Document:

Exhibit 10.6

 

PLEDGE AND SECURITY
AGREEMENT

 

Dated as of January 26,
2006

 

 

among

 

AMC ENTERTAINMENT INC.

as a Grantor

and

Each Other Grantor

From Time to Time Party Hereto

 

 

and

 

 

CITICORP NORTH AMERICA,
INC.

as Administrative Agent

 

 

WEIL, GOTSHAL & MANGES LLP

767 FIFTH AVENUE

NEW YORK, NEW YORK 10153-0119

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINED TERMS

  	
  1

  
	
  Section 1.1

  	
  Definitions

  	
  1

  
	
  Section 1.2

  	
  Certain Other Terms

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  GRANT
  OF SECURITY INTEREST

  	
  5

  
	
  Section 2.1

  	
  Collateral

  	
  5

  
	
  Section 2.2

  	
  Grant of Security
  Interest in Collateral

  	
  6

  
	
  Section 2.3

  	
  Cash Collateral
  Accounts

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  6

  
	
  Section 3.1

  	
  Title; No Other Liens

  	
  7

  
	
  Section 3.2

  	
  Perfection and Priority

  	
  7

  
	
  Section 3.3

  	
  Jurisdiction of
  Organization; Chief Executive Office

  	
  7

  
	
  Section 3.4

  	
  Inventory and Equipment

  	
  7

  
	
  Section 3.5

  	
  Pledged Collateral

  	
  7

  
	
  Section 3.6

  	
  Accounts

  	
  8

  
	
  Section 3.7

  	
  Intellectual Property

  	
  8

  
	
  Section 3.8

  	
  Deposit Accounts;
  Securities Accounts

  	
  8

  
	
  Section 3.9

  	
  Commercial Tort Claims

  	
  8

  
	
  Section 3.10

  	
  Specific Collateral

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  COVENANTS

  	
  9

  
	
  Section 4.1

  	
  Generally

  	
  9

  
	
  Section 4.2

  	
  Maintenance of
  Perfected Security Interest; Further Documentation

  	
  9

  
	
  Section 4.3

  	
  Changes in Locations,
  Name, Etc

  	
  9

  
	
  Section 4.4

  	
  Pledged Collateral

  	
  10

  
	
  Section 4.5

  	
  Accounts

  	
  11

  
	
  Section 4.6

  	
  Delivery of Instruments
  and Chattel Paper

  	
  11

  
	
  Section 4.7

  	
  Intellectual Property

  	
  11

  
	
  Section 4.8

  	
  Notice of Commercial
  Tort Claims

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
  REMEDIAL
  PROVISIONS

  	
  13

  
	
  Section 5.1

  	
  Code and Other Remedies

  	
  13

  
	
  Section 5.2

  	
  Accounts and Payments
  in Respect of General Intangibles

  	
  13

  
	
  Section 5.3

  	
  Pledged Collateral

  	
  14

  
	
  Section 5.4

  	
  Proceeds to be Turned
  Over To Administrative Agent

  	
  15

  
	
  Section 5.5

  	
  Securities Act, Etc

  	
  16

  
	
  Section 5.6

  	
  Deficiency

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
  THE
  ADMINISTRATIVE AGENT

  	
  16

  
	
  Section 6.1

  	
  Administrative Agent’s
  Appointment as Attorney-in-Fact

  	
  16

  
	
  Section 6.2

  	
  Duty of Administrative
  Agent

  	
  18

  
	
  Section 6.3

  	
  Authorization of
  Financing Statements

  	
  18

  
	
  Section 6.4

  	
  Authority of
  Administrative Agent

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  MISCELLANEOUS

  	
  19

  
	
  Section 7.1

  	
  Amendments in Writing

  	
  19

  
	
  Section 7.2

  	
  Notices

  	
  19

  
				

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 7.3

  	
  No Waiver by Course of
  Conduct; Cumulative Remedies

  	
  19

  
	
  Section 7.4

  	
  Successors and Assigns

  	
  20

  
	
  Section 7.5

  	
  Counterparts

  	
  20

  
	
  Section 7.6

  	
  Severability

  	
  20

  
	
  Section 7.7

  	
  Section Headings

  	
  20

  
	
  Section 7.8

  	
  Entire Agreement

  	
  20

  
	
  Section 7.9

  	
  Governing Law

  	
  20

  
	
  Section 7.10

  	
  Additional Grantors

  	
  20

  
	
  Section 7.11

  	
  Release of Collateral

  	
  21

  
	
  Section 7.12

  	
  Reinstatement

  	
  21

  

 

ii

 

ANNEXES
AND SCHEDULES

 

	
  Annex 1

  	
  Form of Pledge Amendment

  
	
  Annex 2

  	
  Form of Joinder Agreement

  
	
  Annex 3

  	
  Form of Short Form Intellectual Property Security
  Agreement

  
	
   

  	
   

  
	
  Schedule 1

  	
  Jurisdiction of Organization; Chief Executive Office

  
	
  Schedule 2

  	
  Pledged Collateral

  
	
  Schedule 3

  	
  Filings

  
	
  Schedule 4

  	
  Location of Inventory and Equipment

  
	
  Schedule 5

  	
  Intellectual Property

  
	
  Schedule 6

  	
  Deposit Accounts; Securities Accounts

  
	
  Schedule 7

  	
  Commercial Tort Claims

  

 

iii

 

PLEDGE AND SECURITY AGREEMENT, dated as of January 26, 2006, by AMC ENTERTAINMENT INC. (the
“Company”) and each of the other entities
listed on the signature pages hereof or that becomes a party hereto pursuant to
Section 7.10 (Additional Grantors)
(each a “Grantor” and, collectively, the “Grantors”), in favor of Citicorp North America, Inc. (“CNAI”), as agent  (in such capacity, the “Administrative
Agent”) for the Secured Parties (as defined in the Credit Agreement
referred to below).

 

W
I T N E S S E T H:

 

WHEREAS, pursuant to the Credit Agreement, dated as of January 26, 2006
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among the Company, Grupo Cinemex, S.A. de C.V., a corporation organized under
the laws of Mexico, Cadena Mexicana de Exhibición, S.A. de C.V., a corporation
organized under the laws of Mexico, the Lenders and Issuers party thereto, CNAI,
as agent for the Lenders and Issuers, and Banco Nacional de Mexico, S.A., Integrante del Grupo Financiero
Banamex, as agent for the Lenders under the Mexican Facility, the
Lenders and the Issuers have severally agreed to make extensions of credit to
the Borrowers upon the terms and subject to the conditions set forth therein;

 

WHEREAS, the Grantors are party to the Guaranty pursuant to which they
have guaranteed the Obligations (as defined in the Credit Agreement); and

 

WHEREAS, it is a condition precedent to the obligation of the Lenders
and the Issuers to make their respective extensions of credit to the Borrowers
under the Credit Agreement that the Grantors shall have executed and delivered
this Agreement to the Administrative Agent;

 

NOW, THEREFORE, in consideration of the premises and to induce the
Lenders, the Issuers and the Agents to enter into the Credit Agreement and to
induce the Lenders and the Issuers to make their respective extensions of
credit to the Borrowers thereunder, each Grantor hereby agrees with the
Administrative Agent as follows:

 

ARTICLE I                                                           DEFINED TERMS

 

Section 1.1                                   Definitions

 

(a)           Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
have the meanings given to them in the Credit Agreement.

 

(b)           Terms
used herein without definition that are defined in the UCC have the meanings
given to them in the UCC (and if defined in more than one Article of the UCC,
shall have the meaning set forth in Article 9 thereof), including the following
terms (which are capitalized herein):

 

“Account Debtor”

“Account”

“Certificated Security”

“Chattel Paper”

“Commercial Tort Claim”

“Commodity Account”

“Deposit Account”

“Documents”

 

 

“Equipment”

“General Intangible”

“Goods”

“Instruments”

“Inventory”

“Investment Property”

“Letter-of-Credit Right”

“Proceeds”

“Securities Account”

“Security”

“Security Entitlement”

 

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

 

“Additional Pledged Collateral” means any
Pledged Collateral acquired by any Grantor after the date hereof and in which a
security interest is granted pursuant to Section 2.2 (Grant of
Security Interest in Collateral), including, to the extent a
security interest is granted therein pursuant to Section 2.2
(Grant of Security Interest in Collateral), (i) all Stock and
Stock Equivalents of any Person that are acquired by any Grantor after the date
hereof, together with all certificates, instruments or other documents representing
any of the foregoing and all Security Entitlements of any Grantor in respect of
any of the foregoing, (ii) all additional Indebtedness from time to time
owed to any Grantor by any obligor on the Pledged Debt Instruments and the Instruments
evidencing such Indebtedness and (iii) all interest, cash, Instruments and
other property or Proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any of the foregoing.  “Additional Pledged
Collateral” may be General Intangibles, Instruments or Investment
Property.

 

“Agreement” means this Pledge and
Security Agreement.

 

“Collateral” has the meaning specified in
Section 2.1 (Collateral).

 

“Copyright Licenses” means any written
agreement naming any Grantor as licensor or licensee granting any right under
any Copyright, including the grant of any right to copy, publicly perform,
create derivative works, distribute, exploit or sell materials derived from any
Copyright.

 

“Copyrights” means (a) all
copyrights arising under the laws of the United States, any other country or
any political subdivision thereof, whether registered or unregistered and
whether published or unpublished, and all registrations and applications in
connection therewith, including all registrations and applications in the
United States Copyright Office or in any foreign counterparts thereof, and
(b) the right to obtain all renewals thereof.

 

“Excluded Equity” means any voting stock in
excess of 65% of the total outstanding voting stock of any direct Subsidiary of
any Grantor that is a Non-U.S. Person. 
For the purposes of this definition, “voting stock”
means, as to any issuer, the issued and outstanding shares of each class of
capital stock or other ownership interests of such issuer entitled to vote
(within the meaning of Treasury Regulations § 1.956-2(c)(2)).

 

“Excluded Property” means, collectively,
(i) Excluded Equity, (ii) any permit, lease, license, contract, instrument or
other agreement held by any Grantor that prohibits or requires the consent of
any Person other than the Company and its Affiliates as a condition to the

 

2

 

creation by such Grantor of a Lien thereon, or any permit, lease,
license contract or other agreement held by any Grantor to the extent that any
Requirement of Law applicable thereto prohibits the creation of a Lien thereon,
but only, in each case, to the extent, and for so long as, such prohibition is
not terminated or rendered unenforceable or otherwise deemed ineffective by the
UCC or any other Requirement of Law, (iii) any Trademark that is the subject of
an application under 15 U.S.C. Section 1051(b) on the basis of any Grantor’s
intent to use such Trademark, unless or until a Statement of Use or Amendment
to Allege Use has been filed with and accepted by the U.S. Patent and Trademark
Office, (iv) Equipment owned by any Grantor that is subject to a purchase money
Lien or a Capital Lease if the contract or other agreement in which such Lien
is granted (or in the documentation providing for such Capital Lease) prohibits
or requires the consent of any Person other than the Company and its Affiliates
as a condition to the creation of any other Lien on such Equipment, (v) the
Stock of Kips Bay Cinemas, Inc. and Thirty-Fourth Street Cinemas, Inc. to the
extent any lease held by such Grantors on the Closing Date prohibits or
requires the consent of any Person other than the Company and its Affiliates as
a condition to the creation by the applicable Grantor of a Lien on such Stock,
but only, in each case, to the extent, and for so long as, such lease or
prohibition is not terminated or rendered unenforceable or otherwise deemed
ineffective by the UCC or any other Requirement of Law or such consent is not
obtained, (vi) prior to the 30th day following the Closing Date, the Stock of
Loews Cineplex Theatres, Inc. and Forty-Second Street Cinemas, Inc., (vii)
Deposit Accounts (other than Cash Collateral Accounts) and (viii) Securities
Accounts (other than Cash Collateral Accounts); provided,
however, “Excluded
Property” shall not include any Proceeds, substitutions or
replacements of Excluded Property (unless such Proceeds, substitutions or
replacements would constitute Excluded Property).

 

“Intellectual Property” means,
collectively, all rights, priorities and privileges of any Grantor relating to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks, Trademark Licenses, trade secrets and Internet
domain names, and all rights to sue at law or in equity for any infringement or
other impairment thereof, including the right to receive all proceeds and
damages therefrom.

 

“Material Intellectual Property” means
Intellectual Property owned by or licensed to a Grantor that is material to the
conduct of such Grantor’s business.

 

“Patents” means (a) all letters patent
of the United States, any other country or any political subdivision thereof
and all reissues and extensions thereof, (b) all applications for letters
patent of the United States or any other country and all divisionals,
continuations and continuations-in-part thereof and (c) all rights to
obtain any reissues, continuations or continuations-in-part of the foregoing.

 

“Patent License” means all written agreements
providing for the grant by or to any Grantor of any right to manufacture, have
manufactured, use, import, sell or offer for sale any invention covered in
whole or in part by a Patent.

 

“Pledged Certificated Stock” means all
Certificated Securities and any other Stock and Stock Equivalent of a Person
evidenced by a certificate, Instrument or other equivalent document, in each
case owned by any Grantor, including all Stock and Stock Equivalents listed on Schedule 2 (Pledged Collateral).

 

“Pledged Collateral” means, collectively,
the Pledged Stock, Pledged Debt Instruments, any other Investment Property of
any Grantor, all certificates or other Instruments

 

3

 

representing any of the foregoing and all Security Entitlements of any
Grantor in respect of any of the foregoing. 
Pledged Collateral may be General Intangibles, Instruments or Investment
Property.

 

“Pledged Debt Instruments” means all
right, title and interest of any Grantor in Instruments evidencing any
Indebtedness having, in the case of each Instrument, a principal amount in
excess of $2,500,000 owed to such Grantor, including all Indebtedness described
on Schedule 2 (Pledged Collateral),
issued by the obligors named therein.

 

“Pledged Stock” means all Pledged
Certificated Stock and all Pledged Uncertificated Stock.  For purposes of this Agreement, the term “Pledged Stock” shall not include any Excluded Equity.

 

“Pledged Uncertificated Stock” means any
Stock or Stock Equivalent of any Person that is not Pledged Certificated Stock,
including all right, title and interest of any Grantor as a limited or general
partner in any partnership not constituting Pledged Certificated Stock or as a
member of any limited liability company not constituting Pledged Certificated
Stock and all right, title and interest of any Grantor in, to and under any Constituent
Document of any partnership or limited liability company to which it is a
party.

 

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

 

“Trademark License” means any written
agreement providing for the grant by or to any Grantor of any right to use any
Trademark.

 

“Trademarks” means (a) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and, in each case, all goodwill associated therewith,
whether now existing or hereafter adopted or acquired, and all registrations
and applications to register any of the foregoing, in each case whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
and (b) the right to obtain all renewals thereof.

 

“UCC” means the Uniform Commercial Code
as from time to time in effect in the State of New York; provided,
however, that, in the event that, by
reason of mandatory provisions of law, any of the attachment, perfection or
priority of the Administrative Agent’s and the Secured Parties’ security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.

 

“Vehicles” means all vehicles covered by
a certificate of title law of any state.

 

Section 1.2                                   Certain
Other Terms

 

(a)           In
this Agreement, in the computation of periods of time from a specified date to
a later specified date, the word “from” means “from and including” and the words “to”
and “until” each mean “to but excluding” and
the word “through” means “to and including.”

 

4

 

(b)           The
terms “herein,” “hereof,”
“hereto” and “hereunder”
and similar terms refer to this Agreement as a whole and not to any particular
Article, Section, subsection or clause in this Agreement.

 

(c)           References
herein to an Annex, Schedule, Article, Section, subsection or clause refer to
the appropriate Annex or Schedule to, or Article, Section, subsection or clause
in this Agreement.

 

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

 

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

 

(f)            Any
reference in this Agreement to a Loan Document shall include all appendices,
exhibits and schedules thereto, and, unless specifically stated otherwise all
amendments, restatements, supplements or other modifications thereto, and as
the same may be in effect at any time such reference becomes operative.

 

(g)           The
term “including” means “including without
limitation” except when used in the computation of time periods.

 

(h)           The
terms “Lender,” “Issuer,”
“Administrative Agent” and “Secured Party” include their respective successors.

 

(i)            References
in this Agreement to any statute shall be to such statute as amended or
modified and in effect from time to time.

 

ARTICLE II                                                       GRANT OF SECURITY INTEREST

 

Section 2.1                                   Collateral

 

For the purposes of this Agreement, all of the following property now
owned or at any time hereafter acquired by a Grantor or in which a Grantor now
has or at any time in the future may acquire any right, title or interests is
collectively referred to as the “Collateral”:

 

(a)           all
Accounts;

 

(b)           all
Chattel Paper;

 

(c)           all
Deposit Accounts that are Cash Collateral Accounts;

 

(d)           all
Documents;

 

(e)           all
Equipment;

 

(f)            all
General Intangibles;

 

(g)           all
Instruments;

 

(h)           all
Inventory;

 

5

 

(i)            all
Investment Property;

 

(j)            all
Letter-of-Credit Rights;

 

(k)           all
Vehicles;

 

(l)            the Commercial Tort Claims
described on Schedule 7 (Commercial Tort Claims)
and on any supplement thereto received by the Administrative Agent pursuant to Section 4.8 (Notice of Commercial Tort Claims);

 

(m)          all
books and records pertaining to the other property described in this Section 2.1;

 

(n)           all
property of any Grantor held by the Administrative Agent or any other Secured
Party, including all property of every description, in the possession or custody
of or in transit to the Administrative Agent or such Secured Party for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor or as to which such Grantor may have any right or power;

 

(o)           all
other Goods and personal property of such Grantor, whether tangible or
intangible and wherever located; and

 

(p)           to
the extent not otherwise included, all Proceeds;

 

provided, however, that “Collateral” shall not include any Excluded Property; and provided, further, that
if and when any property shall cease to be Excluded Property, such property
shall be deemed at all times from and after the date thereof to constitute
Collateral.

 

Section 2.2                                   Grant
of Security Interest in Collateral

 

Each Grantor, as collateral security for the full, prompt and complete
payment and performance when due (whether at stated maturity, by acceleration
or otherwise) of the Secured Obligations of such Grantor, hereby mortgages,
pledges and hypothecates to the Administrative Agent for the benefit of the
Secured Parties, and grants to the Administrative Agent for the benefit of the
Secured Parties a lien on and security interest in, all of its right, title and
interest in, to and under the Collateral of such Grantor; provided, however,  that, if
and when any property that at any time constituted Excluded Property becomes
Collateral, the Administrative Agent shall have, and at all times from and
after the date hereof be deemed to have had, a security interest in such
property.

 

Section 2.3                                   Cash
Collateral Accounts

 

The Administrative Agent has established a Deposit Account at Citibank,
N.A., designated as “Citicorp North America, Inc. – AMC Entertainment Inc. Cash
Collateral Account”.  Such Deposit
Account shall be a Cash Collateral Account. 

 

ARTICLE III                                                   REPRESENTATIONS AND WARRANTIES

 

To induce the Lenders, the Issuers and the Agents to enter into the
Credit Agreement, each Grantor hereby represents and warrants each of the
following to the Agents, the Lenders, the Issuers and the other Secured
Parties:

 

6

 

Section 3.1                                   Title;
No Other Liens

 

Except for the Lien granted to the Administrative Agent pursuant to
this Agreement and the other Liens permitted to exist on the Collateral under
the Credit Agreement, such Grantor owns the Collateral free and clear of any
and all Liens or claims of others.  Such
Grantor (a) is the record and beneficial owner of the Pledged Collateral
pledged by it hereunder constituting Instruments or Certificated Securities and
(b) has rights in or the power to transfer each other item of Collateral in
which a Lien is granted by it hereunder, free and clear of any other Lien.

 

Section 3.2                                   Perfection
and Priority

 

The security interest granted pursuant to this Agreement shall
constitute a valid and continuing perfected security interest in favor of the
Administrative Agent in the Collateral for which perfection is governed by the
UCC or filing with the United States Copyright Office upon (i) in the case
of all Collateral in which a security interest may be perfected by filing a
financing statement under the UCC, the completion of the filings and other
actions specified on Schedule 3 (Filings)
(which, in the case of all filings and other documents referred to on such
schedule, have been delivered to the Administrative Agent in completed and duly
authorized form), (ii) the delivery to the Administrative Agent of all Pledged
Collateral consisting of Instruments and Certificated Securities, in each case
properly endorsed for transfer to the Administrative Agent or in blank and (iii) in
the case of all Collateral in which a security interest may be perfected by
filing with the United States Copyright Office, the recordation of all
appropriate filings having been made with the United States Copyright
Office.  Such security interest shall be
prior to all other Liens on the Collateral except for Liens having priority
over the Administrative Agent’s Lien by operation of law or otherwise as
permitted under the Credit Agreement.

 

Section 3.3                                   Jurisdiction
of Organization; Chief Executive Office

 

Such Grantor’s jurisdiction of organization, legal name, organizational
identification number, if any, and the location of such Grantor’s chief
executive office or sole place of business, in each case as of the date hereof,
is specified on Schedule 1 (Jurisdiction of
Organization; Chief Executive Office) and such Schedule 1
(Jurisdiction of Organization; Chief Executive Office) also lists
all jurisdictions of incorporation and legal names for the five years preceding
the date hereof.

 

Section 3.4                                   Inventory
and Equipment

 

On the date hereof, such Grantor’s Inventory and Equipment (other than
mobile goods and Inventory or Equipment in transit) are kept at the locations
listed on Schedule 4 (Location of Inventory and Equipment).

 

Section 3.5                                   Pledged
Collateral

 

(a)           The
Pledged Stock pledged hereunder by such Grantor (i) is listed on Schedule 2 (Pledged Collateral) and constitutes that
percentage of the issued and outstanding equity of all classes of each issuer
thereof as set forth on Schedule 2 (Pledged
Collateral), (ii) has been duly authorized, validly issued and is
fully paid and nonassessable  (other than
Pledged Stock in limited liability companies and partnerships) and (iii)
constitutes the legal, valid and binding obligation of the obligor with respect
thereto, enforceable in accordance with its terms.

 

7

 

(b)           All
Pledged Collateral and, if applicable, any Additional Pledged Collateral,
consisting of Certificated Securities or Instruments has been delivered to the
Administrative Agent in accordance with Section 4.4(a) (Pledged
Collateral) and Section 7.11 of
the Credit Agreement.

 

Section 3.6                                   Accounts

 

No amount payable to such Grantor under or in connection with any Account
is evidenced by any Instrument or Chattel Paper that has not been delivered to
the Administrative Agent, properly endorsed for transfer, to the extent
delivery is required by Section 4.4 (Pledged
Collateral).

 

Section 3.7                                   Intellectual
Property

 

(a)           Schedule 5 (Intellectual Property) lists all Intellectual
Property owned by such Grantor on the date hereof that is registered or the subject
of an application for registration, in each case in such Grantor’s own name.

 

(b)           All
registered Material Intellectual Property owned by such Grantor is subsisting
and unexpired, has not been adjudged invalid or unenforceable, and has not been
abandoned.

 

(c)           As
of the date hereof, except as set forth in Schedule 5 (Intellectual
Property), none of the Material Intellectual Property owned by such
Grantor is the subject of any licensing or franchise agreement pursuant to
which such Grantor is the licensor or franchisor and with annual payments in
excess of $1,000,000.

 

(d)           No
holding, decision or judgment has been rendered by any Governmental Authority
that would limit, cancel or question the validity of, or such Grantor’s rights
in, any Material Intellectual Property owned by such Grantor in its own name.

 

Section 3.8                                   Deposit
Accounts; Securities Accounts

 

The only Deposit Accounts and Securities Accounts maintained by any
Grantor on the date hereof with an account balance in excess of $1,000,000 are
those listed on Schedule 6 (Deposit Accounts; Securities Accounts), which sets forth
such information separately for each Grantor.

 

Section 3.9                                   Commercial
Tort Claims

 

The only Commercial Tort Claims in excess of $1,000,000 of any Grantor
existing on the date hereof (regardless of whether the amount, defendant or
other material facts can be determined and regardless of whether such
Commercial Tort Claim has been asserted, threatened or has otherwise been made
known to the obligee thereof or whether litigation has been commenced for such
claims) are those listed on Schedule 7 (Commercial
Tort Claims), which sets forth such information separately for each
Grantor.

 

Section 3.10                            Specific
Collateral

 

None of the Collateral is or is Proceeds or products of farm products,
as-extracted collateral, health-care-insurance receivables or timber to be cut.

 

8

 

ARTICLE IV                                                  COVENANTS

 

Each Grantor agrees with the Administrative Agent to the following, as
long as any Obligation or Commitment remains outstanding and, in each case,
unless the Requisite Lenders otherwise consent in writing:

 

Section 4.1                                   Generally

 

Such Grantor shall (a) not use or permit any Collateral to be used
in violation of any provision of this Agreement, any other Loan Document, any
Requirement of Law or any policy of insurance covering the Collateral and (b) not
enter into any agreement or undertaking restricting the right or ability of
such Grantor or the Administrative Agent to sell, assign or transfer any
Collateral if such restriction would have a Material Adverse Effect.

 

Section 4.2                                   Maintenance
of Perfected Security Interest; Further Documentation

 

(a)           Subject
to the rights of such Grantor to dispose of Collateral under the Loan
Documents, such Grantor shall maintain the security interest created by this
Agreement as a perfected security interest having at least the priority described
in Section 3.2  (Perfection
and Priority) and shall defend such security interest and such
priority against the claims and demands of all Persons.

 

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

 

(c)           At
any time and from time to time, upon the written request of the Administrative
Agent, and at the sole expense of such Grantor, such Grantor shall promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further action as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including the
filing of any financing or continuation statement under the UCC (or other
similar laws) in effect in any jurisdiction with respect to the security
interest created hereby.

 

Section 4.3                                   Changes
in Locations, Name, Etc.

 

(a)           Except
upon 15 days’ prior written notice to the Administrative Agent and delivery to
the Administrative Agent of all additional financing statements and other
documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein,
such Grantor shall not do any of the following:

 

(i)            change its jurisdiction of
organization or its location, in each case from that referred to in Section 3.3 (Jurisdiction of Organization; Chief Executive Office);
or

 

(ii)           change its legal name or
organizational identification number, if any, or corporation, limited liability
company, partnership or other organizational structure to such an extent that
any financing statement filed in connection with this Agreement would become
misleading.

 

9

 

(b)           Together
with each delivery of any Financial Statement pursuant to Section
6.1(b) of the Credit Agreement, such Grantor shall deliver to the
Administrative Agent a written supplement to Schedule 4
(Location of Inventory and Equipment) showing any additional
locations at which Inventory or Equipment in excess of $2,500,000 per location (except
for Inventory or Equipment in transit) shall be kept.

 

Section 4.4                                   Pledged
Collateral

 

(a)           Such
Grantor shall deliver to the Administrative Agent, all certificates and
Instruments representing or evidencing any Pledged Collateral (including Additional
Pledged Collateral), whether now existing or hereafter acquired, in suitable
form for transfer by delivery or, as applicable, accompanied by such Grantor’s
endorsement, where necessary, or duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the
Administrative Agent, together, in respect of any Additional Pledged
Collateral, with a Pledge Amendment, duly executed by the Grantor, in
substantially the form of Annex  1 (Form of Pledge Amendment), an
acknowledgment and agreement to a Joinder Agreement duly executed by the
Grantor, in substantially the form in the form of Annex 2
(Form of Joinder Agreement), or such other documentation reasonably acceptable
to the Administrative Agent.  Such
Grantor authorizes the Administrative Agent to attach each Pledge Amendment to
this Agreement.  During the continuance
of an Event of Default, the Administrative Agent shall have the right, at any
time in its discretion and without notice to the Grantor, to (i) transfer to or
to register in its name or in the name of its nominees any Pledged Collateral
and (ii) exchange any certificate or instrument representing or evidencing any
Pledged Collateral for certificates or instruments of smaller or larger
denominations.

 

(b)           Except
as provided in Article V  (Remedial
Provisions), such Grantor shall be entitled to receive all cash
dividends paid in respect of the Pledged Collateral (other than liquidating or
distributing dividends) with respect to the Pledged Collateral.  Any sums paid upon or in respect of any
Pledged Collateral upon the liquidation or dissolution of any issuer of any
Pledged Collateral, any distribution of capital made on or in respect of any
Pledged Collateral or any property distributed upon or with respect to any
Pledged Collateral pursuant to the recapitalization or reclassification of the
capital of any issuer of Pledged Collateral or pursuant to the reorganization
thereof shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Secured
Obligations.  If any sum of money or
property so paid or distributed in respect of any Pledged Collateral shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in trust
for the Administrative Agent, segregated from other funds of such Grantor, as
additional security for the Secured Obligations.

 

(c)           Except
as provided in Article V (Remedial Provisions),
such Grantor shall be entitled to exercise all voting, consent and corporate,
partnership, limited liability company and similar rights with respect to the
Pledged Collateral; provided, however, that no vote shall be cast, consent given or right
exercised or other action taken by such Grantor that would impair the Collateral
or be inconsistent with or result in any violation of any provision of any Loan
Document.

 

(d)           Such
Grantor shall not grant “control” (within the meaning of such term under
Article 9-106 of the UCC) over any Investment Property to any Person other than
the Administrative Agent.

 

10

 

(e)           Such
Grantor shall not, without the consent of the Administrative Agent, agree to
any amendment of any Constituent Document electing to treat any membership
interest or partnership interest that is part of the Pledged Collateral as a “security”
under Section 8-103 of the UCC, or any election to turn any previously
uncertificated Stock that is part of the Pledged Collateral into certificated
Stock.

 

(f)            Such
Grantor shall not create, incur, assume or suffer to exist any Lien upon any of
the Stock described in clause (v) of
the definition of “Excluded Property.”

 

Section 4.5                                   Accounts

 

Such Grantor shall not, other than in the ordinary course of business,
(i) grant any extension of the time of payment of any Account,
(ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the
payment of any Account, (iv) allow any credit or discount on any Account
or (v) amend, supplement or modify any Account in any manner that could
adversely affect the value thereof.

 

Section 4.6                                   Delivery
of Instruments and Chattel Paper

 

If any amount in excess of $2,500,000 payable under or in connection
with any Collateral owned by such Grantor shall be or become evidenced by an
Instrument or Chattel Paper, such Grantor shall immediately deliver such
Instrument or Chattel Paper to the Administrative Agent, duly indorsed in a
manner satisfactory to the Administrative Agent, or, if consented to by the
Administrative Agent, shall mark all such Instruments and Chattel Paper with
the following legend:  “This writing and
the obligations evidenced or secured hereby are subject to the security
interest of Citicorp North America, Inc., as Administrative Agent”.

 

Section 4.7                                   Intellectual
Property

 

(a)           Such
Grantor shall (and shall require its licensees to) (i) continue to use
each Trademark owned by such Grantor that is Material Intellectual Property in connection
with a class of goods that is substantially the same as the class of goods for
which such Trademark is currently used, (ii) maintain as in the past the
quality of products and services offered under such Trademark, (iii) use
such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, to the extent
such Grantor has reasonably determined that it is commercially practical to do
so and (iv) not do any act or knowingly omit to do any act whereby (A) any Trademark
that is Material Intellectual Property may become cancelled, invalidated or
abandoned, or materially diluted, (B) any Patent that is Material Intellectual
Property may become forfeited, abandoned or dedicated to the public, (C) any Copyright
that is Material Intellectual Property may become invalidated or fall into the
public domain or (D) any trade secret that is Material Intellectual Property
may become publicly available.

 

(b)           Such
Grantor shall notify the Administrative Agent immediately if it knows, or has
reason to know, (i) that any application or registration relating to any
Material Intellectual Property owned by such Grantor may become forfeited,
abandoned or dedicated to the public, or (ii) of any adverse determination or ruling,
or the institution of any judicial or administrative proceeding (including the
filing of any action in the United States Patent and Trademark Office, the
United States Copyright Office or any court or tribunal in any country)
regarding such Grantor’s ownership of, or the validity of, any Material
Intellectual Property or such Grantor’s right to register the same or to own
and maintain the same.

 

11

 

(c)           Whenever
such Grantor, either by itself or through any agent, licensee or designee,
shall file an application for the registration of any Intellectual Property
with the United States Patent and Trademark Office or the United States
Copyright Office, such Grantor shall report such filing to the Administrative
Agent within thirty (30) days after the last day of the fiscal quarter in which
such filing occurs.  Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have
recorded, all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent’s security interest in any such United States Copyright, Patent or Trademark.

 

(d)           Such
Grantor shall take all reasonable actions necessary or requested by the
Administrative Agent, including in any proceeding before the United States
Patent and Trademark Office or the United States Copyright Office, to maintain
and pursue each application for, and to maintain each registration of, any United
States Copyright, Trademark or Patent that is and remains Material Intellectual
Property.

 

(e)           In
the event that any Material Intellectual Property is or has been infringed upon
or misappropriated or diluted by a third party, such Grantor shall notify the
Administrative Agent promptly after such Grantor learns thereof.  Such Grantor shall take any action such
Grantor deems appropriate in its reasonable business judgment  in response to such infringement, misappropriation
or dilution, including promptly bringing suit for infringement,
misappropriation or dilution and to recover all damages for such infringement,
misappropriation of dilution, and such other actions as may be appropriate in such
Grantor’s reasonable business judgment under the circumstances to protect such
Material Intellectual Property.

 

(f)            Unless
otherwise agreed to by the Administrative Agent, with resect to each
registration or application to register a United States Copyright, Patent or
Trademark, such Grantor shall execute and deliver to the Administrative Agent
for filing in (i) the United States Copyright Office a short-form
copyright security agreement in the form attached hereto as Annex 3 (Form of Short Form Intellectual Property Security
Agreement), (ii) in the United States Patent and Trademark
Office a short-form patent security agreement in the form attached hereto as Annex 3 (Form of Short Form Intellectual Property Security
Agreement) and (iii) the United States Patent and Trademark
Office a short-form trademark security agreement in form attached hereto as Annex 3 (Form of Short Form Intellectual Property Security
Agreement).

 

Section 4.8                                   Notice
of Commercial Tort Claims

 

Such Grantor agrees that, if it shall acquire any interest in any
Commercial Tort Claim in excess of $1,000,000 (whether from another Person or
because such Commercial Tort Claim shall have come into existence),
(i) such Grantor shall, within thirty (30) after such acquisition, deliver
to the Administrative Agent, in each case in form and substance satisfactory to
the Administrative Agent, a notice of the existence and nature of such
Commercial Tort Claim and deliver a supplement to Schedule 7
(Commercial Tort Claims) containing a specific description of such
Commercial Tort Claim, (ii) Section 2.1 (Collateral)
shall apply to such Commercial Tort Claim and (iii) such Grantor shall
execute and deliver to the Administrative Agent, in each case in form and
substance satisfactory to the Administrative Agent, any document, and take all
other action, deemed by the Administrative Agent to be reasonably necessary or
appropriate for the Administrative Agent to obtain, on behalf of the Lenders, a
first-priority, perfected security interest in all such Commercial Tort
Claims.  Any supplement to Schedule 7 (Commercial Tort Claims) delivered pursuant
to this Section 4.8 (Notice of Commercial Tort Claims)
shall, after the receipt thereof by the Administrative Agent, become

 

12

 

part of Schedule 7 (Commercial Tort Claims)
for all purposes hereunder other than in respect of representations and
warranties made prior to the date of such receipt.

 

ARTICLE V                                                      REMEDIAL PROVISIONS

 

Section 5.1                                   Code
and Other Remedies

 

During the continuance of an Event of Default, the Administrative Agent
may exercise, in addition to all other rights and remedies granted to it in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the UCC or any other applicable law. 
Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon any
Collateral, and may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver any Collateral (or contract to do
any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker’s board or office of the Administrative Agent or
any Lender or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. 
The Administrative Agent shall have the right upon any such public sale
or sales, and, to the extent permitted by the UCC and other applicable law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption of any Grantor,
which right or equity is hereby waived and released.  Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it
available to the Administrative Agent at places that the Administrative Agent
shall reasonably select, whether at such Grantor’s premises or elsewhere.  The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this Section 5.1,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any Collateral
or in any way relating to the Collateral or the rights of the Administrative
Agent and any other Secured Party hereunder, including reasonable attorneys’
fees and disbursements, to the payment in whole or in part of the Secured
Obligations, in such order as the Credit Agreement shall prescribe, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, need the Administrative Agent
account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any other Secured Party arising out of the exercise by
them of any rights hereunder.  If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.

 

Section 5.2                                   Accounts
and Payments in Respect of General Intangibles

 

(a)           In
addition to, and not in substitution for, any similar requirement in the Credit
Agreement, if required by the Administrative Agent at any time during the
continuance of an Event of Default, any payment of Accounts or payment in
respect of General Intangibles, when collected by any Grantor, shall be
forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent, in a Cash Collateral Account, subject to withdrawal by
the Administrative Agent as provided in Section 5.4 (Proceeds
to be Turned Over To Administrative Agent).  Until so

 

13

 

turned over or turned over, such payment shall be held by such Grantor
in trust for the Administrative Agent, segregated from other funds of such
Grantor.  Each such deposit of Proceeds
of Accounts and payments in respect of General Intangibles shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit.

 

(b)           At
the Administrative Agent’s request, during the continuance of an Event of
Default, each Grantor shall deliver to the Administrative Agent all original
and other documents evidencing, and relating to, the agreements and
transactions that gave rise to the Accounts or payments in respect of General
Intangibles, including all original orders, invoices and shipping receipts.

 

(c)           The
Administrative Agent may, without notice, at any time during the continuance of
an Event of Default, limit or terminate the authority of a Grantor to collect
its Accounts or amounts due under General Intangibles or any thereof.

 

(d)           The
Administrative Agent in its own name or in the name of others may at any time
during the continuance of an Event of Default communicate with Account Debtors
to verify with them to the Administrative Agent’s satisfaction the existence,
amount and terms of any Account or amounts due under any General Intangible.

 

(e)           Upon
the request of the Administrative Agent at any time during the continuance of
an Event of Default, each Grantor shall notify Account Debtors that the
Accounts or General Intangibles have been collaterally assigned to the
Administrative Agent and that payments in respect thereof shall be made
directly to the Administrative Agent.  In
addition, the Administrative Agent may at any time during the continuance of an
Event of Default enforce such Grantor’s rights against such Account Debtors and
obligors of General Intangibles.

 

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

 

Section 5.3                                   Pledged
Collateral

 

(a)           During
the continuance of an Event of Default, upon notice by the Administrative Agent
to the relevant Grantor or Grantors, (i) the Administrative Agent shall
have the right to receive any Proceeds of the Pledged Collateral and make
application thereof to the Obligations in the order set forth in the Credit
Agreement and (ii) the Administrative Agent or its nominee may exercise
(A) any voting, consent, corporate and other right pertaining to the
Pledged Collateral at any meeting of shareholders, partners or members, as the
case may be, of

 

14

 

the relevant issuer or issuers of Pledged Collateral or otherwise and
(B) any right of conversion, exchange and subscription and any other
right, privilege or option pertaining to the Pledged Collateral as if it were
the absolute owner thereof (including the right to exchange at its discretion
any of the Pledged Collateral upon the merger, amalgamation, consolidation,
reorganization, recapitalization or other fundamental change in the corporate or
equivalent structure of any issuer of Pledged Stock, the right to deposit and
deliver any Pledged Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine), all without liability except to account
for property actually received by it; provided, however, that the Administrative Agent shall have no duty to
any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.

 

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

 

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

 

(d)           Upon
the occurrence and during the continuance of an Event of Default, the
Administrative Agent shall be entitled to exercise all of the rights of the
Grantor granting the security interest in any Pledged Stock, and a transferee
or assignee of such Pledged Stock shall become a holder of such Pledged Stock
to the same extent as such Grantor and be entitled to participate in the
management of the issuer of such Pledged Stock and, upon the transfer of the
entire interest of such Grantor, such Grantor shall, by operation of law, cease
to be a holder of such Pledged Stock.

 

Section 5.4                                   Proceeds
to be Turned Over To Administrative Agent

 

Unless otherwise expressly provided in the Credit Agreement, all
Proceeds received by the Administrative Agent hereunder in cash or Cash
Equivalents shall be held by the Administrative Agent in a Cash Collateral
Account.  All Proceeds while held by the

 

15

 

Administrative Agent in a Cash Collateral Account (or by such Grantor
in trust for the Administrative Agent) shall continue to be held as collateral
security for the Secured Obligations and shall not constitute payment thereof
until applied as provided in the Credit Agreement.

 

Section 5.5                                   Securities
Act, Etc.

 

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

 

(b)           Each
Grantor agrees to use its best efforts to do or cause to be done all such other
acts as may be necessary to make such sale or sales of all or any portion of
the Pledged Collateral pursuant to this Section 5.5 valid
and binding and in compliance with all other applicable Requirements of
Law.  Each Grantor further agrees that a
breach of any covenant contained in this Section 5.5 will
cause irreparable injury to the Administrative Agent and other Secured Parties,
that the Administrative Agent and the other Secured Parties have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 5.5
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defense against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.

 

Section 5.6                                   Deficiency

 

Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay the
Secured Obligations and the fees and disbursements of any attorney employed by
the Administrative Agent or any other Secured Party to collect such deficiency.

 

ARTICLE VI                                                  THE ADMINISTRATIVE AGENT

 

Section 6.1                                   Administrative
Agent’s Appointment as Attorney-in-Fact

 

(a)           Each
Grantor hereby irrevocably constitutes and appoints the Administrative Agent
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of such Grantor and in the name of such Grantor or in its own
name, for the purpose of carrying out the terms of this Agreement, to take any
appropriate action and to execute any document or instrument that may be
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative

 

16

 

Agent the power and right, on behalf of such Grantor, without notice to
or assent by such Grantor, to do any of the following:

 

(i)            in the name of such Grantor or its
own name, or otherwise, take possession of and indorse and collect any check,
draft, note, acceptance or other instrument for the payment of moneys due under
any Account or General Intangible or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any such moneys due under any Account or General
Intangible or with respect to any other Collateral whenever payable;

 

(ii)           in the case of any Intellectual
Property, execute and deliver, and have recorded, any agreement, instrument,
document or paper as the Administrative Agent may request to evidence the
Administrative Agent’s security interest in such Intellectual Property and the
goodwill and General Intangibles of such Grantor relating thereto or
represented thereby;

 

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

 

(iv)          execute, in connection with any sale
provided for in Section 5.1 (Code and Other Remedies)
or 5.5 (Registration Rights), any
endorsement, assignment or other instrument of conveyance or transfer with
respect to the Collateral; or

 

(v)           (A) direct any party liable for
any payment under any Collateral to make payment of any moneys due or to become
due thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct, (B) ask or demand for, collect, and receive payment of
and receipt for, any moneys, claims and other amounts due or to become due at
any time in respect of or arising out of any Collateral, (C) sign and
indorse any invoice, freight or express bill, bill of lading, storage or
warehouse receipt, draft against debtors, assignment, verification, notice and
other document in connection with any Collateral, (D) commence and
prosecute any suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect any Collateral and to enforce any other right
in respect of any Collateral, (E) defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral, (F) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent may
deem appropriate, (G) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Trademark pertains)
throughout the world for such term or terms, on such conditions, and in such
manner as the Administrative Agent shall in its sole discretion determine,
including the execution and filing of any document necessary to effectuate or
record such assignment and (H) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any Collateral as fully
and completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things that the
Administrative Agent deems necessary to protect, preserve or realize upon the
Collateral and the Administrative Agent’s and the other Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.

 

17

 

Anything in this clause (a)
to the contrary notwithstanding, the Administrative Agent agrees that it shall
not exercise any right under the power of attorney provided for in this clause (a) unless an Event of Default shall be
continuing.

 

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

 

(c)           The
expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 6.1,
together with interest thereon at a rate per annum equal to the rate per annum
at which interest would then be payable on past due Revolving Loans that are
Base Rate Loans under the Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.

 

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

 

Section 6.2                                   Duty
of Administrative Agent

 

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

 

Section 6.3                                   Authorization
of Financing Statements

 

Each Grantor authorizes the Administrative Agent and its Affiliates,
counsel and other representatives, at any time and from time to time, to file
or record financing statements, amendments to financing statements, and other
filing or recording documents or instruments with respect to the Collateral in
such form and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement, and such financing statements and amendments may described the
Collateral covered thereby as “all assets of the debtor”, “all personal
property of the debtor” or words of similar effect.  Each Grantor hereby also authorizes the
Administrative Agent and its Affiliates, counsel and other representatives, at
any time and from time to time, to file continuation statements with respect to
previously filed financing statements.  A
photographic or other reproduction of this

 

18

 

Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any
jurisdiction.

 

Section 6.4                                   Authority
of Administrative Agent

 

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

 

ARTICLE VII                                              MISCELLANEOUS

 

Section 7.1                                   Amendments
in Writing

 

None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit
Agreement; provided, however,
that annexes to this Agreement may be supplemented (but no existing provisions
may be modified and no Collateral may be released) through Pledge Amendments
and Joinder Agreements, in substantially the form of Annex 1
(Form of Pledge Amendment) and Annex  2 (Form of Joinder Agreement)
respectively, in each case duly executed by the Administrative Agent and each
Grantor directly affected thereby.

 

Section 7.2                                   Notices

 

All notices, requests and demands to or upon the Administrative Agent
or any Grantor hereunder shall be effected in the manner provided for in Section 11.8 (Notices, Etc.) of the Credit Agreement; provided, however, that
any such notice, request or demand to or upon any Grantor shall be addressed to
the Company’s notice address set forth in such Section 11.8.

 

Section 7.3                                   No
Waiver by Course of Conduct; Cumulative Remedies

 

Neither the Administrative Agent nor any other Secured Party shall by
any act (except by a written instrument pursuant to Section 7.1
(Amendments in Writing)), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default.  No
failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent or any other Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof. 
No single or partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  A
waiver by the Administrative Agent or any other Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Administrative Agent or such other Secured Party would
otherwise have on any future occasion. 
The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies
provided by law.

 

19

 

Section 7.4                                   Successors
and Assigns

 

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

 

Section 7.5                                   Counterparts

 

This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by telecopy), each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple
counterparts and attached to a single counterpart so that all signature pages
are attached to the same document. 
Delivery of an executed counterpart by facsimile or electronic mail
shall be effective as delivery of a manually executed counterpart.

 

Section 7.6                                   Severability

 

Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

Section 7.7                                   Section
Headings

 

The Article and Section titles contained in this Agreement are, and
shall be, without substantive meaning or content of any kind whatsoever and are
not part of the agreement of the parties hereto.

 

Section 7.8                                   Entire
Agreement

 

This Agreement together with the other Loan Documents represents the
entire agreement of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.

 

Section 7.9                                   Governing
Law

 

This Agreement and the rights and obligations of the parties hereto
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York.

 

Section 7.10                            Additional
Grantors

 

If, pursuant to Section 7.11
(Additional Collateral and Guaranties) of the Credit Agreement, the Company
shall be required to cause any Subsidiary that is not a Grantor to become a
Grantor hereunder, such Subsidiary shall execute and deliver to the
Administrative Agent a Joinder Agreement substantially in the form of Annex 2 (Form of Joinder Agreement) and shall thereafter for
all purposes be a party hereto and have the same rights, benefits and
obligations as a Grantor party hereto on the Closing Date.

 

20

 

Section 7.11                            Release
of Collateral

 

(a)           At
the time provided in Section 10.8(b)(i)
(Concerning the Collateral and the Collateral
Documents) of the Credit Agreement, the Collateral shall be released
from the Lien created hereby and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Administrative Agent
and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. 
At the request and sole expense of any Grantor following any such
termination, the Administrative Agent shall deliver to such Grantor any
Collateral of such Grantor held by the Administrative Agent hereunder and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.

 

(b)           If
the Administrative Agent shall be directed or permitted pursuant to Section 10.8(b)(ii) or (iii)
(Concerning the Collateral and the Collateral
Documents) of the Credit Agreement to release any Lien created
hereby upon any Collateral (including any Collateral sold or disposed of by any
Grantor in a transaction permitted by the Credit Agreement), such Collateral
shall be released from the Lien created hereby to the extent provided under, and
subject to the terms and conditions set forth in, Section 10.8(b)(ii)
or (iii)  (Concerning
the Collateral and the Collateral Documents) of the Credit
Agreement.  In connection therewith, the
Administrative Agent, at the request and sole expense of the Company, shall
execute and deliver to the Company all releases or other documents, including,
without limitation, UCC termination statements, reasonably necessary or
desirable for the release of the Lien created hereby on such Collateral.  At the request and sole expense of the Company,
a Grantor shall be released from its obligations hereunder in the event that
all the capital stock of such Grantor shall be so sold or disposed; provided, however, that
the Company shall have delivered to the Administrative Agent, at least ten
Business Days prior to the date of the proposed release, a written request for
release identifying the relevant Grantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Company in form
and substance satisfactory to the Administrative Agent stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.

 

Section 7.12                            Reinstatement

 

Each Grantor further agrees that, if any payment made by any Loan Party
or other Person and applied to the Obligations is at any time annulled,
avoided, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid, or the proceeds of
Collateral are required to be returned by any Secured Party to such Loan Party,
its estate, trustee, receiver or any other party, including any Grantor, under
any bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or repayment, any Lien or other Collateral
securing such liability shall be and remain in full force and effect, as fully
as if such payment had never been made or, if prior thereto the Lien granted
hereby or other Collateral securing such liability hereunder shall have been
released or terminated by virtue of such cancellation or surrender), such Lien
or other Collateral shall be reinstated in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect any Lien or other Collateral securing the obligations of
any Grantor in respect of the amount of such payment.

 

[SIGNATURE
PAGES FOLLOW]

 

21

 

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

 

	
   

  	
  AMC ENTERTAINMENT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EACH GRANTOR LISTED ON SCHEDULE I

  HERETO

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DOWNTOWN BOSTON CINEMAS, LLC

  
	
   

  	
  LOEWS NORTH VERSAILLES CINEMAS, LLC

  
	
   

  	
  LOEWS PLAINVILLE CINEMAS, LLC

  
	
   

  	
  METHUEN CINEMAS, LLC

  
	
   

  	
  OHIO CINEMAS, LLC

  
	
   

  	
  RICHMOND MALL CINEMAS, LLC

  
	
   

  	
  SPRINGFIELD CINEMAS, LLC

  
	
   

  	
  WATERFRONT CINEMAS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: Plitt Theatres, Inc., the Sole Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
  GATEWAY CINEMAS, LLC

  
	
   

  	
  LEWISVILLE CINEMAS, LLC

  
	
   

  	
  LOEWS GARDEN STATE CINEMAS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: RKO Century Warner Theatres, Inc., the

  Sole Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  

 

 

[SIGNATURE PAGE TO PLEDGE
AND SECURITY AGREEMENT]

 

 

	
   

  	
  LOEWS CINEPLEX U.S. CALLCO, LLC

  
	
   

  	
   

  
	
   

  	
  By: Loews Cineplex Theatres, Inc., the Sole
  Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LOEKS-STAR PARTNERS

  
	
   

  	
   

  
	
   

  	
  By: Star Theatres of Michigan, Inc., a
  General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAGIC JOHNSON THEATERS LIMITED

  PARTERSHIP

  
	
   

  	
   

  
	
   

  	
  By: S & J Theatres, Inc., its General
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig R. Ramsey

  	
   

  
	
   

  	
  Name: Craig R. Ramsey

  
	
   

  	
  Title: Executive Vice President and Chief

  Financial Officer

  

 

 

	
  ACCEPTED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  CITICORP NORTH AMERICA, INC.,

  
	
  as Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Rob Ziemer

  	
   

  
	
  Name: Rob Ziemer

  
	
  Title: Vice President

  

 

 

SCHEDULE
I

 

AMC CARD PROCESSING SERVICES, INC.

AMC ENTERTAINMENT INTERNATIONAL, INC.

AMC REALTY, INC.

AMC-GCT, INC.

AMERICAN MULTI -CINEMA, INC.

CENTERTAINMENT, INC.

CLUB CINEMA OF MAZZA, INC.

GCT PACIFIC BEVERAGE SERVICES, INC.

NATIONAL CINEMA NETWORK, INC.

PREMIUM CINEMA OF YORKTOWN, INC.

PREMIUM THEATER OF FRAMINGHAM, INC.

PREMIUM THEATRE OF MAYFAIR, INC.

71ST & 3RD AVE. CORP.

BRICK PLAZA CINEMAS, INC.

CITYPLACE CINEMAS, INC.

CRESCENT ADVERTISING CORPORATION

CRESTWOOD CINEMAS, INC.

ETON AMUSEMENT CORPORATION

FALL RIVER CINEMA, INC.

FARMERS CINEMAS, INC.

FORTY-SECOND STREET CINEMAS, INC.

FOUNTAIN CINEMAS, INC.

HAWTHORNE AMUSEMENT CORPORATION

HINSDALE AMUSEMENT CORPORATION

ILLINOIS CINEMAS, INC.

JERSEY GARDEN CINEMAS, INC.

KIPS BAY CINEMAS, INC.

LANCE THEATRE CORPORATION

LCE ACQUISITIONSUB, INC.

LCE MEXICAN HOLDINGS, INC.

LIBERTY TREE CINEMA CORP.

LOEKS ACQUISITION CORP.

LOEWS AKRON CINEMAS, INC.

LOEWS ARLINGTON CINEMAS, INC.

LOEWS ARLINGTON WEST CINEMAS, INC.

LOEWS ASTOR PLAZA CINEMAS, INC.

LOEWS BALTIMORE CINEMAS, INC.

LOEWS BAY TERRACE CINEMAS, INC.

LOEWS BEREA CINEMAS, INC.

LOEWS BOULEVARD CINEMAS, INC.

LOEWS BRISTOL CINEMAS, INC.

LOEWS BROADWAY CINEMAS, INC.

LOEW’S CALIFORNIA THEATRES, INC.

LOEWS CENTERPARK CINEMAS, INC.

LOEWS CENTURY MALL CINEMAS, INC.

LOEWS CHERI CINEMAS, INC.

LOEWS CHERRY TREE MALL CINEMAS, INC.

 

 

LOEWS CHICAGO CINEMAS, INC.

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

LOEWS CINEPLEX ENTERTAINMENT GIFT CARD CORPORATION

LOEWS CINEPLEX INTERNATIONAL HOLDINGS, INC.

LOEWS CINEPLEX THEATRES, INC.

LOEWS CINEPLEX THEATRES HOLDCO, INC.

LOEWS CITYWALK THEATRE CORPORATION

LOEWS CONNECTICUT CINEMAS, INC.

LOEWS CRYSTAL RUN CINEMAS, INC.

LOEWS DEAUVILLE NORTH CINEMAS, INC.

LOEWS EAST HANOVER CINEMAS, INC.

LOEWS EAST VILLAGE CINEMAS, INC.

LOEWS ELMWOOD CINEMAS, INC.

LOEWS FORT WORTH CINEMAS, INC.

LOEWS FREEHOLD MALL CINEMAS, INC.

LOEWS FRESH POND CINEMAS, INC.

LOEWS GREENWOOD CINEMAS, INC.

LOEWS HOUSTON CINEMAS, INC.

LOEWS LAFAYETTE CINEMAS, INC.

LOEWS LEVITTOWN CINEMAS, INC.

LOEWS LINCOLN PLAZA CINEMAS, INC.

LOEWS LINCOLN THEATRE HOLDING CORP.

LOEWS MEADOWLAND CINEMAS 8, INC.

LOEWS MEADOWLAND CINEMAS, INC.

LOEWS MERRILLVILLE CINEMAS, INC.

LOEWS MONTGOMERY CINEMAS, INC.

LOEWS MOUNTAINSIDE CINEMAS, INC.

LOEWS NEW JERSEY CINEMAS, INC.

LOEWS NEWARK CINEMAS, INC.

LOEWS ORPHEUM CINEMAS, INC.

LOEWS PALISADES CENTER CINEMAS, INC.

LOEWS PENTAGON CITY CINEMAS, INC.

LOEWS PIPER’S THEATRES, INC.

LOEWS RICHMOND MALL CINEMAS, INC.

LOEWS RIDGEFIELD PARK CINEMAS, INC.

LOEWS ROLLING MEADOWS CINEMAS, INC.

LOEWS ROOSEVELT FIELD CINEMAS, INC.

LOEWS STONYBROOK CINEMAS, INC.

LOEWS THEATRE MANAGEMENT CORP.

LOEWS THEATRES CLEARING CORP.

LOEWS TOMS RIVER CINEMAS, INC.

LOEWS TRYLON THEATRE, INC.

LOEWS USA CINEMAS INC.

LOEWS VESTAL CINEMAS, INC.

LOEWS WASHINGTON CINEMAS, INC.

LOEWS WEST LONG BRANCH CINEMAS, INC.

LOEWS-HARTZ MUSIC MAKERS THEATRES, INC.

LTM NEW YORK, INC.

LTM TURKISH HOLDINGS, INC.

 

 

MID-STATES THEATRES, INC.

MUSIC MAKERS THEATRES, INC.

NEW BRUNSWICK CINEMAS, INC.

NICKELODEON BOSTON, INC.

NORTH STAR CINEMAS, INC.

PARKCHESTER AMUSEMENT CORPORATION

PARSIPPANY THEATRE CORP.

PLITT SOUTHERN THEATRES, INC.

PLITT THEATRES, INC.

POLI-NEW ENGLAND THEATRES, INC.

PUTNAM THEATRICAL CORPORATION

RED BANK THEATRE CORPORATION

RKO CENTURY WARNER THEATRES, INC.

ROSEMONT CINEMAS, INC.

S & J THEATRES INC.

SACK THEATRES, INC.

SKOKIE CINEMAS, INC.

SOUTH HOLLAND CINEMAS, INC.

STAR THEATRES OF MICHIGAN, INC.

STAR THEATRES, INC.

STROUD MALL CINEMAS, INC.

TALENT BOOKING AGENCY, INC.

THE WALTER READE ORGANIZATION, INC.

THEATRE HOLDINGS, INC.

THIRTY-FOURTH STREET CINEMAS, INC.

U.S.A. CINEMAS, INC.

WEBSTER CHICAGO CINEMAS, INC.

WHITE MARSH CINEMAS, INC.

WOODFIELD CINEMAS, INC.

WOODRIDGE CINEMAS, INC.

 

 

ANNEX 1

TO

PLEDGE
AND SECURITY AGREEMENT

 

FORM OF PLEDGE AMENDMENT

 

This PLEDGE AMENDMENT, dated as of                     
    , 20    , is delivered pursuant to Section 4.4(a)  (Pledged Collateral) of
the Pledge and Security Agreement, dated as of January 26, 2006 (the “Pledge and Security Agreement”), by AMC ENTERTAINMENT INC.
(the “Company”) and the Subsidiaries of the Company
from time to time party thereto, as Grantors, in favor of Citicorp North
America, Inc., as agent for the Secured Parties referred to therein, and the
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge and Security Agreement and that the Pledged Collateral listed on this
Pledge Amendment shall be and become part of the Collateral referred to in the
Pledge and Security Agreement and shall secure all Secured Obligations of the
undersigned.  Capitalized terms used
herein but not defined herein are used herein with the meaning given them in
the Pledge and Security Agreement.

 

	
   

  	
  [GRANTOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Pledged Stock

 

	
  ISSUER

  	
   

  	
  CLASS

  	
   

  	
  CERTIFICATE NO(S).

  	
   

  	
  PAR VALUE

  	
   

  	
  NUMBER OF

  SHARES,

  UNITS OR

  INTERESTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pledged Debt Instruments

 

	
  ISSUER

  	
   

  	
  DESCRIPTION OF DEBT

  	
   

  	
  CERTIFICATE NO(S).

  	
   

  	
  FINAL MATURITY

  	
   

  	
  PRINCIPAL

  AMOUNT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A1-1

 

	
  ACKNOWLEDGED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  CITICORP NORTH AMERICA, INC.,

  
	
  as Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

A1-2

 

ANNEX 2

TO

PLEDGE AND SECURITY AGREEMENT

 

FORM OF JOINDER AGREEMENT

 

 

This JOINDER AGREEMENT, dated as of                   
    , 20    , is delivered pursuant to Section 7.10  (Additional Grantors) of
the Pledge and Security Agreement, dated as of January 26, 2006 (the “Pledge and Security Agreement”), by AMC ENTERTAINMENT INC. (the
“Company”) and the Subsidiaries of the Company
listed on the signature pages thereof in favor of the Citicorp North America,
Inc., as agent for the Secured Parties referred to therein.  Capitalized terms used herein but not defined
herein are used with the meanings given them in the Pledge and Security
Agreement.

 

By executing and delivering this Joinder Agreement, the undersigned, as
provided in Section 7.10 (Additional Grantors) of
the Pledge and Security Agreement, hereby becomes a party to the Pledge and
Security Agreement as a Grantor thereunder with the same force and effect as if
originally named as a Grantor therein and, without limiting the generality of
the foregoing, hereby grants to the Administrative Agent, as collateral
security for the full, prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations of the undersigned, hereby collaterally assigns, mortgages, pledges
and hypothecates to the Administrative Agent and grants to the Administrative
Agent a Lien on and security interest in, all of its right, title and interest
in, to and under the Collateral of the undersigned and expressly assumes all
obligations and liabilities of a Grantor thereunder.

 

The information set forth in Annex I hereto is hereby added to the information set forth in Schedules 1 through 6 to the
Pledge and Security Agreement. [By acknowledging and agreeing to this Joinder
Agreement, the undersigned hereby agree that this Joinder Agreement may be
attached to the Pledge and Security Agreement and that the Pledged Collateral
listed on Annex 1 hereto to
this Pledge Amendment shall be and become part of the Collateral referred to in
the Pledge and Security Agreement and shall secure all Secured Obligations of
the undersigned.](1)

 

The undersigned hereby represents and warrants that each of the
representations and warranties contained in Article III (Representations and Warranties) of the Pledge and Security
Agreement applicable to it is true and correct in all material respects on and
as the date hereof as if made on and as of such date.

 

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

 

	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

(1)  Insert to pledge Stock of
the new Subsidiary without doing a Pledge Amendment.

 

A2-1

 

 

	
  ACKNOWLEDGED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  [EACH
  GRANTOR PLEDGING 

  ADDITIONAL COLLATERAL]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
  CITICORP NORTH AMERICA, INC.,

  as Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

A2-2

 

ANNEX I

 

 

[Update Schedules 1
through 6 of the Pledge and Security Agreement.]

 

A2-3

 

ANNEX 3

TO

PLEDGE AND SECURITY AGREEMENT

 

FORM OF
SHORT FORM INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY
AGREEMENT, dated as of                   
    , 20    , by each of the entities
listed on the signature pages hereof or that becomes a party hereto pursuant to
Section 7.10 (Additional Grantors) of
the Pledge and Security Agreement referred to below (each a “Grantor” and, collectively, the “Grantors”),
in favor of Citicorp North America, Inc. (“CNAI”), as agent for
the Secured Parties (as defined in the Credit Agreement referred to below) (in
such capacity, the “Administrative Agent”).

 

W I T N
E S S E T H:

 

WHEREAS, pursuant to the Credit Agreement, dated as of January 26, 2006
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among AMC Entertainment Inc., a Delaware corporation, Grupo Cinemex, S.A. de
C.V., a corporation organized under the laws of Mexico, Cadena Mexicana de
Exhibición, S.A. de C.V., a corporation organized under the laws of Mexico, the
Lenders and Issuers party thereto, CNAI, as agent for the Lenders and Issuers,
and Banco Nacional de
Mexico, S.A., Integrante del Grupo Financiero Banamex, as agent for the Lenders
under the Mexican Facility, the Lenders and the Issuers have severally
agreed to make extensions of credit to the Borrowers upon the terms and subject
to the conditions set forth therein;

 

WHEREAS, the Grantors are party to the Guaranty pursuant to which they
have guaranteed the Obligations; and

 

WHEREAS, the Grantors are party to a Pledge and Security Agreement,
dated as of January 26, 2006 (the “Pledge and Security
Agreement”), in favor of the Administrative Agent pursuant to which
the Grantors are required to execute and deliver this [Copyright] [Patent]
[Trademark] Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and to induce the
Lenders, the Issuers and the Agents to enter into the Credit Agreement and to
induce the Lenders and the Issuers to make their respective extensions of
credit to the Borrowers thereunder, each Grantor hereby agrees with the
Administrative Agent as follows:

 

Section 1.              Defined Terms

 

Unless otherwise defined herein, terms defined in the Credit Agreement
or in the Pledge and Security Agreement and used herein have the meaning given
to them in the Credit Agreement or the Pledge and Security Agreement.

 

Section 2.              Grant of Security Interest in [Copyright]
[Trademark] [Patent] Collateral

 

Each Grantor, as collateral security for the full, prompt and complete
payment and performance when due (whether at stated maturity, by acceleration
or otherwise) of the Secured Obligations of such Grantor, hereby mortgages,
pledges and hypothecates to the Administrative Agent for the benefit of the
Secured Parties, and grants to the Administrative Agent for the benefit of the
Secured Parties a lien on and security interest in, all of its right, title

 

A3-1

 

and interest in, to and under the following Collateral of such Grantor
(the “[Copyright] [Patent] [Trademark] Collateral”):

 

[(a)          all Copyrights owned by such Grantor,
including, without limitation, those referred to on Schedule I
hereto;

 

(b)           all extensions of the foregoing; and

 

(c)           all Proceeds of the foregoing,
including, without limitation, any claim by Grantor against third parties for
past, present or future infringement of any such Copyright.]

 

or

 

 

[(a)          all Patents owned by such Grantor,
including, without limitation, those referred to on Schedule I
hereto;

 

(b)           all reissues, continuations or continuations-in-part
of the foregoing; and

 

(c)           all Proceeds of the foregoing,
including, without limitation, any claim by Grantor against third parties for
past, present or future infringement of any such Patent.]

 

or

 

[(a)          all Trademarks owned by such Grantor,
including, without limitation, those referred to on
Schedule I hereto;

 

(b)           all goodwill of the business connected
with the use of, and symbolized by, each Trademark; and

 

(c)           all Proceeds of the foregoing,
including, without limitation, any claim by Grantor against third parties for
past, present or future (i) infringement or dilution of any such Trademark
or (ii) injury to the goodwill associated with any such Trademark.]

 

Section 3.              Security Agreement

 

The security interest granted pursuant to this [Copyright] [Patent]
[Trademark] Security Agreement is granted in conjunction with the security
interest granted to the Administrative Agent pursuant to the Pledge and Security
Agreement and each Grantor hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the [Copyright] [Patent] [Trademark] Collateral made and granted hereby are
more fully set forth in the Pledge and Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.

 

[SIGNATURE
PAGES FOLLOW]

 

A3-2

 

IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent]
[Trademark] Security Agreement to be executed and delivered by its duly
authorized offer as of the date first set forth above.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [GRANTOR],

  
	
   

  	
  as Grantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE TO
[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

 

 

 

	
  ACCEPTED AND AGREED

  
	
  as of the date first above written:

  
	
   

  
	
  CITICORP NORTH AMERICA, INC.,

  as Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

SCHEDULE I

TO

[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT

 

[Copyright] [Patent] [Trademark]
Registrations

 

 

INCLUDE ONLY U.S.
REGISTERED INTELLECTUAL PROPERTY

 

[A.          REGISTERED COPYRIGHTS

 

[Include Copyright Registration Number and Date]

 

B.                                     COPYRIGHT
APPLICATIONS]

 

[A.          REGISTERED PATENTS

 

B.                                     PATENT
APPLICATIONS]

 

[A.          REGISTERED TRADEMARKS

 

B.                                     TRADEMARK
APPLICATIONS]

 

A3-5Exhibit 4.1

 

EXECUTION COPY

 

 

 

AAR CORP.

 

 

(a Delaware corporation)

 

 

Convertible Senior Notes due
2026

 

 

 

PURCHASE AGREEMENT

 

 

Dated:  January 26, 2006

 

 

 

 

AAR CORP.

(a Delaware corporation)

 

$125,000,000

Convertible Senior Notes due 2026

 

PURCHASE AGREEMENT

 

January 26, 2006

 

MERRILL LYNCH & CO.

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

as Representative of the several Initial Purchasers

4 World Financial Center

New York, New York  10080

 

Ladies and Gentlemen:

 

AAR CORP., a Delaware corporation (the “Company”),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and the other
Initial Purchasers named in Schedule A hereto (collectively, the “Initial
Purchasers,” which term shall also include any initial purchaser substituted as
hereinafter provided in Section 11 hereof), for whom Merrill Lynch is
acting as representative (in such capacity, the “Representative”), with respect
to the issue and sale by the Company and the purchase by the Initial
Purchasers, acting severally and not jointly, of the respective principal
amounts set forth in said Schedule A of $125,000,000 aggregate principal
amount of the Company’s Convertible Senior Notes due 2026 (the “Initial
Securities”), and with respect to the grant by the Company to the Initial
Purchasers of the option described in Section 2(b) hereof to purchase
all or any part of an additional $25,000,000 aggregate principal amount of
Convertible Senior Notes due 2026 (the “Option Securities” and together with
the Initial Securities, the “Securities”). 
The Securities are to be issued pursuant to an indenture to be dated as
of February 1, 2006 (the “Indenture”) between the Company and U.S. Bank
National Association, as trustee (the “Trustee”).

 

The Securities are convertible, subject to
certain conditions as described in the Final Offering Memorandum (as defined
below), prior to maturity (unless previously redeemed or otherwise purchased)
into cash or a combination of cash and shares of common stock, par value $1.00
per share, of the Company (the “Common Stock”) in accordance with the terms of
the Securities and the Indenture, as described in Schedule B hereto.  Securities issued in book-entry form will be
issued to Cede & Co. as nominee of The Depository Trust Company (“DTC”)
pursuant to a letter agreement, to be dated as of the Initial Closing Time (as
defined in Section 2(c)) (the “DTC Agreement”), among the Company, the
Trustee and DTC.

 

The Company understands that the Initial
Purchasers propose to make an offering of the Securities on the terms and in
the manner set forth herein and agrees that the Initial Purchasers may resell,
subject to the conditions set forth herein, all or a portion of the Securities
to

 

 

purchasers (“Subsequent
Purchasers”) at any time after this Agreement has been executed and
delivered.  The Securities are to be sold
to the Initial Purchasers and resold by the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the “1933 Act”), in reliance
upon exemptions therefrom.  Pursuant to
the terms of the Securities and the Indenture, investors that acquire
Securities may only resell or otherwise transfer such Securities if such
Securities are hereafter registered under the 1933 Act or if an exemption from
the registration requirements of the 1933 Act is available (including the
exemption afforded by Rule 144A (“Rule 144A”) of the rules and
regulations promulgated under the 1933 Act by the Securities and Exchange
Commission (the “Commission”)).  On or
prior to the Initial Closing Time, the Company will enter into an agreement
with the Initial Purchasers (the “Registration Rights Agreement”), pursuant to
which, subject to the conditions set forth therein, the Company will be
required to file and use its reasonable efforts to have declared effective a
registration statement (the “Registration Statement”) under the 1933 Act to
register resales of the Securities and the shares of Common Stock issuable upon
conversion thereof.

 

Section 1.               Representations
and Warranties by the Company.

 

(a)  Representations
and Warranties.  The Company
represents and warrants to the Initial Purchasers as of the date hereof and as
of the Closing Time referred to in Section 2(c) hereof, and agrees
with the Initial Purchasers, as follows:

 

(i)            The
Company has prepared and delivered to each Initial Purchaser copies of a
preliminary offering memorandum dated January 26, 2006 (the “Preliminary
Offering Memorandum”) and has prepared and will deliver to each Initial
Purchaser, the next succeeding day, copies of a final offering memorandum dated
January 26, 2006 (the “Final Offering Memorandum”), each for use by each
Initial Purchaser in connection with its solicitation of purchases of, or
offering of, the Securities.  “Offering Memorandum”
means, with respect to any date or time referred to in this Agreement, the most
recent offering memorandum (whether the Preliminary Offering Memorandum or the
Final Offering Memorandum, or any amendment or supplement to either such
document), including exhibits thereto and any documents incorporated therein by
reference, which has been prepared and delivered by the Company to the Initial
Purchasers in connection with their solicitation of purchases of, or offering
of, the Securities.  All references in
this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the Offering Memorandum (or
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which are incorporated
by reference in the Offering Memorandum; and all references in this Agreement
to amendments or supplements to the Offering Memorandum shall be deemed to mean
and include the filing of any document under the Securities Exchange Act of
1934 (the “Exchange Act”) which is incorporated by reference in the Offering
Memorandum.

 

As of the
Applicable Time (as defined below), neither (x) the Offering Memorandum as of
the Applicable Time as supplemented by the final pricing term sheet, in the
form attached hereto as Schedule B (the “Pricing Supplement”), that has
been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of offers to purchase Securities, all considered
together (collectively, the

 

2

 

“Disclosure Package”), nor (y) any individual
Supplemental Offering Materials (as defined below), when read together with the
Disclosure Package, included any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

 

“Applicable
Time” means 8:30 a.m. (Eastern time) on January 27, 2006 or such
other time as agreed by the Company and the Representative.

 

“Supplemental
Offering Materials” means any “written communication” (within the meaning of
the rules and regulations under the Securities Act of 1933, as amended
(the “Act”)) prepared by or on behalf of the Company, or used or referred to by
the Company, that constitutes an offer to sell or a solicitation of an offer to
buy the Securities other than the Offering Memorandum or amendments or
supplements thereto (including the Pricing Supplement), including, without
limitation, any road show relating to the Securities that constitutes such a
written communication.

 

As of its
issue date and as of the Closing Time, the Final Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  The documents incorporated or deemed to be
incorporated by reference in the Offering Memorandum at the time they were or
hereafter are filed with the Commission complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the “1934 Act Regulations”), and,
when read together with the other information in the Offering Memorandum, at
the time the Offering Memorandum was issued and at the Closing Time, did not
and will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.  The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Disclosure Package or the Final Offering
Memorandum made in reliance upon and in conformity with written information
furnished to the Company by any Initial Purchaser through the Representative
expressly for use therein.

 

(ii)           Neither
the Company nor any of its subsidiaries has sustained since the date of the latest
audited financial statements included in the Disclosure Package and the
Offering Memorandum, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Disclosure Package and the
Final Offering Memorandum; and, since the respective dates as of which
information is given in the Disclosure Package and the Final Offering
Memorandum, there has not been any change in the capital stock or long term
debt of the Company or any of its subsidiaries (other than stock option
transactions, normal debt payments and other such transactions in the normal
course of business) or any material adverse change, or any development that
would reasonably be expected to involve a prospective material adverse change,
in or affecting the general affairs, management, financial position,
stockholders’ equity or results of operations of

 

3

 

the Company and its subsidiaries (a “material
adverse change”), otherwise than as set forth or contemplated in the Disclosure
Package and the Final Offering Memorandum.

 

(iii)          The
financial statements, together with the related schedules and notes, included
in the Disclosure Package and the Final Offering Memorandum present fairly the
financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders’ equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the periods involved.  The
supporting schedules, if any, included in the Disclosure Package and the Final
Offering Memorandum present fairly in accordance with GAAP the information
required to be stated therein.  The
selected financial data and the summary financial information included in the
Disclosure Package and the Final Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Disclosure Package and
the Final Offering Memorandum.

 

(iv)          The
Company and its significant subsidiaries (within the meaning of Section 1-02(w)
of Regulation S-X under the Act) (each such significant subsidiary, a “Significant
Subsidiary”), have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as are
described in the Disclosure Package and the Final Offering Memorandum or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its Significant Subsidiaries; and any real property and buildings held under
lease by the Company and its Significant Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Significant Subsidiaries.

 

(v)           The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the Delaware, with power and authority
(corporate and other) to own its properties and through its subsidiaries
conduct its business as described in the Disclosure Package and the Final
Offering Memorandum, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any such
jurisdiction.

 

(vi)          Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation with power and authority (corporate and other) to own its
properties, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, or is subject to no

 

4

 

material liability or disability by reason of
the failure to be so qualified in any such jurisdiction.

 

(vii)         The
Company has an authorized capitalization as set forth in the Disclosure Package
and the Final Offering Memorandum, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued and are
fully paid and non assessable; the shares of Common Stock initially issuable
upon conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered against payment therefor
in accordance with the provisions of the Securities and the Indenture referred
to below, will be duly and validly issued, fully paid and non assessable and
will conform to the description of the Common Stock contained in the Disclosure
Package and the Final Offering Memorandum; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non assessable and (except for
directors’ qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims.

 

(viii)        The
Securities have been duly authorized and, when issued and delivered pursuant to
this Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture between the Company
and the Trustee, under which they are to be issued; the Securities will rank
equal in right of payment with all of the Company’s other unsecured and
unsubordinated indebtedness. The Indenture has been duly authorized and
assuming the authorization, execution and delivery by the Trustee, when
executed and delivered by the Company and the Trustee, the Indenture will
constitute a valid and binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors’
rights and to general equity principles; and the Securities and the Indenture
will conform to the descriptions thereof in the Disclosure Package and the
Final Offering Memorandum.

 

(ix)           This
Agreement has been duly authorized, executed and delivered by the Company; and
the Registration Rights Agreement has been duly authorized and, assuming due
authorization, execution and delivery by the Initial Purchasers, when executed
and delivered by the Company, will constitute a valid and binding instrument of
the Company, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles.

 

(x)            None
of the transactions contemplated by this Agreement (including, without
limitation, the use of the proceeds from the sale of the Securities) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulation promulgated thereunder, including, without limitation, Regulations
G, T, U, and X of the Board of Governors of the Federal Reserve System.

 

(xi)           Prior
to the date hereof, neither the Company nor any of its affiliates has taken any
action which is designed to or which has constituted or which might have been

 

5

 

expected to cause or result in stabilization
or manipulation of the price of any security of the Company in connection with
the offering of the Securities.

 

(xii)          The
issue and sale of the Securities and the compliance by the Company with all of
the provisions of the Securities, the Indenture, the Registration Rights
Agreement and this Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the Certificate
of Incorporation or By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue
and sale of the Securities or the consummation by the Company of the
transactions contemplated by this Agreement, the Registration Rights Agreement
or the Indenture, except such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Initial Purchasers.

 

(xiii)         Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation or By-laws or in default in the performance or observance of any
material obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound.

 

(xiv)        The
statements set forth in the Offering Memorandum under the caption “Description
of the Notes” and “Description of Capital Stock”, insofar as they purport to
constitute a summary of the terms of the Securities and the Common Stock, under
the caption “Material United States Federal Income Tax Consequences”, and under
the caption “Plan of Distribution”, insofar as they purport to describe the
provisions of the laws and documents referred to therein, accurately summarize
or describe in all material respect the matters referred to therein.

 

(xv)         Other
than as set forth in the Disclosure Package and the Final Offering Memorandum,
there are no legal or governmental proceedings pending to which the Company or
any of its Significant Subsidiaries is a party or of which any property of the
Company or any of its Significant Subsidiaries is the subject which, if
determined adversely to the Company or any of its Significant Subsidiaries,
would individually or in the aggregate have a material adverse effect on the
current or future financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries or on the power or ability of
the Company to perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement or the Securities or to consummate the
transactions contemplated herein and therein; and, to the best of the Company’s

 

6

 

knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.

 

(xvi)        The
Company and its Significant Subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental
Laws”), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except as described in the
Disclosure Package and the Final Offering Memorandum and except where such
noncompliance with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(xvii)       There
are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties) which are not described in the
Disclosure Package and Final Offering Memorandum or which would, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

(xviii)      When
the Securities are issued and delivered pursuant to this Agreement, the
Securities will not be of the same class (within the meaning of Rule 144A
under the Act) as securities which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.

 

(xix)         The
Company is subject to Section 13 or 15(d) of the Exchange Act.

 

(xx)          The
Company is not, and after giving effect to the offering and sale of the
Securities, will not be an “investment company”, as such term is defined in the
United States Investment Company Act of 1940, as amended (the “Investment
Company Act”).

 

(xxi)         Neither
the Company nor any person acting on its behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has offered or sold
the Securities by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the 1933 Act.

 

(xxii)        Within
the preceding six months, neither the Company nor any other person acting on
behalf of the Company has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Initial Purchasers hereunder.  The Company will take reasonable precautions
designed to provide assurance that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902 under the
1933 Act) of any

 

7

 

Securities or any substantially similar
security issued by the Company, within six months subsequent to the date on
which the distribution of the Securities has been completed (as notified to the
Company by the Representative), is made under restrictions and other
circumstances reasonably designed not to affect the status of the offer and
sale of the Securities in the United States and to U.S. persons contemplated by
this Agreement as transactions exempt from the registration provisions of the
1933 Act.

 

(xxiii)       To
the Company’s knowledge, KPMG LLP who have certified certain financial
statements of the Company and its subsidiaries, is an independent registered
public accounting firm as required by the 1933 Act and the rules and
regulations of the Commission thereunder.

 

(xxiv)       It
is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by this
Agreement to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.

 

(xxv)        The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions
are executed in accordance with management’s general or specific
authorizations; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (C) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.  Except
as described in the Disclosure Package and the Final Offering Memorandum, since
the end of the Company’s most recent audited fiscal year, there has been (1) no
material weakness in the Company’s internal control over financial reporting
(whether or not remediated) and (2) no change in the Company’s internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

 

The Company
and its consolidated subsidiaries employ disclosure controls and procedures
that are designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission’s rules and forms, and is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
principal financial officer or officers, as appropriate, to allow timely
decisions regarding disclosure.

 

(xxvi)       The
Company and its subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively, “Governmental Licenses”)
issued by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them, except where
the failure so to possess would not, singly or in the aggregate, result in a
material adverse change; the Company and its subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, result in a
material adverse change; all of the Governmental Licenses are valid

 

8

 

and in full force and effect, except where
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not, singly or in
the aggregate, result in a material adverse change; and neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change.

 

(xxvii)      There
is and has been no failure on the part of the Company or, to the knowledge of
the Company, any of the Company’s directors or officers, in their capacities as
such, to comply in all material respects with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith (the “Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to certifications.

 

(xxviii)     To
the knowledge of the directors and officers of the Company, neither the Company
nor any director, officer, agent, employee, affiliate or other person acting on
behalf of the Company or any of its subsidiaries has taken any action, directly
or indirectly, that would result in a violation of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA and the Company and, to
the knowledge of the Company, its affiliates have conducted their businesses in
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.

 

(xxix)       The
operations of the Company are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the
money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the best knowledge
of the Company, threatened.

 

(b)  Officer’s
Certificates.  Any certificate
signed by any officer of the Company or any of its subsidiaries delivered to
the Representative or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by the Company to each Initial Purchaser as to the
matters covered thereby.

 

9

 

Section 2.               Sale
and Delivery to Initial Purchasers; Closing.

 

(a)  Initial
Securities.  On the basis of
the representations, warranties and agreements herein contained and subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Initial Purchaser, severally and not jointly, and each Initial Purchaser,
severally and not jointly, agrees to purchase from the Company, at a purchase
price of 96.75% of the principal amount thereof, $125,000,000 aggregate
principal amount of Initial Securities set forth in Schedule A opposite
the name of such Initial Purchaser, plus any additional principal amount of
Securities which such Initial Purchaser may become obligated to purchase
pursuant to the provisions of Section 11 hereof.

 

(b)  Option
Securities.  In addition, on
the basis of the representations, warranties and agreements herein contained
and subject to the terms and conditions herein set forth, the Company hereby
grants an option to the Initial Purchasers to purchase up to an additional
$25,000,000 aggregate principal amount of Option Securities at a purchase price
of 96.75% of the principal amount thereof, plus accrued and unpaid interest
from the Initial Closing Time to, but excluding, the Option Closing Time.  The option hereby granted will expire 30 days
after the date hereof and may be exercised at any time (but not more than once)
upon notice by the Representative to the Company setting forth the number of
Option Securities as to which each Initial Purchaser is then exercising the
option and the time and date of payment and delivery for such Option
Securities.  Any such time and date of
delivery (the “Option Closing Time”) shall be determined by the Representative
but shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Initial Closing Time, as hereinafter
defined.

 

(c)  Payment.  Payment of the purchase price for, and
delivery of certificates for, the Initial Securities shall be made at the office
of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York
10022, or at such other place as shall be agreed upon by the Representative and
the Company, at 9:00 A.M. (Eastern time) on the fourth business day after
the date hereof (unless postponed in accordance with the provisions of Section 11),
or such other time not later than ten business days after such date as shall be
agreed upon by the Representative and the Company (such time and date of
payment and delivery being herein called the “Initial Closing Time” and the
Initial Closing Time and the Option Closing Time, each being the applicable “Closing
Time”).

 

In addition, in the event that the Initial
Purchasers have exercised its option to purchase all or any of the Option
Securities, payment of the purchase price for, and delivery of one or more
global certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Representative and the Company, on the Option Closing Time as specified in the
notice from the Representative to the Company.

 

Payment shall be made to the Company by wire
transfer of immediately available funds to a bank account designated by the
Company, against delivery to the Representative for the respective accounts of
the Initial Purchasers of certificates for the Securities to be purchased by
them.  It is understood that each Initial
Purchaser has authorized the Representative, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Securities
which it has agreed to purchase.  Merrill
Lynch, individually and not as representative of the Initial Purchasers, may
(but shall not be obligated to) make payment of the purchase price

 

10

 

for the Securities to be purchased by any Initial Purchaser whose funds
have not been received by Closing Time, but such payment shall not relieve such
Initial Purchaser from its obligations hereunder.

 

(d)  Denominations;
Registration.  Global
certificates for the Initial Securities and the Option Securities, if any,
shall be registered in the name of Cede & Co., as nominee of DTC, and
shall be in such denominations ($1,000 or integral multiples of $1,000 in
excess thereof) as the Representative may request in writing at least one full
business day before the Initial Closing Time or the Option Closing Time, as the
case may be.  The global certificates
representing the Initial Securities and the Option Securities, if any, shall be
made available for examination and packaging by the Initial Purchasers in The
City of New York not later than 10:00 A.M. on the last business day prior
to the Initial Closing Time or the Option Closing Time, as the case may be.

 

Section 3.               Covenants
of the Company.  The Company
covenants with each Initial Purchaser as follows:

 

(a)  Offering
Memorandum.  The Company, as
promptly as possible, will furnish to each Initial Purchaser, without charge,
such number of copies of the Offering Memorandum and any amendments and
supplements thereto and documents incorporated by reference therein as such
Initial Purchaser may reasonably request.

 

(b)  Notice
and Effect of Material Events. 
The Company will immediately notify each Initial Purchaser, and confirm
such notice in writing, of (x) any filing made by the Company of information
relating to the offering of the Securities with any securities exchange or any
other regulatory body in the United States or any other jurisdiction, and (y)
prior to the completion of the placement of the Securities by the Initial
Purchasers as evidenced by a notice in writing from the Initial Purchasers to
the Company, any material changes in or affecting the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise which (i) make
any statement in the Disclosure Package, any Offering Memorandum or any
Supplemental Offering Materials false or misleading or (ii) are not
disclosed in the Disclosure Package or the Offering Memorandum.  In such event or if during such time any
event shall occur as a result of which it is necessary, in the reasonable
opinion of any of the Company, its counsel, the Initial Purchasers or counsel
for the Initial Purchasers, to amend or supplement the Offering Memorandum in
order that the Offering Memorandum not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Company will forthwith amend or supplement the Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment
or amendments of, or a supplement or supplements to, the Offering Memorandum
(in form and substance satisfactory in the reasonable opinion of counsel for
the Initial Purchasers) so that, as so amended or supplemented, the Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.

 

(c)  Amendment
and Supplements to the Offering Memorandum; Preparation of Pricing Supplement;
Supplemental Offering Materials. 
The Company will advise each Initial Purchaser

 

11

 

promptly of any proposal to amend or supplement the Offering Memorandum
and will not effect such amendment or supplement without the consent of the
Initial Purchasers.  Neither the consent
of the Initial Purchasers, nor the Initial Purchasers’ delivery of any such
amendment or supplement, shall constitute a waiver of any of the conditions set
forth in Section 5 hereof.  The
Company will prepare the Pricing Supplement, in form and substance satisfactory
to the Representative, and shall furnish prior to the Applicable Time to each
Initial Purchaser, without charge, as many copies of the Pricing Supplement as
such Initial Purchaser may reasonably request. 
The Company represents and agrees that, unless it obtains the prior
consent of the Representative, it has not made and will not make any offer
relating to the Securities by means of any Supplemental Offering Materials.

 

(d)  Qualification
of Securities for Offer and Sale. 
Promptly from time to time the Company will take such action as the
Initial Purchasers may reasonably request to qualify the Securities and the
shares of Common Stock issuable upon conversion thereof for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Initial Purchasers may designate and to maintain such qualifications in
effect as long as required for the sale of the Securities; provided that in
connection therewith the Company shall not be required to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file any
general consent to service of process in any jurisdiction.

 

(e)  DTC.  The Company will cooperate with the Initial
Purchasers and use its reasonable best efforts to permit the Securities to be
eligible for clearance and settlement through the facilities of DTC.

 

(f)  Use
of Proceeds.  The Company will
use the net proceeds received by it from the sale of the Securities in the
manner specified in the Disclosure Package and the Final Offering Memorandum
under “Use of Proceeds.”

 

(g)  Restriction
on Sale of Securities.  During
a period of 60 days from the date of the Final Offering Memorandum, the Company
will not, without the prior written consent of Merrill Lynch, directly or
indirectly, (i) issue, sell, offer or agree to sell, grant any option for
the sale of, or otherwise dispose of, any other debt securities of the Company
or securities of the Company that are convertible into, or exchangeable for,
the offered Securities or such other debt securities, (ii) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
lend or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
or exchangeable for Common Stock, or file any registration statement under the
1933 Act with respect to any of the foregoing or (iii) enter into any swap
or other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, any of the economic consequence of ownership of the
Common Stock, or any securities convertible into or exchangeable or exercisable
for or exchangeable for Common Stock, whether any such swap or transaction
described in clause (ii) or (iii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise.  The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder or the Common Stock to be delivered upon
conversion thereof, (B) the resale registration statement to be filed by
the Company pursuant to the Registration Rights Agreement relating to the resale
of the Securities and the shares of Common Stock or any other registration
statement filed pursuant to registration

 

12

 

rights described in the Disclosure Package and the Final Offering
Memorandum and (C) shares of Common Stock to be issued pursuant to the
Company’s existing employee stock option plans (including reload options)
existing on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date hereof.

 

(h)  PORTAL
Designation.  The Company will
use its reasonable best efforts to permit the Securities to be designated
PORTAL securities in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. (“NASD”) relating to
trading in the PORTAL Market.

 

(i)  Listing
on Securities Exchange.  The
Company will use its reasonable best efforts to cause all shares of Common
Stock issuable upon conversion of the Securities to be listed on the New York
Stock Exchange or on a “national securities exchange” registered under Section 6
of the 1934 Act.

 

(j)  Reporting Requirements.  Until the offering of the Securities is
complete, the Company will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by the
1934 Act and the 1934 Act Regulations.

 

Section 4.               Payment
of Expenses.

 

(a)  Expenses.  The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including: (i) the
fees, disbursements and expenses of the Company’s counsel and accountants in
connection with the issue of the Securities and the shares of Common Stock
issuable upon conversion of the Securities and all other expenses in connection
with the preparation, printing and any filing of the Disclosure Package and any
Offering Memorandum and any amendments and supplements thereto and the mailing
and delivering of copies thereof to the Initial Purchasers and dealers; (ii) the
cost of printing or producing this Agreement, the Indenture, the Registration
Rights Agreement, the Blue Sky and Legal Investment Memoranda, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Securities; (iii) all
expenses in connection with the qualification of the Securities and the shares
of Common Stock issuable upon conversion of the Securities for offering and
sale under state securities laws as provided in Section 3(d) hereof,
including the fees and disbursements of counsel for the Initial Purchasers in
connection with such qualification and in connection with the Blue Sky and
legal investment surveys; (iv) any fees charged by securities rating
services for rating the Securities; (v) the cost of preparing the
Securities; (vi) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Securities; (vii) any cost incurred in
connection with the designation of the Securities for trading in PORTAL and the
listing of the shares of Common Stock issuable upon conversion of the
Securities and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section; provided, however, that the Initial Purchasers
shall reimburse the Company for up to an aggregate of $937,500 of its
reasonably documented offering expenses. 
It is understood, however, that, except as provided in this Section, and
Sections 7 and 8 hereof, the Initial Purchasers will pay all of its own costs
and expenses, including the fees of its counsel, transfer

 

13

 

taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.

 

(b)  Termination
of Agreement.  If this
Agreement is terminated by the Representative in accordance with the provisions
of Section 5 or Section 10(a)(i) hereof, the Company shall
reimburse the Initial Purchasers for their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Initial
Purchasers.

 

Section 5.               Conditions
of Initial Purchasers’ Obligations. 
The obligations of several Initial Purchasers hereunder are subject to
the accuracy of the representations and warranties of the Company contained in Section 1
hereof or in certificates of any officer of the Company or any of its
subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:

 

(a)  Opinion
of Counsel for Company.  At
the applicable Closing Time, the Initial Purchasers shall have received (1) the
favorable opinion, dated as of such Closing Time, of Schiff Hardin LLP, counsel
for the Company, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect set forth in Exhibit A(1) hereto and to
such further effect as counsel to the Initial Purchasers may reasonably request
and (2) the favorable opinion, dated as of such Closing Time, of Howard A.
Pulsifer, Esq., General Counsel for the Company, in form and substance
satisfactory to counsel for the Initial Purchasers, to the effect set forth in Exhibit A(2) hereto
and to such further effect as counsel to the Initial Purchasers may reasonably
request.  Such counsel may also state
that, insofar as such opinion involves factual matters, they have relied, to
the extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.

 

(b)  Opinion
of Counsel for Initial Purchasers. 
At Closing Time, the Initial Purchasers shall have received the
favorable opinion, dated as of Closing Time, of Shearman & Sterling
LLP, counsel for the Initial Purchasers, with respect to the matters set forth
in (i), (ii), (iv) through (vii), inclusive, (xiii) and the penultimate
paragraph of Exhibit A(1) hereto. 
In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States and the General Corporation Law of the State
of Delaware, upon the opinions of counsel satisfactory to the Representative.  Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its subsidiaries
and certificates of public officials.

 

(c)  Officers’
Certificate.  At the
applicable Closing Time, there shall not have been, since the date hereof or
since the date as of which information is given in the Final Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the
Representative shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of such Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the

 

14

 

representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and as of
such Closing Time, and (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to such Closing Time.

 

(d)  Accountants’
Comfort Letter.  At the time
of the execution of this Agreement, the Representative shall have received from
KPMP LLP a letter dated such date, in form and substance satisfactory to the
Representative, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers, containing statements and information of
the type ordinarily included in accountants’ “comfort letters” to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.

 

(e)  Bring-down
Comfort Letter.  At the
applicable Closing Time, the Representative shall have received from KPMG LLP a
letter, dated as of such Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (d) of
this Section, except that the specified date referred to shall be a date not
more than three business days prior to such Closing Time.

 

(f)  Credit
Ratings.  On or after the date
hereof (i) no downgrading shall have occurred in the rating accorded the
Company’s debt securities by any “nationally recognized statistical rating
organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company’s debt securities.

 

(g)  PORTAL.  At the Initial Closing Time, the Securities
shall have been designated for trading on PORTAL.

 

(h)  Lock-up
Agreements.  On the date of
this Agreement, the Representative shall have received “lock-up letters,” in
form and substance satisfactory to it, from named executive officers and
directors of the Company, and such letters shall be in full force and effect at
the Closing Time.

 

(i)  Indenture
and Registration Rights Agreement. 
At or prior to the Initial Closing Time, the Company and the Trustee
shall have executed and delivered the Indenture, and the Company and the
Representative, on behalf of the Initial Purchasers, shall have executed and
delivered the Registration Rights Agreement, each in a form satisfactory to the
Representative.

 

(j)  Approval of Listing.  At the Initial Closing Time, the shares of
Common Stock issuable upon conversion of the Securities shall have been
approved for listing on the New York Stock Exchange, subject only to official
notice of issuance.

 

(k)  Additional Documents.  At the applicable Closing Time, counsel for
the Initial Purchasers shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the

 

15

 

Company in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the
Representative and counsel for the Initial Purchasers.

 

(l)  Termination of Agreement.  If any condition specified in this Section shall
not have been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the Representative by notice to the Company at any time at
or prior to the applicable Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
and except that Sections 1, 7, 8 and 9 shall survive any such termination and
remain in full force and effect.

 

Section 6.               Subsequent
Offers and Resales of the Securities.

 

(a)  Offer
and Sale Procedures.  Each of
the Initial Purchasers and the Company hereby establish and agree to observe
the following procedures in connection with the offer and sale of the
Securities:

 

(i)            Offers
and Sales.  Offers and sales of the
Securities shall only be made to persons whom the offeror or seller reasonably
believes to be qualified institutional buyers, as defined in Rule 144A
under the 1933 Act (“Qualified Institutional Buyers”).

 

(ii)           No
General Solicitation.  No general
solicitation or general advertising (within the meaning of Rule 502(c) under
the 1933 Act) will be used in the United States in connection with the offering
or sale of the Securities.

 

(iii)          Purchases
by Non-Bank Fiduciaries.  In the case
of a non-bank Subsequent Purchaser of a Security acting as a fiduciary for one
or more third parties, each third party shall, in the judgment of the Initial
Purchaser, be a Qualified Institutional Buyer.

 

(iv)          Subsequent
Purchaser Notification.  Each Initial
Purchaser will take reasonable steps to inform, and cause each of its U.S.
Affiliates to take reasonable steps to inform, persons acquiring Securities
from such Initial Purchaser or affiliate, as the case may be, in the United
States that the Securities (A) have not been and will not be registered
under the 1933 Act, (B) are being sold to them without registration under
the 1933 Act in reliance on Rule 144A or in accordance with another
exemption from registration under the 1933 Act, as the case may be, and (C) may
not be offered, sold or otherwise transferred except (1) to the Company, (2) outside
the United States in accordance with Regulation S under the 1933 Act, or (3) inside
the United States in accordance with (x) Rule 144A to a person whom the
seller reasonably believes is a Qualified Institutional Buyer that is
purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the 1933 Act.

 

(v)           Minimum
Principal Amount.  No sale of the
Securities to any one Subsequent Purchaser will be for less than U.S. $1,000
principal amount and no Security will be issued in a smaller principal amount.  If the Subsequent Purchaser is a non-bank

 

16

 

fiduciary acting on behalf of others, each
person for whom it is acting must purchase at least U.S. $1,000 principal
amount of the Securities.

 

(b)  Covenants
of the Company.  The Company
covenants with each Initial Purchaser as follows:

 

(i)            Integration.  The Company agrees that it will not and will
cause its Affiliates not to, directly or indirectly, solicit any offer to buy,
sell or make any offer or sale of, or otherwise negotiate in respect of,
securities of the Company of any class if, as a result of the doctrine of “integration”
referred to in Rule 502 under the 1933 Act, such offer or sale would
render invalid (for the purpose of (i) the sale of the Securities by the
Company to the Initial Purchasers, (ii) the resale of the Securities by
the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the
Securities by such Subsequent Purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A thereunder or otherwise.

 

(ii)           Rule 144A
Information.  The Company agrees
that, in order to render the offered Securities eligible for resale pursuant to
Rule 144A under the 1933 Act, while any of the offered Securities remain
outstanding, it will make available, upon request, to any holder of offered
Securities or prospective purchasers of Securities the information specified in
Rule 144A(d)(4), unless the Company furnishes information to the
Commission pursuant to Section 13 or 15(d) of the 1934 Act.

 

(iii)          Restriction
on Repurchases.  Until the expiration
of two years after the original issuance of the offered Securities, the Company
will not, and will cause its Affiliates not to, resell any offered Securities
which are “restricted securities” (as such term is defined under Rule 144(a)(3) under
the 1933 Act), whether as beneficial owner or otherwise (except as agent acting
as a securities broker on behalf of and for the account of customers in the
ordinary course of business in unsolicited broker’s transactions).

 

(c)  Qualified
Institutional Buyer.  Each
Initial Purchaser, severally and not jointly, represents and warrants to, and
agrees with, the Company that it is a Qualified Institutional Buyer and an “accredited
investor” within the meaning of Rule 501(a) under the 1933 Act (an “Accredited
Investor”).

 

Section 7.               Indemnification.

 

(a)  Indemnification
of Initial Purchasers.  The
Company agrees to indemnify and hold harmless each Initial Purchaser, its
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
(each, an “Affiliate”), its selling agents and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:

 

(i)            against
any and all loss, liability, claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Memorandum, the Disclosure Package,
the Final Offering Memorandum (or any amendment or supplement thereto) or any
Supplemental Offering Materials, or the omission or alleged omission therefrom
of a

 

17

 

material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

 

(ii)           against
any and all loss, liability, claim, damage and expense whatsoever, as incurred,
to the extent of the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; provided that
(subject to Section 7(d) below) any such settlement is effected with
the written consent of the Company; and

 

(iii)          against
any and all expense whatsoever, as incurred (including the fees and
disbursements of counsel chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;

 

provided, however,
that this indemnity agreement shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any Initial Purchaser
through Merrill Lynch expressly for use in any Preliminary Offering Memorandum,
the Disclosure Package, the Final Offering Memorandum (or any amendment or
supplement thereto) or in any Supplemental Offering Materials.

 

(b)  Indemnification
of Company.  Each Initial
Purchaser severally agrees to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in any preliminary offering memorandum, the Disclosure Package, the Final
Offering Memorandum or any Supplemental Offering Materials in reliance upon and
in conformity with written information furnished to the Company by such Initial
Purchaser through Merrill Lynch expressly for use therein.

 

(c)  Actions
against Parties; Notification. 
Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement.  In the case of parties indemnified pursuant
to Section 7(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 7(b) above,
counsel to the indemnified parties shall be selected by the Company.  An indemnifying party may participate at its
own expense in the defense of any such action;

 

18

 

provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified party)
also be counsel to the indemnified party. 
In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.  No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section or Section 8 hereof
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

 

(d)  Settlement
without Consent if Failure to Reimburse.  If at any time an indemnified party shall
have requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 7(a)(ii) effected
without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

 

Section 8.               Contribution.  If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand and of the Initial
Purchasers on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as
well as any other relevant equitable considerations.

 

The relative benefits received by the Company
on the one hand and the Initial Purchasers on the other hand in connection with
the offering of the Securities pursuant to this Agreement shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
Initial Purchasers, bear to the aggregate initial offering price of the
Securities.

 

19

 

The relative fault of the Company on the one
hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Initial Purchasers
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

 

The Company and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this Section.  The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.

 

Notwithstanding the provisions of this
Section, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities purchased
and sold by it hereunder exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.

 

No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.

 

For purposes of this Section, each person, if
any, who controls an Initial Purchaser within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act and each Initial Purchaser’s
Affiliates and selling agents shall have the same rights to contribution as
such Initial Purchaser, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company.  The Initial Purchasers’ respective
obligations to contribute pursuant to this Section are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.

 

Section 9.               Representations,
Warranties and Agreements to Survive. 
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of
any Initial Purchaser or its Affiliates or selling agents, any person
controlling any Initial Purchaser, its officers or directors or any person
controlling the Company and (ii) delivery of and payment for the
Securities.

 

20

 

Section 10.             Termination
of Agreement.

 

(a)  Termination;
General.  The Representative
may terminate this Agreement, by notice to the Company, at any time at or prior
to the applicable Closing Time (i) if there has been, since the time of
execution of this Agreement or since the date as of which information is given
in the Preliminary Offering Memorandum, the Disclosure Package or the Final
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such as to make it, in the judgment of the Representative, impracticable or
inadvisable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New
York Stock Exchange or in the NASDAQ System has been suspended or materially limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc.
or any other governmental authority, or (iv) a material disruption has
occurred in commercial banking or securities settlement or clearance services
in the United States, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.

 

(b)  Liabilities.  If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further
that Sections 1, 7, 8 and 9 shall survive such termination and remain in full
force and effect.

 

Section 11.             Default
by One or More of the Initial Purchasers. 
If one or more of the Initial Purchasers shall fail at the applicable
Closing Time to purchase the Securities which it or they are obligated to purchase
under this Agreement (the “Defaulted Securities”), the Representative shall
have the right, within 24 hours thereafter, to make arrangements for one or
more of the non-defaulting Initial Purchasers, or any other initial purchasers,
to purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Representative shall not have completed such arrangements within such 24-hour
period, then:

 

(a)           if
the number of Defaulted Securities does not exceed 10% of the aggregate
principal amount of the Securities to be purchased hereunder, each of the
non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Initial Purchasers, or

 

21

 

(b)           if
the number of Defaulted Securities exceeds 10% of the aggregate principal
amount of the Securities to be purchased hereunder, this Agreement shall
terminate without liability on the part of any non-defaulting Initial
Purchaser.

 

No action taken pursuant to this Section shall
relieve any defaulting Initial Purchaser from liability in respect of its
default.

 

In the event of any such default which does
not result in a termination of this Agreement, either the Representative or the
Company shall have the right to postpone the applicable Closing Time for a
period not exceeding seven days in order to effect any required changes in the
Offering Memorandum or in any other documents or arrangements.  As used herein, the term “Initial Purchaser”
includes any person substituted for an Initial Purchaser under this Section.

 

Section 12.             Tax
Disclosure.  Notwithstanding any
other provision of this Agreement, immediately upon commencement of discussions
with respect to the transactions contemplated hereby, the Company (and each
employee, representative or other agent of the Company) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials
of any kind (including opinions or other tax analyses) that are provided to the
Company relating to such tax treatment and tax structure.  For purposes of the foregoing, the term “tax
treatment” is the purported or claimed federal income tax treatment of the
transactions contemplated hereby, and the term “tax structure” includes any
fact that may be relevant to understanding the purported or claimed federal
income tax treatment of the transactions contemplated hereby.

 

Section 13.             Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication.  Notices to the Initial Purchasers shall be
directed to the Representative at 4 World Financial Center, New York, New York
10080, attention of John Fortson, Director, notices to the Company shall be
directed to it at One AAR Place, 1100 N. Wood Dale Road, Wood Dale, Illinois
60191, attention Secretary.

 

Section 14.             No
Advisory or Fiduciary Relationship. 
The Company acknowledges and agrees that (a) the purchase and sale
of the Securities pursuant to this Agreement, including the determination of
the offering price of the Securities and any related discounts and commissions,
is an arm’s-length commercial transaction between the Company, on the one hand,
and several Initial Purchasers on the other hand, (b) in connection with
the offering contemplated hereby and the process leading to such transaction
each Initial Purchaser is and has been acting solely as a principal and is not
the agent or fiduciary of the Company, or its stockholders, creditors,
employees or any other party, (c) no Initial Purchaser has assumed, or
will assume, an advisory or fiduciary responsibility in favor of the Company
with respect to the offering contemplated hereby or the process leading thereto
(irrespective of whether such Initial Purchaser has advised or is currently
advising the Company on other matters) and no Initial Purchaser has any
obligation to the Company with respect to the offering contemplated hereby
except the obligations expressly set forth in this Agreement, (d) the
Initial Purchasers and their respective affiliates may be engaged in a broad
range of transactions that involve interests that differ from those of each of
the Company, and (e) the Initial Purchasers have not provided any legal,
accounting, regulatory or tax advice with respect to the offering contemplated
hereby and the

 

22

 

Company has consulted its own legal, accounting, regulatory and tax
advisors to the extent it deemed appropriate.

 

Section 15.             Integration.  This Agreement supersedes all prior
agreements and understandings (whether written or oral) between the Company and
the Initial Purchasers, or any of them with respect to the subject matter
hereof.

 

Section 16.             Parties.  This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers and the Company and their respective
successors.  Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Initial Purchasers and the Company
and their respective successors and the controlling persons and officers and
directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained.  This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Initial Purchasers and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or
corporation.  No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely
of such purchase.

 

Section 17.             GOVERNING
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 18.             TIME.  TIME SHALL BE OF THE ESSENCE OF THIS
AGREEMENT.  EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

 

Section 19.             Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

 

Section 20.             Effect
of Headings.  The Section headings
herein are for convenience only and shall not affect the construction hereof.

 

23

 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement between the Initial Purchasers and the Company
in accordance with its terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  AAR CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TIMOTHY J. ROMENESKO

  	
   

  
	
   

  	
   

  	
  Name: Timothy J. Romenesko

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
  CONFIRMED AND ACCEPTED,

  	
   

  
	
    as of the date first above
  written:

  	
   

  
	
   

  	
   

  
	
  MERRILL LYNCH & CO.

  	
   

  
	
   

  	
   

  
	
  MERRILL LYNCH, PIERCE, FENNER &
  SMITH

  	
   

  
	
   

  	
  INCORPORATED

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ JOHN C. FORTSON

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  
								

 

For itself and as Representative of the other
Initial Purchasers named in Schedule A hereto.

 

24

 

Exhibit A(1)

 

FORM OF OPINION OF SHIFF
HARDIN LLP

TO BE DELIVERED PURSUANT TO

SECTION 5(a)

 

(i)            The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware.

 

(ii)           The
Company has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Disclosure Package
and the Final Offering Memorandum and to enter into and perform its obligations
under the Purchase Agreement.

 

(iii)          The
authorized capital stock of the Company is as set forth in the Disclosure
Package and the Final Offering Memorandum;

 

(iv)          The
Purchase Agreement has been duly authorized, executed and delivered by the
Company.

 

(v)           The
Indenture has been duly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery thereof by the Trustee)
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.

 

(vi)          The
Registration Rights Agreement has been authorized by the Company and, when
executed and delivered by the Company and the Representative, will constitute a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.

 

(vii)         The
Securities are in the form contemplated by the Indenture, have been duly
authorized by the Company and, when executed by the Company and authenticated
by the Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
issued and delivered against payment of the purchase price therefor will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, and will be entitled to the
benefits of the Indenture.

 

(viii)        Upon
issuance and delivery of the Securities in accordance with the Purchase
Agreement and the Indenture, the Securities will be convertible at the option
of the holder thereof into shares of Common Stock, cash or a combination of
cash and shares of Common Stock in accordance with the terms of the Securities
and the Indenture; the shares of Common Stock issuable upon conversion of the
Securities have been duly authorized and reserved for issuance upon such
conversion by all necessary corporate action and such shares, when issued upon
such conversion in accordance with the terms of the Securities, will be validly
issued and will be fully paid and non-assessable, and will conform to the
description of the Common Stock contained in the Disclosure Package and the
Final Offering Memorandum; no holder of such

 

A(1) - 1

 

shares will be subject to personal liability by reason of being such a
holder; and the issuance of such shares upon such conversion will not be
subject to the preemptive or other similar rights of any security holder of the
Company.

 

(ix)           The
Securities, the Indenture and the Registration Right Agreement conform in all
material respects to the descriptions thereof contained in the Disclosure
Package and the Final Offering Memorandum.

 

(x)            The
documents incorporated by reference in the Offering Memorandum (other than the
financial statements and supporting schedules therein, as to which no opinion need
be rendered), when they were filed with the Commission complied as to form in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder.

 

(xi)           The
information in the Disclosure Package and in the Offering Memorandum under “Description
of the Notes”, “Description of Capital Stock”, “Material United States Federal
Income Tax Considerations” and “Plan of Distribution” and to the extent that it
constitutes matters of law, summaries of legal matters, the Company’s charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.

 

(xii)          No
filing with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency,
domestic or foreign (other than such as may be required under the applicable
securities laws of the various jurisdictions in which the Securities will be
offered or sold, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and delivery of
the Purchase Agreement or the due execution, delivery or performance of the
Indenture or the Registration Rights Agreement by the Company or for the offering,
issuance, sale or delivery of the Securities to the Initial Purchasers or the
resale by the Initial Purchasers in accordance with the terms of the Purchase
Agreement, except with respect to the Company’s obligations under the
Registration Rights Agreement, the filing of the registration statement with
the Commission under the 1933 Act and the Commission’s declaration of
effectiveness of such registration statement and the qualification of the
Indenture under Trust Indenture Act of 1939, as amended (the “1939 Act”).

 

(xiii)         It
is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent Purchaser in the
manner contemplated by the Purchase Agreement, the Disclosure Package and the
Final Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture under the Trust Indenture Act of 1939.

 

(xiv)        The
execution, delivery and performance of the Purchase Agreement, the Indenture,
the Securities and the Registration Rights Agreement and the consummation of
the transactions contemplated in the Purchase Agreement, the Disclosure Package
and the Final Offering Memorandum (including the use of the proceeds from the
sale of the Securities as described in the Disclosure Package and the Final
Offering Memorandum under the caption “Use Of Proceeds” and the issuance of the
shares of Common Stock upon conversion of any Securities) and compliance by the
Company with its obligations under the Purchase Agreement,

 

A(1) - 2

 

the Indenture, the Securities and the Registration Rights Agreement do
not and will not, whether with or without the giving of notice or lapse of time
or both, conflict with or constitute a breach of, or default or Repayment Event
(as defined below) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary thereof pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, filed as an exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended May 31, 2005 or any subsequent Exchange Act
filing prior to the date of the Purchase Agreement, to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any subsidiary thereof
is subject (except for such conflicts, breaches, defaults or Repayment Events
or liens, charges or encumbrances that would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole), nor will such action
result in any violation of the provisions of the charter or by-laws of the
Company, or any applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to us, of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties, assets or operations.  “Repayment Event” means any event or
condition which gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.

 

(xv)         The
Company is not required, and upon the issuance and sale of the Securities as
herein contemplated and the application of the net proceeds therefrom as
described in the Disclosure Package and the Final Offering Memorandum will not
be required to, register as “investment company” under the 1940 Act.

 

Nothing has come to our attention that would
lead us to believe that (1) as of the Applicable Time, the Disclosure
Package (except for the financial statements and schedules and other financial
data included or incorporated by reference therein or omitted therefrom, as to
which we need make no statement) included any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements therein, in the light of circumstances under which they were made,
not misleading or (2) that the Offering Memorandum or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom as to which we need make no statement), at the time the Offering
Memorandum was issued, at the time any such amended or supplemented Offering
Memorandum was issued or at Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

 

In rendering such opinion, such counsel may
rely, as to matters of fact (but not as to legal conclusions), to the extent
they deem proper, on certificates of responsible officers of the Company and
public officials.  Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).

 

A(1) - 3

 

Exhibit A(2)

 

FORM OF OPINION OF GENERAL
COUNSEL

FOR THE COMPANY PURSUANT TO

SECTION 5(a)

 

(i)            The
Company is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

(ii)           The
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any security holder of
the Company.

 

(iii)          Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Disclosure Package
and the Final Offering Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to the best of my
knowledge and information, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.

 

(iv)          There
is not pending or, to the best of my knowledge, threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any subsidiary is
a party, or to which the property of the Company or any subsidiary thereof is
subject, before or brought by any court or governmental agency or body, which
would reasonably be expected to result in a material adverse effect on the
Company and its subsidiaries, taken as a whole, or which would reasonably be
expected to materially and adversely affect the properties or assets thereof or
the consummation of the transactions contemplated in the Purchase Agreement or
the performance by the Company of its obligations thereunder or the
transactions contemplated by the Disclosure Package and the Final Offering
Memorandum.

 

(v)           Neither
the Company nor any of its subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which or any of them may be bound, or to which any of the property
or assets of the Company or any of its subsidiaries is subject, except for such
defaults that would not result in a material adverse effect on the Company and
its subsidiaries, taken as a whole.

 

A(2) - 1

 

SCHEDULE A

 

	
  Name of Initial Purchaser

  	
   

  	
  Principal

  Amount of

  Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill Lynch, Pierce, Fenner &
  Smith Incorporated

  	
   

  	
  $

  	
  100,000,000

  	
   

  
	
  Goldman, Sachs & Co.

  	
   

  	
  12,500,000

  	
   

  
	
  SG Cowen & Co., LLC

  	
   

  	
  12,500,000

  	
   

  
	
  Total

  	
   

  	
  $

  	
  125,000,000

  	
   

  

 

A-1

 

SCHEDULE B

 

**APPROVED
FOR EXTERNAL USE**

**QIBS
ONLY**

 

~ Sole-Bookrun $125mm 144A Convertible Senior Notes due 2026 Pricing ~

 

 

AAR CORP.

(AIR/NYSE)

 

Gross
Proceeds: $125,000,000

Overallotment
Option: $25,000,000

 

144A
Convertible Senior Notes Pricing Terms:

Issuer: AAR CORP.

Ticker/Exchange:
AIR/NYSE

Offering
Size: $125,000,000

Overallotment
Option: $25,000,000

Issue
Price: $1,000.00

Maturity: February 1, 2026

Interest
Rate: 1.75% per annum

Conversion
Premium: 21.5%

Last Sale
(1/26/06): $24.22

Conversion
Price: $29.43

Conversion
Rate: 33.9789

Conversion
Rate Cap: 41.2881

Interest
Pay Dates: February 1 &
August 1 beginning August 1, 2006

Hard Call
Protection: Ending February 6,
2013

Put Dates: February 1, 2013, February 1, 2016
and February 1, 2021

Contingent
Conversion Trigger: 120%
of the conversion price (initially $35.32)

Registration:
144A with
Registration Rights

Dividend
Protection: Full
dividend protection via a conversion rate adjustment

 

 

Make Whole Premium:

 

	
  Stock Price on

  	
   

  	
  Make Whole Premium (Increase in Applicable Conversion Rate)

  	
   

  
	
  Effective Date

  	
   

  	
  2/1/06

  	
   

  	
  2/1/07

  	
   

  	
  2/1/08

  	
   

  	
  2/1/09

  	
   

  	
  2/1/10

  	
   

  	
  2/1/11

  	
   

  	
  2/1/12

  	
   

  	
  2/6/13

  	
   

  
	
  $

  	
  24.22

  	
   

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  7.30

  	
   

  	
  0.00

  	
   

  
	
  27.50

  	
   

  	
   

  	
  5.79

  	
   

  	
  5.66

  	
   

  	
  5.50

  	
   

  	
  5.30

  	
   

  	
  5.03

  	
   

  	
  4.64

  	
   

  	
  3.98

  	
   

  	
  0.00

  	
   

  
	
  30.00

  	
   

  	
   

  	
  4.94

  	
   

  	
  4.78

  	
   

  	
  4.55

  	
   

  	
  4.29

  	
   

  	
  3.94

  	
   

  	
  3.44

  	
   

  	
  2.62

  	
   

  	
  0.00

  	
   

  
	
  32.50

  	
   

  	
   

  	
  4.36

  	
   

  	
  4.10

  	
   

  	
  3.93

  	
   

  	
  3.64

  	
   

  	
  3.15

  	
   

  	
  2.61

  	
   

  	
  1.76

  	
   

  	
  0.00

  	
   

  
	
  35.00

  	
   

  	
   

  	
  3.78

  	
   

  	
  3.57

  	
   

  	
  3.30

  	
   

  	
  2.98

  	
   

  	
  2.57

  	
   

  	
  2.02

  	
   

  	
  1.21

  	
   

  	
  0.00

  	
   

  
	
  40.00

  	
   

  	
   

  	
  3.03

  	
   

  	
  2.81

  	
   

  	
  2.53

  	
   

  	
  2.22

  	
   

  	
  1.82

  	
   

  	
  1.32

  	
   

  	
  0.66

  	
   

  	
  0.00

  	
   

  
	
  50.00

  	
   

  	
   

  	
  2.15

  	
   

  	
  1.95

  	
   

  	
  1.71

  	
   

  	
  1.44

  	
   

  	
  1.11

  	
   

  	
  0.75

  	
   

  	
  0.35

  	
   

  	
  0.00

  	
   

  
	
  60.00

  	
   

  	
   

  	
  1.67

  	
   

  	
  1.50

  	
   

  	
  1.29

  	
   

  	
  1.07

  	
   

  	
  0.82

  	
   

  	
  0.56

  	
   

  	
  0.28

  	
   

  	
  0.00

  	
   

  
	
  70.00

  	
   

  	
   

  	
  1.38

  	
   

  	
  1.24

  	
   

  	
  1.06

  	
   

  	
  0.88

  	
   

  	
  0.68

  	
   

  	
  0.46

  	
   

  	
  0.24

  	
   

  	
  0.00

  	
   

  
	
  80.00

  	
   

  	
   

  	
  1.19

  	
   

  	
  1.06

  	
   

  	
  0.91

  	
   

  	
  0.75

  	
   

  	
  0.58

  	
   

  	
  0.40

  	
   

  	
  0.21

  	
   

  	
  0.00

  	
   

  

 

(No adjustment to the applicable conversion
rate below $24.22 or above $80.00)

 

Trade Date:
1/26/06

Settlement
Date: 2/01/06

144A CUSIP:
000361 AG 0

 

Sole-Bookrunner:
Merrill Lynch & Co.

Co-Lead
Managers: Goldman, Sachs & Co. and SG Cowen & Co.

 

AAR is a diversified provider of products and
services to the worldwide aviation/aerospace and defense industries.

 

**QIBS
ONLY**

**APPROVED
FOR EXTERNAL USE**

 

This communication is intended for the sole
use of the person to whom it is provided by us. 
This offering is being conducted in the U.S. pursuant to Rule 144A
of the Securities Act 1933, as amended, and may therefore only be offered to
QIBs.

 

A written offering memorandum may be obtained
from your Merrill Lynch sales representative, from Merrill Lynch, Pierce, Fenner &
Smith Incorporated, 4 World Financial Center, FL 05, New York, NY 10080 or, in
Canada, from Merrill Lynch Canada Inc., 181 Bay Street-Suite 400, Toronto,
Ontario M4T 2A9.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]