Exhibit 10.3

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended, restated, supplemented
or otherwise modified from time to time, the “Security Agreement”) is entered
into as of May 3, 2019 by and among CLARUS CORPORATION, a Delaware corporation
(the “Company”), BLACK DIAMOND EQUIPMENT, LTD., a Delaware corporation (“Black
Diamond”), BLACK DIAMOND RETAIL, INC., a Delaware corporation (“BDR”), SIERRA
BULLETS, L.L.C., a Delaware limited liability company (“Sierra”),
EVEREST/SAPPHIRE ACQUISITION, LLC, a Delaware limited liability company
(“Everest”), BD EUROPEAN HOLDINGS, LLC, a Delaware limited liability company
(“BDEH”), SKINOURISHMENT, LLC, a Delaware limited liability company (“Skin”),
BLACK DIAMOND RETAIL - ALASKA, LLC, a Delaware limited liability company (“BD
Alaska”), and any additional entities which become parties to this Security
Agreement by executing a Security Agreement Supplement hereto in substantially
the form of Annex I hereto (such additional entities, together with the Company,
Black Diamond, BDR, Sierra, Everest, BDEH, Skin and BD Alaska, each a “Grantor”,
and collectively, the “Grantors”), and JPMorgan Chase Bank, N.A., in its
capacity as administrative agent (the “Administrative Agent”) for the lenders
party to the Credit Agreement referred to below.

 

PRELIMINARY STATEMENT

 

The Grantors, the Administrative Agent, and the Lenders are entering into a
Credit Agreement dated as of the date hereof (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).
Each Grantor is entering into this Security Agreement in order to induce the
Lenders to enter into and extend credit to the Borrowers under the Credit
Agreement and to secure the Secured Obligations that it has agreed to guarantee
pursuant to Article X of the Credit Agreement.

 

ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Secured
Parties, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1.         Terms Defined in the Credit Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.

 

1.2.         Terms Defined in UCC. The following terms are used herein as
defined in Article 9 of the UCC: Accounts, Account Debtor, Chattel Paper,
Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Goods,
Instruments, Inventory, Investment Property, Letter-of-Credit Rights and
Supporting Obligations. The terms “Securities Account” and “Security” are used
herein as defined in Article 8 of the UCC.

 

1.3.         Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined above and in the Preliminary
Statement, the following terms shall have the following meanings:

 

“Applicable IP Office” means the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or, solely
in the case of Section 4.7, outside the United States.

 

“Article” means a numbered article of this Security Agreement, unless another
document is specifically referenced.

 

“Collateral” shall have the meaning set forth in Article II.

 

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“Commercial Tort Claims” means commercial tort claims as defined in Article 9 of
the UCC, including each Commercial Tort Claim specifically described on Exhibit
H.

 

“Confirmatory Grant” shall have the meaning set forth in Section 3.10(e).

 

“Control” shall have the meaning set forth in Article 8 or, if applicable, in
Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to copyrights and
all mask works, database and design rights, whether or not registered or
published, all registrations and recordations thereof and all applications in
connection therewith.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Deposit Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among any Loan Party, a
banking institution holding such Loan Party’s funds, and the Administrative
Agent with respect to collection and control of all deposits and balances held
in a deposit account maintained by such Loan Party with such banking
institution.

 

“Event of Default” means an event described in Section 5.1.

 

“Excluded Account” means the collective reference to: (i) Deposit Accounts of
Grantors specially and exclusively used for payroll, payroll taxes, trust or
fiduciary purposes and other employee wage and benefit payments to or for the
Grantors’ employees, (ii) Deposit Accounts specially and exclusively used for
taxes, including sales taxes, and (iii) other Deposit Accounts which have a
balance of less than (a) $100,000 individually for any such Deposit Account at
all times and (b) $250,000 in the aggregate for all such Deposit Accounts at all
times.

 

“Excluded Property” means, collectively, (i) voting Equity Interests of any
Foreign Subsidiary, solely to the extent that (1) such Equity Interests
represent more than 65% of the outstanding voting Equity Interests of such
Foreign Subsidiary, and (2) pledging more than 65% of the total outstanding
voting Equity Interests of such Foreign Subsidiary would result in material
adverse tax consequences to the Loan Parties, (ii) any rights or interest in any
contract, lease, permit, license, or license agreement covering real or personal
property of any Grantor if under the terms of such contract, lease, permit,
license, or license agreement, or applicable law with respect thereto, the grant
of a security interest or lien therein is prohibited as a matter of law or under
the terms of such contract, lease, permit, license, or license agreement and
such prohibition or restriction has not been waived or the consent of the other
party to such contract, lease, permit, license, or license agreement has not
been obtained (provided, that, (A) the foregoing exclusions of this clause (ii)
shall in no way be construed (1) to apply to the extent that any described
prohibition or restriction is ineffective under Section 9-406, 9-407, 9-408, or
9-409 of the UCC or other applicable law, or (2) to apply to the extent that any
consent or waiver has been obtained that would permit the Administrative Agent’s
security interest or lien to attach notwithstanding the prohibition or
restriction on the pledge of such contract, lease, permit, license, or license
agreement and (B) the foregoing exclusions of this clause (ii) shall in no way
be construed to limit, impair, or otherwise affect any of the Administrative
Agent’s continuing security interests in and liens upon any rights or interests
of any Grantor in or to (1) monies due or to become due under or in connection
with any described contract, lease, permit, license, license agreement, or
Equity Interests (including any Accounts), or (2) any proceeds from the sale,
license, lease, or other dispositions of any such contract, lease, permit,
license, license agreement, or Equity Interests), (iii) any United States
intent-to-use trademark applications to the extent that, and solely during the
period in which, the grant of a security interest therein would impair the
validity or enforceability of such intent-to-use trademark applications under
applicable federal law, provided that upon submission and acceptance by the
United States Patent and Trademark Office of an amendment to allege use pursuant
to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use
trademark application shall be considered Collateral, (iv) any assets identified
in writing by the Administrative Agent (which writing shall expressly reference
this Security Agreement and this definition) where the Administrative Agent
determines in its sole discretion that the costs of obtaining or perfecting a
security interest in such assets is excessive in relation to the value of the
security afforded thereby, (v) any Deposit Account that constitutes an “Excluded
Account” under subclause (i) or (ii) of the definition of “Excluded Account”,
(vi) any shares of the capital stock of the Company held by the Company as
treasury stock, (vii) motor vehicles and trailers and (viii) any specifically
identified assets as to which the Administrative Agent shall determine in its
sole discretion (after consultation with the Borrower) that the costs and
burdens of obtaining a security interest therein or perfection thereof outweigh
the value of the security afforded thereby; provided, however, that “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).

 

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“Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.

 

“Industrial Designs” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
registered industrial designs and industrial design applications.

 

“Intellectual Property” means all rights, title and interests in or relating to
intellectual property and industrial property arising under any Requirement of
Law and all IP Ancillary Rights relating thereto, including all Copyrights,
Patents, Industrial Designs, Software, Trademarks, Internet Domain Names, Trade
Secrets and IP Licenses.

 

“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.

 

“IP Ancillary Rights” means, with respect to any Intellectual Property, as
applicable, all foreign counterparts to, and all divisionals, reversions,
continuations, continuations-in-part, reissues, reexaminations, renewals and
extensions of, such Intellectual Property and all income, royalties, proceeds
and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property
throughout the world, including all rights to sue or recover at law or in equity
for any past, present or future infringement, misappropriation, dilution,
violation or other impairment thereof, and, in each case, all rights to obtain
any other IP Ancillary Right throughout the world.

 

“IP License” means all contractual obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right, title and interest in or
relating to any Intellectual Property.

 

“Lenders” means the lenders party to the Credit Agreement and their successors
and assigns.

 

“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, Taxes, commissions, charges, disbursements and expenses (including those
incurred upon any appeal or in connection with the preparation for and/or
response to any subpoena or request for document production relating thereto),
in each case of any kind or nature (including interest accrued thereon or as a
result thereto and fees, charges and disbursements of financial, legal and other
advisors and consultants), whether joint or several, whether or not indirect,
contingent, consequential, actual, punitive, treble or otherwise.

 

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

 

“Patents” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to letters patent
and applications therefor.

 

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“Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the
Administrative Agent pursuant to this Security Agreement, except for shares of
the capital stock of the Company held by the Company as treasury stock.

 

“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property,
Instruments and any other rights or claims to receive money which are General
Intangibles or which are otherwise included as Collateral.

 

“Required Secured Parties” means (a) prior to an acceleration of the Obligations
under the Credit Agreement, the Required Lenders, (b) after an acceleration of
the Obligations under the Credit Agreement but prior to the date upon which the
Credit Agreement has terminated by its terms and all of the obligations
thereunder have been Paid in Full, Lenders holding in the aggregate at least a
majority of the total of the Aggregate Credit Exposure, and (c) after the Credit
Agreement has terminated by its terms and all of the Obligations thereunder have
been Paid in Full (whether or not the Obligations under the Credit Agreement
were ever accelerated), the Secured Parties holding in the aggregate at least a
majority of the aggregate net early termination payments and all other amounts
then due and unpaid from any Grantor to the Secured Parties in respect of the
Secured Obligations, as determined by the Administrative Agent in its reasonable
discretion.

 

“Section” means a numbered section of this Security Agreement, unless another
document is specifically referenced.

 

“Security Agreement Supplement” shall mean any Security Agreement Supplement to
this Security Agreement in substantially the form of Annex I hereto executed by
an entity that becomes a Grantor under this Security Agreement after the date
hereof.

 

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

 

“Stock Rights” means all dividends, instruments or other distributions and any
other right or property which the Grantors shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any Equity Interest constituting Collateral, any right to
receive an Equity Interest and any right to receive earnings, in which the
Grantors now have or hereafter acquire any right, issued by an issuer of such
Equity Interest.

 

“Trade Secrets” mean all right, title and interest (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to proprietary,
confidential and/or non-public information, however documented, including but
not limited to confidential ideas, know-how, concepts, methods, processes,
formulae, reports, data, customer lists, mailing lists, business plans and all
other trade secrets.

 

“Trademarks” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers and, in each case, all goodwill associated therewith, all
registrations and recordations thereof and all applications in connection
therewith.

 

“UCC” means the Uniform Commercial Code, as in effect from time to time, of the
State of New York or of any other state the laws of which are required as a
result thereof to be applied in connection with the attachment, perfection or
priority of, or remedies with respect to, Administrative Agent’s or any other
Secured Party’s Lien on any Collateral.

 

The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms.

 

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ARTICLE II

GRANT OF SECURITY INTEREST

 

Each Grantor hereby pledges, assigns and grants to the Administrative Agent, on
behalf of and for the ratable benefit of the Secured Parties, a security
interest in all of its right, title and interest in, to and under all personal
property and other assets, whether now owned by or owing to, or hereafter
acquired by or arising in favor of such Grantor (including under any trade name
or derivations thereof), and whether owned or consigned by or to, or leased or
licensed from or to, such Grantor, and regardless of where located (all of which
will be collectively referred to as the “Collateral”), including:

 

(i)all Accounts;

(ii)all Chattel Paper;

(iii)all Copyrights, Patents and Trademarks;

(iv)all Documents;

(v)all Equipment;

(vi)all Fixtures;

(vii)all General Intangibles;

(viii)all Goods;

(ix)all Instruments;

(x)all Inventory;

(xi)all Investment Property;

(xii)all cash or cash equivalents;

(xiii)all letters of credit, Letter-of-Credit Rights and Supporting Obligations;

(xiv)all Deposit Accounts with any bank or other financial institution;

(xv)all Commercial Tort Claims; and

(xvi)all accessions to, substitutions for and replacements, proceeds (including
Stock Rights), insurance proceeds and products of the foregoing, together with
all books and records, customer lists, credit files, computer files, programs,
printouts and other computer materials and records related thereto and any
General Intangibles at any time evidencing or relating to any of the foregoing;

 

to secure the prompt and complete payment and performance of the Secured
Obligations.

 

Notwithstanding the foregoing, the term “Collateral” shall not include any
Excluded Property, provided that, in the event that any property ceases to
constitute Excluded Property, such property shall be deemed to constitute
Collateral at all times on and after the date it so ceases to constitute
Excluded Property.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Each Grantor represents and warrants, and each Grantor that becomes a party to
this Security Agreement pursuant to the execution of a Security Agreement
Supplement represents and warrants (after giving effect to supplements, if any,
to each of the Exhibits hereto with respect to such Grantor as attached to such
Security Agreement Supplement), to the Administrative Agent and the Lenders
that:

 

3.1.         Title, Authorization, Validity, Enforceability, Perfection and
Priority. Such Grantor has good and valid rights in or the power to transfer the
Collateral and title to the Collateral with respect to which it has purported to
grant a security interest hereunder, free and clear of all Liens except for
Liens permitted under Section 4.1(e), and has full power and authority to grant
to the Administrative Agent the security interest in the Collateral pursuant
hereto. The execution and delivery by such Grantor of this Security Agreement
has been duly authorized by proper corporate or limited liability company
proceedings, as applicable, of such Grantor, and this Security Agreement
constitutes a legal valid and binding obligation of such Grantor and creates a
security interest which is enforceable against such Grantor in all Collateral it
now owns or hereafter acquires, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law. When financing statements have been filed in
the appropriate offices against such Grantor in the locations listed on Exhibit
F, the Administrative Agent will have a fully perfected first priority security
interest in that Collateral of such Grantor in which a security interest may be
perfected by filing, subject only to Liens permitted under Section 4.1(e).

 

3.2.         Type and Jurisdiction of Organization, Organizational and
Identification Numbers. The type of entity of such Grantor, its state of
organization, the organizational number issued to it by its state of
organization and its federal employer identification number are set forth on
Exhibit A.

 

3.3.         Principal Location. Such Grantor’s mailing address, which shall be
its address for notices and other communications provided for herein and the
location of its places of business and its chief executive office (if it has
more than one place of business), are disclosed in Exhibit A; such Grantor has
no other places of business except those set forth in Exhibit A.

 

3.4.         Collateral Locations. All of such Grantor’s locations where
Collateral having a value in excess of $75,000, is located (other than any
Collateral in transit in the ordinary course of business) are listed on Exhibit
A. All of said locations are owned by such Grantor except for locations (i)
which are leased by such Grantor as lessee and designated in Part VII(b) of
Exhibit A and (ii) at which Inventory is held in a public warehouse or is
otherwise held by a bailee or on consignment as designated in Part VII(c) of
Exhibit A.

 

3.5.         Deposit Accounts and Securities Accounts. All of such Grantor’s
Deposit Accounts and Securities Accounts are listed on Exhibit B.

 

3.6.         Exact Names. Such Grantor’s name in which it has executed this
Security Agreement is the exact name as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction
of organization. Except as disclosed on Exhibit A, such Grantor has not, during
the past five years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or been a party to any
acquisition.

 

3.7.         Letter-of-Credit Rights and Chattel Paper. As of the Effective
Date, Exhibit C lists all Letter-of-Credit Rights and Chattel Paper of such
Grantor. All action by such Grantor necessary or desirable to protect and
perfect the Administrative Agent’s Lien on (i) the Letter-of-Credit Rights
listed on Exhibit C, with a value in excess of $500,000, individually, or
$1,000,000, in the aggregate, and (ii) the Chattel Paper listed on Exhibit C,
with a value in excess of $25,000, individually (including the delivery of all
originals and the placement of a legend on all Chattel Paper as required
hereunder) has been duly taken. The Administrative Agent will have a fully
perfected first priority security interest in (i) the Letter-of-Credit Rights
listed on Exhibit C, with a value in excess of $500,000, individually, or
$1,000,000, in the aggregate, and (ii) the Chattel Paper listed on Exhibit C,
with a value in excess of $25,000, individually, subject only to Liens permitted
under Section 4.1(e).

 

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3.8.         Accounts and Chattel Paper.

 

(a)          The names of the obligors, amounts owing, due dates and other
information with respect to its Accounts and Chattel Paper are and will be
correctly stated in all material respects in the records of such Grantor
relating thereto and in all invoices with respect thereto furnished to the
Administrative Agent by such Grantor from time to time. As of the time when each
Account or each item of Chattel Paper arises, such Grantor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, and all records relating thereto, are genuine and in all material
respects what they purport to be.

 

(b)          With respect to each Grantor’s Accounts, (i) there are no known
setoffs, claims or disputes existing or asserted with respect thereto and (ii)
to such Grantor’s knowledge, there are no facts, events or occurrences which in
any material way may impair the validity or enforceability thereof or could
reasonably be expected to reduce the amount payable thereunder as shown on such
Grantor’s books and records and any invoices or statements with respect thereto.

 

(c)          In addition, with respect to each Grantor’s Accounts, the amounts
shown on all invoices and statements with respect thereto are actually and
absolutely owing to such Grantor as indicated thereon and are not in any way
contingent.

 

3.9.         [Reserved].

 

3.10.       Intellectual Property.

 

(a)          Exhibit D contains a complete and accurate listing as of the
Effective Date and the date each compliance certificate (and such compliance
certificate shall update such Exhibit D with all of such Intellectual Property
listings, except Trademarks, Copyrights and Patents that do not constitute
Material Intellectual Property) is required to be delivered under the Credit
Agreement 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, 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 such Grantor with respect thereto. Such Grantor owns directly or is
entitled to use, by license or otherwise, all Material Intellectual Property, in
each case, necessary for the conduct of such Grantor’s business as currently
conducted. All of the U.S. registrations, applications for registration or
applications for issuance of the Intellectual Property are in good standing and
are recorded or in the process of being recorded in the name of such Grantor,
other than Trademarks, Copyrights and Patents, if any, that do not constitute
Material Intellectual Property.

 

(b)          On the Effective 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. The
consummation of the transactions contemplated by any Loan Documents will not
limit or impair the ownership, use, validity or enforceability of, or any rights
of such Grantor in, any Material Intellectual Property. 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 Material Intellectual Property of such Grantor.

 

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(c)          Such Grantor has taken or caused to be taken commercially
reasonable steps to ensure that none of its Material Intellectual Property, the
value of which to such Grantor is contingent upon maintenance of the
confidentiality thereof, has been disclosed by such Grantor to any Person other
than employees, contractors, customers, representatives and agents of such
Grantor who are parties to customary confidentiality and nondisclosure
agreements with such Grantor. Each employee and contractor of such Grantor
involved in development or creation of any Material Intellectual Property has
assigned any and all inventions and ideas of such Person in and to such Material
Intellectual Property to such Grantor.

 

(d)          No settlement or consents, covenants not to sue, nonassertion
assurances, or releases have been entered into by such Grantor or exist to which
such Grantor is bound that adversely affect its rights to own or use any
Intellectual Property except as could not be reasonably expected to result in a
Material Adverse Effect, in each case individually or in the aggregate.

 

(e)          This Agreement is effective to create a valid and continuing Lien
on such Copyrights, Patents and Trademarks, in each case, registered, or subject
to application for registration, in the U.S., and IP Licenses and, upon filing
with the Applicable IP Office within the U.S. of the Confirmatory Grant of
Security Interest in Copyrights, the Confirmatory Grant of Security Interest in
Patents and the Confirmatory Grant of Security Interest in Trademarks (each, a
“Confirmatory Grant”), and the filing of appropriate financing statements in the
jurisdictions listed in Exhibit F hereto, all action necessary or desirable to
protect and perfect the security interest in, to and on Grantor’s Copyrights,
Patents and Trademarks, in each case, registered, or subject to application for
registration, in the U.S., and IP Licenses have been taken and such perfected
security interest is enforceable as such as against any and all creditors of and
purchasers from Grantor. Grantor has no interest in any Copyright that is
necessary in connection with the operation of Grantor’s business, except for
those Copyrights identified in Exhibit D attached hereto which have been
registered with the United States Copyright Office.

 

3.11.       Filing Requirements. None of the Collateral owned by it is of a type
for which security interests or liens may be perfected by filing under any
federal statute except for Patents, Trademarks and Copyrights held by such
Grantor and described in Exhibit D. The legal description, county and street
address of each property on which any Fixtures are located is set forth in
Exhibit F together with the name and address of the record owner of each such
property.

 

3.12.       No Financing Statements, Security Agreements. No financing statement
or security agreement describing all or any portion of the Collateral which has
not lapsed or been terminated (by a filing authorized by the secured party in
respect thereof) naming such Grantor as debtor has been filed or is of record in
any jurisdiction except for financing statements or security agreements (a)
naming the Administrative Agent on behalf of the Secured Parties as the secured
party and (b) as permitted by Section 4.1(e).

 

3.13.       Pledged Collateral.

 

(a)          Exhibit E sets forth a complete and accurate list of all Pledged
Collateral owned by such Grantor. Such Grantor is the direct, sole beneficial
owner and sole holder of record of the Pledged Collateral listed on Exhibit E as
being owned by it, free and clear of any Liens, except for any Liens permitted
by Section 4.1(e). Such Grantor further represents and warrants that (i) all
Pledged Collateral owned by it constituting an Equity Interest has been (to the
extent such concepts are relevant with respect to such Pledged Collateral) duly
authorized, validly issued, are fully paid and non-assessable, (ii) with respect
to any certificates delivered to the Administrative Agent representing an Equity
Interest, either such certificates are Securities as defined in Article 8 of the
UCC as a result of actions by the issuer or otherwise, or, if such certificates
are not Securities, such Grantor has so informed the Administrative Agent so
that the Administrative Agent may take steps to perfect its security interest
therein as a General Intangible, (iii) all such Pledged Collateral held by a
securities intermediary is covered by a control agreement among such Grantor,
the securities intermediary and the Administrative Agent pursuant to which the
Administrative Agent has Control and (iv) all Pledged Collateral which
represents Indebtedness owed to such Grantor has been duly authorized,
authenticated or issued and delivered by the issuer of such Indebtedness, is the
legal, valid and binding obligation of such issuer and such issuer is not in
default thereunder.

 

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(b)          In addition, (i) none of the Pledged Collateral owned by it has
been issued or transferred in violation of the securities registration,
securities disclosure or similar laws of any jurisdiction to which such issuance
or transfer may be subject, (ii) no options, warrants, calls or commitments of
any character whatsoever (A) exist relating to such Pledged Collateral or (B)
obligate the issuer of any Equity Interest included in the Pledged Collateral to
issue additional Equity Interests, and (iii) no consent, approval,
authorization, or other action by, and no giving of notice, filing with, any
governmental authority or any other Person is required for the pledge by such
Grantor of such Pledged Collateral pursuant to this Security Agreement or for
the execution, delivery and performance of this Security Agreement by such
Grantor, or for the exercise by the Administrative Agent of the voting or other
rights provided for in this Security Agreement or for the remedies in respect of
the Pledged Collateral pursuant to this Security Agreement, except as may be
required in connection with such disposition by laws affecting the offering and
sale of securities generally.

 

(c)          Except as set forth in Exhibit E, such Grantor owns 100% of the
issued and outstanding Equity Interests which constitute Pledged Collateral
owned by it and none of the Pledged Collateral which represents Indebtedness
owed to such Grantor is subordinated in right of payment to other Indebtedness
or subject to the terms of an indenture.

 

ARTICLE IV

COVENANTS

 

From the date of this Security Agreement and thereafter until this Security
Agreement is terminated pursuant to the terms hereof, each Grantor party hereto
as of the date hereof agrees, and from and after the effective date of any
Security Agreement Supplement applicable to any Grantor (and after giving effect
to supplements, if any, to each of the Exhibits hereto with respect to such
subsequent Grantor as attached to such Security Agreement Supplement) and
thereafter until this Security Agreement is terminated pursuant to the terms
hereof, each such additional Grantor agrees that:

 

4.1.        General.

 

(a)          Collateral Records. Such Grantor will maintain complete and
accurate books and records, in all material respects, with respect to the
Collateral owned by it, and furnish to the Administrative Agent, with sufficient
copies for each of the Lenders, such reports relating to such Collateral as the
Administrative Agent shall from time to time reasonably request.

 

(b)          Authorization to File Financing Statements; Ratification. Such
Grantor hereby authorizes the Administrative Agent to file, and if requested
will deliver to the Administrative Agent, all financing statements (including
fixture filings) and other documents and take such other actions as may from
time to time be reasonably requested by the Administrative Agent in order to
maintain a first perfected security interest in and, if applicable, Control of,
the Collateral owned by such Grantor. Any financing statement filed by the
Administrative Agent may be filed in any filing office in any UCC jurisdiction
and may (i) indicate such Grantor’s Collateral (1) as all assets of such Grantor
or words of similar effect, regardless of whether any particular asset comprised
in the Collateral falls within the scope of Article 9 of the UCC of such
jurisdiction, or (2) by any other description which reasonably approximates the
description contained in this Security Agreement, or (3) in the case of a
financing statement filed as a fixture filing, with a sufficient description of
the real property to which such Collateral relates and (ii) contain any other
information required by the UCC for the sufficiency or filing office acceptance
of any financing statement or amendment, including whether such Grantor is an
organization, the type of organization and any organization identification
number issued to such Grantor. Such Grantor also agrees to furnish any such
information described in the foregoing sentence to the Administrative Agent
promptly upon reasonable request. Such Grantor also ratifies its authorization
for the Administrative Agent to have filed in any UCC jurisdiction any initial
financing statements or amendments thereto if filed prior to the date hereof.

 

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(c)          Further Assurances. Such Grantor will, if so requested by the
Administrative Agent, furnish to the Administrative Agent, as often as the
Administrative Agent requests, in its Permitted Discretion, statements and
schedules further identifying and describing the Collateral owned by it and such
other reports and information in connection with its Collateral as the
Administrative Agent may reasonably request, all in such reasonable detail as
the Administrative Agent may specify. Such Grantor also agrees to take any and
all commercially reasonable actions necessary to defend title to the Collateral
against all persons and to defend the security interest of the Administrative
Agent in its Collateral and the priority thereof against any Lien not expressly
permitted under Section 4.1(e).

 

(d)          Disposition of Collateral. Such Grantor will not sell, lease or
otherwise dispose of the Collateral owned by it except for dispositions
specifically permitted pursuant to Section 6.05 of the Credit Agreement.

 

(e)          Liens. Such Grantor will not create, incur, or suffer to exist any
Lien on the Collateral owned by it except (i) the security interest created by
this Security Agreement, and (ii) other Liens permitted under Section 6.02 of
the Credit Agreement.

 

(f)          Other Financing Statements. Such Grantor will not authorize the
filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by it, except for financing statements (i)
naming the Administrative Agent on behalf of the Secured Parties as the secured
party, and (ii) in respect to other Liens permitted by Section 4.1(e). Such
Grantor acknowledges that it is not authorized to file any financing statement
or amendment or termination statement with respect to any financing statement
without the prior written consent of the Administrative Agent, subject to such
Grantor’s rights under Section 9-509(d)(2) of the UCC.

 

(g)          Locations. Such Grantor will not (i) maintain any Collateral (other
than any Collateral in transit in the ordinary course of business and Collateral
in an amount not to exceed $150,000) owned by it at any location other than
those locations listed on Exhibit A or (ii) change its principal place of
business or chief executive office from the location identified on Exhibit A,
other than as permitted by Section 4.15.

 

(h)          Compliance with Terms. Such Grantor will perform and comply with
all obligations in respect of the Collateral owned by it and all agreements to
which it is a party or by which it is bound relating to such Collateral.

 

4.2.        Receivables.

 

(a)          Certain Agreements on Receivables. Such Grantor will not make or
agree to make any discount, credit, rebate or other reduction in the original
amount owing on a Receivable or accept in satisfaction of a Receivable less than
the original amount thereof, except that, prior to the occurrence of an Event of
Default, such Grantor may reduce the amount of Accounts arising from the sale of
Inventory in accordance with its present policies and in the ordinary course of
business.

 

(b)          Collection of Receivables. Except as otherwise provided in this
Security Agreement, such Grantor will use commercially reasonable efforts to
collect and enforce, at such Grantor’s sole expense, all amounts due or
hereafter due to such Grantor under the Receivables owned by it.

 

(c)          Delivery of Invoices. Such Grantor will deliver to the
Administrative Agent promptly upon its request duplicate invoices with respect
to each Account owned by it bearing such language of assignment as the
Administrative Agent shall specify.

 

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(d)          Disclosure of Counterclaims on Receivables. If (i) any discount,
credit or agreement to make a rebate or to otherwise reduce the amount owing on
any Receivable owned by such Grantor exists or (ii) if, to the knowledge of such
Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to any such Receivable having a value in
excess of $100,000, such Grantor will promptly disclose such fact to the
Administrative Agent in writing.

 

(e)          Electronic Chattel Paper. Such Grantor shall take all steps
necessary to grant the Administrative Agent Control of all electronic chattel
paper in accordance with the 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.

 

4.3.         Inventory and Equipment. Such Grantor will do all things necessary
to maintain, preserve, protect and keep its Inventory and Equipment in good
repair and working and saleable condition, except for damaged or defective goods
arising in the ordinary course of such Grantor’s business and except for
ordinary wear and tear in respect of Equipment.

 

4.4.         Delivery of Instruments, Securities, Chattel Paper and Documents.
With respect to all Chattel Paper, Securities and Instruments constituting
Collateral owned by it (if any then exist) with an individual value in excess of
$25,000, such Grantor will (a) deliver to the Administrative Agent immediately
upon execution of this Security Agreement the originals of all such Chattel
Paper, Securities and Instruments constituting Collateral, (b) hold in trust for
the Administrative Agent upon receipt and promptly thereafter deliver to the
Administrative Agent any such Chattel Paper, Securities and Instruments
constituting Collateral, (c) upon the Administrative Agent’s request, deliver to
the Administrative Agent (and thereafter hold in trust for the Administrative
Agent upon receipt and immediately deliver to the Administrative Agent) any
Document evidencing or constituting Collateral and (d) promptly upon the
Administrative Agent’s request, deliver to the Administrative Agent a duly
executed amendment to this Security Agreement, in the form of Exhibit G hereto
(the “Amendment”), pursuant to which such Grantor will pledge such additional
Collateral. Such Grantor hereby authorizes the Administrative Agent to attach
each Amendment to this Security Agreement and agrees that all additional
Collateral owned by it set forth in such Amendments shall be considered to be
part of the Collateral.

 

4.5.         Uncertificated Pledged Collateral. Such Grantor will permit the
Administrative Agent from time to time to cause the appropriate issuers (and, if
held with a securities intermediary, such securities intermediary) of
uncertificated securities or other types of Pledged Collateral owned by it not
represented by certificates to mark their books and records with the numbers and
face amounts of all such uncertificated securities or other types of Pledged
Collateral not represented by certificates and all rollovers and replacements
therefor to reflect the Lien of the Administrative Agent granted pursuant to
this Security Agreement. With respect to any Pledged Collateral owned by it,
such Grantor will take any actions necessary to cause (a) the issuers of
uncertificated securities which are Pledged Collateral and (b) any securities
intermediary which is the holder of any such Pledged Collateral, to cause the
Administrative Agent to have and retain Control over such Pledged Collateral.
Without limiting the foregoing, such Grantor will, with respect to any such
Pledged Collateral held with a securities intermediary, cause such securities
intermediary to enter into a control agreement with the Administrative Agent, in
form and substance satisfactory to the Administrative Agent, giving the
Administrative Agent Control.

 

4.6.         Pledged Collateral.

 

(a)          Changes in Capital Structure of Issuers. Such Grantor will not (i)
permit or suffer any issuer of an Equity Interest constituting Pledged
Collateral owned by it to dissolve, divide, merge, liquidate, retire any of its
Equity Interests or other Instruments or Securities evidencing ownership, reduce
its capital, sell or encumber all or substantially all of its assets (except for
Liens permitted by Section 4.1(e) and sales of assets permitted pursuant to
Section 4.1(d)) or merge or consolidate with any other entity, or (ii) vote any
such Pledged Collateral in favor of any of the foregoing, except, in each case,
to the extent permitted by the Credit Agreement or any other Loan Document.

 

11

 

 

(b)          Issuance of Additional Securities. Such Grantor will not permit or
suffer the issuer of an Equity Interest constituting Pledged Collateral owned by
it to issue additional Equity Interests, any right to receive the same or any
right to receive earnings, except to such Grantor or as otherwise permitted by
the Credit Agreement.

 

(c)          Registration of Pledged Collateral. Such Grantor will permit any
registerable Pledged Collateral owned by it to be registered in the name of the
Administrative Agent or its nominee at any time at the option of the Required
Secured Parties upon and during the continuance of an Event of Default.

 

(d)          Exercise of Rights in Pledged Collateral.

 

(i)          Without in any way limiting the foregoing and subject to clause
(ii) below, such Grantor shall have the right to exercise all voting rights or
other rights relating to the Pledged Collateral owned by it for all purposes not
inconsistent with this Security Agreement, the Credit Agreement or any other
Loan Document; provided however, that no vote or other right shall be exercised
or action taken which would have the effect of impairing the rights of the
Administrative Agent in respect of such Pledged Collateral.

 

(ii)         Such Grantor will permit the Administrative Agent or its nominee at
any time after the occurrence and during the continuation of an Event of
Default, without notice, to exercise all voting rights or other rights relating
to the Pledged Collateral owned by it, including, without limitation, exchange,
subscription or any other rights, privileges, or options pertaining to any
Equity Interest or Investment Property constituting such Pledged Collateral as
if it were the absolute owner thereof.

 

(iii)        Such Grantor shall be entitled to collect and receive for its own
use all cash dividends and interest paid in respect of the Pledged Collateral
owned by it to the extent not in violation of the Credit Agreement other than
any of the following distributions and payments (collectively referred to as the
“Excluded Payments”): (A) dividends and interest paid or payable other than in
cash in respect of such Pledged Collateral, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
any Pledged Collateral; (B) dividends and other distributions paid or payable in
cash in respect of such Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in capital of an issuer; and (C) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of, or in exchange
for, such Pledged Collateral; provided however, that until actually paid, all
rights to such distributions shall remain subject to the Lien created by this
Security Agreement; and

 

(iv)        All Excluded Payments and all other distributions in respect of any
Pledged Collateral owned by such Grantor, whenever paid or made, shall be
delivered to the Administrative Agent to hold as Pledged Collateral and shall,
if received by such Grantor, be received in trust for the benefit of the
Administrative Agent, be segregated from the other property or funds of such
Grantor, and be forthwith delivered to the Administrative Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).

 

(e)          Interests in Limited Liability Companies and Limited Partnerships.
Each Grantor agrees that no ownership interests in a limited liability company
or a limited partnership which are included within the Collateral owned by such
Grantor shall at any time constitute a Security under Article 8 of the UCC of
the applicable jurisdiction.

 

12

 

 

4.7.        Intellectual Property.

 

(a)          After any change to Exhibit D (or the information required to be
disclosed thereon), such Grantor shall provide the Administrative Agent
notification thereof in the next compliance certificate required to be delivered
under the Credit Agreement and the respective Confirmatory Grant as described in
this Section 4.7 and any other documents that Administrative Agent reasonably
requests with respect thereto.

 

(b)          Such Grantor shall (and shall use commercially reasonable efforts
to cause all its licensees to) (i) (1) continue to use each Trademark included
in the Material Intellectual Property in order to maintain such 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 and (4) not adopt or use any other
Trademark that is confusingly similar or a colorable imitation of such Trademark
unless Administrative 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 material respect, (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 Administrative Agent as promptly as
reasonably practicable if it knows, or has reason to know, that any application
or registration relating to any Trademark or other 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 Trademark or other 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
Administrative 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 use
commercially reasonable efforts, including suing for infringement,
misappropriation or dilution, to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other
commercially reasonable actions as the Administrative Agent shall deem
appropriate under the circumstances to protect such Material Intellectual
Property.

 

(e)          Such Grantor shall execute and deliver to the Administrative Agent
in form and substance reasonably acceptable to Administrative Agent and suitable
for filing in the Applicable IP Office within the U.S. the respective
Confirmatory Grant in form and substance acceptable to the Administrative Agent
for all Copyrights, Trademarks, and Patents of such Grantor.

 

(f)          Such Grantor shall take all commercially reasonable actions
necessary or actions reasonably requested by the Administrative Agent to
maintain and pursue each application, to obtain the relevant registration and to
maintain the registration of all Material Intellectual Property (now or
hereafter existing), including the filing of applications for renewal,
affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings.

 

4.8         Commercial Tort Claims. Such Grantor shall promptly after the same
is acquired by it, notify the Administrative Agent of any commercial tort claim
(as defined in the UCC) acquired by it and, unless the Administrative Agent
otherwise consents, such Grantor shall enter into an amendment to this Security
Agreement, in the form of Exhibit H hereto, granting to Administrative Agent a
first priority security interest in such commercial tort claim.

 

13

 

 

4.9.        Letter-of-Credit Rights. After the Effective Date, If such Grantor
is or becomes the beneficiary of a letter of credit, except for letters of
credit in an amount not to exceed $500,000, individually, or $1,000,000, in the
aggregate for all such letters of credit, then it shall promptly, and in any
event within five (5) Business Days after becoming a beneficiary, notify the
Administrative Agent thereof and cause the issuer and/or confirmation bank to
(i) consent to the assignment of any Letter-of-Credit Rights to the
Administrative Agent and (ii) agree to direct all payments thereunder to a
Deposit Account at the Administrative Agent or subject to a Deposit Account
Control Agreement for application to the Secured Obligations, in accordance with
Section 2.18 of the Credit Agreement, all in form and substance reasonably
satisfactory to the Administrative Agent.

 

4.10.      Federal, State or Municipal Claims. Such Grantor will promptly notify
the Administrative Agent of any Collateral which constitutes a claim against the
United States government or any state or local government or any instrumentality
or agency thereof, the assignment of which claim is restricted by federal, state
or municipal law.

 

4.11.      No Interference. Such Grantor agrees that it will not knowingly
interfere with any right, power and remedy of the Administrative Agent provided
for in this Security Agreement or now or hereafter existing at law or in equity
or by statute or otherwise, or the exercise or beginning of the exercise by the
Administrative Agent of any one or more of such rights, powers or remedies.

 

4.12.      Insurance.

 

(a)          In the event any Collateral is located in any area that has been
designated by the Federal Emergency Management Agency as a “Special Flood Hazard
Area”, such Grantor shall purchase and maintain flood insurance on such
Collateral (including any personal property which is located on any real
property leased by such Loan Party within a “Special Flood Hazard Area”). The
minimum amount of flood insurance required by this Section 4.12 shall be in an
amount equal to the lesser of the sum of the Aggregate Revolving Commitments and
Aggregate Term Loan Commitments or the total replacement cost value of the
improvements.

 

(b)          All insurance policies required hereunder and under Section 5.10 of
the Credit Agreement shall name the Administrative Agent (for the benefit of the
Administrative Agent and the Lenders) as an additional insured or as lender loss
payee, as applicable, and shall contain lender loss payable clauses or mortgagee
clauses, through endorsements in form and substance satisfactory to the
Administrative Agent, in its Permitted Discretion, which provide that: (i) all
proceeds thereunder with respect to any Collateral shall be payable to the
Administrative Agent; (ii) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy; and
(iii) such policy and lender loss payable or mortgagee clauses may be canceled,
amended, or terminated only upon at least thirty (30) days prior written notice
given to the Administrative Agent.

 

(c)          All premiums on any such insurance shall be paid when due by such
Grantor, and copies of the policies delivered to the Administrative Agent
promptly upon request. If such Grantor fails to obtain any insurance as required
by this Section 4.12, the Administrative Agent may obtain such insurance at the
Borrowers’ expense. By purchasing such insurance, the Administrative Agent shall
not be deemed to have waived any Default arising from such Grantor’s failure to
maintain such insurance or pay any premiums therefor.

 

4.13.      [Reserved]

 

14

 

 

4.14.      Deposit Account Control Agreements.

 

(a)          Such Grantor will provide to the Administrative Agent on or prior
to the Effective Date, Deposit Account Control Agreements and securities account
control agreements (in each case in form and substance satisfactory to the
Administrative Agent in its Permitted Discretion), for each Deposit Account
(other than any Excluded Account) and Securities Account maintained by such
Grantor in each case duly executed on behalf of each financial institution
holding a Deposit Account or a Securities Account of such Grantor as set forth
in this Security Agreement.

 

(b)          Before opening or replacing any Deposit Account or Securities
Account, each Grantor shall, except with respect to any Excluded Account, (a)
promptly notify the Administrative Agent of the opening of such Deposit Account
or Securities Account, and (b) cause each bank or financial institution in which
it seeks to open Deposit Account (other than an Excluded Account) or Securities
Account, to enter into a Deposit Account Control Agreement or securities account
control agreement (in each case, in form and substance satisfactory to the
Administrative Agent), as applicable, with the Administrative Agent.

 

4.15.      Change of Name or Location; Change of Fiscal Year. Such Grantor shall
not (a) change its name as it appears in official filings in the state of its
incorporation or organization, (b) change its chief executive office, principal
place of business, mailing address, or the location of its records concerning
the Collateral as set forth in this Security Agreement, (c) change the type of
entity that it is, (d) change its federal employee identification number or its
organization identification number, if any, issued by its state of incorporation
or other organization, or (e) change its state of incorporation or organization,
in each case, unless the Administrative Agent shall have received at least
thirty (30) days prior written notice (or such other notice as the
Administrative Agent may agree) of such change and any reasonable action
requested by the Administrative Agent in connection therewith has been completed
or taken (including any action to continue the perfection of any Liens in favor
of the Administrative Agent, on behalf of the Secured Parties, in any
Collateral), provided that, any new location shall be in the continental U.S.
Such Grantor shall not change its fiscal year which currently ends on December
31.

 

ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

 

5.1.        Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:

 

(a)          Any representation or warranty made by or on behalf of any Grantor
under or in connection with this Security Agreement shall be materially false as
of the date on which made.

 

(b)          Any Grantor shall fail to observe or perform any of the terms or
provisions of (I) Sections 4.1(d) through (f), 4.2(a) and (b), 4.3, 4.6, 4.7(b)
through (f), 4.11, 4.14, 4.15, or Article VII, in each case, at any time, or
(II) Article IV (other than as set forth in clause (I) of the foregoing) and
such failure shall continue unremedied for a period of five (5) Business Day
after the earlier of any Grantor’s knowledge of such breach or notice thereof
from the Administrative Agent.

 

(c)          Any Grantor shall fail to observe or perform any of the terms or
provisions of this Security Agreement (other than a breach which constitutes an
Event of Default under any other Section of this Article V) and such failure
shall continue unremedied for a period of ten (10) days after the earlier of
knowledge of such breach or notice thereof from the Administrative Agent.

 

(d)          The occurrence of any “Event of Default” under, and as defined in,
the Credit Agreement.

 

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(e)          Any Equity Interest which is included within the Collateral shall
at any time constitute a Security or the issuer of any such Equity Interest
shall take any action to have such interests treated as a Security unless (i)
all certificates or other documents constituting such Security have been
delivered to the Administrative Agent and such Security is properly defined as
such under Article 8 of the UCC of the applicable jurisdiction, whether as a
result of actions by the issuer thereof or otherwise, or (ii) the Administrative
Agent has entered into a control agreement with the issuer of such Security or
with a securities intermediary relating to such Security and such Security is
defined as such under Article 8 of the UCC of the applicable jurisdiction,
whether as a result of actions by the issuer thereof or otherwise.

 

5.2.       Remedies.

 

(a)          Upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent may exercise any or all of the following
rights and remedies:

 

(i)          those rights and remedies provided in this Security Agreement, the
Credit Agreement, or any other Loan Document; provided that, this Section 5.2(a)
shall not be understood to limit any rights or remedies available to the
Administrative Agent and the other Secured Parties prior to an Event of Default;

 

(ii)         those rights and remedies available to a secured party under the
UCC (whether or not the UCC applies to the affected Collateral) or under any
other applicable law (including, without limitation, any law governing the
exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in
default under a security agreement;

 

(iii)        give notice of sole control or any other instruction under any
Deposit Account Control Agreement or other control agreement with any securities
intermediary and take any action therein with respect to such Collateral;

 

(iv)        without notice (except as specifically provided in Section 8.1 or
elsewhere herein), demand or advertisement of any kind to any Grantor or any
other Person, enter the premises of any Grantor where any Collateral is located
(through self-help and without judicial process) to collect, receive, assemble,
process, appropriate, sell, lease, assign, grant an option or options to
purchase or otherwise dispose of, deliver, or realize upon, the Collateral or
any part thereof in one or more parcels at public or private sale or sales
(which sales may be adjourned or continued from time to time with or without
notice and may take place at any Grantor’s premises or elsewhere), for cash, on
credit or for future delivery without assumption of any credit risk, and upon
such other terms as the Administrative Agent may deem commercially reasonable;
and

 

(v)         concurrently with written notice to the applicable Grantor, transfer
and register in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations, exercise the voting and all other rights as a holder with
respect thereto, to collect and receive all cash dividends, interest, principal
and other distributions made thereon and to otherwise act with respect to the
Pledged Collateral as though the Administrative Agent was the outright owner
thereof.

 

(b)          The Administrative Agent, on behalf of the Secured Parties, may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.

 

(c)          The Administrative Agent shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase for the benefit of the Administrative Agent and the other
Secured Parties, the whole or any part of the Collateral so sold, free of any
right of equity redemption, which equity redemption each Grantor hereby
expressly releases.

 

16

 

 

(d)          Until the Administrative Agent is able to effect a sale, lease, or
other disposition of Collateral, the Administrative Agent shall have the right
to hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by the Administrative Agent. The Administrative
Agent may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of the Administrative Agent’s
remedies (for the benefit of the Administrative Agent and the other Secured
Parties), with respect to such appointment without prior notice or hearing as to
such appointment.

 

(e)          If, after the Credit Agreement has terminated by its terms and all
of the Obligations have been Paid in Full, there remain Swap Agreement
Obligations outstanding, the Required Secured Parties may exercise the remedies
provided in this Section 5.2 upon the occurrence of any event which would allow
or require the termination or acceleration of any Swap Agreement Obligations
pursuant to the terms of the Swap Agreement.

 

(f)          Notwithstanding the foregoing, neither the Administrative Agent nor
any other Secured Party shall be required to (i) make any demand upon, or pursue
or exhaust any of its rights or remedies against, any Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of
the Secured Obligations or to pursue or exhaust any of its rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee
thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations
or to resort to the Collateral or any such guarantee in any particular order, or
(iii) effect a public sale of any Collateral.

 

(g)          Each Grantor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof in accordance with
clause (a) above. Each Grantor also acknowledges that any private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit any Grantor or the
issuer of the Pledged Collateral to register such securities for public sale
under the Securities Act of 1933, as amended, or under applicable state
securities laws, even if the applicable Grantor and the issuer would agree to do
so.

 

5.3.        Grantors’ Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence and during the continuation of a
Default, each Grantor will:

 

(a)          assemble and make available to the Administrative Agent the
Collateral and all books and records relating thereto at any place or places
specified by the Administrative Agent, whether at such Grantor’s premises or
elsewhere;

 

(b)          permit the Administrative Agent, by the Administrative Agent’s
representatives and agents, to enter, occupy and use any premises where all or
any part of the Collateral, or the books and records relating thereto, or both,
are located, to take possession of all or any part of the Collateral or the
books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct
sales of the Collateral, without any obligation to pay the Grantor for such use
and occupancy;

 

(c)          prepare and file, or cause an issuer of Pledged Collateral to
prepare and file, with the Securities and Exchange Commission or any other
applicable government agency, registration statements, a prospectus and such
other documentation in connection with the Pledged Collateral as the
Administrative Agent may request, all in form and substance satisfactory to the
Administrative Agent, and furnish to the Administrative Agent, or cause an
issuer of Pledged Collateral to furnish to the Administrative Agent, any
information regarding the Pledged Collateral in such detail as the
Administrative Agent may specify;

 

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(d)          take, or cause an issuer of Pledged Collateral to take, any and all
actions necessary to register or qualify the Pledged Collateral to enable the
Administrative Agent to consummate a public sale or other disposition of the
Pledged Collateral; and

 

(e)          at its own expense, cause the independent certified public
accountants then engaged by each Grantor to prepare and deliver to the
Administrative Agent and each Lender, at any time, and from time to time,
promptly upon the Administrative Agent’s request, the following reports with
respect to the applicable Grantor: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) a test verification of
such Accounts.

 

5.4.        Grant of Intellectual Property License. For the purpose of enabling
the Administrative Agent to exercise the rights and remedies under this Article
V at such time as the Administrative Agent shall be lawfully entitled to
exercise such rights and remedies (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), each
Grantor hereby (a) grants to the Administrative Agent, for the benefit of the
Administrative Agent and the other Secured Parties, an irrevocable, nonexclusive
worldwide license (exercisable without payment of royalty or other compensation
to any Grantor), including in such license the right to use, license, sublicense
or practice any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
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 (b) irrevocably agrees that the Administrative Agent may sell any of such
Grantor’s assets directly to any person, including without limitation persons
who have previously purchased such Grantor’s assets from such Grantor and in
connection with any such sale or other enforcement of the Administrative Agent’s
rights under this Security Agreement, may sell any asset which bears any
Trademark owned by or licensed to such Grantor and any asset that is covered by
any Copyright owned by or licensed to such Grantor and the Administrative Agent
may (but shall have no obligation to) finish any work in process and affix any
Trademark owned by or licensed to such Grantor and sell such asset as provided
herein.

 

ARTICLE VI

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

 

6.1.        Account Verification. The Administrative Agent may at any time, in
the Administrative Agent’s own name, in the name of a nominee of the
Administrative Agent, or in the name of any Grantor communicate (by mail,
telephone, facsimile or otherwise) with the Account Debtors of any such Grantor,
parties to contracts with any such Grantor and obligors in respect of
Instruments of any such Grantor to verify with such Persons, to the
Administrative Agent’s satisfaction, the existence, amount, terms of, and any
other matter relating to, Accounts, Instruments, Chattel Paper, payment
intangibles and/or other Receivables.

 

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6.2.        Authorization for Administrative Agent to Take Certain Action.

 

(a)          Each Grantor irrevocably authorizes the Administrative Agent at any
time and from time to time in the sole discretion of the Administrative Agent
and appoints the Administrative Agent as its attorney in fact (i) to execute on
behalf of such Grantor as debtor and to file financing statements necessary or
desirable in the Administrative Agent’s sole discretion to perfect and to
maintain the perfection and priority of the Administrative Agent’s security
interest in the Collateral, (ii) in the case of any Intellectual Property owned
by or licensed to such Grantor, execute, deliver and have recorded any document
that the Administrative Agent may request to evidence, effect, publicize or
record the Administrative Agent’s security interest in such Intellectual
Property and the goodwill and General Intangibles of such Grantor relating
thereto or represented thereby, (iii) to endorse and collect any cash proceeds
of the Collateral, (iv) to file a carbon, photographic or other reproduction of
this Security Agreement or any financing statement with respect to the
Collateral as a financing statement and to file any other financing statement or
amendment of a financing statement (which does not add new collateral or add a
debtor) in such offices as the Administrative Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the Administrative Agent’s security interest in the Collateral, (v) to contact
and enter into one or more agreements with the issuers of uncertificated
securities which are Pledged Collateral or with securities intermediaries
holding Pledged Collateral as may be necessary or advisable to give the
Administrative Agent Control over such Pledged Collateral, (vi) to apply the
proceeds of any Collateral received by the Administrative Agent to the Secured
Obligations, (vii) to discharge past due taxes, assessments, charges, fees or
Liens on the Collateral (except for such Liens that are permitted by Section
4.1(e)), (viii) to contact Account Debtors for any reason, (ix) to demand
payment or enforce payment of the Receivables in the name of the Administrative
Agent or such Grantor and to endorse any and all checks, drafts, and other
instruments for the payment of money relating to the Receivables, (x) to sign
such Grantor’s name on any invoice or bill of lading relating to the
Receivables, drafts against any Account Debtor of such Grantor, assignments and
verifications of Receivables, (xi) to exercise all of such Grantor’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral, (xii) to settle, adjust, compromise, extend or renew the
Receivables, (xiii) to settle, adjust or compromise any legal proceedings
brought to collect Receivables, (xiv) to prepare, file and sign such Grantor’s
name on a proof of claim in bankruptcy or similar document against any Account
Debtor of such Grantor, (xv) to prepare, file and sign such Grantor’s name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables, (xvi) to change the address for delivery of
mail addressed to such Grantor to such address as the Administrative Agent may
designate and to receive, open and dispose of all mail addressed to such
Grantor, and (xvii) to do all other acts and things necessary to carry out this
Security Agreement; and such Grantor agrees to reimburse the Administrative
Agent on demand for any payment made or any expense incurred by the
Administrative Agent in connection with any of the foregoing; provided that,
this authorization shall not relieve such Grantor of any of its obligations
under this Security Agreement or under the Credit Agreement.

 

(b)          All acts of said attorney or designee are hereby ratified and
approved. The powers conferred on the Administrative Agent, for the benefit of
the Administrative Agent and the other Secured Parties, under this Section 6.2
are solely to protect the Administrative Agent’s interests in the Collateral and
shall not impose any duty upon the Administrative Agent or any other Secured
Party to exercise any such powers. The Administrative Agent agrees that, except
for the powers granted in Section 6.2(a)(i)-(vii), it shall not exercise any
power or authority granted to it unless an Event of Default has occurred and is
continuing.

 

6.3.        Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
ADMINISTRATIVE AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION
6.2 ABOVE) WITH RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE
ANY OF THE PLEDGED COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN
ADDITION TO THE RIGHT TO VOTE ANY OF THE PLEDGED COLLATERAL, THE APPOINTMENT OF
THE ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT
TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER
OF ANY OF THE PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF
ANY OF THE PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY
PERSON (INCLUDING THE ISSUER OF THE PLEDGED COLLATERAL OR ANY OFFICER OR AGENT
THEREOF), UPON THE OCCURRENCE OF A DEFAULT.

 

6.4.        Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE
ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.14. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, NONE OF THE ADMINISTRATIVE AGENT, ANY LENDER, ANY
OTHER SECURED PARTY, ANY OF THEIR AFFILIATES, OR ANY OF THEIR OR THEIR
AFFILIATES’ RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES
SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR
OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO
SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE
SOLELY TO ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED
BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE
LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

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ARTICLE VII

[RESERVED]

 

ARTICLE VIII

GENERAL PROVISIONS

 

8.1.        Waivers. Each Grantor hereby waives notice of the time and place of
any public sale or the time after which any private sale or other disposition of
all or any part of the Collateral may be made. To the extent such notice may not
be waived under applicable law, any notice made shall be deemed reasonable if
sent to the Grantors, addressed as set forth in Article IX, at least ten days
prior to (i) the date of any such public sale or (ii) the time after which any
such private sale or other disposition may be made. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and
demands against the Administrative Agent or any other Secured Party arising out
of the repossession, retention or sale of the Collateral, except such as arise
solely out of the gross negligence or willful misconduct of the Administrative
Agent or such other Secured Party as finally determined by a court of competent
jurisdiction. 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 Administrative Agent or any other Secured Party, any
valuation, stay, appraisal, extension, moratorium, redemption or similar laws
and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise.
Except as otherwise specifically provided herein, each Grantor hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Security Agreement or any
Collateral.

 

8.2.        Limitation on Administrative Agent’s and Other Secured Parties’ Duty
with Respect to the Collateral. The Administrative Agent shall have no
obligation to clean-up or otherwise prepare the Collateral for sale. The
Administrative Agent and each other Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control. Neither the
Administrative Agent nor any other Secured Party shall have any other duty as to
any Collateral in its possession or control or in the possession or control of
any agent or nominee of the Administrative Agent or such other Secured Party, or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. To the extent that applicable law imposes
duties on the Administrative Agent to exercise remedies in a commercially
reasonable manner, each Grantor acknowledges and agrees that it is commercially
reasonable for the Administrative Agent (i) to fail to incur expenses deemed
significant by the Administrative Agent to prepare Collateral for disposition or
otherwise to transform raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as such Grantor, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing 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, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Administrative Agent, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose
of this Section 8.2 is to provide non-exhaustive indications of what actions or
omissions by the Administrative Agent would be commercially reasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 8.2. Without limitation upon the foregoing, nothing contained in this
Section 8.2 shall be construed to grant any rights to any Grantor or to impose
any duties on the Administrative Agent that would not have been granted or
imposed by this Security Agreement or by applicable law in the absence of this
Section 8.2.

 

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8.3.        Compromises and Collection of Collateral. The Grantors and the
Administrative Agent recognize that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain of the Receivables,
that certain of the Receivables may be or become uncollectible in whole or in
part and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a Receivable. In view of the foregoing, each Grantor agrees that
the Administrative Agent may at any time and from time to time, if an Event of
Default has occurred and is continuing, compromise with the obligor on any
Receivable, accept in full payment of any Receivable such amount as the
Administrative Agent in its sole discretion shall determine or abandon any
Receivable, and any such action by the Administrative Agent shall be
commercially reasonable so long as the Administrative Agent acts in good faith
based on information known to it at the time it takes any such action.

 

8.4.        Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to perform or pay in this Security Agreement and
the Grantors shall reimburse the Administrative Agent for any amounts paid by
the Administrative Agent pursuant to this Section 8.4. The Grantors’ obligation
to reimburse the Administrative Agent pursuant to the preceding sentence shall
be a Secured Obligation payable on demand.

 

8.5.        Specific Performance of Certain Covenants. Each Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1(d),
4.1(e), 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 4.13, 4.14, 4.15, 5.3, or 8.7
or in Article VII will cause irreparable injury to the Administrative Agent and
the other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breaches and therefore
agrees, without limiting the right of the Administrative Agent or the other
Secured Parties to seek specific performance of other obligations of the
Grantors contained in this Security Agreement, that the covenants of the
Grantors contained in the Sections referred to in this Section 8.5 shall be
specifically enforceable against the Grantors.

 

8.6.        Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(d) and
notwithstanding any course of dealing between any Grantor and the Administrative
Agent or other conduct of the Administrative Agent, no authorization to sell or
otherwise dispose of the Collateral (except as set forth in Section 4.1(d))
shall be binding upon the Administrative Agent or the other Secured Parties
unless such authorization is in writing signed by the Administrative Agent with
the consent or at the direction of the Required Secured Parties.

 

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8.7.        No Waiver; Amendments; Cumulative Remedies. No delay or omission of
the Administrative Agent or any other Secured Party to exercise any right or
remedy granted under this Security Agreement shall impair such right or remedy
or be construed to be a waiver of any Default or an acquiescence therein, and
any single or partial exercise of any such right or remedy shall not preclude
any other or further exercise thereof or the exercise of any other right or
remedy. No waiver, amendment or other variation of the terms, conditions or
provisions of this Security Agreement whatsoever shall be valid unless in
writing signed by the Administrative Agent with the concurrence or at the
direction of the Lenders required under Section 9.02 of the Credit Agreement and
then only to the extent in such writing specifically set forth. All rights and
remedies contained in this Security Agreement or by law afforded shall be
cumulative and all shall be available to the Administrative Agent and the other
Secured Parties until the Secured Obligations have been Paid in Full.

 

8.8.        Limitation by Law; Severability of Provisions. All rights, remedies
and powers provided in this Security Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law, and all the provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this
Security Agreement invalid, unenforceable or not entitled to be recorded or
registered, in whole or in part. Any provision in this Security Agreement that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of this Security Agreement are declared to be severable.

 

8.9.        Reinstatement. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof (including a payment effected through exercise of a right of
setoff), is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise
(including pursuant to any settlement entered into by a Secured Party in its
discretion), all as though such payment or performance had not been made. In the
event that any payment, or any part thereof (including a payment effected
through exercise of a right of setoff), is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

 

8.10.      Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the other Secured Parties and their respective
successors and assigns (including all persons who become bound as a debtor to
this Security Agreement), except that no Grantor shall have the right to assign
its rights or delegate its obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent.
No sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to the Administrative Agent,
for the benefit of the Administrative Agent and the other Secured Parties,
hereunder.

 

8.11.      Survival of Representations. All representations and warranties of
the Grantors contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.

 

8.12.      Taxes and Expenses. Any taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security
Agreement shall be paid by the Grantors, together with interest and penalties,
if any. The Grantors shall reimburse the Administrative Agent for any and all
out-of-pocket expenses and internal charges (including reasonable attorneys’,
auditors’ and accountants’ fees and reasonable time charges of attorneys,
paralegals, auditors and accountants who may be employees of the Administrative
Agent) paid or incurred by the Administrative Agent in connection with the
preparation, execution, delivery, administration, collection and enforcement of
this Security Agreement and in the audit, analysis, administration, collection,
preservation or sale of the Collateral (including the expenses and charges
associated with any periodic or special audit of the Collateral). Any and all
costs and expenses incurred by the Grantors in the performance of actions
required pursuant to the terms hereof shall be borne solely by the Grantors.

 

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8.13.      Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

 

8.14.      Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been Paid in
Full and no commitments of the Administrative Agent or the other Secured Parties
which would give rise to any Secured Obligations are outstanding.

 

8.15.      Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantors and the Administrative Agent
relating to the Collateral and supersedes all prior agreements and
understandings between the Grantors and the Administrative Agent relating to the
Collateral.

 

8.16.      CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAWS OF CONFLICTS)
OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.

 

8.17.      CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR
NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT AND EACH GRANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.

 

8.18.      WAIVER OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND EACH
LENDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE OR OTHER AGENT (INCLUDING ANY ATTORNEY) 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
SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 8.18.

 

23

 

 

8.19.      Indemnity. Each Grantor hereby agrees to indemnify the Administrative
Agent and the other Secured Parties, and their respective successors, assigns,
agents and employees, from and against any and all liabilities, damages,
penalties, suits, fees, costs, and expenses of any kind and nature (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Administrative Agent or any other Secured Party is a party thereto)
imposed on, incurred by or asserted against the Administrative Agent or the
other Secured Parties, or their respective successors, assigns, agents and
employees, in any way relating to or arising out of this Security Agreement, or
the manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other defects, whether or
not discoverable by the Administrative Agent or the other Secured Parties or any
Grantor, and any claim for Patent, Trademark or Copyright infringement).

 

8.20.      Counterparts. This Security Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Security Agreement by signing any
such counterpart. Delivery of an executed counterpart of a signature page of
this Security Agreement by facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this Security
Agreement.

 

ARTICLE IX

NOTICES

 

9.1.        Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be sent in accordance with Section 9.01 of the
Credit Agreement.

 

9.2.        Change in Address for Notices. Each of the Grantors, the
Administrative Agent and the Lenders may change the address for service of
notice upon it by a notice in writing to the other parties.

 

ARTICLE X

THE ADMINISTRATIVE AGENT

 

JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the other
Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It
is expressly understood and agreed by the parties to this Security Agreement
that any authority conferred upon the Administrative Agent hereunder is subject
to the terms of the delegation of authority made by the Secured Parties to the
Administrative Agent pursuant to the Credit Agreement, and that the
Administrative Agent has agreed to act (and any successor Administrative Agent
shall act) as such hereunder only on the express conditions contained in such
Article VIII. Any successor Administrative Agent appointed pursuant to Article
VIII of the Credit Agreement shall be entitled to all the rights, interests and
benefits of the Administrative Agent hereunder.

 

[Signature Page Follows]

 

24

 

 

IN WITNESS WHEREOF, the Grantors and the Administrative Agent have executed this
Security Agreement as of the date first above written.

 

  CLARUS CORPORATION,   a Delaware corporation,   as a Grantor         By /s/
Aaron J. Kuehne     Name: Aaron J. Kuehne     Title: Chief Financial Officer,
Chief Administrative Officer, Secretary and Treasurer         BLACK DIAMOND
EQUIPMENT, LTD.,   a Delaware corporation,   as a Grantor         By /s/ Aaron
J. Kuehne     Name: Aaron J. Kuehne     Title: Chief Financial Officer and
Secretary         BLACK DIAMOND RETAIL, INC.,   a Delaware corporation,   as a
Grantor         By /s/ Aaron J. Kuehne     Name: Aaron J. Kuehne     Title:
Chief Financial Officer and Secretary         SIERRA BULLETS, L.L.C.,   a
Delaware limited liability company,   as a Grantor         By /s/ Aaron J.
Kuehne     Name: Aaron J. Kuehne     Title: Secretary         EVEREST/SAPPHIRE
ACQUISITION, LLC,   a Delaware limited liability company,   as a Grantor        
By  /s/ Aaron J. Kuehne     Name: Aaron J. Kuehne     Title: Secretary and
Treasurer

 

Signature Page to Pledge and Security Agreement

 

 

 

 

  BD EUROPEAN HOLDINGS, LLC,   a Delaware limited liability company,   as a
Grantor         By /s/ Aaron J. Kuehne     Name: Aaron J. Kuehne     Title:
Secretary and Treasurer         SKINOURISHMENT, LLC,   a Delaware limited
liability company,   as a Grantor         By /s/ Aaron J. Kuehne     Name: Aaron
J. Kuehne     Title: Secretary and Treasurer         BLACK DIAMOND RETAIL -
ALASKA, LLC,   a Delaware limited liability company,   as a Grantor         By
/s/ Aaron J. Kuehne     Name: Aaron J. Kuehne     Title: Chief Financial Officer
and Secretary

 

Signature Page to Pledge and Security Agreement

 

 

 

 

  JPMORGAN CHASE BANK, N.A.,   as Administrative Agent         By: /s/ Kristin
L. Gubler   Name: Kristin L. Gubler   Title: Authorized Signer

 

Signature Page to Pledge and Security Agreement