Lender shall have
any obligation to protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2 or any property
subject thereto.

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

 

11

     2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Borrower Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though such payments had
not been made.

     2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid
to the Collateral Agent without set-off or counterclaim in Dollars at the office of the Collateral
Agent located at 270 Park Avenue, New York, New York 10017.

SECTION 3. GRANT OF SECURITY INTEREST

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

     (a) all Accounts; all Deposit Accounts; all Letter-of-Credit Rights; all Supporting
Obligations; all other property not otherwise described below;

     (b) all Chattel Paper;

     (c) all Contracts;

     (d) all Documents;

     (e) all Equipment;

     (f) all General Intangibles;

     (g) all Instruments;

     (h) all Intellectual Property;

     (i) all Inventory;

     (j) all Investment Property (except to the extent that such Investment Property
constitutes more than 65% of the voting equity of any entity organized under laws other than
those of the United States or any state thereof);

     (k) all Pledged Securities;

 

12

     (l) all Receivables;

     (m) all Goods;

     (n) all Commercial Tort Claims with respect to an arbitration filed by the Borrower
against Household Credit Services (II), Inc. and/or Household Bank (SB), N.A. with the
American Arbitration Association in Chicago, IL in 2003;

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

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

     3.2 Formalities. (a) Stock Powers. Unless effected previously under the
Existing Guarantee and Collateral Agreement, concurrently with the delivery to the Collateral Agent
of each certificate representing one or more shares of Pledged Stock to the Collateral Agent, the
Grantor owning such Pledged Stock shall deliver an undated stock power covering such certificate,
duly executed in blank by such Grantor.

     (a) Powers; Registration of Partnership Pledge. (i) Unless effected previously under
the Existing Guarantee and Collateral Agreement, concurrently with the delivery to the Collateral
Agent of any certificate representing any Pledged Partnership Interests, the Grantor owning such
Pledged Partnership Interests shall, if requested by the Collateral Agent, deliver an undated power covering such certificate, duly executed in blank by such
Grantor; and

     (i) Concurrently with the execution of this Agreement, unless effected previously under the
Existing Guarantee and Collateral Agreement, each Grantor will send to each Issuer of Pledged
Partnership Interests written instructions substantially in the form of Exhibit A hereto and shall
cause such Issuer to, and such Issuer shall, deliver to the Collateral Agent the transaction
statement in the form of Exhibit B hereto confirming that such Issuer has registered the pledge
effected by this Agreement on its books.

SECTION 4. REPRESENTATIONS AND WARRANTIES

     To induce the Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the Borrower thereunder, each Grantor hereby represents
and warrants to each Secured Creditor that:

     4.1 Representations in Credit Agreement. In the case of each Guarantor, the
representations and warranties set forth in Article V of the Credit Agreement as they relate to
such Guarantor or to the Credit Documents to which such Guarantor is a party, each of which is
hereby incorporated herein by reference, are true and correct in all material respects, and the
Collateral Agent and each Lender shall be entitled to rely on each of them as if they were fully
set forth herein, provided that each reference in each such representation and warranty to
the

 

13

Borrower’s knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference
to such Guarantor’s knowledge.

     4.2 Title; No Other Liens. Except for the security interest granted to the Collateral
Agent for the benefit of the Secured Creditors pursuant to this Agreement and the other Liens
permitted to exist on the Collateral by the Credit Agreement, such Grantor owns, or has rights in,
each item of the Collateral free and clear of any and all Liens or claims of others. No financing
statement or other public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the Collateral Agent, for
the benefit of the Secured Creditors, pursuant to this Agreement or as are permitted by the Credit
Agreement.

     4.3 Perfected First Priority Liens. The security interests granted pursuant to this
Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in
the case of all filings and other documents referred to on said Schedule, have been delivered to
the Collateral Agent in completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral in favor of the Collateral Agent, for the benefit of the Secured
Creditors, as collateral security for such Grantor’s Obligations, enforceable in accordance with
the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on
the date hereof except for (i) unrecorded Liens permitted by the Credit Agreement which have
priority over the Liens on the Collateral by operation of law and (ii) Permitted Liens as defined in the Credit
Agreement.

     4.4 Chief Executive Office. On the date hereof, such Grantor’s jurisdiction of
organization, identification number from the jurisdiction of organization (if any) and the location
of such Grantor’s chief executive office or sole place of business are specified on Schedule
4. Such Grantor has furnished to the Collateral Agent a certified charter, certificate of
incorporation or other organization document and long-form good standing certificate as of a date
which is recent to the date hereof.

     4.5 Inventory and Equipment. Except for goods in transit and items sent to third
parties for repair, on the date hereof, the Inventory and the Equipment (other than mobile goods)
are kept at the locations listed on Schedule 5.

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

     4.7 Pledged Securities. (a) The shares of Pledged Stock pledged by such Grantor
hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of
each domestic corporate Issuer owned by such Grantor (100% of all the issued and outstanding
classes of the non-voting Capital Stock of each Foreign Subsidiary Issuer and 65% of all the issued
and outstanding classes of the Capital Stock of each Foreign Subsidiary Issuer).

     (b) The Pledged Partnership Interests pledged by each Grantor constitute all of the issued and
outstanding partnership interests of each Issuer that is a partnership in which such Grantor has
any right, title and interest.

 

14

     (c) All the shares of the Pledged Stock issued by subsidiaries of Borrower and all of the
Pledged Partnership Interests have been duly and validly issued and are fully paid and
nonassessable.

     (d) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the
obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.

     (e) Such Grantor is the record and beneficial owner of, and has good and marketable title to,
the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by
this Agreement and as set forth on Annex 4.7.

     4.8 Receivables. (a) No amount in excess of $250,000 payable to such Grantor under
or in connection with any Receivable is evidenced by any Instrument (other than an item deposited
for collection in the ordinary course of business) or Chattel Paper which has not been delivered to
the Collateral Agent.

     (b) None of the obligors on any Receivables is a Governmental Authority except with respect to
immaterial amounts.

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

     4.9 Contracts. (a) Neither such Grantor nor (to the best of such Grantor’s
knowledge) any of the other parties to the Contracts is in default in the performance or observance
of any of the terms thereof in any manner that, in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

     (b) The right, title and interest of such Grantor in, to and under the Contracts are not
subject to any defenses, offsets, counterclaims or claims that, in the aggregate, could reasonably
be expected to have a Material Adverse Effect.

     (c) No amount in excess of $250,000 payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument (other than an item deposited for collection in the
ordinary course of business) or Chattel Paper which has not been delivered to the Collateral Agent.

     (d) None of the parties to any material Contract is a Governmental Authority.

     4.10 Intellectual Property. (a) Schedule 6 lists all Intellectual Property owned by
such Grantor in its own name on the date hereof.

 

15

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

     (c) Except as set forth in Schedule 6, on the date hereof, no material portion of the
Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such
Grantor is the licensor or franchisor.

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

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

     4.11 Leasehold Mortgages. No Grantor will execute, deliver or record, or permit to be
executed, delivered or recorded, any leasehold mortgage or fixture filing in respect of any
leasehold except for leasehold mortgages and fixture filings granted in favor of the Collateral
Agent for the benefit of the Secured Parties.

     4.12 Commercial Tort Claims On the date hereof, except to the extent listed in
Section 3.1 above, no Grantor has rights in any Commercial Tort Claim with a value that could
reasonably be expected to exceed $50,000.

SECTION 5. COVENANTS

     Each Grantor covenants and agrees with the Collateral Agent and the other Secured Creditors
that, from and after the date of this Agreement until the Obligations (other than contingent
indemnification obligations) shall have been paid in full, no Letter of Credit shall be outstanding
and the Commitments shall have terminated:

     5.1 Covenants in Credit Agreement. In the case of each Guarantor, such Guarantor
shall take, or shall refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default under any Credit
Agreement is caused by the failure to take such action or to refrain from taking such action by
such Guarantor or any of its Subsidiaries.

     5.2 Delivery of Instruments and Chattel Paper. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any Instrument (other than
items deposited for collection in the ordinary course of business), Certificated Security or
Chattel Paper, such Instrument, Certificated Security or Chattel Paper (other than any Instrument,
Certificated Security or Chattel Paper which evidences an amount payable which does not exceed
$250,000) shall within 14 days be delivered (unless a Default or Event of Default has occurred and
is continuing under the Credit Agreement, in which case delivery shall

 

16

be immediate) to the
Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.

     5.3 Maintenance of Insurance. The Grantors agree to maintain insurance as required by
the Credit Agreement.

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

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

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

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

     5.6 Changes in Locations, Name, etc. Such Grantor will not, except upon not less than
15 days’ prior written notice to the Collateral Agent and delivery to the Collateral Agent of (a)
all additional executed financing statements and other documents reasonably requested by the
Collateral Agent to maintain the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, a written supplement to Schedule 5 showing any additional location at which Inventory
or Equipment shall be kept:

 

17

     (i) change its jurisdiction of organization or the location of its chief
executive office or sole place of business from that referred to in Section 4.4; or

     (ii) change its legal name.

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

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

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

     5.8 Pledged Securities. (a) If such Grantor shall become entitled to receive or
shall receive any certificate or instrument (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any reclassification, increase
or reduction of capital or any certificate issued in connection with any reorganization), option or
rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of,
as a conversion of, or in exchange for, any shares or units of the Pledged Stock or the Pledged
Partnership Interests, or otherwise in respect thereof, such Grantor shall accept the same as the
agent of the Collateral Agent and the other Secured Creditors, hold the same in trust for the
Collateral Agent and the other Secured Creditors and deliver the same forthwith to the Collateral
Agent in the exact form received, duly indorsed by such Grantor to the Collateral Agent, if
required, together with an undated stock or other power covering such certificate duly executed in
blank by such Grantor and with, if the Collateral Agent so requests, signature guaranteed, to be
held by the Collateral Agent, subject to the terms hereof, as additional collateral security for
the Obligations. Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer at any time that a Default or Event of Default shall have occurred and
be continuing under the Credit Agreement shall be paid over to the Collateral Agent to be held by
it hereunder as additional collateral security for the Obligations, and in case any distribution of
capital shall be made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security interest in favor
of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such Grantor at any time that
a Default or Event of Default shall have occurred and be continuing under the Credit Agreement, such Grantor shall, until such
money or property is paid or delivered to the Collateral Agent, hold such money or property in
trust for the Secured Creditors, segregated from other funds of such Grantor, as additional
collateral security for the Obligations.

     (b) Without the prior written consent of the Collateral Agent, such Grantor will not (i) vote
to enable, or take any other action to permit, any of its Issuers to issue any stock,

 

18

partnership
interests or other equity securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or other equity securities of any
nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or permit to exist
any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged
Securities or Proceeds thereof, or any interest therein, except for the security interests created
by this Agreement or set forth on Schedule 4.7 or (iv) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell,
assign or transfer any of the Pledged Securities or Proceeds thereof.

     (c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be
bound by the terms of this Agreement relating to the Pledged Securities issued by it and will
comply with such terms insofar as such terms are applicable to it, (ii) it will notify the
Collateral Agent promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c)
and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may
be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Securities issued
by it.

     5.9 [Reserved].

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

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

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

 

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

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

     (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, such Grantor shall report such
filing to the Collateral Agent within five Business Days after the last day of the fiscal quarter
in which such filing occurs. Upon request of the Collateral Agent, such Grantor shall execute and
deliver, and have recorded, any and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent’s and the other Secured Creditors’
security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of
such Grantor relating thereto or represented thereby.

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

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

     5.11 Receivables. Other than in the ordinary course of business consistent with its
past practice, such Grantor will not (i) grant any extension of the time of payment of any material
Receivable, (ii) compromise or settle any material Receivable for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the payment of any material
Receivable, (iv) allow any credit or discount whatsoever on any material Receivable or (v) amend,
supplement or modify any material Receivable in any manner that could materially adversely affect
the value thereof.

 

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     5.12 Commercial Tort Claims If such Grantor shall obtain an interest in any
Commercial Tort Claim with a value that could reasonably be expected to exceed $50,000, such
Grantor shall within 30 days of obtaining such interest execute and deliver documentation
acceptable to the Administrative Agent granting a security interest under the terms and provisions
of this Agreement in and to such Commercial Tort Claim.

SECTION 6. REMEDIAL PROVISIONS

     6.1 Certain Matters Relating to Receivables. (a) At any time that an Event of
Default shall have occurred and be continuing under the Credit Agreement (x) the Collateral Agent
shall have the right to make test verifications of the Receivables in any manner and through any
medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance
and information as the Collateral Agent may require in connection with such test verifications; and
(y) upon the Collateral Agent’s request and at the expense of the relevant Grantor, such Grantor
shall cause independent public accountants or others satisfactory to the Collateral Agent to
furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of,
and trial balances for, the Receivables.

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

     (c) At the Collateral Agent’s request, at any time that an Event of Default shall have
occurred and be continuing under the Credit Agreement, each Grantor shall deliver to the Collateral
Agent all original and other documents evidencing, and relating to, the agreements and transactions
which gave rise to the Receivables, including, without limitation, all original orders, invoices
and shipping receipts.

     6.2 Communications with Obligors; Grantors Remain Liable. (a) The Collateral Agent
in its own name or in the name of others may, at any time that an Event of Default shall have
occurred and be continuing under the Credit Agreement, communicate with obligors under the
Receivables and parties to the Contracts to verify with them to the Collateral Agent’s satisfaction
the existence, amount and terms of any Receivables or Contracts.

     (b) Upon the request of the Collateral Agent at any time that an Event of Default shall have
occurred and be continuing under the Credit Agreement, each Grantor shall

 

21

notify obligors on the
Receivables and parties to the Contracts that the Receivables and the Contracts have been assigned
to the Collateral Agent for the benefit of the Secured Creditors and that payments in respect
thereof shall be made directly to the Collateral Agent.

     (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Receivables and Contracts to observe and perform all the conditions and obligations to
be observed and performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither the Collateral Agent nor any other Secured Creditor shall have any
obligation or liability under any Receivable (or any agreement giving rise thereto) or Contract by
reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other
Secured Creditor of any payment relating thereto, nor shall the Collateral Agent or any other
Secured Creditor be obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.

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

     (b) If (i) an Event of Default shall occur and be continuing under the Credit Agreement and
(ii) the Collateral Agent shall give notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (1) the Collateral Agent shall have the right to receive any and all cash
dividends, payments or other Proceeds paid in respect of the Pledged Securities and make
application thereof to the Obligations in such order as the Collateral Agent may determine, and (2)
any or all of the Pledged Securities shall be registered in the name of the Collateral Agent or its
nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate,
partnership and other rights pertaining to such Pledged Securities at any meeting of shareholders
or partners (as the case may be) of the relevant Issuer or Issuers or otherwise and (y) any and all
rights of conversion, exchange and subscription and any other rights, privileges or options
pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other fundamental change in the
corporate or partnership structure (as the case may be) of any Issuer, or upon the exercise by

 

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any
Grantor or the Collateral Agent of any right, privilege or option pertaining to such Pledged
Securities, and in connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Collateral Agent may determine), all without liability
except to account for property actually received by it, but the Collateral Agent shall have no duty
to any Grantor to exercise any such right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.

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

     6.4 Proceeds to be Turned Over To Collateral Agent. In addition to the rights of the
Collateral Agent and the Lenders specified in Section 6.1 with respect to payments of Receivables,
if an Event of Default shall occur and be continuing under the Credit Agreement, all Proceeds
received by any Grantor consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Collateral Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent
in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required). All Proceeds
received by the Collateral Agent hereunder shall be held by the Collateral Agent in a Collateral
Account maintained under its sole dominion and control. All Proceeds while held by the Collateral
Agent in a Collateral Account (or by such Grantor in trust for the Collateral Agent and the
Lenders) shall continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 6.5.

     6.5 Application of Proceeds. At such intervals as may be agreed upon by the Borrower
and the Collateral Agent, or, if an Event of Default shall have occurred and be continuing, at any
time at the Collateral Agent’s election, the Collateral Agent may apply all or any part of Proceeds
held in any Collateral Account in payment of the Obligations in such order as the Collateral Agent
may elect, and any part of such funds which the Collateral Agent elects not so to apply and deems
not required as collateral security for the Obligations shall be paid over from time to time by the
Collateral Agent to the Borrower or to whomsoever may be lawfully entitled to receive the same.
Any balance of such Proceeds remaining after the Obligations shall have been paid in full, no
Letters of Credit shall be outstanding and the Commitments shall have terminated shall be paid over
to the Borrower or to whomsoever may be lawfully entitled to receive the same. Proceeds held in
the Collateral Account at any time when no Default or Event of Default exists shall be returned to
the Borrower.

     6.6 Code and Other Remedies. If an Event of Default shall occur and be continuing
under the Credit Agreement, the Collateral Agent, on behalf of the Secured Creditors, may exercise,
in addition to all other rights and remedies granted to them in this Agreement and

 

23

in any other
instrument or agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable law. Without limiting
the generality of the foregoing, the Collateral Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any notice required by
law referred to below) to or upon any Grantor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, at any exchange, broker’s board or office of the
Collateral Agent or any other Secured Creditor or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Collateral Agent or any other Secured Creditor
shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each Grantor further agrees, at the Collateral Agent’s request, to assemble the
Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the
rights of the Collateral Agent and the Secured Creditors hereunder, including, without limitation,
reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Collateral Agent may elect, and only after such application and
after the payment by the Collateral Agent of any other amount required by any provision of law,
including, without limitation, Section 9-615(a)(3) of the New York UCC, need the Collateral Agent
account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each
Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any
Secured Creditor arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other disposition.

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

 

24

to
permit the Issuer thereof to register such securities for public sale under the Securities Act, or
under applicable state securities laws, even if such Issuer would agree to do so.

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

     6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the New York UCC. Each Grantor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Collateral
Agent or any other Secured Creditor to collect such deficiency.

SECTION 7. THE COLLATERAL AGENT

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

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

     (ii) in the case of any Intellectual Property, execute and deliver, and have
recorded, any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral Agent’s and the other

 

25

Secured Creditors’ security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented thereby;

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

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

     (v) (i) direct any party liable for any payment under any of the Collateral to
make payment of any and all moneys due or to become due thereunder directly to the
Collateral Agent or as the Collateral Agent shall direct; (ii) ask or demand for,
collect, and receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of any
Collateral; (iii) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection with
any of the Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the Collateral
or any portion thereof and to enforce any other right in respect of any Collateral;
(v) defend any suit, action or proceeding brought against such Grantor with respect
to any Collateral; (vi) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases as the
Collateral Agent may deem appropriate; (vii) assign any Copyright, Patent or
Trademark (along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (viii) generally, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely as
though the Collateral Agent were the absolute owner thereof for all purposes, and
do, at the Collateral Agent’s option and such Grantor’s expense, at any time, or
from time to time, all acts and things which the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Collateral Agent’s and the
other Secured Creditors’ security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.

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

 

26

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

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

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

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

     7.3 Execution of Financing Statements. Pursuant to any applicable law, each Grantor
authorizes the Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Collateral Agent reasonably determines appropriate
to perfect the security interests of the Collateral Agent under this Agreement. Each Grantor
authorizes the Collateral Agent to use the collateral description “all personal property” in any
such financing statements. Each Grantor hereby ratifies and authorizes the filing by the
Collateral Agent of any financing statement with respect to the Collateral made prior to the date
hereof. The Collateral Agent shall furnish Borrower with a copy of any documents filed or recorded
pursuant to this Section 7.3; provided that failing to furnish such copies shall not affect
the validity of effectiveness of such filing or recordation.

     7.4 Authority of Collateral Agent. Each Grantor acknowledges that the rights and
responsibilities of the Collateral Agent under this Agreement with respect to any action taken by

 

27

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

SECTION 8. MISCELLANEOUS

     8.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except in accordance with Section 10.06 of the Credit Agreement.

     8.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any
Grantor hereunder shall be effected in the manner provided for in Section 9.01 of the Credit
Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be
addressed to such Guarantor at its notice address set forth on Schedule 1.

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

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

     (b) Each Guarantor agrees to pay, and to save the Collateral Agent and the other Secured
Creditors harmless from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.

 

28

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

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

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

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

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

     8.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any

 

29

such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

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

     8.10 Integration. This Agreement and the other Credit Documents and the documents and
agreements entered into with respect to the Operating Bank Obligations represent the agreement of
the Grantors, the Collateral Agent and the Secured Creditors with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or warranties by the
Collateral Agent or any Secured Creditor relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the other Credit Documents or such other documents
and agreements.

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

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

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

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

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

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

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

 

30

     8.13 Acknowledgements. Each Grantor hereby acknowledges that:

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

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

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

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

     8.15 Additional Grantors. Each Subsidiary of the Borrower that is required to become
a party to this Agreement pursuant to Section 3.04 of the Credit Agreement shall become a Grantor
for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.

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

     (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any
Grantor in a transaction permitted by the Credit Agreement, then the Collateral Agent, at the
request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or
other documents reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Subsidiary Guarantor shall be
released from its obligations hereunder in the event that all the Capital Stock of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the
Credit Agreement; provided that the Borrower shall have delivered to the Collateral Agent,
at least ten Business Days prior to the date of the proposed release, a written request for release
identifying the relevant Subsidiary Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection

 

31

therewith, together
with a certification by the Borrower stating that such transaction is in compliance with the Credit
Agreement and the other Credit Documents.

     (c) In addition, the Collateral Agent shall release all or a portion of the Collateral upon
directions from the Agent in accordance with the Collateral Agency Agreement.

     (d) By acceptance of the benefits hereof, each Secured Creditor acknowledges and consents to
the provisions of this Section 8.16 and agrees that neither the Collateral Agent nor the
Administrative Agent shall incur any liability whatsoever to any Secured Creditor for any release
directed or consented to by it in accordance with the Collateral Agency Agreement or the Credit
Agreement.

     8.17 Operating Bank Obligations. By acceptance of the benefits hereof, each Operating
Bank acknowledges and consents to the provisions of the Collateral Agency Agreement, and that it
shall not be entitled to the benefits of this Agreement or the Operating Bank Guaranty except
pursuant to the terms and conditions of the Collateral Agency Agreement.

     8.18 Confirmation; Supplement to Operating Bank Guaranty. (a) Each Grantor hereby
agrees, with respect to each of the Guarantees and Collateral Documents that it has executed, that:

     (i) all of its obligations, liabilities and indebtedness under the Existing
Guarantees and Collateral Documents remain in full force and effect on a continuous
basis, unpaid, unimpaired, uninterrupted and undischarged, after giving effect to
the amendment and restatement of the Existing Credit Agreement pursuant to the
Credit Agreement, the making of the Term Advances and the amendment or amendment and restatement of the Existing Guarantees and
Collateral Documents pursuant to the Guarantees and Collateral Documents;

     (ii) all of the Liens and security interests created and arising under the
Existing Guarantees and Collateral Documents remain in full force and effect on a
continuous basis, unpaid, unimpaired, uninterrupted and undischarged, and having the
same perfected status and priority, as collateral security for the Obligations
including Obligations in respect of the Term Advances, after giving effect to the
amendment and restatement of the Existing Credit Agreement pursuant to the Credit
Agreement, the making of the Term Advances and the amendment or amendment or
restatement of the Existing Guarantees and Collateral Documents pursuant to the
Guarantees and Collateral Documents;

     (iii) all of the obligations, liabilities and indebtedness of the Borrower
under the Existing Credit Agreement and the Credit Agreement (i) are continued in
full force and effect on a continuous basis, unpaid, unimpaired, uninterrupted and
undischarged, after giving effect to the amendment of the Existing Credit Agreement
pursuant to the Credit Agreement, the making of the Term Advances and the amendment
or amendment and restatement of the Existing Guarantees and Collateral Documents
pursuant to the Guarantees and Collateral Documents, and (ii) constitute
Obligations;

 

32

     (iv) the perfected status and priority of each Lien and security interest
created under the Guarantees and Collateral Documents continue in full force and
effect on a continuous basis, unpaid, unimpaired, uninterrupted and undischarged,
after giving effect to the amendment and restatement of the Existing Credit
Agreement pursuant to the Credit Agreement, the making of the Term Advances and the
amendment or amendment and restatement of the Existing Guarantees and Collateral
Documents pursuant to the Guarantees and Collateral Documents, as collateral
security for the Obligations including the L/C Obligations; and

     (v) interest rates and fees under the Existing Credit Agreement are increased
pursuant to the Credit Agreement.

     (b) By executing and delivering this Agreement, each Grantor (i) which was not previously a
party to either the Guarantee and Collateral Agreement or the Operating Bank Guaranty hereby
becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder and a party to
the Operating Bank Guaranty as a Guarantor thereunder, in each case, with the same force and effect
as if originally named therein as a Grantor or Guarantor (as the case may be) and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor or Guarantor thereunder (it being understood that, without limitation, the Borrower is a
guarantor of Operating Bank Obligations owed by its Subsidiaries), provided, that the
execution and delivery of this Agreement by Funding Corp. shall become effective in accordance with
section 6.19 of the Credit Agreement, (ii) acknowledges and agrees that references in the Operating
Bank Guaranty to the “Credit Agreement” shall refer to the Credit Agreement as defined in this
Agreement and (iii) affirms its obligation under the Operating Bank Guaranty.

[Remainder of Page Intentionally Left Blank]

 

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

	 	 	 	 	 
	 	BALLY TOTAL FITNESS HOLDING CORPORATION

 	 
	 	By:  	/s/ William G. Fanelli
 	 
	 	 	Title:  Sr. VP and Acting CFO 	 
	 
	 
	 	 	BALLY'S FITNESS AND RACQUET CLUBS, INC.

BALLY FITNESS FRANCHISING, INC.

BALLY FRANCHISE RSC, INC.

BALLY FRANCHISING HOLDINGS, INC.

BALLY REAL ESTATE II, LLC

BALLY REAL ESTATE III, LLC

BALLY REAL ESTATE IV, LLC

BALLYS REFS WEST HARTFORD, LLC

BALLY TOTAL FITNESS CORPORATION

BALLY TOTAL FITNESS HOLDING CORPORATION

BALLY TOTAL FITNESS INTERNATIONAL, INC.

BALLY TOTAL FITNESS OF MISSOURI, INC.

BALLY TOTAL FITNESS OF TOLEDO, INC.

BFIT REHAB OF WEST PALM BEACH, INC.

CONNECTICUT COAST FITNESS CENTERS, INC.

CONNECTICUT VALLEY FITNESS CENTERS, INC.

GREATER PHILLY NO. 1 HOLDING COMPANY

GREATER PHILLY NO. 2 HOLDING COMPANY

HEALTH & TENNIS CORPORATION OF NEW YORK

HOLIDAY HEALTH & FITNESS CENTERS OF NEW YORK, INC.

HOLIDAY HEALTH CLUBS AND FITNESS CENTERS, INC.

HOLIDAY HEALTH CLUBS OF THE SOUTHEAST, INC.

HOLIDAY HEALTH CLUBS OF THE EAST COAST, INC.

HOLIDAY/SOUTHEAST HOLDING CORP.

HOLIDAY SPA HEALTH CLUBS OF CALIFORNIA

HOLIDAY UNIVERSAL, INC.

JACK LA LANNE FITNESS CENTERS, INC.

JACK LA LANNE HOLDING CORP.

MANHATTAN SPORTS CLUB, INC.

 

 

	 	 	 	 	 
	 	 	NEW FITNESS HOLDING CO., INC.

NYCON HOLDING CO., INC.

PHYSICAL FITNESS CENTERS OF PHILADELPHIA, INC.

PROVIDENCE FITNESS CENTERS, INC.

RHODE ISLAND HOLDING COMPANY

SCANDINAVIAN HEALTH SPA, INC.

SCANDINAVIAN U.S. SWIM & FITNESS, INC.

TIDELANDS HOLIDAY HEALTH CLUBS, INC.

U.S. HEALTH, INC.

59TH STREET GYM LLC

708 GYM LLC

ACE, LLC

CRUNCH FITNESS INTERNATIONAL, LLC

CRUNCH L.A. LLC

CRUNCH WORLD LLC

FLAMBE LLC

MISSION IMPOSSIBLE, LLC

SOHO HO LLC

SPORTSLIFE, INC.

WEST VILLAGE GYM AT THE ARCHIVES LLC
 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ William G. Fanelli
 	 
	 	 	Title:  Sr. VP and Acting
CFO
     for each of the Guarantors listed above

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