Document:

Exhibit 10.53

 

PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT (as amended,
supplemented, amended and restated or otherwise modified from time to time,
this “Pledge and Security Agreement”), dated as of July 8, 2003, is made
by NEW WORLD RESTAURANT GROUP, INC., a Delaware corporation (the “Issuer”),
each Subsidiary (as defined below) of the Issuer a signatory hereto, and each
other Subsidiary of the Issuer which may from time to time hereafter become a
party hereto pursuant to Section 7.5 (each, individually, an “Additional
Grantor”, and collectively, the “Additional Grantors”, and together
with the Issuer, each such Subsidiary, 
each, individually, a “Grantor”, and collectively, the “Grantors”),
in favor of THE BANK OF NEW YORK, in its capacity as trustee, as Collateral
Agent (together with its successor(s) thereto, in such capacity, the “Collateral
Agent”) for each of the Secured Parties.

W I T N E S S E T H :

WHEREAS, the Issuer, the other Grantors and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of July
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Notes due
2008 (and, if applicable, its Senior Secured Notes due 2008, Series B issued in
exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain
Loan and Security Agreement, dated as of July 8, 2003 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the “Loan
Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, as a condition precedent to the Notes
Issuance, each Grantor is required to execute and deliver this Pledge and Security
Agreement;

WHEREAS, each Grantor has duly authorized the
execution, delivery and performance of this Pledge and Security Agreement; and

WHEREAS, it is in the best interests of each Grantor
to execute this Pledge and Security Agreement inasmuch as such Grantor will
derive substantial direct and indirect benefits from proceeds of the Notes
issued by the Issuer;

NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and in order to
induce the Holders to acquire the Notes and maintain the Indebtedness evidenced
thereby, each Grantor agrees, for the benefit of each Secured Party, as
follows:

 

 

ARTICLE I

DEFINITIONS

SECTION 1.1.  Certain Terms.  The following terms (whether or not
underscored) when used in this Pledge and Security Agreement, including its
preamble and recitals, shall have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):

“Additional Grantor” and “Additional
Grantors” are defined in the preamble.

“AFC Lien” means the Lien granted in favor of
AFC Enterprises, Inc. pursuant to that certain Asset Purchase Agreement dated
as of July 26, 1999 as amended August 27,1999 by and between AFC Enterprises,
Inc.  and CBB Acquisition Corp.  (n/k/a Chesapeake Bagel Franchise
Corp.)  and New World Coffee- Manhattan
Bagel, Inc. and in connection with the sale of certain AFC Enterprises Inc.
properties, assets, rights and the business of franchising and operating of
certain Chesapeake Bagel Bakery stores to CBB Acquisition Corp.

“Agent” is defined in the second recital.

“Capital Securities” means, with respect to any
Person, all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of such Person’s capital, whether now
outstanding or issued after the date hereof.

“Coca-Cola Equipment” is defined in Section
2.1.

“Collateral” is defined in Section 2.1.

“Collateral Agent” is defined in the preamble.

“Computer Hardware and Software Collateral” means:

(a)  all computer and other electronic data
processing hardware, integrated computer systems, central processing units,
memory units, display terminals, printers, features, computer elements, card
readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories and all peripheral devices
and other related computer hardware;

(b)  all software programs (including both source
code, object code and all related applications and data files), whether now
owned, licensed or leased or hereafter acquired by any Grantor, designed for
use on the computers and electronic data processing hardware described in clause (a)
above;

(c)  all firmware associated therewith;

(d)  all documentation (including flow charts,
logic diagrams, manuals, guides and specifications) with respect to such
hardware, software and firmware described in the preceding clauses (a)
through (c); and

 

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(e)  all rights with respect to all of the
foregoing, including any and all copyrights, licenses, options, warranties,
service contracts, program services, test rights, maintenance rights, support
rights, improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of the
foregoing.

“Control Agreement” means an agreement in form
and substance satisfactory to the Collateral Agent which provides for the
Collateral Agent to have “control” (as defined in Section 8-106 of the
U.C.C., as such term relates to investment property (other than certificated
Capital Securities or commodity contracts), or as used in Section 9-106
of the U.C.C., as such term relates to commodity contracts).

“Copyright Collateral” means all copyrights
(including all copyrights for semiconductor chip product mask works) of each
Grantor, whether statutory or common law, registered or unregistered, now or
hereafter in force throughout the world including all of such Grantor’s right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including the
copyrights referred to in Item A of Schedule V attached
hereto, and all applications for registration thereof, whether pending or in
preparation, all copyright licenses, including each copyright license referred
to in Item B of Schedule V attached hereto, the right to sue for
past, present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and
all proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.

“Distributions” means all stock dividends, paid
on Capital Securities,  liquidating
dividends paid on Capital Securities, shares of Capital Securities resulting
from (or in connection with the exercise of) stock splits, reclassifications,
warrants, options, non-cash dividends, mergers, consolidations, and all other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Capital Securities constituting Collateral, but shall not
include Dividends.

“Dividends” means cash dividends and cash
distributions with respect to any Capital Securities constituting Collateral made
in the ordinary course of business and not a liquidating dividend.

“Equipment” is defined in clause (d)
of Section 2.1.

“Grantor” and “Grantors” are defined in
the preamble.

“In Effect” 
means, in respect of the Loan Agreement, any time when the “Senior
Liabilities” (as defined in the Intercreditor Agreement) shall not be “Fully
Paid” (as defined in the Intercreditor Agreement) up to the “Maximum Aggregate
Principal Amount” (as defined in the Intercreditor Agreement) plus all
interest, fees (including attorneys’ fees), indemnification obligations (to the
extent set forth in the Intercreditor Agreement), costs and expenses thereof
whether accrued or incurred before or after an “Insolvency Proceeding” (as
defined in the Intercreditor Agreement) and regardless of whether or not
allowed or allowable in any “Insolvency Proceeding,” and the Agent having
received any amounts required pursuant to the last sentence of Section 4.01(a)
of the Intercreditor Agreement.

 

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“Indenture” is defined in the first recital.

“Intellectual Property Collateral” means,
collectively, the Computer Hardware and Software Collateral, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.

“Intercompany Note” means, with respect to any
Grantor, as the payee thereunder, a subordinated promissory note, which
subordinated promissory note evidences all intercompany loans (to the extent
such loans are evidenced by a note) which may be made from time to time by such
Grantor to the Issuer or any of its Subsidiaries as the maker of such
subordinated promissory note, as such subordinated promissory note, in
accordance with Section 4.2.4, is amended, modified or supplemented
from time to time, together with any subordinated promissory note of such maker
taken in extension or renewal thereof or substitution therefor.

“Inventory” is defined in clause (e) of Section
2.1.

“Issuer” is defined in the preamble.

“Loan Agreement” is defined in the second
recital.

“Master Deposit Account” means the deposit
account of the Issuer to be established and maintained with the Collateral
Agent upon the occurrence of an Event of Default.

“Material Adverse
Effect” means a material adverse effect on

(a)  the business, operating results or condition
(financial or otherwise) of the Issuer and its Subsidiaries, taken as a whole;

(b)  the ability of any Grantor to perform its
obligations under any of the Related Documents, including the payment of any
principal, interest, fees, expenses or other amounts under or in respect of any
of the Related Documents; or

(c)  the validity or enforceability of any of the
Related Documents or any of the rights or remedies of the Collateral Agent or
any other Secured Party under any of the Related Documents.

“Motor Vehicles” means motor vehicles,
tractors, trailers and other like property, whether or not the title thereto is
governed by a certificate of title or ownership.

“Notes” is defined in the first recital.

“Notes Issuance” is defined in the first
recital.

“Patent
Collateral” means:

(a)  all letters patent and applications for
letters patent throughout the world, including all patent applications in
preparation for filing anywhere in the world and 

 

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including each patent and
patent application referred to in Item A of Schedule III attached
hereto;

(b)  all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);

(c)  all patent licenses, including each patent
license referred to in Item B of Schedule III attached hereto;
and

(d)  all proceeds of, and rights associated with,
the foregoing (including license royalties and proceeds of infringement suits),
the right to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule III attached hereto, and for
breach or enforcement of any patent license, including any patent license
referred to in Item B of Schedule III attached hereto, and all
rights corresponding thereto throughout the world.

“Pledge and Security Agreement” is defined in
the preamble.

“Receivables” is defined in clause (f)
of Section 2.1.

“Related Contracts” is defined in clause (f)
of Section 2.1.

“Related Documents” means the Indenture, the
Notes, this Pledge and Security Agreement, the Trademark Security Agreement,
the Patent Security Agreement, if any, the Copyright Security Agreement, if
any, and the Mortgages.

“Restricted Equipment” is defined in Section
2.1.

“Secured Obligations” is defined in Section 2.2.

“Secured Parties” means the Collateral Agent,
the Trustee and the Holders.

“Securities Act” is defined in Section 6.2.

“Senior Lenders” is defined in the second
recital.

“Trademark Collateral” means:

(a)  all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other source of
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of a like nature (all of
the foregoing items in this clause (a) being collectively called a
“Trademark”), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any office or agency of the
United States of America or any State 

 

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thereof or any foreign
country, including those referred to in Item A of Schedule IV
attached hereto;

(b)  all Trademark licenses, including each
Trademark license referred to in Item B of Schedule IV
attached hereto;

(c)  all reissues, extensions or renewals of any
of the items described in clause (a) and (b);

(d)  all of the goodwill of the business
connected with the use of, and symbolized by the items described in, clauses
(a) and (b); and

(e)  all proceeds of, and rights associated with,
the foregoing, including any claim by any Grantor against third parties for
past, present or future infringement or dilution of any Trademark, Trademark
registration or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in Item A and Item B
of Schedule IV attached hereto, or for any injury to the goodwill
associated with the use of any such Trademark or for breach or enforcement of
any Trademark license.

“Trade Secrets Collateral” means all common law
and statutory trade secrets and all other confidential or proprietary or useful
information and all know-how obtained by or used in or contemplated at any time
for use in the business of any Grantor (all of the foregoing being collectively
called a “Trade Secret”), whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all documents and things
embodying, incorporating or referring in any way to such Trade Secret, all
Trade Secret licenses, including each Trade Secret license referred to in Schedule
VI attached hereto, and including the right to sue for and to enjoin and to
collect damages for the actual or threatened misappropriation of any Trade
Secret and for the breach or enforcement of any such Trade Secret license.

“U.C.C.” means the Uniform Commercial Code, as
in effect from time to time in the State of New York.

SECTION 1.2.  Indenture Definitions.  Unless otherwise defined herein or the
context otherwise requires, terms used in this Pledge and Security Agreement,
including its preamble and recitals, have the meanings provided in the
Indenture.

SECTION 1.3.  U.C.C. Definitions.  Unless otherwise defined herein or in the
Indenture or the context otherwise requires and whether or not capitalized,
terms for which meanings are provided in Article 8 or Article 9 of the U.C.C.
are used in this Pledge and Security Agreement, including its preamble and
recitals, with such meanings.

ARTICLE II

SECURITY INTEREST

SECTION 2.1.  Grant of Security.  Each Grantor hereby assigns (which
assignment in the case of any Trademark Collateral shall be an assignment of a
security interest), pledges, 

 

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hypothecates, charges,
mortgages, delivers, and transfers to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, and hereby grants to the
Collateral Agent for its benefit and the ratable benefit of each of the Secured
Parties, a continuing security interest in all of the following property,
whether tangible or intangible, whether now or hereafter existing, owned or
acquired by such Grantor, and wherever located (the “Collateral”):

(a)  all Intercompany Notes in which such Grantor
has an interest (including each Intercompany Note described in Item A
of Schedule I hereto);

(b)  all interest and other payments and rights
with respect to each Intercompany Note in which such Grantor has an interest;

(c)  (i) all
investment property in which such Grantor has an interest (including the
Capital Securities of each issuer of such Capital Securities described in Schedule
I hereto) and (ii) all other Capital Securities which are interests in
limited liability companies or partnerships in which such Grantor has an
interest (including the Capital Securities of each issuer of such Capital
Securities described in Schedule I hereto), in each case together with
Dividends and Distributions payable in respect of the Collateral described in
the foregoing clauses (c)(i) and (c)(ii), and;

(d)  all equipment in all of its forms (including
all Motor Vehicles) of such Grantor, wherever located, including all parts
thereof and all accessions, additions, attachments, improvements, substitutions
and replacements thereto and therefor and all accessories related thereto (any
and all of the foregoing being the “Equipment”);

(e)  all inventory in all of its forms of such
Grantor, wherever located, including

(i)  all raw materials and work in process
therefor, finished goods thereof, and materials used or consumed in the
manufacture or production thereof,

(ii)  all goods in which such Grantor has an
interest in mass or a joint or other interest or right of any kind (including
goods in which such Grantor has an interest or right as consignee), and

(iii)  all goods which are returned to or
repossessed by such Grantor,

and all accessions
thereto, products thereof and documents therefor (any and all such inventory,
materials, goods, accessions, products and documents being the “Inventory”);

(f)  all accounts, contracts (including franchise
agreements), contract rights, chattel paper, documents, instruments, promissory
notes and general intangibles (including tax refunds and payment intangibles)
of such Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of such Grantor
now or hereafter existing in and to all security agreements, guaranties, leases
and other contracts securing or otherwise relating to any such accounts,
contracts (including franchise agreements), contract rights, chattel paper,
documents, instruments, promissory notes and general intangibles and payment
intangibles (all of the 

 

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foregoing being the “Receivables”,
and any and all such security agreements, guaranties, leases and other
contracts being the “Related Contracts”);

(g)  all deposit accounts of such Grantor
(including the Master Deposit Account in the case where such Grantor is the
Issuer) and all cash, checks, drafts, notes, bills of exchange, money orders
and other like instruments, if any, now owned or hereafter acquired, held
therein (or in sub-accounts thereof) and all certificates and instruments, if
any, from time to time representing or evidencing such investments, and all
interest, earnings and proceeds in respect thereof;

(h)  all Intellectual Property Collateral of such
Grantor;

(i)  all of such Grantor’s letter of credit
rights;

(j)  all commercial tort claims in which such
Grantor has rights (including as a plaintiff);

(k)  all books, records, writings, data bases,
information and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the foregoing in
this Section 2.1;

(l)  all of such Grantor’s other property and
rights of every kind and description and interests therein; and

(m)  all products, offspring, rents, issues,
profits, returns, income, supporting obligations and proceeds of and from any
and all of the foregoing Collateral (including proceeds which constitute
property of the types described in clauses (a) through (l),
proceeds deposited from time to time in any lock box or deposit account of such
Grantor (including the Master Deposit Account in the case where such Grantor is
the Issuer), and, to the extent not otherwise included, all payments under
insurance (whether or not the Collateral Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral).

Notwithstanding the foregoing, “Collateral” shall not
include any (A) general intangibles or other rights described in clause (f)
above arising under any contracts, instruments, licenses or other documents
described in such clause as to which the grant of a security interest would
constitute a violation of a valid and enforceable restriction in favor of a
third party on such grant, unless and until any required consents shall have
been obtained, (B) Capital Securities of any Non-Restricted Subsidiary, (C) any
item of Equipment owned by any Grantor that is subject to any agreement
restricting the right of such Grantor to grant a security interest therein (“Restricted
Equipment”) and (D) all equipment purchased by the Grantors under the
agreement, dated September 27, 1996 (as amended, supplemented or modified from
time to time), among Coca-Cola USA, Coca-Cola Foods and Einstein/Noah Bagel
Corp. , concerning the competitive marketing program to be made available in
connection with the purchase and promotion of Coca-Cola Company beverages by
Einstein/Noah Bagel Corp. (the “Coca-Cola Equipment”).  Each Grantor agrees to use its best efforts
(which shall not be deemed to include an obligation to pay 

 

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money) to obtain any such required consent in respect
of the general intangibles or other rights referred to in clause (A) above.

SECTION 2.2.  Security for Obligations.  This Pledge and Security Agreement secures
the payment of all Obligations of the Issuer now or hereafter existing under
the Indenture, the Notes and each other Related Document to which the Issuer is
or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all Obligations of each Grantor now or hereafter existing
under its Subsidiary Guarantee, this Pledge and Security Agreement and each
other Related Document to which such Grantor is or may become a party (all such
obligations of such Grantor being the “Secured Obligations”).

SECTION 2.3.  Delivery of Certificated Securities and
Intercompany Notes.  All Collateral
comprised of Intercompany Notes and certificated Capital Securities shall be
delivered to and held by or on behalf of (and, in the case of the Intercompany
Notes, endorsed to the order of) the Collateral Agent pursuant hereto, shall be
in suitable form for transfer by delivery, and shall be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank.

SECTION 2.4.  Dividends on Securities and Payments on
Intercompany Notes.  In the event
that any Dividend is to be paid on any Capital Security that constitutes
Collateral or any payment of principal or interest is to be made on any
Intercompany Note, such Dividend or payment may be paid directly to the
applicable Grantor, unless a Default of the nature referred to in clause (f) of
Section 6.01 of the Indenture or Event of Default has occurred and is
continuing or would result therefrom. 
If any such Default or Event of Default has occurred and is continuing,
then any such Dividend or payment shall be paid directly to the Collateral
Agent.

SECTION 2.5.  Continuing Security Interest; Transfer of
Notes.  This Pledge and Security
Agreement shall create a continuing security interest in the Collateral and
shall

(a)  remain in full force and effect until
payment in full in cash of all Secured Obligations,

(b)  be binding upon each Grantor, its
successors, transferees and assigns, and

(c)  inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the Collateral Agent and
each other Secured Party.

Without limiting the generality of the foregoing clause (c),
any Holder may assign or otherwise transfer (in whole or in part) any Note held
by it to any other Person, and such other Person shall thereupon become vested
with all the rights and benefits in respect thereof granted to such Holder
under any Related Document (including this Pledge and Security Agreement) or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Sections 2.14 and 2.15 of the
Indenture.  Upon the payment in full in
cash of all Secured Obligations, the security interest granted herein shall
terminate and all rights to the Collateral shall revert to such Grantor. Upon
any such termination, the Collateral Agent will, at such Grantor’s sole
expense, execute and deliver to such Grantor such documents as such Grantor
shall reasonably request to evidence such termination.  Upon (i) the sale, transfer or other
disposition of Collateral in accordance with Section 4.15 of the Indenture
or (ii) the 

 

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payment in full in cash of all Secured Obligations,
the security interests granted herein shall automatically terminate with
respect to (x) such Collateral (in the case of clause (i)) or (y)
all Collateral (in the case of clause (ii)).  Upon any such sale, transfer, disposition or termination, the
Collateral Agent will, at such Grantor’s sole expense, deliver to such Grantor,
without any representations, warranties or recourse of any kind whatsoever, all
applicable certificated securities and all applicable Intercompany Notes,
together with all other applicable 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 (including such
documents as such Grantor shall reasonably request to remove the notation of
the Collateral Agent as lienholder on any certificate of title for any
applicable Motor Vehicle).

SECTION 2.6.  Grantor Remains Liable.  Anything herein to the contrary
notwithstanding

(a)  each Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein, and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Pledge and Security
Agreement had not been executed,

(b)  the exercise by the Collateral Agent of any
of its rights hereunder shall not release any Grantor from any of its duties or
obligations under any such contracts or agreements included in the Collateral,
and

(c)  neither the Collateral Agent nor any other
Secured Party shall have any obligation or liability under any such contracts
or agreements included in the Collateral by reason of this Pledge and Security
Agreement, nor shall the Collateral Agent or any other Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

SECTION 2.7.  Security Interest Absolute.  This Pledge and Security Agreement shall in
all respects be a continuing, absolute, unconditional and irrevocable grant of
security interest, and shall remain in full force and effect until all of the
Security Obligations have been paid in full. All rights of the Collateral
Agent and the security interests granted to the Collateral Agent (for its
benefit and the ratable benefit of each other Secured Party) hereunder, and all
obligations of each Grantor hereunder, shall be absolute and unconditional and
irrevocable, irrespective of

(a)  any lack of validity, legality or
enforceability of the Indenture, any Note or any other Related Document;

(b)  the failure of any Secured Party

(i)  to assert any claim or demand or to enforce
any right or remedy against the Issuer, any other Grantor or any other Person
under the provisions of the Indenture, any Note, any other Related Document or
otherwise, or

(ii)  to exercise any right or remedy against any
other guarantor of, debtor or obligor with respect to, or collateral securing,
any Secured Obligations;

 

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(c)  any change in the time, manner or place of
payment of, or in any other term of, all or any of the Secured Obligations or
any other extension, compromise or renewal of any Secured Obligations;

(d)  any reduction, limitation, impairment or
termination of any Secured Obligations for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to (and each Grantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any Secured
Obligations or otherwise;

(e)  any amendment to, rescission, waiver, or
other modification of, or any consent to departure from, any of the terms of
the Indenture, any Note or any other Related Document;

(f)  any addition, exchange, release, surrender
or non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to departure
from any guaranty, for any of the Secured Obligations; or

(g)  any other circumstances which might
otherwise constitute a defense available to, or a legal or equitable discharge
of, the Issuer, any other Grantor, any surety or any guarantor, debtor or
obligor.

SECTION 2.8.  Postponement of Subrogation, etc.  Each Grantor hereby agrees that it will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment in full in cash of all Secured Obligations.  Any amount paid to any Grantor on account of
any payment made hereunder prior to the payment in full in cash of all Secured
Obligations shall be held in trust for the benefit of the Secured Parties and
shall immediately be paid to the Secured Parties and credited and applied against
the Secured Obligations, whether matured or unmatured, in accordance with the
terms of the Indenture; provided, however, that if

(a)  such Grantor has made payment to the Secured
Parties of all or any part of the Secured Obligations, and

(b)  all Secured Obligations have been paid in
full in cash,

each Secured Party agrees that, at the requesting
Grantor’s request and sole expense, the Secured Parties will execute and
deliver to such Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to such Grantor of an interest in the Secured Obligations resulting from such
payment by such Grantor.  In furtherance
of the foregoing, for so long as any Secured Obligations remain outstanding,
each Grantor shall refrain from taking any action or commencing any proceeding
against the Issuer or any other Grantor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge and Security Agreement to any
Secured Party.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1.  Representations and Warranties.  Each Grantor represents and warrants to each
Secured Party insofar as the representations and warranties contained herein
are applicable to such Grantor and its properties, as set forth in this Article
III.

SECTION 3.2.  As to Capital Securities of Subsidiaries.  With respect to any Subsidiary of any
Grantor that is

(a)  a corporation, business trust, joint stock
company or similar Person, all Capital Securities issued by such Subsidiary are
duly authorized and validly issued, fully paid and non-assessable, and
represented by a certificate; and

(b)  a partnership or limited liability company,
no Capital Securities issued by such Subsidiary (i) are dealt in or traded
on securities exchanges or in securities markets, (ii) expressly provide
that such Capital Securities are a security governed by Article 8 of the
U.C.C. or (iii) are held in a securities account.

The percentage of the issued and outstanding Capital
Securities of each Subsidiary pledged by any Grantor hereunder are as set forth
in Schedule I hereto.

SECTION 3.3.  As to Intercompany Notes.  In the case of each Intercompany Note, all
of such Intercompany Notes have been duly authorized, executed, endorsed,
issued and delivered, and are the legal, valid and binding obligation of the
issuers thereof, and are not in default.

SECTION 3.4.  Grantor Name, Location, etc.  The jurisdiction in which each Grantor is
located for purposes of Sections 9-301 and 9-307 of the U.C.C. is
set forth in Item A of Schedule II hereto.  Set forth in Item B of Schedule II
is each location a secured party would have filed a U.C.C. financing statement
to perfect a security interest in equipment, inventory and general intangibles
owned by each Grantor in the past five years. 
No Grantor has any trade names other than those set forth in Item C
of Schedule II hereto.  During
the past five years preceding the date hereof, no Grantor has been known by any
legal name different from the one set forth on the signature page hereto, nor
has such Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item D of Schedule II
hereto.  The name set forth on the
signature page is the true and correct name of such Grantor.  Each Grantor’s federal taxpayer
identification number is (and, during the four months preceding the date
hereof, such Grantor has not had a federal taxpayer identification number
different from that) set forth in Item E of Schedule II
hereto.  No Grantor is a party to any
federal, state or local government contract except as set forth in Item F
of Schedule II hereto.  No
Grantor maintains any deposit accounts with any Person except as set forth in Item
G of Schedule II hereto.

SECTION 3.5.  Ownership, No Liens, etc.  Such Grantor owns its Collateral free and
clear of any Lien, security interest, charge or encumbrance except for the
security interest created by this Pledge and Security Agreement except as
permitted by the Indenture; provided, however that in the case of
Collateral consisting of Capital Securities, such Capital Securities are only
subject to the prior Lien of the Agent for so long as the Loan Agreement is In
Effect.  No 

 

12

 

effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed in favor of the Collateral Agent relating to this Pledge and Security
Agreement or as have been filed in connection with Liens permitted pursuant to
Section 4.17 of the Indenture or as to which a duly executed termination
statement relating to such financing statement or other instrument has been
delivered to the Collateral Agent on the Closing Date.

SECTION 3.6.  Possession and Control.  Each Grantor agrees that it will maintain
exclusive possession of its goods, instruments, promissory notes and inventory,
other than (a) inventory in transit in the ordinary course of business, (b)
inventory which is in the possession or control of a warehouseman, bailee agent
or other Person (other than a Person controlled by or under common control with
such Grantor) that has been notified of the security interest created in favor
of the Secured Parties pursuant to this Security Agreement, and has agreed to
hold such inventory subject to the Secured Parties’ Lien and waive any Lien
held by it against such inventory and (c) instruments or promissory notes that
have been delivered to the Collateral Agent or the Agent, as applicable,
pursuant to Section 3.7.

SECTION 3.7.  Negotiable Documents, Instruments and
Chattel Paper.  Such Grantor has,
contemporaneously herewith, delivered to the Agent possession of all originals
of all negotiable documents, instruments and chattel paper currently owned or
held by such Grantor (duly endorsed in blank).

SECTION 3.8.  Intellectual Property Collateral.  With respect to any Intellectual Property
Collateral the loss, impairment or infringement of which would reasonably be
expected to have a Material Adverse Effect:

(a)  such Intellectual Property Collateral is
subsisting and has not been adjudged invalid or unenforceable, in whole or in
part;

(b)  such Intellectual Property Collateral is
valid and enforceable;

(c)  such Grantor has made all necessary filings
and recordations to protect its interest in such Intellectual Property
Collateral (except with respect to Intellectual Property Collateral that it is
acquiring on the date hereof, in which case, such Grantor agrees to promptly
(and in any event within 15 Business Days of the date hereof) deliver to the
United States Patent and Trademark Office for filing on proper forms, together
with the necessary filing fees, all necessary filings and recordations to
protect its interest in such newly-acquired Intellectual Property Collateral),
including recordations of all of its interests in the Patent Collateral, if
any, and Trademark Collateral in the United States Patent and Trademark Office
and in corresponding offices in countries in which the failure to so file
and/or record would reasonably be expected to have a Material Adverse Effect
and its claims to the Copyright Collateral, if any, in the United States
Copyright Office and in corresponding offices in countries in which the failure
to so file and/or record would reasonably be expected to have a Material
Adverse Effect;

(d)  such Grantor is the exclusive owner of the
entire and unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been 

 

13

 

made that the use of such
Intellectual Property Collateral does or may violate the asserted rights of any
third party; and

(e)  such Grantor has performed and will continue
to perform all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every such item of Intellectual Property Collateral
in full force and effect throughout the world, as applicable.

Such Grantor owns directly or is entitled to use by
license or otherwise, all patents, Trademarks, Trade Secrets, copyrights, mask
works, licenses, technology, know-how, processes and rights with respect to any
of the foregoing used in or necessary for the conduct of such Grantor’s
business.

SECTION 3.9.  Validity, etc.  This Pledge and Security Agreement creates a
valid continuing security interest in the Collateral securing the payment of
the Secured Obligations, and Liens of the type referred to in clause (xiii) of
the definition of “Permitted Liens” in the Indenture:

(a)  in the case of Collateral comprised of
certificated securities or instruments, upon the delivery of such Collateral to
the Agent, such security interest will be a valid first priority perfected
security interest;

(b)  in the case of Collateral comprised of
uncertificated securities and other investment property (other than
certificated Securities), upon the Agent obtaining “control” (as defined in
Section 8-106 of the U.C.C., as such term relates to investment property
(other than certificated securities or commodity contracts), or as used in
Section 9-106 of the U.C.C., as such term relates to commodity
contracts) of such Collateral and the filing of the Uniform Commercial Code
financing statements delivered by the Grantor having an interest in such
Collateral to the Collateral Agent with respect to such Collateral, such
security interest will be a valid first priority perfected security interest;

(c)  in the case of Collateral comprised of Motor
Vehicles, upon the recordation or notation of the Collateral Agent’s Lien on
the certificates of title or ownership in respect of such Motor Vehicles and
the filing of the Uniform Commercial Code financing statements delivered by the
Grantor having an interest in such Motor Vehicles to the Collateral Agent with
respect to such Collateral, such security interest will be a valid first
priority perfected security interest;

(d)  in the case of all other Collateral, upon the
filing in the jurisdiction of incorporation or formation of the applicable
Grantor Uniform Commercial Code financing statements delivered by the Grantor
to the Collateral Agent with respect to such Collateral, such security interest
will be a valid first priority perfected security interest (except to the
extent a Uniform Commercial Code financing statement was previously filed in
connection with Liens permitted pursuant to Section 4.17 of the Indenture and
such financing statement remains effective in respect of such Collateral).

 

14

 

Each Grantor agrees to deliver UCC-1 and UCC-3
financing statements to a filing agent acceptable to the Collateral Agent and
make any other filings reasonably necessary to perfect the security interests
contemplated hereby at the sole expense of such Grantor.

SECTION 3.10.  Authorization, Approval, etc.  Except as have been obtained or made and are
in full force and effect (or otherwise provided for to the satisfaction of the
Agents), no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either

(a)  for the grant by such Grantor of the
security interest granted hereby, the pledge by such Grantor of any Collateral
pursuant hereto or for the execution, delivery and performance of this Pledge
and Security Agreement by such Grantor,

(b)  for the perfection of or the exercise by the
Collateral Agent of its rights and remedies hereunder, or

(c)  for the exercise by the Collateral Agent of
the voting or other rights provided for in this Pledge and Security Agreement,
or, except with respect to any Capital Securities issued by a Subsidiary of
such Grantor, as may be required in connection with a disposition of such
Capital Securities by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this Pledge
and Security Agreement.

SECTION 3.11.  Compliance with Laws.  Such Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which would reasonably be expected to have a Material
Adverse Effect or which would reasonably be expected to materially adversely
affect the value of the Collateral as a whole or the worth of the Collateral as
a whole as collateral security.

SECTION 3.12.  Coca-Cola Equipment.  The Coca-Cola Equipment has an aggregate book
value of not more than $275,000 on the date hereof.

ARTICLE IV

COVENANTS

SECTION 4.1.  Certain Covenants.  Each Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, such
Grantor will, unless the Trustee shall otherwise consent in writing, perform,
comply with and be bound by the obligations set forth in this Article IV.

SECTION 4.2.  As to Investment Property and
Intercompany Notes; Etc.

SECTION 4.2.1.  Capital Securities of Subsidiaries.  No Grantor will allow any of its
Subsidiaries that is

 

15

 

(a)  a corporation, business trust, joint stock
company or similar Person, to issue uncertificated securities; and

(b)  a partnership or limited liability company,
to (i) issue Capital Securities that are to be dealt in or traded on
securities exchanges or in securities markets, (ii) expressly provide in its
organic documents that its Capital Securities are securities governed by
Article 8 of the U.C.C., or (iii) place such Subsidiary’s Capital
Securities in a securities account.

SECTION 4.2.2.  Investment Property (other than
Certificated Securities).  With
respect to any investment property (other than certificated securities) of such
Grantor, such Grantor shall (a) cause a Control Agreement relating to such
investment property to be executed and delivered in favor of the Collateral
Agent and (b) deliver Uniform Commercial Code financing statements which
when filed will result in the Collateral Agent having a first priority
perfected security interest in such investment property.

SECTION 4.2.3.  Stock Powers, etc.  Such Grantor agrees that all certificated
securities constituting Collateral delivered by such Grantor pursuant to this
Pledge and Security Agreement will be accompanied by duly executed undated
blank stock powers, or other equivalent instruments of transfer acceptable to
the Collateral Agent.  Such Grantor
will, from time to time upon the request of the Collateral Agent, promptly
deliver to the Collateral Agent such stock powers, instruments, and similar
documents, satisfactory in form and substance to the Collateral Agent, with
respect to such Collateral as the Collateral Agent may reasonably request and
will, from time to time upon the request of the Collateral Agent after the
occurrence of any Event of Default, promptly transfer any securities
constituting Collateral into the name of any nominee designated by the
Collateral Agent.

SECTION 4.2.4.  Continuous Pledge.  Such Grantor will, at all times, keep
pledged to the Collateral Agent pursuant hereto on a first priority perfected
basis all investment property constituting Collateral, all Dividends and
Distributions with respect thereto, all Intercompany Notes, all interest,
principal and other proceeds received by the Collateral Agent with respect to
the Intercompany Notes, and all other Collateral and other securities,
instruments, proceeds, and rights from time to time received by or
distributable to such Grantor in respect of any of the foregoing Collateral and
will not permit any Subsidiary of such Grantor to issue any securities which
shall not have been immediately duly pledged hereunder on a first priority
perfected basis.  Nothing in this
Section 4.2.4 shall require the delivery of any such Collateral to the
Collateral Agent in contravention of Section 2.3 and 2.4 hereof.

SECTION 4.2.5.  Voting Rights; Dividends, etc.  Such Grantor agrees that, subject to the
restrictions on the obligation to deliver certain Collateral to the Collateral
Agent under this Pledge and Security Agreement:

(a)  after any Default of the nature referred to
in clause (f) of Section 6.01 of the Indenture or any Event of Default
shall have occurred and be continuing, promptly upon receipt of notice thereof
by such Grantor and without any request therefor by the Collateral Agent, to
deliver (properly endorsed where required hereby or requested by the Collateral
Agent) to the Collateral Agent all Dividends, Distributions, all interest, all 

 

16

 

principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be held by the
Collateral Agent as additional Collateral for use in accordance with clause (b)
of Section 6.1; and

(b)  after any Event of Default shall have
occurred and be continuing and the Collateral Agent has notified such Grantor
of the Collateral Agent’s intention to exercise its voting power under this Section 4.2.5(b)

(i)  the Collateral Agent may exercise (to the
exclusion of such Grantor) the voting power and all other incidental rights of
ownership with respect to any securities or other investment property
constituting Collateral and such Grantor hereby grants the Collateral Agent an
irrevocable proxy, exercisable under such circumstances, to vote such
securities and such other Collateral; and

(ii)  promptly to deliver to the Collateral Agent
such additional proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.

All Dividends, Distributions, interest, principal,
cash payments, payment intangibles and proceeds which may at any time and from
time to time be held by such Grantor but which such Grantor is then obligated
to deliver to the Collateral Agent, shall, until delivery to the Collateral
Agent, be held by such Grantor separate and apart from its other property in
trust for the Collateral Agent.  The
Collateral Agent agrees that unless an Event of Default shall have occurred and
be continuing and the Collateral Agent shall have given the notice referred to
in Section 4.2.5(b), such Grantor shall have the exclusive voting
power with respect to any securities constituting Collateral and the Collateral
Agent shall, upon the written request of such Grantor, promptly deliver such
proxies and other documents, if any, as shall be reasonably requested by such
Grantor which are necessary to allow such Grantor to exercise voting power with
respect to any such securities; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by
such Grantor that would violate any provision of the Indenture or any other
Related Document (including this Pledge and Security Agreement).

SECTION 4.2.6.  Amendment of Organic Documents.  Such Grantor will not amend, supplement or
otherwise modify, or permit, consent or suffer to occur any amendment,
supplement or modification of any terms or provisions contained in, or
applicable to, any certificate of incorporation, formation, LLC agreement,
operating agreement, shareholder agreement or similar document of any issuer of
any Capital Security comprising the Collateral in which it has an equity
interest if the effect thereof is to impair, or is in any material manner
adverse to, the rights or interests of the Collateral Agent or any other
Secured Party hereunder or under the Indenture or any other Related Document,
without the prior written consent of the Collateral Agent and the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes.  No Grantor will change its name
or place of incorporation or organization or federal taxpayer identification
number except upon 30 days’ prior written notice to the Collateral Agent.  If any Grantor is organized outside of the
United States, it will not change its “location” as determined in accordance
with Sections 9-301 and 9-307 of the U.C.C. and as set forth in Item
A of Schedule II hereto except upon 30 days’ prior written notice to
the Collateral Agent.

 

17

 

SECTION 4.3.  As to Receivables.  (a)   Each Grantor shall have the right to collect
all Receivables so long as no Default of the nature set forth in clause (f) of
Section 6.01 of the Indenture nor any Event of Default shall have occurred
and be continuing; provided, however, that such Grantor agrees to
promptly deposit all payments received by such Grantor on account of the
Receivables, whether in the form of cash, checks, drafts, notes, bills of
exchange, money orders or other like instruments or otherwise, in a deposit
account in precisely the form in which received (but with any endorsements of
such Grantor necessary for deposit or collection).

(b)  All proceeds of Collateral received by such
Grantor shall be deposited into a deposit account of such Grantor, unless,
during the occurrence and continuance of an Event of Default, such Grantor is
otherwise notified in writing by the Collateral Agent.  Following any such notice by the Collateral
Agent to such Grantor pursuant to this Section 4.4(c), all proceeds of
Collateral received by such Grantor shall be delivered in kind to the Master
Deposit Account (which shall be established by the Issuer with the Collateral
Agent if such Master Deposit Account is not then existing) or any other account
or accounts specified by the Collateral Agent. 
Proceeds of Collateral received by such Grantor shall, prior to deposit
in the Master Deposit Account or such other account or accounts specified by
the Collateral Agent, be held separate and apart from, and not commingled with,
all other property and in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Master Deposit Account or such other
account or accounts.

(c)  Following and during the continuance of an
Event of Default, such Grantor shall transfer all funds out of each of its
deposit accounts that is not the Master Deposit Account (other than, in the
aggregate, cash or Cash Equivalent Investments in all deposit accounts (other
than the Master Deposit Account) that do not exceed at any time $10,000) for
deposit into the Master Deposit Account at the close of business each day or,
if not commercially reasonable to do so, no less frequently than once every
five Business Days.

(d)  The Collateral Agent shall have the right to
apply any amount in each deposit account (including the Master Deposit Account)
to the payment of any Secured Obligations which are due and payable or payable
upon demand or to the payment of any Secured Obligations at any time that an
Event of Default shall have occurred and be continuing.

(e)  With respect to each deposit account
maintained with the Collateral Agent (including the Master Deposit Account), it
is hereby agreed that (i) deposits in each such
deposit account are subject to a security interest as contemplated hereby, (ii) each such deposit account shall be under the
sole dominion and control of the Collateral Agent and (iii) the
Collateral Agent shall have the sole right of withdrawal over each such deposit
account; provided, however, that, unless and until the Collateral
Agent shall notify the applicable Grantors that an Event of Default shall have
occurred and be continuing and that during the continuance thereof, no such
Grantor shall withdraw any of the funds contained in any such deposit account
(which notice may be given by telephone if promptly confirmed in writing or by
facsimile), any such Grantor may at any time withdraw any of the funds
contained in its deposit account for use in any lawful manner not inconsistent
with the provisions of this Pledge and Security Agreement, the Indenture or any
other Related Document.

 

18

 

SECTION 4.4.  Motor Vehicles.  (a)  Such Grantor shall deliver to the Collateral Agent the original of
the certificate of title or ownership listing the Collateral Agent as
lienholder for  (i) any Motor
Vehicle owned by such Grantor that has a fair market value of at least $50,000
or (ii) at the request of the Collateral Agent, any other Motor Vehicle
owned by such Grantor.

(b)  Upon the acquisition after the date hereof
by such Grantor of (i) any Motor Vehicle having a fair market value of at
least $50,000 or (ii) any other Motor Vehicle for which the Collateral
Agent has requested the original of the certificate of title or ownership
thereof, such Grantor shall deliver to the Collateral Agent originals of the
certificates of title or ownership for such Motor Vehicles, together with the
manufacturer’s statement of origin with the Collateral Agent listed as
lienholder.

(c)  Without limiting Section 5.1,
such Grantor hereby appoints the Collateral Agent as its attorney-in-fact,
effective the date hereof, and terminating upon the termination of this Pledge
and Security Agreement, for the purpose of (i) executing on behalf of such
Grantor  title or ownership applications
for filing with appropriate state agencies to enable Motor Vehicles now owned
or hereafter acquired by such Grantor to be retitled and the Collateral Agent
listed as lienholder thereon, (ii) filing such applications with such
state agencies and (iii) executing such other documents and instruments on
behalf of, and taking such other action in the name of, such Grantor as the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, the purpose of creating in favor of the
Collateral Agent a perfected lien on the Motor Vehicles and exercising the
rights and remedies of the Collateral Agent under Section 6.1
hereof).  This appointment as attorney-in-fact
is irrevocable and coupled with an interest.

(d)  Any certificates of title or ownership
delivered pursuant to the terms hereof shall be accompanied by odometer
statements for each Motor Vehicle covered thereby.

SECTION 4.5.  As to Collateral.  (a)  Until the occurrence and continuance of a Default of the nature
set forth in clause (f) of Section 6.01 of the Indenture or an Event of
Default, and such time as the Collateral Agent shall notify such Grantor of
the revocation of such power and authority such Grantor (i)
may in the ordinary course of its business (except as otherwise permitted under
the Indenture), at its own expense, sell, lease or furnish under the contracts
of service any of the Inventory normally held by such Grantor for such purpose,
and use and consume, in the ordinary course of its business (except as
otherwise permitted under the Indenture), any raw materials, work in process or
materials normally held by such Grantor for such purpose,
(ii) will, at its own expense, endeavor to collect, as and when due, all
amounts due with respect to any of the Collateral, including the taking of such
action with respect to such collection as the Collateral Agent may reasonably
request following the occurrence of a Default of the nature set forth in clause
(f) of Section 6.01 of the Indenture or an Event of Default or, in the
absence of such request, as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business
(except as otherwise prohibited under the Indenture), to any party obligated on
any of the Collateral, any rebate, refund or allowance to which such party may
be lawfully entitled, and may accept, in connection therewith, the return of
goods, the sale or lease of which shall have given rise to such
Collateral.  The Collateral Agent,
however, may, at any time following a Default of the nature set forth in clause
(f) of Section 6.01 of the Indenture or an Event of Default, and whether
before or after any revocation of such power and authority or the 

 

19

 

maturity of any of the
Secured Obligations, notify any parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amounts due or to become due
thereunder and enforce collection of any of the Collateral by suit or otherwise
and surrender, release, or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the original period)
any indebtedness thereunder or evidenced thereby.  Upon request of the Collateral Agent following a Default of the
nature set forth in clause (f) of Section 6.01 of the Indenture or an
Event of Default, such Grantor will, at its own expense, notify any parties
obligated on any of the Collateral to make payment to the Collateral Agent of
any amounts due or to become due thereunder.

(b)  Following a Default of the nature set forth
in clause (f) of Section 6.01 of the Indenture or an Event of Default, and
the Collateral Agent is authorized to endorse, in the name of such Grantor, any
item, howsoever received by the Collateral Agent, representing any payment on
or other proceeds of any of the Collateral.

SECTION 4.6.  As to Intellectual Property Collateral.  Each Grantor covenants and agrees to comply
with the following provisions as such provisions relate to any Intellectual
Property Collateral of such Grantor:

(a)  such Grantor shall not, unless such Grantor
shall either (i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that any of
the Patent Collateral is of negligible economic value to such Grantor, or (ii)
have a valid business purpose to do otherwise, do any act, or omit to do any
act, whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable;

(b)  such Grantor shall not, and such Grantor
shall not permit any of its licensees to, unless such Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination shall
have been delivered to the Collateral Agent) that any of the Trademark
Collateral is of negligible economic value to such Grantor, or (ii) have a
valid business purpose to do otherwise,

(i)  fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark Collateral in full force
free from any claim of abandonment for non-use,

(ii)  fail to maintain as in the past the quality
of products and services offered under all of the Trademark Collateral in a
manner which might reasonably be expected to cause material impairment of any
such Trademark Collateral,

(iii)  fail to employ all of the Trademark
Collateral registered with any Federal or state or foreign authority with
an appropriate notice of such registration,

(iv)  adopt or use any other Trademark which is
confusingly similar or a colorable imitation of any of the Trademark
Collateral,

 

20

 

(v)  use any of the Trademark Collateral
registered with any Federal or state or foreign authority except for the uses
for which registration or application for registration of all of the Trademark
Collateral has been made, and

(vi)  do or permit any act or knowingly omit to do
any act whereby any of the Trademark Collateral may lapse or become invalid or
unenforceable;

(c)  such Grantor shall not, unless such Grantor
shall either (i) 
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Copyright
Collateral or any of the Trade Secrets Collateral is of negligible economic
value to such Grantor, or (ii)  have a valid business purpose to do
otherwise, do or permit any act or knowingly omit to do any act whereby any of
the Copyright Collateral or any of the Trade Secrets Collateral may lapse or
become invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration thereof;

(d)  such Grantor shall notify the Collateral Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any material item of the Intellectual Property
Collateral may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse determination or
development (including 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 foreign counterpart thereof
or any court) regarding such Grantor’s ownership of any of the Intellectual
Property Collateral, its right to register the same or to keep and maintain and
enforce the same;

(e)  in the event such Grantor or any of its
agents, employees, designees or licensees shall file an application for the
registration of any Intellectual Property Collateral 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, it
shall promptly inform the Collateral Agent, and upon request of the Collateral
Agent, execute and deliver any and all agreements, instruments, documents and
papers as the Collateral Agent may reasonably request to evidence the
Collateral Agent’s security interest in such Intellectual Property Collateral
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby;

(f)  such Grantor shall take all necessary steps,
including 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
any application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property Collateral,
including the filing of applications for renewal, affidavits of use, affidavits
of incontestability and opposition, interference and cancellation proceedings
and the payment of fees and taxes (except to the extent that dedication,
abandonment or invalidation is permitted under the foregoing clauses (a),
(b) and (c)); and

 

21

 

(g)  such Grantor shall, contemporaneously
herewith, execute and deliver to the Collateral Agent a Patent Security
Agreement and a Trademark Security Agreement in the forms of Exhibits A
and B hereto, respectively, and shall execute and deliver to the
Collateral Agent any other document required to acknowledge or register or
perfect the Collateral Agent’s interest in any part of the Intellectual
Property Collateral.

SECTION 4.7.  Insurance.  Such Grantor will maintain or cause to be maintained with
responsible insurance companies insurance with respect to its business and
properties (including the Equipment and Inventory) against such casualties and
contingencies and of such types and in such amounts as is required pursuant to
the Indenture and will, upon the request of the Collateral Agent, furnish a
certificate of a reputable insurance broker setting forth the nature and extent
of all insurance maintained by such Grantor in accordance with this Section.

SECTION 4.8.  Further Assurances, etc.  Each Grantor agrees that, from time to time
at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.  Without limiting the generality of the foregoing each Grantor
will

(a)  mark conspicuously each document included in
the Inventory, each chattel paper included in the Receivables and each Related
Contract and, at the request of the Collateral Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Collateral Agent, indicating that such document, chattel paper, Related
Contract or Collateral is subject to the security interest granted hereby;

(b)  if any Receivable shall be evidenced by a
promissory note or other instrument, negotiable document or chattel paper,
deliver and pledge to the Collateral Agent hereunder such promissory note,
instrument, negotiable document or chattel paper duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to the Collateral Agent;

(c)  execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices (including any assignment of claim form under or pursuant to the
federal assignment of claims statute, 31 U.S.C. § 3726, any successor or
amended version thereof or any regulation promulgated under or pursuant to any
version thereof), as may be necessary or desirable, or as the Collateral Agent
may request, in order to perfect and preserve the security interests and other
rights granted or purported to be granted to the Collateral Agent hereby;

(d)  promptly execute and deliver all further
instruments, and take all further action, that may be necessary or desirable,
or that the Collateral Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral;

 

22

 

(e)  cause the Collateral Agent to be listed as
the lienholder on the certificate of title or ownership relating to
(i) any Motor Vehicle owned by such Grantor that has a fair market value
of at least $50,000 or (ii) at the request of the Collateral Agent, any
other Motor Vehicle owned by such Grantor;

(f)  not take or omit to take any action the
taking or the omission of which would result in any impairment or alteration of
any obligation of the maker of any Intercompany Note or other instrument
constituting Collateral;

(g)  furnish to the Collateral Agent, from time
to time at the Collateral Agent’s request, 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;

(h)  do all things reasonably requested by the
Collateral Agent in order to enable the Collateral Agent to have control (as
such term is defined in Article 8 and Article 9 of any applicable Uniform
Commercial Code relevant to the creation, perfection or priority of Collateral
consisting of investment property, deposit accounts, electronic chattel paper
and letter of credit rights) over any Collateral; and

(i)  notify the Collateral Agent if such Grantor
reasonably believes it is entitled to recover a commercial tort claim the value
of which is in excess of $50,000 and such Grantor take all such action
reasonably requested by the Collateral Agent to grant to the Collateral Agent
and perfect a security interest in such commercial tort claim.

With respect to the foregoing and the grant of the
security interest hereunder, such Grantor hereby authorizes the Collateral
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
such Grantor where permitted by law.  A
carbon, photographic or other reproduction of this Pledge and Security
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.

ARTICLE V

THE COLLATERAL AGENT

SECTION 5.1.  Collateral Agent Appointed
Attorney-in-Fact.  Each Grantor
hereby irrevocably appoints the Collateral Agent such Grantor’s
attorney-in-fact, with full authority in the place and stead of such Grantor
and in the name of such Grantor or otherwise, from time to time in the
Collateral Agent’s discretion, following the occurrence and continuation of a
Default of the nature set forth in clause (f) of Section 6.01 of the
Indenture or an Event of Default, to take any action and to execute any
instrument which the Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Pledge and Security Agreement, including:

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

 

23

 

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

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

(d)  to perform the affirmative obligations of
such Grantor hereunder (including all obligations of such Grantor pursuant to Section 4.10).

Such Grantor hereby acknowledges, consents and agrees
that the power of attorney granted pursuant to this Section is irrevocable
and coupled with an interest.  The
Collateral Agent shall not exercise, and shall have no duty to exercise, any of
the powers set forth in this Section.

SECTION 5.2.  Collateral Agent May Perform.  If any Grantor fails to perform any
agreement contained herein, the Collateral Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by such Grantor pursuant to Section 6.4.

SECTION 5.3.  Collateral Agent Has No Duty.  In addition to, and not in limitation of, Section 2.6,
the powers conferred on the Collateral Agent hereunder are solely to protect
its interest (on behalf of the Secured Parties) in the Collateral and shall not
impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral or responsibility for

(a)  ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Investment Property, whether or not the Collateral Agent has or is
deemed to have knowledge of such matters, or

(b)  taking any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.

SECTION 5.4.  Reasonable Care.  The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as any Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Collateral
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.

 

24

 

ARTICLE VI

REMEDIES

SECTION 6.1.  Certain Remedies.  If any Event of Default shall have occurred
and be continuing:

(a)  The Collateral Agent may exercise in respect
of the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may

(i)  require each Grantor to, and such Grantor
hereby agrees that it will, at its expense and upon request of the Collateral
Agent forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a place to be
designated by the Collateral Agent which is reasonably convenient to both
parties, and

(ii)  without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent’s offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable. 
Each Grantor agrees that, to the extent notice of sale shall be required
by law, at least ten days’ prior notice to such Grantor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given.  The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.

(b)  All cash proceeds received by the Collateral
Agent in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral shall be applied by the Collateral Agent
against, all or any part of the Secured Obligations as follows:

(i)  first, to the payment of any amounts payable
to the Collateral Agent pursuant to Sections 6.08 and 7.07 of the
Indenture and Section 6.4;

(ii)  second, to the equal and ratable payment of
Secured Obligations, in accordance with each Secured Party’s Secured
Obligations owing to it under or pursuant to the Indenture or any other Related
Document, applied

(A)  first to fees and expense reimbursements
then due to such Secured Party,

(B)  then to interest due to such Secured Party,
and

 

25

 

(C)  then to pay the remaining outstanding
Secured Obligations; and

(iii)  fourth, to be held as additional collateral
security until the payment in full in cash of all of the Secured Obligations,
after which such remaining cash proceeds shall be paid over to the applicable
Grantor or to whomsoever may be lawfully entitled to receive such surplus.

(c)  The Collateral Agent may,

(i)  transfer all or any part of the Collateral
into the name of the Collateral Agent or its nominee, with or without
disclosing that such Collateral is subject to the lien and security interest
hereunder,

(ii)  notify the parties obligated on any of the
Collateral to make payment to the Collateral Agent of any amount due or to
become due thereunder,

(iii)  enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party with
respect thereto,

(iv)  endorse any checks, drafts, or other writings
in such Grantor’s name to allow collection of the Collateral,

(v)  take control of any proceeds of the
Collateral, and

(vi)  execute (in the name, place and stead of
such Grantor) endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.

SECTION 6.2.  Securities Laws.  If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
each Grantor agrees that, upon request of the Collateral Agent, such Grantor
will, at its own expense:

(a)  execute and deliver, and cause each issuer
of the Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of the Collateral Agent, advisable to register such Collateral under
the provisions of the Securities Act of 1933, as from time to time amended (the
“Securities Act”), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all amendments
and supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;

 

26

 

(b)  use its best efforts to qualify the
Collateral under the state securities or “Blue Sky” laws and to obtain all
necessary governmental approvals for the sale of the Collateral, as requested
by the Collateral Agent;

(c)  cause each such issuer to make available to
its security holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and

(d)  do or cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.

Each Grantor further acknowledges the impossibility of
ascertaining the amount of damages that would be suffered by the Collateral
Agent or the Secured Parties by reason of the failure by any Grantor to perform
any of the covenants contained in this Section and, consequently, agrees
that, if such Grantor shall fail to perform any of such covenants, it shall
pay, as liquidated damages and not as a penalty, an amount equal to the value
(as reasonably determined by the Collateral Agent) of the Collateral on the
date the Collateral Agent shall demand compliance with this Section.

SECTION 6.3.  Compliance with Restrictions.  Each Grantor agrees that in any sale of any
of the Collateral whenever an Event of Default shall have occurred and be
continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to Persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and such Grantor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially reasonable
manner, nor shall the Collateral Agent be liable nor accountable to such
Grantor for any discount allowed by the reason of the fact that such Collateral
is sold in compliance with any such limitation or restriction.

SECTION 6.4.  Indemnity and Expenses.

(a)  Each Grantor jointly and severally agrees to
indemnify the Collateral Agent from and against any and all claims, losses and
liabilities arising out of or resulting from this Pledge and Security Agreement
(including enforcement of this Pledge and Security Agreement), except claims,
losses or liabilities resulting from the Collateral Agent’s gross negligence or
wilful misconduct.

(b)  Each Grantor will upon demand pay to the
Collateral Agent the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Collateral Agent may incur in connection with

 

27

 

(i)  the administration of this Pledge and
Security Agreement,

(ii)  the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of the
Collateral,

(iii)  the exercise or enforcement of any of the
rights of the Collateral Agent or the Secured Parties hereunder, and

(iv)  the failure by any Grantor to perform or
observe any of the provisions hereof.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1.  Related Document.  This Pledge and Security Agreement is a
Related Document executed pursuant to the Indenture and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the provisions of Article I thereof.

SECTION 7.2.  Amendments; etc.  No amendment to or waiver of
any provision of this Pledge and Security Agreement nor consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent (on behalf of (x)
the Holders or (y) the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Notes, as the case may be), and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

SECTION 7.3.  Protection of Collateral.  The Collateral Agent may from time to time,
at its option, perform any act which each Grantor agrees hereunder to perform
and which such Grantor shall fail to perform after being requested in writing
so to perform (it being understood that no such request need be given after the
occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation
or protection of any of the Collateral or of its security interest therein.

SECTION 7.4.  Addresses for Notices.  All notices and other communications
provided for hereunder shall be in writing (including telegraphic
communication) and, if to any Grantor, mailed or telecopied or delivered to it,
addressed to it in care of the Issuer at the address of the Issuer specified in
the Indenture, if to the Collateral Agent, mailed or telecopied or delivered to
it, addressed to it at the address of the Collateral Agent specified in the
Indenture.  All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any such notice or communication, if transmitted by telecopier,
shall be deemed given when transmitted and electronically confirmed.

SECTION 7.5.  Additional Grantors.  Upon the execution and delivery by any other
Person of an instrument in the form of Annex I hereto, such Person shall
become a “Grantor” 

 

28

 

hereunder with the same
force and effect as if originally named as a Grantor herein.  The execution and delivery of any such
instrument shall not require the consent of any other Grantor hereunder.  The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor as a party to this Pledge and Security Agreement.

SECTION 7.6.  Section Captions.  Section captions used in
this Pledge and Security Agreement are for convenience of reference only,
and shall not affect the construction of this Pledge and Security Agreement.

SECTION 7.7.  Severability.  Wherever possible each provision
of this Pledge and Security Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Pledge and Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Pledge and Security Agreement.

SECTION 7.8.  Counterparts.  This Pledge and Security Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed an original and all of which shall constitute together but one and the
same agreement.

SECTION 7.9.  Governing Law, Entire Agreement, etc.  THIS
PLEDGE AND SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF NEW YORK.  THIS PLEDGE AND SECURITY AGREEMENT AND THE OTHER RELATED DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO
THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.

SECTION 7.10.  Intercreditor Agreement.  Notwithstanding anything else contained in
this Pledge and Security Agreement, so long as the Loan Agreement is In Effect,
the following provisions govern all obligations of each Grantor hereunder.

(a)  In case of any conflict or inconsistency
between this Pledge and Security Agreement and the Intercreditor Agreement or
with respect to the rights and obligations of the parties prior to enforcement
and the conditions and terms on which security interests may be enforced, the
Intercreditor Agreement shall control; provided, however, that
the terms of the Intercreditor Agreement shall not increase the obligations of,
or adversely affect any rights, of any Grantor, in each case under this Pledge
and Security Agreement.

(b)  Nothing in this Pledge and Security
Agreement shall be deemed to require the delivery of any Collateral to the
Collateral Agent while the Loan Agreement is In Effect.

 

29

 

(c)  Any provision of this Pledge and Security
Agreement that provides for the Collateral Agent to have “control” of any
Collateral for purposes of Article 8 or 9 of the U.C.C. shall be deemed
satisfied if the Agent shall have control of such Collateral (including, in the
case of any such Collateral consisting of certificated securities by the
delivery of such Collateral to the Agent) so long as the conditions described
in Section 9-314(c) of the U.C.C. shall not be satisfied prior to the
Collateral Agent obtaining control of any such Collateral following the
relinquishment of such control by the Agent unless the Lien of the Collateral
Agent in such Collateral is terminated or released in accordance with the terms
hereof or the Intercreditor Agreement.

(d)  So long as the Loan Agreement is In Effect,
in the event that any obligation of a Grantor conflicts with an obligation of
such Grantor under the Loan Documents executed pursuant to (and as defined in)
the Loan Agreement, such Grantor will first comply with its obligation under
such Loan Documents, and then, to the extent possible, comply with its
obligations hereunder and its inability to comply with its obligation hereunder
as a result of a conflict between such Loan Document and this Pledge and
Security Agreement shall not constitute a breach of this Pledge and Security
Agreement or a Default or Event of Default under the Indenture.

(e)  The Lien and security interest granted to
the Collateral Agent pursuant to this Pledge and Security Agreement and the
exercise of any right or remedy by the Collateral Agent hereunder, are subject
to the provisions of the Intercreditor Agreement.  In the event of any conflict between the terms of the
Intercreditor Agreement and this Security Agreement, the terms of the
Intercreditor Agreement shall govern.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

30

 

IN WITNESS WHEREOF, each Grantor has caused this
Pledge and Security Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.

	
   

  	
  NEW WORLD RESTAURANT GROUP, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name: 
  Anthony D. Wedo

  
	
   

  	
   

  	
  Title: 
  Chairman and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHESAPEAKE BAGEL FRANCHISE CORP.

  (F/K/A CBB ACQUISITION CORP.), a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WILLOUGHBY’S INCORPORATED, a

  Connecticut corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MANHATTAN BAGEL COMPANY, INC., a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  I. & J. BAGEL, INC., a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  EINSTEIN/NOAH BAGEL PARTNERS, INC., a

  California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EINSTEIN AND NOAH CORP., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

 

SCHEDULE I

to Pledge and Security Agreement

([NAME OF GRANTOR])

Item A.  Intercompany
Notes

 

	
  Maker

  	
   

  	
  Maximum
  Amount of Intercompany Loans Maximum Amount of

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Securities

	
   

  	
   

  	
   Common Stock

  	
   

  
	
  Issuer
  (corporate)

  	
   

  	
  Authorized  Shares

  	
   

  	
  Outstanding  Shares

  	
   

  	
  % of
  Shares Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Limited
  Liability Company Interests

  	
   

  
	
  Issuer
  (limited liability company)

  	
   

  	
  % of
  Limited Liability

  Company Interests Pledged

  	
   

  	
  Type of
  Limited Liability

  Company Interests Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Partnership
  Interests

  	
   

  
	
  Issuer
  (partnership)

  	
   

  	
  % of
  Partnership

  Interests Pledged

  	
   

  	
  Type of
  Partnership

  Interests Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item C.  Additional
Subsidiaries

 

 

 

SCHEDULE II

to Pledge and Security Agreement

Item A.   Locations
of each Grantor:

	
  Name of
  Grantor:

  	
   

  	
  Location
  for purposes of U.C.C.:

  	
   

  
	
  [GRANTOR]

  	
   

  	
  [LOCATION]

  	
   

  

 

Item B.                    Filing
locations prior to July 1, 2001

	
  Name of
  Grantor:

  	
   

  	
  Filing
  Locations for the past five years:

  	
   

  
	
  [GRANTOR]

  	
   

  	
  [LOCATION]

  	
   

  

 

Item C.                    Trade
names.

	
  Name of
  Grantor:

  	
   

  	
  Trade
  Names:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item D.   Merger
or other corporate reorganization.

	
  Name of
  Grantor:

  	
   

  	
  Merger or
  other corporate reorganization:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item E.                    Taxpayer
ID numbers.

	
  Name of
  Grantor:

  	
   

  	
  Taxpayer
  ID numbers:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item F.                    Government
Contracts:

	
  Name of
  Grantor:

  	
   

  	
  Description
  of Contract:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item G.    Deposit
Accounts:

 

 

 

	
  Name of
  Grantor:

  	
   

  	
  Description
  of Deposit Account:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

 

 

SCHEDULE III

to Pledge and Security Agreement

([NAME OF GRANTOR])

Item A.  Patents

 

	
  Issued
  Patents

  	
   

  
	
  *Country

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  Pending
  Patent Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Patent
  Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Patent
Licenses

 

	
  *Country
  or

  	
   

  	
  Effective

  	
   

  	
  Expiration

  	
   

  	
  Subject

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Date

  	
   

  	
  Date

  	
   

  	
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

 

SCHEDULE IV

to Pledge and Security Agreement

([NAME OF GRANTOR])

Item A.  Trademarks

 

	
  Registered
  Trademarks

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Trademark Applications

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Products/
  Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Trademark
Licenses

	
  *Country or 

  Territory

  	
   

  	
  Trademark

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective

  Date

  	
   

  	
  Expiration

  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

SCHEDULE V

to Pledge and Security Agreement

([NAME OF GRANTOR])

Item A.  Copyrights/Mask
Works

 

	
  Registered
  Copyrights/Mask Works

  	
   

  
	
  *Country

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Pending Registration Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Registration Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Copyright/Mask
Work Licenses

 

	
  *Country or

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
  Date

  	
   

  	
  Expiration
  Date

  	
   

  	
  Subject
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

 

SCHEDULE VI

to Pledge and Security Agreement

([NAME OF GRANTOR])

	
  Trade
  Secret or Know-How Licenses

  	
   

  
	
  *Country or 

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
     Date

  	
   

  	
  Expiration
     Date

  	
   

  	
  Subject
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

EXHIBIT A

to Pledge and Security Agreement

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT (this “Agreement”),
dated as of           
  ,     , is made between
                   ,
a              (the
“Grantor”), and THE BANK OF NEW YORK, in its capacity as trustee, as
Collateral Agent (together with its successor(s) thereto, in such capacity the
“Collateral Agent”) for each of the Secured Parties;

W I T N E S S E T H :

WHEREAS, New World Restaurant Group, Inc., a Delaware
corporation (the “Issuer”), the Subsidiaries of the Issuer and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of July
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Increasing
Rate Notes due 2003 (and its Senior Secured Increasing Rate Notes due 2003,
Series B to be issued in exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain
Loan and Security Agreement, dated as of July 8, 2003 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Loan Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, in connection with the Indenture, the Grantor
has executed and delivered a Pledge and Security Agreement, dated as of July 8,
2003 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Pledge and Security Agreement”);

WHEREAS, as a condition precedent to the Notes
Issuance, the Grantor is required to execute and deliver this Agreement and to
grant to the Collateral Agent a continuing security interest in all of the
Patent Collateral (as defined below) to secure all Secured Obligations;

WHEREAS, the Grantor has duly authorized the
execution, delivery and performance of this Agreement; and

WHEREAS, it is in the best interests of each Grantor
to execute this Agreement inasmuch as such Grantor will derive substantial
direct and indirect benefits from proceeds of the Notes issued by the Issuer;

 

 

NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to induce the Holders
to acquire the Notes and maintain the Indebtedness evidenced thereby, the
Grantor agrees, for the benefit of each Secured Party, as follows:

SECTION 1.  Definitions.  Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Pledge and Security Agreement.

SECTION 2.  Grant of Security Interest.  For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Secured Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Collateral Agent, and grant to the Collateral Agent a
security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the “Patent Collateral”), whether now
owned or hereafter acquired or existing by it:

(a)  all letters patent and applications for
letters patent throughout the world, including all patent applications in
preparation for filing anywhere in the world and including each patent and
patent application referred to in Item A of Schedule III
attached hereto;

(b)  all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);

(c)  all patent licenses, including each patent
license referred to in Item B of Schedule III attached
hereto; and

(d)  all proceeds of, and rights associated with,
the foregoing (including license royalties and proceeds of infringement suits),
the right to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule III attached hereto, and
for breach or enforcement of any patent license, including any patent license
referred to in Item B of Schedule III attached hereto, and
all rights corresponding thereto throughout the world.

SECTION 3.  Pledge and Security Agreement.  This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Collateral Agent in the Patent Collateral with the United States Patent
and Trademark Office and corresponding offices in other countries of the
world.  The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to the Collateral Agent for its benefit and the benefit
of each Secured Party under the Pledge and Security Agreement.  The Pledge and Security Agreement (and all
rights and remedies of the Collateral Agent and each Secured Party thereunder)
shall remain in full force and effect in accordance with its terms.

 

2

 

SECTION 4.  Release of Security Interest.  Upon payment in full in cash of all Secured
Obligations, the Collateral Agent shall, at the Grantor’s expense, execute and
deliver to the Grantor all instruments and other documents as may be necessary
or proper to release the lien on and security interest in the Patent Collateral
which has been granted hereunder.

SECTION 5.  Acknowledgment.  The Grantor does hereby
further acknowledge and affirm that the rights and remedies of the
Collateral Agent with respect to the security interest in the Patent Collateral
granted hereby are more fully set forth in the Pledge and Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.

SECTION 6.  Related Document, etc.  This Agreement is a Related Document
executed pursuant to the Indenture and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Indenture.

SECTION 7.  Counterparts.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.

	
   

  	
  [NAME OF GRANTOR], a 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

4

 

SCHEDULE III

to Patent Security Agreement

Item A.  Patents

 

	
  Issued
  Patents

  	
   

  
	
  *Country

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Patent Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Patent
  Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Patent
Licenses

 

	
  *Country
  or

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Effective

  	
   

  	
  Expiration

  	
   

  	
  Subject

  	
   

  
	
  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Date

  	
   

  	
  Date

  	
   

  	
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

EXHIBIT B

to Pledge and Security Agreement

TRADEMARK SECURITY AGREEMENT

This TRADEMARK SECURITY AGREEMENT (this “Agreement”),
dated as of           
  ,     , is made between
                     ,
a            
           (the “Grantor”),
and THE BANK OF NEW YORK, in its capacity as trustee, as Collateral Agent
(together with its successor(s) thereto, in such capacity the “Collateral
Agent”) for each of the Secured Parties;

W I T N E S S E T H :

WHEREAS, the Issuer, the other Grantors and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of July
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Notes due
2008 (and, if applicable, its Senior Secured Notes due 2008, Series B issued in
exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain
Loan and Security Agreement, dated as of July 8, 2003 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Loan Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, in connection with the Indenture, the Grantor
has executed and delivered a Pledge and Security Agreement, dated as of July 8,
2003 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Pledge and Security Agreement”);

WHEREAS, as a condition precedent to the Notes
Issuance, the Grantor is required to execute and deliver this Agreement and to
grant to the Collateral Agent a continuing security interest in all of the
Trademark Collateral (as defined below) to secure all Secured Obligations;

WHEREAS, the
Grantor has duly authorized the execution, delivery and performance of this
Agreement; and

 

 

WHEREAS, it is in the best interests of each Grantor
to execute this Agreement inasmuch as such Grantor will derive substantial
direct and indirect benefits from proceeds of the Notes issued by the Issuer;

NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to induce the Holders
to acquire the Notes and maintain the Indebtedness evidenced thereby, the
Grantor agrees, for the benefit of each Secured Party, as follows:

SECTION 1.  Definitions.  Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Pledge and Security Agreement.

SECTION 2.  Grant of Security Interest.  For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Secured Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Collateral Agent, and grant to the Collateral Agent a
security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the “Trademark Collateral”), whether now
owned or hereafter acquired or existing by it:

(a)  all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other source of
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of a like nature (all of
the foregoing items in this clause (a) being collectively called a
“Trademark”), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any office or agency of the
United States of America or any State thereof or any foreign country, including
those referred to in Item A of Schedule IV attached
hereto;

(b)  all Trademark licenses, including each
Trademark license referred to in Item B of Schedule IV
attached hereto;

(c)  all reissues, extensions or renewals of any
of the items described in clause (a) and (b);

(d)  all of the goodwill of the business
connected with the use of, and symbolized by the items described in, clauses
(a) and (b); and

(e)  all proceeds of, and rights associated with,
the foregoing, including any claim by the Grantor against third parties for
past, present or future infringement or dilution of 

 

2

 

any
Trademark, Trademark registration or Trademark license, including any
Trademark, Trademark registration or Trademark license referred to in Item A
and Item B of Schedule IV attached hereto, or for any injury
to the goodwill associated with the use of any such Trademark or for breach or
enforcement of any Trademark license.

SECTION 3.  Pledge and Security Agreement.  This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Collateral Agent in the Trademark Collateral with the United States
Patent and Trademark Office and corresponding offices in other countries of the
world.  The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to the Collateral Agent for its benefit and the
benefit of each Secured Party under the Pledge and Security Agreement.  The Pledge and Security Agreement (and all
rights and remedies of the Collateral Agent and each Secured Party thereunder)
shall remain in full force and effect in accordance with its terms.

SECTION 4.  Release of Security Interest.  Upon payment in full in cash of all Secured
Obligations, the Collateral Agent shall, at the Grantor’s expense, execute and
deliver to the Grantor all instruments and other documents as may be necessary
or proper to release the lien on and security interest in the Trademark
Collateral which has been granted hereunder.

SECTION 5.  Acknowledgment.  The Grantor does hereby
further acknowledge and affirm that the rights and remedies of the
Collateral Agent with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Pledge and Security
Agreement, the terms and provisions of which (including the remedies provided
for therein) are incorporated by reference herein as if fully set forth herein.

SECTION 6.  Related Document, etc.  This Agreement is a Related Document
executed pursuant to the Indenture and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Indenture.

SECTION 7.  Counterparts.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their respective  officers thereunto duly authorized as of the
day and year first above written.

	
   

  	
  [NAME OF GRANTOR], a 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

4

 

SCHEDULE IV

to Trademark Security Agreement

Item A.  Trademarks

 

	
  Registered
  Trademarks

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Trademark Applications

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Products/
  Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Trademark
Licenses

	
  *Country or 

  Territory

  	
   

  	
  Trademark

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective

  Date

  	
   

  	
  Expiration

  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

EXHIBIT C

to Pledge and Security Agreement

COPYRIGHT SECURITY AGREEMENT

This COPYRIGHT SECURITY AGREEMENT (this “Agreement”),
dated as of              ,
    , is made between
                     ,
a                  
(the “Grantor”), and THE BANK OF NEW YORK, in its capacity as trustee,
as Collateral Agent (together with its successor(s) thereto, in such capacity
the “Collateral Agent”) for each of the Secured Parties;

W I T N E S S E T H :

WHEREAS, the Issuer, the other Grantors and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of July
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Notes due
2008 (and, if applicable, its Senior Secured Notes due 2008, Series B issued in
exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain
Loan and Security Agreement, dated as of July 8, 2003 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Loan Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, in connection with the Indenture, the Grantor
has executed and delivered a Pledge and Security Agreement, dated as of July 8,
2003 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Pledge and Security Agreement”);

WHEREAS, as a condition precedent to the Notes
Issuance, the Grantor is required to execute and deliver this Agreement and to
grant to the Collateral Agent a continuing security interest in all of the
Copyright Collateral (as defined below) to secure all Secured Obligations;

WHEREAS, the Grantor has duly authorized the
execution, delivery and performance of this Agreement; and

 

 

WHEREAS, it is in the best interests of each Grantor
to execute this Agreement inasmuch as such Grantor will derive substantial
direct and indirect benefits from proceeds of the Notes issued by the Issuer;

NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to induce the Holders
to acquire the Notes and maintain the Indebtedness evidenced thereby, the
Grantor agrees, for the benefit of each Secured Party, as follows:

SECTION 1.  Definitions.  Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Pledge and Security Agreement.

SECTION 2.  Grant of Security Interest.  For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Secured Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Collateral Agent, and grant to the Collateral Agent a
security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the “Copyright Collateral”), whether now
owned or hereafter acquired or existing by it, being all copyrights (including
all copyrights for semi-conductor chip product mask works) of the Grantor,
whether statutory or common law, registered or unregistered, now or hereafter
in force throughout the world including all of the Grantor’s right, title and
interest in and to all copyrights registered in the United States Copyright
Office or anywhere else in the world and also including the copyrights referred
to in Item A of Schedule V attached hereto, and all
applications for registration thereof, whether pending or in preparation, all
copyright licenses, including each copyright license referred to in Item B
of Schedule V attached hereto, the right to sue for past, present
and future infringements of any thereof, all rights corresponding thereto
throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.

SECTION 3.  Pledge and Security Agreement.  This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Collateral Agent in the Copyright Collateral with the United States Copyright
Office and corresponding offices in other countries of the world.  The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to the Collateral Agent for its benefit and the benefit
of each Secured Party under the Pledge and Security Agreement.  The Pledge and Security Agreement (and all
rights and remedies of the Collateral Agent and each Secured Party thereunder)
shall remain in full force and effect in accordance with its terms.

SECTION 4.  Release of Security Interest.  Upon payment in full in cash of all Secured
Obligations, the Collateral Agent shall, at the Grantor’s expense, execute and
deliver to the Grantor all instruments and other documents as may be necessary
or proper to release the lien on and security interest in the Copyright
Collateral which has been granted hereunder.

 

2

 

SECTION 5.  Acknowledgment.  The Grantor does hereby
further acknowledge and affirm that the rights and remedies of the
Collateral Agent with respect to the security interest in the Copyright
Collateral granted hereby are more fully set forth in the Pledge and Security
Agreement, the terms and provisions of which (including the remedies provided for
therein) are incorporated by reference herein as if fully set forth herein.

SECTION 6.  Related Document, etc.  This Agreement is a Related Document
executed pursuant to the Indenture and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Indenture.

SECTION 7.  Counterparts.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.

	
   

  	
  [NAME OF GRANTOR], a 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  

 

 

4

 

SCHEDULE V

to Copyright

Security Agreement

Item A.  Copyrights/Mask
Works

 

	
  Registered
  Copyrights/Mask Works

  	
   

  
	
  *Country

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Pending Registration Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Registration Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Copyright/Mask
Work Licenses

 

	
  *Country
  or

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
    Date

  	
   

  	
  Expiration
    Date

  	
   

  	
  Subject
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                           List items
related to the United States first for ease of recordation. List items related
to other countries next, grouped by country and in alphabetical order by
country name.

 

 

ANNEX I

to Pledge and Security Agreement

SUPPLEMENT TO
PLEDGE AND SECURITY AGREEMENT

This SUPPLEMENT NO.    , dated as of
           ,
     (this “Supplement”),  to the Pledge and Security Agreement, dated as of
           ,
     (as amended, supplemented, amended and restated or
otherwise modified from time to time, the “Pledge and Security Agreement”),
among the initial signatories thereto and each other Person which from time to
time thereafter became a party thereto pursuant to Section 7.5 thereof
(each, individually, a “Grantor”, and, collectively, the “Grantors”),
in favor of THE BANK OF NEW YORK, in its capacity as trustee, as Collateral
Agent (together with its successor(s) thereto, in such capacity the “Collateral
Agent”) for each of the Secured Parties (such and other capitalized terms
being used herein with the meanings provided, or incorporated by reference, in
the Pledge and Security Agreement), is made by the undersigned.

W I T N E S S E T H:

WHEREAS, the Issuer, the other Grantors and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of July
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Notes due
2008 (and, if applicable, its Senior Secured Notes due 2008, Series B issued in
exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain Loan
and Security Agreement, dated as of July 8, 2003 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the “Loan
Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, as a condition to the Notes Issuance, the
undersigned is required to execute and deliver this Supplement;

WHEREAS, the undersigned has duly authorized the
execution, delivery and performance of this Supplement and the Pledge and
Security Agreement;

 

 

WHEREAS, the Pledge and Security Agreement provides
that additional parties may become Grantors under the Pledge and Security
Agreement by execution and delivery of an instrument in the form of this
Supplement;

WHEREAS, pursuant to the provisions of
Section 7.5 of the Pledge and Security Agreement, the undersigned is
becoming an Additional Grantor under the Pledge and Security Agreement; and

WHEREAS, the undersigned desires to become a Grantor
under the Pledge and Security Agreement in order to induce the Holders to
acquire the Notes and maintain the Indebtedness evidenced thereby as
consideration therefor;

NOW, THEREFORE, the undersigned agrees, for the
benefit of each Secured Party, as follows:

SECTION 1.  In accordance with the Pledge and Security
Agreement, the undersigned by its signature below becomes a Grantor under the
Pledge and Security Agreement with the same force and effect as if it were an
original signatory thereto as a Grantor and the undersigned hereby

(a)  agrees to all the terms and provisions of
the Pledge and Security Agreement applicable to it as a Grantor thereunder;

(b)  assigns and pledges to the Collateral Agent
for its benefit and the ratable benefit of each of the Secured Parties, and
grants to the Collateral Agent for its benefit and the ratable benefit of each
of the Secured Parties, a security interest in all of the following, whether
now or hereafter existing or acquired by the undersigned (its “Collateral”):

(i)  all Intercompany Notes in which the
undersigned has an interest (including each Intercompany Note described in Item A
of Schedule I hereto);

(ii)  all interest and other payments and rights
with respect to each Intercompany Note in which the undersigned has an
interest;

(iii)  (A) all investment property in which the
undersigned has an interest (including the Capital Securities of each issuer of
such Capital Securities described in Schedule I hereto the undersigned)
and (B) all other Capital Securities which are interests in limited liability
companies or partnerships in which the undersigned has an interest (including the
Capital Securities of each issuer of such Capital Securities described in Schedule
I hereto), in each case together with Dividends and Distributions payable
in respect of the Collateral described in the foregoing clauses (c)(i)
and (c)(ii);

 

2

 

(iv)  all equipment in all of its forms (including
all Motor Vehicles) of the undersigned, wherever located, including all parts
thereof and all accessions, additions, attachments, improvements, substitutions
and replacements thereto and therefor and all accessories related thereto (any
and all of the foregoing being the “Equipment”);

(v)  all inventory in all of its forms of the
undersigned, wherever located, including

(A)  all raw materials and work in process therefor,
finished goods thereof, and materials used or consumed in the manufacture or
production thereof,

(B)  all goods in which the undersigned has an
interest in mass or a joint or other interest or right of any kind (including
goods in which the undersigned has an interest or right as consignee), and

(C)  all goods which are returned to or
repossessed by the undersigned,

and all accessions
thereto, products thereof and documents therefor (any and all such inventory,
materials, goods, accessions, products and documents being the “Inventory”);

(vi)  all accounts, contracts (including franchise
agreements), contract rights, chattel paper, documents, instruments, promissory
notes and general intangibles (including tax refunds and payment intangibles)
of the undersigned, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights of the
undersigned now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating to any
such accounts, contracts (including franchise agreements), contract rights,
chattel paper, documents, instruments, promissory notes and general intangibles
(any and all such accounts, contracts, contract rights, chattel paper,
documents, instruments, promissory notes and general intangibles being the “Receivables”,
and any and all such security agreements, guaranties, leases and other
contracts being the “Related Contracts”);

(vii)  all deposit accounts of the undersigned and
all cash, checks, drafts, notes, bills of exchange, money orders and other like
instruments, if any, now owned or hereafter acquired, held therein (or in
sub-accounts thereof) and all certificates and instruments, if any, from time
to time representing or evidencing such investments, and all interest, earnings
and proceeds in respect thereof;

(viii)  all Intellectual Property Collateral of the
undersigned;

 

3

 

(ix)  all of such Grantor’s letter of credit
rights;

(x)  all commercial tort claims in which such
Grantor has rights (including as a plaintiff);

(xi)  all books, records, writings, data bases,
information and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the foregoing in
this Section;

(xii)  all of the undersigned’s other property and
rights of every kind and description and interests therein; and

(xiii)  all products, offspring, rents, issues,
profits, returns, income, supporting obligations and proceeds of and from any
and all of the foregoing Collateral (including proceeds which constitute
property of the types described in subclauses (b)(i) through (b)(xii),
proceeds deposited from time to time in any lock box or deposit account of the
undersigned, and, to the extent not otherwise included, all payments under
insurance (whether or not the Collateral Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral);

provided, however, that “Collateral” shall
not include any general intangibles or other rights arising under any
contracts, instruments, licenses or other documents as to which the grant of a
security interest would constitute a violation of a valid and enforceable
restriction in favor of a third party on such grant, unless and until any
required consents shall have been obtained and the undersigned agrees to use
its best efforts (which shall not be deemed to include an obligation to pay
money) to obtain any such required consent;

(c)  agrees that each of the Schedules attached
hereto shall be deemed to be a Schedule thereto; and

(d)  represents and warrants that the
representations and warranties made by it as a Grantor thereunder are true and
correct on and as of the date hereof.

In furtherance of the foregoing, each reference to a
“Grantor” or “Additional Grantor” in the Pledge and Security Agreement shall be
deemed to include the undersigned.

SECTION 2.  The undersigned hereby represents and
warrants that this Supplement has been duly authorized, executed and delivered
by the undersigned and constitutes a legal, valid and binding obligation of the
undersigned, enforceable against it in accordance with its terms.

SECTION 3.  Except as expressly supplemented hereby, the
Pledge and Security Agreement shall remain in full force and effect in
accordance with its terms.

 

4

 

SECTION 4.  In the event any one or more of the
provisions contained in this Supplement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and in the Pledge and Security Agreement
shall not in any way be affected or impaired.

SECTION 5.  Without limiting the provisions of the
Indenture (or any other Related Document, including the Pledge and Security
Agreement), the undersigned agrees to reimburse the Collateral Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
reasonable attorneys’ fees and expenses of the Collateral Agent.

SECTION 6.  THIS SUPPLEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.  THIS SUPPLEMENT, THE
PLEDGE AND SECURITY AGREEMENT AND THE OTHER RELATED DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL,
WITH RESPECT THERETO.

SECTION 7.  This Supplement hereby incorporates by
reference the provisions of the Pledge and Security Agreement, which provisions
are deemed to be a part hereof, and this Supplement shall be deemed to be a
part of the Pledge and Security Agreement. 
Unless otherwise defined herein or the context otherwise requires, terms
used in this Supplement, including its preamble and recitals, have the meanings
provided (or incorporated by reference) in the Pledge and Security Agreement.

SECTION 8.  This Supplement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.

 

5

 

IN WITNESS WHEREOF, the undersigned has caused this
Supplement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.

	
   

  	
   

  	
   

  	
   

  	
  [NAME OF ADDITIONAL GRANTOR], a 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND ACCEPTED BY:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  THE BANK OF NEW YORK, as Collateral Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

 

6

 

SCHEDULE I

to Supplement No.     

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

Item A.  Intercompany
Notes

 

	
  Maker

  	
   

  	
  Maximum
  Amount of Intercompany Loans Evidenced Thereby

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Securities

 

	
  Common
  Stock

  	
   

  
	
  Issuer
  (corporate)

  	
   

  	
  Authorized
  Shares

  	
   

  	
  Outstanding
  Shares%

  	
   

  	
  of Shares
  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Limited
  Liability Company Interests

  	
   

  
	
  Issuer
  (limited liability company)

  	
   

  	
  % of
  Limited Liability

  Company Interests Pledged

  	
   

  	
  Type of
  Limited Liability

  Company Interests Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Partnership
  Interests

  	
   

  
	
  Issuer
  (partnership)

  	
   

  	
  % of
  Partnership

  Interests Pledged

  	
   

  	
  Type of
  Partnership

  Interests Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item C.  Additional
Subsidiaries

 

 

SCHEDULE II

to Supplement No.    

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

Item A.   Locations
of each Grantor:

	
  Name of
  Grantor:

  	
   

  	
  Location
  for purposes of U.C.C.:

  	
   

  
	
  [GRANTOR]

  	
   

  	
  [LOCATION]

  	
   

  

 

Item B.                    Filing
locations prior to July 1, 2001

	
  Name of
  Grantor:

  	
   

  	
  Filing
  Locations for the past five years:

  	
   

  
	
  [GRANTOR]

  	
   

  	
  [LOCATION]

  	
   

  

 

Item C.                    Trade
names.

	
  Name of Grantor:

  	
   

  	
  Trade
  Names:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item D.   Merger
or other corporate reorganization.

	
  Name of
  Grantor:

  	
   

  	
  Merger or
  other corporate reorganization:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item E.                    Taxpayer
ID numbers.

	
  Name of
  Grantor:

  	
   

  	
  Taxpayer
  ID numbers:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item F.Government
Contracts:

	
  Name of
  Grantor:

  	
   

  	
  Description
  of Contract:

  	
   

  

 

 

 

 

	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

Item G.Deposit Accounts:

	
  Name of
  Grantor:

  	
   

  	
  Description
  of Deposit Account:

  	
   

  
	
  [GRANTOR]

  	
   

  	
   

  	
   

  

 

 

 

SCHEDULE III

to Supplement No.    

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

Item A.  Patents

 

	
  Issued
  Patents

  	
   

  
	
  *Country

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Patent Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Patent Applications
  in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Docket No.

  	
   

  	
  Expected

  Filing Date

  	
   

  	
  Inventor(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Patent
Licenses

 

	
  *Country or 

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
    Date

  	
   

  	
  Expiration
     Date

  	
   

  	
  Subject  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*List items related to the United States first for
ease of recordation. List items related to other countries next, grouped by
country and in alphabetical order by country name.

 

 

SCHEDULE IV

to Supplement No.    

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

Item A.  Trademarks

 

	
  Registered
  Trademarks

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Trademark Applications

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Pending
  Applications in Preparation

  	
   

  
	
  *Country

  	
   

  	
  Trademark

  	
   

  	
  Docket No.

  	
   

  	
  Expected
  Filing Date

  	
   

  	
  Products/
  Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Item B.  Trademark
Licenses

	
  *Country or

  Territory

  	
   

  	
  Trademark

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
    Date

  	
   

  	
  Expiration
     Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*List items related to the United States first for
ease of recordation. List items related to other countries next, grouped by
country and in alphabetical order by country name.

 

 

SCHEDULE V

to Supplement No.    

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

Item A.  Copyrights/Mask
Works

 

	
  Registered
  Copyrights/Mask Works

  	
   

  
	
  *Country

  	
   

  	
  Registration
  No.

  	
   

  	
  Registration
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Pending Registration Applications

  	
   

  
	
  *Country

  	
   

  	
  Serial No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Copyright/Mask
  Work Registration Applications in Preparation

  	
   

  
	
  *Country

  	
  Docket No.

  	
   

  	
  Expected

  Filing Date

  	
   

  	
  Author(s)

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
										

 

Item B.  Copyright/Mask
Work Licenses

 

	
  *Country or

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
    Date

  	
   

  	
  Expiration
    Date

  	
   

  	
  Subject
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*List items related to the United States first for
ease of recordation. List items related to other countries next, grouped by
country and in alphabetical order by country name.

 

 

SCHEDULE VI

to Supplement No    

to Pledge and Security Agreement

([NAME OF ADDITIONAL GRANTOR])

	
  Trade
  Secret or Know-How Licenses

  	
   

  
	
  *Country or 

  Territory

  	
   

  	
  Licensor

  	
   

  	
  Licensee

  	
   

  	
  Effective
     Date

  	
   

  	
  Expiration
     Date

  	
   

  	
  Subject
  Matter

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*List items related to the United States first for
ease of recordation. List items related to other countries next, grouped by
country and in alphabetical order by country name.Exhibit 10.54

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT (this “Agreement”),
dated as of July 8, 2003, is made between EINSTEIN AND NOAH CORP., a Delaware
corporation (the “Grantor”), and THE BANK OF NEW YORK, in its capacity
as trustee, as Collateral Agent (together with its successor(s) thereto, in
such capacity the “Collateral Agent”) for each of the Secured Parties;

W I T N E S S E T H
:

WHEREAS, New World Restaurant Group, Inc., a Delaware
corporation (the “Issuer”), the Subsidiaries of the Issuer and the
Collateral Agent, as trustee, have entered into an Indenture, dated as of June
8, 2003 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the “Indenture”), and in connection therewith, the
Issuer has issued (the “Notes Issuance”) its Senior Secured Increasing
Rate Notes due 2003 (and its Senior Secured Increasing Rate Notes due 2003,
Series B to be issued in exchange therefor) (collectively, the “Notes”);

WHEREAS, the Grantors have entered into that certain
Loan and Security Agreement, dated as of July 8, 2003 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Loan Agreement”) among the financial institutions named therein (the “Senior
Lenders”) as lenders, Amsouth Bank, as the agent (the “Agent”), and
Amsouth Capital Corp., as the administrative agent, pursuant to which such
lenders have agreed to make certain loans and other financial accommodations to
the Grantors from time to time, which Loan Agreement is referenced as the
Senior Credit Facility under the Indenture, and the other Grantors hereto have
each entered into various agreements granting Liens to the Agent for the
benefit of the Senior Lenders as well;

WHEREAS, in connection with the Indenture, the Grantor
has executed and delivered a Pledge and Security Agreement, dated as of July 8,
2003 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Pledge and Security Agreement”);

WHEREAS, as a condition precedent to the Notes
Issuance, the Grantor is required to execute and deliver this Agreement and to
grant to the Collateral Agent a continuing security interest in all of the
Patent Collateral (as defined below) to secure all Secured Obligations;

WHEREAS, the Grantor has duly authorized the
execution, delivery and performance of this Agreement; and

WHEREAS, it is in the best interests of each Grantor
to execute this Agreement inasmuch as such Grantor will derive substantial
direct and indirect benefits from proceeds of the Notes issued by the Issuer;

NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, and in order to induce the Holders
to acquire the Notes and maintain the Indebtedness evidenced thereby, the
Grantor agrees, for the benefit of each Secured Party, as follows:

 

SECTION 1.  Definitions.  Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Pledge and Security Agreement.

SECTION 2.  Grant of Security Interest.  For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, to secure all of
the Secured Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Collateral Agent, and grant to the Collateral Agent a
security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the “Patent Collateral”), whether now
owned or hereafter acquired or existing by it:

(a)  all letters patent and applications for
letters patent throughout the world, including all patent applications in
preparation for filing anywhere in the world and including each patent and
patent application referred to in Item A of Schedule III
attached hereto;

(b)  all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);

(c)  all patent licenses, including each patent
license referred to in Item B of Schedule III attached
hereto; and

(d)  all proceeds of, and rights associated with,
the foregoing (including license royalties and proceeds of infringement suits),
the right to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule III attached hereto, and
for breach or enforcement of any patent license, including any patent license
referred to in Item B of Schedule III attached hereto, and
all rights corresponding thereto throughout the world.

SECTION 3.  Pledge and Security Agreement.  This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Collateral Agent in the Patent Collateral with the United States Patent
and Trademark Office and corresponding offices in other countries of the
world.  The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to the Collateral Agent for its benefit and the
benefit of each Secured Party under the Pledge and Security Agreement.  The Pledge and Security Agreement (and all
rights and remedies of the Collateral Agent and each Secured Party thereunder)
shall remain in full force and effect in accordance with its terms.

SECTION 4.  Release of Security Interest.  Upon payment in full in cash of all Secured
Obligations, the Collateral Agent shall, at the Grantor’s expense, execute and
deliver to the Grantor all instruments and other documents as may be necessary
or proper to release the lien on and security interest in the Patent Collateral
which has been granted hereunder.

SECTION 5.  Acknowledgment.  The Grantor does hereby
further acknowledge and affirm that the rights and remedies of the
Collateral Agent with respect to the security interest in the Patent Collateral
granted hereby are more fully set forth in the Pledge and Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.

 

SECTION 6.  Related Document, etc.  This Agreement is a Related Document
executed pursuant to the Indenture and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Indenture.

SECTION 7.  Counterparts.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.

 

[Signature page to
Patent Security Agreement]

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.

	
   

  	
  EINSTEIN AND NOAH CORP., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

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