Document:

Exhibit 10.2

 

EXECUTION COPY

 

 

GUARANTEE AND COLLATERAL
AGREEMENT

 

made by 

 

DOCTOR ACQUISITION CO.,

 

RDA HOLDING CO.,

 

THE READER’S DIGEST
ASSOCIATION, INC.

 

and

 

THE GUARANTORS IDENTIFIED
HEREIN

 

in favor of

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

Dated as of March 2, 2007

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  DEFINED TERMS

  	
  1

  
	
  1.1.

  	
  Definitions

  	
  1

  
	
  1.2.

  	
  Other Definitional Provisions

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  GUARANTEE

  	
  5

  
	
  2.1.

  	
  Guarantee

  	
  5

  
	
  2.2.

  	
  Right of Contribution

  	
  6

  
	
  2.3.

  	
  No Subrogation

  	
  6

  
	
  2.4.

  	
  Amendments, etc., with respect to the Borrower Obligations

  	
  7

  
	
  2.5.

  	
  Guarantee Absolute and Unconditional

  	
  7

  
	
  2.6.

  	
  Reinstatement

  	
  8

  
	
  2.7.

  	
  Payments

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  GRANT OF SECURITY INTEREST

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  10

  
	
  4.1.

  	
  Title; No Other Liens

  	
  10

  
	
  4.2.

  	
  Perfected First Priority Liens

  	
  11

  
	
  4.3.

  	
  Jurisdiction of Organization

  	
  11

  
	
  4.4.

  	
  Inventory and Equipment

  	
  11

  
	
  4.5.

  	
  Farm Products

  	
  11

  
	
  4.6.

  	
  Investment Property

  	
  11

  
	
  4.7.

  	
  Receivables

  	
  12

  
	
  4.8.

  	
  Intellectual Property

  	
  12

  
	
  4.9.

  	
  Commercial Tort Claims

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  COVENANTS

  	
  12

  
	
  5.1.

  	
  Delivery of Instruments, Certificated Securities and Chattel Paper

  	
  13

  
	
  5.2.

  	
  Maintenance of Insurance

  	
  13

  
	
  5.3.

  	
  Maintenance of Perfected Security Interest; Further Documentation

  	
  13

  
	
  5.4.

  	
  Changes in Locations, Name, etc.

  	
  14

  
	
  5.5.

  	
  Notices

  	
  14

  
	
  5.6.

  	
  Investment Property

  	
  14

  
	
  5.7.

  	
  Receivables

  	
  16

  
	
  5.8.

  	
  Intellectual Property

  	
  16

  
	
  5.9.

  	
  Commercial Tort Claims

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  REMEDIAL PROVISIONS

  	
  18

  
	
  6.1.

  	
  Certain Matters Relating to Receivables

  	
  18

  
	
  6.2.

  	
  Communications with Obligors; Grantors Remain Liable

  	
  19

  
	
  6.3.

  	
  Pledged Equity

  	
  20

  
	
  6.4.

  	
  Proceeds to be Turned Over to Administrative Agent

  	
  21

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.5.

  	
  Application of Proceeds

  	
  21

  
	
  6.6.

  	
  Code and Other Remedies

  	
  21

  
	
  6.7.

  	
  Registration Rights

  	
  22

  
	
  6.8.

  	
  Deficiency

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  THE ADMINISTRATIVE AGENT

  	
  23

  
	
  7.1.

  	
  Administrative Agent’s Appointment as Attorney-in-Fact, etc.

  	
  23

  
	
  7.2.

  	
  Duty of Administrative Agent

  	
  25

  
	
  7.3.

  	
  Execution of Financing Statements

  	
  25

  
	
  7.4.

  	
  Authority of Administrative Agent

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  MISCELLANEOUS

  	
  26

  
	
  8.1.

  	
  Amendments in Writing

  	
  26

  
	
  8.2.

  	
  Notices

  	
  26

  
	
  8.3.

  	
  No Waiver by Course of Conduct; Cumulative Remedies

  	
  26

  
	
  8.4.

  	
  Enforcement Expenses; Indemnification

  	
  26

  
	
  8.5.

  	
  Successors and Assigns

  	
  27

  
	
  8.6.

  	
  Setoff

  	
  27

  
	
  8.7.

  	
  Counterparts

  	
  27

  
	
  8.8.

  	
  Severability

  	
  28

  
	
  8.9.

  	
  Section Headings

  	
  28

  
	
  8.10.

  	
  Integration

  	
  28

  
	
  8.11.

  	
  GOVERNING LAW

  	
  28

  
	
  8.12.

  	
  Submission To Jurisdiction; Waivers

  	
  28

  
	
  8.13.

  	
  Acknowledgments

  	
  29

  
	
  8.14.

  	
  Additional Guarantors and Grantors

  	
  29

  
	
  8.15.

  	
  Releases

  	
  29

  
	
  8.16.

  	
  WAIVER OF JURY TRIAL

  	
  30

  
	
  8.17.

  	
  Effectiveness of the Merger; Assignment and Delegation to and
  Assumption by Reader’s Digest

  	
  30

  
	
  8.18.

  	
  German Borrower Security

  	
  30

  
	
  8.19.

  	
  Parallel Obligations

  	
  31

  

 

SCHEDULES

 

	
  Schedule 1

  	
  Notice Addresses

  	
   

  
	
  Schedule 2

  	
  Investment Property

  	
   

  
	
  Schedule 3

  	
  Perfection Matters

  	
   

  
	
  Schedule 4

  	
  Jurisdictions of Organization

  	
   

  
	
  Schedule 5

  	
  Inventory and Equipment Locations

  	
   

  
	
  Schedule 6

  	
  Intellectual Property

  	
   

  
	
  Schedule 7

  	
  Commercial Tort Claims

  	
   

  

 

ANNEX

 

	
  Annex 1

  	
  Form of Security Agreement Supplement

  	
   

  
	
  Annex 2

  	
  Form of Perfection Certificate

  	
   

  

 

ii

 

GUARANTEE AND COLLATERAL AGREEMENT, dated as
of March 2, 2007, made by each of the signatories hereto (other than the
German Borrower, and together with any other entity that may become a party
hereto as provided herein, the “Grantors”), in favor of JPMORGAN CHASE
BANK, N.A., as Administrative Agent (in such capacity, the “Administrative
Agent”) for the lending and other financial institutions (the “Lenders”)
from time to time parties to the Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among DOCTOR ACQUISITION CO., a Delaware corporation (to be
merged with and into Reader’s Digest (as defined below), the “Company”),
RDA HOLDING CO., a Delaware corporation (“Holdings”), THE READER’S
DIGEST ASSOCIATION, INC., a Delaware corporation (“Reader’s Digest”),
the Overseas Borrowers from time to time party thereto (together with the
Company, the “Borrowers”), the Lenders and the Administrative Agent.

 

W I T N E S S E T H:

 

WHEREAS, Holdings, the Borrowers, the Lenders
and the Administrative Agent have entered into the Credit Agreement, pursuant
to which the Lenders have severally agreed to make extensions of credit to the
Borrowers upon the terms and subject to the conditions set forth therein;

 

WHEREAS, each Borrower is a member of an
affiliated group of companies that, following the consummation of the
Acquisitions, will include each other Grantor;

 

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

 

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

 

WHEREAS, it is a condition precedent to the
obligation of the Lenders 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 for the ratable benefit of
the Secured Parties;

 

NOW, THEREFORE, in consideration of the
premises and the agreements hereinafter set forth, and in order to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and in
order to induce the Lenders to make their respective extensions of credit to
the Borrowers thereunder, each Grantor hereby agrees with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:

 

SECTION 1.   DEFINED
TERMS

 

1.1.                              Definitions.  (a)  Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms are used herein
as defined in the New York UCC: 
Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims,
Documents,

 

 

Equipment, Farm
Products, General Intangibles, Instruments, Inventory, Letter of Credit Rights
and Supporting Obligations.

 

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

 

“Agreement”:  this Guarantee and Collateral Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.

 

“Applicable Governmental
Authority”:  as defined in Section 5.7(c).

 

“Borrower Obligations”:  the “Obligations” as defined in the Credit Agreement.

 

“Collateral”:  as defined in Section 3.

 

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

 

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

 

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

 

“Deposit Account”:  as defined in the Uniform Commercial Code of
any applicable jurisdiction and, in any event, including, without limitation,
any demand, time savings, passbook or like account maintained with a depositary
institution.

 

“Excluded Property”: as
defined in Section 3.

 

“Foreign Subsidiary”:  any direct or indirect Restricted Subsidiary
of the Company which (i) is not a Domestic Subsidiary or (ii) is set
forth on Schedule 1.01E to the Credit Agreement.

 

“Foreign Subsidiary Voting
Stock”:  the voting Equity Interests
of any Foreign Subsidiary and of any Domestic Subsidiary substantially all of
whose assets consist of voting Equity Interests of one or more Foreign
Subsidiaries.

 

“Guarantor Obligations”:  with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2)
or any other Loan Document or any Secured Hedge Agreement to which such
Guarantor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or

 

2

 

otherwise (including, without
limitation, all Attorney Costs that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Loan Document).

 

“Guarantors”:  the collective reference to each Grantor
other than the Company; provided that the term “Guarantors” shall
include the Company in the case of the Overseas Obligations.

 

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

 

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

 

“Investment Property”:  the collective reference to (i) all “investment
property” as such term is defined in Section 9-102(a)(49) of the New York
UCC (other than any Foreign Subsidiary Voting Stock and any Equity Interests of
Unrestricted Subsidiaries excluded from the definition of “Pledged Equity”) and
(ii) whether or not constituting “investment property” as so defined, all
Pledged Debt and all Pledged Equity.

 

“Issuers”:  the collective reference to each issuer of
any Investment Property.

 

“LTIBR”:  any interest-bearing receivables, including
deposits or other funds, with a maturity that qualifies as long-term pursuant
to section 8 no. 1 German Trade Tax Act (Gewerbesteuergesetz)
to be applied mutatis  mutandis
in accordance with marginal notes 20 and 37 of the decree to § 8a of the German
Corporate Income Tax Act (Körperschaftsteuergesetz)
dated July 15, 2004.

 

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

 

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

 

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

 

“Patent License”:  all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, use
or sell any invention covered in

 

3

 

whole or in part by a Patent,
including, without limitation, any of the foregoing referred to in Schedule 6.

 

“Perfection Certificate”:
 means a certificate substantially in the
form of Annex 2, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by the associate general counsel or the
chief legal officer of Reader’s Digest.

 

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

 

“Pledged Equity”:  the Equity Interests listed on Schedule 2,
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Equity Interests of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in
effect; provided that in no event shall (i) more than 65% of the
issued and outstanding Foreign Subsidiary Voting Stock of any Foreign
Subsidiary or of any Domestic Subsidiary substantially all of whose assets
consist of voting Equity Interests of one or more Foreign Subsidiaries, (ii) Equity
Interests of any Unrestricted Subsidiary, (iii) the Company Preferred
Stock or (iv) Equity Interests of any Restricted Subsidiary pledged to
secure Indebtedness permitted under Section 7.03(g) of the Credit
Agreement constitute Pledged Equity or be required to be pledged hereunder.

 

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

 

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

 

“Secured Parties”:  the collective reference to the Administrative Agent, the other Agents,
the L/C Issuers, the Lenders, the Hedge Banks, any Affiliate of a
Lender, the Supplemental
Administrative Agent and each co-agent or sub-agent appointed by the Administrative
Agent from time to time pursuant to Section 9.01(c) of the Credit
Agreement, to which Borrower Obligations or Guarantor Obligations, as
applicable, are owed.

 

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

 

“Specified Assets” means
(a) LTIBR and (b) following any amendment or replacement of § 8a of
the German Corporate Income Tax Act (Körperschaftsteuergesetz),
any other property or assets owned by any Loan Party or any other provider of
security, direct or indirect access to which property or assets (whether
through inclusion in the Collateral or otherwise) would result in adverse tax

 

4

 

consequences to Holdings and
its Subsidiaries as a consequence of any such amendment or replacement,
provided that the aggregate fair market value of the property and assets
included in the definition of Specified Assets pursuant to this clause (b) shall
not exceed an amount equal to 10% of the consolidated total assets of the
German Borrower and its Subsidiaries.

 

“Subsidiary Guarantor”:  any Subsidiary of the Company that is or
becomes a party to this Agreement.

 

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

 

“Trademark License”:  any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark.

 

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

 

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

 

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

 

SECTION 2.   GUARANTEE

 

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

 

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

 

5

 

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

 

(d)         The guarantee contained in this Section 2 shall remain
in full force and effect until all the Obligations (other than contingent
indemnification and contingent expense reimbursement obligations, any
Obligations in respect of Secured Hedge Agreements and Cash Management
Obligations) shall have been satisfied by payment in full, no Letter of Credit
shall be outstanding and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Borrowers
may be free from any Borrower Obligations.

 

(e)          Except as provided in Section 8.15, no payment made by
any Borrower, any of the Guarantors, any other guarantor or any other Person or
received or collected by the Administrative Agent or any Lender from any
Borrower, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any setoff, appropriation or application
at any time or from time to time in reduction of or in payment of the Borrower
Obligations shall be deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor
in respect of the Borrower Obligations), remain liable for the Borrower
Obligations up to the maximum liability of such Guarantor hereunder until the
Borrower Obligations are paid in full, no Letter of Credit is outstanding and
the Commitments are terminated.

 

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

 

2.3.                              No Subrogation.  Notwithstanding any payment made by any
Guarantor hereunder or any setoff or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against any Borrower or any other Guarantor or any collateral security,
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek any
contribution or reimbursement from any Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing
to the Administrative Agent and the Lenders by the Borrowers on account of the
Borrower Obligations are paid in full, no Letter of Credit is outstanding and
the Commitments are terminated.  If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Borrower Obligations shall not

 

6

 

have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.  For the avoidance of doubt, nothing in the
foregoing shall operate as a waiver of any subrogation rights.

 

2.4.                              Amendments, etc., with respect
to the Borrower Obligations.  To the fullest extent permitted by applicable
law, each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to
or further assent by any Guarantor, any demand for payment of any of the
Borrower Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon them or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders or all Lenders, as the case may
be) may reasonably deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. 
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Borrower Obligations or for the guarantee contained in
this Section 2 or any property subject thereto.

 

2.5.                              Guarantee Absolute and
Unconditional.  To the fullest extent permitted by applicable
law, each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Borrower Obligations and notice of or proof
of reliance by the Administrative Agent or any Lender upon the guarantee
contained in this Section 2 or acceptance of the guarantee contained in
this Section 2; the Borrower Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guarantee contained
in this Section 2; and all dealings between any Borrower and any of the
Guarantors, on the one hand, and the Administrative Agent and the Lenders, on
the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2.  To the fullest extent permitted by applicable
law, each Guarantor waives diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon any Borrower or any of the
Guarantors with respect to the Borrower Obligations.  Each Guarantor understands and agrees that
the guarantee contained in this Section 2, to the fullest extent permitted
by applicable law, shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or
enforceability of the Credit Agreement or any other Loan Document, any of the
Borrower Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Administrative Agent or any Lender, (b) any defense, setoff or
counterclaim (other than a defense of payment or performance)

 

7

 

which may at any
time be available to or be asserted by any Borrower or any other Person against
the Administrative Agent or any Lender or (c) any other circumstance
whatsoever (with or without notice to or knowledge of any Borrower or such
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of any Borrower for the Borrower Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy
or in any other instance.  When making
any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as it may have against any Borrower, any other Guarantor or
any other Person or against any collateral security or guarantee for the
Borrower Obligations or any right of offset with respect thereto, and any
failure by the Administrative Agent or any Lender to make any such demand, to
pursue such other rights or remedies or to collect any payments from any
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or
any release of any Borrower, any other Guarantor or any other Person or any
such collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any
Guarantor.  For the purposes hereof “demand”
shall include the commencement and continuance of any legal proceedings.

 

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

 

2.7.                              Payments.  Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent without setoff or
counterclaim in Dollars at the Administrative Agent’s Office.

 

SECTION 3.   GRANT OF
SECURITY INTEREST

 

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

 

(a)          all Accounts;

 

(b)         all Chattel Paper;

 

8

 

(c)          all Deposit Accounts;

 

(d)         all Documents;

 

(e)          all Equipment;

 

(f)            all Fixtures;

 

(g)         all General Intangibles;

 

(h)         all Instruments;

 

(i)             all Intellectual Property;

 

(j)             all Inventory;

 

(k)          all Investment Property;

 

(l)             all Letter of Credit Rights;

 

(m)       all Commercial Tort Claims with respect to the
matters described on Schedule 7;

 

(n)         all other personal property not otherwise
described above;

 

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

 

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

 

provided, however, that notwithstanding
any of the other provisions set forth in this Section 3, the term
Collateral and the terms set forth in this Section defining the components
of Collateral shall not include, and this Agreement shall not constitute a
grant of a security interest in, any of the following (the “Excluded
Property”): (i) any property to the extent that such grant of a
security interest is prohibited by any applicable Law of a Governmental
Authority, requires a consent not obtained of any Governmental Authority
pursuant to such Law or is prohibited by, or constitutes a breach or default
under or results in the termination of or gives rise to a right on the part of
the parties thereto other than Holdings, the Company and the Company’s
Subsidiaries to terminate (or materially modify) or requires any consent not
obtained under any contract, license, agreement, instrument or other document
evidencing or giving rise to such property or, in the case of any Investment
Property, Pledged Equity or Pledged Debt, any applicable shareholder or similar
agreement, except to the extent that such Law or the term in such contract,
license, agreement, instrument or other document or shareholder or similar
agreement providing for such prohibition, breach, default or right of
termination or modification or requiring such consent is ineffective under
applicable law, (ii) any property owned by any Grantor on the date hereof
or hereafter acquired that is subject to a Lien securing a purchase money,
project financing or capital or finance lease obligation permitted to be
incurred pursuant to the Credit Agreement if

 

9

 

the contract or other agreement in which such Lien is granted (or the
documentation providing for such purchase money, project financing or capital
or finance lease obligation) prohibits the creation of any other Lien on such
property, (iii) any trucks, trailers, tractors, service vehicles,
automobiles, rolling stock or other registered mobile equipment or equipment
covered by certificates of title or ownership of any Grantor, (iv) Deposit
Accounts exclusively used for payroll, payroll taxes and other employee wage
and benefit payments or any other Deposit Account with an average annual
balance of less than $5,000,000 and (v) the Equity Interests of Direct
Holdings IP L.L.C., a Delaware limited liability company, and any joint venture
in respect of which Holdings or any of its Subsidiaries holds an Equity
Interest if (and only so long as), in any case, the grant of any such security
interest is prohibited by, or constitutes a breach or default under or results
in the termination of or gives rise to a right on the part of the parties
thereto other than Holdings, the Company and the Company’s Subsidiaries to
terminate (or materially modify) or requires any consent not obtained under any
contract, license, agreement, instrument or other document evidencing or giving
rise to such property or any applicable shareholder, joint venture or similar
agreement; provided, however, that Excluded Property shall not
include any Proceeds, substitutions or replacements of any Excluded Property
referred to above and such Proceeds shall not constitute “Excluded Property”
(unless such Proceeds, substitutions or replacements would constitute Excluded
Property referred to above).  If an Event
of Default shall have occurred and be continuing, each Grantor shall, if
requested to do so by the Administrative Agent, use commercially reasonable
efforts to obtain any required consent that is reasonably obtainable with
respect to Collateral which the Administrative Agent reasonably determines to
be material.

 

SECTION 4.   REPRESENTATIONS
AND WARRANTIES

 

To induce the Administrative Agent and the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the Borrowers thereunder, each Grantor
hereby represents and warrants to the Administrative Agent and each Lender
that:

 

4.1.                              Title; No Other Liens.  Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Secured Parties
pursuant to this Agreement and the other Liens permitted to exist on the
Collateral by the Credit Agreement, such Grantor owns each item of the Collateral
free and clear of any and all Liens.  No
effective financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except
such as have been filed in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, pursuant to this Agreement or as are permitted
by the Credit Agreement or as to which documentation to terminate the same
shall have been delivered to the Administrative Agent.  For the avoidance of doubt, it is understood
and agreed that any Grantor may, as part of its business, grant licenses to
third parties to use Intellectual Property owned or developed by a
Grantor.  For purposes of this Agreement
and the other Loan Documents, such licensing activity shall not constitute a “Lien”
on such Intellectual Property.  Each of
the Administrative Agent and each Lender understands that any such licenses may
be exclusive to the applicable licensees, and such exclusivity provisions may
limit the ability of the Administrative Agent to utilize, sell, lease or
transfer the related Intellectual Property or otherwise realize value from such
Intellectual Property pursuant hereto.

 

10

 

4.2.                              Perfected First Priority Liens.  The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein,
including the exact legal name of each Grantor, is correct and complete in all
material aspects as of the Closing Date. 
The security interests granted pursuant to this Agreement (i) upon
completion of the filings and other actions specified on Schedule 3
(which, in the case of all filings and other documents referred to on said
Schedule, have been delivered to the Administrative Agent in completed and,
where required, duly executed form) (x) will constitute valid perfected
security interests in all of the Collateral (other than Intellectual Property)
in favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any
Persons purporting to purchase any Collateral from such Grantor, to the extent
a security interest therein may be perfected by filing, recording or
registration in the United States pursuant to the New York UCC, and (y) will
constitute valid perfected security interests in all of the Collateral
consisting of Intellectual Property in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, as collateral security for such
Grantor’s Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor, to the extent a security interest therein may be
perfected by filings to be made in the United States Patent and Trademark
Office and the United States Copyright Office, and (ii) are prior to all
other Liens on the Collateral in existence on the date hereof except for Liens
permitted by the Credit Agreement which have priority over the Liens on the
Collateral by operation of law (including the priority rules under the New
York UCC) or which, in the case of Collateral consisting of Pledged Equity and
Pledged Debt, are nonconsensual Liens permitted pursuant to Section 7.01
of the Credit Agreement to be prior to the security interests granted pursuant
to this Agreement or which, in the case of Collateral other than Pledged Equity
and Pledged Debt, are permitted pursuant to Section 7.01 of the Credit
Agreement to be prior to the security interests granted pursuant to this
Agreement.

 

4.3.                              Jurisdiction of Organization.  On the date hereof, such Grantor’s
jurisdiction of organization and identification number from the jurisdiction of
organization (if any) are specified on Schedule 4.  Such Grantor has furnished to the
Administrative Agent a certified charter, certificate of incorporation or other
organization document and long-form good standing certificate as of a date
which is recent to the date hereof.

 

4.4.                              Inventory and Equipment.  On the date hereof, the Inventory and the
Equipment of each Grantor are kept at the locations listed on Schedule 5.  The provisions of this Section 4.4 shall
not apply to Equipment or Inventory in transit, that has been sold (including
sales on consignment or approval in the ordinary course of business), that is
out for repair, that is at other locations for purposes of onsite maintenance
or repair or to Equipment and Inventory at locations with less than $5,000,000
in aggregate value.

 

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

 

4.6.                              Investment Property.  (a)  On the date hereof, the shares of
Pledged Equity pledged by such Grantor hereunder constitute all the issued and
outstanding shares of all classes of the Equity Interests of each Restricted
Subsidiary owned by such Grantor or, in the case of Restricted Subsidiaries
that are Foreign Subsidiaries or Domestic Subsidiaries substantially all of

 

11

 

whose assets consist
of voting Equity Interests of one or more Foreign Subsidiaries, the shares of
such Issuers pledged by such Grantor constitute 65% of the outstanding Foreign
Subsidiary Voting Stock of each such Issuer (or, if such Grantor owns less than
65% of the outstanding Foreign Subsidiary Voting Stock of any such Issuer,
constitute all the Foreign Subsidiary Voting Stock of such Issuer owned by such
Grantor) in each case to the extent required by clause (d) of the
Collateral and Guarantee Requirement.

 

(b)         All the shares of the Pledged Equity as to which the Company
or a Restricted Subsidiary of the Company is the Issuer have been duly and
validly issued and are fully paid and nonassessable.

 

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

 

(d)         Such Grantor is the beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens or options in favor of any other Person, except the security
interest created by this Agreement or nonconsensual Liens permitted pursuant to
Section 7.01 of the Credit Agreement.

 

4.7.                              Receivables.  (a)  No amount payable to such Grantor
under or in connection with any Receivable of an amount greater than $5,000,000
is evidenced by any Instrument or Chattel Paper which has not been delivered to
the Administrative Agent.

 

(b)         As of the Effective Date, the
aggregate amount of Receivables required to be included in Collateral owed by
Governmental Authorities to the Grantors does not exceed $5,000,000.

 

4.8.                              Intellectual Property.  Schedule 6 lists all Intellectual
Property (other than Copyright Licenses and Trademark Licenses) that is
registered in the United States or for which application for registration in
the United States has been filed and that is material to the operation of the
business of the Company and its Subsidiaries taken as a whole owned by such
Grantor in its own name on the date hereof.

 

4.9.                              Commercial Tort Claims.  On the date hereof, except to the extent
listed in Section 3 above, no Grantor has knowledge of rights in any
Commercial Tort Claim as to which it reasonably expects to recover more than
$5,000,000.

 

SECTION 5.   COVENANTS

 

Each Grantor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until the Obligations (other than contingent indemnification and
contingent expense reimbursement obligations, any Obligations

 

12

 

in respect of Secured Hedge Agreements and
Cash Management Obligations) shall have been paid in full, no Letter of Credit
shall be outstanding and the Commitments shall have terminated:

 

5.1.                              Delivery of Instruments,
Certificated Securities and Chattel Paper.  (a)  If (i) any
amount in excess of $5,000,000 owed by any Subsidiary of the Company to any
Grantor or (ii) any other amount in excess of $5,000,000 payable under or
in connection with any of the Collateral shall be or become evidenced by any
Instrument, Certificated Security or Chattel Paper, such Instrument,
Certificated Security or Chattel Paper shall be delivered as soon as reasonably
practicable to the Administrative Agent, duly indorsed in a manner reasonably
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.

 

(b)         Any Guarantee required to be subordinated pursuant to Section 7.03(c)(C) of
the Credit Agreement and any Indebtedness required to be subordinated pursuant
to Section 7.03(d) of the Credit Agreement shall, in each case, be
fully subordinated to the payment in full of the Obligations.

 

5.2.                              Maintenance of Insurance.  (a)  Such Grantor will maintain the
insurance required by Section 6.07 of the Credit Agreement.

 

(b)         All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days or, in the case of insurance
existing as of the date hereof, at least 10 days after receipt by the
Administrative Agent of written notice thereof and (ii) name the
Administrative Agent as insured party or loss payee.

 

5.3.                              Maintenance of Perfected
Security Interest; Further Documentation.  (a)  Such
Grantor shall take all actions reasonably requested by the Administrative Agent
to maintain the security interest created by this Agreement as a security
interest having at least the perfection and priority described in Section 4.2
and shall take all commercially reasonable actions to defend such security
interest against the claims and demands of all Persons whomsoever, subject in
each case to, in the case of Collateral consisting of Pledged Equity and
Pledged Debt, nonconsensual Liens permitted by Section 7.01 of the Credit
Agreement and, in the case of Collateral other than Pledged Equity and Pledged
Debt, Liens permitted by the Credit Agreement and to the rights of such Grantor
under the Loan Documents to dispose of the Collateral.

 

(b)         Such Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing the
assets and property of such Grantor and such other reports in connection
therewith as the Administrative Agent may reasonably request, all in reasonable
detail.  Each year, at the time of
delivery of annual financial statements with respect to the preceding fiscal
year pursuant to Section 6.01(a) of the Credit Agreement, the Company
shall deliver to the Administrative Agent a certificate executed by the
associate general counsel or the chief legal officer of the Company setting
forth the information required pursuant to the Perfection Certificate or
confirming that there has been no change in such information since the date of
such certificate or the date of the most recent certificate delivered pursuant
to this Section 5.3(b).

 

13

 

(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 will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions 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, without limitation, (i) filing any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property not issued by
the Company or its Subsidiaries, Deposit Accounts, Letter of Credit Rights and
any other relevant Collateral, using commercially reasonable efforts to take,
at any time after the occurrence and during the continuation of an Event of
Default, any actions necessary to enable the Administrative Agent to obtain “control”
(within the meaning of the applicable Uniform Commercial Code) with respect
thereto.

 

5.4.                              Changes in Locations, Name, etc. 
Such Grantor will not, except upon 10 days’ prior written notice to the
Administrative Agent (or such shorter notice as shall be reasonably
satisfactory to the Administrative Agent) and delivery to the Administrative
Agent of all additional executed 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, (i) change
its jurisdiction of organization from that referred to in Section 4.3 or (ii) change
its name.

 

5.5.                              Notices.  Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of:

 

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

 

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

 

5.6.                              Investment Property.  (a)  If such Grantor shall become
entitled to receive or shall receive any certificate (including, without
limitation, any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Equity Interests of any Restricted Subsidiary, which Equity
Interests are required to have been pledged pursuant to clause (d) of the
Collateral and Guarantee Requirement, whether in addition to, in substitution
of, as a conversion of, or in exchange for, any shares of the Pledged Equity,
or otherwise in respect thereof, such Grantor shall accept the same as the
agent of the Administrative Agent and the Lenders, hold the same in trust for
the Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor, to be held by
the Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (provided that stock certificates representing the
Pledged Equity of any Foreign

 

14

 

Immaterial
Subsidiary need not be delivered to the Administrative Agent for so long as
such Foreign Immaterial Subsidiary remains a Foreign Immaterial
Subsidiary).  If an Event of Default
shall have occurred and be continuing, and any distribution of capital to a
Grantor (other than cash) required to be included in Collateral shall be made
on or in respect of the Investment Property or any property (other than cash)
required to be included in Collateral shall be distributed to a Grantor upon or
with respect to the Investment Property pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, such Grantor shall, unless such distribution of capital or property is
otherwise subject to a perfected security interest in favor of the
Administrative Agent, use commercially reasonable efforts to cause it to be subject
to a perfected security interest in favor of the Administrative Agent to the
extent and in the manner required pursuant to Section 5.3 hereof.  If any such property so distributed in
respect of the Investment Property shall be received by such Grantor, such
Grantor shall, until such property is delivered to the Administrative Agent,
hold such property in trust for the Administrative Agent and the Lenders as
additional collateral security for the Obligations.

 

(b)         Without the prior written consent of the Administrative
Agent, such consent not to be unreasonably withheld, such Grantor will not (i) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Investment Property or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (ii) create,
incur or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Investment Property or Proceeds thereof, or
any interest therein, except for the security interests created by this
Agreement or permitted under Section 7.01 of the Credit Agreement or (iii) except
as permitted by the Credit Agreement, enter, subsequent to the date upon which
such Investment Property becomes Collateral hereunder, into any agreement
(other than the Credit Agreement) or undertaking restricting the right or
ability of such Grantor or the Administrative Agent to sell, assign or transfer
any of the Investment Property required to be included in Collateral or Proceeds
thereof.

 

(c)          In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating
to the Investment Property required to be included in Collateral issued by it
and will comply with such terms insofar as such terms are applicable to it, (ii) it
will notify the Administrative Agent promptly in writing of the occurrence of
any of the events described in Section 5.6(a) with respect to such
Investment Property issued by it and (iii) the terms of Sections 6.3(c) and
6.7 shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 6.3(c) and 6.7 with
respect to such Investment Property issued by it.

 

(d)         No Grantor shall permit any security interest in
certificated Pledged Equity of any Issuer that is not a Subsidiary to be
perfected by possession in favor of a Person other than the Administrative
Agent.

 

(e)          The Company shall not permit any security interest in
certificated Pledged Equity of 1302791 Alberta ULC (or any ULC parent entity
thereof that is a Foreign Subsidiary the Equity Interests of which are directly
owned by the Company or a U.S. Guarantor) to be perfected by possession in
favor of a Person other than the Administrative Agent (and shall so

 

15

 

perfect by
possession in favor of the Administrative Agent on behalf of the Secured
Parties upon the reasonable request of the Administrative Agent).

 

5.7.                              Receivables.  (a)  Other than in the ordinary course
of business, such Grantor will not (i) grant any extension of the time of
payment of any Receivable required to be included in Collateral, (ii) compromise
or settle any Receivable required to be included in Collateral for less than
the full amount thereof, (iii) release, wholly or partially, any Person
liable for the payment of any Receivable required to be included in Collateral,
(iv) allow any credit or discount whatsoever on any Receivable required to
be included in Collateral or (v) amend, supplement or modify any
Receivable required to be included in Collateral in any manner that could
adversely affect the value thereof.

 

(b)         Such Grantor will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 20% of the
aggregate amount of the then-outstanding Receivables.

 

(c)          If such Grantor shall enter into any contract or other
transaction with an Applicable Governmental Authority (as defined below) which
will result in an Applicable Governmental Authority becoming an obligor on any
Receivable required to be included in Collateral of an amount greater than
$5,000,000, such Grantor shall (i) promptly thereafter notify the Administrative
Agent thereof, (ii) provide to the Administrative Agent all such documents
and instruments, and take all such actions, as shall be reasonably requested by
the Administrative Agent to enable the Administrative Agent to comply with the
requirements of the Federal Assignment of Claims Act or any other applicable
Law to perfect its security interest in such Receivables and obtain the
benefits of such Act or Law with respect thereto and (iii) otherwise
comply with its obligations under Section 5.3(c) with respect
thereto.  As used in this paragraph, the
term “Applicable Governmental Authority” shall mean any Governmental
Authority the  Law applicable to which
provide that, for a creditor of a Person to which such Governmental Authority
has an obligation to pay money, whether pursuant to a Receivable, a General
Intangible or otherwise, to perfect such creditor’s Lien on such obligation
and/or to obtain the full benefits of such Lien and such Law, certain notice,
filing, recording or other similar actions other than the filing of a financing
statement under the Uniform Commercial Code must be given, executed, filed,
recorded, delivered or completed, including, without limitation, any Federal
Governmental Authority to which the Federal Assignment of Claims Act of 1940 is
applicable.

 

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

 

16

 

knowingly omit to do
any act whereby such Trademark may become invalidated or impaired in any
material respect.

 

(b)         Such Grantor (either itself or through licensees) will not
do any act, or omit to do any act, whereby any Patent that is material to the
operation of the business of the Company and its Subsidiaries taken as a whole
may become forfeited, abandoned or dedicated to the public.

 

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

 

(d)         Such Grantor (either itself or through licensees) will not
do any act that knowingly uses any Intellectual Property that is material to
the operation of the business of the Company and its Subsidiaries taken as a
whole to infringe the intellectual property rights of any other Person.

 

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

 

(f)            In the event such Grantor,
either by itself or through any agent, employee, licensee or designee, shall in
any fiscal year file an application for the registration of any Intellectual
Property that is material to the operation of the Company and its Subsidiaries
taken as a whole with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
any political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent at the time of delivery of annual financial statements
with respect to such fiscal year pursuant to Section 6.01(a) of the
Credit Agreement.  Upon reasonable
request of the Administrative Agent, such Grantor shall execute and deliver,
and have recorded, any and all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the Lenders’ security interest in any such
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.

 

(g)         Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office, the United

 

17

 

States Copyright
Office or any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the Intellectual
Property that is material to the operation of the business of the Company and
its Subsidiaries taken as a whole, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.

 

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

 

(i)             Notwithstanding anything to the
contrary in this Agreement, subject to the provisions of the Credit Agreement,
nothing shall prevent any Grantor in the ordinary course of business from
abandoning, ceasing to use or otherwise impairing or disposing of any
Intellectual Property if such Grantor reasonably believes that doing so is in
its business interests.  For the
avoidance of doubt, nothing in this Section 5.8 shall prohibit a sale,
transfer or disposition of any Intellectual Property made in accordance with
Sections 7.04 or 7.05 of the Credit Agreement.

 

(j)             No Grantor shall, and the
Grantors in the aggregate shall not, make filings in the United States
Copyright Office or the United States Trademark Office to perfect any security
interest in all or substantially all of the Copyright Licenses held by the
Grantors in the aggregate or all or substantially all of the Trademark Licenses
held by the Grantors in the aggregate (other than to perfect the security
interest in such Copyright Licenses and Trademark Licenses securing the
Obligations).

 

(k)          Upon and during the continuance of an Event of Default, each
Grantor shall use all commercially reasonable efforts to obtain all requisite
consents or approvals under each Copyright License, Patent License and
Trademark License reasonably requested by the Administrative Agent to effect
the assignment of all such Grantor’s right, title and interest thereunder to
the Administrative Agent or its designee.

 

5.9.                              Commercial Tort Claims.  If such Grantor shall obtain an interest in
any Commercial Tort Claim as to which it determines that it reasonably expects
to recover more than $5,000,000, such Grantor shall within 30 days of making
such determination (or such other period reasonably satisfactory to the
Administrative Agent) sign and deliver documentation reasonably acceptable to
the Administrative Agent granting a security interest under the terms and
provisions of this Agreement in and to such Commercial Tort Claim.

 

SECTION 6.   REMEDIAL
PROVISIONS

 

6.1.                              Certain Matters Relating to
Receivables.  (a)  The Administrative Agent shall have
the right annually (or, if an Event of Default has occurred and is continuing,
at any

 

18

 

time) to make test
verifications of the Receivables required to be included in Collateral in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications.  Annually (or, if an Event of Default has
occurred and is continuing, at any time), upon the Administrative Agent’s
reasonable request and at the expense of the relevant Grantor, such Grantor
shall use commercially reasonable efforts to cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to
the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, such Receivables.

 

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

 

(c)          If an Event of Default has occurred and is continuing, at
the Administrative Agent’s request, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables required
to be included in Collateral, including, without limitation, all original
orders, invoices and shipping receipts.

 

6.2.                              Communications with Obligors;
Grantors Remain Liable.  (a)  The Administrative Agent in its own
name or in the name of others may at any time when an Event of Default has
occurred and is continuing, communicate with obligors under the Receivables
required to be included in Collateral to verify with them to the Administrative
Agent’s satisfaction the existence, amount and terms of any such Receivables.

 

(b)         Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Receivables required to be included in
Collateral that such Receivables have been assigned to the Administrative Agent
for the ratable benefit of the Secured Parties and that payments in respect
thereof shall be made directly to the Administrative Agent.

 

(c)          Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables required to be
included in Collateral 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

 

19

 

Agent nor any Lender
shall have any obligation or liability under any such Receivable (or any
agreement giving rise thereto) by reason of or arising out of this Agreement or
the receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to
any such Receivable (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.

 

6.3.                              Pledged Equity.  (a)  Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the relevant Grantor of the Administrative Agent’s intent to exercise
its corresponding rights pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all dividends (other than dividends payable in Equity
Interests) paid in respect of the Pledged Equity and all payments made in
respect of the Pledged Debt, in each case to the extent permitted in the Credit
Agreement, and to exercise all voting and corporate or other organizational
rights with respect to the Investment Property; provided, however,
that such Grantor will not be entitled to exercise any such right if the result
thereof could materially and adversely affect the rights inuring to a holder of
the Investment Property or the rights and remedies of the Administrative Agent
or the Lenders under any Loan Document or the ability of the Administrative
Agent or the Lenders to exercise the same.

 

(b)         If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have
the right to receive any and all cash dividends, payments (including sums paid
upon the liquidation or dissolution of any Issuer or in connection with any
distribution of capital) or other Proceeds paid in respect of the Investment
Property and make application thereof to the Obligations in accordance with the
provisions of the Credit Agreement and (ii) any or all of the Investment
Property shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all
voting, corporate and other rights pertaining to such Investment Property at
any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any
and all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of the Investment Property 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, but
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.  If any sums of
money paid or distributed in respect of Investment Property, which the
Administrative Agent shall be entitled to receive pursuant to clause (i) above,
shall be received by a Grantor, such Grantor shall, until such

 

20

 

money is paid to the
Administrative Agent, hold such money in trust for the Administrative Agent and
the Lenders as additional collateral for the Obligations.

 

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

 

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

 

6.5.                              Application of Proceeds.  At such intervals as may be agreed upon by
the Company and the Administrative Agent, or, if an Event of Default has
occurred and is continuing, at any time at the Administrative Agent’s election,
the Administrative Agent shall apply all or any part of Proceeds required to be
included in Collateral, whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the
Obligations in accordance with Section 8.04 of the Credit Agreement, and
any part of such funds which the Administrative Agent elects not so to apply
and deems not required as collateral security for the Obligations shall be paid
over from time to time by the Administrative Agent to the Company or to
whosoever may be lawfully entitled to receive the same.  Any balance of such Proceeds remaining after
the Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Company or to whomsoever may be lawfully entitled to receive the same.

 

6.6.                              Code and Other Remedies.  If an Event of Default occurs and is
continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to
the Obligations, all rights and remedies of a secured party under the New York
UCC or any other applicable law.  Without
limiting the generality of the foregoing, if an Event of Default occurs and is
continuing, 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

 

21

 

hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
give option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the 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 or any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released.  Each Grantor further agrees,
at the Administrative Agent’s request following and during the continuance of
an Event of Default, to assemble the Collateral and make it available to the
Administrative Agent at places which 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 6.6, after
deducting all reasonable out-of-pocket costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the rights of
the Administrative Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys’ fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as the Administrative Agent may
elect, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-615(a)(3) of the New York
UCC, need the 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 Lender arising out of the
exercise by them of any rights hereunder. 
If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.

 

6.7.                              Registration Rights.  (a)  If the Administrative Agent shall
determine to exercise its rights to sell all or any of the Pledged Equity
pursuant to Section 6.6, and if, in the opinion of the Administrative
Agent, it is necessary or advisable to have the Pledged Equity, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Grantor will cause the Issuer thereof to (i) execute and deliver,
and cause the directors and officers of such Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Administrative Agent, necessary or advisable
to register the Pledged Equity, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Equity, or that portion thereof to be sold, and (iii) make
all amendments thereto and/or to the related prospectus which, in the opinion
of the Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto.  Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or “Blue Sky” laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of Section 11(a) of
the Securities Act.

 

22

 

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

 

(c)          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 Equity pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable Law.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause irreparable
injury to the Administrative Agent and the Lenders, that the Administrative
Agent and the Lenders have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section 6.7
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives, to the fullest extent permitted by applicable law, and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing under the Credit Agreement.

 

6.8.                              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 its Obligations and the reasonable fees and
disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.

 

SECTION 7.   THE
ADMINISTRATIVE AGENT

 

7.1.                              Administrative Agent’s
Appointment as Attorney-in-Fact, etc.  (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
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Administrative Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following:

 

(i)                                     in the name of
such Grantor or its own name, or otherwise, take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under any Receivable required to be included

 

23

 

in Collateral hereunder 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 and all such moneys due under any such Receivable or
with respect to any other Collateral whenever payable;

 

(ii)                                  in the case of any
Intellectual Property required to be included in Collateral hereunder, execute
and deliver, and have recorded, any and all agreements, instruments, documents
and papers as the Administrative Agent may request to evidence the
Administrative Agent’s and the Lenders’ security interest in such Intellectual
Property and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby;

 

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

 

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

 

(v)                                 (1) direct any
party liable for any payment under any of the Collateral to make payment of any
and all moneys due or to become due thereunder directly to the Administrative
Agent or as the Administrative Agent shall direct; (2) ask or demand for,
collect, and receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (3) sign and indorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent may
reasonably deem appropriate; (7) subject to any licenses (and the rights
granted therein) existing at the time of such assignment, assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any such
Copyright, Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative Agent
shall in its sole discretion determine; and (8) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the 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 which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent’s and the Lenders’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.

 

24

 

Anything in this Section 7.1(a) to
the contrary notwithstanding, the Administrative Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section 7.1(a) unless
an Event of Default shall have occurred and 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 reasonable out-of-pocket expenses of the Administrative
Agent incurred in connection with actions undertaken as provided in this Section 7.1,
together with interest thereon at a rate per annum equal to the highest rate
per annum at which interest would then be payable on any category of past due
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.

 

7.2.                              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, under Section 9-207 of the New York UCC or otherwise,
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 Lender nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent’s
and the Lenders’ interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers.  The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.

 

7.3.                              Execution of Financing
Statements.  Pursuant to any applicable law, each Grantor
authorizes the Administrative Agent to file or record financing statements and
other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent determines appropriate to perfect the
security interests of the Administrative Agent under this Agreement.  Each Grantor authorizes the Administrative
Agent to use the collateral description “all personal property” or “all assets”
in any such financing statements.  Each
Grantor hereby ratifies and authorizes the filing by the Administrative Agent
of any financing statement with respect to the Collateral made prior to the
date hereof; provided that, at the reasonable request of any Grantor,

 

25

 

the Administrative
Agent shall amend any such statement (and any other financing statement filed
by the Administrative Agent in connection with this Agreement) to exclude any
property that is released from, or otherwise not included in, the
Collateral.  The Administrative Agent
agrees promptly to furnish copies of all such filings to the Company.

 

7.4.                              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 Lenders, 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 Lenders with full and valid authority so to act
or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.

 

SECTION 8.   MISCELLANEOUS

 

8.1.                              Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.01 of the Credit Agreement.

 

8.2.                              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 10.02 of the Credit Agreement; provided
that any such notice, request or demand to or upon any Guarantor shall be
addressed to such Guarantor at its notice address set forth on Schedule 1.

 

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

 

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

 

26

 

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

 

(c)          Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments and suits and
related reasonable out-of-pocket expenses (including Attorney Costs) of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Company
would be required to do so pursuant to Section 10.05 of the Credit
Agreement.

 

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

 

8.5.                              Successors and Assigns.  This Agreement shall be binding upon the
permitted successors and assigns of each Grantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their permitted successors and
assigns; provided that no Grantor may, except pursuant to a merger or
consolidation permitted by the Credit Agreement, assign, transfer or delegate
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.

 

8.6.                              Setoff.  In addition to any rights and remedies of the
Lenders provided by Law, upon the occurrence and during the continuance of any
Event of Default, each Lender and its Affiliates is authorized at any time and
from time to time, without prior notice to any Grantor, any such notice being
waived by each Grantor to the fullest extent permitted by applicable Law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other Indebtedness at any time
owing by, such Lender and its Affiliates to or for the credit or the account of
any Grantor against any and all Obligations owing to such Lender and its Affiliates
hereunder or under any other Loan Document, now or hereafter existing,
irrespective of whether or not such Agent or such Lender or Affiliate shall
have made demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured or denominated in a currency
different from that of the applicable deposit or Indebtedness; provided that, in the case of any such
deposits or other Indebtedness for the credit or the account of any Foreign
Subsidiary, such set off may only be against any Obligations of Foreign
Subsidiaries.  Each Lender agrees
promptly to notify such Grantor and the Administrative Agent after any such set
off and application made by such Lender; provided,
that the failure to give such notice shall not affect the validity of such
setoff and application.  The rights of
the Administrative Agent and each Lender under this Section 8.6 are in
addition to other rights and remedies (including other rights of setoff) that
the Administrative Agent and such Lender may have.

 

8.7.                              Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Delivery by telecopier of an executed
counterpart of a signature

 

27

 

page to this
Agreement shall be effective as delivery of an original executed counterpart of
this Agreement.

 

8.8.                              Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable, the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected or impaired
thereby.  The invalidity of a provision
in a particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

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

 

8.10.                        Integration.  This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter.

 

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

 

8.12.                        Submission To Jurisdiction;
Waivers.  (a)  Any legal action or proceeding
arising under any Loan Document or in any way connected with or related or
incidental to the dealings of the parties hereto or any of them with respect to
any Loan Document, or the transactions related thereto, in each case whether
now existing or hereafter arising, may be brought in the courts of the State of
New York sitting in New York City or of the United States for the Southern
District of such State, and by execution and delivery of this Agreement, each
Grantor and the Administrative Agent consents, for itself and in respect of its
property, to the non-exclusive jurisdiction of those courts.  Each Grantor and the Administrative Agent
irrevocably waives any objection, including any objection to the laying of
venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any action or proceeding in such courts in
respect of any Loan Document or other document related thereto.

 

(b)  Each
Grantor hereby irrevocably and unconditionally:

 

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

 

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

 

28

 

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

 

8.13.                        Acknowledgments.  Each Grantor hereby acknowledges that:

 

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

 

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

 

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

 

8.14.                        Additional Guarantors and
Grantors.  Each Subsidiary of the Company that is
required to become a party to this Agreement pursuant to Section 6.10 of
the Credit Agreement shall become a Guarantor and a Grantor for all purposes of
this Agreement upon execution and delivery by such Subsidiary of a Security
Agreement Supplement in the form of Annex 1 hereto.

 

8.15.                        Releases.  (a)  At such time as the Loans and the
other Obligations (other than contingent indemnification and contingent expense
reimbursement obligations, Obligations in respect of Secured Hedge Agreements
and Cash Management Obligations) shall have been paid in full, the Commitments
have been terminated and no Letters of Credit shall be outstanding, the
Collateral shall be released from the Liens created hereby, and this Agreement
and all obligations (other than those expressly stated to survive such
termination) of the 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 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 any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then (i) the Liens created hereby on such Collateral shall
automatically be released and (ii) the Administrative Agent, at the
request and sole expense of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or desirable for
the release of the Liens created hereby on such Collateral.  If any of the Collateral shall become
Specified Assets described in clause (b) of the definition thereof (taking
into account the proviso thereto), then (A) the Liens created hereby on
such Collateral shall automatically be released and (ii) the
Administrative Agent, at the request and sole expense of the Company, shall
execute and deliver to the Company or the

 

29

 

relevant Grantor all
releases or other documents reasonably necessary or desirable for the release
of the Liens created hereby on such Collateral. 
In addition, at the request and at the sole expense of the Company, the
Administrative Agent agrees to (x) provide to each Grantor a power of
attorney to execute any document reasonably required to permit any sale
permitted by the Credit Agreement of any asset, the perfection of which is
governed by a certificate-of-title statute, free of the Liens created by the
Security Documents and (y) with respect to any jurisdiction in which
releases executed pursuant to such power of attorney are insufficient to
release such Liens, (1) execute in blank any document reasonably required
to permit any sale permitted by the Credit Agreement of any asset, the
perfection of which is governed by a certificate-of-title statute, free of the
Liens created by the Security Documents and (2) authorize such Grantor to
fill in the relevant information to release such Lien.  At the request and sole expense of the
Company, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Equity Interests of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted
by the Credit Agreement; provided that the Company shall have delivered
to the Administrative Agent, at least five Business Days prior to the date of
the proposed release, a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the sale or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Company stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.

 

8.16.                     WAIVER OF JURY
TRIAL.  EACH GRANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 10.17 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.

 

8.17.                        Effectiveness of the Merger;
Assignment and Delegation to and Assumption by Reader’s Digest.  Reader’s Digest and its Subsidiaries shall
have no rights or obligations hereunder until the consummation of the Merger
and any representations and warranties of Reader’s Digest or any of its
Subsidiaries hereunder shall not become effective until such time.  Upon consummation of the Merger, Reader’s
Digest shall succeed to all the rights and obligations of Doctor Acquisition
Co. under this Agreement and all rights, obligations, representations and
warranties of Reader’s Digest and its Subsidiaries shall become effective as of
the date hereof, without any further action by any Person.

 

8.18.                        German Borrower Security.  Notwithstanding any provision to the contrary
in any Loan Document or any Secured Hedge Agreement, any guarantees, security
interests or other security provided under or in connection with this Agreement
or any other

 

30

 

Loan Document or any
Secured Hedge Agreement (“Security”) shall at all times exclude direct
or indirect access to Specified Assets other than Specified Assets of the
German Borrower (in particular, no security in rem (dingliche Sicherheit) in Specified Assets other than
Specified Assets of the German Borrower shall be created (or, in the event such
exclusion is not possible under applicable law, no such security in rem shall
be enforceable), and no disposal restriction (Verfügungsbeschränkung)
and no submission to immediate foreclosure (Unterwerfung
unter die sofortige Zwangsvollstreckung) regarding Specified Assets
other than Specified Assets of the German Borrower shall apply with respect to
any contractual claim (schuldrechtlicher
Anspruch) in favor of any Secured Party).  The restriction set forth in this Section 8.18
shall be applicable if and only to the extent that (and only for so long as) (a) such
Security secures Obligations of the German Borrower and (b) direct or
indirect access to such Specified Assets would result in adverse tax
consequences to Holdings and its Subsidiaries as a consequence of § 8a of the
German Corporate Income Tax Act (Körperschaftsteuergesetz)
as amended from time to time or of any future rules replacing § 8a of the
German Corporate Income Tax Act (Körperschaftsteuergesetz).

 

8.19.                        Parallel Obligations

 

(a) 
Solely for purposes of the validity and enforcement of any security interest
granted to the Secured Parties in any Equity Interests or other assets governed
by German law, each
of the parties hereto agrees (and each Secured Party by its execution of the
Credit Agreement or its Assignment and Assumption agrees), and each of the Loan
Parties acknowledges by way of an abstract acknowledgement of debt (abstraktes Schuldanerkenntnis as effective
under German law) (the “Acknowledgement”), that the Obligations of such
Loan Party (and each of their respective permitted successors and assigns) (the
“Original Obligations”) shall also be owing in full to the
Administrative Agent (and its permitted successors and assigns), and that
accordingly the Administrative Agent will have its own independent right to
demand performance by the respective Loan Party of the Obligations of such Loan
Party (such Obligations owed to the Administrative Agent, the “Parallel
Obligations”).  Any payment by any
Loan Party of its Parallel Obligations shall to the same extent reduce and be a
good discharge of the corresponding Original Obligations of such Loan Party
owing to the relevant Secured Parties, and payment by any Loan Party of its
Original Obligations to the relevant Secured Parties shall to the same extent
reduce and be a good discharge of the Parallel Obligations owing by it to the Administrative
Agent.  The Administrative Agent
undertakes to each Loan Party that in the case of any discharge of any such
obligation owing to one of the Administrative Agent or a Secured Party, it
will, to the same extent, not make a claim against such Loan Party under the
Acknowledgement at any time, provided that any such claims can be made against
such Loan Party if such discharge is made by virtue of any set off,
counterclaim or similar defense invoked by such Loan Party vis-a-vis the
Administrative Agent other than with respect to claims arising under the Loan
Documents.

 

(b)  Without limiting or affecting the Administrative Agent’s
rights against the Loan Parties (whether under this Section 8.19 or under
any other provision of the Loan Documents), the Administrative Agent agrees
with each other Secured Party that it will not exercise its rights under the
Acknowledgement with respect to Obligations owed to such Secured Party except
with the consent of such Secured Party, which consent is hereby deemed given by
its execution of the Credit Agreement or its Assignment and Assumption.  Nothing in the

 

31

 

previous
sentence shall in any way limit the Administrative Agent’s right to act in the
protection or preservation of rights under or to enforce any Collateral
Document (or to do any act reasonably incidental to the foregoing).

 

32

 

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

 

 

	
   

  	
  RDA HOLDING CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[Signature Page to Guarantee & Collateral
Agreement]

 

 

	
   

  	
  DOCTOR ACQUISITION CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]

 

 

	
   

  	
  THE READER’S DIGEST ASSOCIATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]

 

 

	
   

  	
  Solely for purposes of Sections 8.18 and
  8.19:

  
	
   

  	
  RD GERMAN HOLDINGS GmbH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]

 

 

	
   

  	
  [CERTAIN SUBSIDIARIES OF THE READER’S

  DIGEST ASSOCIATION, INC.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]

 

 

ACKNOWLEDGMENT AND CONSENT***

 

The undersigned hereby acknowledges receipt
of a copy of the Guarantee and Collateral Agreement dated as of March 2,
2007 (the “Agreement”), made by the Grantors parties thereto for the
benefit of JPMORGAN CHASE BANK, N.A., as Administrative Agent.  The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:

 

1.               The undersigned
will be bound by the terms of the Agreement and will comply with such terms
insofar as such terms are applicable to the undersigned.

 

2.               The undersigned
will notify the Administrative Agent promptly in writing of the occurrence of
any of the events described in Section 5.6(a) of the Agreement.

 

3.               The terms of
Sections 6.3(c) and 6.7 of the Agreement shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section 6.3(c) or
6.7 of the Agreement.

 

	
   

  	
  [NAME OF ISSUER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
    Name:

  
	
   

  	
    Title:

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax:

  

 

***                          This
consent is necessary only with respect to any Issuer which is not also a
Grantor.  This consent may be modified or
eliminated with respect to any Issuer that is not controlled by a Grantor.

 

 

Annex 1 to

Guarantee
and Collateral Agreement

 

ASSUMPTION AGREEMENT, dated as of
                                ,
20    , made by
                                                  ,
a                             
corporation (the “Additional Grantor”), in favor of JPMORGAN CHASE BANK,
N.A., as administrative agent (in such capacity, the “Administrative Agent”),
for the lending and other financial institutions (the “Lenders”) parties
to the Credit Agreement referred to below. 
All capitalized terms not defined herein shall have the meaning ascribed
to them in such Credit Agreement.

 

W I T N E S S E T H :

 

WHEREAS, RDA HOLDING CO., a Delaware
corporation (“Holdings”), THE READER’S DIGEST ASSOCIATION, INC., a
Delaware corporation (the “Company”), the Overseas Borrowers, the
Lenders and the Administrative Agent have entered into a Credit Agreement,
dated as of March 2, 2007 (as amended, supplemented or otherwise modified
from time to time, the “Credit Agreement”);

 

WHEREAS, in connection with the Credit
Agreement, Holdings, the Company and certain of the Company’s Subsidiaries
(other than the Additional Grantor) have entered into the Guarantee and
Collateral Agreement, dated as of March 2, 2007 (as amended, supplemented
or otherwise modified from time to time, the “Guarantee and Collateral
Agreement”) in favor of the Administrative Agent for the benefit of the
Lenders;

 

WHEREAS, the Credit Agreement requires the
Additional Grantor to become a party to the Guarantee and Collateral Agreement;
and

 

WHEREAS, the Additional Grantor has agreed to
execute and deliver this Assumption Agreement in order to become a party to the
Guarantee and Collateral Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                       Guarantee
and Collateral Agreement.  By
executing and delivering this Assumption Agreement, the Additional Grantor, as
provided in Section 8.14 of the Guarantee and Collateral Agreement, hereby
becomes a party to the Guarantee and Collateral Agreement as a Guarantor and a
Grantor thereunder with the same force and effect as if originally named
therein as a Guarantor and a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor and a Grantor thereunder.  The
information set forth in Annex 1-A hereto is hereby added to the
information set forth in the Schedules to the Guarantee and Collateral
Agreement.  The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 4 of the Guarantee and Collateral Agreement is true
and correct on and as the date hereof (after giving effect to this Assumption
Agreement) as if made on and as of such date.

 

 

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

 

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

 

	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:Exhibit 10.3

 

EXECUTION VERSION

 

STOCKHOLDERS’ AGREEMENT

 

Dated as of January 23, 2007

 

with respect to

 

RDA Holding Co.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Methodology for Calculations

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Restrictions on Transfers of Stock; Right of First Offer

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Tag-Along Rights

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Drag-Along Rights

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  New Securities; Distributions

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Corporate Governance; Management

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Voting; Major Transactions

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Registration Rights

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Indemnification

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Legend

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Representations and Warranties

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 13.

  	
  Management Rights

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Reports to Stockholders

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Expenses and Fees

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Miscellaneous

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Effectiveness of Agreement

  	
  34

  
	
   

  	
   

  	
   

  
	
  Annex A

  	
  Form of Assumption Agreement

  	
   

  
	
  Annex B

  	
  Form of Management Services Agreement

  	
   

  

 

i

 

STOCKHOLDERS’ AGREEMENT

 

THIS AGREEMENT (this “Agreement”) is made as of January 23,
2007 by and among RDA Holding Co., a corporation organized under the laws of
the State of Delaware (the “Company”), RDA Investors I, LLC, a limited
liability company organized under the laws of the State of Delaware (“Ripplewood
I”), RDA Investors II, LLC, a limited liability company organized under the
laws of the State of Delaware (“Ripplewood II”), RDA Investors III, LLC,
a limited liability company organized under the laws of the State of Delaware
(together with Ripplewood I and Ripplewood II, “Ripplewood”), J.
Rothschild Group (Guernsey) Ltd., a company organized under the laws of
Guernsey, Channel Islands (“Rothschild”), GoldenTree Asset Management,
LP, a limited partnership organized under the laws of Delaware (together with
Ripplewood and Rothschild, the “Original Stockholders”), and the other
Stockholders of the Company party hereto from time to time.

 

W I T N E S S E T H:

 

WHEREAS, the Company, Doctor Acquisition Co., a corporation organized
under the laws of the State of Delaware and a wholly owned subsidiary of the
Company (“Merger Sub”), and The Reader’s Digest Association, Inc.,
a corporation organized under the laws of the State of Delaware (“RDA”),
entered into an Agreement and Plan of Merger dated as of November 16, 2006
(as such agreement may be amended, supplemented or otherwise modified from time
to time, the “Merger Agreement”);

 

WHEREAS, pursuant to the terms and conditions of the Merger Agreement,
Merger Sub will merge with and into RDA (the “Acquisition”), and RDA
shall continue as the surviving corporation (the “Surviving Corporation”)
and as a wholly owned subsidiary of the Company;

 

WHEREAS, on the date hereof the Company is entering into agreements to
acquire WRC Media, Inc., a corporation organized under the laws of the
State of Delaware (“WRC”), and Direct Holdings U.S. Corp., a corporation
organized under the laws of the State of Delaware (“DHUS”) (the
potential acquisition of either or both of WRC and DHUS, the “Combination”);
and pursuant to the applicable acquisition agreements certain investors in the
WRC and DHUS businesses will receive Common Stock as consideration, which
investors will be required to enter into Assumption Agreements hereto;

 

WHEREAS, for U.S. Federal income tax purposes, the parties hereto
intend that (x) the contribution of capital by the Original Stockholders
and the other common and preferred equity investors in the Company in
connection with the Acquisition and (y) the Combination shall together
constitute a transaction described under Section 351 of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”);

 

WHEREAS, pursuant to subscription agreements to be entered into as of
the Closing Date by each of the Original Stockholders and each other
Stockholder to become a party hereto as of the Closing Date (other than the
Stockholders who receive Common Stock as consideration in the Combination), on
the one hand, in form and substance reasonably satisfactory to the Company,
each such Stockholder will purchase from the Company, and

 

1

 

the Company will issue to such Stockholder, the number of shares of
Common Stock set forth in Schedule I next to the name of such Stockholder (or
in the case of Stockholders not set forth on Schedule I, as separately agreed),
in each case for $10 in cash per share of Common Stock and on the other terms
and conditions set forth in the applicable subscription agreement;

 

WHEREAS, the parties hereto deem it to be in their best interests to
enter into an agreement establishing and setting forth their agreement with
respect to certain rights and obligations associated with ownership of Stock;
and

 

WHEREAS, this Agreement shall become effective immediately following the
Closing.

 

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:

 

Section 1.               Certain
Definitions.

 

As used herein, the following terms shall have the following meanings:

 

“1940 Act”: The United States Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.

 

“Acquisition”: As defined in the recitals.

 

“Affiliate”: With respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such first
Person. The term “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; provided that no Stockholder shall be deemed to be an
Affiliate of any other Stockholder solely as a result of being a party to this
Agreement or the transactions contemplated hereby; provided  further
that none of the Company or any of its subsidiaries shall be deemed to be an
Affiliate of any Stockholder and no Stockholder or any of its Affiliates shall
be deemed to be an Affiliate of the Company or any of its subsidiaries.

 

“Affiliate Transferee”: As defined in Section 3(a).

 

“Agreement”: As defined in the preamble.

 

“Assignee”: As defined in Section 3(a).

 

“Assumption Agreement”: A writing substantially in the form
attached hereto as Annex A whereby a Person becomes a party to this
Agreement.

 

“Board”: As defined in Section 7(a).

 

“Business Day”: A day which is not a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close.

 

2

 

“Closing”: As defined in the Merger Agreement.

 

“Closing Date”: As defined in the Merger Agreement.

 

“Code”: As defined in the recitals.

 

“Combination”: As defined in the recitals.

 

“Common Stock”: The common stock, par value $1.00 per share, of the Company.

 

“Company”: As defined in the preamble.

 

“Demand Notice”: As defined in Section 9.1(a). 

 

“DHW”:
As defined in the recitals.

 

“Director” and “Directors”:
As defined in Section 7(a). 

 

“Drag-Along Notice”: As defined in Section 5(a).

 

“Drag-Along Sale”: As defined in Section 5(a).

 

“Drag-Along Stockholders”: As defined in Section 5(a). 

 

“Effective Time”: As defined in the Merger Agreement.

 

“Exchange Act”: The United States Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“First Offer Acceptance”: As defined in Section 3(c)(i).

 

“First Offer Marketing Period”: As defined in Section 3(c)(ii).

 

“First Offer Notice”: As defined in Section 3(c)(i).

 

“First Offer Offeree”: As defined in Section 3(c)(i).

 

“First Offer Transferor”: As defined in Section 3(c)(i).

 

“HSR Act”: As defined in Section 3(c)(i).

 

“Indemnified Party”: As defined in Section 10(a).

 

“Initial Public Offering”: The initial bona fide underwritten public
offering and sale of Common Stock pursuant to an effective registration
statement under the Securities Act that results in (i) proceeds to the
Stockholders and the Company of at least $50 million and (ii) the listing
of the Common Stock on a United States national securities exchange or the
quotation of such Common Stock on a United States inter-dealer quotation
system.

 

3

 

“Management
Services Agreement”: The Management Services Agreement to be entered into
as of the Closing Date by and among the Company and the Original Stockholders
in the form attached hereto as Annex B.

 

“Merger
Sub” As defined in the recitals.

 

“Merger
Agreement”: As defined in the recitals.

 

“New
Stock”: Any Stock that is issued or otherwise created by the Company
subsequent to the Closing Date; provided, however, that the term “New Stock” does not include
Stock (i) issued pursuant to the acquisition of, or investment in, another
Person by the Company or any of its subsidiaries, whether by merger,
consolidation, purchase or exchange of stock or assets or reorganization or
otherwise; (ii) issued in connection with any stock split or stock
dividend of the Company; (iii) issued in connection with, or with any
refinancing of, the Financing (as defined in the Merger Agreement) or any alternative
Financing that includes financing for the Combination; (iv) issued
pursuant to any registered public offering; (v) issued to employees of the
Company or any of its subsidiaries under any incentive plan or upon exercise of
options granted under any incentive stock option plan; or (vi) the issuance of
which, individually or in the aggregate with any prior issuance of shares of
Stock of the Company (other than any such prior issuances exempted under
clauses (i) through (v) of this definition), results in a decrease to
the percentage of outstanding Stock held by any Stockholder of not more than
1%.

 

“Offer
Date”: As defined in Section 3(c)(i).

 

“Offer
Price”: As defined in Section 3(c)(i).

 

“Offered
Stock”: As defined in Section 3(c)(i).

 

“Original
Stockholders”: As defined in the preamble.

 

“Other
Stockholders”: The Stockholders other than Ripplewood.

 

“Permitted
Transferee”: As defined in Section 3(a).

 

“Person”:
Any individual, partnership, corporation, limited liability company, limited
company, unincorporated organization or association, trust (including the
trustees thereof, in their capacity as such), joint venture, joint-stock
company or other entity or organization, including a government or governmental
agency.

 

“RDA”:
As defined in the recitals.

 

“Registrable
Securities”: At any time, (a) any shares of Stock (other than Stock
Equivalents) held by a Stockholder, (b) any shares of Stock issuable upon
conversion, exchange or exercise of any Stock Equivalent of the Company held by
a Stockholder (whether or not so converted, exchanged or exercised, provided
that the conversion, exchange or exercise occurs not later than the
effectiveness of the registration) and (c) any securities of the Company
issued in exchange for or in respect of any of the

 

4

 

foregoing,
whether pursuant to a merger or consolidation, as a result of any stock split
or reclassification of, or share dividend on, any of the foregoing or
otherwise. For purposes of this Agreement, any Registrable Securities shall
cease to be Registrable Securities when (i) a registration statement
covering such Registrable Securities has been declared effective and such
Registrable Securities have been disposed of pursuant to such effective
registration statement, (ii) such Registrable Securities shall have been
disposed of pursuant to Rule 144, (iii) such Registrable Securities
are sold by a Person in a transaction in which the rights under the provisions
of this Agreement relating to registration are not assigned or (iv) such
Registrable Securities shall cease to be outstanding.

 

“Registration
Expenses”: As defined in Section 9.4(c).

 

“Registration
Indemnified Party”: As defined in Section 9.6(c).

 

“Registration
Indemnifying Party”: As defined in Section 9.6(c).

 

“Requesting
Demand Stockholder”: As defined in Section 9.1(a).

 

“Required
Interest”: As defined in Section 16(f).

 

“Ripplewood”:
As defined in the preamble.

 

“Ripplewood
I”: As defined in the preamble.

 

“Ripplewood
II”: As defined in the preamble.

 

“Rule 144”:
Rule 144 promulgated under the Securities Act. 

 

“SEC”:
The United States Securities and Exchange Commission.

 

“Securities
Act”: The United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Senior
PIK Preferred Stock”: The series of senior pay-in-kind preferred stock, par
value $0.01 per share, of the Company, to be issued as of the Closing Date, in
connection with the financing for the Merger Agreement.

 

“Stock”:
(i) any Common Stock, (ii) any other capital stock of the Company
that (x) has voting rights generally and not only in limited circumstances
or (y) shares in the proceeds of a liquidation or dissolution of the
Company on a basis that is tied to the proceeds payable with respect to Common
Stock and (iii) any Stock Equivalents of the Company, in each case,
whether owned on the date hereof or acquired hereafter.

 

“Stock
Equivalents”: Securities, including options, that are, or may become,
convertible into or exchangeable or exercisable for Stock, including any
options, warrants or rights to acquire Stock.

 

“Stockholder”
or “Stockholders”: The Original Stockholders and any other subsequent
holder of Stock who agrees to be bound by the terms of this Agreement,

 

5

 

including
each Person who acquires Common Stock on the Closing Date in connection with
the acquisition of Senior PIK Preferred Stock or in connection with the
Combination.

 

“Surviving
Corporation”: As defined in the recitals.

 

“Tag-Along
Notice”: As defined in Section 4(a)(i).

 

“Tag-Along
Sale”: As defined in Section 4(a)(i).

 

“Tag-Along
Seller”: As defined in Section 4(a)(i).

 

“Tagging
Stockholder”: As defined in Section 4(a)(ii).

 

“Transfer”:
To sell, transfer, assign, distribute, pledge, encumber or otherwise dispose of
any Stock, either voluntarily or involuntarily. Any sale, transfer, assignment,
distribution, pledge, encumbrance or other disposition of any ownership
interests in any entity that is a direct or indirect beneficial or record owner
of any Stock, or any other transaction that has the economic effect of
Transferring Stock, shall be deemed to be a Transfer of Stock by the
Stockholder directly owning such Stock. Notwithstanding the foregoing, it is
understood and agreed that a Transfer shall not include (a) any Transfer
of any ownership interests in Ripplewood Partners I, L.P. or Ripplewood
Partners II, L.P. (or in any of their partners) or in any entity that owns
Stock among a diverse group of other assets, (b) any distribution of Stock
to any direct or indirect holders of ownership interests in Ripplewood or any
such entity that owns Stock among a diverse group of other assets, so long as
the transferee is a Stockholder (or agrees to become a Stockholder in
connection therewith), or (c) any indirect Transfer which the Company
determines should not under the circumstances be treated as a Transfer.

 

“United
States” or “U.S.”: The United States of America, its
territories and possessions, any State of the United States of America and the
District of Columbia, as the context requires.

 

“Unwinding
Event”: As defined in Section 3(a).

 

“VCOC
Stockholder”: A Stockholder or any Affiliate thereof that is intended to
qualify as a “venture capital operating company” within the meaning of 29
C.F.R. § 2510.3-101(d).

 

“WRC”:
As defined in the recitals.

 

6

 

Section 2.               Methodology
for Calculations. For all purposes
of this Agreement, the proposed Transfer or the Transfer of a Stock Equivalent
shall be treated as the proposed Transfer or the Transfer of the shares of
Stock into which such Stock Equivalent can be converted, exchanged or
exercised. All holdings of Stock by Persons who are Affiliates of each other
shall be aggregated for purposes of meeting any threshold tests under this
Agreement; provided that
equitable adjustment to the calculation of such holdings shall be made in the
event that more than one class of Stock of the Company is issued.

 

Section 3.               Restrictions on
Transfers of Stock; Right of First Offer.

 

(a)   Without the consent of Ripplewood acting in its
sole discretion, no Stockholder may Transfer its Stock in whole or in part to
any Person (an “Assignee”) prior to the sixth anniversary of the Closing Date, after which time a
Stockholder may Transfer all or any portion of its Stock to another Person only
in accordance with the terms of this Section 3, Section 4 or Section 5
(a “Permitted Transferee”); provided that a Stockholder may at any time and from
time to time (A) Transfer all or a portion of its Stock to one or more
Affiliates of such Stockholder (an “Affiliate Transferee”), and (B) Transfer its Stock in
accordance with Section 4 as a Tagging Stockholder or Section 5 as a
Drag-Along Stockholder, in each case without the consent of Ripplewood. In the
event a transaction or event is contemplated in which any such Affiliate
Transferee will cease to qualify as an Affiliate Transferee (an “Unwinding
Event”), then (i) such
Affiliate Transferee will promptly notify the Company of the pending occurrence
of such Unwinding Event and (ii) prior to such Unwinding Event, such
Affiliate Transferee will take all actions necessary to effect a transfer of
all of the Stock held by such Affiliate Transferee either back to the Person
who originally transferred such Stock to it or to another Affiliate of such
original transferor. In the event of any purported Transfer by a Stockholder of
any Stock in violation of the provisions of this Agreement, such purported
Transfer will be void and of no effect, and the Company or the applicable
Stockholder, as the case may be, will not give effect to such Transfer.

 

(b)   No Transfer shall be made pursuant to Section 3(a) unless:

 

(i)     such Transfer would not
violate the Securities Act or other securities laws applicable to the Company
or the Stock to be Transferred;

 

(ii)    such Transfer would not jeopardize the tax treatment intended by Section 16(m);

 

(iii)   such Transfer would not cause the Company to become subject to the
1940 Act;

 

(iv)   such Transfer would not require
the Company to register a class of equity securities under Section 12 of
the Exchange Act or any similar provision of any applicable foreign securities
laws; and

 

(v)    any transferee of Stock
(including Affiliate Transferees, but excluding transferees who acquire shares
of Stock pursuant to Section 5 or in a registered offering pursuant to Section 9
or, following the Initial Public Offering, in a bona fide widely

 

7

 

distributed
sale either to the public or pursuant to Rule 144), at the time of and as
a condition to such Transfer, becomes a party to this Agreement by executing
and delivering to the Company an Assumption Agreement.

 

Upon
executing and delivering an Assumption Agreement, the transferee will be
treated as a Stockholder for all purposes hereof and shall succeed to the
rights of the transferring Stockholder hereunder, except as otherwise provided
in this Agreement or the Assumption Agreement.

 

In
its reasonable discretion, the Company may condition any Transfer to be made
pursuant to this Section 3 upon receipt of an opinion of counsel (who may
be counsel for the Company and who with respect to Section 3(b)(ii) must
be tax counsel) to the effect that such Transfer complies with this Section 3,
which opinion and counsel shall be reasonably satisfactory to the Company; provided that if the Transfer is conditioned on an
opinion of tax counsel relating to Section 3(b)(ii), the Company may
impose such condition only during the six months following the Closing Date.

 

(c)   Right
of First Offer. (i) Subject
to the provisions of Section 9.5(b), if at any time any or all of the
Stock held by any Other Stockholder (each such Other Stockholder, a “First
Offer Transferor”) is proposed to
be Transferred to any Person in a Transfer permitted pursuant to Section 3(a) (other
than to an Affiliate of such First Offer Transferor or in accordance with Section 4
as a Tagging Stockholder or Section 5 as a Drag-Along Stockholder), the
First Offer Transferor shall give Ripplewood (the “First Offer
Offeree”) written notice (the “First
Offer Notice”) of its bona fide
intention to Transfer such Stock indicating the number of shares of Stock to be
offered for Transfer (the “Offered Stock”), the price in cash at which the First Offer
Transferor proposes to Transfer the Offered Stock (the “Offer Price”) and all other material terms and conditions
on which the First Offer Transferor proposes to Transfer the Offered Stock
(including the identity of the proposed Transferee). Delivery of a First Offer
Notice shall constitute an offer by the First Offer Transferor, irrevocable
through and including the Offer Date (as defined below) to Transfer to the
First Offer Offeree, subject to the terms of this Section 3(c), all (but
not less than all) of the Offered Stock at the Offer Price. During the 15 days
following the receipt of such First Offer Notice (such 15th day, for the
purposes of this Section 3(c), the “Offer Date”), the First Offer Offeree shall have the right
to exercise the right to purchase, at the Offer Price, the Offered Stock by
delivery of a reply notice (a “First Offer Acceptance”) to the First Offer Transferor setting forth (x) its
irrevocable election to purchase from the First Offer Transferor all of the
Offered Stock, (y) closing arrangements and (z) a closing date not
less than 30 nor more than 60 days following the Offer Date (unless a longer
period of time is necessary to comply with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”), or to obtain any other consent required
to effect such purchase and sale, in which case such longer period). The First
Offer Acceptance shall constitute a binding commitment of the First Offer
Offeree to purchase, and a binding commitment of the First Offer Transferor to
Transfer, all of the Offered Stock at the Offer Price. The First Offer
Transferor shall transfer to the First Offer Offeree the Offered Stock, free
and clear of all liens, and shall deliver to the First Offer Offeree such other
documents and instruments of transfer as the First Offer Offeree reasonably may
request.

 

8

 

(ii) In the event there has not been a timely election by the
First Offer Offeree to purchase the Offered Stock in accordance with Section 3(c)(i),
then for a period of 60 days immediately following the Offer Date (unless a
longer period of time is necessary to comply with the requirements of the HSR
Act or to obtain any other consent required to effect such purchase and sale,
in which case such longer period) (the “First Offer Marketing Period”),
the First Offer Transferor may Transfer, subject to the terms and provisions of
this Agreement, the Offered Stock at a price not less than the Offer Price and
on the same terms and conditions as provided in the First Offer Notice to the
First Offer Offeree. If such Transfer is not made within the First Offer
Marketing Period or is proposed to be made at a price that is less than the
Offer Price or not on the same terms and conditions as provided in the First
Offer Notice to the First Offer Offeree, (x) no Transfer of Stock shall be
made unless and until a further application of the procedure set forth in Section 3(c)(i) shall
have been made with respect to any such prospective Transfer of Stock and (y) the
First Offer Transferor may not offer to Transfer its Stock to any Person
(including the First Offer Offeree pursuant to this Section 3(c)) until
the date that is six months after the last day of the First Offer Marketing
Period.

 

Section 4.               Tag-Along
Rights.

 

(a)   Transfer of Stock. (i) Subject to the
provisions of Section 9.5(b), if at any time Stock held by any Stockholder
(the “Tag-Along Seller”) is proposed to be Transferred to any Person
(other than to an Affiliate of such Tag-Along Seller, to Ripplewood pursuant to
Section 3(c) or in accordance with Section 4 as a Tagging
Stockholder or Section 5 as a Drag-Along Stockholder) in an amount that,
together with any related Transfers of Stock by such Tag-Along Seller and any
of its Affiliates, exceeds either (x) 10% of the Stock originally acquired
by such Tag-Along Seller and its Affiliates, provided that such amount
also exceeds $2.5 million (based on the proposed Transfer price), or (y) $20
million (based on the proposed Transfer price), and such Transfer shall
otherwise be permitted in accordance with Section 3 (each a “Tag-Along
Sale”), then at least 20 days prior to the date proposed for such Tag-Along
Sale, the Tag-Along Seller shall provide to all other Stockholders a notice
(the “Tag-Along Notice”) stating the material terms and conditions of
such proposed Tag-Along Sale (including the amount of Stock to be Transferred,
the consideration to be paid for such Stock and the name of the proposed
purchaser) and offer to all other Stockholders the opportunity to participate
in such Tag-Along Sale in accordance with this Section 4 on the same terms
and conditions as the Tag-Along Seller (with appropriate adjustments as may be
determined by the Company in the case of an indirect Transfer of Stock; provided
that any indemnities shall be made by the Stockholders severally and not
jointly.

 

(ii)   Within 10 Business Days
of its receipt of the Tag-Along Notice, each Stockholder that has elected (each
such electing Stockholder, a “Tagging Stockholder”) to participate in
the Tag-Along Sale shall notify the Tag-Along Seller and the Company of its
election. Each Tagging Stockholder shall have the right (without the consent of
Ripplewood) to Transfer to the proposed purchaser its pro rata share (based on
its relative Stock ownership as compared to all other Stockholders) of the
Stock being sold in the Tag-Along Sale.

 

9

 

(b)   Any notification by a
Tagging Stockholder pursuant to Section 4(a) shall be a final and
binding commitment of such Tagging Stockholder to participate in such Tag-Along
Sale; provided, however, that in the event there is a material
change in the terms and conditions (including the consideration) of the
Tag-Along Sale, the Tag-Along Seller shall give written notice of such change
to each Tagging Stockholder, and each Tagging Stockholder shall thereafter have
the right to revoke its election to participate in the Tag-Along Sale by
providing written notice to the Tag-Along Seller within two Business Days of
receiving the notice of such change.

 

(c)   Notwithstanding anything
contained in this Section 4, there shall be no liability on the part of
the Tag-Along Seller to the Tagging Stockholders if the transfer of the Stock
of the Tag-Along Seller pursuant to this Section 4 is not consummated for
any reason. Whether to effect a transfer of Stock, or to terminate any such
transaction prior to its consummation, is in the sole discretion of such
Tag-Along Seller.

 

Section 5.               Drag-Along
Rights.

 

(a)   If at any time
Ripplewood and/or any of its Affiliates proposes to Transfer at least 50% of
the Stock then held by Ripplewood and its Affiliates to any Person (other than
Affiliates of Ripplewood) (a “Drag-Along Sale”), then Ripplewood may
cause to be included in such Drag-Along Sale a proportionate amount of the
Stock held by each of the Other Stockholders (the “Drag-Along Stockholders”)
and shall provide notice at least 15 days prior to the date proposed for such
Drag-Along Sale (the “Drag-Along Notice”) to the Drag-Along Stockholders
stating the material terms and conditions of such Drag-Along Sale (including
the kind and amount of consideration to be paid for such Stock and the name of
the proposed purchaser).

 

(b)   In the event Ripplewood
provides a Drag-Along Notice in accordance with this Section 5, each
Drag-Along Stockholder shall (i) be obligated to Transfer to the proposed
purchaser its Stock for the same consideration per Share and otherwise on the
same terms and conditions as Ripplewood and/or its Affiliates, as applicable
(with appropriate adjustments as may be determined by Ripplewood in the case of
an indirect Transfer of Stock), as such terms and conditions are set forth in
such Drag-Along Notice and (ii) execute and deliver such instruments of
conveyance and transfer and take such other actions as Ripplewood or the
proposed purchaser may reasonably require in order to carry out the terms of
this Section 5.

 

(c)   The instruments of
conveyance and transfer for a Drag-Along Sale shall not include any
representations and warranties of any Drag-Along Stockholder except such
representations and warranties as are ordinarily given by a seller of
securities, including with respect to such seller’s authority to sell,
enforceability of agreements against such seller, such seller’s good title in
such securities and good title in such securities to be acquired by the
purchaser at the closing of such sale; provided, however, that
all representations and warranties, covenants, indemnities and agreements shall
be made by Ripplewood and/or its Affiliates, on the one hand, and each
Drag-Along Stockholder, on the other hand, thereunder severally and not jointly
and that any liability of Ripplewood and/or its Affiliates, as the case may be,
and each Drag-Along Stockholder thereunder

 

10

 

shall
be borne by each of them on a pro rata basis based on the relative number of
shares of Stock being sold by it.

 

Section 6.               New Securities; Distributions.

 

(a)   When
and to the extent the Company determines that it will issue shares of New
Stock, the Company shall offer to each Stockholder its pro rata share of the
New Stock to be issued (based on its pro rata Stock ownership as compared to
all Stock issued and outstanding prior to the issuance of such New Stock),
which offer shall be made by written notice from the Company to the
Stockholders. Within 10 Business Days of its receipt of such notice, each
Stockholder shall notify the Company of the number of shares of New Stock the
Stockholder requests to purchase, subject to a maximum of such Stockholder’s
pro rata share of such New Stock as described in the immediately preceding
sentence (it being understood and agreed that the Company may make provision for
Stockholders (on a pro rata basis) to request to purchase more than their
respective pro rata shares of such New Stock, to the extent other Stockholders
decline to purchase such New Stock). Any request by a Stockholder pursuant to
the immediately preceding sentence shall be a final and binding commitment by
such Stockholder to purchase the shares of New Stock so requested.

 

Section 7.               Corporate Governance; Management.

 

(a)   The Board of Directors of the Company (the “Board”) shall be composed of the number of directors (each a “Director” and collectively the “Directors”) determined by Ripplewood in its discretion
from time to time, which shall be at least three Directors. Ripplewood shall be
entitled to propose the appointment of the Directors (including the Chairman of
the Board and independent Directors). At least one Director shall be
“independent” for purposes of Rule 10A-3 promulgated under the Exchange
Act. The Company and each of the Stockholders hereby agree to take all action
necessary to effect the appointment to the Board of each Director appointee of
Ripplewood.

 

(b)   Any Director may resign upon delivery of written notice from such
Director to the Company and shall be removed by action of the Company or the
Stockholders at the request of Ripplewood.

 

(c)   Except as otherwise required by law or regulation, the Company and each
of the Stockholders shall use commercially reasonable best efforts to cause the
charter, by-laws or other comparable organizational documents of the Company
(and, to the extent necessary, the charter, by-laws or other comparable
organizational documents of any subsidiary of the Company) to contain
limitations on the liability of Directors to the fullest extent permissible
under the laws of the State of Delaware.

 

(d)   The Company shall use commercially reasonable best efforts to procure
and maintain during the term of this Agreement directors’ and officers’
liability insurance for each of the Directors (at the Company’s reasonable
expense) which is comparable to that provided by other companies similar to the
Company.

 

(e)   The Stockholders acknowledge that the holders of Senior PIK Preferred
Stock (voting as a class) shall have the right to appoint two observers to the
Board;

 

11

 

provided
that such observers shall not be entitled to vote on any matter. The Company
may also grant observer status to others from time to time.

 

Section 8.               Voting; Major
Transactions. (a) Notwithstanding
anything to the contrary contained in this Agreement, each Stockholder of the
Company shall vote its respective shares of Stock, on all matters presented to
the Stockholders for their approval (other than matters requiring a
Stockholder’s approval pursuant to Section 8(b)), in such manner as such
Stockholder is directed by Ripplewood I. Upon becoming a Stockholder, each
Stockholder other than Ripplewood I hereby makes, constitutes and appoints
Ripplewood I, with full power of substitution and resubstitution, its true and
lawful attorney, for it and in its name, place and stead and for its use and
benefit, to act as its proxy in respect of any vote or approval of Stockholders
(other than matters requiring a Stockholder’s approval pursuant to Section 8(b)).
The proxy granted pursuant to this Section 8(a) is a special proxy
coupled with an interest and is irrevocable.

 

(b)  Without the affirmative vote or
consent of Ripplewood I and the affirmative vote or consent of a majority in
interest of the Other Stockholders, the Company shall not, and shall not permit
its subsidiaries to (i) enter into any transaction between the Company or
any of its subsidiaries, on the one hand, and Ripplewood or any of its
Affiliates, on the other hand, other than the Management Services Agreement,
the payment of a $25 million transaction fee to Ripplewood Holdings L.L.C.
pursuant to a transaction fee agreement, the Acquisition and the Combination, (ii) enter
into a material line of business that is unrelated to the existing business of
the Company or any of its Subsidiaries, (iii) make any amendment to the
certificate of incorporation or by-laws of the Company that would materially
adversely affect the rights of the Other Stockholders or (iv) make any
acquisition or divestiture of assets that have an enterprise value in excess of
$400 million, other than the Acquisition or the Combination.

 

Section 9.               Registration Rights.

 

9.1           Demand Registration.

 

(a)  At
any time and from time to time, Ripplewood and, after 180 days (or earlier if
permitted by Ripplewood and the underwriter(s) in the Initial Public
Offering) following the consummation of the Initial Public Offering, any other
Original Stockholder (the “Requesting Demand Stockholder”) may, in a written notice (a “Demand
Notice”) to the Company, request
that the Company file a registration statement on any Form that is
available to the Company for the registration of securities (other than a Form S-4
or Form S-8 or any successor or similar forms) under the Securities Act
covering the registration of all or a portion of such Requesting Demand
Stockholder’s Registrable Securities, as specified in the Demand Notice. In
order to be valid, any Demand Notice after the Initial Public Offering must
request the registration of Registrable Securities having an aggregate market
value, based on the closing price of the Common Sock on the most recent trading
day prior to the date of such Demand Notice, of not less than $25 million, and
must otherwise provide the information described in Section 9.3(a) or
be followed by such information, when requested as contemplated by Section 9.3(a).
Following receipt of a valid Demand Notice, the Company shall use commercially
reasonable efforts, in accordance with Section 9.4, to effect the
registration of the

 

12

 

Registrable Securities covered by such Demand Notice, subject to any
“cutbacks” imposed in accordance with Section 9.3(d).

 

(b)  The maximum number of
registrations that the Company is required to effect in response to Demand
Notices given by Requesting Demand Stockholders is four with respect to
Ripplewood and one with respect to each other Original Stockholder. A
registration requested by a Demand Notice shall not be deemed to have been
effected on behalf of a Requesting Demand Stockholder unless (i) the
related registration statement has been declared effective by the SEC, (ii) such
registration statement has remained effective for the period set forth in Section 9.4(b) plus
such longer period as, in the opinion of counsel for the underwriter or underwriters,
a prospectus is required by law to be delivered in connection with the sale of
Registrable Securities by an underwriter or dealer, (iii) the offering of
Registrable Securities pursuant to such registration is not subject to any stop
order, injunction or other similar order or requirement of the SEC during such
period and (iv) in the event of an underwritten offering, the conditions
to closing specified in the underwriting agreement entered into in connection
with such registration are satisfied pursuant to the terms of such underwriting
agreement. However, notwithstanding the requirement of clause (i), if the
Requesting Demand Stockholder withdraws its request prior to the related
registration statement being declared effective by the SEC, then such registration
will be deemed to have been effected for purposes of this Section 9.1(b) unless
(A) the Requesting Demand Stockholder pays the Registration Expenses
incurred by the Company through the date of such withdrawal or (B) the
withdrawal is due to the disclosure of material adverse information relating
specifically to the Company that the Requesting Demand Stockholder did not know
prior to submitting its Demand Notice. Furthermore, if in a registered offering
requested by a Requesting Demand Stockholder such Requesting Demand Stockholder
is subject to a cutback imposed in accordance with Section 9.3(d) of
more than 50% of the Registrable Securities as to which it has requested
registration, such Requesting Demand Stockholder shall not be deemed to have used
one of its “demand rights” in connection with such offering.

 

(c)  As soon as reasonably
practicable, but in no event later than 30 days, after receiving a valid Demand
Notice, the Company shall file with the SEC a registration statement covering
all of the Registrable Securities covered by such Demand Notice as well as any
other Registrable Securities as to which registration is properly requested in
accordance with Section 9.2 (which other Registrable Securities may be
included by means of a pre-effective amendment), but subject in both cases to
any cutbacks imposed in accordance with Section 9.3(d). However, if this
filing deadline would otherwise occur within 120 days following the effective
date of any other registration statement with respect to which the Stockholders
have been entitled to join pursuant to Section 9.2 (180 days in the case
of the registration statement for the Initial Public Offering), then the
Company may defer the filing date until after such 120th day (or 180th day in
the case of the registration statement for the Initial Public Offering).

 

(d)  In the case of a shelf
registration statement, the Company shall not be required to keep such
registration statement effective for longer than (i) one year following
the effectiveness of the registration statement or, if earlier, (ii) the
date on which (x) all of the Registrable Securities covered by the
registration statement have been sold pursuant

 

13

 

thereto
and (y) the date on which all Registrable Securities held by the
Requesting Demand Stockholder are eligible for sale without volume restrictions
pursuant to Rule 144.

 

(e)  In
the event that, following the receipt of a Demand Notice, (i) the Company
is in possession of material non-public information the disclosure of which the
Board determines, in its reasonable judgment and in good faith, would be
materially adverse to the Company and would not otherwise be required under any
applicable law to be publicly disclosed and (ii) the Company gives the
Requesting Demand Stockholder written notice of such determination, the Company
shall, notwithstanding the provisions of Section 9.1 hereof, be entitled
to postpone for up to an aggregate of 120 days in any 12-month period the
filing of any registration statement otherwise required to be prepared and
filed by it pursuant to Section 9.1 hereof. In the event the Company
postpones the filing of any registration statement pursuant to the preceding
sentence, the Requesting Demand stockholder may withdraw its Demand Notice
prior to the filing of the registration statement and shall not be deemed to
have used one of its “demand rights”.

 

9.2           Piggyback Registration.

 

(a)  If at any time following the consummation of the Initial
Public Offering the Company intends to file a registration statement under the
Securities Act (other than a registration statement on Form S-4 or S-8 or
any successor or similar forms) covering a primary or secondary offering of any
Stock, whether in response to a valid Demand Notice or otherwise, the Company
shall promptly give each Stockholder written notice specifying the date on
which the Company anticipates filing such registration statement and advising
each such party of its right to have its Registrable Securities included in
such registration in accordance with this Section 9. Each Stockholder will
then have the opportunity, by written notice received by the Company no later
than 10 Business Days after such Stockholder’s receipt of the Company’s notice
of such proposed filing, to request that all or a portion of such Stockholder’s
Registrable Securities be included in such registration statement.

 

(b)  Following receipt of any such timely request, the
Company shall include in such registration statement (including by means of a
pre-effective amendment if the registration statement has already been filed)
all of the Registrable Securities that such Stockholder requests for inclusion
in such registration statement, subject to any cutbacks imposed in accordance
with Section 9.3(d), and the Company shall use commercially reasonable
efforts in accordance with Section 9.4 to effect the registration of all
such Registrable Securities. However, if at any time after giving written
notice of its intention to file such a registration statement and prior to the
effective date of such registration statement, the Company decides for any
reason not to proceed with the proposed registration (including because the
Requesting Demand Stockholder withdraws its request pursuant to Section 9.1),
then the Company shall give written notice of such decision to the parties
holding Registrable Securities, at which point the Company will be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the related Registration
Expenses); provided that this right on the part of the Company
shall not affect the Company’s obligation to proceed with a registration
validly requested under Section 9.1 and to include in such registration the

 

14

 

Registrable
Securities requested for inclusion by any Stockholder pursuant to this Section 9.2.

 

(c)  In
connection with any underwritten offering, the Company shall not be required
under Section 9.2 to include Registrable Securities in such underwritten
offering unless the holders intending to sell Registrable Securities accept the
terms of the underwriting of such offering that have been reasonably agreed
upon between the Company, the Requesting Demand Stockholder (if any) and the
underwriters selected in accordance with this Agreement, but no Stockholder
will be required to make representations or warranties to the underwriters or
other purchasers or to provide indemnities other than as specified in this
Agreement, and all such representations and warranties shall be on a several
and not joint basis.

 

9.3           Rights and Obligations of
Holders in Connection with a Registration.

 

(a)  The Stockholders participating in a registration in
accordance with this Section 9 shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition and plan of distribution of such securities
as the Company may reasonably request and as may reasonably be required in
connection with the registration to be effected by the Company.

 

(b)  The Stockholders participating in a registered offering
in accordance with this Section 9 will, if it is an underwritten offering,
enter into an underwriting agreement, to be negotiated by the Company and its
counsel, in customary form, which agreement will contain such representations
and warranties by and obligations of the Company as are customarily contained
in underwriting agreements generally, including, without limitation, customary
indenmification and contribution provisions. Customary representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of the
Stockholders participating in such offering in a manner customary for such
transaction. No Stockholder of Registrable Securities shall be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than those representations, warranties and agreements
(including limited indemnification with respect to written information supplied
by such Stockholder with respect to itself) regarding such Stockholder as are
customarily given by non-controlling stockholders seeking to sell shares in an
underwritten secondary offering; provided, however, that if any Stockholder of Registrable
Securities disapproves of the terms of the underwriting, such Stockholder’s
sole remedy shall be to elect to withdraw all of its Registrable Securities by
written notice to the Company, the managing underwriter and, if applicable, the
Requesting Demand Stockholder. The Registrable Securities so withdrawn shall
also be withdrawn from registration and the corresponding Demand Notice of such
Requesting Demand Stockholder, if any, shall also be deemed to have been
withdrawn.

 

(c)  The Company will have the right to select the
underwriters in connection with any registered offering in accordance with this
Section 9.

 

15

 

(d)  If
the managing underwriter or underwriters determine in their reasonable business
judgment that the total amount of Registrable Securities and other securities
of the Company proposed to be included in an offering to which Section 9.1
or Section 9.2 applies is such as to materially adversely affect the
success of such offering, then the Company shall only be obligated to include
in such registered offering the amount of securities which the Company is so
advised can be sold in such offering, as follows:

 

(i)  if such registration includes a registration of shares
of securities to be offered for sale by the Company (other than in connection
with a registration in response to a Demand Notice), the Company shall include
in such registration, to the extent of available capacity, first, all such
securities that the Company proposes to be included in such registration, and
second, the Registrable Securities requested to be included in such
registration by the Stockholders, pro rata among them in the proportion that
the number of Registrable Securities sought to be registered by each of them
bears to the total number of Registrable Securities sought to be registered by
all of them; and

 

(ii)  if such registration is a registration of Registrable
Securities in response to a Demand Notice, then the Company shall include in
such registration, to the extent of available capacity, first, the Registrable
Securities requested to be included in such registration by the Stockholders
pro rata among them in the proportion that the number of Registrable Securities
sought to be registered by each of them bears to the total number of
Registrable Securities sought to be registered by all of them, and second, such
securities that the Company proposes to be included in such registration.

 

(e)  Each
Stockholder of Registrable Securities agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section 9.4(a)(viii),
such Stockholder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Stockholder’s receipt of the copies of the supplemented
or amended prospectus contemplated by Section 9.4(a)(viii) and, if so
directed by the Company, such Stockholder shall deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
Stockholder’s possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice; provided,
however, that any period
of time during which a Stockholder must discontinue disposition of Registrable
Securities shall not be included in the determination of a period of
distribution for purposes of Section 9.4(b).

 

9.4           Obligations of the Company
in Connection with a Registration.

 

(a)  Whenever
required under Section 9.1 or Section 9.2 to use commercially
reasonable efforts to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably practicable (but subject to Section 9.1(d),
Section 9.1(e) and any other applicable provisions in this Section 9):

 

(i)  prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby determined as provided in Section 9.4(b);

 

16

 

(ii)  before filing a registration
statement or prospectus or any amendments or supplements thereto, furnish to
counsel of the holders of such Registrable Securities copies of all such
documents proposed to be filed, which documents will be subject to the
reasonable review and comment of such counsel, and such other documents
reasonably requested by such counsel, including any comment letter from the
SEC, and provide such counsel reasonable opportunity to participate in the
preparation of such registration statement and each prospectus included therein
(including any amendments and supplements thereto) and such other opportunities
to conduct a reasonable investigation within the meaning of the Securities Act,
including reasonable access to the Company’s books and records, officers,
accountants and other advisors;

 

(iii)  prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith (A) reasonably requested by any
Stockholder of such Registrable Securities (to the extent such request relates
to information relating to such Stockholder) and (B) as may be necessary
to keep such registration statement effective for the period of distribution
contemplated thereby determined as provided in Section 9.4(b) and
comply in all material respects with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement, and furnish to the Stockholders of such Registrable
Securities copies of any such amendments and supplements prior to their being
used or filed with the SEC;

 

(iv)  furnish to the selling
holders of Registrable Securities such numbers of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus and any amendments or supplements thereto in conformity with the
requirements of the Securities Act, and, in each case including all exhibits
thereto and all documents incorporated by reference therein) and such other
documents and information as they may reasonably request and make available for
inspection by the parties referred to in Section 9.4(a)(xv) such financial
and other information and books and records of the Company, and cause the
officers, Directors, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be reasonably
necessary, in the judgment of the respective counsel referred to in Section 9.4(a)(xv),
to conduct a reasonable investigation within the meaning of Section 11 of
the Securities Act;

 

(v)  use commercially reasonable
efforts to register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as any selling Stockholder or underwriter of Registrable
Securities reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such Stockholder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Stockholder; provided, however, that the Company
will not be required in connection therewith or as a condition thereto to (A) register
or qualify to do business in or file a general consent to service of process in
any jurisdiction wherein it would not, but for the requirements of this Section 9.4(a)(v),
be obligated to do so, or (B) take any action that would subject it to
more than de minimis taxation in a jurisdiction where it is not already subject
to tax but for the requirements of this paragraph;

 

17

 

(vi)  promptly notify in writing each selling Stockholder of
Registrable Securities, their counsel, the sales or placement agent, if any,
therefor and the managing underwriter or underwriters, if any, thereof (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been filed,
and, with respect to such registration statement or any post-effective
amendment, when the same has become effective, (B) of any comments by the
SEC or by any blue sky or securities commissioner or regulator of any state
with respect thereto or any request by the SEC for amendments or supplements to
such registration statement or prospectus or for additional information, (C) of
the issuance by the SEC of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings for
that purpose, (D) if at any time the representations and warranties
of the Company contained in any underwriting agreement or other customary
agreement cease to be true and correct in all material respects or (E) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of such Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;

 

(vii)  use commercially reasonable efforts to prevent the
entry of and obtain the withdrawal of any order suspending the effectiveness of
such registration statement or any post-effective amendment thereto at the
earliest practicable date;

 

(viii)  promptly notify in writing each selling Stockholder
of Registrable Securities, at any time when a prospectus relating to such Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included or
incorporated by reference in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make, in light of the
circumstances under which they were made, the statements therein not
misleading, and at the request of any such Stockholder promptly prepare and
furnish to such Stockholder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall 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, in light of the
circumstances under which they were made, the statements therein not
misleading;

 

(ix)  furnish, at the request of any selling Stockholder of
Registrable Securities, if the method of distribution is by means of an
underwriting, on the date that the Registrable Securities are delivered to the
underwriters for sale pursuant to such registration, or if such Registrable
Securities are not being sold through underwriters, on the date that the
registration statement with respect to such Registrable Securities becomes
effective, (A) a signed opinion, dated such date, of the independent legal
counsel representing the Company for the purpose of such registration,
addressed to the underwriters, if any, and to the Stockholders making such
request, as to such matters as such underwriters or the Stockholders including
Registrable Securities in such registration, as the case may be, may reasonably
request and as would be customary in such a transaction; and (B) letters,
dated such date and the date the offering is priced, from the independent
certified public accountants of the Company, addressed to the underwriters, if
any, and to the Stockholders making such request and, if such accountants
refuse to deliver such letters to such

 

18

 

Stockholders, then to the Company (x) stating that they are
independent certified public accountants within the meaning of the Securities
Act and that, in the opinion of such accountants, the financial statements and
other financial data of the Company included or incorporated by reference in
the registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and (y) covering such other
financial matters (including information as to the period ending not more than
five Business Days prior to the date of such letters) with respect to the
registration in respect of which such letter is being given as such
underwriters or the Stockholders holding a majority of the Registrable
Securities included in such registration, as the case may be, may reasonably
request and as would be customary in such a transaction;

 

(x)  provide a transfer agent and
registrar for all such Registrable Securities not later than the effective date
of such registration;

 

(xi)  enter into customary
agreements (including if the method of distribution is by means of an
underwriting, an underwriting agreement in customary form, including customary
indemnification provisions substantially consistent with Section 9.6 and,
to the extent required by the underwriters, customary lock-up provisions
substantially consistent with Section 9.7) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities to be so included in the registration statement;

 

(xii)  use commercially reasonable
efforts to obtain the governmental and self regulatory organization
authorizations which may be required to effect such registration or the
offering or sale in connection therewith or to enable the selling Stockholders
to offer, or to consummate the disposition of, their Registrable Securities;

 

(xiii)  use commercially reasonable
efforts to cause all Registrable Securities covered by the registration
statement to be approved for listing on a U.S. national securities exchange or
approved for traded on a national interdealer quotation system, and cooperate
with the selling Stockholders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing such Registrable Securities to be sold,
which certificates shall conform to the requirements of such national
securities exchange or interdealer quotation system and shall not bear any
restrictive legends, and, in the case of an underwritten offering, enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters may request at least two Business
Days prior to any sale of such Registrable Securities;

 

(xiv)  otherwise comply in all material
respects with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the registration statement, an
earnings statement covering the period of at least 12 months beginning with the
first full month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 10(a) of
the Securities Act and Rule 158 promulgated thereunder;

 

19

 

(xv)  make available for inspection by any selling
Stockholder of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such Stockholder or underwriter, all
financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company’s officers, Directors, employees and
independent accountants to supply all information reasonably requested by any
such Stockholder, underwriter, attorney, accountant or agent in connection with
such registration statement;

 

(xvi)  permit any selling Stockholder of Registrable
Securities that, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling Person of the Company to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of the Stockholder and its counsel should be included;

 

(xvii)  if requested by the managing underwriter or agent or
any selling Stockholder of Registrable Securities covered by the registration
statement, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or agent or such
Stockholder reasonably requests to be included therein, including, with respect
to the number of Registrable Securities being sold by such Stockholder to such
underwriter or agent, the purchase price being paid therefor by such
underwriter or agent and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering, and make
all required filings of such prospectus supplement or post-effective amendment
as soon as reasonably practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective amendment;

 

(xviii)  cause the Company’s executive officers to use, in
accordance with customary practice, their commercially reasonable best efforts
to support the marketing of the Registrable Securities, which may include
participating in a so-called “road show” if requested and deemed advisable by
the managing underwriter or underwriters; and

 

(xix)  use commercially reasonable efforts to take all other
steps customary or necessary to effect the registration and sale of the
Registrable Securities as contemplated hereby.

 

(b)  For
purposes of Section 9.4(a), and with respect to registration required
pursuant to Section 9.1, (i) the period of distribution of
Registrable Securities in a firm commitment underwritten public offering will
be deemed to extend until each underwriter has completed the distribution of all
securities purchased by it (or such shorter period as may be required in the
underwriting agreement) and (ii) the period of distribution of Registrable
Securities in any other registration will be deemed to extend until the earlier
of the sale of all Registrable Securities covered thereby and 60 days after the
effective date thereof.

 

(c)  All fees, costs and expenses incurred in connection with
each registration or attempted registration pursuant to Section 9.1 or
9.2, including all registration, filing and qualification fees, word
processing, duplicating, printers’ and accounting costs and fees (including the
expenses of any special audits or “cold comfort”

 

20

 

letters required by or incident to the Company’s performance of its
obligations under Section 9.4), fees of the National Association of
Securities Dealers, Inc., listing fees, fees and expenses of complying
with state securities or blue sky laws, fees and disbursements of counsel for
the Company, fees and disbursements of underwriters customarily paid by the
issuers or sellers of securities and fees and expenses of the counsel to the
Stockholders participating therein), but excluding any underwriting discounts
or commissions (“Registration Expenses”), shall be paid by the Company.
However, the Company will not be required to pay the fees and expenses of more
than one counsel for Ripplewood and one other counsel for all other
Stockholders of Registrable Securities participating therein.

 

9.5           Rule 144.

 

(a)  With a view to making available the benefits of certain rules and
regulations of the SEC that may permit the sale of the Registrable Securities
to the public without registration, the Company agrees that, after such time as
the Company shall have consummated its Initial Public Offering, it will:

 

(i)  make and keep public
information available, as those terms are understood and defined in Rule 144;

 

(ii)  use commercially
reasonable efforts to file with the SEC in a timely manner all reports and other
documents required to be filed by the Company under the Securities Act and the
Exchange Act;

 

(iii)  furnish to each
Stockholder forthwith upon written request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports
and documents so filed by the Company as such Stockholder may reasonably
request in availing itself of Rule 144; and

 

(iv)  upon the reasonable request
of an Original Stockholder, provide reasonable cooperation in connection with
the marketing of a “block” trade of Registrable Securities by such Stockholder.

 

(b)  After such time as the Company shall have consummated
its Initial Public Offering, any Transfer pursuant to and in accordance with
the provisions of Rule 144 shall not be subject to the provisions or
procedures set forth in Section 3(c) or Section 4 above (but,
for the avoidance of doubt, shall be subject to the remaining provisions of Section 3
above).

 

9.6           Indemnification.
In the event the Company files any registration statement under the Securities
Act or the Exchange Act, this Section 9.6 shall apply.

 

(a)  The Company shall indemnify and hold harmless each
Stockholder and each such Stockholder’s directors, officers and each Person, if
any, who controls such Stockholder, as the case may be, within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including any legal or other expenses reasonably incurred in

 

21

 

connection
with defending or investigating any such action or claim) to which they may
become subject under the Securities Act or otherwise, including any amount paid
in settlement of any litigation commenced or threatened, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof, whether or not such indemnified person is a party thereto) arise out
of or are based on any untrue or alleged untrue statement of a material fact
contained in such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto or arise out of or are based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make, in light of the circumstances under
which they were made, the statements therein not misleading; provided,
however, that the Company
shall not be liable to any Stockholder or such Stockholder’s directors or
officers or controlling Persons, in any such case, for any such loss, claim,
damage or liability (or action or proceeding in respect thereof, whether or not
such indemnified person is a party thereto) to the extent that it arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto,
in conformity with written information relating to such Stockholder furnished
to the Company by such Stockholder expressly for inclusion therein in
connection with such registration; provided  further,  however, that as to any preliminary prospectus or any
final prospectus, this indemnity agreement shall not inure to the benefit of
any Stockholder or any such Stockholder’s directors or officers or controlling
Persons, on account of any loss, claim, damage or liability arising from the
sale of Registrable Securities to any Person by such Stockholder, if such
Stockholder or its representatives failed to send or give a copy of the final
prospectus or a prospectus supplement, as the case may be (excluding documents
incorporated by reference therein), as the same may be amended or supplemented,
to that Person within the time required by the Securities Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such preliminary prospectus or final
prospectus was corrected in the final prospectus or such prospectus supplement,
as the case may be (excluding documents incorporated by reference therein),
unless such failure resulted from the non-compliance by the Company with Section 9.4(a)(viii).
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such Stockholder or any such
Stockholder’s directors or officers or controlling Persons and shall survive
the transfer of such securities by such Stockholder.

 

(b)  Each
Stockholder requesting or joining in a registration, severally and not jointly,
shall indemnify and hold harmless the Company, each of its Directors and
officers and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
the Stockholders but only with reference to written information relating to
such Stockholder furnished to the Company by such Stockholder expressly for
inclusion in connection with such registration; provided, however, that the liability of each Stockholder
hereunder shall not exceed the net proceeds received by such Stockholder from
the sale of Registrable Securities covered by such registration.

 

(c)  In
case any proceeding (including any governmental investigation) shall be
instituted involving any Person in respect of which indemnity may be sought
pursuant to

 

22

 

either
Section 9.6(a) or (b), such Person (the “Registration
Indemnified Party”) shall
promptly notify the Person against whom such indemnity may be sought (the “Registration
Indemnifying Party”) in writing and
the Registration Indemnifying Party, upon request of the Registration
Indemnified Party, shall retain counsel reasonably satisfactory to the
Registration Indemnified Party to represent the Registration Indemnified Party
and any others the Registration Indemnifying Party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding, and the Registration Indemnifying Party shall, at
its election and at the expense of the Registration Indemnifying Party, assume
the defense thereof. In any such proceeding, any Registration Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Registration Indemnified Party
unless (i) the Registration Indemnifying Party and the Registration
Indemnified Party shall have mutually agreed to the retention of such counsel
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the Registration Indemnifying Party and the Registration
Indemnified Party and representation of both parties by the same counsel would
be, in the reasonable opinion of counsel to the Registration Indemnified Party,
inappropriate due to actual or potential differing interests between them, in
which event the fees and expenses of such counsel shall be borne by the
Registration Indemnifying Party. It is understood that the Registration
Indemnifying Party shall not, in respect of the legal expenses of any Registration
Indemnified Party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the affected
Stockholder(s), in the case of parties indemnified pursuant to Section 9.6(a),
and by the Company, in the case of parties indemnified pursuant to Section 9.6(b).
The Registration Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent (which shall not be
unreasonably withheld or delayed), but if settled with such consent or if there
shall be a final judgment for the plaintiff, the Registration Indemnifying
Party agrees to indemnify the Registration Indemnified Party from and against
any loss or liability by reason of such settlement or judgment. No Registration
Indemnifying Party shall, without the prior written consent of the Registration
Indemnified Party, effect any settlement of any pending or threatened
proceeding in respect of which any Registration Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Registration Indemnified Party, unless such settlement includes an
unconditional release of such Registration Indemnified Party from all liability
on claims that are the subject matter of such proceeding.

 

(d) If
the indemnification provided for in this Section 9.6 is held by a court of
competent jurisdiction to be unavailable to any Person entitled to
indemnification hereunder with respect to any losses, claims, damages,
liabilities and expenses referred to herein, then the Registration Indemnifying
Party, in lieu of indemnifying such Registration Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Registration Indemnified
Party as a result of such loss, claim, damage, liability or expense (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Registration Indemnifying Party and the Registration Indemnified Party from
the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect

 

23

 

not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Registration Indemnifying Party and of the Registration
Indemnified Party in connection with the statements or omissions which resulted
in such loss, claim, damage, liability or expense, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the selling Stockholder of Registrable Securities
or underwriter, as the case may be, on the other hand, in connection with the
distribution of the Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the Company from the offering
bear to the total net proceeds received by such Stockholder from the offering
or the underwriting discounts and commissions received by the underwriter in
such offering, as the case may be. The relative fault of the Registration
Indemnifying Party and of the Registration Indemnified Party shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Registration
Indemnifying Party, the Registration Indemnified Party or the underwriter and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided that the foregoing contribution agreement
shall not inure to the benefit of any Registration Indemnified Party if
indemnification would be unavailable to such Registration Indemnified Party by
reason of the provisions of Sections 9.6(a) or (b), and in no event shall
the obligation of any Registration Indemnifying Party to contribute under this
clause (d) exceed the amount that such Registration Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Sections 9.6(a) or (b) had been
available under the circumstances.

 

9.7           Lock-up.

 

(a)  Each
Stockholder that holds Registrable Securities that could be included in a
registration statement pursuant to Section 9.2 shall, in connection with
any registration by the Company of any Stock (including Registrable
Securities), at the request of the Company, promptly cease to effect any sale,
disposition or distribution of any Stock (other than any included in the registration)
without the prior written consent of the Company for a period beginning from
the time the Company gives notice to each Stockholder of its intention to file
a registration statement and ending upon the earlier of the expiration of the
“lock-up” period imposed on the Company under the underwriting agreement (if
any) relating to an underwritten offering covered by such registration
statement, the date such registration statement is withdrawn or abandoned, or
60 days after the effective date of such registration statement in the case of
a registration that is not an underwritten offering, except to the extent the
Company and the underwriter or underwriters each conclude that Stockholders
holding less than a minimum ownership percentage of outstanding Stock need not
be subject to the “lock-up” period.

 

(b)  The
Company agrees (i) not to effect any public offer, sale or distribution of
Stock for a period beginning from the time the Company gives notice to each
Stockholder pursuant to this Section 9 of its intention to file a
registration statement to which Section 9.1 or 9.2 applies and 90 days
after the effective date of such registration statement (180 days after such
effective date in the case of the Initial Public Offering), and (ii) to
use commercially reasonable efforts to cause each Stockholder to agree not to
effect any sale, disposition or distribution of any Stock during such period
(other than any

 

24

 

included
in the registration) without the prior written consent of the Company for a
period beginning from the time the Company gives notice to each Stockholder of
its intention to file a registration statement and ending upon the earlier of
the expiration of the “lock-up” period imposed on the Company under the
underwriting agreement (if any) relating to an underwritten offering covered by
such registration statement, the date such registration statement is withdrawn
or abandoned, or 60 days after the effective date of such registration
statement in the case of an registration that is not an underwritten offering.

 

Section 10.             Indemnification.

 

(a)  To
the fullest extent permitted by law, none of the Stockholders, their respective
Affiliates, nor any of their respective partners, members, shareholders, directors,
officers, employees, agents, consultants, legal or other advisors, nor the
Directors (each, an “Indemnified Party”), shall be liable to the Company
or to any Stockholder for (i) any act or omission by such Indemnified
Party in connection with the conduct of the affairs of the Company or otherwise
in connection with this Agreement or the matters contemplated herein, unless
such act or omission resulted from gross negligence or willful misconduct by
such Indemnified Party or (ii) any act or omission of any broker or other
agent or representative of the Company.

 

(b)  No
Stockholder shall have any personal liability whatsoever in its capacity as a
Stockholder, whether to the Company, to any of the other Stockholders or to the
creditors of the Company, including, without limitation, for the debts,
liabilities, contracts or other obligations of the Company or for any losses of
the Company.

 

(c)  To
the fullest extent permitted by law, the Company shall indemnify and save
harmless each Indemnified Party from and against any and all claims,
liabilities, damages, losses, costs and expenses (including amounts paid in
satisfaction of judgments, in compromises and settlements, as fines and
penalties and legal or other costs and reasonable expenses of investigating or
defending against any claim or alleged claim) of any nature whatsoever, known
or unknown, liquidated or unliquidated, that are incurred by any Indemnified
Party and arise out of or in connection with the affairs of the Company,
including acting as a Director or the equivalent of the Company, or the
performance by such Indemnified Party of any of the Board’s responsibilities
hereunder or otherwise in connection with the matters contemplated herein; provided
that each Indemnified Party shall be entitled to indemnification hereunder only
to the extent that such Indemnified Party’s conduct did not constitute gross
negligence or willful misconduct. 

 

The
satisfaction of any indemnification and any saving harmless pursuant to this Section 10
shall be from and limited to the Company’s assets, and no Stockholder shall
have any personal liability on account thereof.

 

(d)  Expenses
reasonably incurred by an Indemnified Party in defense or settlement of any
claim that may be subject to a right of indemnification hereunder shall be
advanced by the Company prior to the final disposition thereof upon receipt of
an undertaking by or on behalf of the Indemnified Party to repay such amount to
the extent that it shall be determined ultimately that such Indemnified Party is
not entitled to be indemnified hereunder.

 

25

 

(e)  The right of any Indemnified
Party to the indemnification provided herein shall be cumulative of, and in
addition to, any and all rights to which such Indemnified Party may otherwise
be entitled by contract or as a matter of law or equity and shall extend to
such Indemnified Party’s successors, assigns and legal representatives.

 

(f)  Any Indemnified Party shall be
deemed to be a creditor of the Company with respect to any amounts payable to
such Indemnified Party pursuant to this Section 10.

 

Section 11.             Legend.
Each Stockholder and the Company shall take all action necessary to cause each
certificate representing outstanding shares of Stock owned by a Stockholder to
bear legends containing substantially the following words:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
THE

SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS.

 

THE SALE, TRANSFER, ASSIGNMENT, DISTRIBUTION, PLEDGE, ENCUMBRANCE OR
OTHER DISPOSITION (EACH A “TRANSFER”) AND VOTING OF ANY OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF A
STOCKHOLDERS’ AGREEMENT DATED AS OF JANUARY 23, 2007 (THE “STOCKHOLDERS’
AGREEMENT”) AMONG THE COMPANY AND THE STOCKHOLDERS NAMED THEREIN, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. THE COMPANY WILL NOT
REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND
UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE
STOCKHOLDERS’ AGREEMENT.

 

The requirement that the above securities legend be placed upon
certificates evidencing shares of Stock shall terminate upon the earliest of
the following events: (i) when such shares of Stock are Transferred
pursuant to an effective registration statement under the Securities Act or (ii) when
such shares of Stock are Transferred in any other transaction if the seller
delivers to the Company an opinion of its counsel, which counsel

 

26

 

and
opinion shall be reasonably satisfactory to the Company, or a “no-action”
letter from the staff of the SEC, in either case to the effect that such legend
is no longer necessary in order to protect the Company against a violation by
it of the Securities Act upon any sale or other disposition of such shares of
Stock without registration thereunder. The requirement that the above
stockholder’s agreement legend be placed upon certificates evidencing shares of
Stock shall terminate upon a Transfer of Stock to a Transferee that is not
required to become party to this Agreement. Upon the consummation of any event
requiring the removal of a legend hereunder, the Company, upon the surrender of
certificates containing such legend, shall, at its own expense, deliver to the
Stockholder of any such shares of Stock as to which the requirement for such
legend shall have terminated, one or more new certificates evidencing such
shares of Stock not bearing such legend.

 

Section 12.             Representations and
Warranties. Each of the Stockholders, severally and not
jointly, hereby represents and warrants to the other Stockholders and to the
Company as follows:

 

(a)  Authorization. The Stockholder has the
power and authority to enter into this Agreement and all other documents and instruments
executed or to be executed by the Stockholder pursuant to this Agreement. The
execution and delivery of this Agreement and all other documents and
instruments executed or to be executed by the Stockholder pursuant to this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary action on the part of the
Stockholder. This Agreement and all other documents and instruments executed or
to be executed by the Stockholder pursuant to this Agreement have been, or will
have been, at the time of their respective execution and delivery, duly
executed and delivered by a Person duly authorized to execute and deliver this
Agreement and such other documents and instruments on behalf of the Stockholder.

 

(b)  Compliance with Other Instruments and Laws. The execution
and delivery of this Agreement and all other documents and instruments executed
or to be executed by the Stockholder pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation of or default under any provision of (i) the
organizational documents of the Stockholder or (ii) any mortgage,
indenture, trust, lease, partnership or other agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Stockholder
or any of its properties or assets except in the case of clause (ii) for
any such conflicts, violations or defaults which would not have a material
adverse effect on the validity or enforceability of this Agreement.

 

(c)  Authorizations and Consents. No consent,
approval or authorization is required to be obtained or made by the Stockholder
in connection with its execution, delivery or performance of this Agreement or
the validity and enforceability of this Agreement, other than under
circumstances where the failure to obtain such consent, approval or
authorization would not have a material adverse effect on the validity or
enforceability of this Agreement.

 

27

 

(d)  Litigation. No action,
suit, proceeding or governmental investigation is pending against the
Stockholder at law or in equity or before any governmental authority that seeks
to question, delay or prevent the consummation of
the transactions contemplated hereby.

 

(e)  Information
and Experience. The Stockholder has made detailed inquiry
concerning the Company and has received any and all written information which
it has requested and all questions and inquiries have been answered to its
satisfaction. The Stockholder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Stock, is able to bear the risks of an investment in the
Stock and understands the risks of, and other considerations relating to, a
purchase of the Stock. Other than as set forth in the Agreement, the
Stockholder is not relying upon any other information, representation or
warranty by Ripplewood, the Company or any agent of either of them in
determining to invest in the Company. The Stockholder has consulted with its
own advisers as to the financial, tax, legal and related matters concerning an
investment in the Stock and, on that basis, believes that an investment in the
Stock is suitable and appropriate for the Stockholder. The Stockholder has no
need for immediate liquidity in the Stockholder’s investment in the Stock.

 

(f)  Interests
Acquired for Investment Purposes. The Stock to be acquired
hereunder is being acquired by the Stockholder for its own account for
investment purposes only and not with a view to resale or distribution. The
Stockholder understands that the Stock has not been registered under the
Securities Act, the securities laws of any U.S. state or the securities laws of
any other jurisdiction, nor is such registration contemplated. The Stockholder
understands and agrees further that shares of the Stock must be held indefinitely
unless they are subsequently registered under the Securities Act and such laws
or an exemption from registration under the Securities Act and such laws
covering the sale of the Stock is available and that even if such an exemption
is available, the assignability and transferability of the Stock will be
governed by this Agreement, which imposes substantial restrictions on transfer.
The Stockholder understands that legends as set forth in Section 11 will
be placed on all documents evidencing the Stock.

 

(g)  Tax. The
Stockholder does not and will not have any pre-existing commitment at the
Effective Time to transfer its Stock to any other Person (except as described
under Section 351(c) of the Code).

 

(h)  Accredited
Investor. The Stockholder is an “accredited investor” as
defined in Rule 501(a) promulgated under Regulation D of the
Securities Act.

 

(i)  Financial
Capability. The Stockholder and its Affiliates, after making
any requisite capital calls, will have the financial capacity to complete the
transactions contemplated by this Agreement.

 

(j)  Brokers. The
Stockholder has not retained any finder, broker, agent, financial advisor, “purchaser
representative” (as defined in Rule 501(h) promulgated under
Regulation D of the Securities Act) or other intermediary in connection with
the transactions contemplated by this Agreement. No agent, broker or other
Person acting on

 

28

 

behalf
of the Stockholder is, or will be, entitled to any commission or broker’s or
finder’s fees from the Stockholder, or from any Affiliate of the Stockholder,
in connection with any of the transactions contemplated herein.

 

(k) The
Stockholder hereby agrees to indemnify and hold harmless the Company from any
liability for any compensation or other fees or expenses of any such
intermediary, agent, broker or other Person described in Section 12(i) retained
by such Stockholder and the fees and expenses of defending against such
liability or alleged liability.

 

Section 13.             Management Rights.

 

(a)  With respect to each VCOC Stockholder, the Company
hereby agrees that for so long as such VCOC Stockholder continues to hold any
Stock, the Company shall, with respect to such VCOC Stockholder:

 

(b)  provide the VCOC Stockholder or a designated
representative thereof with (A) upon reasonable notice, at reasonable
times, from time to time, the right to inspect and copy the books and records
of the Company and its subsidiaries, (B) upon reasonable notice, at
reasonable times, from time to time, the right to visit and inspect the
properties of the Company and its subsidiaries, (C) copies of all audited
financial statements of the Company and its subsidiaries and (D) copies of
all materials provided to the Board;

 

(c)  make appropriate officers and/or Directors of the
Company and the Surviving Corporation available periodically for consultation
with the VCOC Stockholder or a designated representative thereof with respect
to matters relating to the business and affairs of the Company and its subsidiaries,
including significant changes in management personnel and compensation of
employees, introduction of new products or new lines of business, important
acquisitions or dispositions of plants and equipment, significant research and
development programs, the purchasing or selling of important trademarks,
licenses or concessions or the proposed commencement or compromise of
significant litigation;

 

(d)  inform the VCOC Stockholder or a designated
representative thereof in advance with respect to any significant corporate
actions, including extraordinary dividends, mergers, acquisitions or
dispositions of assets, issuances of significant amounts of debt or equity and
material amendments to the certificate of incorporation or bylaws of the
Company and the Surviving Corporation, and upon reasonable notice, at
reasonable times, from time to time, provide the VCOC Stockholder or a
designated representative thereof with the right to consult with the Company
and the Surviving Corporation with respect to such actions; and

 

(e)  provide the VCOC Stockholder or a designated
representative thereof with such other rights of consultation as may be
reasonably necessary to qualify its investment in the Company as a “venture
capital investment” for purposes of the United States Department of Labor
Regulation published at 29 C.F.R. Section 2510.3-101(d)(3)(i).

 

29

 

The
Company agrees to consider, in good faith, the recommendations of each VCOC
Stockholder or its designated representative in connection with the matters on
which it is consulted as described above, it being understood that the ultimate
discretion with respect to such matters shall be retained by the Company.

 

Section 14.             Reports
to Stockholders.

 

(a)  Books, Records and Accounts. Appropriate books,
records and accounts shall be kept by the Company at the principal place of
business of the Company or such other place as the Board shall determine in its
discretion. Except as otherwise expressly provided herein, such books and
records shall be maintained on a basis that allows the proper preparation of
the financial statements and tax returns of the Company. Upon furnishing
reasonable advance notice to the Company, each Stockholder or its duly
authorized representative shall have access to all books, records and accounts
of the Company and its subsidiaries and the right to make copies thereof for
any purpose reasonably related to the Stockholder’s interest as a Stockholder
of the Company at any reasonable time during normal business hours of the
Company, in each case, under such conditions and restrictions as the Board may
reasonably prescribe.

 

(b)  Reports to Stockholders. (i) As soon as
practicable after the audited consolidated financial statements of the Company
and its subsidiaries are available for each fiscal year of the Company, the
Company shall send to each Stockholder:

 

(A) copies of such information as may be
required for applicable income tax reporting purposes arising by reason of the
Stockholder’s investment in the Company;

 

(B) the following annual audited consolidated
financial statements of the Company and its subsidiaries prepared on the basis
of generally accepted accounting principles in the United States:

 

(1)           a
balance sheet as of the end of such period,

 

(2)           a statement of income or loss for such period, and

 

(3)           a statement of cash flows for such period; and

 

(C) in the case of the financial statements for
the Company with respect to any fiscal year, an opinion of the independent
auditors of the Company based upon their audit of the financial statements
referred to in clause (B) above.

 

(ii)  As
soon as practicable after the unaudited consolidated financial statements of
the Company and its subsidiaries are available for each fiscal quarter of the
Company, the Company shall send to each Stockholder the following unaudited
quarterly consolidated financial statements of the Company and its subsidiaries
prepared on the basis of generally accepted accounting principles in the United
States:

 

30

 

(A)          a balance sheet as of
the end of such period,

 

(B)           a statement of
income or loss for such period, and

 

(C)           a statement of cash
flows for such period.

 

(iii)  As soon as practicable after the end of each calendar
month, the Company shall send to each Stockholder any management reports, key
performance indicators and financial reports for banks lending funds to the
Company or any of its subsidiaries prepared by the Company or any such
subsidiary for such period; provided that neither
the Company nor any subsidiary thereof shall be deemed to be required to
prepare any of the foregoing solely as a result of this Section 14(b)(iii).

 

(iv)  The financial statements referenced in this Section 14(b) shall
be expressed in U.S. dollars.

 

(v)  This Section 14(b) shall terminate upon an
Initial Public Offering and, with respect to any Stockholder, when such
Stockholder and its Affiliates cease to own at least 2% of the issued and
outstanding Stock.

 

Section 15.             Expenses and Fees.

 

(a)  Other Expenses. The Company shall pay any
and all fees and expenses incurred by the Original Stockholders and the Company
in connection with the transactions contemplated hereby and the Merger
Agreement (including expenses incurred in connection with the Acquisition and
the Combination).

 

(b)  Management Services Agreement. The
Stockholders acknowledge that the Company shall annually pay to the Original
Stockholders or their respective designees their respective management fee as
required pursuant to the Management Services Agreement.

 

Section 16.             Miscellaneous.

 

(a)  Consent to
Jurisdiction. Each party hereto irrevocably submits to the
exclusive jurisdiction of (i) the Court of Chancery of the State of
Delaware and (ii) the United States District Court for the District of
Delaware for purposes of any suit, action or other proceeding arising out of
this Agreement. Each party agrees to commence any such suit, action or
proceeding either in the Court of Chancery of the State of Delaware or the
United States District Court for the District of Delaware. Each party hereto
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any suit, action or proceeding with
respect to this Agreement, any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
serve process in accordance with this Section 16(a), that its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior
to judgment, attachment in aid of execution of judgment, execution of judgment
or otherwise), and to the fullest extent permitted by applicable law, that the
suit, action or proceeding in any such court is brought in an inconvenient
forum, or that this Agreement,

 

31

 

or
the subject matter hereof, may not be enforced in or by such courts and further
irrevocably waives, to the fullest extent permitted by applicable law, the
benefit of any defense that would hinder, fetter or delay the levy, execution
or collection of any amount to which the party is entitled pursuant to the
final judgment of any court having jurisdiction. Each party irrevocably
consents to the service of process out of any of the aforementioned courts in
any such suit, action or proceeding by the mailing of copies thereof by
registered airmail, postage prepaid, to such party at its address set forth in
this Agreement, such service of process to be effective upon acknowledgement of
receipt of such registered mail. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the other party in any other
jurisdiction in which the other party may be subject to suit.

 

(b)  Governing
Law. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware applicable to agreements made and to
be performed entirely within such State, without regard to conflict of laws
principles of such State.

 

(c)  Successor
and Assigns. This Agreement and the rights and duties of the parties hereto
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective executors, administrators, heirs, successors and permitted
assigns; provided that no Person (other than an Affiliate Transferee or
Permitted Transferee) claiming by, through or under a Stockholder (whether such
Stockholder’s executor, administrator, heir, successor or permitted Assignee),
as distinct from such Stockholder itself, shall have any rights as, or in
respect of, a Stockholder (including the right to approve or vote on any matter
or to notice thereof). In the event of any merger, consolidation or other
business combination of the Company with any of its Affiliates, each of the
parties hereto or their permitted Assignees (or, if different, the surviving
entity of the merger, consolidation or other business combination) shall
execute a stockholders’ agreement with terms that are substantially equivalent
to this Agreement (including the registration rights provided for in Section 9
hereof). Notwithstanding anything in this Agreement to the contrary, neither
this Agreement, nor any right, remedy, obligation or liability arising
hereunder shall be assignable by any party other than in connection with a
Transfer of Stock permitted by the terms of this Agreement.

 

(d)  Further
Assurances. Each Stockholder shall take all necessary or desirable actions
within its control (including, without limitation, attending all meetings in
person or by proxy for purposes of obtaining a quorum and executing all written
consents in lieu of meetings, as applicable), and the Company shall take all
necessary and desirable actions within its control (including, without
limitation, calling special Board and Stockholder meetings), to effectuate the
provisions of this Agreement, including, but not limited to, the election of
the Directors pursuant to Section 7(a).

 

(e)  Confidentiality.
Each Stockholder will maintain the confidentiality of any and all materials of
any kind, including but not limited to management presentations, the subject
matter of meetings and any other information relating to the business,
financial structure, financial position or financial results, clients or
affairs of the Company, or any entity owned directly or indirectly by the
Company, that shall not be generally known to

 

32

 

the
public received by such Stockholder, except (A) as otherwise required by
governmental regulatory agencies, self-regulating bodies, stock exchanges or
equivalent bodies, law or legal process or (B) for disclosures to directors,
officers, employees, partners, members, shareholders, representatives and
advisors of such Stockholder and its Affiliates who need to know the
information and who are informed of the confidential nature of the information
and agree to keep such information confidential. Each Stockholder further
agrees to destroy or return to the Company any such confidential information in
the event it ceases to be a Stockholder.

 

(f)  Amendments.
Except as required by law, this Agreement may not be amended or supplemented
without the written consent of Ripplewood, the Company and a majority in
interest of the Other Stockholders; provided that no such amendment
shall materially adversely affect the interests of a Stockholder without the
written consent of such Stockholder so affected. The Board shall provide a copy
of all amendments approved pursuant to this Section 16(f) to the
Stockholders.

 

(g)  Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at (i) in the case of any
Stockholder, at the address or fax number of such Stockholder as set forth in
the Company’s books and records (or at such other address as shall be specified
by such Stockholder by like notice) or (ii) in the case of the Company, at
the following address (or at such other address as shall be specified by the
Company by like notice):

 

RDA
Holding Co.

c/o
Ripplewood Holdings L.L.C.

One
Rockefeller Plaza, 32nd Floor

New
York, New York 10020

Attn:
Christopher Minnetian, General Counsel

Fax:
(212) 218-2769

 

with
a copy to:

 

Cravath,
Swaine & Moore LLP

Worldwide
Plaza

825
Eighth Avenue

New
York, New York 10019

Attn:
Peter S. Wilson, Esq.

Fax:
(212) 474-3700

 

Each
such notice shall be effective if given by fax, upon dispatch (with
confirmation of receipt), or if otherwise, upon delivery to the address of such
Stockholder.

 

(h)  Counterparts. This Agreement may be executed in
one or more original or facsimile or electronically transmitted counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.

 

33

 

(i)  Entire Agreement; No Third-Party Beneficiaries.
This Agreement, taken together with the other documents and agreements referred
to herein or entered into concurrently herewith, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter contained herein
and (b) except for Sections 9.6 and 10, are not intended to confer upon
any Person other than the parties hereto any rights or remedies. Notwithstanding
the foregoing, each VCOC Stockholder that is not a signatory to this Agreement
shall have the rights and obligations under Section 13 as if a signatory
to this Agreement.

 

(j)  Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.

 

(k)  Section Titles.
Section titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text hereof.

 

(1)  Waiver
of Jury Trial. The Stockholders hereby irrevocably and unconditionally
waive trial by jury in any legal action or proceeding relating to this
Agreement in any jurisdiction in which a jury trial in such an action or
proceeding would be permitted.

 

(m)  Tax
Treatment. For U.S. Federal income tax purposes, the parties hereto intend
that (x) the contribution of capital by the Original Stockholders and the
other common and preferred equity investors in the Company in connection with
the Acquisition and (y) the Combination shall together constitute a
transaction described under Section 351 of the Code. Each party will (and
will cause its Affiliates to) not take any action and will not fail to take any
action which action or failure to act would be reasonably expected to prevent
the tax treatment intended by this Section 16(m). The parties hereto shall
not (and will cause their Affiliates to not) take any position inconsistent
with such tax treatment on any return or filing or otherwise with any taxing
authority unless otherwise required by applicable law.

 

Section 17.       Effectiveness
of Agreement; Termination. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall be effective immediately following the
Closing and shall terminate and be of no further effect upon termination of the
Merger Agreement in accordance with its terms; provided such termination
of the Merger Agreement occurs prior to the consummation of the Merger.

 

[Signature page to follow.]

 

34

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.

 

	
   

  	
  RDA
  HOLDING CO.,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
  RDA
  INVESTORS I, LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
  RDA
  INVESTORS II, LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
  RDA
  INVESTORS III, LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
  J.
  ROTHSCHILD GROUP (GUERNSEY) LTD.,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Mark Le Ray

  
	
   

  	
   

  	
   

  	
    Name:
  Mark Le Ray

  
	
   

  	
   

  	
   

  	
    Title:
  Director

  

 

35

 

	
   

  	
  GOLDENTREE ASSET MANAGEMENT, LP.,

  
	
   

  	
  not in its individual and principal capacity, but
  as

  
	
   

  	
  investment advisor to one or more managed

  
	
   

  	
  funds/clients

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
  /s/
  Steven Shapiro

  
	
   

  	
   

  	
   

  	
    Name:
  Steven Shapiro

  
	
   

  	
   

  	
   

  	
    Title:
  Partner/Portfolio Manager

  

 

36

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