Exhibit 10.3.2

SECURITY AGREEMENT

SECURITY AGREEMENT (this “Agreement”), dated as of June 25, 2007, by and among
(a) each of the Borrowers listed on Schedule I hereto (each such Borrower,
individually, a “Grantor” and, collectively, the “Grantors”), and (b) BANK OF
AMERICA, N.A., a national banking association, as collateral agent (in such
capacity, the “Collateral Agent”) for its own benefit and the benefit of the
other Credit Parties (as defined in the Credit Agreement referred to below), in
consideration of the mutual covenants contained herein and benefits to be
derived herefrom.

WITNESSETH:

WHEREAS, reference is made to that certain Credit Agreement, dated as of
June 25, 2007 (as amended, modified, supplemented or restated and in effect from
time to time, the “Credit Agreement”), by and among (i) the Borrowers from time
to time party thereto, (ii) the Guarantors from time to time party thereto,
(iii) the Lenders from time to time party thereto (individually, a “Lender” and,
collectively, the “Lenders”), and (iv) Bank of America, N.A., as Administrative
Agent, Collateral Agent, Swing Line Lender and L/C Issuer, pursuant to which the
Lenders have agreed to make Loans to the Borrowers, and the L/C Issuer has
agreed to issue Letters of Credit for the account of the Borrowers, upon the
terms and subject to the conditions specified in the Credit Agreement; and

WHEREAS, the obligations of the Lenders to make Loans and of the L/C Issuer to
issue Letters of Credit are each conditioned upon, among other things, the
execution and delivery by the Grantors of an agreement in the form hereof to
secure the Secured Obligations (as defined herein).

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth in this Agreement, and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Grantors and the
Collateral Agent, on its own behalf and on behalf of the other Credit Parties
(and each of their respective successors or assigns), hereby agree as follows:

ARTICLE 1

Definitions

SECTION 1.01 Generally. All references herein to the UCC shall mean the Uniform
Commercial Code as in effect from time to time in the State of New York;
provided, however, that if a term is defined in Article 9 of the UCC differently
than in another Article thereof, the term shall have the meaning set forth in
Article 9; provided further that, if by reason of mandatory provisions of law,
perfection, or the effect of perfection or non-perfection, of the Security
Interest in any Collateral or the availability of any remedy hereunder is
governed by the

 

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Uniform Commercial Code as in effect in a jurisdiction other than New York,
“UCC” means the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or availability of such remedy, as the case may be.

SECTION 1.02 Definition of Certain Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement. In addition, as used herein, the
following terms shall have the following meanings:

“Accessions” shall have the meaning given that term in the UCC.

“Account Debtor” shall have the meaning given that term in the UCC.

“Blue Sky Laws” shall have the meaning assigned to such term in SECTION 6.01 of
this Agreement.

“Chattel Paper” shall have the meaning given that term in the UCC.

“Collateral” shall mean all personal property of each Grantor, including,
without limitation, all: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort
Claims (including, but not limited to, those Commercial Tort Claims listed on
Schedule 3.07 hereto), (d) Deposit Accounts, (e) Documents, (f) Equipment,
(g) Fixtures, (h) General Intangibles (including Payment Intangibles),
(i) Goods, (j) Instruments, (k) Inventory, (l) Investment Property,
(m) Letter-of-Credit Rights, (n) Software, (o) Supporting Obligations,
(p) money, policies and certificates of insurance, deposits, cash, or other
property, (q) all books, records, and information relating to any of the
foregoing ((a) through (p)) and/or to the operation of any Grantor’s business,
and all rights of access to such books, records, and information, and all
property in which such books, records, and information are stored, recorded and
maintained, (r) all insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing ((a)
through (q)) or otherwise, (s) all liens, guaranties, rights, remedies, and
privileges pertaining to any of the foregoing ((a) through (r)), including the
right of stoppage in transit, and (t) any of the foregoing, whether now owned or
now due, or in which any Grantor has an interest, or hereafter acquired,
arising, or to become due, or in which any Grantor obtains an interest, and all
products, Proceeds, substitutions, and Accessions of or to any of the foregoing;
provided, however, that the Collateral shall not include, and the Security
Interest shall not attach to, (a) any rights or property acquired under a lease,
contract, property rights agreement or license, the grant of a security interest
in which shall constitute or result in (i) the abandonment, invalidation or
unenforceability of any right, title or interest of any Grantor therein or
(ii) a breach or termination pursuant to the terms of, or a default under, any
lease, contract, property rights agreement or license (other than to the extent
that any restriction on such assignment would be rendered ineffective pursuant
to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision
or provisions) of any relevant jurisdiction or any other applicable Law or

 

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principles of equity), provided that the Proceeds from any such lease, contract,
property rights agreement or license shall not be excluded from the definition
of Collateral to the extent that the assignment of such Proceeds is not
prohibited, or (b) any Security or other Equity Interest in any CFC.

“Collateral Agent” shall have the meaning assigned to such term in the preamble
of this Agreement.

“Collateral Agent’s Rights and Remedies” shall have the meaning assigned to such
term in SECTION 8.08.

“Commercial Tort Claim” shall have the meaning given that term in the UCC.

“Commodity Account” shall have the meaning given that term in the UCC.

“Commodity Intermediary” shall have the meaning given that term in the UCC.

“Control” shall have the meaning given that term in the UCC.

“Credit Agreement” shall have the meaning assigned to such term in the
preliminary statement of this Agreement.

“Deposit Account” shall have the meaning given that term in the UCC and shall
also include all demand, time, savings, passbook, or similar accounts maintained
with a bank or other financial institution.

“Documents” shall have the meaning given that term in the UCC.

“Electronic Chattel Paper” shall have the meaning given that term in the UCC.

“Equipment” shall mean “equipment”, as defined in the UCC, and shall also mean
all furniture, store fixtures, motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, and other goods, property, and
assets which are used and/or were purchased for use in the operation or
furtherance of a Grantor’s business, and any and all Accessions or additions
thereto, and substitutions therefor.

“Financial Asset” shall have the meaning given that term in the UCC.

“Financing Statement” shall have the meaning given that term in the UCC.

“Fixtures” shall have the meaning given that term in the UCC.

“General Intangibles” shall have the meaning given that term in the UCC, and
shall also include, without limitation, all: Payment Intangibles; rights to
payment for credit extended; deposits; amounts due to any Grantor; credit
memoranda in favor of any Grantor; warranty

 

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claims; tax refunds and abatements; insurance refunds and premium rebates; all
means and vehicles of investment or hedging, including, without limitation,
options, warrants, and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; rights to collect payments under
any settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of any Grantor to enforce
same; permits, certificates of convenience and necessity, and similar rights
granted by any governmental authority; developmental ideas and concepts;
proprietary processes; blueprints, drawings, designs, diagrams, plans, reports,
and charts; catalogs; technical data; tapes, disks, semi-conductors chips and
printouts; IP Collateral (as defined in the Intellectual Property Security
Agreement); proposals; cost estimates, and reproductions on paper, or otherwise,
of any and all concepts or ideas, and any matter related to, or connected with,
the design, development, manufacture, sale, marketing, leasing, or use of any or
all property produced, sold, or leased, by or credit extended or services
performed, by any Grantor, whether intended for an individual customer or the
general business of any Grantor, or used or useful in connection with research
by any Grantor.

“Goods” shall have the meaning given that term in the UCC.

“Grantor” and “Grantors” shall have the meaning assigned to such terms in the
preamble of this Agreement.

“Indemnitee” shall have the meaning assigned to such term in SECTION 8.06 of
this Agreement.

“Instruments” shall have the meaning given that term in the UCC.

“Inventory” shall have the meaning given that term in the UCC, and shall also
include, without limitation, all: (a) Goods which (i) are leased by a Person as
lessor, (ii) are held by a Person for sale or lease or to be furnished under a
contract of service, (iii) are furnished by a Person under a contract of
service, or (iv) consist of raw materials, work in process, or materials used or
consumed in a business; (b) Goods of said description in transit; (c) Goods of
said description which are returned, repossessed or rejected; and (d) packaging,
advertising, and shipping materials related to any of the foregoing.

“Investment Property” shall have the meaning given that term in the UCC;
provided that Investment Property shall not include any Security or other Equity
Interest in any CFC.

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

“Lender” and “Lenders” shall have the meaning assigned to such terms in the
preliminary statement of this Agreement.

 

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“Letter-of-Credit Right” shall have the meaning given that term in the UCC and
shall also mean any right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded, or is at the time entitled to
demand, payment or performance.

“Letters of Credit” shall have the meaning given that term in the UCC.

“Payment Intangible” shall have the meaning given that term in the UCC and shall
also mean any General Intangible under which the Account Debtor’s primary
obligation is a monetary obligation.

“Proceeds” shall mean “proceeds”, as defined in the UCC, and shall also mean
each type of property described in the definition of Collateral.

“Secured Obligations” shall mean the Obligations (as defined in the Credit
Agreement); provided, however, that Obligations which constitute Other
Liabilities shall be Secured Obligations solely to the extent that there is
sufficient Collateral following satisfaction of the obligations described in
clause (a) of the definition of Obligations.

“Securities Act” shall have the meaning assigned to such term in SECTION 6.01 of
this Agreement.

“Securities Account” shall have the meaning given that term in the UCC.

“Securities Intermediary” shall have the meaning given that term in the UCC.

“Security” shall have the meaning given that term in the UCC.

“Security Entitlement” shall have the meaning given that term in the UCC.

“Security Interest” shall have the meaning assigned to such term in SECTION 2.01
of this Agreement.

“Software” shall have the meaning given that term in the UCC.

“Supporting Obligation” shall have the meaning given that term in the UCC and
shall also refer to a Letter-of-Credit Right or secondary obligation that
supports the payment or performance of an Account, Chattel Paper, a Document, a
General Intangible, an Instrument, or Investment Property.

SECTION 1.03 Rules of Interpretation. The rules of interpretation specified in
Sections 1.02 through 1.06 of the Credit Agreement shall be applicable to this
Agreement.

 

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ARTICLE 2

Security Interest

SECTION 2.01 Security Interest. As security for the payment or performance, as
the case may be, in full of the Secured Obligations, each Grantor hereby grants
to the Collateral Agent, its successors and assigns, for its own benefit and the
benefit of the other Credit Parties, a security interest in all of such
Grantor’s right, title and interest in, to and under the Collateral (the
“Security Interest”). Without limiting the foregoing, each Grantor hereby
designates the Collateral Agent as such Grantor’s true and lawful attorney,
exercisable by the Collateral Agent whether or not an Event of Default exists,
with full power of substitution, at the Collateral Agent’s option, to file one
or more Financing Statements, continuation statements, or to sign other
documents for the purpose of perfecting, confirming, continuing, or protecting
the Security Interest granted by each Grantor, without the signature of any
Grantor (each Grantor hereby appointing the Collateral Agent as such Person’s
attorney to sign such Person’s name to any such instrument or document, whether
or not an Event of Default exists), and naming any Grantor or the Grantors, as
debtors, and the Collateral Agent, as secured party. Any such financing
statement may indicate the Collateral as “all assets of the Grantor”, “all
personal property of the debtor” or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the UCC.

SECTION 2.02 No Assumption of Liability. The Security Interest is granted as
security only and shall not subject the Collateral Agent or any other Credit
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.

ARTICLE 3

Representations and Warranties

The Grantors jointly and severally represent and warrant to the Collateral Agent
and the other Credit Parties that:

SECTION 3.01 Title and Authority. Each Grantor has good and valid rights in, and
title to, the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person, other than
any consent or approval which has been obtained.

SECTION 3.02 Filings. Upon the filing of UCC Financing Statements or other
appropriate filings, recordings or registrations naming each Grantor as “debtor”
and the Collateral Agent as “secured party” and containing a description of the
Collateral in each governmental, municipal or other office as is necessary to
publish notice of and protect the

 

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validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for its own benefit and the benefit of the other
Credit Parties) in respect of all Collateral in which the Security Interest may
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, the Security
Interest granted to the Collateral Agent (for its own benefit and the benefit of
the other Credit Parties) hereunder shall constitute a legal, valid and
perfected security interest in the Collateral, and no further or subsequent
filing, refiling, recording, rerecording, registration or re-registration is
necessary in any such jurisdiction, except as provided under applicable Law with
respect to the filing of continuation statements or as a result of any change in
a Grantor’s name or jurisdiction of incorporation or formation or under any
other circumstances under which, pursuant to the UCC, filings previously made
have become misleading or ineffective in whole or in part.

SECTION 3.03 Validity and Priority of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all of the Collateral
securing the payment and performance of the Secured Obligations, and (b) subject
to the making of the filings described in SECTION 3.02 above, a perfected
security interest in all of the Collateral (to the extent perfection in the
Collateral can be accomplished by such filing) and (c) subject to the obtaining
of Control, a perfected security interest in all of the Collateral (to the
extent perfection in the Collateral can be accomplished by Control). The
Security Interest is and shall be prior to any other Lien on any of the
Collateral, subject only to Permitted Encumbrances having priority by operation
of applicable Law.

SECTION 3.04 Absence of Other Liens. The Collateral is owned by the Grantors
free and clear of any Lien, except for (i) Permitted Encumbrances or (ii) Liens
for which termination statements or releases (or payoff letters providing for
the delivery or filing of termination statements or releases) have been
delivered to the Collateral Agent. Except, in each case, for Permitted
Encumbrances, the Grantors have not (a) filed or consented to the filing of
(i) any Financing Statement or analogous document under the UCC or any other
applicable Law covering any Collateral, (ii) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (iii) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, or
(b) entered into any agreement in which any Grantor grants Control over any
Collateral, which Financing Statement, control agreement or analogous document,
assignment, security agreement or similar instrument is still in effect.

SECTION 3.05 Bailees, Warehousemen, Etc. Except as set forth on Schedule 3.05
hereto, no Inventory of any Grantor is in the care or custody of any third party
or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage or entrustment unless a
Collateral Access Agreement is delivered to the Collateral Agent by such third
party or bailee.

 

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SECTION 3.06 Consignments. Except as set forth on Schedule 3.06 hereto, no
Grantor has, and none shall have, possession of any property on consignment.

SECTION 3.07 Commercial Tort Claims. As of the date hereof, none of the
Collateral consists of a Commercial Tort Claim, except as set forth on Schedule
3.07 hereto.

SECTION 3.08 Instruments and Chattel Paper. As of the date hereof, no amounts
payable under or in connection with any of the Collateral are evidenced by any
Instrument or Chattel Paper with an individual face value in excess of $500,000
(or, with respect to all such Instruments or Chattel Paper, an aggregate face
value in excess of $1,000,000), other than such Instruments and Chattel Paper
listed in Schedule 3.08 hereto. Each Instrument and each item of Chattel Paper
listed in Schedule 3.08 hereto has been properly endorsed, assigned and
delivered to the Collateral Agent, accompanied by instruments of transfer or
assignment duly executed in blank.

SECTION 3.09 Securities Accounts and Commodity Accounts. As of the date hereof,
no Grantor has any Securities Accounts or Commodity Accounts other than those
listed in Schedule 3.09 hereto.

SECTION 3.10 Electronic Chattel Paper and Transferable Records. As of the date
hereof, no amount under or in connection with any of the 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) with an individual face value in
excess of $500,000 (or, with respect to all such Electronic Chattel Paper or
transferable records, an aggregate face value in excess of $1,000,000), other
than such Electronic Chattel Paper and transferable records listed in Schedule
3.10 hereto.

ARTICLE 4

Covenants

SECTION 4.01 Change of Name; Location of Collateral; Records; Place of Business.

(a) Each Grantor will furnish to the Collateral Agent at least thirty (30) days
prior written notice of any change in: (i) any Grantor’s name or in any trade
name used to identify it in the conduct of its business or in the ownership of
its properties; (ii) the location of any Grantor’s chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility); (iii) any Grantor’s organizational structure or jurisdiction of
incorporation or formation; or (iv) any Grantor’s Federal Taxpayer
Identification Number or organizational identification number, if any, assigned
to it by its state of organization.

 

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Each Grantor agrees not to effect or permit any change referred to in the
preceding sentence unless all filings, publications and registrations have been
made under the UCC or other applicable Law that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral
(subject only to Permitted Encumbrances having priority by operation of
applicable Law) for its own benefit and the benefit of the other Credit Parties.

(b) Each Grantor agrees (i) to maintain, at its own cost and expense, records
with respect to the Collateral owned by it which are complete and accurate in
all material respects and which are consistent with its current practices, but
in any event to include accounting records which are complete in all material
respects indicating all payments and proceeds received with respect to any part
of the Collateral, and (ii) at such time or times as the Collateral Agent may
reasonably request, promptly to prepare and deliver to the Collateral Agent a
duly certified schedule or schedules in form and detail reasonably satisfactory
to the Collateral Agent showing the identity, amount and location of any and all
Collateral.

SECTION 4.02 Protection of Security. Each Grantor shall, at its own cost and
expense, take any and all actions reasonably necessary to defend title to the
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
(other than Permitted Encumbrances).

SECTION 4.03 Further Assurances. Each Grantor agrees, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
documents, Financing Statements, agreements and instruments and take all such
further actions as the Collateral Agent may from time to time reasonably request
to better assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby or the validity or priority of such Security
Interest, including the payment of any fees and taxes required in connection
with the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any Financing Statements or other documents in
connection herewith or therewith. Without limiting the foregoing, each Grantor
agrees, at its own expense, to execute, acknowledge, deliver and cause to be
duly filed all such further documents, Financing Statements, agreements and
instruments and take all such further actions as the Collateral Agent may from
time to time reasonably request to perfect the Collateral Agent’s Security
Interest in all Accounts, Inventory, Deposit Accounts, Investment Property, and
the Proceeds therefrom (including causing the Collateral Agent to have Control
of any such Collateral to the extent required under the Credit Agreement and to
the extent perfection in such Collateral can be accomplished by Control).

SECTION 4.04 Inspection and Verification. Each Grantor shall, and shall cause
each of its Subsidiaries to, permit representatives and independent contractors
of the Collateral Agent to visit its properties and inspect the Collateral and
all records related thereto (and to make extracts and copies from such records),
to discuss its affairs, finances and accounts with its

 

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directors, officers and Registered Public Accounting Firm, and to conduct
appraisals, commercial finance examinations and other evaluations, all in
accordance with and subject to the terms and conditions of Section 6.10 of the
Credit Agreement. The Collateral Agent and such Persons as the Collateral Agent
may reasonably designate shall have the right to verify the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating
to, the Collateral, including, in the case of Accounts or Collateral in the
possession of any third Person, by contacting Account Debtors or the third
Person possessing such Collateral for the purpose of making such a verification.
The Collateral Agent shall have the right, subject to the confidentiality
provisions of Section 10.07 of the Credit Agreement, to share any information it
gains from such inspection or verification with any Credit Party. The Grantors
shall pay the fees and expenses of the Collateral Agent or such other Persons
with respect to such inspections and verifications to the extent required by the
terms of Section 6.10 of the Credit Agreement.

SECTION 4.05 Taxes; Encumbrances. At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral (other than
Permitted Encumbrances), and may take any other action which the Collateral
Agent may reasonably deem necessary or desirable to repair, maintain or preserve
any of the Collateral to the extent any Grantor fails to do so as required by
the Credit Agreement or this Agreement, and each Grantor jointly and severally
agrees to reimburse the Collateral Agent on demand for any payment made or any
expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that the Collateral Agent shall not have any
obligation to undertake any of the foregoing and shall have no liability on
account of any action so undertaken except where a court of competent
jurisdiction determines by final and nonappealable judgment that the Collateral
Agent’s actions constitute gross negligence or willful misconduct; provided
further that the making of any such payments or the taking of any such action by
the Collateral Agent shall not be deemed to constitute a waiver of any Default
or Event of Default arising from such Grantor’s failure to have made such
payments or taken such action. Nothing in this SECTION 4.05 shall be interpreted
as excusing any Grantor from the performance of any covenants or other promises
of such Grantor with respect to taxes, assessments, charges, fees, Liens,
security interests or other encumbrances and maintenance as set forth herein or
in the other Loan Documents.

SECTION 4.06 Assignment of Security Interest. If at any time any Grantor shall
take a security interest in any property of an Account Debtor or any other
Person to secure payment and performance of an Account with a value in excess of
$500,000 (or, with respect to all such property, an aggregate value in excess of
$1,000,000), such Grantor shall promptly assign such security interest to the
Collateral Agent. Such assignment need not be filed of public record unless
necessary to continue the perfected status of the security interest against
creditors of, and transferees from, the Account Debtor or other Person granting
the security interest.

SECTION 4.07 Continuing Obligations of the Grantors. Each Grantor shall remain
liable to observe and perform all the conditions and obligations to be observed
and performed by

 

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it under each contract, agreement or instrument relating to the Collateral, all
in accordance with the terms and conditions thereof, and each Grantor jointly
and severally agrees to indemnify and hold harmless the Collateral Agent and the
Credit Parties from and against any and all liability for such performance.

SECTION 4.08 Use and Disposition of Collateral. None of the Grantors shall make
or permit to be made a collateral assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral or shall
grant Control of any Collateral to any Person, except for Permitted
Encumbrances. Except for Permitted Dispositions, none of the Grantors shall make
or permit to be made any transfer of the Collateral. Each Grantor shall remain
at all times in possession of the Collateral owned by it, except with respect to
the following: (a) Eligible In-Transit Inventory and Inventory which is the
subject of an Eligible Letter of Credit; (b) Inventory placed under the care,
custody, storage or entrustment of a bailee or other third party, provided that
such bailee or other third party shall have delivered to the Collateral Agent a
Collateral Access Agreement on terms reasonably satisfactory to the Collateral
Agent; (c) sales of Inventory in the ordinary course of business; (d) movement
of Inventory from one location of such Grantor to another location of such
Grantor; and (e) disposal of Equipment which is obsolete, worn out, or damaged
beyond repair, or no longer used or useful.

SECTION 4.09 Limitation on Modification of Accounts. None of the Grantors will,
without the Collateral Agent’s prior written consent, grant any extension of the
time of payment of any of the Accounts, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or partly, any Person
liable for the payment thereof or allow any credit or discount whatsoever
thereon, except, in each case, for extensions, releases, credits, discounts,
compromises or settlements granted or made in the ordinary course of business or
consistent with its current practices.

SECTION 4.10 Insurance.

(a) Each Grantor shall (i) maintain or shall cause to be maintained such
insurance as is required pursuant to Section 6.07 of the Credit Agreement;
(ii) maintain such other insurance as may be required by applicable Law; and
(ii) furnish to the Collateral Agent, upon written request, full information as
to the insurance carried.

(b) Each Grantor hereby irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor’s true and lawful agent (and
attorney-in-fact), exercisable only after the occurrence and during the
continuance of a Cash Dominion Event, for the purpose of making, settling and
adjusting claims in respect of Collateral under policies of insurance, endorsing
the name of such Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that any Grantor
at any time or times shall fail to obtain or maintain any of the policies of
insurance required

 

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hereby or to pay any premium in whole or in part relating thereto, the
Collateral Agent may, without waiving or releasing any obligation or liability
of the Grantors hereunder or any Default or Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Collateral Agent deems
advisable. All sums disbursed by the Collateral Agent in connection with this
SECTION 4.10, including reasonable attorneys’ fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by the Grantors
to the Collateral Agent and shall be additional Secured Obligations secured
hereby.

SECTION 4.11 Commercial Tort Claims. If any Grantor shall at any time hold or
acquire a Commercial Tort Claim having a value in excess of $1,000,000, such
Grantor shall promptly (but, in any event, within five (5) Business Days) notify
the Collateral Agent in writing of the details thereof, and the Grantors shall
take such actions as the Collateral Agent shall reasonably request in order to
grant to the Collateral Agent, for the ratable benefit of the Credit Parties, a
perfected security interest therein and in the Proceeds thereof.

SECTION 4.12 Legend. Upon the occurrence and during the continuance of an Event
of Default, and at the request of the Collateral Agent, each Grantor shall
legend, in form and manner reasonably satisfactory to the Collateral Agent, its
Accounts and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such Accounts have been assigned
to the Collateral Agent, for its own benefit and the benefit of the other Credit
Parties, and that the Collateral Agent has a security interest therein.

SECTION 4.13 Other Actions. In order to further ensure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Collateral Agent’s Security Interest in the Collateral, each Grantor
covenants and agrees, in each case at such Grantor’s own expense, to take the
following actions with respect to the following Collateral:

(a) If any amount then payable under or in connection with any of the Collateral
shall become evidenced by any Instrument or Chattel Paper with an individual
face value in excess of $500,000 (or, with respect to all such Instruments or
Chattel Paper, an aggregate face value in excess of $1,000,000), other than such
Instruments and Chattel Paper listed in Schedule 3.08 hereto, the Grantor
acquiring such Instrument or Chattel Paper shall promptly (but, in any event,
within five (5) Business Days after receipt thereof) endorse, assign and deliver
the same to the Collateral Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Collateral Agent may from time to time
specify.

(b) No Grantor shall hereafter establish and maintain any Securities Account or
Commodity Account with any Securities Intermediary or Commodity Intermediary
unless (i) such Securities Intermediary or Commodity Intermediary shall be
reasonably acceptable to the Collateral Agent, and (ii) such Securities
Intermediary or Commodity

 

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Intermediary, as the case may be, and such Grantor shall have duly executed and
delivered a control agreement with respect to such Securities Account or
Commodity Account, as the case may be. Each Grantor shall accept any cash and
Investment Property in trust for the benefit of the Collateral Agent and within
one (1) Business Day of actual receipt thereof, deposit any and all cash and
Investment Property received by it into a Deposit Account or Securities Account
subject to the Collateral Agent’s Control. The provisions of this SECTION
4.13(b) shall not apply to any Financial Assets credited to a Securities Account
for which the Collateral Agent is the Securities Intermediary. No Grantor shall
grant Control over any Investment Property to any person other than the
Collateral Agent.

(c) As between the Collateral Agent and the Grantors, the Grantors 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 Securities (except where a court of competent
jurisdiction determines by final and nonappealable judgment that such loss,
damage or destruction has resulted from the gross negligence or willful
misconduct of the Collateral Agent), whether in the possession of, or maintained
as a Security Entitlement or deposit by, or subject to the Control of, the
Collateral Agent, a Securities Intermediary, a Commodity Intermediary, any
Grantor or any other Person.

(d) If any amount payable under or in connection with any of the Collateral
shall become evidenced by any Electronic Chattel Paper or any transferable
record with an individual face value in excess of $500,000 (or, with respect to
all such Electronic Chattel Paper or transferable records, an aggregate face
value in excess of $1,000,000), other than such Electronic Chattel Paper and
transferable records listed in Schedule 3.10 hereto, the Grantor acquiring such
Electronic Chattel Paper or transferable record shall promptly notify the
Collateral Agent thereof and shall take such action as the Collateral Agent may
reasonably request to vest in the Collateral 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.

(e) If any Grantor is at any time a beneficiary under a Letter of Credit now or
hereafter issued having a face value in an amount in excess of $500,000 (or with
respect to all such Letters of Credit, having an aggregate face value in an
amount in excess of $1,000,000), such Grantor shall promptly notify the
Collateral Agent thereof and such Grantor shall, at the request of the
Collateral Agent, pursuant to an agreement in form and substance reasonably
satisfactory to the Collateral Agent, either (i) arrange for the issuer and any
confirmer of such Letter of Credit to consent to an assignment to the Collateral
Agent of the proceeds of any drawing under the Letter of Credit and to cause the
proceeds of any drawing under such Letter of Credit to be paid directly to the

 

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Collateral Agent after the occurrence and during the continuance of any Cash
Dominion Event, or (ii) arrange for the Collateral Agent to become the
transferee beneficiary of such Letter of Credit, with the Collateral Agent
agreeing, in each case, that the proceeds of any drawing under the Letter of
Credit are to be paid directly to the Collateral Agent after the occurrence and
during the continuance of any Cash Dominion Event and applied as provided in the
Credit Agreement.

SECTION 4.14 Joinder of Additional Grantors. Upon the formation or acquisition
of any new direct or indirect Subsidiary (other than any CFC or a Subsidiary
that is held directly or indirectly by a CFC) by any Grantor, then the Grantors
shall, at the Grantors’ expense, cause such Subsidiary to execute and deliver to
the Collateral Agent a Joinder Agreement substantially in the form of Exhibit A
hereto and to comply with the requirements of Section 6.12 of the Credit
Agreement, within the time periods specified therein, and, upon such execution
and delivery, such Subsidiary shall constitute a “Grantor” for all purposes
hereunder with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of such Joinder Agreement shall not require
the consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor as a party to this Agreement.

ARTICLE 5

Collections; Power of Attorney

SECTION 5.01 Collections.

(a) Each Grantor shall at all times comply with the cash management provisions
of Section 6.13 of the Credit Agreement including, without limitation, after the
occurrence and during the continuance of a Cash Dominion Event, causing the ACH
or wire transfer no less frequently than daily (and whether or not there are
then any outstanding Secured Obligations) of all cash receipts and collections
into the Concentration Account or a Blocked Account, as provided for in the
Credit Agreement.

(b) Without the prior written consent of the Collateral Agent (which consent
shall not be unreasonably withheld), no Grantor shall modify or amend the
instructions pursuant to any of the Credit Card Notifications or the Blocked
Account Agreements. So long as no Event of Default has occurred and is
continuing, each Grantor shall, and the Collateral Agent hereby authorizes each
Grantor to, enforce and collect all amounts owing on the Inventory and Accounts,
for the benefit and on behalf of the Collateral Agent and the other Credit
Parties; provided, however, that such authorization may, at the direction of the
Collateral Agent, be terminated upon the occurrence and during the continuance
of any Event of Default.

SECTION 5.02 Power of Attorney. Each Grantor irrevocably makes, constitutes and
appoints the Collateral Agent (and all officers, employees or agents designated
by the

 

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Collateral Agent) as such Grantor’s true and lawful agent and attorney-in-fact,
and in such capacity the Collateral Agent shall have the right, with power of
substitution for each Grantor and in each Grantor’s name or otherwise, for the
use and benefit of the Collateral Agent and the other Credit Parties, (a) at any
time, whether or not a Default or Event of Default has occurred, to take actions
required to be taken by the Grantors under SECTION 2.01 of this Agreement,
(b) upon the occurrence and during the continuance of a Cash Dominion Event or
as otherwise permitted under the Credit Agreement, (i) to take actions required
to be taken by the Grantors under SECTION 5.01 of this Agreement; and (ii) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral or
any part thereof, and (c) upon the occurrence and during the continuance of an
Event of Default or as otherwise permitted under the Credit Agreement, (i) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (ii) to sign the name of any Grantor
on any invoices, schedules of Collateral, Documents, freight or express
receipts, or bills of lading storage receipts, warehouse receipts or other
documents of title relating to any of the Collateral; (iii) to sign the name of
any Grantor on any notice to such Grantor’s Account Debtors; (iv) to sign the
name of any Grantor on any proof of claim in bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic’s liens, or assignments or releases
of mechanic’s liens securing the Accounts; (v) to sign change of address forms
to change the address to which each Grantor’s mail is to be sent to such address
as the Collateral Agent shall designate; (vi) to receive and open each Grantor’s
mail, remove any Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Lead Borrower or to any trustee in bankruptcy or
receiver of a Grantor, or other legal representative of a Grantor whom the
Collateral Agent reasonably determines to be the appropriate person to whom to
so turn over such mail; (vii) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (viii) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (ix) to take all such action as may be
reasonably necessary to obtain the payment of any letter of credit and/or
banker’s acceptance of which any Grantor is a beneficiary; (x) to repair,
manufacture, assemble, complete, package, deliver, alter or supply goods, if
any, necessary to fulfill in whole or in part the purchase order of any customer
of any Grantor; (xi) to use, license or transfer any or all General Intangibles
of any Grantor, subject to those restrictions to which such Grantor is subject
under applicable Law and by contract; (xii) to cause all Documents (including,
without limitation, freight or express receipts, or bills of lading storage
receipts, warehouse receipts or other documents of title) to name the Collateral
Agent as consignee and to obtain control over the Documents, and (xiii) to use,
sell, assign, transfer, pledge, make any agreement with respect to or otherwise
deal with all or any of the Collateral, and to do all other acts and things
reasonably necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent was the absolute owner of the
Collateral for all purposes; provided, however, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent or any other
Credit Party to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any other Credit
Party, or to present or file any claim or notice. It is

 

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understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable.

SECTION 5.03 No Obligation to Act. The Collateral Agent shall not be obligated
to do any of the acts or to exercise any of the powers authorized by SECTION
5.02, but if the Collateral Agent elects to do any such act or to exercise any
of such powers, it shall not be accountable for more than it actually receives
as a result of such exercise of power, and shall not be responsible to any
Grantor for any act or omission to act, except where a court of competent
jurisdiction determines by final and nonappealable judgment that the subject act
or omission to act has resulted from the gross negligence or willful misconduct
of the Collateral Agent. The provisions of SECTION 5.02 shall in no event
relieve any Grantor of any of its obligations hereunder or under any other Loan
Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any other Credit Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any other Credit Party of any
other or further right which it may have on the date of this Agreement or
hereafter, whether hereunder, under any other Loan Document, by applicable Law
or otherwise.

ARTICLE 6

Remedies

SECTION 6.01 Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, it is agreed that the Collateral Agent shall
have in any jurisdiction in which enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a secured party under
the UCC or other applicable Law. The rights and remedies of the Collateral Agent
shall include, without limitation, the right to take any or all of the following
actions at the same or different times:

(a) With respect to any Collateral consisting of Accounts, General Intangibles
(including Payment Intangibles), Letter-of-Credit Rights, Instruments, Chattel
Paper, Documents, and Investment Property, the Collateral Agent may collect the
Collateral with or without the taking of possession of any of the Collateral.

(b) With respect to any Collateral consisting of Accounts, the Collateral Agent
may: (i) demand, collect and receive any amounts relating thereto, as the
Collateral Agent may determine; (ii) commence and prosecute any actions in any
court for the purposes of collecting any such Accounts and enforcing any other
rights in respect thereof; (iii) defend, settle or compromise any action brought
and, in connection therewith, give such discharges or releases as the Collateral
Agent may reasonably deem appropriate; (iv) without limiting the Collateral
Agent’s rights set forth in SECTION 5.02 hereof, receive, open and dispose of
mail addressed to any Grantor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other

 

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instruments or documents evidencing payment, shipment or storage of the goods
giving rise to such Accounts or securing or relating to such Accounts, on behalf
of and in the name of such Grantor; and (v) sell, assign, transfer, make any
agreement in respect of, or otherwise deal with or exercise rights in respect
of, any such Accounts or the goods or services which have given rise thereto, as
fully and completely as though the Collateral Agent was the absolute owner
thereof for all purposes.

(c) With respect to any Collateral consisting of Investment Property, the
Collateral Agent may: (i) exercise all rights of any Grantor with respect
thereto, including without limitation, the right to exercise all voting and
corporate rights at any meeting of the shareholders of the Issuer of any
Investment Property and to exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any
Investment Property as if the Collateral Agent was the absolute owner thereof,
including the right to exchange, at its discretion, any and all of any
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Issuer thereof, all without
liability except to account for property actually received as provided in
SECTION 5.03 hereof; (ii) transfer such Collateral at any time to itself, or to
its nominee, and receive the income thereon and hold the same as Collateral
hereunder or apply it to the Secured Obligations; and (iii) demand, sue for,
collect or make any compromise or settlement it deems desirable. The Grantors
recognize that (a) the Collateral Agent may be unable to effect a public sale of
all or a part of the Investment Property by reason of certain prohibitions
contained in the Securities Act of 1933, 15 U.S.C. §77, (as amended and in
effect, the “Securities Act”) or the Securities laws of various states (the
“Blue Sky Laws”), but may be compelled to resort to one or more private sales to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire the Investment Property for their own account, for investment
and not with a view to the distribution or resale thereof, (b) that private
sales so made may be at prices and upon other terms less favorable to the seller
than if the Investment Property were sold at public sales, (c) that neither the
Collateral Agent nor any other Credit Party has any obligation to delay sale of
any of the Investment Property for the period of time necessary to permit the
Investment Property to be registered for public sale under the Securities Act or
the Blue Sky Laws, and (d) that private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner. Notwithstanding anything herein to the contrary, no Grantor shall be
required to register, or cause the registration of, any Investment Property
under the Securities Act or any Blue Sky Laws.

(d) With respect to any Collateral consisting of Inventory, Goods, and
Equipment, the Collateral Agent may conduct one or more going out of business
sales, in the Collateral Agent’s own right or by one or more agents and
contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by any Grantor. The Collateral Agent and any such agent or contractor,
in conjunction with any such sale, may augment the Inventory with other goods
(all of which other goods shall remain the sole

 

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property of the Collateral Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Collateral Agent or such agent or
contractor and neither any Grantor nor any Person claiming under or in right of
any Grantor shall have any interest therein. Each purchaser at any such going
out of business sale shall hold the property sold absolutely, free from any
claim or right on the part of any Grantor.

(e) With or without legal process and with or without prior notice or demand for
performance, the Collateral Agent may enter upon, occupy, and use any premises
owned or occupied by each Grantor, and may exclude the Grantors from such
premises or portion thereof as may have been so entered upon, occupied, or used
by the Collateral Agent. The Collateral Agent shall not be required to remove
any of the Collateral from any such premises upon the Collateral Agent’s taking
possession thereof, and may render any Collateral unusable to the Grantors. In
no event shall the Collateral Agent be liable to any Grantor for use or
occupancy by the Collateral Agent of any premises pursuant to this SECTION 6.01,
nor for any charge (such as wages for the Grantors’ employees and utilities)
incurred in connection with the Collateral Agent’s exercise of the Collateral
Agent’s Rights and Remedies (as defined herein) hereunder, other than for direct
or actual damages resulting from the gross negligence or willful misconduct of
the Collateral Agent as determined by a final and nonappealable judgment of a
court of competent jurisdiction.

(f) The Collateral Agent may require any Grantor to assemble the Collateral and
make it available to the Collateral Agent at the Grantor’s sole risk and expense
at a place or places which are reasonably convenient to both the Collateral
Agent and such Grantor.

(g) The Collateral Agent may require any Grantor to name the Collateral Agent as
consignee on any Documents and to furnish the Collateral Agent with control over
any such Documents.

(h) Each Grantor agrees that the Collateral Agent shall have the right, subject
to applicable Law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale, for cash, upon credit or for future
delivery as the Collateral Agent shall deem appropriate. Each purchaser at any
such sale shall hold the property sold absolutely, free from any claim or right
on the part of any Grantor.

(i) Unless the Collateral is perishable or threatens to decline speedily in
value, or is of a type customarily sold on a recognized market (in which event
the Collateral Agent shall provide the Grantors such advance notice as may be
practicable under the circumstances), the Collateral Agent shall give the
Grantors at least ten (10) days’ prior written notice, by authenticated record,
of the date, time and place of any proposed public sale, and of the date after
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the Collateral may be made. Each Grantor agrees that such written notice shall
satisfy all requirements for notice to that Grantor which are imposed under the
UCC or other applicable Law with respect to the exercise of the Collateral
Agent’s Rights and Remedies upon default. The Collateral Agent shall not be
obligated to make any sale or other disposition of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale or other
disposition of such Collateral shall have been given. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned.

(j) Any public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent may fix and state in
the notice of such sale. At any sale or other disposition, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. If any of the Collateral is sold, leased, or otherwise disposed of by
the Collateral Agent on credit, the Secured Obligations shall not be deemed to
have been reduced as a result thereof unless and until payment in full is
received thereon by the Collateral Agent. In the event that the purchaser fails
to pay for the Collateral, the Collateral Agent may resell the Collateral and
apply the proceeds from such resale in accordance with the terms of SECTION 6.02
of this Agreement.

(k) At any public (or, to the extent permitted by applicable Law, private) sale
made pursuant to this SECTION 6.01, the Collateral Agent or any other Credit
Party may bid for or purchase, free (to the extent permitted by applicable Law)
from any right of redemption, stay, valuation or appraisal on the part of any
Grantor, the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to the
Collateral Agent or such other Credit Party from any Grantor on account of the
Secured Obligations as a credit against the purchase price, and the Collateral
Agent or such other Credit Party may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability to any
Grantor therefor.

(l) For purposes hereof, a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof. The Collateral Agent shall
be free to carry out such sale pursuant to such agreement and no Grantor shall
be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Secured Obligations paid in full.

(m) As an alternative to exercising the power of sale herein conferred upon it,
the Collateral Agent may proceed by a suit or suits at law or in equity to
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the Collateral and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.

(n) To the extent permitted by applicable Law, each Grantor hereby waives all
rights of redemption, stay, valuation and appraisal which such Grantor now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.

SECTION 6.02 Application of Proceeds. After the occurrence and during the
continuance of an Event of Default and acceleration of the Secured Obligations,
the Collateral Agent shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, or any Collateral
granted under any other of the Collateral Documents, in accordance with
Section 8.03 of the Credit Agreement.

The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale or other disposition of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the purchase money by the
Collateral Agent or of the officer making the sale or other disposition shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold
or otherwise disposed of and such purchaser or purchasers shall not be obligated
to see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

ARTICLE 7

Perfection of Security Interest

SECTION 7.01 Perfection by Filing. This Agreement constitutes an authenticated
record, and each Grantor hereby authorizes the Collateral Agent, pursuant to the
provisions of SECTION 2.01 and SECTION 5.02, to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral, in such filing offices as the Collateral Agent shall reasonably
deem appropriate, and the Grantors shall pay the Collateral Agent’s reasonable
costs and expenses incurred in connection therewith.

SECTION 7.02 Other Perfection, Etc. The Grantors shall at any time and from time
to time take such steps as the Collateral Agent may reasonably request for the
Collateral Agent (a) to obtain an acknowledgment, in form and substance
reasonably satisfactory to the Collateral Agent, of any bailee having possession
of any of the Collateral that the bailee holds such Collateral for the
Collateral Agent, (b) to obtain Control of any Investment Property, Deposit
Accounts, Letter-of-Credit Rights or Electronic Chattel Paper, with any
agreements establishing Control to be in form and substance reasonably
satisfactory to the Collateral Agent,

 

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and (c) otherwise to insure the continued perfection of the Collateral Agent’s
security interest in any of the Collateral with the priority described in
SECTION 3.03 and of the preservation of its rights therein.

SECTION 7.03 Savings Clause. Nothing contained in this ARTICLE 7 shall be
construed to narrow the scope of the Collateral Agent’s Security Interest in any
of the Collateral or the perfection or priority thereof or to impair or
otherwise limit any of the Collateral Agent’s Rights and Remedies hereunder
except (and then only to the extent) as mandated by the UCC.

ARTICLE 8

Miscellaneous

SECTION 8.01 Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in
Section 10.02 of the Credit Agreement.

SECTION 8.02 Grant of Non-Exclusive License. Without limiting the provisions of
SECTION 6.01 hereof or any other rights of the Collateral Agent as the holder of
a Lien on any IP Collateral (as defined in the Intellectual Property Security
Agreement), each Grantor hereby grants to the Collateral Agent, and the
representatives and independent contractors of the Collateral Agent, a royalty
free, non-exclusive, irrevocable license, to use, apply, and affix any
trademark, trade name, logo, or the like in which any Grantor now or hereafter
has rights, such license to be effective only upon the occurrence and during the
continuance of any Event of Default in connection with the Collateral Agent’s
exercise of the Collateral Agent’s Rights and Remedies hereunder including,
without limitation, in connection with any completion of the manufacture of
Inventory or any sale or other disposition of Inventory. The license granted in
this SECTION 8.02 shall remain in full force and effect throughout the term of
this Agreement, notwithstanding the release of any Grantor hereunder.

SECTION 8.03 Security Interest Absolute. All rights of the Collateral Agent
hereunder, the Security Interest and all obligations of the Grantors hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Secured Obligations or any other agreement or
instrument relating to any of the foregoing, (b) 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 other Loan Document, or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from the Guaranty or any other guarantee, securing or guaranteeing all
or any of the Secured Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Grantor in
respect of the Secured Obligations or this Agreement.

 

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SECTION 8.04 Survival of Agreement. All covenants, agreements, representations
and warranties made by the Grantors herein and in any other Loan Document and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Credit Parties and
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making of any Loans and the issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Collateral Agent, the L/C Issuer or any Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended under the Credit Agreement, and
shall continue in full force and effect unless terminated in accordance with
SECTION 8.14 hereof.

SECTION 8.05 Binding Effect; Several Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the Grantors that are contained in
this Agreement shall bind and inure to the benefit of each Grantor and its
respective successors and assigns. This Agreement shall be binding upon each
Grantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of each Grantor, the Collateral Agent and the
other Credit Parties and their respective successors and assigns, except that no
Grantor shall have the right to assign or transfer its rights or obligations
hereunder or any interest herein or in the Collateral (and any such attempted
assignment or transfer shall be void) except as expressly permitted by this
Agreement or the Credit Agreement. This Agreement shall be construed as a
separate agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.

SECTION 8.06 Collateral Agent’s Fees and Expenses; Indemnification.

(a) Without limiting or duplicating any of their obligations under the Credit
Agreement or the other Loan Documents, the Grantors jointly and severally agree
to pay all reasonable out-of-pocket expenses incurred by the Collateral Agent,
including the reasonable fees, charges and disbursements of any counsel and any
outside consultants for the Collateral Agent, in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from or other realization upon any of the Collateral,
(iii) the exercise, enforcement or protection of any of the Collateral Agent’s
Rights and Remedies hereunder or (iv) the failure of any Grantor to perform or
observe any of the provisions hereof.

(b) Without limiting or duplicating any of their indemnification obligations
under the Credit Agreement or the other Loan Documents, the Grantors shall
jointly and severally indemnify the Collateral Agent (or any sub-agent thereof),
each other Credit Party and each Related Party of any of the foregoing Persons
(each such Person being

 

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called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses (including the
fees, charges and disbursements of any counsel for any Indemnitee) incurred by
any Indemnitee or asserted against any Indemnitee by any third party or by any
Grantor arising out of, in connection with, or as a result of, (i) the execution
or delivery of this Agreement, the Credit Agreement, any other Loan Document or
any other agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder, or the consummation of the transactions contemplated hereby or
thereby, or, in the case of the Collateral Agent (and any sub-agent thereof) and
its Related Parties only, the administration of this Agreement, the Credit
Agreement and the other Loan Documents, or (ii) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by any Grantor, and regardless of whether any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee or (y) result from a claim brought by any
Grantor against an Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if such Grantor has
obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction. In connection with any
indemnified claim hereunder, the Indemnitee shall be entitled to select its own
counsel and the Grantors shall promptly pay the reasonable fees and expenses of
such counsel.

(c) To the fullest extent permitted by applicable Law, the Grantors shall not
assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, the Credit Agreement, any other Loan Document or any
agreement or instrument contemplated hereby, or the transactions contemplated
hereby or thereby. No Indemnitee shall be liable for any damages arising from
the use by unintended recipients of any information or other materials
distributed to such unintended recipients by such Indemnitee through
telecommunications, electronic or other information transmission systems in
connection with this Agreement, the Credit Agreement or the other Loan Documents
or the transactions contemplated hereby or thereby other than for direct or
actual damages resulting from the gross negligence or willful misconduct of such
Indemnitee as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

(d) Any such amounts payable as provided hereunder shall be additional Secured
Obligations secured hereby and by the other Security Documents. All amounts due
under this SECTION 8.06 shall be payable not later than ten (10) Business Days
after demand therefor.

 

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(e) The agreements in this SECTION 8.06 shall survive the resignation of the
Collateral Agent, the termination of the Aggregate Commitments and the
repayment, satisfaction or discharge of all the other Secured Obligations.

SECTION 8.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 8.08 Waivers; Amendment.

(a) The rights, remedies, powers, privileges, and discretions of the Collateral
Agent hereunder (herein, the “Collateral Agent’s Rights and Remedies”) shall be
cumulative and not exclusive of any rights or remedies which it would otherwise
have. No delay or omission by the Collateral Agent in exercising or enforcing
any of the Collateral Agent’s Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Collateral Agent of any Event of
Default or of any Default under any other agreement shall operate as a waiver of
any other Event of Default or other Default hereunder or under any other
agreement. No single or partial exercise of any of the Collateral Agent’s Rights
or Remedies, and no express or implied agreement or transaction of whatever
nature entered into between the Collateral Agent and any Person, at any time,
shall preclude the other or further exercise of the Collateral Agent’s Rights
and Remedies. No waiver by the Collateral Agent of any of the Collateral Agent’s
Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. The Collateral
Agent’s Rights and Remedies may be exercised at such time or times and in such
order of preference as the Collateral Agent may determine. The Collateral
Agent’s Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Secured Obligations. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to a written agreement entered into between the
Collateral Agent and the Grantor or Grantors with respect to whom such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 10.01 of the Credit Agreement.

SECTION 8.09 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL

 

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PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09.

SECTION 8.10 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 8.11 Counterparts. This Agreement may be executed in counterparts (and
by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or e-mail shall be effective as delivery of a manually
executed counterpart of this Agreement.

SECTION 8.12 Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.

SECTION 8.13 Jurisdiction; Waiver of Venue; Consent to Service of Process.

(a) EACH OF THE GRANTORS IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE
SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR

 

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PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
COLLATERAL AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AGAINST ANY OF THE GRANTORS OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(b) EACH OF THE GRANTORS IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO
IN PARAGRAPH (A) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

(c) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 8.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.

SECTION 8.14 Termination; Release of Collateral.

(a) Any Lien upon any Collateral will be released automatically if the
Collateral constitutes property being sold, transferred or disposed of in a
Permitted Disposition upon receipt by the Collateral Agent of the Net Proceeds
thereof to the extent required by the Credit Agreement. Upon at least two
(2) Business Days’ prior written request by the Grantors, the Collateral Agent
shall execute such documents as may be necessary to evidence the release of the
Liens upon any Collateral described in this SECTION 8.14(a); provided, however,
that (i) the Collateral Agent shall not be required to execute any such document
on terms which, in its reasonable opinion, would, under applicable Law, expose
the Collateral Agent to liability or entail any adverse consequence other than
the release of such Liens without recourse or warranty, and (ii) such release
shall not in any manner discharge, affect or impair the Secured Obligations or
any Liens (other than those expressly being released) upon (or obligations of
any Grantor in respect of) all interests retained by any Grantor, including,
without limitation, the Proceeds of any sale, all of which shall continue to
constitute part of the Collateral.

 

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(b) Except for those provisions which expressly survive the termination thereof,
this Agreement and the Security Interest granted herein shall terminate when
(i) the Commitments have expired or been terminated, (ii) all of the Secured
Obligations have been paid in full in cash or otherwise satisfied, (iii) all L/C
Obligations have been reduced to zero (or fully cash collateralized in a manner
reasonably satisfactory to the L/C Issuer and the Administrative Agent), and
(iv) the L/C Issuer has no further obligation to issue Letters of Credit under
the Credit Agreement, at which time the Collateral Agent shall execute and
deliver to the Grantors, at the Grantors’ expense, all UCC termination
statements, releases and similar documents that the Grantors shall reasonably
request to evidence such termination; provided, however, that the Credit
Agreement, this Agreement, and the Security Interest granted herein shall be
reinstated if at any time payment, or any part thereof, of any Secured
Obligation is rescinded or must otherwise be restored by any Credit Party upon
the bankruptcy or reorganization of any Grantor. Any execution and delivery of
termination statements, releases or other documents pursuant to this SECTION
8.14 shall be without recourse to, or warranty by, the Collateral Agent or any
other Credit Party.

SECTION 8.15 Conflict. In the event of a conflict between this Agreement and the
Pledge Agreement, the terms of the Pledge Agreement shall control with respect
to the Pledged Collateral (as defined in the Pledge Agreement) and the terms of
this Agreement shall control with respect to all other Collateral. In the event
of a conflict between this Agreement and the Intellectual Property Security
Agreement, the terms of the Intellectual Property Security Agreement shall
control with respect to the IP Collateral (as defined in the Intellectual
Property Security Agreement) and the terms of this Agreement shall control with
respect to all other Collateral.

[SIGNATURE PAGES FOLLOW]

 

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

 

GRANTORS:   COST PLUS, INC.   By:  

/s/ Tom Willardson

  Name:   Thomas D. Willardson   Title:   Executive Vice President and CFO  
COST PLUS OF TEXAS, INC.   By:  

/s/ Linda Nartz

  Name:   Linda Nartz   Title:   VP and Secretary   COST PLUS OF IDAHO, INC.  
By:  

/s/ Tom Willardson

  Name:   Thomas D. Willardson   Title:   President, VP, Treasurer   COST PLUS
MANAGEMENT SERVICES, INC.   By:  

/s/ Barry Feld

  Name:   Barry J. Feld   Title:   President, CEO, CFO and Secretary COLLATERAL
AGENT:   BANK OF AMERICA, N.A.   By:  

/s/ Stephen Garvin

  Name:   Stephen Garvin   Title:   Managing Director

Signature Page to Security Agreement

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SCHEDULE I

Borrowers

Cost Plus, Inc.

Cost Plus of Texas, Inc.

Cost Plus of Idaho, Inc.

Cost Plus Management Services, Inc.

Schedule I

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EXHIBIT A

Form of Joinder Agreement

[Name of New Grantor]

[Address of New Grantor]

[Date]

 

 

 

 

 

 

 

 

 

Ladies and Gentlemen:

Reference is made to the Security Agreement, dated as of June 25, 2007 (as
amended, modified, supplemented or restated and in effect from time to time, the
“Security Agreement”), by and among (a) each of the Borrowers listed on Schedule
I to the Security Agreement (each such Borrower, individually, a “Grantor” and,
collectively, the “Grantors”), and (b) Bank of America, N.A., a national banking
association, as collateral agent (in such capacity, the “Collateral Agent”) for
its own benefit and the benefit of the other Credit Parties. All capitalized
terms used but not defined herein shall have the meanings set forth in the
Security Agreement.

This Joinder Agreement supplements the Security Agreement and is delivered by
the undersigned, [                    ] (the “New Grantor”), pursuant to
Section 4.14 of the Security Agreement. The New Grantor hereby agrees to be
bound as a [Borrower/Guarantor] and as a Grantor party to the Security Agreement
by all of the terms, covenants and conditions set forth in the Security
Agreement to the same extent that it would have been bound if it had been a
signatory to the Security Agreement on the date of the Security Agreement.
Without limiting the generality of the foregoing, the New Grantor hereby grants
and pledges to the Collateral Agent, its successors and assigns, for its own
benefit and the benefit of the other Credit Parties, as collateral security for
the full, prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of the Secured Obligations, a
Lien on and security interest in, all of its right, title and interest in, to
and under the Collateral and expressly assumes all obligations and liabilities
of a [Borrower/Guarantor] and Grantor under the Security Agreement. The New
Grantor hereby makes each of the representations and warranties and agrees to
each of the covenants applicable to the Grantors contained in the Security
Agreement.

Annexed hereto are supplements to each of the schedules to the Security
Agreement with respect to the New Grantor. Such supplements shall be deemed to
be part of the Security Agreement.

Exhibit A

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This Joinder 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.

THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the New Grantor has caused this Joinder Agreement to be
executed and delivered by its duly authorized officer as of the date first above
written.

 

      [NEW GRANTOR]       By:  

 

      Name:  

 

      Title:  

 

AGREED TO AND ACCEPTED:      

BANK OF AMERICA, N.A.,

as Collateral Agent

      By:  

 

      Name:  

 

      Title:  

 

     

[Schedules to be attached]

Exhibit A

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SCHEDULE 3.05

Bailees; Warehousemen

Schedule 3.05

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SCHEDULE 3.06

Consignments

Schedule 3.06

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SCHEDULE 3.07

Commercial Tort Claims

Schedule 3.07

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SCHEDULE 3.08

Instruments and Chattel Paper

Schedule 3.07

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SCHEDULE 3.09

Securities Accounts and Commodity Accounts

Schedule 3.07

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SCHEDULE 3.10

Electronic Chattel Paper and Transferable Records

Schedule 3.07