COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT

 

 

 

                                                                    Exhibit 10.5

 

 

                                                                  EXECUTION COPY

 

 

                  COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT

 

 

     This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT, is dated as of April 1,

2005, and entered into by and among KRISPY KREME DOUGHNUT CORPORATION, a North

Carolina corporation (the "Borrower"), KRISPY KREME DOUGHNUTS, INC., a North

Carolina corporation (the " Parent Guarantor"), the subsidiaries of the Borrower

party hereto (the "Subsidiary Guarantors," and together with Parent Guarantor,

the "Guarantors"), WELLS FARGO FOOTHILL, INC., a California corporation

("Foothill"), in its capacity as collateral agent for the First Lien Obligations

(as defined below), including its successors and assigns from time to time (in

such capacity, the "First Lien Collateral Agent"), CREDIT SUISSE FIRST BOSTON,

in its capacity as collateral agent for the Second Lien Obligations (as defined

below), including its successors and assigns from time to time (in such

capacity, the "Second Lien Collateral Agent"), CREDIT SUISSE FIRST BOSTON, in

its capacity as administrative agent for the First Lien Lenders (as defined

below), including its successors and assigns from time to time (in such

capacity, the "First Lien Administrative Agent") and CREDIT SUISSE FIRST BOSTON,

in its capacity as administrative agent for the Second Lien Lenders (as defined

below), including its successors and assigns from time to time (in such

capacity, the "Paying Agent"). Capitalized terms used herein but not otherwise

defined herein have the meanings set forth in Section 1 below.

 

 

                                    RECITALS

 

 

     WHEREAS, the Borrower, the Guarantors, the First Lien Lenders party

thereto, Credit Suisse First Boston ("CSFB"), as Administrative Agent, and

Foothill, as First Lien Collateral Agent, have entered into that certain First

Lien Credit Agreement, dated as of the date hereof, providing for a revolving

credit facility (as amended, restated, supplemented, modified or Refinanced from

time to time, the "First Lien Credit Agreement");

 

 

     WHEREAS, the Borrower, the Guarantors, the Second Lien Lenders party

thereto, Paying Agent, and the Second Lien Collateral Agent, have entered into

that certain Second Lien Credit Agreement, dated as of the date hereof,

providing for a synthetic revolving credit facility and term loans (as amended,

restated, supplemented, modified or Refinanced from time to time, the "Second

Lien Credit Agreement");

 

 

     WHEREAS, pursuant to (i) Article III of the First Lien Credit Agreement,

the Guarantors have agreed to guarantee the First Lien Obligations (the "First

Lien Guaranty"); and (ii) Article III of the Second Lien Credit Agreement, the

Guarantors have agreed to guarantee the Second Lien Obligations (the "Second

Lien Guaranty");

 

 

     WHEREAS, the obligations of the Borrower under the First Lien Credit

Agreement, any First Lien Hedging Agreements (as defined herein) and the

obligations of the Guarantors under the First Lien Guaranty will be secured on a

first priority basis by liens on substantially all the assets of the Borrower

and the Guarantors, respectively, pursuant to the terms of the Mortgages and the

other First Lien Collateral Documents;

 

 

     WHEREAS, the obligations of the Borrower under the Second Lien Credit

Agreement, any Second Lien Hedging Agreements (as defined herein) and the

obligations of the Guarantors

 

 

<PAGE>

 

under the Second Lien Guaranty will be secured on a second priority basis by

liens on substantially all the assets of the Borrower, and the Guarantors,

respectively, pursuant to the terms of the Mortgages and the other Second Lien

Collateral Documents;

 

 

     WHEREAS, the First Lien Credit Documents and the Second Lien Credit

Documents provide, among other things, that the parties thereto shall set forth

in this Agreement their respective rights and remedies with respect to the

Collateral; and

 

 

     WHEREAS, in order to induce the First Lien Collateral Agent and the First

Lien Claimholders to consent to the Grantors incurring the Second Lien

Obligations and to induce the First Lien Claimholders to extend credit and other

financial accommodations and lend monies to or for the benefit of the Borrower,

or any other Grantor, the Second Lien Collateral Agent, for itself and on behalf

of the Second Lien Claimholders, has agreed to the subordination, intercreditor

and other provisions set forth in this Agreement.

 

 

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and

obligations herein set forth and for other good and valuable consideration, the

sufficiency and receipt of which are hereby acknowledged, the parties hereto,

intending to be legally bound, hereby agree as follows:

 

     Section 1. Definitions.

 

     1.1 Defined Terms. Capitalized terms used but not defined herein shall have

the meanings provided therefor in the First Lien Credit Agreement. As used in

the Agreement, the following terms shall have the following meanings:

 

 

     "Accounts" means any and all deposit accounts and securities investment

accounts of the Grantors.

 

 

     "Agreement" means this Collateral Agency and Intercreditor Agreement, as

amended, renewed, extended, supplemented or otherwise modified from time to time

in accordance with the terms hereof.

 

 

     "Bankruptcy Code" means Title 11 of the United States Code entitled

"Bankruptcy," as now and hereafter in effect, or any successor statute.

 

 

     "Bankruptcy Law" means the Bankruptcy Code and any similar federal, state

or foreign law for the relief of debtors.

 

 

     "Borrower" has the meaning assigned to that term in the Preamble hereto.

 

 

     "Business Day" means a day other than a Saturday, Sunday or other day on

which commercial banks in New York City are authorized or required by law to

close.

 

 

     "Claimholders" means, collectively, the First Lien Claimholders and the

Second Lien Claimholders.

 

 

 

 

                                       2

<PAGE>

 

     "Collateral" means all of the assets and property of any Grantor, whether

real, personal or mixed, constituting both First Lien Collateral and Second Lien

Collateral.

 

 

     "Comparable Second Lien Collateral Document" means, in relation to any

Collateral subject to any Lien created under any First Lien Collateral Document,

that Second Lien Credit Document which creates a Lien on the same Collateral,

granted by the same Grantor.

 

 

     "Control Agreements" means control agreements covering Accounts entered

into by the First Lien Collateral Agent, as Shared Lien Collateral Agent, the

Borrower and a depository bank or securities intermediary, as applicable, which

shall secure both the First Lien Obligations and the Second Lien Obligations in

the aggregate.

 

 

     "CSFB" has the meaning assigned to that term in the Recitals hereto.

 

 

     "DIP Financing" has the meaning assigned to that term in Section 6.1

hereof.

 

 

     "Discharge of First Lien Obligations" means, without duplication and except

to the extent otherwise provided in Section 5.6, (a) payment in full in cash of

the principal of and interest (including interest accruing on or after the

commencement of any Insolvency or Liquidation Proceeding, whether or not such

interest would be allowed in such Insolvency or Liquidation Proceeding) and

premium, if any, on all Indebtedness outstanding under the First Lien Credit

Documents and the termination or expiration of all commitments to extend credit

thereunder, (b) payment in full of all other First Lien Obligations that are due

and payable or otherwise accrued and owing at or prior to the time such

principal and interest are paid (c) termination or cash collateralization (in an

amount reasonably satisfactory to the First Lien Collateral Agent) of all

letters of credit issued under the First Lien Credit Documents, and (d) payment

in full of all termination fees and other amounts due in respect of termination

of First Lien Hedging Agreements that are due and payable or otherwise have

accrued and are due and owing at or prior to the time such principal and

interest are paid.

 

 

     "Disposition" has the meaning set forth in Section 5.1(a)(ii).

 

 

     "Enforcement Action" means (a) to take from or for the account of any

Obligor, by set off or in any other manner, the whole or any part of any moneys

which may now or hereafter be owing by such Obligor to such First Lien

Claimholders, (b) to notify account debtors or directly collect accounts

receivable or other payment rights of any Obligor, (c) take any action under the

provisions of any state or federal law, including, without limitation, the

Uniform Commercial Code, or under any contract or agreement, to enforce,

foreclose upon, take possession of or sell any Collateral, or (d) declare

immediately due and payable by acceleration all of the Obligations under the

First Lien Credit Documents; provided that the issuance of a notice of Default

or Event of Default, reservation of rights letter or other similar notice shall

not be deemed to be an Enforcement Action.

 

 

     "First Lien Claimholders" means, at any relevant time, the holders of First

Lien Obligations at such time, including without limitation the First Lien

Administrative Agent, the First Lien Collateral Agent, the Arranger, any First

Lien Lender, the Swingline Lender, any Issuing Lender or any Affiliate of the

First Lien Administrative Agent, the First Lien Collateral

 

 

 

                                       3

<PAGE>

 

Agent, the Arranger, any First Lien Lender, the Swingline Lender or any Issuing

Lender under the First Lien Credit Agreement.

 

 

     "First Lien Collateral Agent" has the meaning set forth in the Recitals

hereto.

 

 

     "First Lien Collateral" means all of the assets and property of any

Grantor, whether real, personal or mixed, with respect to which a Lien is

granted as security for any First Lien Obligations.

 

 

     "First Lien Collateral Documents" means the Security Documents (as defined

in the First Lien Credit Agreement) and any other agreement, document or

instrument pursuant to which a Lien is granted securing any First Lien

Obligations or under which rights or remedies with respect to such Liens are

governed.

 

 

     "First Lien Credit Agreement" has the meaning set forth in the recitals

hereto.

 

 

     "First Lien Credit Documents" means the First Lien Credit Agreement, the

First Lien Collateral Documents, the other Loan Documents (as defined in the

First Lien Credit Agreement) and each of the other agreements, documents and

instruments providing for or evidencing any other First Lien Obligation, and any

other document or instrument executed or delivered at any time in connection

with any First Lien Obligations, including any intercreditor or joinder

agreement among holders of First Lien Obligations, to the extent such are

effective at the relevant time, as each may be modified or Refinanced from time

to time; provided that any such modification does not increase the principal

amount thereof beyond the aggregate principal amount of First Lien Obligations

permitted under the this Agreement on the date hereof (as such amount may be

increased from time to time).

 

 

     "First Lien Guaranty" has the meaning assigned to that term in the Recitals

hereto.

 

 

     "First Lien Hedging Agreement" means any interest rate protection agreement

or other interest hedging arrangement that mitigates the risk of fluctuation in

interest rates entered into by Borrower with any Person who was, in respect of

the First Lien Credit Agreement and at the time of entry into such agreement,

any or all of the First Lien Administrative Agent, the First Lien Collateral

Agent, the Arranger, any First Lien Lender or any Affiliate of the First Lien

Administrative Agent, the First Lien Collateral Agent, the Arranger or any First

Lien Lender.

 

 

     "First Lien Lenders" means the "Lenders" under and as defined in the First

Lien Credit Agreement.

 

 

     "First Lien Obligations" means all "Obligations" outstanding under and as

defined in the First Lien Credit Agreement and the other First Lien Credit

Documents, in an aggregate principal amount at any one time outstanding (with

letters of credit being deemed to have a principal amount equal to the maximum

potential liability of the Grantors thereunder) of up to $75,000,000, as such

principal amount may be increased by amendments complying with Section 5.3(a)

hereof, plus, First Lien Hedging Agreements, other additional Obligations

designated by the First Lien Collateral Agent as "Obligations" under the First

Lien Credit Agreement, and all other obligations, liabilities and indebtedness

of every kind, nature and description owing by the Grantors to the First Lien

Claimholders and/or any of their respective

 

 

 

                                       4

<PAGE>

 

affiliates, including interest, charges, fees, costs and expenses, however

evidenced, whether as principal, surety, endorser, guarantor or otherwise,

whether now existing or hereafter arising, whether arising before, during or

after the initial or any renewal term of the First Lien Credit Agreement or

after the commencement of an Insolvency or Liquidation Proceeding (including the

payment of interest and other amounts which would accrue and become due but for

the commencement of such Insolvency or Liquidation Proceeding, whether or not

such amounts are allowed or allowable in whole or in part in such Insolvency or

Liquidation Proceeding), whether direct or indirect, absolute or contingent,

joint or several, due or not due, primary or secondary, liquidated or

unliquidated, secured or unsecured, and however acquired by the First Lien

Claimholders. To the extent any payment with respect to the First Lien

Obligations (whether by or on behalf of any Grantor, as proceeds of security,

enforcement of any right of set-off or otherwise) is declared to be fraudulent

or preferential in any respect, set aside or required to be paid to a debtor in

possession, trustee, receiver or similar Person, then the obligation or part

thereof originally intended to be satisfied shall be deemed to be reinstated and

outstanding as if such payment had not occurred.

 

 

     "Fronting Bank" has the meaning assigned to it in the Second Lien Credit

Agreement.

 

 

     "Grantors" means the Borrower and each of the Guarantors that have executed

and delivered, or may from time to time hereafter execute and deliver, a First

Lien Collateral Document or a Second Lien Collateral Document.

 

 

     "Guarantors" has the meaning set forth in the Recitals hereto.

 

 

     "Hedging Agreements" means, collectively, all First Lien Hedging Agreements

and all Second Lien Hedging Agreements .

 

 

     "Indebtedness" means and includes all Obligations that constitute

"Indebtedness" within the meaning of the First Lien Credit Agreement or the

Second Lien Credit Agreement, as applicable.

 

 

     "Insolvency or Liquidation Proceeding" means (a) any voluntary or

involuntary case or proceeding under the Bankruptcy Code with respect to any

Grantor, (b) any other voluntary or involuntary insolvency, reorganization or

bankruptcy case or proceeding, or any receivership, liquidation, reorganization

or other similar case or proceeding with respect to any Grantor or with respect

to a material portion of their respective assets, (c) any liquidation,

dissolution, reorganization or winding up of any Grantor whether voluntary or

involuntary and whether or not involving insolvency or bankruptcy or (d) any

assignment for the benefit of creditors or any other marshalling of assets and

liabilities of any Grantor.

 

 

     "Issuing Lender" has the meaning assigned to it in the First Lien Credit

Agreement.

 

 

     "Lien" means, with respect to any asset, (a) any mortgage, deed of trust,

lien, pledge, hypothecation, encumbrance, charge or security interest in, on or

of such asset, (b) the interest of a vendor or a lessor under any conditional

sale agreement, capital lease or title retention agreement (or any financing

lease having substantially the same economic effect as any of the foregoing)

relating to such asset and (c) in the case of securities, any purchase option,

call or similar right of a third party with respect to such securities.

 

 

 

 

                                        5

<PAGE>

 

     "Mortgage" or "Mortgages" means each "Mortgage" as defined in the First

Lien Credit Agreement and the Second Lien Credit Agreement each of which is made

in favor of the First Lien Collateral Agent, as Shared Lien Collateral Agent,

which secure both the First Lien Obligations and the Second Lien Obligations in

the aggregate.

 

 

     "New First Lien Collateral Agent" has the meaning assigned to that term in

Section 5.6 hereof.

 

 

     "New Second Lien Collateral Agent" has the meaning assigned to that term in

Section 5.6 hereof.

 

 

     "Person" means any natural person, corporation, limited liability company,

trust, joint venture, association, company, partnership, governmental authority

or other entity.

 

 

     "Pledged Collateral" has the meaning set forth in Section 5.5 hereof.

 

 

     "Priority Cap" means the amount of $82,500,000.

 

 

     "Recovery" has the meaning set forth in Section 6.5 hereof.

 

 

     "Refinance" means, in respect of any indebtedness, to refinance, extend,

renew, defease, amend, modify, supplement, restructure, replace, refund or

repay, or to issue other indebtedness, in exchange or replacement for, such

indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have

correlative meanings.

 

 

     "Second Lien Claimholders" means, at any relevant time, the holders of

Second Lien Obligations at such time, including without limitation the Paying

Agent, the Second Lien Collateral Agent, the Arranger (as defined in the Second

Lien Credit Agreement), the Fronting Bank (as defined in the Second Lien Credit

Agreement), any Second Lien Lender, any Issuing Lender or any Affiliate of the

Paying Agent, the Second Lien Collateral Agent, the Arranger, the Fronting Bank,

any Second Lien Lender or any Issuing Lender under the Second Lien Credit

Agreement.

 

 

     "Second Lien Collateral" means all of the assets and property of any

Grantor, whether real, personal or mixed, with respect to which a Lien is

granted as security for any Second Lien Obligations.

 

 

     "Second Lien Collateral Agent" has the meaning set forth in the preamble

hereof.

 

 

     "Second Lien Collateral Documents" means the Security Documents (as defined

in the Second Lien Credit

 

 

                                       6

<PAGE>

 

Agreement) and any other agreement, document or instrument pursuant to which a

Lien is granted securing any Second Lien Obligations or under which rights or

remedies with respect to such Liens are governed.

 

 

     "Second Lien Credit Agreement" has the meaning set forth in the Recitals

hereto.

 

 

     "Second Lien Credit Documents" means the Second Lien Credit Agreement, the

Second Lien Collateral Documents, the other Loan Documents (as defined in the

Second Lien Credit Agreement) and each of the other agreements, documents and

instruments providing for or evidencing any other Second Lien Obligation, and

any other document or instrument executed or delivered at any time in connection

with any Second Lien Obligations, including any intercreditor or joinder

agreement among holders of Second Lien Obligations, to the extent such are

effective at the relevant time, as each may be modified or Refinanced from time

to time; provided that any such modification does not increase the principal

amount thereof beyond the aggregate principal amount of Second Lien Obligations

permitted under the this Agreement on the date hereof (as such amount may be

increased pursuant to a Refinancing permitted by Section 5.3(b)).

 

 

     "Second Lien Guaranty" has the meaning assigned to that term in the

Recitals hereto.

 

 

     "Second Lien Hedging Agreement" means any commodity price protection

agreement or other commodity price hedging arrangement that mitigates the risk

of fluctuation in the prices of certain commodities entered into by Borrower

with any Person who was, in respect of the Second Lien Credit Agreement and at

the time of entry into such agreement, any or all of the Administrative Agent,

the Second Lien Collateral Agent, the Arranger, any Second Lien Lender or any

Affiliate of the Administrative Agent, the Second Lien Collateral Agent, the

Arranger or any Second Lien Lender.

 

 

     "Second Lien Lenders" means the "Lenders" under and as defined in the

Second Lien Credit Agreement.

 

 

     "Second Lien Obligations" " means all "Obligations" outstanding under and

as defined in the Second Lien Credit Agreement and the other Second Lien Credit

Documents, an aggregate principal amount at any one time outstanding (with

letters of credit being deemed to have a principal amount equal to the maximum

potential liability of the Grantors thereunder) of up to $150,000,000, as such

principal amount may be increased by amendments complying with Section 5.3(b)

hereof, plus, Second Lien Hedging Agreements, other additional Obligations

designated by the Second Lien Collateral Agent as "Obligations" under the Second

Lien Credit Agreement, and all other obligations, liabilities and indebtedness

of every kind, nature and description owing by the Grantors to the Second Lien

Claimholders and/or any of their respective affiliates, including interest,

charges, fees, costs and expenses, however evidenced, whether as principal,

surety, endorser, guarantor or otherwise, whether now existing or hereafter

arising, whether arising before, during or after the initial or any renewal term

of the Second Lien Credit Agreement or after the commencement of an Insolvency

or Liquidation Proceeding (including the payment of interest and other amounts

which would accrue and become due but for the commencement of such Insolvency or

Liquidation Proceeding, whether or not such amounts are allowed or allowable in

whole or in part in such Insolvency or Liquidation Proceeding), whether direct

or indirect, absolute or contingent, joint or several, due or not due, primary

or secondary, liquidated or unliquidated, secured or unsecured, and however

acquired by the Second Lien Claimholders. To the extent any payment with respect

to the Second Lien Obligations (whether by or on behalf of any Grantor, as

proceeds of security, enforcement of any right of set-off or otherwise) is

declared to be fraudulent or preferential in any respect, set aside or required

to be paid to a debtor in possession, trustee, receiver or similar Person, then

the obligation or part thereof originally intended to be satisfied shall be

deemed to be reinstated and outstanding as if such payment had not occurred.

 

 

 

 

                                       7

<PAGE>

 

     "Shared Lien Collateral Agent" and "Shared Collateral Agent" have the

meaning set forth in Section 8.1 hereof.

 

 

     "Shared Collateral" means Collateral encumbered by the Shared Collateral

Documents.

 

 

     "Shared Collateral Documents" means (i) the Control Agreements; (ii) the

Mortgages; and (iii) certificates of title for motor vehicles in which a

security interest is granted pursuant to the First Lien Security Documents and

the Second Lien Security Documents.

 

 

     "Standstill Period" has the meaning set forth in Section 3.1 hereof.

 

 

     "Subsidiary Guarantors" has the meaning set forth in the Recitals hereto.

 

 

     "Uniform Commercial Code" or "UCC" means the Uniform Commercial Code (or

any similar or equivalent legislation) as in effect in any applicable

jurisdiction.

 

     1.2 Terms Generally. The definitions of terms herein shall apply equally to

the singular and plural forms of the terms defined. Whenever the context may

require, any pronoun shall include the corresponding masculine, feminine and

neuter forms. The words "include", "includes" and "including" shall be deemed to

be followed by the phrase "without limitation." The word "will" shall be

construed to have the same meaning and effect as the word "shall". Unless the

context requires otherwise (a) any definition of or reference to any agreement,

instrument or other document herein shall be construed as referring to such

agreement, instrument or other document as from time to time amended,

supplemented or otherwise modified, (b) any reference herein to any Person shall

be construed to include such Person's successors and assigns, (c) the words

"herein", "hereof" and "hereunder", and words of similar import, shall be

construed to refer to this Agreement in its entirety and not to any particular

provision hereof, (d) all references herein to Exhibits or Sections shall be

construed to refer to Exhibits or Sections of this Agreement and (e) the words

"asset" and "property" shall be construed to have the same meaning and effect

and to refer to any and all tangible and intangible assets and properties,

including cash, securities, accounts and contract rights.

 

     Section 2. Lien Priorities.

 

     2.1 Relative Priorities. Notwithstanding the date, manner or order of

grant, attachment or perfection of any Liens securing the Second Lien

Obligations granted on the Collateral, or of any Liens securing the First Lien

Obligations granted on the Collateral and notwithstanding any provision of the

UCC or any other applicable law or the provisions of the Second Lien Credit

Documents or any other circumstance whatsoever (including, without limitation,

the time, order or method of grant, attachment, recording or perfection of any

financing statements or other security interests, assignments, pledges, deeds,

mortgages and other liens, charges or encumbrances or any defect or deficiency

or alleged defect or deficiency in any of the foregoing, or the fact that any

such Liens securing First Lien Obligations are at any time (x) subordinated to

any Lien securing any obligation of any Person or to any Indebtedness in favor

of any Person or (y) otherwise subordinated, voided, avoided, invalidated or

lapsed), the Second Lien Collateral Agent, for itself and on behalf of the

Second Lien Claimholders, hereby agrees that: (a) any Lien on the Collateral

securing any First Lien Obligations now or hereafter held by or on behalf of the

First Lien Collateral Agent or any First Lien Claimholders or any

 

 

 

                                       8

<PAGE>

 

agent or trustee therefor, regardless of how acquired, whether by grant,

possession, statute, operation of law, subrogation or otherwise, shall be senior

in all respects and prior to any Lien on the Collateral securing any Second Lien

Obligations; and (b) any Lien on the Collateral now or hereafter held by or on

behalf of the Second Lien Collateral Agent, any Second Lien Claimholders or any

agent or trustee therefor, regardless of how acquired, whether by grant,

possession, statute, operation of law, subrogation or otherwise, shall be junior

and subordinate in all respects to all Liens on the Collateral securing any

First Lien Obligations. All Liens on the Collateral securing any First Lien

Obligations shall be and remain senior in all respects and prior to all Liens on

the Collateral securing any Second Lien Obligations for all purposes, regardless

of the time, order or method of grant, attachment, recording or perfection of

any financing statements or other security interests, assignments, pledges,

deeds, mortgages and other liens, charges or encumbrances or any defect or

deficiency or alleged defect or deficiency in any of the foregoing, or the fact

that any such Liens in favor of any First Lien Collateral Agent are (x)

subordinated to any Lien securing any obligation of any Person or to any

Indebtedness in favor of any Person or (y) otherwise subordinated, voided,

avoided, invalidated or lapsed.

 

     2.2 Prohibition on Contesting Liens. Each of the Second Lien Collateral

Agent, for itself and on behalf of each Second Lien Claimholder, and the First

Lien Collateral Agent, for itself and on behalf of each First Lien Claimholder,

agrees that it shall not (and hereby waives any right to) contest, or support

any other Person in contesting, in any proceeding (including any Insolvency or

Liquidation Proceeding), the priority, validity or enforceability of a Lien held

by or on behalf of any of the First Lien Claimholders in the First Lien

Collateral or by or on behalf of any of the Second Lien Claimholders in the

Second Lien Collateral, as the case may be; provided that nothing in this

Agreement shall be construed to prevent or impair the rights of the First Lien

Collateral Agent or any First Lien Claimholder to enforce this Agreement,

including the priority of the Liens securing the First Lien Obligations as

provided in Sections 2.1 and 3.1, and release of the Liens encumbering Second

Lien Collateral as provided in Section 5.

 

     2.3 No New Liens. So long as the Discharge of First Lien Obligations has

not occurred, the parties hereto agree that neither the Parent Guarantor nor the

Borrower shall , and nor shall they permit any Subsidiary Guarantor to, (i)

grant or permit any additional Liens on any asset or property to secure any

Second Lien Obligation unless it has granted a Lien on such asset or property to

secure the First Lien Obligations, and (ii) grant or permit any additional Liens

on any asset or property to secure any First Lien Obligations unless it has

granted a Lien on such asset or property to secure the Second Lien Obligations.

To the extent that the foregoing provisions are not complied with for any

reason, without limiting any other rights and remedies available to the First

Lien Collateral Agent and/or the First Lien Claimholders, the Second Lien

Collateral Agent, for itself and on behalf of the Second Lien Claimholders,

agrees that any amounts received by or distributed to any of them pursuant to or

as a result of Liens granted in contravention of this Section 2.3 shall be

subject to Section 4.2.

 

     2.4 Similar Liens and Agreements. The parties hereto agree that it is their

intention that the First Lien Collateral and the Second Lien Collateral be

identical. In furtherance of the foregoing and of Section 9.9, the parties

hereto agree, subject to the other provisions of this Agreement:

 

          (a) upon request by the First Lien Collateral Agent or the Second Lien

 

 

                                       9

<PAGE>

 

     Collateral Agent, to cooperate in good faith (and to direct their counsel

     to cooperate in good faith) from time to time in order to determine the

     specific items included in the First Lien Collateral and the Second Lien

     Collateral and the steps taken to perfect their respective Liens thereon

     and the identity of the respective parties obligated under the First Lien

     Credit Documents and the Second Lien Credit Documents; and

 

          (b) that the documents and agreements creating or evidencing the First

     Lien Collateral and the Second Lien Collateral and guarantees for the First

     Lien Obligations and the Second Lien Obligations shall be in all material

     respects the same forms of documents other than with respect to the first

     lien and the second lien nature of the Obligations thereunder.

 

     Section 3. Enforcement.

 

     3.1 Exercise of Remedies. (a) So long as the Discharge of First Lien

Obligations has not occurred, whether or not any Insolvency or Liquidation

Proceeding has been commenced by or against the Borrower or any other Grantor:

 

          (i) the Second Lien Collateral Agent and the Second Lien Claimholders

     (x) will not exercise or seek to exercise any rights or remedies (including

     set-off) with respect to any Collateral (including, without limitation, the

     exercise of any right under any lockbox agreement, account control

     agreement, landlord waiver or bailee's letter or similar agreement or

     arrangement to which the Second Lien Collateral Agent or any Second Lien

     Claimholder is a party) or institute any action or proceeding with respect

     to such rights or remedies (including any action of foreclosure); provided,

     however, that the Second Lien Collateral Agent, upon instruction from the

     Paying Agent, may exercise any or all such rights after the passage of a

     period of 120 days has elapsed since the date on which the First Lien

     Administrative Agent receives written notice from the Paying Agent that the

     Paying Agent has declared the existence of any Event of Default thereunder

     and accelerated all obligations thereunder (the "Standstill Period");

     provided, further, however, that notwithstanding anything herein to the

     contrary, in no event shall the Second Lien Collateral Agent or any Second

     Lien Claimholder exercise any rights or remedies with respect to the

     Collateral if, notwithstanding the expiration of the Standstill Period, the

     First Lien Collateral Agent, on instruction of the First Lien

     Administrative Agent shall have commenced the exercise of any of its rights

     or remedies with respect the Collateral (prompt notice of such exercise to

     be given the First Lien Collateral Agent to the Second Lien Collateral

     Agent), (y) will not contest, protest or object to any foreclosure

     proceeding or action brought by the First Lien Collateral Agent or any

     other exercise by the First Lien Collateral Agent, of any rights and

     remedies relating to the Collateral under the First Lien Credit Documents

     or otherwise, and (z) subject to its rights under clause (i)(x) above, will

     not object to the forbearance by the First Lien Collateral Agent from

     bringing or pursuing any foreclosure proceeding or action or any other

     exercise of any rights or remedies relating to the Collateral, in each case

     so long as the respective interests of the Second Lien Claimholders attach

     to the proceeds thereof subject to the relative priorities described in

     Section 2 hereof; and

 

 

 

                                       10

<PAGE>

 

          (ii) the First Lien Collateral Agent, pursuant to instruction of the

     First Lien Administrative Agent, shall have the exclusive right to enforce

     rights, exercise remedies (including set-off and the right to credit bid

     their debt) and make determinations regarding the release, disposition, or

     restrictions with respect to the Collateral without any consultation with

     or the consent of the Second Lien Collateral Agent or any Second Lien

     Claimholder; provided, that (A) in any Insolvency or Liquidation Proceeding

     commenced by or against the Borrower or any other Grantor, the Second Lien

     Collateral Agent may file a claim or statement of interest with respect to

     the Second Lien Obligations, (B) the Second Lien Collateral Agent, upon

     instruction of the Paying Agent, may take any action (not adverse to the

     prior Liens on the Collateral securing the First Lien Obligations, or the

     rights of the First Lien Collateral Agent or any First Lien Claimholders to

     exercise remedies in respect thereof and not inconsistent with the term of

     this Agreement) in order to preserve or protect its Lien on the Collateral,

      (C) the Second Lien Claimholders shall be entitled to file any necessary

     responsive or defensive pleadings in opposition to any motion, claim,

     adversary proceeding or other pleading made by any person objecting to or

     otherwise seeking the disallowance of the claims of the Second Lien

     Claimholders, including without limitation any claims secured by the

     Collateral, if any, in each case in accordance with the terms of this

     Agreement, (D) the Second Lien Claimholders shall be entitled to file any

     pleadings, objections, motions or agreements which assert rights or

     interests available to unsecured creditors of the Grantors arising under

     either Bankruptcy Law or applicable non-bankruptcy law, in each case in

     accordance with the terms of this Agreement, (E) the Second Lien

     Claimholders shall be entitled to file any proof of claim and other filings

     and make any arguments and motions that are, in each case, in accordance

     with the terms of this Agreement, with respect to the Second Lien

     Obligations and the Collateral and (F) the Second Lien Collateral Agent, on

     instruction of the Paying Agent, may exercise any of its rights or remedies

     with respect to the Collateral after the termination of the Standstill

     Period to the extent permitted by clause (i)(x) above. In exercising rights

     and remedies with respect to the Collateral, the First Lien Collateral

     Agent may enforce the provisions of the First Lien Credit Documents and

      exercise remedies thereunder, all in such order and in such manner as they

     may determine in the exercise of their sole discretion. Such exercise and

     enforcement shall include the rights of an agent appointed by them to sell

     or otherwise dispose of Collateral upon foreclosure, to incur expenses in

     connection with such sale or disposition, and to exercise all the rights

     and remedies of a secured creditor under the Uniform Commercial Code of any

     applicable jurisdiction and of a secured creditor under Bankruptcy Laws of

     any applicable jurisdiction. The First Lien Collateral Agent agrees to

     provide at least five (5) days' notice to the Second Lien Collateral Agent

     of its intent to exercise and enforce its rights or remedies with respect

     to the Collateral.

 

     (b) The Second Lien Collateral Agent, for itself and on behalf of the

Second Lien Claimholders, agrees that it will not take or receive any Collateral

or any proceeds of Collateral in connection with the exercise of any right or

remedy (including set-off) with respect to any Collateral, unless and until the

Discharge of First Lien Obligations has occurred, except as expressly provided

in the proviso in clause (ii) of Section 3.1(a) of this Agreement. Without

limiting the generality of the foregoing, unless and until the Discharge of

First Lien Obligations has occurred, except as expressly provided in the proviso

in clause (ii) of Section 3.1(a) of this Agreement, the sole right of the Second

Lien Collateral Agent and the Second Lien Claimholders

 

 

 

                                       11

<PAGE>

 

with respect to the Collateral is to hold a Lien on the Collateral pursuant to

the Second Lien Collateral Documents for the period and to the extent granted

therein and to receive a share of the proceeds thereof, if any, after the

Discharge of the First Lien Obligations has occurred in accordance with the

terms of the Second Lien Credit Documents and applicable law.

 

     (c) Subject to the proviso in clause (ii) of Section 3.1(a) of this

Agreement, the Second Lien Collateral Agent, for itself and on behalf of the

Second Lien Claimholders, (i) agrees that the Second Lien Collateral Agent and

the Second Lien Claimholders will not take any action that would hinder any

exercise of remedies under the First Lien Credit Documents or is otherwise

prohibited hereunder, including any sale, lease, exchange, transfer or other

disposition of the Collateral, whether by foreclosure or otherwise, and (ii)

hereby waives any and all rights it or the Second Lien Claimholders may have as

a junior lien creditor or otherwise to object to the manner in which the First

Lien Collateral Agent or the First Lien Claimholders seek to enforce or collect

the First Lien Obligations or the Liens granted in any of the First Lien

Collateral, regardless of whether any action or failure to act by or on behalf

of the First Lien Collateral Agent or First Lien Claimholders is adverse to the

interest of the Second Lien Claimholders.

 

     (d) The Second Lien Collateral Agent hereby acknowledges and agrees that no

covenant, agreement or restriction contained in the Second Lien Collateral

Documents or any other Second Lien Credit Document shall be deemed to restrict

in any way the rights and remedies of the First Lien Collateral Agent or the

First Lien Claimholders with respect to the Collateral as set forth in this

Agreement and the First Lien Credit Documents.

 

     (e) Notwithstanding anything to the contrary set forth in the Second Lien

Credit Documents, no Event of Default under the First Lien Credit Agreement

shall give rise to an Event of Default solely under a cross default provision of

the Second Lien Credit Agreement unless such First Lien Credit Agreement Event

of Default has continued without waiver or cure for more than 45 days. Upon a

cure or waiver of any Event of Default under the First Lien Credit Agreement,

any Event of Default under the Second Lien Credit Agreement that arises solely

as a result of a cross default provision under the Second Lien Credit Agreement

shall thereupon be automatically and concurrently be deemed cured or waived.

 

     3.2 Cooperation. Subject to its rights after the expiration of the

Standstill Period and subject to the proviso in clause (ii) of Section 3.1(a) of

this Agreement, the Second Lien Collateral Agent, for itself and on behalf of

the Second Lien Claimholders, agrees that, unless and until the Discharge of

First Lien Obligations has occurred, it will not commence, or join with any

Person in commencing, any enforcement, collection, execution, levy or

foreclosure action or proceeding (including, without limitation, any Insolvency

or Liquidation Proceeding) with respect to any Lien held by it under the Second

Lien Collateral Documents or any other Second Lien Credit Document or otherwise.

Following the Discharge of the First Lien Obligations, First Lien Collateral

Agent shall reasonably promptly execute documents and take other steps that

First Lien Collateral Agent determines to be reasonably necessary, at the

expense of Second Lien Collateral Agent, to transfer to Second Lien Collateral

Agent all Shared Collateral Documents and other similar First Lien Collateral

Documents in which Second Lien Collateral Agent has a residual interest for

continuing perfection of heretofore shared Liens.

 

 

 

                                       12

<PAGE>

 

     Section 4. Payments.

 

     4.1 Application of Proceeds. So long as the Discharge of First Lien

Obligations has not occurred, any Collateral or proceeds thereof received by the

First Lien Collateral Agent in connection with the sale or other disposition of,

or collection on, such Collateral upon the exercise of remedies, shall be

applied by the First Lien Administrative Agent to the First Lien Obligations in

such order as specified in the relevant First Lien Credit Documents. Upon the

Discharge of the First Lien Obligations, the First Lien Collateral Agent shall

deliver to the Second Lien Collateral Agent any proceeds of Collateral held by

it in the same form as received, with any necessary endorsements or as a court

of competent jurisdiction may otherwise direct to be applied by the Second Lien

Collateral Agent to the Second Lien Obligations in such order as specified in

the relevant Second Lien Collateral Documents.

 

     4.2 Turnover of Payments. So long as the Discharge of First Lien

Obligations has not occurred, any Collateral or proceeds thereof (together with

assets or proceeds subject to Liens referred to in the final sentence of Section

2.3) received by the Second Lien Collateral Agent, the Second Lien Collateral

Agent or any Second Lien Claimholders in connection with the exercise of any

right or remedy (including set-off) relating to the Collateral, both before and

after commencement of any Liquidation or Insolvency Proceeding and including

specifically any distribution on account of any proof of claim or interest of

any Second Lien Claimholders in any Liquidation or Insolvency Proceeding, in

contravention of this Agreement shall be segregated and held in trust and

forthwith paid over to the First Lien Administrative Agent for the benefit of

the First Lien Claimholders in the same form as received, with any necessary

endorsements or as a court of competent jurisdiction may otherwise direct. The

First Lien Administrative Agent is hereby authorized to make any such

endorsements as agent for the Second Lien Collateral Agent or any such Second

Lien Claimholders. This authorization is coupled with an interest and is

irrevocable until such time as this Agreement is terminated in accordance with

its terms. For avoidance of doubt, scheduled payments of principal and/or

interest in respect of the Second Lien Obligations, mandatory prepayments of the

Second Lien Obligations required under the Second Lien Credit Agreement and

permitted under the First Lien Credit Agreement, and voluntary prepayments of

the Second Lien Obligations permitted under both the Second Lien Credit

Agreement and the First Lien Credit Agreement, (as well as payment of fees due

under, and reimbursement of expenses pursuant to, the Second Lien Credit

Documents), whether or not timely made, and cash adequate protection payments on

account of secured claims of Second Lien Claimholders made pursuant to and as

permitted under this Agreement, shall not be subject to turn over pursuant to

this Section 4.2.

 

     Section 5. Other Agreements.

 

     5.1 Releases.

 

     (a) If, in connection with:

 

          (i) the exercise of any of the First Lien Collateral Agent's remedies

     in respect of the Collateral provided for in Section 3.1, including any

     sale, lease, exchange, transfer or other disposition of any such

     Collateral; or

 

 

 

                                       13

<PAGE>

 

          (ii) any sale, lease, exchange, transfer or other disposition

     (collectively, a "Disposition") of any Collateral permitted under the terms

     of the First Lien Credit Documents (whether or not an event of default

     thereunder, and as defined therein, has occurred and is continuing),

 

 

the First Lien Collateral Agent, for itself or on behalf of any of the First

Lien Claimholders, releases any of its Liens on any part of the Collateral, or

releases any Grantor from its obligations under its guaranty of the First Lien

Obligations, in each case other than in connection with the Discharge of First

Lien Obligations, then the Liens, if any, of the Second Lien Collateral Agent,

for itself and on behalf of the Second Lien Claimholders, on such Collateral,

including real property Collateral, and the obligations of such Grantor under

its guaranty of the Second Lien Obligations, shall be automatically,

unconditionally and simultaneously released and the Second Lien Collateral

Agent, for itself and on behalf of any such Second Lien Claimholders, promptly

shall execute and deliver to the First Lien Collateral Agent or such Grantor

such termination statements, reconveyances of Mortgage, releases and other

documents as the First Lien Collateral Agent or such Grantor may request to

effectively confirm such release. For avoidance of doubt, this Section 5.1 shall

not apply to any release of a Lien that does not facilitate a concurrent

Disposition of released Collateral to a Person who is neither a Grantor nor an

Affiliate of a Grantor, which release shall require specific Lender approvals as

provided under both the First Lien Credit Agreement and the Second Lien Credit

Agreement.

 

     (b) Until the Discharge of First Lien Obligations occurs, the Second Lien

Collateral Agent, for itself and on behalf of the Second Lien Claimholders,

hereby irrevocably constitutes and appoints the First Lien Collateral Agent and

any officer or agent of the First Lien Collateral Agent, 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 the Second Lien Collateral Agent

or such holder or in the First Lien Collateral Agent's own name, from time to

time in the First Lien Collateral Agent's discretion, for the purpose of

carrying out the terms of this Section 5.1, to take any and all appropriate

action and to execute any and all documents and instruments, including without

limitation, reconveyances of Mortgages, which may be necessary to accomplish the

purposes of this Section 5.1, including any endorsements or other instruments of

transfer or release. This power of attorney is coupled with an interest and is

irrevocable.

 

     (c) Until the Discharge of the First Lien Obligations occurs, the Second

Lien Credit Agreement shall be deemed for all purposes to permit any Disposition

of Collateral, including all or substantially all of the Collateral, so long as

the proceeds of such Collateral are used in accordance with the First Lien

Credit Agreement and the Second Lien Cred