REVOLVING CREDIT SECURITY AGREEMENT

 

By

 

FOAMEX L.P.,

as Borrower,

 

and

 

THE GUARANTORS PARTY HERETO

 

and

 

BANK OF AMERICA, N.A.,

as Administrative Agent

______________________

 

Dated as of February 12, 2007

 

 

 

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TABLE OF CONTENTS

Page

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1.

Definitions

2

SECTION 1.2.

Interpretation

9

SECTION 1.3.

Resolution of Drafting Ambiguities

9

SECTION 1.4.

Perfection Certificate

9

 

ARTICLE II

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1.

Grant of Security Interest

9

SECTION 2.2.

Filings

10

 

ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF PLEDGED COLLATERAL

 

SECTION 3.1.

Delivery of Certificated Securities Collateral

11

SECTION 3.2.

Perfection of Uncertificated Securities Collateral

12

SECTION 3.3.

Financing Statements and Other Filings; Maintenance of

 

Perfected Security Interest

12

SECTION 3.4.

Other Actions

13

SECTION 3.5.

Joinder of Additional Guarantors

16

SECTION 3.6.

Supplements; Further Assurances

16

 

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

SECTION 4.1.

Title

17

SECTION 4.2.

Validity of Security Interest

18

SECTION 4.3.

Defense of Claims; Transferability of Pledged Collateral

18

SECTION 4.4.

Other Financing Statements

18

SECTION 4.5.

Chief Executive Office; Change of Name; Jurisdiction of

 

Organization

18

SECTION 4.6.

Location of Inventory and Equipment

19

SECTION 4.7.

Due Authorization and Issuance

19

SECTION 4.8.

Consents, etc.

19

SECTION 4.9.

Pledged Collateral

19

 

 

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SECTION 4.10.

[Insurance

20

SECTION 4.11.

ABL Collateral Accounts.

20

SECTION 4.12.

Accounts

20

ARTICLE V

 

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

SECTION 5.1.

Pledge of Additional Securities Collateral

21

SECTION 5.2.

Voting Rights; Distributions; etc.

21

SECTION 5.3.

Defaults, etc.

22

SECTION 5.4.

Certain Agreements of Pledgors As Issuers and Holders

 

of Equity Interests

23

 

ARTICLE VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

 

SECTION 6.1.

Grant of Intellectual Property License

23

SECTION 6.2.

Protection of Administrative Agent’s Security

23

SECTION 6.3.

After-Acquired Property

24

SECTION 6.4.

Litigation

24

 

ARTICLE VII

 

CERTAIN PROVISIONS CONCERNING RECEIVABLES

 

SECTION 7.1.

Maintenance of Records

25

SECTION 7.2.

Legend

25

SECTION 7.3.

Modification of Terms, etc.

26

SECTION 7.4.

Collection

27

 

ARTICLE VIII

 

TRANSFERS

 

SECTION 8.1.

Transfers of Pledged Collateral

28

 

ARTICLE IX

 

REMEDIES

 

SECTION 9.1.

Remedies

28

SECTION 9.2.

Notice of Sale

30

SECTION 9.3.

Waiver of Notice and Claims

30

SECTION 9.4.

Certain Sales of Pledged Collateral

30

 

 

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SECTION 9.5.

No Waiver; Cumulative Remedies

32

SECTION 9.6.

Certain Additional Actions Regarding Intellectual Property

32

 

ARTICLE X

 

APPLICATION OF PROCEEDS

 

SECTION 10.1.

Application of Proceeds

32

 

ARTICLE XI

 

MISCELLANEOUS

 

SECTION 11.1.

Concerning Administrative Agent

33

SECTION 11.2.

Administrative Agent May Perform; Administrative Agent Appointed

 

Attorney-in-Fact

34

SECTION 11.3.

Continuing Security Interest; Assignment

34

SECTION 11.4.

Termination; Release

35

SECTION 11.5.

Modification in Writing

35

SECTION 11.6.

Notices

35

SECTION 11.7.

Governing Law, Consent to Jurisdiction and Service of

 

Process; Waiver of Jury Trial

36

SECTION 11.8.

Severability of Provisions

36

SECTION 11.9.

Execution in Counterparts

36

SECTION 11.10.

Business Days

36

SECTION 11.11.

No Credit for Payment of Taxes or Imposition

36

SECTION 11.12.

No Claims Against Administrative Agent

36

SECTION 11.13.

No Release

36

SECTION 11.14.

Obligations Absolute

37

SECTION 11.15.

Intercreditor Agreement

38

 

SIGNATURES

S-1

EXHIBIT 1

Form of Issuer’s Acknowledgment

EXHIBIT 2

Form of Pledge Amendment

EXHIBIT 3

Form of Joinder Agreement

EXHIBIT 4

Form of Revolving Credit Copyright Security Agreement

EXHIBIT 5

Form of Revolving Credit Patent Security Agreement

EXHIBIT 6

Form of Revolving Credit Trademark Security Agreement

 

SCHEDULE A

ABL Collateral Accounts

 

 

 

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REVOLVING CREDIT SECURITY AGREEMENT

This REVOLVING CREDIT SECURITY AGREEMENT dated as of February 12, 2007 (as
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with the provisions hereof, this “Agreement”) made by and
among FOAMEX L.P., a Delaware limited partnership (the “Borrower”), FOAMEX
INTERNATIONAL INC., a Delaware corporation ( “Holdings”), and the other
Guarantors listed on the signature pages hereto (together with Holdings, the
“Original Guarantors”) or from time to time party hereto by execution of a
Joinder Agreement (the “Additional Guarantors,” and together with the Original
Guarantors, the “Guarantors”), as pledgors, assignors and debtors (the Borrower,
together with the Guarantors, in such capacities and together with any
successors in such capacities, the “Pledgors,” and each, a “Pledgor”), in favor
of BANK OF AMERICA, N.A., in its capacity as administrative agent pursuant to
the Credit Agreement (as hereinafter defined), as pledgee, assignee and secured
party (in such capacities and together with any successors in such capacities,
the “Administrative Agent”).

R E C I T A L S :

A.           The Borrower, the Original Guarantors, the Administrative Agent,
the lending institutions party thereto from time to time (the “Lenders”) and
certain other parties have entered into that certain revolving credit agreement,
dated as of February 12, 2007 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”; which term shall
also include and refer to any increase in the amount of indebtedness under the
Credit Agreement and any refinancing or replacement of the Credit Agreement
(whether under a bank facility, securities offering or otherwise) or one or more
successor or replacement facilities whether or not with a different group of
agents or lenders (whether under a bank facility, securities offering or
otherwise) and whether or not with different obligors upon the Administrative
Agent’s acknowledgment of the termination of the predecessor Credit Agreement).

B.           Each Guarantor has, pursuant to the Credit Agreement,
unconditionally guaranteed the Secured Obligations.

C.           The Borrower and each Guarantor will receive substantial benefits
from the execution, delivery and performance of the obligations under the Credit
Agreement and the other Loan Documents and each is, therefore, willing to enter
into this Agreement.

D.           This Agreement is given by each Pledgor in favor of the
Administrative Agent for the benefit of the Secured Parties to secure the
payment and performance of all of the Secured Obligations.

E.            It is a condition to the obligations of the Lenders to make the
Loans under the Credit Agreement and issue or cause the issuance of Letters of
Credit and Credit Support as provided in the Credit Agreement that each Pledgor
execute and deliver the applicable Loan Documents, including this Agreement.

 

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A G R E E M E N T :

NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor and the Administrative Agent hereby agree as follows:

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1.

Definitions.

(a)          Unless otherwise defined herein or in the Credit Agreement,
capitalized terms used herein that are defined in the UCC shall have the
meanings assigned to them in the UCC; provided that in any event, the following
terms shall have the meanings assigned to them in the UCC:

“Accounts”; “Bank”; “Certificated Securities”; “Chattel Paper”; “Commercial Tort
Claim”; “Commodity Account”; “Commodity Contract”; “Commodity Intermediary”;
“Documents”; “Electronic Chattel Paper”; “Entitlement Order”; “Equipment”;
“Financial Asset”; “Fixtures”; “Goods”, “Inventory”; “Letter-of-Credit Rights”;
“Letters of Credit”; “Money”; “Payment Intangibles”; “Proceeds”; “Records”;
“Securities Account”; “Securities Intermediary”; “Security Entitlement”;
“Supporting Obligations”; “Tangible Chattel Paper”; and “Uncertificated
Security”.

(b)          Terms used but not otherwise defined herein that are defined in the
Credit Agreement shall have the meanings given to them in the Credit Agreement.
The sections of Annex A to the Credit Agreement entitled “Other Interpretive
Provisions” and “Accounting Terms” shall apply herein mutatis mutandis.

 

(c)

The following terms shall have the following meanings:

“ABL Collateral” shall have the meaning assigned to such term in the
Intercreditor Agreement.

“ABL Collateral Account” shall mean the Deposit Accounts identified on Schedule
A hereto and any other Deposit Account or Securities Account established or
approved by the Administrative Agent and subject to its Control (and with
respect to which the Agent’s Lien in such Deposit Account or Securities Account
is prior to all other Liens (including Permitted Liens)) and into which any ABL
Collateral shall be deposited from time to time.

“Account Debtor” shall mean each person who is obligated on a Receivable or
Supporting Obligation related thereto.

“Administrative Agent” shall have the meaning assigned to such term in the
Preamble hereof.

 

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“Agreement” shall have the meaning assigned to such term in the Preamble hereof.

“Bailee Letter” shall mean a letter in a form that is reasonably satisfactory to
the Administrative Agent.

“BofA Accounts” shall mean lockbox accounts number 3750206876, 750325553 and
018076-932-3 established by the Borrower at Bank of America, N.A.

“Borrower” shall have the meaning assigned to such term in the Preamble hereof.

“Collateral Support” shall mean all property (real or personal) assigned,
hypothecated or otherwise securing any Pledged Collateral and shall include any
security agreement or other agreement granting a lien or security interest in
such real or personal property.

“Commodity Account Control Agreement” shall mean a control agreement in a form
that is reasonably satisfactory to the Administrative Agent establishing the
Administrative Agent’s Control with respect to any Commodity Account.

“Contracts” shall mean, collectively, with respect to each Pledgor, all sale,
service, performance, equipment or personal property lease contracts and
agreements and all other contracts or agreements (in each case, whether written
or oral, or third party or intercompany), between such Pledgor and any third
party, and all assignments, amendments, restatements, supplements, extensions,
renewals, replacements or modifications thereof.

“Control” shall mean (i) in the case of each Deposit Account, “control,” as such
term is defined in Section 9-104 of the UCC, (ii) in the case of any Security
Entitlement, “control,” as such term is defined in Section 8-106 of the UCC, and
(iii) in the case of any Commodity Contract, “control,” as such term is defined
in Section 9-106 of the UCC.

“Control Agent” shall have the meaning assigned to such term in the
Intercreditor Agreement.

“Control Agreements” shall mean, collectively, the Deposit Account Control
Agreements, the Securities Account Control Agreements and the Commodity Account
Control Agreements.

“Control Collateral” shall have the meaning assigned to such term in the
Intercreditor Agreement.

“Copyrights” shall mean, collectively, with respect to each Pledgor, all
copyrights (whether statutory or common law, whether established or registered
in the United States or any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished) and all
copyright registrations and applications thereof made by such Pledgor, in each
case, whether now owned or hereafter created or acquired by or assigned to such
Pledgor, together with any and all (i) rights and privileges arising under
applicable law with respect to such Pledgor’s use of such copyrights,
(ii) renewals thereof, (iii) income, fees,

 

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royalties, damages, claims and payments now or hereafter due and/or payable with
respect thereto, including damages and payments for past, present or future
infringements thereof, (iv) rights corresponding thereto throughout the world
and (v) rights to sue for past, present or future infringements thereof.

“Credit Agreement” shall have the meaning assigned to such term in Recital A
hereof.

“Deposit Account Control Agreement” shall mean a control agreement in a form
that is reasonably satisfactory to the Administrative Agent establishing the
Administrative Agent’s Control with respect to any Deposit Account.

“Deposit Accounts” shall mean, collectively, with respect to each Pledgor,
(i) all “deposit accounts” as such term is defined in the UCC and all accounts
and sub-accounts relating to any of the foregoing accounts and (ii) all cash,
funds, checks, notes and instruments from time to time on deposit in any of the
accounts or sub-accounts described in clause (i) of this definition.

“Distributions” shall mean, collectively, with respect to each Pledgor, all
dividends, cash, options, warrants, rights, instruments, distributions, returns
of capital or principal, income, interest, profits and other property, interests
(debt or equity) or proceeds, including as a result of a split, revision,
reclassification or other like change of the Pledged Securities, from time to
time received, receivable or otherwise distributed to such Pledgor in respect of
or in exchange for any or all of the Pledged Securities or Intercompany Notes.

“Excluded Accounts” shall mean, collectively, (i) any Deposit Account or
Securities Account that is maintained with an average daily balance not
exceeding $10,000 at any time; provided that the aggregate average daily balance
of all such Deposit Accounts and Securities Accounts excluded pursuant to this
clause (i), shall not exceed $1,000,000, and (ii) any Deposit Account or
Securities Account that is a fiduciary or similar account for the benefit of
employees.

“Excluded Property” shall mean:

(a)          any permit or license issued by a Governmental Authority to any
Pledgor or any agreement to which any Pledgor is a party, in each case, only to
the extent and for so long as the terms of such permit, license or agreement or
any Requirement of Law applicable thereto, validly prohibit the creation by such
Pledgor of a security interest in such permit, license or agreement in favor of
the Administrative Agent (after giving effect to Sections 9-406(d), 9-407(a),
9-408(a) or 9-409 of the UCC (or any successor provision or provisions) or any
other applicable law (including the Bankruptcy Code) or principles of equity);

(b)          assets owned by any Pledgor on the date hereof or hereafter
acquired that is subject to a purchase money Lien or other Lien permitted by
clauses (j), (l) and (o) of Section 7.14 of the Credit Agreement or a Capital
Lease Obligation permitted to be incurred pursuant to the provisions of the
Credit Agreement if the contract or other agreement in which such Lien is
granted (or the documentation providing for such

 

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purchase money Lien or Capital Lease Obligation) validly prohibits the creation
of any other Lien on such assets; and

(c)          any Pledged Securities which are specifically excluded from the
definition of Pledged Securities by virtue of the proviso to such definition;

provided, however, that Excluded Property shall not include any Proceeds,
substitutions or replacements of any Excluded Property (unless such Proceeds,
substitutions or replacements would constitute Excluded Property).

“General Intangibles” shall mean, collectively, with respect to each Pledgor,
all “general intangibles,” as such term is defined in the UCC, of such Pledgor
and, in any event, shall include (i) all of such Pledgor’s rights, title and
interest in, to and under all Contracts and insurance policies (including all
rights and remedies relating to monetary damages, including indemnification
rights and remedies, and claims for damages or other relief pursuant to or in
respect of any Contract), (ii) all know-how and warranties relating to any of
the Pledged Collateral or the Mortgaged Property, (iii) any and all other
rights, claims, choses-in-action and causes of action of such Pledgor against
any other Person and the benefits of any and all collateral or other security
given by any other Person in connection therewith, (iv) all guarantees,
endorsements and indemnifications on, or of, any of the Pledged Collateral or
any of the Mortgaged Property, (v) all lists, books, records, correspondence,
ledgers, printouts, files (whether in printed form or stored electronically),
tapes and other papers or materials containing information relating to any of
the Pledged Collateral or any of the Mortgaged Property, including all customer
or tenant lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, appraisals, recorded knowledge, surveys,
studies, engineering reports, test reports, manuals, standards, processing
standards, performance standards, catalogs, research data, computer and
automatic machinery software and programs and the like, field repair data,
accounting information pertaining to such Pledgor’s operations or any of the
Pledged Collateral or any of the Mortgaged Property and all media in which or on
which any of the information or knowledge or data or records may be recorded or
stored and all computer programs used for the compilation or printout of such
information, knowledge, records or data, (vi) all licenses, consents, permits,
variances, certifications, authorizations and approvals, however characterized,
now or hereafter acquired or held by such Pledgor, including building permits,
certificates of occupancy, environmental certificates, industrial permits or
licenses and certificates of operation and (vii) all rights to reserves,
deferred payments, deposits, refunds, indemnification of claims and claims for
tax or other refunds against any Governmental Authority, except in each case for
Excluded Property.

“Goodwill” shall mean, collectively, with respect to each Pledgor, the goodwill
connected with such Pledgor’s business including all goodwill connected with
(i) the use of and symbolized by any Trademark or Intellectual Property License
with respect to any Trademark in which such Pledgor has any interest, (ii) all
know-how, trade secrets, customer and supplier lists, proprietary information,
inventions, methods, procedures, formulae, descriptions, compositions, technical
data, drawings, specifications, name plates, catalogs, confidential information
and the right to limit the use or disclosure thereof by any person, pricing and
cost information, business and marketing plans and proposals, consulting
agreements, engineering contracts and such other assets which relate to such
goodwill and (iii) all product lines of such Pledgor’s business.

 

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“Guarantors” shall have the meaning assigned to such term in the Preamble
hereof.

“Instruments” shall mean, collectively, with respect to each Pledgor, all
“instruments,” as such term is defined in Article 9, rather than Article 3, of
the UCC, and shall include all promissory notes, drafts, bills of exchange or
acceptances.

“Intellectual Property Collateral” shall mean, collectively, the Patents,
Trademarks, Copyrights, Intellectual Property Licenses and Goodwill.

“Intellectual Property Licenses” shall mean, collectively, with respect to each
Pledgor, all written license agreements to which such Pledgor is a party with
any other party other than an Affiliate or Subsidiary with respect to any
Patent, Trademark or Copyright or any other patent, trademark or copyright,
whether such Pledgor is a licensor or licensee, under any such license
agreement, subject in each case to the terms of such license agreements, and the
right to prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such license agreements.

“Intercompany Notes” shall mean, with respect to each Pledgor, all intercompany
notes described in Schedule 11 to the Perfection Certificate and intercompany
notes hereafter acquired by such Pledgor and all certificates, instruments or
documents evidencing such intercompany notes, and all assignments, amendments,
restatements, supplements, extensions, renewals, replacements or modifications
thereof to the extent permitted pursuant to the terms hereof.

“Investment Property” shall mean a Security, whether certificated or
uncertificated, Security Entitlement, Securities Accounts, Commodity Contract or
Commodity Account, excluding, however, the Securities Collateral.

“Joinder Agreement” shall mean an agreement substantially in the form of Exhibit
3 hereto.

“Lenders” shall have the meaning assigned to such term in Recital A hereof.

“Material Intellectual Property Collateral” shall mean any Intellectual Property
Collateral that is material (i) to the use and operation of the Pledged
Collateral or Mortgaged Property or (ii) to the business, results of operations,
prospects or condition, financial or otherwise, of any Pledgor.

“Mortgaged Property” shall have the meaning assigned to such term in the
Mortgages.

“Motor Vehicles” shall mean all trucks, trailers, tractors, service vehicles,
automobiles and other registered mobile equipment of the Loan Parties.

“Original Guarantors” shall have the meaning assigned to such term in the
Preamble hereof.

 

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“Patents” shall mean, collectively, with respect to each Pledgor, all patents
issued or assigned to, and all patent applications and registrations made by,
such Pledgor (whether established or registered or recorded in the United States
or any other country or any political subdivision thereof), together with any
and all (i) rights and privileges arising under applicable law with respect to
such Pledgor’s use of any patents, (ii) inventions and improvements described
and claimed therein, (iii) reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and amendments thereto,
(iv) income, fees, royalties, damages, claims and payments now or hereafter due
and/or payable thereunder and with respect thereto including damages and
payments for past, present or future infringements thereof, (v) rights
corresponding thereto throughout the world and (vi) rights to sue for past,
present or future infringements thereof.

“Perfection Certificate” shall mean that certain perfection certificate dated as
of the date hereof, executed and delivered by each Pledgor in favor of the
Administrative Agent for the benefit of the Secured Parties and attached hereto
as Exhibit 7, and each other Perfection Certificate (which shall be in form
reasonably acceptable to the Administrative Agent) executed and delivered by the
applicable Guarantor in favor of the Administrative Agent for the benefit of the
Secured Parties contemporaneously with the execution and delivery of each
Joinder Agreement executed in accordance with Section 3.5 hereof.

“Pledge Amendment” shall have the meaning assigned to such term in Section 5.1
hereof.

“Pledged Collateral” shall have the meaning assigned to such term in Section 2.1
hereof.

“Pledged Securities” shall mean, collectively, with respect to each Pledgor,
(i) all issued and outstanding Equity Interests of each issuer set forth on
Schedules 10(a) and 10(b) to the Perfection Certificate as being owned by such
Pledgor and all options, warrants, rights, agreements and additional Equity
Interests of whatever class of any such issuer acquired by such Pledgor
(including by issuance), together with all rights, privileges, authority and
powers of such Pledgor relating to such Equity Interests in each such issuer or
under any Organizational Document of each such issuer, and the certificates,
instruments and agreements representing such Equity Interests and any and all
interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to such Equity Interests, (ii) all Equity Interests of
any issuer, which Equity Interests are hereafter acquired by such Pledgor
(including by issuance) and all options, warrants, rights, agreements and
additional Equity Interests of whatever class of any such issuer acquired by
such Pledgor (including by issuance), together with all rights, privileges,
authority and powers of such Pledgor relating to such Equity Interests or under
any Organizational Document of any such issuer, and the certificates,
instruments and agreements representing such Equity Interests and any and all
interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to such Equity Interests, from time to time acquired by
such Pledgor in any manner, and (iii) all Equity Interests issued in respect of
the Equity Interests referred to in clause (i) or (ii) upon any consolidation or
merger of any issuer of such Equity Interests; provided, however, that with
respect to the voting Equity Interests of any Foreign Subsidiary (other than any
Canadian Subsidiary) or Foamex Thailand, Pledged

 

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Securities shall not include any such voting Equity Interests to the extent in
excess of 65% of the aggregate outstanding voting Equity Interests of such
Foreign Subsidiary or Foamex Thailand.

“Pledgor” shall have the meaning assigned to such term in the Preamble hereof.

“Receivables” shall mean all (i) Accounts, (ii) Chattel Paper, (iii) Payment
Intangibles, (iv) General Intangibles, (v) Instruments and (vi) all other rights
to payment, whether or not earned by performance, for goods or other property
sold, leased, licensed, assigned or otherwise disposed of, or services rendered
or to be rendered, regardless of how classified under the UCC together with all
of Pledgors’ rights, if any, in any goods or other personal property giving rise
to such right to payment and all Collateral Support and Supporting Obligations
related thereto and all Records relating thereto.

“Revolving Credit Copyright Security Agreement” shall mean an agreement
substantially in the form of Exhibit 4 hereto.

“Revolving Credit Patent Security Agreement” shall mean an agreement
substantially in the form of Exhibit 5 hereto.

“Revolving Credit Trademark Security Agreement” shall mean an agreement
substantially in the form of Exhibit 6 hereto.

“Securities Account Control Agreement” shall mean a control agreement in a form
that is reasonably satisfactory to the Administrative Agent establishing the
Administrative Agent’s Control with respect to any Securities Account.

“Securities Collateral” shall mean, collectively, the Pledged Securities, the
Intercompany Notes and the Distributions.

“Trademarks” shall mean, collectively, with respect to each Pledgor, all
trademarks (including service marks), slogans, logos, certification marks, trade
dress, uniform resource locations (URL’s), domain names, corporate names and
trade names, whether registered or unregistered, owned by or assigned to such
Pledgor and all registrations and applications for the foregoing (whether
statutory or common law and whether established or registered in the United
States or any other country or any political subdivision thereof) (except for
“intent-to-use” applications for trademark or service mark registrations filed
pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until
an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of
said Act has been filed), together with any and all (i) rights and privileges
arising under applicable law with respect to such Pledgor’s use of any
trademarks, (ii) reissues, continuations, extensions and renewals thereof and
amendments thereto, (iii) income, fees, royalties, damages and payments now and
hereafter due and/or payable thereunder and with respect thereto, including
damages, claims and payments for past, present or future infringements thereof,
(iv) rights corresponding thereto throughout the world and (v) rights to sue for
past, present and future infringements thereof.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, however, that, at any time, if by reason of
mandatory provisions of law, any or all of the perfection or priority of the
Administrative Agent’s and the

 

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Secured Parties’ security interest in any item or portion of the Pledged
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as in effect, at such time, in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or priority.

SECTION 1.2.   Interpretation. The rules of interpretation specified in the
Credit Agreement shall be applicable to this Agreement.

SECTION 1.3.   Resolution of Drafting Ambiguities. Each Pledgor acknowledges and
agrees that it was represented by counsel in connection with the execution and
delivery hereof, that it and its counsel reviewed and participated in the
preparation and negotiation hereof and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party (i.e., the
Administrative Agent) shall not be employed in the interpretation hereof.

SECTION 1.4.   Perfection Certificate. The Administrative Agent and each Secured
Party agree that the Perfection Certificate and all descriptions of Pledged
Collateral and schedules thereto are and shall at all times remain a part of
this Agreement.

ARTICLE II

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

SECTION 2.1.   Grant of Security Interest. As collateral security for the
payment and performance in full of all the Secured Obligations, each Pledgor
hereby pledges and grants to the Administrative Agent for the benefit of the
Secured Parties, a lien on and security interest in all of the right, title and
interest of such Pledgor in, to and under the following property, wherever
located, and whether now existing or hereafter arising or acquired from time to
time (collectively, the “Pledged Collateral”):

 

(i)

all Accounts;

 

(ii)

all Equipment, Goods, Inventory and Fixtures;

 

(iii)

all Documents, Instruments and Chattel Paper;

 

(iv)

all Letters of Credit and Letter-of-Credit Rights;

 

(v)

all Securities Collateral;

 

(vi)

all Investment Property;

 

(vii)

all Intellectual Property Collateral;

 

(viii)

the Commercial Tort Claims described on Schedule 13 to the Perfection
Certificate;

 

(ix)

all General Intangibles;

 

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(x)

all Money and all Deposit Accounts;

 

(xi)

all Supporting Obligations;

 

(xii)

all books and records relating to the Pledged Collateral; and

 

(xiii)

to the extent not covered by clauses (i) through (xii) of this sentence, all
other personal property of such Pledgor, whether tangible or intangible, and all
Proceeds and products of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing, any and all Proceeds of any insurance, indemnity, warranty or
guaranty payable to such Pledgor from time to time with respect to any of the
foregoing.

Notwithstanding anything to the contrary contained in clauses (i) through (xiii)
above, the security interest created by this Agreement shall not extend to, and
the term “Pledged Collateral” shall not include, any Excluded Property and the
Pledgors shall from time to time at the reasonable request of the Administrative
Agent give written notice to the Administrative Agent identifying in reasonable
detail the Excluded Property and shall provide to the Administrative Agent such
other information regarding the Excluded Property as the Administrative Agent
may reasonably request and (ii) from and after the Closing Date, no Pledgor
shall permit to become effective in any document creating, governing or
providing for any material permit, license or agreement a provision that would
prohibit the creation of a Lien on such material permit, license or agreement in
favor of the Administrative Agent unless such Pledgor believes, in its
reasonable judgment, that such prohibition is usual and customary in
transactions of such type.

It is further understood and agreed that, notwithstanding anything herein to the
contrary, at any time that the Intercreditor Agreement is in effect, any Control
Collateral that is required to be delivered to the Administrative Agent
hereunder shall be delivered to the Control Agent and the Control Agent shall
act as agent of the Administrative Agent and the Secured Parties with respect to
all Control Collateral.

SECTION 2.2.   Filings. (a) Each Pledgor hereby irrevocably authorizes the
Administrative Agent at any time and from time to time to file in any relevant
jurisdiction any financing statements (including fixture filings) and amendments
thereto that contain the information required by Article 9 of the Uniform
Commercial Code of each applicable jurisdiction for the filing of any financing
statement or amendment relating to the Pledged Collateral, including (i) whether
such Pledgor is an organization, the type of organization and any organizational
identification number issued to such Pledgor, (ii) any financing or continuation
statements or other documents without the signature of such Pledgor where
permitted by law, including the filing of a financing statement describing the
Pledged Collateral as “all assets now owned or hereafter acquired by the Pledgor
or in which Pledgor otherwise has rights” and (iii) in the case of a financing
statement filed as a fixture filing or covering Pledged Collateral constituting
minerals or the like to be extracted or timber to be cut, a sufficient
description of the real property to which such Pledged Collateral relates. Each
Pledgor agrees to

 

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provide all information described in the immediately preceding sentence to the
Administrative Agent promptly upon request by the Administrative Agent.

(b)          Each Pledgor hereby ratifies its authorization for the
Administrative Agent to file in any relevant jurisdiction any financing
statements of the type described in clause (a) above relating to the Pledged
Collateral if filed prior to the date hereof, with the Administrative Agent
delivering a copy of such filing to the applicable Pledgor.

(c)          Each Pledgor hereby further authorizes the Administrative Agent to
file filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country), including the Revolving Credit Copyright Security Agreement, the
Revolving Credit Patent Security Agreement and the Revolving Credit Trademark
Security Agreement, or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the security interest granted by
such Pledgor hereunder, without the signature of such Pledgor, and naming such
Pledgor where permitted by law, as debtor, and the Administrative Agent, as
secured party.

(d)          Each Pledgor hereby agrees to notify the Administrative Agent when
an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of
the Lanham Act, 15 U.S.C. § 1051 has been filed in the United States Patent and
Trademark Office in respect of any “intent-to-use” applications for trademark or
service mark registrations filed pursuant to Section 1(b) of such Act within 30
days of the end of the fiscal quarter in which such filing is made.

ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF PLEDGED COLLATERAL

SECTION 3.1.   Delivery of Certificated Securities Collateral. Each Pledgor
represents and warrants that all certificates, agreements or instruments
representing or evidencing the Securities Collateral in existence on the date
hereof have been delivered to the Control Agent or the Administrative Agent in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank and that (assuming continuing
possession by the Control Agent or the Administrative Agent of any such
Securities Collateral constituting Certificated Securities), the Administrative
Agent has a perfected security interest therein prior to all other Liens on such
Securities Collateral except for Permitted Liens which have priority over, or
are pari passu with, the security interest on such Securities Collateral by
operation of law or pursuant to the Intercreditor Agreement. Each Pledgor hereby
agrees that all certificates, agreements or instruments representing or
evidencing Securities Collateral acquired by such Pledgor after the date hereof
shall promptly (but in any event within ten Business Days after receipt thereof
by such Pledgor) be delivered to and held by or on behalf of the Control Agent
or the Administrative Agent pursuant hereto. All certificated Securities
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Administrative Agent. The
Administrative Agent shall have the right, at any time upon the

 

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occurrence and during the continuance of any Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Administrative
Agent or any of its nominees or endorse for negotiation any or all of the
Securities Collateral, without any indication that such Securities Collateral is
subject to the security interest hereunder. In addition, upon the occurrence and
during the continuance of an Event of Default, the Administrative Agent shall
have the right at any time to exchange certificates representing or evidencing
Securities Collateral for certificates of smaller or larger denominations.

SECTION 3.2.   Perfection of Uncertificated Securities Collateral. Each Pledgor
represents and warrants that the Administrative Agent has a perfected security
interest in all uncertificated Pledged Securities pledged by it hereunder that
are in existence on the date hereof prior to all other Liens on such Securities
Collateral except for Permitted Liens which have priority over, or are pari
passu with, the security interest on such Pledged Securities by operation of law
or pursuant to the Intercreditor Agreement. Each Pledgor hereby agrees that if
any of the Pledged Securities are at any time not evidenced by certificates of
ownership, then each applicable Pledgor shall, to the extent permitted by
applicable law, (i) cause (or, if the issuer is not a Subsidiary, use
commercially reasonable efforts to cause) the issuer to execute and deliver to
the Administrative Agent an acknowledgment of the pledge of such Pledged
Securities substantially in the form of Exhibit 1 hereto or such other form that
is reasonably satisfactory to the Administrative Agent, (ii) if necessary or
desirable to perfect a security interest in such Pledged Securities, cause (or,
if the issuer is not a Subsidiary, use commercially reasonable efforts to cause)
such pledge to be recorded on the equityholder register or the books of the
issuer, execute any customary pledge forms or other documents necessary or
appropriate to complete the pledge and give the Administrative Agent the right
to transfer such Pledged Securities under the terms hereof, and (iii) after the
occurrence and during the continuance of any Event of Default, upon request by
the Administrative Agent, (A) cause (or, if the issuer is not a Subsidiary, use
commercially reasonable efforts to cause) the Organization Documents of each
such issuer to be amended to provide that such Pledged Securities shall be
treated as “securities” for purposes of the UCC and (B) cause (or, if the issuer
is not a Subsidiary, use commercially reasonable efforts to cause) such Pledged
Securities to become certificated and delivered to the Administrative Agent in
accordance with the provisions of Section 3.1. Each Pledgor hereby agrees that
if any of the Pledged Securities not issued by any Subsidiary of such Pledgor
are at any time not evidenced by certificates of ownership, such Pledgor shall
enter agreements granting “control” to the Administrative Agent with respect to
such uncertificated Pledged Securities or take any other action reasonably
requested by the Administrative Agent in order to perfect security interest
therein prior to all other Liens on such Pledged Securities except for Permitted
Liens which have priority over, or are pari passu with, the security interest on
such Pledged Securities by operation of law or pursuant to the Intercreditor
Agreement.

SECTION 3.3.   Financing Statements and Other Filings; Maintenance of Perfected
Security Interest Each Pledgor represents and warrants that all financing
statements, agreements, instruments and other documents necessary to perfect the
security interest granted by it to the Administrative Agent in respect of the
Pledged Collateral have been delivered to the Administrative Agent in completed
and, to the extent necessary or appropriate, duly executed form for filing in
each governmental, municipal or other office specified in Schedule 7 to the
Perfection Certificate. Each Pledgor agrees that at the sole cost and expense of
the Pledgors, such Pledgor will maintain the security interest created by this
Agreement in the Pledged

 

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Collateral as a perfected security interest subject only to Permitted Liens and
prior to all other Liens on such Pledged Collateral except, in the case of
Pledged Collateral other than ABL Collateral, for Permitted Liens identified in
clauses (b), (j),(l), (o) and (r) of Section 7.14 of the Credit Agreement and,
with respect to all Pledged Collateral, except for Permitted Liens which have
priority over, or are pari passu with, the security interest on such Pledged
Collateral by operation of law or pursuant to the Intercreditor Agreement.

SECTION 3.4.   Other Actions. In order to further ensure the attachment,
perfection and priority of, and the ability of the Administrative Agent to
enforce, the Administrative Agent’s security interest in the Pledged Collateral,
each Pledgor represents and warrants (as to itself) as follows and agrees, in
each case at such Pledgor’s own expense, to take the following actions with
respect to the following Pledged Collateral:

(a)          Instruments and Tangible Chattel Paper. As of the date hereof, no
amounts payable under or in connection with any of the Pledged Collateral are
evidenced by any Instrument or Tangible Chattel Paper other than such
Instruments and Tangible Chattel Paper listed in Schedule 11 to the Perfection
Certificate. Each Instrument and each item of Tangible Chattel Paper in excess
of $500,000 listed in Schedule 11 to the Perfection Certificate has been
properly endorsed, assigned and delivered to the Control Agent or the
Administrative Agent, accompanied by instruments of transfer or assignment duly
executed in blank. If at any time any amount in excess of $500,000 then payable
under or in connection with any of the Pledged Collateral shall be evidenced by
any Instrument or Tangible Chattel Paper, the Pledgor acquiring such Instrument
or Tangible Chattel Paper shall promptly (but in any event within ten Business
Days after receipt thereof) endorse, assign and deliver the same to the Control
Agent or the Administrative Agent, accompanied by such instruments of transfer
or assignment duly executed in blank as the Administrative Agent may from time
to time specify.

(b)          Deposit Accounts. As of the date hereof, no Pledgor has any Deposit
Accounts other than the accounts listed in Schedule 14 to the Perfection
Certificate. The Administrative Agent has a perfected security interest in each
such Deposit Account (other than any Excluded Account and the BofA Accounts),
which security interest is perfected by Control. With respect to each BofA
Account, the Borrower shall, within 60 days of the Closing Date either (i)
provide evidence reasonably acceptable to the Administrative Agent that it has
closed each such BofA Account or (ii) deliver to the Administrative Agent a
Deposit Account Control Agreement with respect to such BofA Account, duly
executed by the Borrower and Bank of America, N.A., in its capacity as the Bank
(it being understood that if any such BofA Account is not closed in accordance
with the foregoing, such BofA Account shall be an ABL Collateral Account for the
purposes hereof, subject to a first priority security interest in favor of the
Administrative Agent). No Pledgor shall hereafter establish and maintain any
Deposit Account (other than any Excluded Account) unless (1) it shall have given
the Administrative Agent 10 days’ prior written notice of its intention to
establish such new Deposit Account with a Bank, (2) such Bank shall be
reasonably acceptable to the Administrative Agent and (3) such Bank and such
Pledgor shall have duly executed and delivered to the Administrative Agent a
Deposit Account Control Agreement with respect to such Deposit Account within 15
days of the establishment of such Deposit Account (or such longer

 

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period of time as the Administrative Agent may agree to in writing). The
Administrative Agent agrees with each Pledgor that the Administrative Agent
shall not give any instructions directing the disposition of funds from time to
time credited to any Deposit Account or withhold any withdrawal rights from such
Pledgor with respect to funds from time to time credited to any Deposit Account
unless a Triggering Event has occurred or a Default or Event of Default has
occurred and is continuing. The second sentence of this Section 3.4(b) shall not
apply to the “Master Funding Account” of Foamex International Inc. at Bank of
America, N.A. (Account No. 3752192166) or to any other disbursement account
opened by a Pledgor (in the ordinary course of business) at Bank of America,
N.A. that Bank of America, N.A. does not permit to be subject to a Deposit
Account Control Agreement. No Pledgor shall grant Control of any Deposit Account
to any person other than the First Lien Term Collateral Agent, the Second Lien
Term Collateral Agent and the Administrative Agent.

(c)          Securities Accounts and Commodity Accounts. (i) As of the date
hereof, no Pledgor has any Securities Accounts or Commodity Accounts other than
those listed in Schedule 14 to the Perfection Certificate. The Administrative
Agent has a perfected security interest in each such Securities Account and
Commodity Account, which security interest is perfected by Control (except with
respect to any Securities Account that is an Excluded Account). No Pledgor shall
hereafter establish and maintain any Securities Account or Commodity Account
with any Securities Intermediary or Commodity Intermediary unless (1) it shall
have given the Administrative Agent 10 days’ prior written notice of its
intention to establish such new Securities Account or Commodity Account with
such Securities Intermediary or Commodity Intermediary, (2) such Securities
Intermediary or Commodity Intermediary shall be reasonably acceptable to the
Administrative Agent and (3) such Securities Intermediary or Commodity
Intermediary, as the case may be, and such Pledgor shall have duly executed and
delivered a Control Agreement with respect to such Securities Account (except
with respect to any Securities Account that is an Excluded Account) or Commodity
Account, as the case may be within 15 days of the establishment of such
Securities Account or Commodity Account (or such longer period of time as the
Administrative Agent may agree to in writing). Each Pledgor shall accept any
cash and Investment Property in trust for the benefit of the Administrative
Agent and within two (2) Business Days of actual receipt thereof, deposit any
and all cash and Security Entitlements received by it into a Deposit Account or
Securities Account subject to Administrative Agent’s Control or, if in the
ordinary course of business, an Excluded Account (provided that any cash and
Securities Entitlement that is received by a Pledgor that constitutes ABL
Collateral shall be deposited into an ABL Collateral Account). The
Administrative Agent agrees with each Pledgor that the Administrative Agent
shall not give any Entitlement Orders or instructions or directions to any
issuer of uncertificated securities, Securities Intermediary or Commodity
Intermediary, and shall not withhold its consent to the exercise of any
withdrawal or dealing rights by such Pledgor, unless a Triggering Event has
occurred or a Default or Event of Default has occurred and is continuing or,
after giving effect to any such investment and withdrawal rights, would occur.
The provisions of this Section 3.4(c) shall not apply to any Financial Assets
credited to any ABL Collateral Account for which the Administrative Agent is the
Securities Intermediary. No Pledgor shall grant Control over any Investment
Property to any Person other than the First Lien

 

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Term Collateral Agent, the Second Lien Term Collateral Agent and the
Administrative Agent.

(ii)          As between the Administrative Agent and the Pledgors, the Pledgors
shall bear the investment risk with respect to the Investment Property and
Pledged Securities, and the risk of loss of, damage to, or the destruction of
the Investment Property and Pledged Securities, whether in the possession of, or
maintained as a Security Entitlement or deposit by, or subject to the Control
of, the Administrative Agent, a Securities Intermediary, a Commodity
Intermediary, any Pledgor or any other person.

(d)          Electronic Chattel Paper and Transferable Records. As of the date
hereof, no amount under or in connection with any of the Pledged Collateral is
evidenced by any Electronic Chattel Paper or any “transferable record” (as that
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act, or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction) other than such
Electronic Chattel Paper and transferable records listed in Schedule 11 to the
Perfection Certificate. If any amount in excess of $500,000 payable under or in
connection with any of the Pledged Collateral shall be evidenced by any
Electronic Chattel Paper or any transferable record, the Pledgor acquiring such
Electronic Chattel Paper or transferable record shall promptly notify the
Administrative Agent thereof and shall use commercially reasonable efforts to
take such action as the Administrative Agent may reasonably request to vest in
the Administrative Agent control of such Electronic Chattel Paper under
Section 9-105 of the UCC or control under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction, of such transferable record. The Administrative Agent agrees with
such Pledgor that the Administrative Agent will arrange, pursuant to procedures
reasonably satisfactory to the Administrative Agent, for the Pledgor to make
alterations to the Electronic Chattel Paper or transferable record permitted
under Section 9-105 of the UCC or, as the case may be, Section 201 of the
Federal Electronic Signatures in Global and National Commerce Act or Section 16
of the Uniform Electronic Transactions Act for a party in control to allow
without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Pledgor
with respect to such Electronic Chattel Paper or transferable record.

(e)          Letter-of-Credit Rights. If any Pledgor is at any time a
beneficiary under a Letter of Credit now or hereafter issued with a face amount
in excess of $500,000, such Pledgor shall promptly notify the Administrative
Agent thereof and such Pledgor shall, at the reasonable request of the
Administrative Agent, use commercially reasonable efforts to, either (i) arrange
for the issuer and any confirmer of such Letter of Credit to consent to an
assignment to the Administrative Agent of the proceeds of any drawing under the
Letter of Credit or (ii) arrange for the Administrative Agent to become the
transferee beneficiary of such Letter of Credit, in each case, pursuant to an
agreement in form and substance reasonably satisfactory to the Administrative
Agent, and with the Administrative Agent agreeing, in each case, that the
proceeds of any drawing under the Letter of Credit are to be applied as provided
in the Credit Agreement.

 

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(f)           Commercial Tort Claims. As of the date hereof, each Pledgor hereby
represents and warrants that it holds no Commercial Tort Claims other than those
listed in Schedule 13 to the Perfection Certificate. If any Pledgor shall at any
time hold or acquire a Commercial Tort Claim in excess of $100,000, such Pledgor
shall promptly (and in any event within 10 Business Days) notify the
Administrative Agent in writing signed by such Pledgor of the brief details
thereof and if such Commercial Tort Claim is in excess of $1,000,000, grant to
the Administrative Agent in such writing a security interest therein and in the
Proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to the Administrative Agent.

(g)          Landlord’s Access Agreements and Bailee Letters. Each Pledgor shall
use its commercially reasonable efforts to obtain as soon as practicable after
the date hereof with respect to each leased real property set forth in Schedule
8.1(d)(v) to the Credit Agreement, where such Pledgor maintains Pledged
Collateral, a Bailee Letter and/or Landlord Access Agreement, as applicable, and
use commercially reasonable efforts to obtain a Bailee Letter, a Landlord Access
Agreement and/or landlord’s lien waiver, as applicable, from all bailees and
landlords, as applicable, who from time to time have possession of any Pledged
Collateral or on whose premises any Pledged Collateral is located. A Bailee
Letter and or a Landlord Access Agreement shall not be required if the value of
the Pledged Collateral held by such bailee or on such landlord’s premises is
less than $1,000,000.

(h)          Motor Vehicles. Upon the reasonable request of the Administrative
Agent, each Pledgor shall deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles (and any other
Equipment covered by certificates of title or ownership) owned by it, with the
Administrative Agent listed as lienholder therein. Such requirement shall not
apply to any such Motor Vehicle (or any such other Equipment) with a fair market
value of $100,000 or less.

SECTION 3.5.   Joinder of Additional Guarantors. The Pledgors shall cause each
Subsidiary of Holdings which, from time to time, after the date hereof shall be
required to pledge any assets to the Administrative Agent for the benefit of the
Secured Parties pursuant to the provisions of the Credit Agreement, to execute
and deliver to the Administrative Agent (i) a Joinder Agreement substantially in
the form of Exhibit 3 hereto within ten (10) Business Days of the date on which
it was acquired or created and (ii) a Perfection Certificate, in each case,
within ten (10) Business Days of the date on which it was acquired or created.
With respect to the foregoing in this Section 3.5, upon such execution and
delivery, such Subsidiary shall constitute a “Guarantor” and a “Pledgor” for all
purposes hereunder with the same force and effect as if originally named as a
Guarantor and Pledgor herein. The execution and delivery of such Joinder
Agreement shall not require the consent of any Pledgor hereunder. The rights and
obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor and Pledgor as a party to this
Agreement.

SECTION 3.6.   Supplements; Further Assurances. Each Pledgor shall take such
further actions, and execute and/or deliver to the Administrative Agent such
additional financing statements, amendments, assignments, agreements,
supplements, powers and instruments, as the Administrative Agent may in its
reasonable judgment deem necessary or appropriate in order to

 

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create, perfect, preserve and protect the security interest in the Pledged
Collateral as a security interest having at least the perfection and priority
described in Sections 3.1 through 3.4 as provided herein and to preserve and
protect the rights and interests granted to the Administrative Agent hereunder,
to carry into effect the purposes hereof or better to assure and confirm the
validity, enforceability and priority of the Administrative Agent’s security
interest in the Pledged Collateral as a security interest having at least the
perfection and priority described in Sections 3.1 through 3.4 or permit the
Administrative Agent to exercise and enforce its rights, powers and remedies
hereunder with respect to any Pledged Collateral, including the filing of
financing statements, continuation statements and other documents (including
this Agreement) under the Uniform Commercial Code (or other similar laws) in
effect in any jurisdiction with respect to the security interest created hereby
and the execution and delivery of Control Agreements, all in form reasonably
satisfactory to the Administrative Agent and in such offices (including the
United States Patent and Trademark Office and the United States Copyright
Office) wherever required by law to perfect, continue and maintain the validity,
enforceability and priority of the security interest in the Pledged Collateral
as a security interest having at least the perfection and priority described in
Sections 3.1 through 3.4 as provided herein and to preserve the other rights and
interests granted to the Administrative Agent hereunder, as against third
parties, with respect to the Pledged Collateral. Without limiting the generality
of the foregoing, each Pledgor shall make, execute, endorse, acknowledge, file
or refile and/or deliver to the Administrative Agent from time to time upon
reasonable request by the Administrative Agent such lists, schedules,
descriptions and designations of the Pledged Collateral, copies of warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
supplements, additional security agreements, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments as the Administrative Agent shall reasonably request
for such purposes. If an Event of Default has occurred and is continuing, the
Administrative Agent may institute and maintain, in its own name or in the name
of any Pledgor, such suits and proceedings as the Administrative Agent may be
advised by counsel shall be necessary or expedient to prevent any impairment of
the security interest in or the perfection thereof in the Pledged Collateral.
All of the foregoing shall be at the sole cost and expense of the Pledgors.

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

Each Pledgor represents, warrants and covenants as follows:

SECTION 4.1.   Title. Except for the security interest granted to the
Administrative Agent for the ratable benefit of the Secured Parties pursuant to
this Agreement and Permitted Liens, such Pledgor owns and has rights and, as to
Pledged Collateral acquired by it from time to time after the date hereof, will
own and have rights in each item of Pledged Collateral pledged by it hereunder,
free and clear of any and all Liens. In addition, no Liens exist on the
Securities Collateral, other than Permitted Liens.

 

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SECTION 4.2.   Validity of Security Interest. The security interest in and Lien
on the Pledged Collateral granted to the Administrative Agent for the benefit of
the Secured Parties hereunder constitutes (a) a legal and valid security
interest in all the Pledged Collateral securing the payment and performance of
the Secured Obligations, and (b) subject to the filings and other actions
described in Schedule 7 to the Perfection Certificate, the payment of all
applicable fees, the delivery to and continuing possession by the Control Agent
or the Administrative Agent of all Certificated Securities, all Instruments, all
Tangible Chattel Paper and all Documents a security interest in which is
perfected by possession, and the obtaining and maintenance of “control” (as
described in the Unifor m Commercial Code as in effect in the applicable
jurisdiction) by the Administrative Agent of all Deposit Accounts, all
Securities Accounts, all Commodities Accounts, all Electronic Chattel Paper,
Letter-of-Credit Rights and all Uncertificated Securities, in each case a
security interest in which is perfected by such “control”, a perfected security
interest in all the Pledged Collateral. To the extent perfection of the security
interest in such Pledged Collateral is required by this Agreement, the security
interest and Lien granted to the Administrative Agent for the benefit of the
Secured Parties pursuant to this Agreement in and on such Pledged Collateral
will at all times constitute a perfected security interest and Lien prior to all
other Liens, except for, in the case of Pledged Collateral other than ABL
Collateral, for Permitted Liens identified in clauses (b), (j), (l), (o) and (r)
of Section 7.14 of the Credit Agreement and, with respect to all Pledged
Collateral, except for Permitted Liens which have priority over, or are pari
passu with, the security interest on such Pledged Collateral by operation of law
or pursuant to the Intercreditor Agreement.

SECTION 4.3.   Defense of Claims; Transferability of Pledged Collateral. Subject
to Section 7.1 of the Credit Agreement, each Pledgor shall, at its own cost and
expense, defend title to the Pledged Collateral pledged by it hereunder and the
security interest therein and Lien thereon granted to the Administrative Agent
and the priority thereof against all claims and demands of all Persons, at its
own cost and expense, at any time claiming any interest therein adverse to the
Administrative Agent or any other Secured Party other than Permitted Liens.

SECTION 4.4.   Other Financing Statements. It has not filed, nor authorized any
third party to file (nor will there be), any valid or effective financing
statement (or similar statement, instrument of registration or public notice
under the law of any jurisdiction) covering or purporting to cover any interest
of any kind in the Pledged Collateral, except such as have been filed in favor
of the Administrative Agent pursuant to this Agreement or in favor of any holder
of a Permitted Lien with respect to such Permitted Liens or financing statements
or public notices relating to the termination statements listed on Schedule 9(b)
to the Perfection Certificate. No Pledgor shall execute, authorize or permit to
be filed in any public office any financing statement (or similar statement,
instrument of registration or public notice under the law of any jurisdiction)
relating to any Pledged Collateral, except financing statements and other
statements and instruments filed or to be filed in respect of and covering the
security interests granted by such Pledgor to the holder of the Permitted Liens.

SECTION 4.5.   Chief Executive Office; Change of Name; Jurisdiction of
Organization. The Administrative Agent may rely on advice of counsel as to
whether any or all UCC financing statements of the Pledgors need to be amended
as a result of any of the changes described in Section 7.12 of the Credit
Agreement. If any Pledgor fails to provide information to the Administrative
Agent about such changes on a timely basis, the Administrative Agent shall

 

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not be liable or responsible to any party for any failure to maintain a
perfected security interest in such Pledgor’s property constituting Pledged
Collateral, for which the Administrative Agent needed to have information
relating to such changes. The Administrative Agent shall have no duty to inquire
about such changes if any Pledgor does not inform the Administrative Agent of
such changes, the parties acknowledging and agreeing that it would not be
feasible or practical for the Administrative Agent to search for information on
such changes if such information is not provided by any Pledgor.

SECTION 4.6.   Location of Inventory and Equipment. It shall not locate any
Equipment or Inventory in an aggregate amount exceeding $1,000,000 in value in
any location, other than any location that is listed in the relevant Schedules
to the Perfection Certificate, unless (i) it shall have given the Administrative
Agent written notice thereof within 30 calendar days following such move,
clearly describing such new location and providing such other information in
connection therewith as the Administrative Agent may reasonably request and (ii)
to the extent applicable with respect to such new location, such Pledgor shall
have complied with Section 3.4(g); provided that in no event shall any Equipment
of any Pledgor exceeding $1,000,000 in value in the aggregate be moved after the
date hereof to any location outside of the continental United States, unless the
Pledgor executes any and all documents, financing statements, agreements, and
instruments, and takes all such further actions (including the filing and
recording of financing statements, notarizations, fixture filings, mortgages,
deeds of trust and other documents and the delivery of appropriate opinions of
counsel), which the Administrative Agent may reasonably request, to grant,
preserve, protect or perfect the Liens created by the Security Documents in such
Equipment or the validity or priority of any such Lien, all at the expense of
the Pledgor.

SECTION 4.7.   Due Authorization and Issuance. All of the Pledged Securities
issued by a Pledgor or a Subsidiary of a Pledgor existing on the date hereof
have been, and to the extent any such Pledged Securities are hereafter issued,
such Pledged Securities will be, upon such issuance, duly authorized, validly
issued and fully paid and non-assessable to the extent applicable. There is no
amount or other obligation owing by any Pledgor to any issuer of the Pledged
Securities that is a Pledgor or a Subsidiary of a Pledgor in exchange for or in
connection with the issuance of such Pledged Securities or any Pledgor’s status
as a partner or a member of any issuer of such Pledged Securities.

SECTION 4.8.   Consents, etc. In the event that the Administrative Agent desires
to exercise any remedies, voting or consensual rights or attorney-in-fact powers
set forth in this Agreement and determines it necessary to obtain any approvals
or consents of any Governmental Authority or any other Person therefor, then,
upon the reasonable request of the Administrative Agent, such Pledgor agrees to
use its commercially reasonable efforts to assist and aid the Administrative
Agent to obtain as soon as practicable any necessary approvals or consents for
the exercise of any such remedies, rights and powers.

SECTION 4.9.   Pledged Collateral. All information set forth herein, including
the schedules hereto, and all information contained in any documents, schedules
and lists heretofore delivered to any Secured Party, including the Perfection
Certificate and the schedules thereto, in connection with this Agreement, in
each case, relating to the Pledged Collateral, is accurate and complete in all
material respects. The description of the Pledged Collateral on the

 

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schedules to the Perfection Certificate is accurate and complete in all material
respects as to Pledged Collateral of the type required to be described therein.

SECTION 4.10.   Insurance. In the event that the proceeds of any insurance claim
are paid to any Pledgor after the Administrative Agent has exercised its right
to foreclose in accordance with the terms of this Agreement, such Net Cash
Proceeds shall, subject to the terms of the Intercreditor Agreement, be held in
trust for the benefit of the Administrative Agent and immediately after receipt
thereof shall be paid to the Administrative Agent for application in accordance
with the Credit Agreement.

 

SECTION 4.11.  

ABL Collateral Accounts.

(a)          Each Pledgor shall deposit (and shall direct each applicable
account debtor to deposit) into an ABL Collateral Account any and all
collections, proceeds or other amounts constituting, or received or payable in
connection with, ABL Collateral, subject to Pledgors’ right of withdrawal under
Section 4.11(b). In no event shall anything be deposited into an ABL Collateral
Account other than collections, proceeds or other amounts constituting, or
received or payable in connection with, ABL Collateral. Each Pledgor’s invoices
shall instruct all Account Debtors with respect to ABL Collateral to make all
payments directly to an ABL Collateral Account or to a lock-box associated with
an ABL Collateral Account (and no Pledgor shall change any such instruction).
If, notwithstanding such instructions, a Pledgor receives any payments in
respect of ABL Collateral, it shall receive such payments as the Administrative
Agent’s trustee, and shall promptly (but in no event later than two Business
Days after receipt) deposit them into an ABL Collateral Account, or if the
Administrative Agent shall direct, deliver such payments to the Administrative
Agent in their original form duly endorsed in blank.

(b)          The applicable Pledgor shall have a right to withdraw money from
the ABL Collateral Accounts and otherwise carry out transactions in the ABL
Collateral Accounts until it receives a notice from the Administrative Agent at
any time after the occurrence of a Triggering Event or after the occurrence and
during the continuation of a Default or an Event of Default of the
Administrative Agent’s exercise of its sole control with respect to such ABL
Collateral Accounts, after which time the Pledgors shall have no access to the
ABL Collateral Accounts until such time as the end of the Triggering Event
Compliance Period with respect to such Triggering Event shall have occurred or
until such Default or Event of Default has been cured or waived (and no other
Default or Event of Default has occurred and is continuing), as applicable.

SECTION 4.12.   Accounts. With respect to each Pledgor’s Accounts: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by such Pledgor, or rendition of services by
such Pledgor, in the ordinary course of such Pledgor’s business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Administrative Agent,
without any discount, offset, deduction, defense or counterclaim except those
arising in the ordinary course of such Pledgor’s business and as reported to the
Administrative Agent and the Lenders in Borrowing Base Certificates delivered in
accordance with the Credit Agreement; (iii) no payment will be received with
respect to any Account of such Pledgor, and no credit, discount or

 

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extension or agreement therefor will be granted on any Account of such Pledgor,
except those arising in the ordinary course of such Pledgor’s business and as
reported to the Administrative Agent in Borrowing Base Certificates delivered in
accordance with the Credit Agreement; (iv) each copy of an invoice delivered to
the Administrative Agent by such Pledgor will be a genuine copy of the original
invoice sent to the Account Debtor named therein; and (v) all goods described in
any invoice representing a sale of goods will have been shipped to the Account
Debtor and all services of such Pledgor described in each invoice will have been
performed. For the purposes of the foregoing representations and warranties,
“Accounts” shall have the meaning ascribed thereto in clauses (i) (with respect
to Inventory) and (ii) of Section 9-102(a)(2) of the UCC.

ARTICLE V

 

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

SECTION 5.1.   Pledge of Additional Securities Collateral. Each Pledgor shall,
upon obtaining any Pledged Securities or Intercompany Notes of any Person,
accept the same in trust for the benefit of the Administrative Agent and
promptly (but in any event within ten Business Days after receipt thereof)
deliver to the Administrative Agent a pledge amendment, duly executed by such
Pledgor, in substantially the form of Exhibit 2 hereto (each, a “Pledge
Amendment”), and deliver to the Control Agent or the Administrative Agent the
certificates and other documents required under Section 3.1 and Section 3.2
hereof in respect of the additional Pledged Securities or Intercompany Notes
which are to be pledged pursuant to this Agreement, and confirming the
attachment of the Lien hereby created on and in respect of such additional
Pledged Securities or Intercompany Notes. Each Pledgor hereby authorizes the
Administrative Agent to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Securities or Intercompany Notes listed on any Pledge
Amendment delivered to the Control Agent or the Administrative Agent shall for
all purposes hereunder be considered Pledged Collateral.

 

SECTION 5.2.

Voting Rights; Distributions; etc.

(a)          So long as no Event of Default shall have occurred and be
continuing and the Administrative Agent shall not have delivered the applicable
notice under Section 5.2(c):

(i)           Each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Securities Collateral or any part
thereof for any purpose not inconsistent with the terms or purposes hereof, the
Credit Agreement or any other document evidencing the Secured Obligations;
provided, however, that no Pledgor shall in any event exercise such rights in
any manner which would reasonably be expected to have a Material Adverse Effect.

(ii)          Each Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the Lien hereof, any and all Distributions, but only
if and to the extent made in accordance with the provisions of the Credit
Agreement; provided, however, that any and all such Distributions consisting of
rights or interests in the form of securities shall be

 

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forthwith delivered to the Control Agent or the Administrative Agent to hold as
Pledged Collateral and shall, if received by any Pledgor, be received in trust
for the benefit of the Administrative Agent, be segregated from the other
property or funds of such Pledgor and be promptly (but in any event within ten
Business Days after receipt thereof) delivered to the Control Agent or the
Administrative Agent as Pledged Collateral in the same form as so received (with
any necessary endorsement).

(b)          So long as no Event of Default shall have occurred and be
continuing, the Administrative Agent shall be deemed without further action or
formality to have granted to each Pledgor all necessary consents relating to
voting rights and shall, if necessary, upon written request of any Pledgor and
at the sole cost and expense of the Pledgors, from time to time execute and
deliver (or cause to be executed and delivered) to such Pledgor all such
instruments as such Pledgor may reasonably request in order to permit such
Pledgor to exercise the voting and other rights which it is entitled to exercise
pursuant to Section 5.2(a)(i) hereof and to receive the Distributions which it
is authorized to receive and retain pursuant to Section 5.2(a)(ii) hereof.

(c)          Upon the occurrence and during the continuance of any Event of
Default upon notice from the Administrative Agent to the Pledgors that it is
exercising its rights under Section 5.2(c)(i) and/or (ii), subject to the terms
of the Intercreditor Agreement:

(i)           All rights of each Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to Section
5.2(a)(i) hereof shall immediately cease, and all such rights shall thereupon
become vested in the Administrative Agent, which shall thereupon have the sole
right to exercise such voting and other consensual rights.

(ii)          All rights of each Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 5.2(a)(ii)
hereof shall immediately cease and all such rights shall thereupon become vested
in the Administrative Agent, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such Distributions.

(d)          Each Pledgor shall, at its sole cost and expense, from time to time
execute and deliver to the Administrative Agent appropriate instruments as the
Administrative Agent may reasonably request in order to permit the
Administrative Agent to exercise the voting and other rights which it may be
entitled to exercise pursuant to Section 5.2(c)(i) hereof and to receive all
Distributions which it may be entitled to receive under Section 5.2(c)(ii)
hereof.

(e)          All Distributions which are received by any Pledgor contrary to the
provisions of Section 5.2(a)(ii) hereof shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other funds of
such Pledgor and, subject to the terms of the Intercreditor Agreement, shall
immediately be paid over to the Administrative Agent as Pledged Collateral in
the same form as so received (with any necessary endorsement).

SECTION 5.3.   Defaults, etc. Each Pledgor hereby represents and warrants that
(i) such Pledgor is not in default in the payment of any portion of any
mandatory capital contribution, if any, required to be made under any agreement
to which such Pledgor is a party

 

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relating to the Pledged Securities pledged by it and such Pledgor is not in
violation of any other provisions of any such agreement to which such Pledgor is
a party, or otherwise in default or violation thereunder, (ii) no Securities
Collateral pledged by such Pledgor is subject to any defense, offset or
counterclaim, nor have any of the foregoing been asserted or alleged against
such Pledgor by any Person with respect thereto, and (iii) as of the date
hereof, there are no certificates, instruments, documents or other writings
(other than the Organization Documents and certificates representing such
Pledged Securities that have been delivered to the Control Agent or the
Administrative Agent) which evidence any Pledged Securities of such Pledgor.

SECTION 5.4.  Certain Agreements of Pledgors As Issuers and Holders of Equity
Interests.

(a)          In the case of each Pledgor which is an issuer of Securities
Collateral, such Pledgor agrees to be bound by the terms of this Agreement
relating to the Securities Collateral issued by it and will comply with such
terms insofar as such terms are applicable to it.

(b)          In the case of each Pledgor which is a partner, shareholder or
member, as the case may be, in a partnership, limited liability company or other
entity, such Pledgor hereby consents to the extent required by the applicable
Organizational Document to the pledge by each other Pledgor, pursuant to the
terms hereof, of the Pledged Securities in such partnership, limited liability
company or other entity and, upon the occurrence and during the continuance of
an Event of Default, to the transfer of such Pledged Securities to the
Administrative Agent or its nominee and to the substitution of the
Administrative Agent or its nominee as a substituted partner, shareholder or
member in such partnership, limited liability company or other entity with all
the rights, powers and duties of a general partner, limited partner, shareholder
or member, as the case may be.

ARTICLE VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

SECTION 6.1.   Grant of Intellectual Property License. For the purpose of
enabling the Administrative Agent, during the continuance of an Event of
Default, to exercise rights and remedies under Article IX hereof at such time as
the Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, subject to the terms of the Intercreditor Agreement, and for no other
purpose, each Pledgor hereby grants to the Administrative Agent, to the extent
assignable, an irrevocable, non-exclusive license to use, assign, license or
sublicense any of the Intellectual Property Collateral now owned or hereafter
acquired by such Pledgor wherever the same may be located. Such license shall
include reasonable access to media in which the licensed items may be recorded
or stored and to computer programs used for the compilation or printout hereof.

SECTION 6.2.   Protection of Administrative Agent’s Security. On a continuing
basis, each Pledgor shall, at its sole cost and expense, (i) promptly following
its becoming aware thereof, notify the Administrative Agent of any adverse
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institution of any proceeding in any federal, state or local court or
administrative body or in the United States Patent and Trademark Office or the
United States Copyright Office regarding any Material Intellectual Property
Collateral, such Pledgor’s right to register such Material Intellectual Property
Collateral or its right to keep and maintain such registration in full force and
effect, (ii) maintain all Material Intellectual Property Collateral as presently
used and operated, except as shall be consistent with such Pledgor’s
commercially reasonable business judgment, (iii) not permit to lapse or become
abandoned any Material Intellectual Property Collateral, and not settle or
compromise any pending or future litigation or administrative proceeding with
respect to any such Material Intellectual Property Collateral, in either case
except as shall be consistent with such Pledgor’s commercially reasonable
business judgment, (iv) upon such Pledgor obtaining knowledge thereof, promptly
notify the Administrative Agent in writing of any event which may be reasonably
expected to materially and adversely affect the value or utility of any Material
Intellectual Property Collateral or the rights and remedies of the
Administrative Agent in relation thereto including a levy or threat of levy or
any legal process against any Material Intellectual Property Collateral, (v) not
license any Intellectual Property Collateral other than licenses entered into by
such Pledgor in, or incidental to, the ordinary course of business, or amend or
permit the amendment of any of the licenses in any manner that would materially
impair the value of any Intellectual Property Collateral or the Lien on and
security interest in the Intellectual Property Collateral created therein
hereby, without the consent of the Administrative Agent, (vi) diligently keep
adequate records respecting all Material Intellectual Property Collateral and
(vii) furnish to the Administrative Agent from time to time upon the
Administrative Agent’s request therefor reasonably detailed statements and
amended schedules further identifying and describing the Intellectual Property
Collateral and such other materials evidencing or reports pertaining to any
Intellectual Property Collateral as the Administrative Agent may from time to
time request.

SECTION 6.3.   After-Acquired Property. If any Pledgor shall at any time after
the date hereof (i) obtain any rights to any additional Intellectual Property
Collateral or (ii) become entitled to the benefit of any additional Intellectual
Property Collateral or any renewal or extension thereof, including any reissue,
division, continuation, or continuation-in-part of any Intellectual Property
Collateral, or any improvement on any Intellectual Property Collateral, the
provisions hereof shall automatically apply thereto and any such item enumerated
in the preceding clause (i) or (ii) shall automatically constitute Intellectual
Property Collateral as if such would have constituted Intellectual Property
Collateral at the time of execution hereof and be subject to the Lien and
security interest created by this Agreement without further action by any party.
Each Pledgor shall within 30 days of the end of each fiscal quarter provide to
the Administrative Agent written notice of any of the foregoing and confirm the
attachment of the Lien and security interest created by this Agreement to any
rights described in clauses (i) and (ii) above by execution of an instrument in
form reasonably acceptable to the Administrative Agent and the filing of any
instruments or statements as shall be reasonably necessary to create, preserve,
protect or perfect the Administrative Agent’s security interest in such
Intellectual Property Collateral. Further, each Pledgor authorizes the
Administrative Agent to modify this Agreement by amending Schedules 12(a) and
12(b) to the Perfection Certificate to include any Intellectual Property
Collateral of such Pledgor acquired or arising after the date hereof.

SECTION 6.4.   Litigation. Unless there shall occur and be continuing any Event
of Default, each Pledgor shall have the right to commence and prosecute in its
own name, as the

 

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party in interest, for its own benefit and at the sole cost and expense of the
Pledgors, such applications for protection of the Intellectual Property
Collateral and suits, proceedings or other actions to prevent the infringement,
counterfeiting, unfair competition, dilution, diminution in value or other
damage as are necessary to protect the Intellectual Property Collateral. Upon
the occurrence and during the continuance of any Event of Default, subject to
pre-existing rights and licenses, the Administrative Agent shall have the right
but shall in no way be obligated to file applications for protection of the
Intellectual Property Collateral and/or bring suit in the name of any Pledgor,
the Administrative Agent or the Secured Parties to enforce the Intellectual
Property Collateral and any license thereunder. In the event of suit against any
Intellectual Property Collateral, each Pledgor shall, at the reasonable request
of the Administrative Agent, do any and all lawful acts and execute any and all
documents requested by the Administrative Agent in aid of such enforcement and
the Pledgors shall promptly reimburse and indemnify the Administrative Agent for
all reasonable, out-of-pocket costs and expenses incurred by the Administrative
Agent in the exercise of its rights under this Section 6.4 in accordance with
Section 14.7 of the Credit Agreement. In the event that the Administrative Agent
shall elect not to bring suit to enforce the Intellectual Property Collateral,
each Pledgor agrees, at the reasonable request of the Administrative Agent, to
take all commercially reasonable actions necessary, whether by suit, proceeding
or other action, to prevent the infringement, counterfeiting, unfair
competition, dilution, diminution in value of or other damage to any of the
Material Intellectual Property Collateral by any Person.

ARTICLE VII

 

CERTAIN PROVISIONS CONCERNING RECEIVABLES

SECTION 7.1.   Maintenance of Records. Each Pledgor shall keep and maintain at
its own cost and expense complete records of each Receivable, in a manner
consistent with prudent business practice, including records of all payments
received, all credits granted thereon, all merchandise returned and all other
documentation relating thereto. Each Pledgor shall, at such Pledgor’s sole cost
and expense, upon the Administrative Agent’s demand made at any time after the
occurrence and during the continuance of any Event of Default, deliver all
tangible evidence of Receivables, including all documents evidencing Receivables
and any books and records relating thereto to the Administrative Agent or to its
representatives (copies of which evidence and books and records may be retained
by such Pledgor). Upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent may transfer a full and complete copy of any
Pledgor’s books, records, credit information, reports, memoranda and all other
writings relating to the Receivables to and for the use by any person that has
acquired or is contemplating acquisition of an interest in the Receivables or
the Administrative Agent’s security interest therein without the consent of any
Pledgor.

SECTION 7.2.   Legend. Each Pledgor shall legend, at the request of the
Administrative Agent made at any time during the continuance of an Event of
Default and in form and manner reasonably satisfactory to the Administrative
Agent, the Receivables and the other books, records and documents of such
Pledgor evidencing or pertaining to the Receivables with an appropriate
reference to the fact that the Receivables have been assigned to the

 

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Administrative Agent for the benefit of the Secured Parties and that the
Administrative Agent has a security interest therein.

 

SECTION 7.3.  

Modification of Terms, etc.

(a)          No Pledgor will, other than in the ordinary course of business when
no Event of Default exists, (i) grant any extension of the time of payment of
any Account, (ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the payment
of any Account, (iv) allow any credit or discount on any Account, (v) re-date
any invoice or sale or make sales on extended dating, or (vi) amend, supplement
or modify any Account in any manner that could materially adversely affect the
value thereof.

(b)          The Administrative Agent shall have the right to make test
verifications of the Accounts that constitute ABL Collateral in any manner and
through any medium that it reasonably considers advisable, and the applicable
Pledgor shall furnish all such assistance and information as the Administrative
Agent may reasonably require in connection therewith.

(c)          No Pledgor shall, except to the extent done in the ordinary course
of its business and in accordance with sound business judgment (and provided
that, if an Event of Default has occurred and be continuing, the Administrative
Agent has not instructed such Pledgor otherwise), accept any note or other
instrument (except a check or other instrument for the immediate payment of
money) with respect to any of its Accounts that constitute ABL Collateral
without the Administrative Agent’s written consent. If the Administrative Agent
consents to the acceptance of any such instrument, it shall be considered as
evidence of the Account and not payment thereof and the Pledgor will promptly
deliver such instrument to the Administrative Agent endorsed by such Pledgor to
the Administrative Agent in a manner satisfactory in form and substance to the
Administrative Agent. Regardless of the form of presentment, demand or notice of
protest with respect thereto, the applicable Pledgor shall remain liable thereon
until such instrument is paid in full.

(d)          Each Pledgor shall notify the Administrative Agent promptly of all
disputes and claims in excess of $500,000 with any Account Debtor with respect
to ABL Collateral, and agrees to settle, contest or adjust such dispute or claim
at no expense to the Administrative Agent or any Lender. Each Pledgor shall send
the Administrative Agent a copy of each credit memorandum in excess of $500,000
issued outside of the ordinary course of such Pledgor’s business as soon as
issued, and such Pledgor shall promptly report that credit on Borrowing Base
Certificates submitted by it. The Administrative Agent may, at all times when an
Event of Default exists, settle or adjust disputes and claims directly with
Account Debtors with respect to ABL Collateral for amounts and upon terms which
the Administrative Agent or the Majority Lenders, as applicable, shall consider
advisable and, in all cases, the Administrative Agent will credit the applicable
Pledgor’s Loan Account (or, if such Pledgor does not have a Loan Account, the
Borrower’s Loan Account) with the net amounts received by the Administrative
Agent in payment of any such Pledgor’s Accounts.

(e)          If an Account Debtor returns any Inventory to a Pledgor when no
Event of Default exists, then such Pledgor shall promptly determine the reason
for such return and shall

 

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issue a credit memorandum to the Account Debtor in the appropriate amount. Each
Pledgor shall immediately report to the Administrative Agent any return
involving an amount in excess of $500,000. Each such report shall indicate the
reasons for the returns and the locations and condition of the returned
Inventory. In the event any Account Debtor returns Inventory to a Pledgor when
an Event of Default exists, such Pledgor, upon the request of the Administrative
Agent, shall: (i) hold the returned Inventory in trust for the Administrative
Agent; (ii) segregate all returned Inventory from all of its other property;
(iii) dispose of the returned Inventory in the ordinary course of such Pledgor’s
business or otherwise according to the Administrative Agent’s written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Administrative Agent’s prior written consent. All returned Inventory
shall be subject to the Agent’s Liens thereon.

(f)           No Pledgor will, without the Administrative Agent’s written
consent, sell any of its Inventory on a bill and hold basis. No Pledgor will
record a sale of any Inventory until such Inventory constitutes ABL Inventory
(as defined in the Intercreditor Agreement).

 

SECTION 7.4.  

Collection.

(a)          Each Pledgor shall cause to be collected from the Account Debtor of
each of the Receivables, as and when due in the ordinary course of business and
consistent with prudent business practice (including Receivables that are
delinquent, such Receivables to be collected in accordance with generally
accepted commercial collection procedures), any and all amounts owing under or
on account of such Receivable, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable,
except that, subject to Section 7.3 above, any Pledgor may, with respect to a
Receivable, allow in the ordinary course of business (i) a refund or credit due
as a result of returned or damaged or defective merchandise and (ii) such
extensions of time to pay amounts due in respect of Receivables and such other
modifications of payment terms or settlements in respect of Receivables as shall
be commercially reasonable in the circumstances, all in accordance with such
Pledgor’s ordinary course of business consistent with its collection practices
as in effect from time to time. The costs and expenses (including attorneys’
fees) of collection, in any case, whether incurred by any Pledgor, the
Administrative Agent or any Secured Party, shall be paid by the Pledgors.

(b)          Either the Administrative Agent or the Administrative Agent’s
designee may, at any time during the continuance of an Event of Default, notify
Account Debtors of a Pledgor that such Pledgor’s Accounts have been assigned to
the Administrative Agent and of the Administrative Agent’s security interest
therein, and may collect them directly and the Administrative Agent shall charge
the collection costs and expenses to the Borrower’s Loan Account as a Base Rate
Revolving Loan. So long as an Event of Default has occurred and is continuing,
each Pledgor, at the request of the Administrative Agent, shall execute and
deliver to the Administrative Agent such documents as the Administrative Agent
shall require to grant the Administrative Agent access to any post office box in
which collections of Accounts of such Pledgor are received.

 

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ARTICLE VIII

 

TRANSFERS

SECTION 8.1.   Transfers of Pledged Collateral. No Pledgor shall sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral pledged by it hereunder except as expressly permitted by the
Credit Agreement.

ARTICLE IX

 

REMEDIES

SECTION 9.1.   Remedies. Upon the occurrence and during the continuance of any
Event of Default, the Administrative Agent may from time to time exercise in
respect of the Pledged Collateral, in addition to the other rights and remedies
provided for herein or otherwise available to it, the following remedies, in
each case subject to the terms of the Intercreditor Agreement:

(i)           Personally, or by agents or attorneys, immediately take possession
of the Pledged Collateral or any part thereof, from any Pledgor or any other
person who then has possession of any part thereof with or (to the fullest
extent permitted by applicable law) without notice or process of law, and for
that purpose may enter upon any Pledgor’s premises where any of the Pledged
Collateral is located, remove such Pledged Collateral, remain present at such
premises to receive copies of all communications and remittances relating to the
Pledged Collateral and use in connection with such removal and possession any
and all services, supplies, aids and other facilities of any Pledgor;

(ii)          Demand, sue for, collect or receive any money or property at any
time payable or receivable in respect of the Pledged Collateral including
instructing the obligor or obligors on any agreement, instrument or other
obligation constituting part of the Pledged Collateral to make any payment
required by the terms of such agreement, instrument or other obligation directly
to the Administrative Agent, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications
with respect thereto; provided, however, that in the event that any such
payments are made directly to any Pledgor, prior to receipt by any such obligor
of such instruction, such Pledgor shall segregate all amounts received pursuant
thereto in trust for the benefit of the Administrative Agent and shall promptly
(but in no event later than one (1) Business Day after receipt of available
funds therefor) pay such amounts to the Administrative Agent;

(iii)         Sell, assign, grant a license to use or otherwise liquidate, or
direct any Pledgor to sell, assign, grant a license to use or otherwise
liquidate, any and all investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the proceeds of any such
sale, assignment, license or liquidation;

 

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(iv)         Take possession of the Pledged Collateral or any part thereof, by
directing any Pledgor in writing to deliver the same to the Administrative Agent
at any place or places so designated by the Administrative Agent, in which event
such Pledgor shall at its own expense: (A) forthwith cause the same to be moved
to the place or places designated by the Administrative Agent and therewith
delivered to the Administrative Agent, (B) store and keep any Pledged Collateral
so delivered to the Administrative Agent at such place or places pending further
action by the Administrative Agent and (C) while the Pledged Collateral shall be
so stored and kept, provide such security and maintenance services as shall be
necessary to protect the same and to preserve and maintain them in good
condition. Each Pledgor’s obligation to deliver the Pledged Collateral as
contemplated in this Section 9.1(iv) is of the essence hereof. Upon application
to a court of equity having jurisdiction, the Administrative Agent shall be
entitled to a decree requiring specific performance by any Pledgor of such
obligation;

(v)          Withdraw all moneys, instruments, securities and other property in
any bank, financial securities, deposit or other account of any Pledgor
constituting Pledged Collateral for application to the Secured Obligations as
provided in Article X hereof;

(vi)         Retain and apply the Distributions to the Secured Obligations as
provided in Article X hereof;

(vii)       Exercise any and all rights as beneficial and legal owner of the
Pledged Collateral, including perfecting assignment of and exercising any and
all voting, consensual and other rights and powers with respect to any Pledged
Collateral; and

(viii)      Exercise all the rights and remedies of a secured party on default
under the UCC, and the Administrative Agent may also in its sole discretion,
without notice except as specified in Section 9.2 hereof, sell, assign or grant
a license to use the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker’s board or at any of
the Administrative Agent’s offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as the
Administrative Agent may deem commercially reasonable. The Administrative Agent
or any other Secured Party or any of their respective Affiliates may be the
purchaser, licensee, assignee or recipient of the Pledged Collateral or any part
thereof at any such sale and shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold, assigned or licensed at such sale, to use and apply any
of the Secured Obligations owed to such person as a credit on account of the
purchase price of the Pledged Collateral or any part thereof payable by such
person at such sale. Each purchaser, assignee, licensee or recipient at any such
sale shall acquire the property sold, assigned or licensed absolutely free from
any claim or right on the part of any Pledgor, and each Pledgor hereby waives,
to the fullest extent permitted by law, all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. The Administrative Agent
shall not be obligated to make any sale of the Pledged Collateral or any part
thereof regardless of notice of sale having been given. The Administrative Agent
may adjourn any public or private sale from time to time by announcement at the
time and

 

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place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Pledgor hereby waives, to the
fullest extent permitted by law, any claims against the Administrative Agent
arising by reason of the fact that the price at which the Pledged Collateral or
any part thereof may have been sold, assigned or licensed at such a private sale
was less than the price which might have been obtained at a public sale, even if
the Administrative Agent accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree.

SECTION 9.2.   Notice of Sale. Each Pledgor acknowledges and agrees that, to the
extent notice of sale or other disposition of the Pledged Collateral or any part
thereof shall be required by law, ten (10) days’ prior notice to such Pledgor of
the time and place of any public sale or of the time after which any private
sale or other intended disposition is to take place shall be commercially
reasonable notification of such matters. To the extent permitted by applicable
law, no notification need be given to any Pledgor if it has signed, after the
occurrence and during the continuance of an Event of Default, a statement
renouncing or modifying any right to notification of sale or other intended
disposition.

SECTION 9.3.   Waiver of Notice and Claims. Each Pledgor hereby waives, to the
fullest extent permitted by applicable law, notice or judicial hearing in
connection with the Administrative Agent’s taking possession or the
Administrative Agent’s disposition of the Pledged Collateral or any part
thereof, including any and all prior notice and hearing for any prejudgment
remedy or remedies and any such right which such Pledgor would otherwise have
under law, and each Pledgor hereby further waives, to the fullest extent
permitted by applicable law: (i) all damages occasioned by such taking of
possession, (ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Administrative
Agent’s rights hereunder and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law. The Administrative Agent shall not be liable for any incorrect
or improper payment made pursuant to this Article IX in the absence of gross
negligence or willful misconduct on the part of the Administrative Agent. To the
extent permitted by applicable law, any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of the applicable Pledgor therein and thereto, and shall be a perpetual bar both
at law and in equity against such Pledgor and against any and all persons
claiming or attempting to claim the Pledged Collateral so sold, optioned or
realized upon, or any part thereof, from, through or under such Pledgor.

 

SECTION 9.4.

Certain Sales of Pledged Collateral.

(a)          Each Pledgor recognizes that, by reason of certain prohibitions
contained in law, rules, regulations or orders of any Governmental Authority,
the Administrative Agent may be compelled, with respect to any sale of all or
any part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such Governmental Authority. Each Pledgor acknowledges that any
such sales may be at prices and on terms less favorable to the Administrative
Agent than those obtainable through a public sale without such restrictions,
and, notwithstanding such circumstances, agrees that any such restricted sale
shall be deemed to have been made in a commercially reasonable manner and that,
except as may be required by applicable law, the Administrative Agent shall have
no obligation to engage in public sales.

 

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(b)          Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Administrative Agent may be compelled, with respect to any sale of all or any
part of the Securities Collateral and Investment Property, to limit purchasers
to persons who will agree, among other things, to acquire such Securities
Collateral or Investment Property for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Administrative Agent than those obtainable through a public sale without such
restrictions (including a public offering made pursuant to a registration
statement under the Securities Act), and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Securities Collateral or Investment Property for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.

(c)          Notwithstanding the foregoing, each Pledgor shall, upon the
occurrence and during the continuance of any Event of Default, at the reasonable
request of the Administrative Agent, for the benefit of the Administrative
Agent, cause any registration, qualification under or compliance with any
Federal or state securities law or laws to be effected with respect to all or
any part of the Securities Collateral as soon as practicable and at the sole
cost and expense of the Pledgors. Each Pledgor will use its commercially
reasonable efforts to cause such registration to be effected (and be kept
effective) and will use its commercially reasonable efforts to cause such
qualification and compliance to be effected (and be kept effective) as may be so
requested and as would permit or facilitate the sale and distribution of such
Securities Collateral including registration under the Securities Act (or any
similar statute then in effect), appropriate qualifications under applicable
blue sky or other state securities laws and appropriate compliance with all
other requirements of any Governmental Authority. Each Pledgor shall use its
commercially reasonable efforts to cause the Administrative Agent to be kept
advised in writing as to the progress of each such registration, qualification
or compliance and as to the completion thereof, shall furnish to the
Administrative Agent such number of prospectuses, offering circulars or other
documents incident thereto as the Administrative Agent from time to time may
request, and shall indemnify and shall cause the issuer of the Securities
Collateral to indemnify the Administrative Agent and all others participating in
the distribution of such Securities Collateral against all claims, losses,
damages and liabilities caused by any untrue statement (or alleged untrue
statement) of a material fact contained therein (or in any related registration
statement, notification or the like) or by any omission (or alleged omission) to
state therein (or in any related registration statement, notification or the
like) a material fact required to be stated therein or necessary to make the
statements therein not misleading.

(d)          If the Administrative Agent determines to exercise its right to
sell any or all of the Securities Collateral or Investment Property, upon
written request, the applicable Pledgor shall from time to time furnish to the
Administrative Agent all such information as the Administrative Agent may
request in order to determine the number of securities included in the
Securities Collateral or Investment Property which may be sold by the
Administrative Agent as exempt transactions under the Securities Act and the
rules of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect.

 

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(e)          Each Pledgor further agrees that a breach of any of the covenants
contained in this Section 9.4 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 breach and, as a consequence, that each and every covenant contained in
this Section 9.4 shall be specifically enforceable against such Pledgor, and to
the fullest extent permitted by applicable law such Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred and is
continuing or that all of the Secured Obligations shall have been paid in full.

 

SECTION 9.5.

No Waiver; Cumulative Remedies.

(a)          No failure on the part of the Administrative Agent to exercise, no
course of dealing with respect to, and no delay on the part of the
Administrative Agent in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power, privilege or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power, privilege or remedy;
nor shall the Administrative Agent be required to look first to, enforce or
exhaust any other security, collateral or guaranties. All rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
provided by law or otherwise available.

(b)          In the event that the Administrative Agent shall have instituted
any proceeding to enforce any right, power, privilege or remedy under this
Agreement or any other Loan Document by foreclosure, sale, entry or otherwise,
and such proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Administrative Agent, then and in
every such case, the Pledgors, the Administrative Agent and each other Secured
Party shall be restored to their respective former positions and rights
hereunder with respect to the Pledged Collateral, and all rights, remedies,
privileges and powers of the Administrative Agent and the other Secured Parties
shall continue as if no such proceeding had been instituted.

SECTION 9.6.   Certain Additional Actions Regarding Intellectual Property.
Subject to the terms of the Intercreditor Agreement, if any Event of Default
shall have occurred and be continuing, upon the written demand of the
Administrative Agent, each Pledgor shall execute and deliver to the
Administrative Agent an assignment or assignments of the registered Patents,
Trademarks and/or Copyrights and Goodwill and such other documents as are
necessary or appropriate to carry out the intent and purposes hereof.

ARTICLE X

 

APPLICATION OF PROCEEDS

SECTION 10.1.   Application of Proceeds. The proceeds received by the
Administrative Agent in respect of any sale of, collection from or other
realization upon all or any part of the Pledged Collateral pursuant to the
exercise by the Administrative Agent of its remedies shall be applied, together
with any other sums then held by the Administrative Agent

 

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pursuant to this Agreement, in accordance with the Credit Agreement and the
Intercreditor Agreement.

ARTICLE XI

 

MISCELLANEOUS

 

SECTION 11.1.

Concerning Administrative Agent.

(a)          The Administrative Agent has been appointed as collateral agent
pursuant to the Credit Agreement. The actions of the Administrative Agent
hereunder are subject to the provisions of the Credit Agreement and the
Interecreditor Agreement. The Administrative Agent shall have the right
hereunder to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking action (including the
release or substitution of the Pledged Collateral), in accordance with this
Agreement, the Intercreditor Agreement and the Credit Agreement. The
Administrative Agent may employ agents and attorneys-in-fact in connection
herewith and shall not be liable for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it in good faith. The Administrative
Agent may resign and a successor Administrative Agent may be appointed in the
manner provided in the Credit Agreement. Upon the acceptance of any appointment
as the Administrative Agent by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent under
this Agreement, and the retiring Administrative Agent shall thereupon be
discharged from its duties and obligations under this Agreement. After any
retiring Administrative Agent’s resignation, the provisions hereof shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was the Administrative Agent.

(b)          The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which the Administrative Agent, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Administrative Agent nor any of the Secured
Parties shall have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Securities Collateral, whether or not the Administrative Agent
or any other Secured Party has or is deemed to have knowledge of such matters or
(ii) taking any necessary steps to preserve rights against any person with
respect to any Pledged Collateral.

(c)          The Administrative Agent shall be entitled to rely upon any written
notice, statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this
Agreement and its duties hereunder, upon advice of counsel selected by it.

 

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(d)          If any item of Pledged Collateral also constitutes collateral
granted to the Administrative Agent under any other deed of trust, mortgage,
security agreement, pledge or instrument of any type, in the event of any
conflict between the provisions hereof and the provisions of such other deed of
trust, mortgage, security agreement, pledge or instrument of any type in respect
of such collateral, the Administrative Agent, in its sole discretion, shall
select which provision or provisions shall control.

SECTION 11.2.   Administrative Agent May Perform; Administrative Agent Appointed
Attorney-in-Fact. If any Pledgor shall fail to perform any covenants contained
in this Agreement (including such Pledgor’s covenants to (i) pay the premiums in
respect of all required insurance policies hereunder, (ii) pay and discharge any
taxes, assessments and special assessments, levies, fees and governmental
charges imposed upon or assessed against, and landlords’, carriers’, mechanics’,
workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s
Liens and other claims arising by operation of law against, all or any portion
of the Pledged Collateral, (iii) make repairs, (iv) discharge Liens or (v) pay
or perform any obligations of such Pledgor under any Pledged Collateral) or if
any representation or warranty on the part of any Pledgor contained herein shall
be breached, the Administrative Agent may (but shall not be obligated to) do the
same or cause it to be done or remedy any such breach, and may expend funds for
such purpose; provided, however, that the Administrative Agent shall in no event
be bound to inquire into the validity of any tax, Lien, imposition or other
obligation which such Pledgor fails to pay or perform as and when required
hereby and which such Pledgor does not contest in accordance with the
provisions, if any, of the Credit Agreement. Any and all reasonable amounts so
expended by the Administrative Agent shall be paid by the Pledgors in accordance
with the provisions of Section 14.7 of the Credit Agreement. Neither the
provisions of this Section 11.2 nor any action taken by the Administrative Agent
pursuant to the provisions of this Section 11.2 shall prevent any such failure
to observe any covenant contained in this Agreement nor any breach of
representation or warranty from constituting an Event of Default. Each Pledgor
hereby appoints the Administrative Agent its attorney-in-fact, with full power
and authority in the place and stead of such Pledgor and in the name of such
Pledgor, or otherwise, from time to time in the Administrative Agent’s
discretion to take any action and to execute any instrument consistent with the
terms of the Credit Agreement, this Agreement and the other Loan Documents which
the Administrative Agent may deem necessary or advisable to accomplish the
purposes hereof (but the Administrative Agent shall not be obligated to and
shall have no liability to such Pledgor or any third party for failure to so do
or take action). The foregoing grant of authority is a power of attorney coupled
with an interest and such appointment shall be irrevocable for the term hereof.
Each Pledgor hereby ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof.

SECTION 11.3.   Continuing Security Interest; Assignment. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall (i) be
binding upon the Pledgors, their respective successors and assigns and
(ii) inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent and the other Secured
Parties and each of their respective successors, transferees and assigns. No
other persons (including any other creditor of any Pledgor) shall have any
interest herein or any right or benefit with respect hereto.

 

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SECTION 11.4.   Termination; Release. (a) When all the Secured Obligations have
been paid in full (other than Contingent Obligations at Termination),the
Commitments of the Lenders to make any Loan under the Credit Agreement shall
have been terminated, all Bank Products have terminated and all Letters of
Credit are cancelled or returned (other than those Letters of Credit or related
Credit Support for which Supporting Letters of Credit have been deposited with
the Administrative Agent in accordance with and as required by Section 1.4(g) of
the Credit Agreement), this Agreement shall terminate and the Pledged Collateral
shall be released from the Lien of this Agreement, all without further delivery
of any instrument or further action by any party, and all rights in the
Collateral shall revert to the applicable Pledgor. Upon such release, the
Administrative Agent shall, upon the request and at the sole cost and expense of
the Pledgors, assign, transfer and deliver or cause to be delivered to Pledgor,
against receipt and without recourse to or warranty by the Administrative Agent
except as to the fact that the Administrative Agent has not encumbered the
released assets, such of the Pledged Collateral or any part thereof to be
released (in the case of a release) as may be in possession of the
Administrative Agent and as shall not have been sold or otherwise applied
pursuant to the terms hereof, and, with respect to any other Pledged Collateral,
proper documents and instruments (including UCC-3 termination financing
statements or releases) acknowledging the termination hereof or the release of
such Pledged Collateral, as the case may be.

(b)          If any of the Pledged Collateral is sold, transferred or otherwise
disposed of by any Pledgor in a transaction permitted by the Credit Agreement
(other than any sale, transfer or disposition to another Pledgor), then the Lien
created pursuant to this Agreement in such Pledged Collateral shall be released,
and the Administrative Agent, at the request and sole expense of such Pledgor,
shall execute and deliver to such Pledgor all releases or other documents
reasonably necessary or desirable for the release of such Pledged Collateral
from the security interests created hereby; provided that Borrower shall provide
to the Administrative Agent evidence of such transaction’s compliance with the
Credit Agreement as the Administrative Agent shall reasonably request.

SECTION 11.5.   Modification in Writing. Subject to the terms of the
Intercreditor Agreement, no amendment, modification, supplement, termination or
waiver of or to any provision hereof, nor consent to any departure by any
Pledgor therefrom, shall be effective unless the same shall be made in
accordance with the terms of the Credit Agreement and unless in writing and
signed by the Administrative Agent. Any amendment, modification or supplement of
or to any provision hereof, any waiver of any provision hereof and any consent
to any departure by any Pledgor from the terms of any provision hereof in each
case shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement or any other document evidencing the Secured Obligations, no
notice to or demand on any Pledgor in any case shall entitle any Pledgor to any
other or further notice or demand in similar or other circumstances.

SECTION 11.6.   Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner and become effective as set forth in the
Credit Agreement, as to any Pledgor, addressed to it at the address of the
Borrower set forth in the Credit Agreement and as to the Administrative Agent,
addressed to it at the address set forth in the Credit Agreement, or

 

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in each case at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section 11.6.

SECTION 11.7.   Governing Law, Consent to Jurisdiction and Service of Process;
Waiver of Jury Trial. Sections 14.3 and 14.4 of the Credit Agreement are
incorporated herein, mutatis mutandis, as if a part hereof.

SECTION 11.8.   Severability of Provisions. Any provision hereof which is
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity, legality or enforceability of such provision in any
other jurisdiction.

SECTION 11.9.   Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.

SECTION 11.10.   Business Days. In the event any time period or any date
provided in this Agreement ends or falls on a day other than a Business Day,
then such time period shall be deemed to end and such date shall be deemed to
fall on the next succeeding Business Day, and performance herein may be made on
such Business Day, with the same force and effect as if made on such other day.

SECTION 11.11.   No Credit for Payment of Taxes or Imposition. Such Pledgor
shall not be entitled to any credit against the principal, premium, if any, or
interest payable under the Credit Agreement, and such Pledgor shall not be
entitled to any credit against any other sums which may become payable under the
terms thereof or hereof, by reason of the payment of any Taxes on the Pledged
Collateral or any part thereof.

SECTION 11.12.   No Claims Against Administrative Agent. Nothing contained in
this Agreement shall constitute any consent or request by the Administrative
Agent, express or implied, for the performance of any labor or services or the
furnishing of any materials or other property in respect of the Pledged
Collateral or any part thereof, nor as giving any Pledgor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against the Administrative Agent in respect
thereof or any claim that any Lien based on the performance of such labor or
services or the furnishing of any such materials or other property is prior to
the Lien hereof.

SECTION 11.13.   No Release. Nothing set forth in this Agreement or any other
Loan Document, nor the exercise by the Administrative Agent of any of the rights
or remedies hereunder, shall relieve any Pledgor from the performance of any
term, covenant, condition or agreement on such Pledgor’s part to be performed or
observed under or in respect of any of the Pledged Collateral or from any
liability to any Person under or in respect of any of the Pledged Collateral or
shall impose any obligation on the Administrative Agent or any other Secured
Party

 

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to perform or observe any such term, covenant, condition or agreement on such
Pledgor’s part to be so performed or observed or shall impose any liability on
the Administrative Agent or any other Secured Party for any act or omission on
the part of such Pledgor relating thereto or for any breach of any
representation or warranty on the part of such Pledgor contained in this
Agreement, the Credit Agreement or the other Loan Documents, or under or in
respect of the Pledged Collateral or made in connection herewith or therewith.
Anything herein to the contrary notwithstanding, neither the Administrative
Agent nor any other Secured Party shall have any obligation or liability under
any contracts, agreements and other documents included in the Pledged Collateral
by reason of this Agreement, nor shall the Administrative Agent or any other
Secured Party be obligated to perform any of the obligations or duties of any
Pledgor thereunder or to take any action to collect or enforce any such
contract, agreement or other document included in the Pledged Collateral
hereunder. The obligations of each Pledgor contained in this Section 11.13 shall
survive the termination hereof and the discharge of such Pledgor’s other
obligations under this Agreement, the Credit Agreement and the other Loan
Documents.

SECTION 11.14.   Obligations Absolute. To the fullest extent permitted by
applicable law, all obligations of each Pledgor hereunder shall be absolute and
unconditional irrespective of:

(i)           any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any other Pledgor;

(ii)          any lack of validity or enforceability of the Credit Agreement,
any Swap Contract or Treasury Management Agreement, or any agreement governing
Bank Products or any other Loan Document, or any other agreement or instrument
relating thereto;

(iii)         any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, any Swap
Contract, Treasury Management Agreement, or any agreement governing Bank
Products or any other Loan Document or any other agreement or instrument
relating thereto;

(iv)         any pledge, exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any departure
from any guarantee, for all or any of the Secured Obligations;

(v)          any exercise, non-exercise or waiver of any right, remedy, power or
privilege under or in respect hereof, the Credit Agreement, any Swap Contract,
Treasury Management Agreement, or any agreement governing Bank Products or any
other Loan Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 11.5 hereof; or

(vi)         any other circumstances which might otherwise constitute a defense
available to, or a discharge of, any Pledgor other than the payment in full of
all Secured Obligations.

 

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-38-

 

SECTION 11.15.   Intercreditor AgreementNotwithstanding anything herein to the
contrary, the lien, hypothec and security interest granted to the Administrative
Agent pursuant to this Agreement and the exercise of any right or remedy by the
Administrative Agent hereunder are subject to the provisions of the
Intercreditor Agreement, dated as of February 12, 2007 as the same may be
amended, restated, amended and restated, supplemented, modified or replaced from
time to time (the “Intercreditor Agreement”) among Bank of America, N.A., as
First Lien Term Collateral Agent, Bank of America, N.A., as Second Lien Term
Collateral Agent, Bank of America, N.A., as Revolving Administrative Agent, Bank
of America, N.A., as Control Agent, and the Loan Parties (as defined therein)
from time to time a party thereto. In the event of any conflict between the
terms of the Intercreditor Agreement and this Agreement, the terms of the
Intercreditor Agreement shall govern.. The Administrative Agent acknowledges and
agrees that any provision of this Agreement to the contrary notwithstanding, no
Pledgor shall be required to act or refrain from acting in a manner that is
inconsistent with the terms and provisions of the Intercreditor Agreement.

 

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IN WITNESS WHEREOF, each Pledgor and the Administrative Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.

FOAMEX L.P.,

as Pledgor

 

By:

FMXI, LLC, its Managing General Partner

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

FOAMEX INTERNATIONAL INC.,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Senior Vice President

FMXI, LLC,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

FOAMEX ASIA, INC.,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

 

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-40-

 

FOAMEX LATIN AMERICA, INC.,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

FOAMEX MEXICO, INC.,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

FOAMEX CARPET CUSHION LLC,

as Pledgor

 

By:

/s/ George L. Karpinski

 

Name:

George L. Karpinski

 

Title:

Vice President

BANK OF AMERICA, N.A.,

as Administrative Agent

 

By:

/s/ William J. Wilson

 

Name:

William J. Wilson

 

Title:

Vice President