Document:

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                                                                   Exhibit 10.14

                                   GUARANTY AND SECURITY AGREEMENT (SECOND LIEN)
                                                                      CSAV, INC.

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                     GUARANTY, PLEDGE AND SECURITY AGREEMENT

                            Dated as of July 21, 2006

                                      among

                                   CSAV, INC.

                                       and

                               Each Other Grantor
                         From Time to Time Party Hereto

                                       and

                           ALLIED CAPITAL CORPORATION,
                         as Second Lien Collateral Agent

================================================================================
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
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<S>                                                                         <C>
ARTICLE I DEFINED TERMS..................................................     1
   Section 1.1   Definitions.............................................     1
   Section 1.2   Certain Other Terms.....................................     4

ARTICLE II GUARANTY......................................................     5
   Section 2.1   Guaranty................................................     5
   Section 2.2   Limitation of Guaranty..................................     5
   Section 2.3   Contribution............................................     5
   Section 2.4   Authorization; Other Agreements.........................     6
   Section 2 5   Guaranty Absolute and Unconditional                          6
   Section 2.6   Waivers.................................................     7
   Section 2.7   Reliance................................................     7

ARTICLE III GRANT OF SECURITY INTEREST...................................     8
   Section 3.1   Collateral..............................................     8
   Section 3.2   Grant of Security Interest in Collateral................     8

ARTICLE IV REPRESENTATIONS AND WARRANTIES................................     8
   Section 4.1   Title; No Other Liens...................................     9
   Section 4.2   Perfection and Priority.................................     9
   Section 4.3   Jurisdiction of Organization; Chief Executive Office....     9
   Section 4.4   Locations of Inventory, Equipment and Books and
                 Records.................................................     9
   Section 4.5   Pledged Collateral......................................    10
   Section 4.6   Instruments and Tangible Chattel Paper Formerly
                 Accounts................................................    10
   Section 4.7   Intellectual Property...................................    10
   Section 4.8   Commercial Tort Claims..................................    11
   Section 4.9   Specific Collateral.....................................    11
   Section 4.10  Enforcement.............................................    11
   Section 4.11  Representations and Warranties of the Credit Agreement..    11

ARTICLE V COVENANTS......................................................    11
   Section 5.1   Maintenance of Perfected Security Interest; Further
                 Documentation and Consents..............................    11
   Section 5.2   Changes in Locations, Name, Etc.........................    12
   Section 5.3   Pledged Collateral......................................    13
   Section 5.4   Accounts................................................    13
   Section 5.5   Commodity Contracts.....................................    14
   Section 5.6   Delivery of Instruments and Tangible Chattel Paper and
                 Control of Investment Property, Letter-of-Credit Rights
                 and Electronic Chattel Paper............................    14
   Section 5.7   Intellectual Property...................................    14
   Section 5.8   Notices.................................................    15
   Section 5.9   Notice of Commercial Tort Claims........................    15
   Section 5.10  Controlled Securities Account...........................    16
</TABLE>

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                                TABLE OF CONTENTS
                                  (continued)

<TABLE>
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ARTICLE VI REMEDIAL PROVISIONS...........................................    16
   Section 6.1   Code and Other Remedies.................................    16
   Section 6.2   Accounts and Payments in Respect of General
                 Intangibles.............................................    19
   Section 6.3   Pledged Collateral......................................    20
   Section 6.4   Proceeds to be Turned over to and Held by Agent.........    21
   Section 6.5   Sale of Pledged Collateral..............................    21
   Section 6.6   Deficiency..............................................    22

ARTICLE VII THE AGENT....................................................    22
   Section 7.1   Agent's Appointment as Attorney-in-Fact.................    22
   Section 7.2   Authorization to File Financing Statements..............    23
   Section 7.3   Authority of Agent......................................    24
   Section 7.4   Duty; Obligations and Liabilities.......................    24

ARTICLE VIII MISCELLANEOUS...............................................    25
   Section 8.1   Reinstatement...........................................    25
   Section 8.2   Release of Collateral...................................    25
   Section 8.3   Independent Obligations.................................    25
   Section 8.4   No Waiver by Course of Conduct..........................    26
   Section 8.5   Amendments in Writing...................................    26
   Section 8.6   Additional Grantors; Additional Pledged Collateral......    26
   Section 8.7   Notices.................................................    26
   Section 8.8   Successors and Assigns..................................    26
   Section 8.9   Counterparts............................................    26
   Section 8.10  Severability............................................    27
   Section 8.11  Governing Law...........................................    27
   Section 8.12  Waiver of Jury Trial....................................    27
   Section 8.13  Intercreditor Agreement.................................    27
</TABLE>

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                              ANNEXES AND SCHEDULES

Annex 1      Form of Pledge Amendment
Annex 2      Form of Joinder Agreement
Annex 3      Form of Intellectual Property Security Agreement

Schedule 1   Commercial Tort Claims
Schedule 2   Filings
Schedule 3   Jurisdiction of Organization; Chief Executive Office
Schedule 4   Location of Inventory and Equipment
Schedule 5   Pledged Collateral
Schedule 6   Intellectual Property

                                       iii
<PAGE>

     GUARANTY, PLEDGE AND SECURITY AGREEMENT, dated as of July 21, 2006, by
CSAV, Inc. (the "Borrower"). CSAV Holding Corp. ("Holdings") and each of the
other entities listed on the signature pages hereof or that becomes a party
hereto pursuant to Section 8.6 (together with the Borrower, the "Grantors"), in
favor Allied Capital Corporation, a Maryland corporation ("Allied"), as Second
Lien Collateral Agent, together with its successors and permitted assigns, for
the Lenders (each as defined in the Credit Agreement referred to below) and each
other Secured Party (as defined herein).

                                   WITNESSETH:

     WHEREAS, pursuant to the Second Lien Credit Agreement dated as of July 21,
2006 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement") among the Borrower, Holdings, the
other Persons party hereto that are designated as a "Credit Party", General
Electric Capital Corporation, as Agent, the Second Lien Collateral Agent and the
several financial institutions from time to time party to this Agreement
(collectively, the "Lenders" and individually each a "Lender"), the Lenders have
severally agreed to make the Second Lien Term Loan to the Borrower upon the
terms and subject to the conditions set forth therein;

     WHEREAS, each Grantor (other than the Borrower) has agreed to guaranty the
Obligations (as defined in the Credit Agreement) of the Borrower;

     WHEREAS, each Grantor will derive substantial direct and indirect benefits
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 Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Second Lien Collateral Agent;

     NOW, THEREFORE, in consideration of the premises and to induce the Lenders,
the Second Lien Collateral Agent and the Agent to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby agrees with the Second
Lien Collateral Agent as follows:

                                    ARTICLE I

                                  DEFINED TERMS

     Section 1.1 Definitions. (a) Capital terms used herein without definition
are used as defined in the Credit Agreement.

          (b) The following terms have the meanings given to them in the UCC and
terms used herein without definition that are defined in the UCC have the
meanings given to them in the UCC (such meanings to be equally applicable to
both the singular and plural forms of the terms defined): "account", "account
debtor", "as-extracted collateral", "certificated security", "chattel paper",
"commercial tort claim", "commodity contract", "deposit account", "electronic
chattel paper", "equipment", "farm products", "fixture", "general intangible",
"goods", "healthcare-insurance receivable", "instruments", "inventory",
"investment property", "letter-of-credit right", "proceeds", "record",
"securities account", "security", "supporting obligation" and "tangible chattel
paper".

                                                 GUARANTY AND SECURITY AGREEMENT
                                                                          [CSAV]

<PAGE>

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

          "Agreement" means this Guaranty, Pledge and Security Agreement.

          "Applicable IP Office" means the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
within or outside the United States.

          "Cash Collateral Account" means a deposit account or securities
account subject, in each instance, to a Control Agreement.

          "Collateral" has the meaning specified in Section 3.1.

          "Controlled Securities Account" means each securities account
(including all financial assets held therein and all certificates and
instruments, if any, representing or evidencing such financial assets) that is
the subject of an effective Control Agreement.

          "Excluded Equity" means any voting stock in excess of 65% of the
outstanding voting stock of any Foreign Subsidiary, which, pursuant to the terms
of the Credit Agreement, is not required to guaranty the Obligations and the
equity interests of Chief Hong Kong to the extent not required to be pledged to
Second Lien Collateral Agent pursuant to the terms of Section 4.13 of the Credit
Agreement. For the purposes of this definition, "voting stock" means, with
respect to any issuer, the issued and outstanding shares of each class of Stock
of such issuer entitled to vote (within the meaning of Treasury Regulations
Section 1.956-2(c)(2)).

          "Excluded Property" means, collectively, (i) Excluded Equity, (ii) any
permit or license or any Contractual Obligation entered into by any Grantor (A)
that prohibits or requires the consent of any Person other than the Borrower and
its Affiliates which has not been obtained as a condition to the creation by
such Grantor of a Lien on any right, title or interest in such permit, license
or Contractual Obligation or any Stock or Stock Equivalent related thereto or
(B) to the extent that any Requirement of Law applicable thereto prohibits the
creation of a Lien thereon, but only, with respect to the prohibition in (A) and
(B), to the extent, and for as long as, such prohibition is not terminated or
rendered unenforceable or otherwise deemed ineffective by the UCC or any other
Requirement of Law, (iii) Property owned by any Grantor that is subject to a
purchase money Lien or a Capital Lease permitted under the Credit Agreement if
the Contractual Obligation pursuant to which such Lien is granted (or in the
document providing for such Capital Lease) prohibits or requires the consent of
any Person other than the Borrower and its Affiliates which has not been
obtained as a condition to the creation of any other Lien on such equipment and
(iv) any "intent to use" Trademark applications for which a statement of use has
not been filed (but only until such statement is filed); provided, however,
"Excluded Property" shall not include any proceeds, products, substitutions or
replacements of Excluded Property (unless such proceeds, products, substitutions
or replacements would otherwise constitute Excluded Property).

          "Guaranteed Obligations" has the meaning set forth in Section 2.1.

          "Guarantor" means each Grantor other than the Borrower.

          "Guaranty" means the guaranty of the Guaranteed Obligations made by
the Guarantors as set forth in this Agreement.

                                        2

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          "Internet Domain Name" means all right, title and interest (and all
related IP Ancillary Rights) arising under any Requirement of Law in or relating
to Internet domain names.

          "Material Intellectual Property" means Intellectual Properly that is
owned by or licensed to a Grantor and material to the conduct of any Grantor's
business.

          "Pledged Certificated Stock" means all certificated securities and any
other Stock or Stock Equivalent of any Person evidenced by a certificate,
instrument or other similar document (as defined in the UCC), in each case owned
by any Grantor, and any distribution of property made on, in respect of or in
exchange for the foregoing from time to time, including all Stock and Stock
Equivalents listed on Schedule 5. Pledged Certificated Stock excludes any
Excluded Properly and any Cash Equivalents that are not held in Controlled
Securities Accounts to the extent permitted by Section 5.10 hereof.

          "Pledged Collateral" means, collectively, the Pledged Stock and the
Pledged Debt Instruments.

          "Pledged Debt Instruments" means all right, title and interest of any
Grantor in instruments evidencing any Indebtedness owed to such Grantor or other
obligations, and any distribution of property made on, in respect of or in
exchange for the foregoing from time to time, including all Indebtedness
described on Schedule 5, issued by the obligors named therein. Pledged Debt
Instruments excludes any Cash Equivalents that are not held in Controlled
Securities Accounts to the extent permitted by Section 5.10 hereof.

          "Pledged Investment Property" means any investment property of any
Grantor, and any distribution of property made on, in respect of or in exchange
for the foregoing from time to time, other than any Pledged Stock or Pledged
Debt Instruments. Pledged Investment Property excludes any Cash Equivalents that
are not held in Controlled Securities Accounts to the extent permitted by
Section 5.10 hereof.

          "Pledged Stock" means all Pledged Certificated Stock and all Pledged
Uncertificated Stock.

          "Pledged Uncertificated Stock" means any Stock or Stock Equivalent of
any Person that is not Pledged Certificated Stock, including all right, title
and interest of any Grantor as a limited or general partner in any partnership
not constituting Pledged Certificated Stock or as a member of any limited
liability company, all right, title and interest of any Grantor in, to and under
any Organization Document of any partnership or limited liability company to
which it is a party, and any distribution of property made on, in respect of or
in exchange for the foregoing from time to time, including in each case those
interests set forth on Schedule 5, to the extent such interests are not
certificated. Pledged Certificated Stock excludes any Excluded Property and any
Cash Equivalents that are not held in Controlled Securities Accounts to the
extent permitted by Section 5.10 hereof.

          "Secured Party" means the Second Lien Collateral Agent, each Lender,
each other Indemnitee and each other holder of any Obligation of a Credit Party.

          "Software" means (a) all computer programs, including source code and
object code versions, (b) all data, databases and compilations of data, whether
machine readable or

                                        3

<PAGE>

otherwise, and (c) all documentation, training materials and configurations
related to any of the foregoing.

          "Subsidiary Guarantor" means any Guarantor that is a Subsidiary of the
Borrower.

          "UCC" means the Uniform Commercial Code as from time to time in effect
in the State of New York; provided, however, that, in the event that, by reason
of mandatory provisions of any applicable Requirement of Law, any of the
attachment, perfection or priority of the Second Lien Collateral Agent's or any
other Secured Party's security interest in any Collateral is governed by the
Uniform Commercial Code of a jurisdiction other than the State of New York,
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of the definitions related to or
otherwise used in such provisions.

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

     Section 1.2 Certain Other Terms.

          (a) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The terms
"herein", "hereof and similar terms refer to this Agreement as a whole and not
to any particular Article, Section or clause in this Agreement. References
herein to an Annex, Schedule, Article, Section or clause refer to the
appropriate Annex or Schedule to, or Article, Section or clause in this
Agreement. Where the context requires, provisions relating to any Collateral
when used in relation to a Grantor shall refer to such Grantor's Collateral or
any relevant part thereof.

          (b) Other Interpretive Provisions.

               (i) Defined Terms. Unless otherwise specified herein or therein,
     all terms defined in this Agreement shall have the defined meanings when
     used in any certificate or other document made or delivered pursuant
     hereto.

               (ii) The Agreement. The words "hereof", "herein", "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.

               (iii) Certain Common Terms. The term "including" is not limiting
     and means "including without limitation."

               (iv) Performance; Time. Whenever any performance obligation
     hereunder (other than a payment obligation) shall be stated to be due or
     required to be satisfied on a day other than a Business Day, such
     performance shall be made or satisfied on the next succeeding Business Day.
     In the computation of periods of time from a specified date to a later
     specified date, the word "from" means "from and including"; the words "to"
     and "until" each mean "to but excluding", and the word "through" means "to
     and including." If any provision of this Agreement refers to any action
     taken or to be taken by any Person, or which such Person is prohibited from
     taking, such provision shall be interpreted to encompass any and all means,
     direct or indirect, of taking, or not taking, such action.

                                        4

<PAGE>

               (v) Contracts. Unless otherwise expressly provided herein,
     references to agreements and other contractual instruments, including this
     Agreement and the other Loan Documents, shall be deemed to include all
     subsequent amendments, thereto, restatements and substitutions thereof and
     other modifications and supplements thereto which are in effect from time
     to time, but only to the extent such amendments and other modifications are
     not prohibited by the terms of any Loan Document.

               (vi) Laws. References to any statute or regulation are to be
     construed as including all statutory and regulatory provisions related
     thereto or consolidating, amending, replacing, supplementing or
     interpreting the statute or regulation.

                                   ARTICLE II

                                    GUARANTY

     Section 2.1 Guaranty. To induce the Lenders to make the Second Lien Term
Loan, each Guarantor hereby, jointly and severally, absolutely, unconditionally
and irrevocably guarantees, as primary obligor and not merely as surety, the
full and punctual payment when due, whether at stated maturity or earlier, by
reason of acceleration, mandatory prepayment or otherwise in accordance with any
Loan Document, of all the Obligations of the Borrower whether existing on the
date hereof or hereinafter incurred or created (the "Guaranteed Obligations").
This Guaranty by each Guarantor hereunder constitutes a guaranty of payment and
not of collection.

     Section 2.2 Limitation of Guaranty. Any term or provision of this Guaranty
or any other Loan Document to the contrary notwithstanding, the maximum
aggregate amount for which any Subsidiary Guarantor shall be liable hereunder
shall not exceed the maximum amount for which such Subsidiary Guarantor can be
liable without rendering this Guaranty or any other Loan Document, as it relates
to such Subsidiary Guarantor, subject to avoidance under applicable Requirements
of Law relating to fraudulent conveyance or fraudulent transfer (including the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act and
Section 548 of title 11 of the United States Code or any applicable provisions
of comparable Requirements of Law) (collectively, "Fraudulent Transfer Laws").
Any analysis of the provisions of this Guaranty for purposes of Fraudulent
Transfer Laws shall take into account the right of contribution established in
Section 2.3 and, for purposes of such analysis, give effect to any discharge of
intercompany debt as a result of any payment made under the Guaranty.

     Section 2.3 Contribution. To the extent that any Subsidiary Guarantor shall
be required hereunder to pay any portion of any Guaranteed Obligation exceeding
the greater of (a) the amount of the value actually received by such Subsidiary
Guarantor from the Second Lien Term Loan and other Obligations and (b) the
amount such Subsidiary Guarantor would otherwise have paid if such Subsidiary
Guarantor had paid the aggregate amount of the Guaranteed Obligations (excluding
the amount thereof repaid by the Borrower and Holdings) in the same proportion
as such Subsidiary Guarantor's net worth on the date enforcement is sought
hereunder bears to the aggregate net worth of all the Subsidiary Guarantors on
such date, then such Guarantor shall be reimbursed by such other Subsidiary
Guarantors for the amount of such excess, pro rata, based on the respective net
worth of such other Subsidiary Guarantors on such date.

                                        5

<PAGE>

     Section 2.4 Authorization; Other Agreements. The Secured Parties are hereby
authorized, without notice to or demand upon any Guarantor and without
discharging or otherwise affecting the obligations of any Guarantor hereunder
and without incurring any liability hereunder, from time to time, to do each of
the following:

          (a) (i) modify, amend, supplement or otherwise change, (ii) accelerate
or otherwise change the time of payment or (iii) waive or otherwise consent to
noncompliance with, any Guaranteed Obligation or any Loan Document;

          (b) apply to the Guaranteed Obligations any sums by whomever paid or
however realized to any Guaranteed Obligation in such order as provided in the
Loan Documents;

          (c) refund at any time any payment received by any Secured Party in
respect of any Guaranteed Obligation;

          (d) (i) sell, exchange, enforce, waive, substitute, liquidate,
terminate, release, abandon, fail to perfect, subordinate, accept, substitute,
surrender, exchange, affect, impair or otherwise alter or release any Collateral
for any Guaranteed Obligation or any other guaranty therefor in any manner, (ii)
receive, take and hold additional Collateral to secure any Guaranteed
Obligation, (iii) add, release or substitute any one or more other Guarantors,
makers or endorsers of any Guaranteed Obligation or any part thereof and (iv)
otherwise deal in any manner with the Borrower and any other Guarantor, maker or
endorser of any Guaranteed Obligation or any part thereof; and

          (e) settle, release, compromise, collect or otherwise liquidate the
Guaranteed Obligations.

     Section 2.5 Guaranty Absolute and Unconditional. Each Guarantor hereby
waives and agrees not to assert any defense, whether arising in connection with
or in respect of any of the following or otherwise, and hereby agrees that its
obligations under this Guaranty are irrevocable, absolute and unconditional and
shall not be discharged as a result of or otherwise affected by any of the
following (which may not be pleaded and evidence of which may not be introduced
in any proceeding with respect to this Guaranty, in each case except as
otherwise agreed in writing by the Agent):

          (a) the invalidity or unenforceability of any obligation of the
Borrower or any other Guarantor under any Loan Document or any other agreement
or instrument relating thereto (including any amendment, consent or waiver
thereto), or any security for, or other guaranty of, any Guaranteed Obligation
or any part thereof, or the lack of perfection or continuing perfection or
failure of priority of any security for the Guaranteed Obligations or any part
thereof;

          (b) the absence of (i) any attempt to collect any Guaranteed
Obligation or any part thereof from the Borrower or any other Guarantor or other
action to enforce the same or (ii) any action to enforce any Loan Document or
any Lien thereunder;

          (c) the failure by any Person to take any steps to perfect and
maintain any Lien on, or to preserve any rights with respect to, any Collateral;

                                        6
<PAGE>

          (d) any workout, insolvency, bankruptcy proceeding, reorganization,
arrangement, liquidation or dissolution by or against the Borrower, any other
Guarantor or any of the Borrower's other Subsidiaries or any procedure,
agreement, order, stipulation, election, action or omission thereunder,
including any discharge or disallowance of, or bar or stay against collecting,
any Guaranteed Obligation (or any interest thereon) in or as a result of any
such proceeding;

          (e) any foreclosure, whether or not through judicial sale, and any
other Sale of any Collateral or any election following the occurrence of an
Event of Default by any Secured Party to proceed separately against any
Collateral in accordance with such Secured Party's rights under any applicable
Requirement of Law; or

          (f) any other defense, setoff, counterclaim or any other circumstance
that might otherwise constitute a legal or equitable discharge of the Borrower,
any other Guarantor or any of the Borrower's other Subsidiaries, in each case
other than the payment in full of the Guaranteed Obligations.

     Section 2.6 Waivers. Each Guarantor hereby unconditionally and irrevocably
waives and agrees not to assert any claim, defense, setoff or counterclaim based
on diligence, promptness, presentment, requirements for any demand or notice
hereunder including any of the following: (a) any demand for payment or
performance and protest and notice of protest; (b) any notice of acceptance; (c)
any presentment, demand, protest or further notice or other requirements of any
kind with respect to any Guaranteed Obligation (including any accrued but unpaid
interest thereon) becoming immediately due and payable; and (d) any other notice
in respect of any Guaranteed Obligation or any part thereof, and any defense
arising by reason of any disability or other defense of the Borrower or any
other Guarantor. Each Guarantor further unconditionally and irrevocably agrees
not to (x) enforce or otherwise exercise any right of subrogation or any right
of reimbursement or contribution or similar right against the Borrower or any
other Guarantor by reason of any Loan Document or any payment made thereunder or
(y) assert any claim, defense, setoff or counterclaim it may have against any
other Credit Party or set off any of its obligations to such other Credit Party
against obligations of such Credit Party to such Guarantor. No obligation of any
Guarantor hereunder shall be discharged other than by complete performance.

     Section 2.7 Reliance. Each Guarantor hereby assumes responsibility for
keeping itself informed of the financial condition of the Borrower, each other
Guarantor and any other guarantor, maker or endorser of any Guaranteed
Obligation or any part thereof, and of all other circumstances bearing upon the
risk of nonpayment of any Guaranteed Obligation or any part thereof that
diligent inquiry would reveal, and each Guarantor hereby agrees that no Secured
Party shall have any duty to advise any Guarantor of information known to it
regarding such condition or any such circumstances. In the event any Secured
Party, in its sole discretion, undertakes at any time or from time to time to
provide any such information to any Guarantor, such Secured Party shall be under
no obligation to (a) undertake any investigation not a part of its regular
business routine, (b) disclose any information that such Secured Party, pursuant
to accepted or reasonable commercial finance or banking practices, wishes to
maintain confidential or (c) make any future disclosures of such information or
any other information to any Guarantor.

                                       7

<PAGE>

                                   ARTICLE III

                           GRANT OF SECURITY INTEREST

     Section 3.1 Collateral. For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by a Grantor or
in which a Grantor now has or at any time in the future may acquire any right,
title or interests is collectively referred to as the "Collateral":

          (a) all accounts, chattel paper, deposit accounts, documents (as
defined in the UCC), equipment, general intangibles, instruments, inventory,
investment property, letter of credit rights and any supporting obligations
related to any of the foregoing;

          (b) the commercial tort claims described on Schedule 1 and on any
supplement thereto received by the Second Lien Collateral Agent pursuant to
Section 5.9;

          (c) all books and records pertaining to the other property described
in this Section 3.1;

          (d) all property of such Grantor held by any Secured Party, including
all property of every description, in the custody of or in transit to such
Secured Party for any purpose, including safekeeping, collection or pledge, for
the account of such Grantor or as to which such Grantor may have any right or
power, including but not limited to cash;

          (e) all other goods (including but not limited to fixtures) and
personal property of such Grantor, whether tangible or intangible and wherever
located; and

          (f) to the extent not otherwise included, all proceeds of the
foregoing;

     Section 3.2 Grant of Security Interest in Collateral. Each Grantor, as
collateral security for the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations of
such Grantor (the "Secured Obligations"), hereby mortgages, pledges and
hypothecates to the Second Lien Collateral Agent for the benefit of the Secured
Parties, and grants to the Second Lien Collateral Agent for the benefit of the
Secured Parties a Lien on and security interest in, all of its right, title and
interest in, to and under the Collateral of such Grantor; provided, however,
notwithstanding the foregoing, no Lien or security interest is hereby granted on
any Excluded Property; provided, further, that if and when any property shall
cease to be Excluded Property, a Lien on and security in such property shall be
deemed granted therein. Each Grantor hereby represents and warrants that the
Excluded Property, when taken as a whole, is not material to the business
operations or financial condition of the Grantors, taken as a whole.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     To induce the Lenders, the Second Lien Collateral Agent and the Agent to
enter into the Loan Documents, each Grantor hereby represents and warrants each
of the following to the Agent, the Second Lien Collateral Agent, the Lenders and
the other Secured Parties:

                                       8

<PAGE>

     Section 4.1 Title; No Other Liens. Except for the Lien granted to the
Second Lien Collateral Agent pursuant to this Agreement and other Permitted
Liens (except for those Permitted Liens not permitted to exist on any
Collateral) under any Loan Document (including Section 4.2 hereof), such Grantor
owns each item of the Collateral free and clear of any and all Liens or claims
of others. Such Grantor (a) is the record and beneficial owner of the Collateral
pledged by it hereunder constituting instruments or certificates and (b) has
rights in or the power to transfer each other item of Collateral in which a Lien
is granted by it hereunder, free and clear of any other Lien.

     Section 4.2 Perfection and Priority. The security interest granted pursuant
to this Agreement constitutes a valid and continuing perfected security interest
in favor of the Second Lien Collateral Agent in all Collateral subject, for the
following Collateral, to the occurrence of the following: (i) in the case of all
Collateral in which a security interest may be perfected by filing a financing
statement under the UCC, the completion of the filings and other actions
specified on Schedule 2 (which, in the case of all filings and other documents
referred to on such schedule, have been delivered to the Second Lien Collateral
Agent in completed and duly authorized form), (ii) with respect to any deposit
account, the execution of Control Agreements, (iii) in the case of all
Copyrights, Trademarks and Patents for which UCC filings are insufficient, all
appropriate filings having been made with the United States Copyright Office or
the United States Patent and Trademark Office, as applicable, (iv) in the case
of letter-of-credit rights that are not supporting obligations of Collateral,
the execution of a Contractual Obligation granting control to the Second Lien
Collateral Agent over such letter-of-credit rights, (v) in the case of
electronic chattel paper, the completion of all steps necessary to grant control
to the Second Lien Collateral Agent over such electronic chattel paper and (vi)
in the case of Vehicles, the actions required under Section 5.1(e). Such
security interest shall be prior to all other Liens on the Collateral except for
Permitted Liens having priority over the Second Lien Collateral Agent's Lien by
operation of law, liens permitted pursuant to subsection 5.1(q) of the Credit
Agreement or liens permitted pursuant to subsections 5.1(e), (g), (h), (i) or
(k) of the Credit Agreement upon (i) in the case of all Pledged Certificated
Stock, Pledged Debt Instruments and Pledged Investment Property, the delivery
thereof to the Second Lien Collateral Agent of such Pledged Certificated Stock,
Pledged Debt Instruments and Pledged Investment Properly consisting of
instruments and certificates, in each case properly endorsed for transfer to the
Second Lien Collateral Agent or in blank, (ii) in the case of all Pledged
Investment Property not in certificated form, the execution of Control
Agreements with respect to such investment property and (iii) in the case of all
other instruments and tangible chattel paper that are not Pledged Certificated
Stock, Pledged Debt Instruments or Pledged Investment Property, the delivery
thereof to the Second Lien Collateral Agent of such instruments and tangible
chattel paper. Except as set forth in this Section 4.2, all actions by each
Grantor necessary or desirable to protect and perfect the Lien granted hereunder
on the Collateral have been duly taken.

     Section 4.3 Jurisdiction of Organization; Chief Executive Office. Such
Grantor's jurisdiction of organization, legal name and organizational
identification number, if any, and the location of such Grantor's chief
executive office or sole place of business, in each case as of the date hereof,
is specified on Schedule 3 and such Schedule 3 also lists all jurisdictions of
incorporation, legal names and locations of such Grantor's chief executive
office or sole place of business for the five years preceding the date hereof.

     Section 4.4 Locations of Inventory. Equipment and Books and Records. On the
date hereof, such Grantor's inventory and equipment (other than inventory or
equipment in transit) and

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<PAGE>

books and records concerning the Collateral are kept at the locations listed on
Schedule 4 and such Schedule 4 also lists the locations of such inventory,
equipment and books and records for the five years preceding the date hereof.

     Section 4.5 Pledged Collateral The Pledged Stock pledged by such Grantor
hereunder (i) is listed on Schedule 5 and constitutes that percentage of the
issued and outstanding equity of all classes of each issuer thereof as set forth
on Schedule 5, (ii) has been duly authorized, validly issued and is fully paid
and nonassessable (other than Pledged Stock in limited liability companies and
partnerships) and (iii) constitutes the legal, valid and binding obligation of
the obligor with respect thereto, enforceable in accordance with its terms.

          (b) As of the Closing Date, all Pledged Collateral (other than Pledged
Uncertificated Stock) and all Pledged Investment Property consisting of
instruments and certificates has been delivered to the Second Lien Collateral
Agent in accordance with Section 5.3(a) or the First Lien Agent in accordance
with Section 5.3(a) of the Guaranty, Pledge and Security Agreement dated the
date hereof among the Borrower, Holdings, each other "Grantor" party thereto and
First Lien Agent (the "First Lien Guaranty and Security Agreement").

          (c) Subject to the terms of the Closing Date Intercreditor Agreement,
upon the occurrence and during the continuance of an Event of Default, the
Second Lien Collateral Agent shall be entitled to exercise all of the rights of
the Grantor granting the security interest in any Pledged Stock, and a
transferee or assignee of such Pledged Stock shall become a holder of such
Pledged Stock to the same extent as such Grantor and be entitled to participate
in the management of the issuer of such Pledged Stock and, upon the transfer of
the entire interest of such Grantor, such Grantor shall, by operation of law,
cease to be a holder of such Pledged Stock.

     Section 4.6 Instruments and Tangible Chattel Paper Formerly Accounts. No
amount payable to such Grantor under or in connection with any account is
evidenced by any instrument or tangible chattel paper that has not been
delivered to the Second Lien Collateral Agent, properly endorsed for transfer,
to the extent delivery is required by Section 5.6(a) or the First Lien Agent in
accordance with Section 5.6(a) of the First Lien Guaranty and Security
Agreement.

     Section 4.7 Intellectual Property

          (a) Schedule 6 sets forth a true and complete list of the following
Intellectual Property such Grantor owns, licenses or otherwise has the right to
use: (i) Intellectual Property that is registered or subject to applications for
registration, (ii) Internet Domain Names and (iii) Material Intellectual
Property and material Software, separately identifying that owned and licensed
to such Grantor and including for each of the foregoing items (1) the owner, (2)
the title, (3) the jurisdiction in which such item has been registered or
otherwise arises or in which an application for registration has been filed, (4)
as applicable, the registration or application number and registration or
application date and (5) any IP Licenses or other rights (including franchises)
granted by the Grantor with respect thereto.

          (b) On the Closing Date, all Material Intellectual Property owned by
such Grantor is valid, in full force and effect, subsisting, unexpired and
enforceable, and no Material Intellectual Property has been abandoned. No breach
or default of any material IP License shall be caused by any of the following,
and none of the following shall limit or impair the ownership, use, validity or
enforceability of, or any rights of such Grantor in, any Material Intellectual
Property: (i) the consummation of the transactions contemplated by any Loan
Document or

                                       10

<PAGE>

(ii) any holding, decision, judgment or order rendered by any Governmental
Authority. Except as set forth on Schedule 6 hereof, there are no pending (or,
to the knowledge of such Grantor, threatened) actions, investigations, suits,
proceedings, audits, claims, demands, orders or disputes challenging the
ownership, use, validity, enforceability of, or such Grantor's rights in, any
Material Intellectual Property of such Grantor. To such Grantor's knowledge, no
Person has been or is infringing, misappropriating, diluting, violating or
otherwise impairing any Intellectual Property of such Grantor. Such Grantor, and
to such Grantor's knowledge each other party thereto, is not in material breach
or default of any material IP License.

     Section 4.8 Commercial Tort Claims. The only commercial tort claims of any
Grantor existing on the date hereof (regardless of whether the amount, defendant
or other material facts can be determined and regardless of whether such
commercial tort claim has been asserted, threatened or has otherwise been made
known to the obligee thereof or whether litigation has been commenced for such
claims) are those listed on Schedule 1, which sets forth such information
separately for each Grantor.

     Section 4.9 Specific Collateral. None of the Collateral is or is proceeds
or products of farm products, as-extracted collateral, health-care-insurance
receivables or timber to be cut.

     Section 4.10 Enforcement. No Permit, notice to or filing with any
Governmental Authority or any other Person or any consent from any Person is
required for the exercise by the Second Lien Collateral Agent of its rights
(including voting rights) provided for in this Agreement or the enforcement of
remedies in respect of the Collateral pursuant to this Agreement, including the
transfer of any Collateral, except as may be required in connection with the
disposition of any portion of the Pledged Collateral by laws affecting the
offering and sale of securities generally or any approvals that may be required
to be obtained from any bailees or landlords to collect the Collateral.

     Section 4.11 Representations and Warranties of the Credit Agreement. The
representations and warranties as to such Grantor and its Subsidiaries made in
Article III (Representations and Warranties) of the Credit Agreement are true
and correct on each date as required by Section 2.2 of the Credit Agreement.

                                    ARTICLE V

                                    COVENANTS

     Each Grantor agrees with the Second Lien Collateral Agent to the following,
as long as any Obligation or Commitment remains outstanding (other than
contingent indemnification Obligations to the extent no claim giving rise
thereto has been asserted):

     Section 5.1 Maintenance of Perfected Security Interest; Further
Documentation and Consents. (a) Generally. Such Grantor shall (i) not use or
permit any Collateral to be used unlawfully or in violation of any provision of
any Loan Document, any Related Agreement, any Requirement of Law or any policy
of insurance covering the Collateral and (ii) not enter into any Contractual
Obligation or undertaking restricting the right or ability of such Grantor or
the Second Lien Collateral Agent to sell, assign, convey or transfer any
Collateral if such restriction would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

                                       11

<PAGE>

          (b) Such Grantor shall maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in Section 4.2 and shall defend such security interest and such
priority against the claims and demands of all Persons.

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

          (d) At any time and from time to time, upon the written request of the
Second Lien Collateral Agent, such Grantor shall, for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, (i) promptly and duly execute and deliver, and have recorded,
such further documents, including an authorization to file (or, as applicable,
the filing) of any financing statement or amendment under the UCC (or other
filings under similar Requirements of Law) in effect in any jurisdiction with
respect to the security interest created hereby and (ii) take such further
action as the Second Lien Collateral Agent may reasonably request, including (A)
using its best efforts to secure all approvals necessary or appropriate for the
assignment to or for the benefit of the Second Lien Collateral Agent of any
Contractual Obligation, including any IP License, held by such Grantor and to
enforce the security interests granted hereunder and (B) executing and
delivering any Control Agreements with respect to deposit accounts and
securities accounts.

          (e) If requested by the Second Lien Collateral Agent, the Grantor
shall arrange for the Second Lien Collateral Agent's priority security interest
(subject only to the security interest in favor of the First Lien Agent) to be
noted on the certificate of title of each Vehicle and shall file any other
necessary documentation in each jurisdiction that the Second Lien Collateral
Agent shall deem advisable to perfect its security interests in any Vehicle.

          (f) To ensure that any of the Excluded Property set forth in clause
(ii) of the definition of "Excluded Property" becomes part of the Collateral,
such Grantor shall use its reasonable best efforts to obtain any required
consents from any Person other than the Borrower and its Affiliates with respect
to any permit or license or any Contractual Obligation with such Person entered
into by such Grantor that requires such consent as a condition to the creation
by such Grantor of a Lien on any right, title or interest in such permit,
license or Contractual Obligation or any Stock or Stock Equivalent related
thereto.

     Section 5.2 Changes in Locations, Name, Etc. Except upon thirty (30) days'
prior written notice to the Second Lien Collateral Agent and delivery to the
Second Lien Collateral Agent of (a) all documents reasonably requested by the
Second Lien Collateral Agent to maintain the validity, perfection and priority
of the security interests provided for herein and (b) if applicable, a written
supplement to Schedule 4 showing any additional locations at which inventory or
equipment shall be kept, such Grantor shall not do any of the following:

               (i) permit any inventory or equipment to be kept at a location
     other than those listed on Schedule 4, except for inventory or equipment in
     transit;

               (ii) change its jurisdiction of organization or its location, in
     each case from that referred to in Section 4.3; or

                                       12
<PAGE>

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

     Section 5.3 Pledged Collateral. (a) Delivery of Pledged Collateral. Subject
to the terms of the Closing Date Intercreditor Agreement, such Grantor shall (i)
deliver to the Second Lien Collateral Agent (or the First Lien Agent, as the
case may be), in suitable form for transfer and in form and substance
satisfactory to the Second Lien Collateral Agent, (A) all Pledged Certificated
Stock, (B) all Pledged Debt Instruments and (C) all certificates and instruments
evidencing Pledged Investment Property and (ii) maintain all other Pledged
Investment Property in a Controlled Securities Account.

          (b) Event of Default. Subject to the terms of the Closing Date
Intercreditor Agreement, during the continuance of an Event of Default, the
Second Lien Collateral Agent shall have the right, at any time in its discretion
and without notice to the Grantor, to (i) transfer to or to register in its name
or in the name of its nominees any Pledged Collateral or any Pledged Investment
Property and (ii) exchange any certificate or instrument representing or
evidencing any Pledged Collateral or any Pledged Investment Property for
certificates or instruments of smaller or larger denominations.

          (c) Cash Distributions with respect to Pledged Collateral. Subject to
the terms of the Closing Date Intercreditor Agreement, except as provided in
Article VI and subject to the limitations set forth in the Credit Agreement,
such Grantor shall be entitled to receive all cash distributions paid in respect
of the Pledged Collateral.

          (d) Voting Rights. Subject to the terms of the Closing Date
Intercreditor Agreement, except as provided in Article VI, such Grantor shall be
entitled to exercise all voting, consent and corporate, partnership, limited
liability company and similar rights with respect to the Pledged Collateral;
provided, however, that no vote shall be cast, consent given or right exercised
or other action taken by such Grantor that would impair the Collateral or be
inconsistent with or result in any violation of any provision of any Loan
Document.

     Section 5.4 Accounts.

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

          (b) So long as an Event of Default is continuing, the Second Lien
Collateral Agent shall have the right to make test verifications of the Accounts
in any manner and through any medium that it reasonably considers advisable, and
such Grantor shall furnish all such assistance and information as the Second
Lien Collateral Agent may reasonably require in connection therewith. At any
time and from time to time, upon the Second Lien Collateral Agent's reasonable
request, such Grantor shall cause independent public accountants or others
satisfactory to the Second Lien Collateral Agent to furnish to the Second Lien
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the accounts.

                                       13

<PAGE>

     Section 5.5 Commodity Contracts. Such Grantor shall not have any commodity
contract unless subject to a Control Agreement.

     Section 5.6 Delivery of Instruments and Tangible Chattel Paper and Control
of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper.
(a) If any amount in excess of $100,000 payable under or in connection with any
Collateral owned by such Grantor shall be or become evidenced by an instrument
or tangible chattel paper other than such instrument delivered in accordance
with Section 5.3(a) and in the possession of the Second Lien Collateral Agent or
the First Lien Agent pursuant to the First Lien Guaranty and Pledge Agreement as
the case may be, such Grantor shall mark all such instruments and tangible
chattel paper with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation, as Second Lien Collateral Agent" and, at the
request of the Second Lien Collateral Agent, subject to the terms of the Closing
Date Intercreditor Agreement shall immediately deliver such instrument or
tangible chattel paper to the Second Lien Collateral Agent, duly indorsed in a
manner satisfactory to the Second Lien Collateral Agent.

          (b) Such Grantor shall not grant "control" (within the meaning of such
term under Article 9-106 of the UCC) over any investment property to any Person
other than the Second Lien Collateral Agent or the First Lien Agent.

          (c) If such Grantor is or becomes the beneficiary of a letter of
credit that is (i) not a supporting obligation of any Collateral and (ii) in
excess of $100,000, such Grantor shall promptly, and in any event within two (2)
Business Days after becoming a beneficiary, notify the Second Lien Collateral
Agent thereof and enter into a Contractual Obligation with the Second Lien
Collateral Agent, the issuer of such letter of credit or any nominated person
with respect to the letter-of-credit rights under such letter of credit. Subject
to the terms of the Closing Date Intercreditor Agreement, such Contractual
Obligation shall assign such letter-of-credit rights to the Second Lien
Collateral Agent and such assignment shall be sufficient to grant control for
the purposes of Section 9-107 of the UCC (or any similar section under any
equivalent UCC). Such Contractual Obligation shall also direct all payments
thereunder to a Cash Collateral Account. The provisions of the Contractual
Obligation shall be in form and substance reasonably satisfactory to the Second
Lien Collateral Agent.

          (d) If any amount in excess of $100,000 payable under or in connection
with any Collateral owned by such Grantor shall be or become evidenced by
electronic chattel paper, subject to the terms of the Closing Date Intercreditor
Agreement, such Grantor shall take all steps necessary to grant the Second Lien
Collateral Agent control of all such electronic chattel paper for the purposes
of Section 9-105 of the UCC (or any similar section under any equivalent UCC)
and all "transferable records" as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.

     Section 5.7 Intellectual Property. (a) Within thirty (30) days after any
change to Schedule 6 for such Grantor, such Grantor shall provide the Second
Lien Collateral Agent notification thereof and the short-form intellectual
property agreements and assignments as described in this Section 5.7 and other
documents that the Second Lien Collateral Agent reasonably requests with respect
thereto.

          (b) Such Grantor shall (and shall cause all its licensees to) (i) (1)
continue to use each Trademark included in the Material Intellectual Property in
order to maintain such

                                       14

<PAGE>

Trademark in full force and effect with respect to each class of goods for which
such Trademark is currently used, free from any claim of abandonment for
non-use, (2) maintain at least the same standards of quality of products and
services offered under such Trademark as are currently maintained, (3) use such
Trademark with the appropriate notice of registration and all other notices and
legends required by applicable Requirements of Law, (4) not adopt or use any
other Trademark that is confusingly similar or a colorable imitation of such
Trademark unless the Second Lien Collateral Agent shall obtain a perfected
security interest in such other Trademark pursuant to this Agreement and (ii)
not do any act or omit to do any act whereby (w) such Trademark (or any goodwill
associated therewith) may become destroyed, invalidated, impaired or harmed in
any way, (x) any Patent included in the Material Intellectual Property may
become forfeited, misused, unenforceable, abandoned or dedicated to the public,
(y) any portion of the Copyrights included in the Material Intellectual Property
may become invalidated, otherwise impaired or fall into the public domain or (z)
any Trade Secret that is Material Intellectual Property may become publicly
available or otherwise unprotectable.

          (c) Such Grantor shall notify the Second Lien Collateral Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any Material Intellectual Property may become
forfeited, misused, unenforceable, abandoned or dedicated to the public, or of
any adverse determination or development regarding the validity or
enforceability or such Grantor's ownership of, interest in, right to use,
register, own or maintain any Material Intellectual Property (including the
institution of, or any such determination or development in, any proceeding
relating to the foregoing in any Applicable IP Office). Such Grantor shall take
all actions that are necessary or reasonably requested by the Second Lien
Collateral Agent to maintain and pursue each application (and to obtain the
relevant registration or recordation) and to maintain each registration and
recordation included in the Material Intellectual Property.

          (d) Such Grantor shall not knowingly do any act or omit to do any act
to infringe, misappropriate, dilute, violate or otherwise impair the
Intellectual Property of any other Person. In the event that any Material
Intellectual Property of such Grantor is or has been infringed, misappropriated,
violated, diluted or otherwise impaired by a third party, such Grantor shall
take such action as it reasonably deems appropriate under the circumstances in
response thereto, including promptly bringing suit and recovering all damages
therefor.

          (e) Such Grantor shall execute and deliver to the Second Lien
Collateral Agent in form and substance reasonably acceptable to the Second Lien
Collateral Agent and suitable for (i) filing in the Applicable IP Office the
short-form intellectual property security agreements in the form attached hereto
as Annex 3 for all Copyrights, Trademarks, Patents and IP Licenses of such
Grantor and (ii) recording with the appropriate Internet domain name registrar,
a duly executed form of assignment for all Internet Domain Names of such Grantor
(together with appropriate supporting documentation as may be requested by the
Second Lien Collateral Agent).

     Section 5.8 Notices. Such Grantor shall promptly notify the Second Lien
Collateral Agent in writing of its acquisition of any interest hereafter in
property that is of a type where a security interest or lien must be or may be
registered, recorded or filed under, or notice thereof given under, any federal
statute or regulation.

     Section 5.9 Notice of Commercial Tort Claims. Such Grantor agrees that, if
it shall acquire any interest in any commercial tort claim (whether from another
Person or because such commercial tort claim shall have come into existence),
(i) such Grantor shall, immediately upon

                                       15

<PAGE>

such acquisition, deliver to the Second Lien Collateral Agent, in each case in
form and substance satisfactory to the Second Lien Collateral Agent, a notice of
the existence and nature of such commercial tort claim and a supplement to
Schedule 1 containing a specific description of such commercial tort claim, (ii)
Section 3.1 shall apply to such commercial tort claim and (iii) such Grantor
shall execute and deliver to the Second Lien Collateral Agent, in each case in
form and substance satisfactory to the Second Lien Collateral Agent, any
document, and take all other action, deemed by the Second Lien Collateral Agent
to be reasonably necessary or appropriate for the Second Lien Collateral Agent
to obtain, on behalf of the Lenders, a perfected security interest having at
least the priority set forth in Section 4.2 in all such commercial tort claims.
Any supplement to Schedule 1 delivered pursuant to this Section 5.9 shall, after
the receipt thereof by the Second Lien Collateral Agent, become part of Schedule
1 for all purposes hereunder other than in respect of representations and
warranties made prior to the date of such receipt.

     Section 5.10 Controlled Securities Account. Each Grantor shall deposit all
of its Cash Equivalents in securities accounts that are Controlled Securities
Accounts except for Cash Equivalents the aggregate value of which does not
exceed $25,000.

                                   ARTICLE VI

                               REMEDIAL PROVISIONS

     Section 6.1 Code and Other Remedies, (a) UCC Remedies. Subject to the terms
of the Closing Date Intercreditor Agreement, during the continuance of an Event
of Default, the Second Lien Collateral Agent may exercise, in addition to all
other rights and remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to any Secured
Obligation, all rights and remedies of a secured party under the UCC or any
other applicable law.

          (b) Disposition of Collateral. Without limiting the generality of the
foregoing, the Second Lien Collateral Agent may, subject to the terms of the
Closing Date Intercreditor Agreement, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), during the continuance of any Event of Default (personally or
through its agents or attorneys), (i) enter upon the premises where any
Collateral is located, without any obligation to pay rent, through self-help,
without judicial process, without first obtaining a final judgment or giving any
Grantor or any other Person notice or opportunity for a hearing on the Second
Lien Collateral Agent's claim or action, (ii) collect, receive, appropriate and
realize upon any Collateral and (iii) sell, assign, convey, transfer, grant
option or options to purchase and deliver any Collateral (enter into Contractual
Obligations 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 any Secured
Party 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 Second Lien Collateral Agent shall
have the right, upon any such public sale or sales and, to the extent permitted
by the UCC and other applicable Requirements of Law, upon any such private sale,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption of any Grantor, which right or equity is hereby waived
and released.

                                       16

<PAGE>

          (c) Management of the Collateral. Each Grantor further agrees, that,
during the continuance of any Event of Default, subject to the terms of the
Closing Date Intercreditor Agreement, (i) at the Second Lien Collateral Agent's
request, it shall assemble the Collateral and make it available to the Second
Lien Collateral Agent at places that the Second Lien Collateral Agent shall
reasonably select, whether at such Grantor's premises or elsewhere, (ii) without
limiting the foregoing, the Second Lien Collateral Agent also has the right to
require that each Grantor store and keep any Collateral pending further action
by the Second Lien Collateral Agent and, while any such Collateral is so stored
or kept, provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain such Collateral in good condition,
(iii) until the Second Lien Collateral Agent is able to sell, assign, convey or
transfer any Collateral, the Second Lien Collateral Agent shall have the right
to hold or use such Collateral to the extent that it deems appropriate for the
purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by the Second Lien Collateral Agent and (iv) the Second Lien
Collateral Agent may, if it so elects, seek the appointment of a receiver or
keeper to take possession of any Collateral and to enforce any of the Second
Lien Collateral Agent's remedies (for the benefit of the Secured Parties), with
respect to such appointment without prior notice or hearing as to such
appointment. The Second Lien Collateral Agent shall not have any obligation to
any Grantor to maintain or preserve the rights of any Grantor as against third
parties with respect to any Collateral while such Collateral is in the
possession of the Second Lien Collateral Agent.

          (d) Application of Proceeds. The Second Lien Collateral Agent shall
apply the cash proceeds of any action taken by it pursuant to this Section 6.1,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any Collateral
or in any way relating to the Collateral or the rights of the Second Lien
Collateral Agent and any other Secured Party hereunder, including reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Secured Obligations, as set forth in the Credit Agreement, and only after such
application and after the payment by the Second Lien Collateral Agent of any
other amount required by any Requirement of Law, need the Second Lien Collateral
Agent account for the surplus, if any, to any Grantor.

          (e) Direct Obligation. Neither the Second Lien Collateral Agent nor
any other Secured Party shall be required to make any demand upon, or pursue or
exhaust any right or remedy against, any Grantor, any other Credit Party or any
other Person with respect to the payment of the Obligations or to pursue or
exhaust any right or remedy with respect to any Collateral therefor or any
direct or indirect guaranty thereof. All of the rights and remedies of the
Second Lien Collateral Agent and any other Secured Party under any Loan Document
shall be cumulative, may be exercised individually or concurrently and not
exclusive of any other rights or remedies provided by any Requirement of Law. To
the extent it may lawfully do so, each Grantor absolutely and irrevocably waives
and relinquishes the benefit and advantage of, and covenants not to assert
against the Second Lien Collateral Agent or any Lender, any valuation, stay,
appraisement, extension, redemption or similar laws and any and all rights or
defenses it may have as a surety, now or hereafter existing, arising out of the
exercise by them of any rights hereunder. If any notice of a proposed sale or
other disposition of any Collateral shall be required by law, such notice shall
be deemed reasonable and proper if given at least ten (10) days before such sale
or other disposition.

          (f) Commercially Reasonable. To the extent that applicable
Requirements of Law impose duties on the Second Lien Collateral Agent to
exercise remedies in a

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<PAGE>

commercially reasonable manner, each Grantor acknowledges and agrees that it is
not commercially unreasonable for the Second Lien Collateral Agent to do any of
the following:

               (i) fail to incur significant costs, expenses or other
     Liabilities reasonably deemed as such by the Second Lien Collateral Agent
     to prepare any Collateral for disposition or otherwise to complete raw
     material or work in process into finished goods or other finished products
     for disposition;

               (ii) fail to obtain Permits, or other consents, for access to any
     Collateral to sell or for the collection or sale of any Collateral, or, if
     not required by other Requirements of Law, fail to obtain Permits or other
     consents for the collection or disposition of any Collateral;

               (iii) fail to exercise remedies against account debtors or other
     Persons obligated on any Collateral or to remove Liens on any Collateral or
     to remove any adverse claims against any Collateral;

               (iv) advertise dispositions of any Collateral through
     publications or media of general circulation, whether or not such
     Collateral is of a specialized nature, or to contact other Persons, whether
     or not in the same business as any Grantor, for expressions of interest in
     acquiring any such Collateral;

               (v) exercise collection remedies against account debtors and
     other Persons obligated on any Collateral, directly or through the use of
     collection agencies or other collection specialists, hire one or more
     professional auctioneers to assist in the disposition of any Collateral,
     whether or not such Collateral is of a specialized nature, or, to the
     extent deemed appropriate by the Second Lien Collateral Agent, obtain the
     services of other brokers, investment bankers, consultants and other
     professionals to assist the Second Lien Collateral Agent in the collection
     or disposition of any Collateral, or utilize Internet sites that provide
     for the auction of assets of the types included in the Collateral or that
     have the reasonable capacity of doing so, or that match buyers and sellers
     of assets to dispose of any Collateral;

               (vi) dispose of assets in wholesale rather than retail markets;

               (vii) disclaim disposition warranties, such as title, possession
     or quiet enjoyment; or

               (viii) purchase insurance or credit enhancements to insure the
     Second Lien Collateral Agent against risks of loss, collection or
     disposition of any Collateral or to provide to the Second Lien Collateral
     Agent a guaranteed return from the collection or disposition of any
     Collateral.

Each Grantor acknowledges that the purpose of this Section 6.1(f) is to provide
a non-exhaustive list of actions or omissions that are commercially reasonable
when exercising remedies against any Collateral and that other actions or
omissions by the Secured Parties shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 6.1(f). Without
limitation upon the foregoing, nothing contained in this Section 6.1(f) shall be
construed to grant any rights to any Grantor or to impose any duties on the
Second Lien Collateral Agent

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<PAGE>

that would not have been granted or imposed by this Agreement or by applicable
Requirements of Law in the absence of this Section 6.1(f).

          (g) IP Licenses. For the purpose of enabling the Second Lien
Collateral Agent to exercise rights and remedies under this Section 6.1
(including in order to take possession of, collect, receive, assemble, process,
appropriate, remove, realize upon, sell, assign, convey, transfer or grant
options to purchase any Collateral) at such time as the Second Lien Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to the Second Lien Collateral Agent, for the benefit of
the Secured Parties, (i) an irrevocable, nonexclusive, worldwide license
(exercisable without payment of royalty or other compensation to such Grantor),
including in such license the right to sublicense, use and practice any
Intellectual Property now owned or hereafter acquired by such Grantor and access
to all media in which any of the licensed items may be recorded or stored and to
all Software and programs used for the compilation or printout thereof and (ii)
an irrevocable license (without payment of rent or other compensation to such
Grantor) to use, operate and occupy all real Property owned, operated, leased,
subleased or otherwise occupied by such Grantor.

     Section 6.2 Accounts and Payments in Respect of General Intangibles.
Subject to the terms of the Closing Date Intercreditor Agreement, (a) In
addition to, and not in substitution for, any similar requirement in the Credit
Agreement, if required by the Second Lien Collateral Agent at any time during
the continuance of an Event of Default, any payment of accounts or payment in
respect of general intangibles, when collected by any Grantor, shall be promptly
(and, in any event, within two (2) Business Days) deposited by such Grantor in
the exact form received, duly indorsed by such Grantor to the Second Lien
Collateral Agent, in a Cash Collateral Account, subject to withdrawal by the
Second Lien Collateral Agent as provided in Section 6.4. Until so turned over,
such payment shall be held by such Grantor in trust for the Second Lien
Collateral Agent (or the First Lien Agent, as the case may be), segregated from
other funds of such Grantor. Each such deposit of proceeds of accounts and
payments in respect of general intangibles shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.

          (b) At any time during the continuance of an Event of Default:

               (i) each Grantor shall, upon the Second Lien Collateral Agent's
     request, deliver to the Second Lien Collateral Agent all original and other
     documents evidencing, and relating to, the Contractual Obligations and
     transactions that gave rise to any account or any payment in respect of
     general intangibles, including all original orders, invoices and shipping
     receipts and notify account debtors that the accounts or general
     intangibles have been collaterally assigned to the Second Lien Collateral
     Agent and that payments in respect thereof shall be made directly to the
     Second Lien Collateral Agent;

               (ii) the Second Lien Collateral Agent may, without notice, at any
     time during the continuance of an Event of Default, limit or terminate the
     authority of a Grantor to collect its accounts or amounts due under general
     intangibles or any thereof and, in its own name or in the name of others,
     communicate with account debtors to verify with them to the Second Lien
     Collateral Agent's satisfaction the existence, amount and terms of any
     account or amounts due under any general intangible. In addition, the
     Second Lien Collateral Agent may at any time enforce such Grantor's rights
     against such account debtors and obligors of general intangibles; and

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<PAGE>

               (iii) each Grantor shall take all actions, deliver all documents
     and provide all information necessary or reasonably requested by the Second
     Lien Collateral Agent to ensure any Internet Domain Name is registered.

          (c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each account and each payment in respect of general
intangibles to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto. No Secured Party shall have any obligation or
liability under any agreement giving rise to an account or a payment in respect
of a general intangible by reason of or arising out of any Loan Document or the
receipt by any Secured Party of any payment relating thereto, nor shall any
Secured Party be obligated in any manner to perform any obligation of any
Grantor under or pursuant to any agreement giving rise to an account or a
payment in respect of a general intangible, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.

     Section 6.3 Pledged Collateral. (a) Voting Rights. Subject to the terms of
the Closing Date Intercreditor Agreement, during the continuance of an Event of
Default, upon notice by the Second Lien Collateral Agent to the relevant Grantor
or Grantors, the Second Lien Collateral Agent or its nominee may exercise (A)
any voting, consent, corporate and other right pertaining to the Pledged
Collateral at any meeting of shareholders, partners or members, as the case may
be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (B)
any right of conversion, exchange and subscription and any other right,
privilege or option pertaining to the Pledged Collateral as if it were the
absolute owner thereof (including the right to exchange at its discretion any
Pledged Collateral upon the merger, amalgamation, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or equivalent
structure of any issuer of Pledged Stock, the right to deposit and deliver any
Pledged Collateral with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Second Lien
Collateral Agent may determine), all without liability except to account for
property actually received by it; provided, however, that the Second Lien
Collateral Agent shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.

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

                                       20

<PAGE>

or any officer or agent thereof) during the continuance of an Event of Default
and which proxy shall only terminate upon the payment in full of the Secured
Obligations (other than contingent indemnification obligations to the extent no
claim giving rise thereto has been asserted).

          (c) Authorization of Issuers. Subject to the terms of the Closing Date
Intercreditor Agreement, each Grantor hereby expressly irrevocably authorizes
and instructs, without any further instructions from such Grantor, each issuer
of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with
any instruction received by it from the Second Lien Collateral Agent in writing
that states that an Event of Default is continuing and is otherwise in
accordance with the terms of this Agreement and each Grantor agrees that such
issuer shall be fully protected from Liabilities to such Grantor in so complying
and (ii) unless otherwise expressly permitted hereby or the Credit Agreement,
pay any dividend or make any other payment with respect to the Pledged
Collateral directly to the Second Lien Collateral Agent.

     Section 6.4 Proceeds to be Turned over to and Held by Second Lien
Collateral Agent. Subject to the terms of the Closing Date Intercreditor
Agreement, unless otherwise expressly provided in the Credit Agreement or this
Agreement, all proceeds of any Collateral received by any Grantor hereunder in
cash or Cash Equivalents shall be held by such Grantor in trust for the Second
Lien Collateral Agent and the other Secured Parties, segregated from other funds
of such Grantor, and shall, promptly upon receipt by any Grantor, be turned over
to the Second Lien Collateral Agent in the exact form received (with any
necessary endorsement). Subject to the terms of the Closing Date Intercreditor
Agreement, all such proceeds of Collateral and any other proceeds of any
Collateral received by the Second Lien Collateral Agent in cash or Cash
Equivalents shall be held by the Second Lien Collateral Agent (or First Lien
Agent, as the case may be) in a Cash Collateral Account. All proceeds being held
by the Second Lien Collateral Agent in a Cash Collateral Account (or by such
Grantor in trust for the Second Lien Collateral Agent) shall continue to be held
as collateral security for the Secured Obligations and shall not constitute
payment thereof until applied as provided in the Credit Agreement.

     Section 6.5 Sale of Pledged Collateral. (a) Each Grantor recognizes that
the Second Lien Collateral Agent may be unable to effect a public sale of any
Pledged Collateral by reason of certain prohibitions contained in the Securities
Act and applicable state or foreign securities laws or otherwise or may
determine that a public sale is impracticable, not desirable or not commercially
reasonable and, accordingly, may resort to one or more private sales thereof to
a restricted group of purchasers that shall be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Second Lien Collateral Agent shall
be under no obligation to delay a sale of any Pledged Collateral for the period
of time necessary to permit the issuer thereof to register such securities for
public sale under the Securities Act or under applicable state securities laws
even if such issuer would agree to do so.

          (b) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of any
portion of the Pledged Collateral pursuant to Section 6.1 and this Section 6.5
valid and binding and in compliance with all applicable Requirements of Law.
Each Grantor further agrees that a breach of any covenant contained herein will
cause irreparable injury to the Second Lien Collateral Agent and other Secured
Parties, that the Second Lien Collateral Agent and the other Secured Parties
have no

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<PAGE>

adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained herein shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defense against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
Each Grantor waives any and all rights of contribution or subrogation upon the
sale or disposition of all or any portion of the Pledged Collateral by Second
Lien Collateral Agent.

     Section 6.6 Deficiency. Each Grantor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of any Collateral are
insufficient to pay the Secured Obligations and the fees and disbursements of
any attorney employed by the Second Lien Collateral Agent or any other Secured
Party to collect such deficiency.

                                   ARTICLE VII

                        THE SECOND LIEN COLLATERAL AGENT

     Section 7.1 Second Lien Collateral Agent's Appointment as Attorney-in-Fact.
(a) Each Grantor hereby irrevocably constitutes and appoints the Second Lien
Collateral Agent and any Related Person 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
the Loan Documents, to take any appropriate action and to execute any document
or instrument that may be necessary or desirable to accomplish the purposes of
the Loan Documents, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Second Lien Collateral Agent and its Related Persons
the power and right, on behalf of such Grantor, without notice to or assent by
such Grantor, to do any of the following when an Event of Default shall be
continuing:

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

               (ii) in the case of any Intellectual Property owned by or
     licensed to the Grantors, execute, deliver and have recorded any document
     that the Second Lien Collateral Agent may request to evidence, effect,
     publicize or record the Second Lien Collateral Agent's security interest in
     such Intellectual Property and the goodwill and general intangibles of such
     Grantor relating thereto or represented thereby;

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

               (iv) execute, in connection with any sale provided for in Section
     6.1 or Section 6.5, any document to effect or otherwise necessary or
     appropriate in relation to evidence the Sale of any Collateral; or

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<PAGE>

               (v) (A) subject to the terms of the Closing Date Intercreditor
     Agreement, direct any party liable for any payment under any Collateral to
     make payment of any moneys due or to become due thereunder directly to the
     Second Lien Collateral Agent or as the Second Lien Collateral Agent shall
     direct, (B) ask or demand for, and collect and receive payment of and
     receipt for, any moneys, claims and other amounts due or to become due at
     any time in respect of or arising out of any Collateral, (C) sign and
     indorse any invoice, freight or express bill, bill of lading, storage or
     warehouse receipt, draft against debtors, assignment, verification, notice
     and other document in connection with any Collateral, (D) commence and
     prosecute any suit, action or proceeding at law or in equity in any court
     of competent jurisdiction to collect any Collateral and to enforce any
     other right in respect of any Collateral, (E) defend any actions, suits,
     proceedings, audits, claims, demands, orders or disputes brought against
     such Grantor with respect to any Collateral, (F) settle, compromise or
     adjust any such actions, suits, proceedings, audits, claims, demands,
     orders or disputes and, in connection therewith, give such discharges or
     releases as the Second Lien Collateral Agent may deem appropriate, (G)
     assign any Intellectual Property owned by the Grantors or any IP Licenses
     of the Grantors throughout the world on such terms and conditions and in
     such manner as the Second Lien Collateral Agent shall in its sole
     discretion determine, including the execution and filing of any document
     necessary to effectuate or record such assignment and (H) generally, sell,
     assign, convey, transfer or grant a Lien on, make any Contractual
     Obligation with respect to and otherwise deal with, any Collateral as fully
     and completely as though the Second Lien Collateral Agent were the absolute
     owner thereof for all purposes and do, at the Second Lien Collateral
     Agent's option, at any time or from time to time, all acts and things that
     the Second Lien Collateral Agent deems necessary to protect, preserve or
     realize upon any Collateral and the Secured Parties' security interests
     therein and to effect the intent of the Loan Documents, all as fully and
     effectively as such Grantor might do.

               (vi) If any Grantor fails to perform or comply with any
     Contractual Obligation contained herein, the Second Lien Collateral Agent,
     at its option, but without any obligation so to do, may perform or comply,
     or otherwise cause performance or compliance, with such Contractual
     Obligation.

          (b) The expenses of the Second Lien Collateral Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate set forth in subsection 1.3(c) of the Credit
Agreement, from the date of payment by the Second Lien Collateral Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Second Lien Collateral Agent on demand.

          (c) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue of this Section 7.1. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.

     Section 7.2 Authorization to File Financing Statements. Each Grantor
authorizes the Second Lien Collateral Agent and its Related Persons, at any time
and from time to time, to file or record financing statements, amendments
thereto, and other filing or recording documents or instruments with respect to
any Collateral in such form and in such offices as the Second Lien Collateral
Agent reasonably determines appropriate to perfect the security interests of the
Second Lien Collateral Agent under this Agreement, and such financing statements
and amendments may

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<PAGE>

described the Collateral covered thereby as "all assets of the debtor". A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction. Such Grantor also hereby ratifies its
authorization for the Second Lien Collateral Agent to have filed any initial
financing statement or amendment thereto under the UCC (or other similar laws)
in effect in any jurisdiction if filed prior to the date hereof.

     Section 7.3 Authority of Second Lien Collateral Agent. Each Grantor
acknowledges that the rights and responsibilities of the Second Lien Collateral
Agent under this Agreement with respect to any action taken by the Second Lien
Collateral Agent or the exercise or non-exercise by the Second Lien Collateral
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Second Lien Collateral Agent and the other Secured Parties, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the Second
Lien Collateral Agent and the Grantors, the Second Lien Collateral Agent shall
be conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation or entitlement to make any inquiry respecting such
authority.

     Section 7.4 Duty; Obligations and Liabilities. (a) Duty of Second Lien
Collateral Agent. The Second Lien Collateral Agent's sole duty with respect to
the custody, safekeeping and physical preservation of the Collateral in its
possession shall be to deal with it in the same manner as the Second Lien
Collateral Agent deals with similar property for its own account. The powers
conferred on the Second Lien Collateral Agent hereunder are solely to protect
the Second Lien Collateral Agent's interest in the Collateral and shall not
impose any duty upon the Second Lien Collateral Agent to exercise any such
powers. The Second Lien Collateral Agent shall be accountable only for amounts
that it receives as a result of the exercise of such powers, and neither it nor
any of its Related Persons shall be responsible to any Grantor for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. In
addition, the Second Lien Collateral Agent shall not be liable or responsible
for any loss or damage to any Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehousemen, carrier,
forwarding agency, consignee or other bailee if such Person has been selected by
the Second Lien Collateral Agent in good faith.

          (b) Obligations and Liabilities with respect to Collateral. No Secured
Party and no Related Person thereof shall be liable for failure to demand,
collect or realize upon any Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to any Collateral. The powers conferred on the Second
Lien Collateral Agent hereunder shall not impose any duty upon any other Secured
Party to exercise any such powers. The other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their respective officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.

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<PAGE>

                                  ARTICLE VIII

                                  MISCELLANEOUS

     Section 8.1 Reinstatement. Each Grantor agrees that, if any payment made by
any Credit Party or other Person and applied to the Secured Obligations is at
any time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by any Secured Party
to such Credit Party, its estate, trustee, receiver or any other party,
including any Grantor, under any bankruptcy law, state or federal law, common
law or equitable cause, then, to the extent of such payment or repayment, any
Lien or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made. If, prior to
any of the foregoing, (a) any Lien or other Collateral securing such Grantor's
liability hereunder shall have been released or terminated by virtue of the
foregoing or (b) any provision of the Guaranty hereunder shall have been
terminated, cancelled or surrendered, such Lien, other Collateral or provision
shall be reinstated in full force and effect and such prior release,
termination, cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of any such Grantor in respect of any
Lien or other Collateral securing such obligation or the amount of such payment.

     Section 8.2 Release of Collateral. (a) At the time provided in subsection
8.10(b)(iii) of the Credit Agreement, the Collateral shall be released from the
Lien created hereby and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Second Lien Collateral
Agent and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. Each Grantor is hereby authorized to
file UCC amendments at such time evidencing the termination of the Liens so
released. At the request of any Grantor following any such termination, the
Second Lien Collateral Agent shall deliver to such Grantor any Collateral of
such Grantor held by the Second Lien Collateral Agent hereunder and execute and
deliver to such Grantor such documents as such Grantor shall reasonably request
to evidence such termination.

          (b) If the Second Lien Collateral Agent shall be directed or permitted
pursuant to subsection 8.10(b) of the Credit Agreement to release any Lien or
any Collateral, such Collateral shall be released from the Lien created hereby
to the extent provided under, and subject to the terms and conditions set forth
in, such subsection. In connection therewith, the Second Lien Collateral Agent,
at the request of any Grantor, shall execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such release.

          (c) At the time provided in subsection 8.10(a) of the Credit Agreement
and at the request of the Borrower, a Grantor shall be released from its
obligations hereunder in the event that all the Stock and Stock Equivalents of
such Grantor shall be sold to any Person that is not an Affiliate of Holdings,
the Borrower and the Subsidiaries of the Borrower in a transaction permitted by
the Loan Documents.

     Section 8.3 Independent Obligations. The obligations of each Grantor
hereunder are independent of and separate from the Secured Obligations and the
Guaranteed Obligations. If any Secured Obligation or Guaranteed Obligation is
not paid when due, or upon any Event of Default, the Second Lien Collateral
Agent may, subject to the terms of the Closing Date Intercreditor Agreement, at
its sole election, proceed directly and at once, without notice, against any
Grantor and any Collateral to collect and recover the full amount of any Secured
Obligation

                                       25

<PAGE>

or Guaranteed Obligation then due, without first proceeding against any other
Grantor, any other Credit Party or any other Collateral and without first
joining any other Grantor or any other Credit Party in any proceeding.

     Section 8.4 No Waiver by Course of Conduct. No Secured Party shall by any
act (except by a written instrument pursuant to Section 8.6), 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 any Secured Party, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that such
Secured Party would otherwise have on any future occasion.

     Section 8.5 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 9.1 of the Credit Agreement; provided, however, that
annexes to this Agreement may be supplemented (but no existing provisions may be
modified and no Collateral may be released) through Pledge Amendments and
Joinder Agreements, in substantially the form of Annex 1 and Annex 2,
respectively, in each case duly executed by the Second Lien Collateral Agent and
each Grantor directly affected thereby.

     Section 8.6 Additional Grantors; Additional Pledged Collateral. (a) Joinder
Agreements. If, at the option of the Borrower or as required pursuant to Section
4.13(b) of the Credit Agreement, the Borrower shall cause any Subsidiary that is
not a Grantor to become a Grantor hereunder, such Subsidiary shall execute and
deliver to the Second Lien Collateral Agent a Joinder Agreement substantially in
the form of Annex 2 and shall thereafter for all purposes be a party hereto and
have the same rights, benefits and obligations as a Grantor party hereto on the
Closing Date.

          (b) Pledge Amendments. To the extent any Pledged Collateral has not
been delivered as of the Closing Date, such Grantor shall deliver a pledge
amendment duly executed by the Grantor in substantially the form of Annex 1
(each, a "Pledge Amendment"). Such Grantor authorizes the Second Lien Collateral
Agent to attach each Pledge Amendment to this Agreement.

     Section 8.7 Notices. All notices, requests and demands to or upon the
Second Lien Collateral Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 9.2 of the Credit Agreement; provided, however,
that any such notice, request or demand to or upon any Grantor shall be
addressed to the Borrower's notice address set forth in such Section 9.2.

     Section 8.8 Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of
each Secured Party and their successors and assigns; provided, however, that no
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Second Lien Collateral
Agent.

     Section 8.9 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed

                                       26

<PAGE>

shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Signature pages may be detached from
multiple separate counterparts and attached to a single counterpart. Delivery of
an executed signature page of this Agreement by facsimile transmission or by
Electronic Transmission shall be as effective as delivery of a manually executed
counterpart hereof.

     Section 8.10 Severability. Any provision of this Agreement being held
illegal, invalid or unenforceable in any jurisdiction shall not affect any part
of such provision not held illegal, invalid or unenforceable, any other
provision of this Agreement or any part of such provision in any other
jurisdiction.

     Section 8.11 Governing Law. This Agreement and the rights and obligations
of the parties hereto shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.

     Section 8.12 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREIN OR RELATED THERETO (WHETHER
FOUNDED IN CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO OTHER PARTY AND NO RELATED PERSON OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.

     EACH GRANTOR AGREES TO BE BOUND BY THE PROVISIONS OF SUBSECTION 9.18(b) AND
(c) OF THE CREDIT AGREEMENT.

     Section 8.13 Intercreditor Agreement

     Second Lien Collateral Agent, First Lien Agent, Grantors and Borrower have
entered into that certain Intercreditor Agreement of event date hereof (as the
same may be amended, restated, supplemented or otherwise modified from time to
time pursuant to the terms thereof, the "Closing Date Intercreditor Agreement").
To the extent any provision of this Agreement conflicts with the Closing Date
Intercreditor Agreement, the Closing Date Intercreditor Agreement shall control.
Without limiting the generality of the foregoing, until the First Lien Loan
Termination Date (as such term is defined in the Closing Date Intercreditor
Agreement), (a) any assignment or transfer of Collateral hereunder to Second
Lien Collateral Agent shall be to the First Lien Agent, (b) any request or
consent of Second Lien Collateral Agent required or made hereunder shall be
deemed to be required or made by the First Lien Agent, (c) any deliver of any
Collateral or any other item to Second Lien Collateral Agent required hereunder
shall be to the First Lien Agent, (d) any right of the Second Lien Collateral
Agent to require a Grantor to cause the Second Lien Collateral Agent to obtain
exclusive Control of any Investment Property shall be vested in the First Lien
Agent, (e) any right of the Second Lien Collateral Agent to assert any claims on
behalf of a Grantor shall be vested in the First Lien Agent, (f) the Second Lien
Collateral Agent (or its nominee) shall not exercise any rights pursuant to its
appointment as attorney-in-fact pursuant to Section 7.1 hereof, (g) Second Lien
Collateral Agent shall not

                                       27

<PAGE>

exercise any voting or other consensual rights set forth in Section 5.3(d)
hereof and (h) all items required to be delivered to Second Lien Collateral
Agent hereunder, including without limitation, stock certificates,
distributions, dividends, instruments, chattel paper or other property paid or
payable with respect to any of the Collateral shall be delivered to First Lien
Agent as contractual representative for purposes of perfection for the Second
Lien Collateral Agent and Lenders.

                            [SIGNATURE PAGE FOLLOWS]

                                       28
<PAGE>

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

                                        CSAV, INC., a Massachusetts corporation
                                        as a Grantor

                                        By: /s/ AARON S. MONEY
                                            ------------------------------------
                                        Name: AARON S. MONEY
                                        Title: CLERK

                                        CSAV HOLDING CORP., a Delaware
                                        corporation, as a Grantor

                                        By: /s/ AARON S. MONEY
                                            ------------------------------------
                                        Name: AARON S. MONEY
                                        Title: TREASURER & SECRETARY

                                        DECADE INDUSTRIES, INC., A Minnesota
                                        corporation, as a Grantor

                                        By: /s/ AARON S. MONEY
                                            ------------------------------------
                                        Name: AARON S. MONEY
                                        Title: SECRETARY

Guaranty, Pledge and Security Agreement-Second Lien

<PAGE>

ACCEPTED AND AGREED
as of the date first above written:

ALLIED CAPITAL CORPORATION,
as Second Lien Collateral Agent

By: /s/ Frank Izzo
    ---------------------------------
Name: Frank Izzo
Title: Principal

Guaranty, Pledge and Security Agreement-Second Lien

<PAGE>

                                     ANNEX 1
                                       TO
                   GUARANTY, PLEDGE AND SECURITY AGREEMENT(1)

                            FORM OF PLEDGE AMENDMENT

     This Pledge Amendment, dated as of _____________ __, 20___, is delivered
pursuant to Section 8.6 of the Guaranty, Pledge and Security Agreement, dated as
of July 21, 2006, by CSAV, Inc. (the "Borrower"), the undersigned Grantor and
the other Affiliates of the Borrower from time to time party thereto as Grantors
in favor of Allied Capital Corporation, as Second Lien Collateral Agent for the
Secured Parties referred to therein (the "Guaranty and Security Agreement").
Capitalized terms used herein without definition are used as defined in the
Guaranty and Security Agreement.

     The undersigned hereby agrees that this Pledge Amendment may be attached to
the Guaranty, Pledge and Security Agreement and that the Pledged Collateral
listed on Annex 1-A to this Pledge Amendment shall be and become part of the
Collateral referred to in the Guaranty and Security Agreement and shall secure
all Obligations of the undersigned.

     The undersigned hereby represents and warrants that each of the
representations and warranties contained in Sections 4.1, 4.2, 4.5 and 4.10 of
the Guaranty, Pledge and Security Agreement is true and correct and as of the
date hereof as if made on and as of such date.

                                        [GRANTOR]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

----------
To be used for pledge of Additional Pledged Collateral by existing Grantor.

                                     SECOND LIEN GUARANTY AND SECURITY AGREEMENT
                                                                      CSAV, INC.

                                      A1-1

<PAGE>

                                                                       Annex 1-A

                                  PLEDGED STOCK

<TABLE>
<CAPTION>
                                                  NUMBER OF
                                                   SHARES,
                                                   UNITS OR
ISSUER   CLASS   CERTIFICATE NO(S).   PAR VALUE   INTERESTS
------   -----   ------------------   ---------   ---------
<S>      <C>     <C>                  <C>         <C>

</TABLE>

                            PLEDGED DEBT INSTRUMENTS

<TABLE>
<CAPTION>
                               CERTIFICATE     FINAL    PRINCIPAL
ISSUER   DESCRIPTION OF DEBT      NO(S).     MATURITY     AMOUNT
------   -------------------   -----------   --------   ---------
<S>      <C>                   <C>           <C>        <C>

</TABLE>

                                                 GUARANTY AND SECURITY AGREEMENT
                                                                      CSAV, INC.

                                      A1-2

<PAGE>

ACKNOWLEDGED AND AGREED
as of the date first above written:

ALLIED CAPITAL CORPORATION
as Second Lien Collateral Agent

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                                                 GUARANTY AND SECURITY AGREEMENT
                                                                      CSAV, INC.

                                      A1-3

<PAGE>

                                     ANNEX 2
                                       TO
                     GUARANTY, PLEDGE AND SECURITY AGREEMENT

                            FORM OF JOINDER AGREEMENT

     This JOINDER AGREEMENT, dated as of _____________ __, 20__, is delivered
pursuant to Section 8.6 of the Guaranty, Pledge and Security Agreement, dated as
of July 21, 2006, by CSAV, Inc. (the "Borrower") and the Affiliates of the
Borrower from time to time party thereto as Grantors in favor of the Allied
Capital Corporation, as Second Lien Collateral Agent for the Secured Parties
referred to therein (the "Guaranty and Security Agreement"). Capitalized terms
used herein without definition are used as defined in the Guaranty and Security
Agreement.

     By executing and delivering this Joinder Agreement, the undersigned, as
provided in Section 8.6 of the Guaranty and Security Agreement, hereby becomes a
party to the Guaranty and Security Agreement as a Grantor thereunder with the
same force and effect as if originally named as a Grantor therein and, without
limiting the generality of the foregoing, as collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the Secured Obligations of the undersigned, hereby
mortgages, pledges and hypothecates to the Second Lien Collateral Agent for the
benefit of the Secured Parties, and grants to the Second Lien Collateral Agent
for the benefit of the Secured Parties a lien on and security interest in, all
of its right, title and interest in, to and under the Collateral of the
undersigned and expressly assumes all obligations and liabilities of a Grantor
thereunder. The undersigned hereby agrees to be bound as a Grantor for the
purposes of the Guaranty and Security Agreement.

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

     The undersigned hereby represents and warrants that each of the
representations and warranties contained in Article IV of the Guaranty and
Security Agreement applicable to it is true and correct on and as the date
hereof as if made on and as of such date.

     IN WITNESS WHEREOF, THE UNDERSIGNED HAS CAUSED THIS JOINDER AGREEMENT TO BE
DULY EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.

                                        [Additional Grantor]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                                 GUARANTY AND SECURITY AGREEMENT
                                                                      CSAV, INC.

                                      A2-1

<PAGE>

ACKNOWLEDGED AND AGREED
as of the date first above written:

[EACH GRANTOR PLEDGING ADDITIONAL
COLLATERAL]

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

ALLIED CAPITAL CORPORATION as Second
Lien Collateral Agent

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                                                 GUARANTY AND SECURITY AGREEMENT
                                                                      CSAV, INC.

                                      A2-2
<PAGE>

                                     ANNEX 3
                                       TO
                     GUARANTY, PLEDGE AND SECURITY AGREEMENT

                FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

     THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as
of _________________, 20__, is made by each of the entities listed on the
signature pages hereof (each a "Grantor" and, collectively, the "Grantors"), in
favor of Allied Capital Corporation ("Allied"), as collateral agent (in such
capacity, together with its successors and permitted assigns, the "Second Lien
Collateral Agent") for the Lenders (as defined in the Credit Agreement referred
to below) and the other Secured Parties.

                                   WITNESSETH:

     WHEREAS, pursuant to the Second Lien Credit Agreement, dated as of July 21,
2006 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among CSAV, Inc., a Massachusetts
corporation ("Borrower"), CSAV Holding Corp., a Delaware corporation
("Holdings"), the other Persons party hereto that are designated as a "Credit
Party", General Electric Capital Corporation, as administrative agent for the
several financial institutions from time to time party to the Credit Agreement
(collectively, the "Lenders" and individually each a "Lender") and for itself as
a Lender, the Second Lien Collateral Agent, as collateral agent for the Lenders
and for itself as a Lender and such Lenders, the Lenders have severally agreed
to make extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein;

     WHEREAS, each Grantor (other than the Borrower) has agreed, pursuant to a
Guaranty, Pledge and Security Agreement of even date herewith in favor of the
Second Lien Collateral Agent (the "Guaranty and Security Agreement"), to
guarantee the Obligations (as defined in the Credit Agreement) of the Borrower;
and

     WHEREAS, all of the Grantors are party to the Guaranty and Security
Agreement pursuant to which the Grantors are required to execute and deliver
this [Copyright] [Patent] [Trademark] Security Agreement;

     NOW, THEREFORE, in consideration of the premises and to induce the Lenders
and the Second Lien Collateral Agent to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Second Lien Collateral Agent as
follows:

     Section 1. Defined Terms. Capitalized terms used herein without definition
are used as defined in the Guaranty and Security Agreement.

     Section 2. Grant of Security Interest in [Copyright] [Trademark] [Patent]
Collateral. Each Grantor, as collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges
and hypothecates to the Second Lien Collateral Agent for the benefit of the
Secured Parties, and grants to the Second Lien Collateral Agent for the benefit
of the Secured Parties a Lien on and security interest in, all of its right,
title and interest in, to and under the following Collateral of such Grantor
(the "[Copyright] [Patent] [Trademark] Collateral"):

                                      A3-1

<PAGE>

          (a) [all of its Copyrights and all IP Licenses providing for the grant
by or to such Grantor of any right under any Copyright, including, without
limitation, those referred to on Schedule 1 hereto;

          (b) all renewals, reversions and extensions of the foregoing; and

          (c) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]

                                       or

          (a) [all of its Patents and all IP Licenses providing for the grant by
or to such Grantor of any right under any Patent, including, without limitation,
those referred to on Schedule 1 hereto;

          (b) all reissues, reexaminations, continuations,
continuations-in-part, divisionals, renewals and extensions of the foregoing;
and

          (c) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]

                                       or

          (a) [all of its Trademarks and all IP Licenses providing for the grant
by or to such Grantor of any right under any Trademark, including, without
limitation, those referred to on Schedule 1 hereto;

          (b) all renewals and extensions of the foregoing;

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

          (d) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]

     Section 3. Guaranty and Security Agreement. The security interest granted
pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted
in conjunction with the security interest granted to the Second Lien Collateral
Agent pursuant to the Guaranty and Security Agreement and each Grantor hereby
acknowledges and agrees that the rights and remedies of the Second Lien
Collateral Agent with respect to the security interest in the [Copyright]
[Patent] [Trademark] Collateral made and granted hereby are more fully set forth
in the Guaranty and Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

                                      A3-2

<PAGE>

     Section 4. Grantor Remains Liable. Each Grantor hereby agrees that,
anything herein to the contrary notwithstanding, such Grantor shall assume full
and complete responsibility for the prosecution, defense, enforcement or any
other necessary or desirable actions in connection with their [Copyrights]
[Patents] [Trademarks] and IP Licenses subject to a security interest hereunder.

     Section 5. Counterparts. This [Copyright] [Patent] [Trademark] Security
Agreement may be executed in any number of counterparts and by different parties
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement. Signature pages may be detached from multiple separate counterparts
and attached to a single counterpart.

     Section 6. Governing Law. This [Copyright] [Patent] [Trademark] Security
Agreement and the rights and obligations of the parties hereto shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.

     Section 7. Intercreditor Agreement. Second Lien Collateral Agent, First
Lien Agent, Grantors and Borrower have entered into that certain Intercreditor
Agreement of event date hereof (as the same may be amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms
thereof, the "Closing Date Intercreditor Agreement"). To the extent any
provision of this Agreement conflicts with the Closing Date Intercreditor
Agreement, the Closing Date Intercreditor Agreement shall control.

                            [SIGNATURE PAGES FOLLOW]

                                      A3-3

<PAGE>

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

                                        Very truly yours,

                                        [GRANTOR]
                                        as Grantor

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------exv10w10

 

EXHIBIT 10.10

ULTA SALON, COSMETICS & FRAGRANCE, INC.

2007 INCENTIVE AWARD PLAN

ARTICLE 1.

PURPOSE

     The purpose of the Ulta Salon, Cosmetics & Fragrance, Inc. 2007 Incentive Award Plan (the
“Plan”) is to promote the success and enhance the value of Ulta Salon, Cosmetics &
Fragrance, Inc. (the “Company”) by linking the personal interests of the members of the
Board, Employees, and Consultants to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance to generate superior returns to Company
stockholders. The Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon
whose judgment, interest, and special effort the successful conduct of the Company’s operation is
largely dependent.

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

     Wherever the following terms are used in the Plan they shall have the meanings specified
below, unless the context clearly indicates otherwise. The singular pronoun shall include the
plural where the context so indicates.

     2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right
award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a
Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Performance Bonus
Award, or a Performance-Based Award granted to a Participant pursuant to the Plan.

     2.2 “Award Agreement” means any written agreement, contract, or other instrument or
document evidencing an Award, including through electronic medium.

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Change in Control” means and includes each of the following:

          (a) A transaction or series of transactions (other than an offering of Stock to the general
public through a registration statement filed with the Securities and Exchange Commission) whereby
any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2)
of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan
maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction,
directly or indirectly controls, is controlled by, or is under common control with, the Company)
directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company

 

 

possessing more than 50% of the total combined voting power of the Company’s securities
outstanding immediately after such acquisition; or

          (b) During any period of two consecutive years, individuals who, at the beginning of such
period, constitute the Board together with any new director(s) (other than a director designated by
a person who shall have entered into an agreement with the Company to effect a transaction
described in Section 2.4(a) or Section 2.4(c)) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or

          (c) The consummation by the Company (whether directly involving the Company or indirectly
involving the Company through one or more intermediaries) of (x) a merger, consolidation,
reorganization, or business combination or (y) a sale or other disposition of all or substantially
all of the Company’s assets in any single transaction or series of related transactions or (z) the
acquisition of assets or stock of another entity, in each case other than a transaction:

               (i) Which results in the Company’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being converted into
voting securities of the Company or the person that, as a result of the transaction, controls,
directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of
the Company’s assets or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least a majority of the
combined voting power of the Successor Entity’s outstanding voting securities immediately after the
transaction, and

               (ii) After which no person or group beneficially owns voting securities representing 50% or
more of the combined voting power of the Successor Entity; provided, however, that no person or
group shall be treated for purposes of this Section 2.4(c)(ii) as beneficially owning 50% or more
of combined voting power of the Successor Entity solely as a result of the voting power held in the
Company prior to the consummation of the transaction; or

          (d) The Company’s stockholders approve a liquidation or dissolution of the Company.

The Committee shall have full and final authority, which shall be exercised in its discretion, to
determine conclusively whether a Change in Control of the Company has occurred pursuant to the
above definition, and the date of the occurrence of such Change in Control and any incidental
matters relating thereto.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended.

     2.6 “Committee” means the committee of the Board described in Article 12.

     2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser
renders bona fide services to the Company or any Subsidiary; (b) the services rendered by the

2

 

consultant or adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or maintain a market for the
Company’s securities; and (c) the consultant or adviser is a natural person.

     2.8 “Covered Employee” means an Employee who is, or could be, a “covered employee”
within the meaning of Section 162(m) of the Code.

     2.9 “Deferred Stock” means a right to receive a specified number of shares of Stock
during specified time periods pursuant to Section 8.5.

     2.10 “Director” means a member of the Board, or as applicable, a member of the board
of directors of a Subsidiary.

     2.11 “Disability” means that the Participant qualifies to receive long-term disability
payments under the Company’s long-term disability insurance program, as it may be amended from time
to time.

     2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to Section
8.3 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

     2.13 “Effective Date” shall have the meaning set forth in Section 13.1.

     2.14 “Eligible Individual” means any person who is an Employee, a Consultant or an
Independent Director, as determined by the Committee.

     2.15 “Employee” means any officer or other employee (as defined in accordance with
Section 3401(c) of the Code) of the Company or any Subsidiary.

     2.16 “Equity Restructuring” shall mean a nonreciprocal transaction between the company
and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or
recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or
other securities of the Company) or the share price of Stock (or other securities) and causes a
change in the per share value of the Stock underlying outstanding Awards.

     2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.18 “Fair Market Value” means, as of any given date, (a) if Stock is traded on any
established stock exchange, the closing price of a share of Stock as reported in the Wall Street
Journal (or such other source as the Company may deem reliable for such purposes) for such date, or
if no sale occurred on such date, the first trading date immediately prior to such date during
which a sale occurred; or (b) if Stock is not traded on an exchange but is quoted on a national
market or other quotation system, the last sales price on such date, or if no sales occurred on
such date, then on the date immediately prior to such date on which sales prices are reported; or
(c) if Stock is not publicly traded, the fair market value established by the Committee acting in
good faith.

     2.19 “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.

3

 

     2.20 “Independent Director” means a Director of the Company who is not an Employee.

     2.21 “Non-Employee Director” means a Director of the Company who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor
rule.

     2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.

     2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan
to purchase a specified number of shares of Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

     2.24 “Participant” means any Eligible Individual who, as a member of the Board,
Consultant or Employee, has been granted an Award pursuant to the Plan.

     2.25 “Performance-Based Award” means an Award granted to selected Covered Employees
pursuant to Section 8.7, but which is subject to the terms and conditions set forth in Article 9.

     2.26 “Performance Bonus Award” has the meaning set forth in Section 8.7.

     2.27 “Performance Criteria” means the criteria that the Committee selects for purposes
of establishing the Performance Goal or Performance Goals for a Participant for a Performance
Period. The Performance Criteria that will be used to establish Performance Goals are limited to
the following: net earnings (either before or after interest, taxes, depreciation and
amortization), economic value-added, sales or revenue, net income (either before or after taxes),
operating earnings, cash flow (including, but not limited to, operating cash flow and free cash
flow), cash flow, return on capital, return on invested capital, return on net assets, return on
stockholders’ equity, return on assets, stockholder returns, return on sales, gross or net profit
margin, productivity, expense, margins, operating efficiency, customer satisfaction, working
capital, earnings per share, price per share of Stock, market capitalization and market share, any
of which may be measured either in absolute terms or as compared to any incremental increase or as
compared to results of a peer group. The Committee shall define in an objective fashion the manner
of calculating the Performance Criteria it selects to use for such Performance Period for such
Participant.

     2.28 “Performance Goals” means, for a Performance Period, the goals established in
writing by the Committee for the Performance Period based upon the Performance Criteria. Depending
on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit,
or an individual. The Committee, in its discretion, may, within the time prescribed by Section
162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance
Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event,
or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company, or the financial statements of

4

 

the Company, or in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.

     2.29 “Performance Period” means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the attainment of one or
more Performance Goals will be measured for the purpose of determining a Participant’s right to,
and the payment of, a Performance-Based Award.

     2.30 “Performance Share” means a right granted to a Participant pursuant to Section
8.1, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals
or other performance-based targets established by the Committee.

     2.31 “Performance Stock Unit” means a right granted to a Participant pursuant to
Section 8.2, to receive Stock, the payment of which is contingent upon achieving certain
Performance Goals or other performance-based targets established by the Committee.

     2.32 “Plan” means this Ulta Salon, Cosmetics & Fragrance, Inc. 2007 Incentive Award
Plan, as it may be amended from time to time.

     2.33 “Prior Plans” means, collectively, the following plans of the Company: Ulta
Salon, Cosmetics & Fragrance, Inc. 2002 Equity Incentive Plan, Ulta Salon, Cosmetics & Fragrance,
Inc. Second Amended and Restated Stock Option Plan, and the Ulta Salon, Cosmetics and Fragrance,
Inc. Stock Option Plan — Consultants, in each case as such plan may be amended from time to time.

     2.34 “Public Trading Date” means the first date upon which Stock is listed (or
approved for listing) upon notice of issuance on any securities exchange or designated (or approved
for designation) upon notice of issuance as a national market security on an interdealer quotation
system.

     2.35 “Qualified Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described in Section
162(m)(4)(C) of the Code.

     2.36 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6
that is subject to certain restrictions and may be subject to risk of forfeiture.

     2.37 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6.

     2.38 “Securities Act” shall mean the Securities Act of 1933, as amended.

     2.39 “Stock” means the common stock of the Company, par value $0.01 per share, and
such other securities of the Company that may be substituted for Stock pursuant to Article 11.

     2.40 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number
of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR
was granted as set forth in the applicable Award Agreement.

5

 

     2.41 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an
option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or
other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to
Section 8.4.

     2.42 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of
the Code and any applicable regulations promulgated thereunder or any other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.

ARTICLE 3.

SHARES SUBJECT TO THE PLAN

     3.1 Number of Shares.

          (a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which
may be issued or transferred pursuant to Awards under the Plan shall be the sum of: (i) 6,500,000
shares and (ii) any shares of Stock which as of the Effective Date are available for issuance under
any of the Prior Plans and which following the Effective Date are not issued under the Prior Plans;
provided, however, that no more than 6,500,000 shares of Stock may be delivered upon the exercise
of Incentive Stock Options.

          (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of
Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or
tax withholding obligation pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of
Stock issued in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not be counted against
shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in
cash in conjunction with any outstanding Awards shall not be counted against the shares available
for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of
Common Stock may again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.

     3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.

     3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision
in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Stock with
respect to one or more Awards that may be granted to any one Participant during any calendar year
shall be 4,550,000 and the maximum amount that may be paid in cash during any calendar year with
respect to any Performance-Based Award (including, without limitation, any Performance Bonus Award)
shall be $5,000,000; provided, however, that the foregoing

6

 

limitations shall not apply prior to the Public Trading Date and, following the Public Trading
Date, the foregoing limitations shall not apply until the earliest of: (a) the first material
modification of the Plan (including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 3.1); (b) the issuance of all of the shares of Stock
reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting of
stockholders at which members of the Board are to be elected that occurs after the close of the
third calendar year following the calendar year in which occurred the first registration of an
equity security of the Company under Section 12 of the Exchange Act; or (e) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.

ARTICLE 4.

ELIGIBILITY AND PARTICIPATION

     4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more
Awards pursuant to the Plan.

     4.2 Participation. Subject to the provisions of the Plan, the Committee may, from
time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No Eligible Individual shall have any right
to be granted an Award pursuant to this Plan.

     4.3 Foreign Participants. Notwithstanding any provision of the Plan to the contrary,
in order to comply with the laws in other countries in which the Company and its Subsidiaries
operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power
and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine
which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii)
modify the terms and conditions of any Award granted to Eligible Individuals outside the United
States to comply with applicable foreign laws; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be necessary or advisable
(any such subplans and/or modifications shall be attached to this Plan as appendices); provided,
however, that no such subplans and/or modifications shall increase the share limitations contained
in Sections 3.1 and 3.3 of the Plan; and (v) take any action, before or after an Award is made,
that it deems advisable to obtain approval or comply with any necessary local governmental
regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any
actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code,
any securities law or governing statute or any other applicable law.

7

 

ARTICLE 5.

STOCK OPTIONS

     5.1 General. The Committee is authorized to grant Options to Eligible Individuals on
the following terms and conditions:

          (a) Exercise Price. The exercise price per share of Stock subject to an Option shall
be determined by the Committee and set forth in the Award Agreement; provided, that, subject to
Section 5.2(d), the exercise price for any Option shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.

          (b) Time and Conditions of Exercise. The Committee shall determine the time or times
at which an Option may be exercised in whole or in part; provided that the term of any Option
granted under the Plan shall not exceed ten years. The Committee shall also determine the
performance or other conditions, if any, that must be satisfied before all or part of an Option may
be exercised.

          (c) Payment. The Committee shall determine the methods by which the exercise price of
an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of
Stock held for such period of time as may be required by the Committee in order to avoid adverse
accounting consequences and having a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, or (iii) other property
acceptable to the Committee (including through the delivery of a notice that the Participant has
placed a market sell order with a broker with respect to shares of Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that
payment of such proceeds is then made to the Company upon settlement of such sale). The Committee
shall also determine the methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, after
the Public Trading Date, no Participant who is a Director or an “executive officer” of the Company
within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise
price of an Option, or continue any extension of credit with respect to the exercise price of an
Option with a loan from the Company or a loan arranged by the Company in violation of Section 13(k)
of the Exchange Act.

          (d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between
the Company and the Participant. The Award Agreement shall include such additional provisions as
may be specified by the Committee.

     5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
Employees and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to
the requirements of Section 5.1, must comply with the provisions of this Section 5.2.

          (a) Expiration. Subject to Section 5.2(c), an Incentive Stock Option shall expire and
may not be exercised to any extent by anyone after the first to occur of the following events:

8

 

               (i) Ten years from the date it is granted, unless an earlier time is set in the Award
Agreement;

               (ii) Three months after the Participant’s termination of employment as an Employee; and

               (iii) One year after the date of the Participant’s termination of employment or service on
account of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock
Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s
legal representative or representatives, by the person or persons entitled to do so pursuant to the
Participant’s last will and testament, or, if the Participant fails to make testamentary
disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to
receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.

          (b) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation
as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive
Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall
be considered Non-Qualified Stock Options.

          (c) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of Stock of the Company only if such Option is granted at a price that is not
less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.

          (d) Notice of Disposition. The Participant shall give the Company prompt notice of
any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two
years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of
such shares of Stock to the Participant.

          (e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may
be exercised only by the Participant.

          (f) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an
Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the
Code shall be considered a Non-Qualified Stock Option.

     5.3 Granting of Options to Independent Directors. The Board may from time to time, in
its sole discretion, and subject to the limitations of the Plan:

          (a) Select from among the Independent Directors (including Independent Directors who have
previously been granted Options under the Plan) such of them as in its opinion should be granted
Options;

9

 

          (b) Subject to Section 3.3, determine the number of shares of Stock that may be purchased upon
exercise of the Options granted to such selected Independent Directors; and

          (c) Subject to the provisions of this Article 5, determine the terms and conditions of such
Options, consistent with the Plan.

Options granted to Independent Directors shall be Non-Qualified Stock Options.

ARTICLE 6.

RESTRICTED STOCK AWARDS

     6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject
to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall
be evidenced by an Award Agreement.

     6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at
the time of the grant of the Award or thereafter.

     6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may (a) provide in any Restricted Stock Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified causes, and (b) in other
cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

     6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan
may be evidenced in such manner as the Committee shall determine. If certificates representing
shares of Restricted Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.

10

 

ARTICLE 7.

STOCK APPRECIATION RIGHTS

     7.1 Grant of Stock Appreciation Rights.

          (a) A Stock Appreciation Right may be granted to any Eligible Individual selected by the
Committee. A Stock Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award
Agreement.

          (b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to
exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion
of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market
Value of the Stock on the date the Stock Appreciation Right is exercised over (B) the Fair Market
Value of the Stock on the date the Stock Appreciation Right was granted and (ii) the number of
shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any
limitations the Committee may impose.

     7.2 Payment and Limitations on Exercise.

          (a) Subject to Sections 7.2(b) payment of the amounts determined under Sections 7.1(b) above
shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation
Right is exercised) or a combination of both, as determined by the Committee in the Award
Agreement.

          (b) To the extent any payment under Section 7.1(b) is effected in Stock, it shall be made
subject to satisfaction of all provisions of Article 5 above pertaining to Options.

ARTICLE 8.

OTHER TYPES OF AWARDS

     8.1 Performance Share Awards. Any Eligible Individual selected by the Committee may
be granted one or more Performance Share awards which shall be denominated in a number of shares of
Stock and which may be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee. In making such determinations,
the Committee shall consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other compensation of the
particular Participant.

     8.2 Performance Stock Units. Any Eligible Individual selected by the Committee may be
granted one or more Performance Stock Unit awards which shall be denominated in unit equivalent of
shares of Stock and/or units of value including dollar value of shares of Stock and which may be
linked to any one or more of the Performance Criteria or other specific performance criteria
determined appropriate by the Committee, in each case on a specified date

11

 

or dates or over any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and other compensation of
the particular Participant.

     8.3 Dividend Equivalents.

          (a) Any Eligible Individual selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on the shares of Stock that are subject to any Award, to be
credited as of dividend payment dates, during the period between the date the Award is granted and
the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such formula and at such
time and subject to such limitations as may be determined by the Committee.

          (b) Dividend Equivalents granted with respect to Options or SARs that are intended to be
Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods,
regardless of whether such Option or SAR is subsequently exercised.

     8.4 Stock Payments. Any Eligible Individual selected by the Committee may receive
Stock Payments in the manner determined from time to time by the Committee[; provided, that unless
otherwise determined by the Committee such Stock Payments shall be made in lieu of base salary,
bonus, or other cash compensation otherwise payable to such Participant]. The number of shares
shall be determined by the Committee and may be based upon the Performance Criteria or other
specific performance criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

     8.5 Deferred Stock. Any Eligible Individual selected by the Committee may be granted
an award of Deferred Stock in the manner determined from time to time by the Committee. The number
of shares of Deferred Stock shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or periods determined by
the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock
award has vested, pursuant to a vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred
Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.

     8.6 Restricted Stock Units. The Committee is authorized to make Awards of Restricted
Stock Units to any Eligible Individual selected by the Committee in such amounts and subject to
such terms and conditions as determined by the Committee. At the time of grant, the Committee
shall specify the date or dates on which the Restricted Stock Units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of
grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock
Units which shall be no earlier than the vesting date or dates of the Award and may be determined
at the election of the grantee. On the maturity date, the Company shall,

12

 

subject to Section 10.5(b), transfer to the Participant one unrestricted, fully transferable
share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not
previously forfeited.

     8.7 Performance Bonus Awards. Any Eligible Individual selected by the Committee may
be granted one or more Performance-Based Awards in the form of a cash bonus (a “Performance
Bonus Award”) payable upon the attainment of Performance Goals that are established by the
Committee and relate to one or more of the Performance Criteria, in each case on a specified date
or dates or over any period or periods determined by the Committee. Any such Performance Bonus
Award paid to a Covered Employee shall be based upon objectively determinable bonus formulas
established in accordance with Article 9.

     8.8 Term. Except as otherwise provided herein, the term of any Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted
Stock Units shall be set by the Committee in its discretion.

     8.9 Exercise or Purchase Price. The Committee may establish the exercise or purchase
price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock
Payments or Restricted Stock Units; provided, however, that such price shall not be less than the
par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state
law.

     8.10 Exercise upon Termination of Employment or Service. An Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and
Restricted Stock Units shall only be exercisable or payable while the Participant is an Employee,
Consultant or Director, as applicable; provided, however, that the Committee in its sole and
absolute discretion may provide that an Award of Performance Shares, Performance Stock Units,
Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units may be exercised or
paid subsequent to a termination of employment or service, as applicable, or following a Change in
Control of the Company, or because of the Participant’s retirement, death or disability, or
otherwise; provided, however, that any such provision with respect to Performance Shares or
Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that
apply to Qualified Performance-Based Compensation.

     8.11 Form of Payment. Payments with respect to any Awards granted under this Article
8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.

     8.12 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be evidenced by an Award
Agreement.

13

 

ARTICLE 9.

PERFORMANCE-BASED AWARDS

     9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to
qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as
Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a
Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over
any contrary provision contained in Articles 6 or 8; provided, however, that the Committee may in
its discretion grant Awards to Covered Employees that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 9.

     9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner entitle the Participant
to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant
for a particular Performance Period shall not require designation of such Covered Employee as a
Participant in any subsequent Performance Period and designation of one Covered Employee as a
Participant shall not require designation of any other Covered Employees as a Participant in such
period or in any other period.

     9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to
comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles 6 or 8 which may be granted to one or
more Covered Employees, no later than ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period of service (or such other time as
may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a)
designate one or more Covered Employees, (b) select the Performance Criteria applicable to the
Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable,
which may be earned for such Performance Period, and (d) specify the relationship between
Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be
earned by each Covered Employee for such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing whether the applicable Performance Goals
have been achieved for such Performance Period. In determining the amount earned by a Covered
Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the
amount payable at a given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate performance for the
Performance Period.

     9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable
Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a
Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved. In determining the
amount earned under a Performance-Based Award, the Committee may reduce

14

 

or eliminate the amount of the Performance-Based Award earned for the Performance Period, if
in its sole and absolute discretion, such reduction or elimination is appropriate.

     9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended
to the extent necessary to conform to such requirements.

ARTICLE 10.

PROVISIONS APPLICABLE TO AWARDS

     10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other
Awards.

     10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements
that set forth the terms, conditions and limitations for each Award which may include the term of
an Award, the provisions applicable in the event the Participant’s employment or service
terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.

     10.3 Limits on Transfer. No right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a
Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any
other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee,
no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution or pursuant to beneficiary designation procedures
approved from time to time by the Committee (or the Board in the case of Awards granted to
Independent Directors). The Committee by express provision in the Award or an amendment thereto
may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and
paid to certain persons or entities related to the Participant, including but not limited to
members of the Participant’s family, charitable institutions, or trusts or other entities whose
beneficiaries or beneficial owners are members of the Participant’s family and/or charitable
institutions, or to such other persons or entities as may be expressly approved by the Committee,
pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer
shall be subject to the condition that the Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection
with the Participant’s termination of employment or service with the Company or a Subsidiary to
assume a position with a governmental, charitable, educational or similar non-profit institution)
and on a basis consistent with the Company’s lawful issue of securities.

15

 

     10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is
married and resides in a community property state, a designation of a person other than the
Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s
interest in the Award shall not be effective without the prior written consent of the Participant’s
spouse. If no beneficiary has been designated or survives the Participant, payment shall be made
to the person entitled thereto pursuant to the Participant’s will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the Committee.

     10.5 Stock Certificates; Book Entry Procedures.

          (a) Notwithstanding anything herein to the contrary, the Company shall not be required to
issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award,
unless and until the Board has determined, with advice of counsel, that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of governmental
authorities and, if applicable, the requirements of any exchange on which the shares of Stock are
listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply
with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and
the rules of any national securities exchange or automated quotation system on which the Stock is
listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the
Board may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements. The Committee shall have the right to require any Participant
to comply with any timing or other restrictions with respect to the settlement or exercise of any
Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

          (b) Notwithstanding any other provision of the Plan, unless otherwise determined by the
Committee or required by any applicable law, rule or regulation, the Company shall not deliver to
any Participant certificates evidencing shares of Stock issued in connection with any Award and
instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its
transfer agent or stock plan administrator).

     10.6 Paperless Administration. In the event that the Company establishes, for itself
or using the services of a third party, an automated system for the documentation, granting or
exercise of Awards, such as a system using an internet website or interactive voice response, then
the paperless documentation, granting or exercise of Awards by a Participant may be permitted
through the use of such an automated system.

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ARTICLE 11.

CHANGES IN CAPITAL STRUCTURE

     11.1 Adjustments.

          (a) In the event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of Stock or the share price of the Stock
other than an Equity Restructuring, the Committee shall make such equitable adjustments, if any, as
the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the
aggregate number and kind of shares that may be issued under the Plan (including, but not limited
to, adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and conditions of any
outstanding Awards (including, without limitation, any applicable performance targets or criteria
with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards
under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m) of the Code.

          (b) In the event of any transaction or event described in Section 11.1 or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes in applicable laws, regulations
or accounting principles, the Committee, in its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by action taken prior to
the occurrence of such transaction or event and either automatically or upon the Participant’s
request, is hereby authorized to take any one or more of the following actions whenever the
Committee determines that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan or with respect to
any Award under the Plan, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:

               (i) To provide for either (A) termination of any such Award in exchange for an amount of cash,
if any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the
occurrence of the transaction or event described in this Section 11.2 the Committee determines in
good faith that no amount would have been attained upon the exercise of such Award or realization
of the Participant’s rights, then such Award may be terminated by the Company without payment) or
(B) the replacement of such Award with other rights or property selected by the Committee in its
sole discretion;

               (ii) To provide that such Award be assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;

17

 

               (iii) To make adjustments in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding options, rights and awards and options,
rights and awards which may be granted in the future;

               (iv) To provide that such Award shall be exercisable or payable or fully vested with respect
to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the
applicable Award Agreement; and

               (v) To provide that the Award cannot vest, be exercised or become payable after such event.

          (c) In connection with the occurrence of any Equity Restructuring, and notwithstanding
anything to the contrary in Sections 11.1(a) and 11.1(b):

               (i) The number and type of securities subject to each outstanding Award and the exercise price
or grant price thereof, if applicable, will be equitably adjusted. The adjustments provided under
this Section 11.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected
Participant and the Company.

               (ii) The Committee shall make such equitable adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate
number and kind of shares that may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Sections 3.1 and 3.3).

     11.2 Acceleration Upon a Change in Control. Notwithstanding Section 11.1, and except
as may otherwise be provided in any applicable Award Agreement or other written agreement entered
into between the Company and a Participant, if a Change in Control occurs and a Participant’s
Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the
Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on
such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause
any and all Awards outstanding hereunder to terminate at a specific time in the future, including
but not limited to the date of such Change in Control, and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and absolute discretion,
shall determine. In the event that the terms of any agreement between the Company or any Company
subsidiary or affiliate and a Participant contains provisions that conflict with and are more
restrictive than the provisions of this Section 11.2, this Section 11.2 shall prevail and control
and the more restrictive terms of such agreement (and only such terms) shall be of no force or
effect.

     11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of stock of any class or
any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance by the Company of shares of stock of any class, or securities

18

 

convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of Stock subject to an Award or the
grant or exercise price of any Award.

     11.4 Restrictions on Exercise. In the event of any pending stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change affecting the shares
of Stock or the share price of the Stock including any Equity Restructuring, for reasons of
administrative convenience, the Company in its sole discretion may refuse to permit the exercise of
any Award during a period not to exceed 30 days prior to the consummation of any such transaction.

ARTICLE 12.

ADMINISTRATION

     12.1 Committee. Unless and until the Board delegates administration of the Plan to a
Committee as set forth below, the Plan shall be administered by the full Board, and for such
purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The
Board, at its discretion or as otherwise necessary to comply with the requirements of Section
162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any
other applicable rule or regulation, may delegate administration of the Plan to a Committee
consisting of two or more members of the Board. Unless otherwise determined by the Board, the
Committee shall consist solely of two or more members of the Board each of whom is an “outside
director,” within the meaning of Section 162(m) of the Code, a Non-Employee Director and an
“independent director” under the rules of the New York Stock Exchange (or other principal
securities market on which shares of Stock are traded); provided that any action taken by the
Committee shall be valid and effective, whether or not members of the Committee at the time of such
action are later determined not to have satisfied the requirements for membership set forth in this
Section 12.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing:
(a) the full Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to all Awards granted to Independent Directors and for
purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the
Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section
12.5. In its sole discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters which under Rule
16b-3 under the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the Committee. Except as may
otherwise be provided in any charter of the Committee, appointment of Committee members shall be
effective upon acceptance of appointment; Committee members may resign at any time by delivering
written notice to the Board; and vacancies in the Committee may only be filled by the Board.

     12.2 Action by the Committee. Unless otherwise established by the Board or in any
charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a quorum is present, and acts approved

19

 

in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of
the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company’s independent certified public accountants, or any executive
compensation consultant or other professional retained by the Company to assist in the
administration of the Plan.

     12.3 Authority of Committee. Subject to any specific designation in the Plan, the
Committee has the exclusive power, authority and discretion to:

          (a) Designate Participants to receive Awards;

          (b) Determine the type or types of Awards to be granted to each Participant;

          (c) Determine the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;

          (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any reload provision, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or waivers thereof, any
provisions related to non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines; provided, however, that the
Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any
Performance-Based Awards;

          (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other
property, or an Award may be canceled, forfeited, or surrendered;

          (f) Prescribe the form of each Award Agreement, which need not be identical for each
Participant;

          (g) Decide all other matters that must be determined in connection with an Award;

          (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

          (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and

          (j) Make all other decisions and determinations that may be required pursuant to the Plan or
as the Committee deems necessary or advisable to administer the Plan.

     12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the
Committee with respect to the Plan are final, binding, and conclusive on all parties.

20

 

     12.5 Delegation of Authority. To the extent permitted by applicable law, the Board
may from time to time delegate to a committee of one or more members of the Board or one or more
officers of the Company the authority to grant or amend Awards to Participants other than (a)
Employees who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers
of the Company (or Directors) to whom authority to grant or amend Awards has been delegated
hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board
specifies at the time of such delegation, and the Board may at any time rescind the authority so
delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section
12.5 shall serve in such capacity at the pleasure of the Board.

ARTICLE 13.

EFFECTIVE AND EXPIRATION DATE

     13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the
Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by
the stockholders if it is approved either:

          (a) By a majority of the votes cast at a duly held stockholder’s meeting at which a quorum
representing a representing a majority of outstanding voting stock is, either in person or by
proxy, present and voting on the plan; or

          (b) By a method and in a degree that would be treated as adequate under Delaware law in the
case of an action requiring stockholder approval.

     13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant
to the Plan after the tenth anniversary of the Effective Date, except that no Incentive Stock
Options may be granted under the Plan after the earlier of the tenth anniversary of (a) the date
the Plan is approved by the Board or (b) the Effective Date. Any Awards that are outstanding on
the tenth anniversary of the Effective Date shall remain in force according to the terms of the
Plan and the applicable Award Agreement.

ARTICLE 14.

AMENDMENT, MODIFICATION, AND TERMINATION

     14.1 Amendment, Modification, and Termination. Subject to Section 15.14, with the
approval of the Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as required, and (b)
stockholder approval shall be required for any amendment to the Plan that (i) increases the number
of shares available under the Plan (other than any adjustment as provided by Article 11), (ii)
permits the Committee to grant Options with an exercise price that is below Fair Market Value on
the date of grant, or (iii) permits the Committee to extend the exercise period for an Option
beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the
contrary, absent approval of the stockholders of the Company, no Option may be amended to

21

 

reduce the per share exercise price of the shares subject to such Option below the per share
exercise price as of the date the Option is granted and, except as permitted by Article 11, no
Option may be granted in exchange for, or in connection with, the cancellation or surrender of an
Option having a higher per share exercise price.

     14.2 Awards Previously Granted. Except with respect to amendments made pursuant to
Section 15.14, no termination, amendment, or modification of the Plan shall adversely affect in any
material way any Award previously granted pursuant to the Plan without the prior written consent of
the Participant.

ARTICLE 15.

GENERAL PROVISIONS

     15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim
to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Eligible Individuals, Participants or any other persons uniformly.

     15.2 No Stockholders Rights. Except as otherwise provided herein, a Participant shall
have none of the rights of a stockholder with respect to shares of Stock covered by any Award until
the Participant becomes the record owner of such shares of Stock.

     15.3 Withholding. The Company or any Subsidiary shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax
obligations) required by law to be withheld with respect to any taxable event concerning a
Participant arising as a result of this Plan. The Committee may in its discretion and in
satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold
shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a
Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision
of the Plan, the number of shares of Stock which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such
Award within six months (or such other period as may be determined by the Committee) after such
shares of Stock were acquired by the Participant from the Company) in order to satisfy the
Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to
the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares
which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for federal, state,
local and foreign income tax and payroll tax purposes that are applicable to such supplemental
taxable income.

     15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate
any Participant’s employment or services at any time, nor confer upon any Participant any right to
continue in the employ or service of the Company or any Subsidiary.

22

 

     15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for
incentive compensation. With respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights
that are greater than those of a general creditor of the Company or any Subsidiary.

     15.6 Indemnification. To the extent allowable pursuant to applicable law, each member
of the Committee or of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure to act pursuant to
the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her; provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled pursuant to
the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

     15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken
into account in determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to
the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

     15.8 Expenses. The expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.

     15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the Plan, rather than
such titles or headings, shall control.

     15.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

     15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

23

 

     15.12 Government and Other Regulations. The obligation of the Company to make payment
of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations,
and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid
pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be
exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the availability of any such
exemption.

     15.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of [Delaware].

     15.14 Section 409A. To the extent that the Committee determines that any Award
granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such
Award shall incorporate the terms and conditions required by Section 409A of the Code. To the
extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section
409A of the Code and Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance that may be issued
after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event
that following the Effective Date the Committee determines that any Award may be subject to Section
409A of the Code and related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the
Plan and the applicable Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other actions, that the
Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the
Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award,
or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury
guidance and thereby avoid the application of any penalty taxes under such Section.

* * * * *

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Ulta Salon,
Cosmetics & Fragrance, Inc. on July 17, 2007.

* * * * *

I hereby certify that the foregoing Plan was approved by the stockholders of Ulta Salon, Cosmetics
& Fragrance, Inc. on July ___, 2007.

Executed on this ___day of                                         , 2007.

	 	 	 	 	 
	 

	 	 

Corporate Secretary
	 	 

24

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