Exhibit 10.5

 

 

 

AMENDED AND RESTATED

ABL COLLATERAL AGREEMENT

dated as of

July 31, 2015,

among

BUILDERS FIRSTSOURCE, INC.,

THE OTHER GRANTORS PARTY HERETO,

and

SUNTRUST BANK,

as Collateral Agent

 

 

 

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TABLE OF CONTENTS

 

ARTICLE I    DEFINITIONS    SECTION 1.01.  

Defined Terms

     1    SECTION 1.02.  

Other Defined Terms

     2    ARTICLE II    PLEDGE OF SECURITIES    SECTION 2.01.  

Pledge

     6    SECTION 2.02.  

Delivery of the Pledged Collateral

     6    SECTION 2.03.  

Representations, Warranties and Covenants

     7    SECTION 2.04.  

Registration in Nominee Name; Denominations

     8    SECTION 2.05.  

Voting Rights; Dividends and Interest

     9    SECTION 2.06.  

Article 8 Opt-In

     11    ARTICLE III    SECURITY INTERESTS IN PERSONAL PROPERTY    SECTION
3.01.  

Security Interest

     11    SECTION 3.02.  

Representations and Warranties

     13    SECTION 3.03.  

Covenants

     16    SECTION 3.04.  

Other Actions

     18    SECTION 3.05.  

Covenants Regarding Patent, Trademark and Copyright Collateral

     18    ARTICLE IV    REMEDIES    SECTION 4.01.  

Remedies upon Default

     19    SECTION 4.02.  

Application of Proceeds

     21    SECTION 4.03.  

Securities Act

     21    SECTION 4.04.  

Grant of License to Use Intellectual Property

     22    ARTICLE V    MISCELLANEOUS    SECTION 5.01.  

Notices

     22    SECTION 5.02.  

Waivers; Amendment

     23    SECTION 5.03.  

Collateral Agent’s Fees and Expenses; Indemnification

     23    SECTION 5.04.  

Successors and Assigns

     23    SECTION 5.05.  

Survival of Agreement

     23   

 

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SECTION 5.06.  

Counterparts; Effectiveness; Several Agreement

     24    SECTION 5.07.  

Severability

     24    SECTION 5.08.  

Right of Set-off

     24    SECTION 5.09.  

Governing Law; Jurisdiction; Consent to Service of Process; Appointment of
Service of Process Agent

     24    SECTION 5.10.  

WAIVER OF JURY TRIAL

     25    SECTION 5.11.  

Headings

     25    SECTION 5.12.  

Security Interest Absolute

     26    SECTION 5.13.  

Termination or Release

     26    SECTION 5.14.  

Additional Subsidiaries

     26    SECTION 5.15.  

Collateral Agent Appointed Attorney-in-Fact

     27    SECTION 5.16.  

ABL Intercreditor Agreement Governs

     27    SECTION 5.17.  

Delivery of Notes First Lien Collateral

     28    SECTION 5.18.  

Compromises and Collection of Collateral

     28    SECTION 5.19.  

No Liability

     28    SECTION 5.20.  

Amendment and Restatement

     28   

 

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Schedules

 

Schedule I   Grantors Schedule II   Pledged Equity Interests; Pledged Debt
Securities Schedule III   Intellectual Property Schedule IV   Commercial Tort
Claims

 

Exhibits

 

Exhibit I   Form of Grantor Supplement Exhibit II   Form of ABL Copyright
Security Agreement Exhibit III   Form of ABL Patent Security Agreement Exhibit
IV   Form of ABL Trademark Security Agreement

 

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AMENDED AND RESTATED ABL COLLATERAL AGREEMENT dated as of July 31, 2015 (as
amended, restated, supplemented or otherwise modified from time to time, this
“Agreement”) among BUILDERS FIRSTSOURCE, INC., a Delaware corporation (the
“Borrower”), the other GRANTORS from time to time party hereto and SUNTRUST
BANK, as Collateral Agent (in such capacity, the “Collateral Agent”).

PRELIMINARY STATEMENTS

WHEREAS, Borrower, the financial institutions party thereto and Suntrust Bank,
as administrative agent and collateral agent, entered into that certain Credit
Agreement dated as of May 29, 2013 (as amended, restated, supplemented or
otherwise modified from time to time prior to the date hereof, the “Existing
Credit Agreement”);

WHEREAS, Borrower, each subsidiary of the Borrower from time to time party
thereto, the financial institutions party thereto and Suntrust Bank, as
administrative agent and collateral agent, entered into that certain Collateral
Agreement dated as of May 29, 2013 (as amended, restated, supplemented or
otherwise modified from time to time prior to the date hereof, the “Existing
Collateral Agreement”);

WHEREAS, (i) the Borrower, the subsidiaries of the Borrower party thereto, the
Lenders party thereto from time to time and SunTrust Bank, as Administrative
Agent and as Collateral Agent are entering into the Amended and Restated ABL
Credit Agreement dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”) and (ii) the
Amended and Restated Grantors party thereto and the Collateral Agent are
entering into the ABL Guarantee Agreement dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
“Guarantee Agreement”); and

WHEREAS, the Lenders have agreed to extend credit to the Borrower subject to the
terms and conditions set forth in the Credit Agreement. The obligations of the
Lenders to extend such credit are conditioned upon, among other things, the
execution and delivery of this Agreement. The Subsidiary Guarantors are
affiliates of the Borrower, will derive substantial benefits from the extension
of credit to the Borrower pursuant to the Credit Agreement and are willing to
execute and deliver this Agreement in order to induce the Lenders to extend such
credit. Accordingly, the parties hereto agree to amend and restate the Existing
Collateral Agreement in its entirety as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. (a) Each capitalized term used but not defined
herein shall have the meaning assigned thereto in the Credit Agreement; provided
that each term defined in the New York UCC (as defined herein) and not defined
in this Agreement or the Credit Agreement shall have the meaning specified in
the New York UCC. The term “instrument” shall have the meaning specified in
Article 9 of the New York UCC.

(b) The rules of construction specified in Sections 1.03 and 1.04 of the Credit
Agreement also apply to this Agreement, mutatis mutandis.

 

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SECTION 1.02. Other Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

“Account Debtor” means any Person that is or may become obligated to any Grantor
under, with respect to or on account of an Account, Chattel Paper or General
Intangible.

“After-acquired Debt” has the meaning set forth in the definition of Pledged
Collateral.

“After-acquired Shares” has the meaning set forth in the definition of Pledged
Collateral.

“Agreement” has the meaning assigned to such term in the preamble to this
Agreement.

“Article 9 Collateral” has the meaning assigned to such term in Section 3.01.

“Borrower” has the meaning assigned to such term in the preamble to this
Agreement.

“Collateral” means Article 9 Collateral and Pledged Collateral.

“Collateral Agent” has the meaning assigned to such term in the preamble to this
Agreement.

“Copyright Security Agreement” means the Copyright Security Agreement
substantially in the form of Exhibit II hereto.

“Copyrights” shall mean, with respect to any Grantor, all of such Grantor’s
right, title, and interest in and to the following: (a) all copyrights, rights
and interests in copyrights, works protectable by copyright, copyright
registrations, and copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages, and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements for any of the foregoing;
(d) the right to sue for past, present, and future infringements of any of the
foregoing; and (e) all rights corresponding to any of the foregoing throughout
the world.

“Credit Agreement” has the meaning assigned to such term in the preamble to this
Agreement.

“Discharge of Senior Secured Debt Obligations” has the meaning assigned to such
term in the ABL/Bond Intercreditor Agreement.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person.

 

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“Excluded Accounts” shall have the meaning assigned to such term in the ABL
Credit Agreement.

“Excluded CFC” means any Subsidiary that is a “controlled foreign corporation”
within the meaning of Section 957 of the Code.

“Excluded Collateral” shall mean (i) any governmental licenses or state or local
franchises, charters or authorizations, to the extent a security interest in any
such licenses, franchise, charter or authorization would be prohibited or
restricted thereby (including any legally effective prohibition or restriction),
(ii) pledges and security interests prohibited by applicable law, rule or
regulation (including any legally effective requirement to obtain the consent of
any governmental authority), (iii) margin stock and, to the extent prohibited by
the terms of any applicable organizational documents, joint venture agreement or
shareholders’ agreement, equity interests in any person other than wholly-owned
restricted subsidiaries, (iv) assets to the extent a security interest in such
assets would result in material adverse tax consequences as reasonably
determined by the Borrower in consultation with the Administrative Agent,
(v) any intent-to-use trademark application prior to the filing of a “Statement
of Use” or “Amendment to Allege Use” with respect thereto, (vi) any lease,
license or other agreement or any property subject to a purchase money security
interest or similar arrangement to the extent that a grant of a security
interest therein would violate or invalidate such lease, license or agreement or
purchase money or similar arrangement or create a right of termination in favor
of any other party thereto (other than the Borrower or its Subsidiaries) after
giving effect to the applicable anti-assignment provisions of the UCC or other
similar applicable law, other than proceeds and receivables thereof, the
assignment of which is expressly deemed effective under the UCC or other similar
applicable law notwithstanding such prohibition, (vii) any Excluded Real
Property, (viii) any rolling stock and (ix) Excluded Accounts listed in clauses
(iii) and (iv) of the definition of Excluded Accounts in the Credit Agreement.

“Excluded Equity Interests” shall mean (a) any of the outstanding voting Equity
Interests or other voting ownership interests of any Excluded CFC or FSHCO in
excess of 65% of all the Equity Interests or other voting ownership interests of
such Excluded CFC or FSHCO designated as having voting power, (b) any equity or
other voting ownership interests in any Subsidiary that is not a first tier
Subsidiary of the Borrower or a Guarantor, (c) any Equity Interests to the
extent the pledge thereof would be prohibited or limited by any applicable law,
rule or regulation existing on the date hereof or on the date such Equity
Interests are acquired by the Borrower or a Guarantor or on the date the issuer
of such Equity Interests is created, (d) the Equity Interests of a Subsidiary
(other than a Wholly-Owned Subsidiary) the pledge of which would violate a
contractual obligation to the owners of the other Equity Interests of such
Subsidiary (other than any such owners that are the Borrower or Affiliates of
the Borrower) that is binding on or relating to such Equity Interests and
(e) the Equity Interests of any Unrestricted Subsidiaries.

“Federal Securities Laws” has the meaning assigned to such term in Section 4.03.

“FSHCO” means any Subsidiary that is not a Foreign Subsidiary that owns no
material assets other than the capital stock of one or more Subsidiaries that
are Excluded CFCs.

 

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“Grantor Supplement” means an instrument in the form of Exhibit I hereto, or any
other form approved by the Collateral Agent, and in each case reasonably
satisfactory to the Collateral Agent.

“Grantors” means (a) the Borrower, (b) each other Subsidiary identified on
Schedule I hereto and (c) each Subsidiary that becomes a party to this Agreement
as a Grantor on or after the Closing Date.

“Intellectual Property” shall mean, with respect to any Grantor, all
intellectual and similar property of every kind and nature now owned or
hereafter acquired by such Grantor, including Patents, Copyrights, Trademarks
and all related documentation and registrations and all additions, improvements
or accessions to any of the foregoing.

“Intercompany Note” means a promissory note substantially in the form of Exhibit
I to the Credit Agreement.

“Inventory” shall have the meaning set forth in Article 9 of the UCC and shall
include, without limitation, (a) all goods intended for sale or lease or for
display or demonstration, (b) all work in process, and (c) all raw materials and
other materials and supplies of every nature and description used or which might
be used in connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of goods or services or otherwise used or
consumed in the conduct of business.

“Licenses” shall mean, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to (a) any and all written licensing agreements or
similar arrangements in and to its owned (1) Patents, (2) Copyrights, or
(3) Trademarks, (b) all income, royalties, damages, claims, and payments now or
hereafter due or payable under and with respect thereto, including, without
limitation, damages and payments for past and future breaches thereof, and
(c) all rights to sue for past, present, and future breaches thereof.

“New York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York.

“Patents” shall mean, with respect to any Grantor, all of such Grantor’s right,
title, and interest in and to: (a) any and all patents and patent applications;
(b) all inventions and improvements described and claimed therein; (c) all
reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof; (d) all income, royalties, damages, claims, and
payments now or hereafter due or payable under and with respect thereto,
including, without limitation, damages and payments for past and future
infringements thereof; (e) all rights to sue for past, present, and future
infringements thereof; and (f) all rights corresponding to any of the foregoing
throughout the world.

“Patent Security Agreement” means the Patent Security Agreement substantially in
the form of Exhibit III hereto.

“Pledged Collateral” shall mean collectively, (a) all of the Equity Interests of
Restricted Subsidiaries that are Material Subsidiaries (other than Excluded
Equity Interests) held by the Grantors, including such Equity Interests
described in Schedule 6 in the Perfection Certificate

 

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issued by the entities named therein and all other Equity Interests required to
be pledged by any Grantor under Article 5.11 of the Credit Agreement (the
“After-acquired Shares”) (the “Pledged Equity Securities”) and (b) each
promissory note (including the Intercompany Note), Tangible Chattel Paper and
Instrument evidencing Indebtedness in excess of $1,000,000 (individually) owed
to any Grantor (other than such promissory notes, Tangible Chattel Paper and
Instruments that are Excluded Collateral) described in Schedule 7 in the
Perfection Certificate and issued by the entities named therein and all other
Indebtedness owed to any Grantor hereafter and required to be pledged by any
Grantor pursuant to Section 5.12 of the Credit Agreement (the “After-acquired
Debt”), in each case as such Section may be amended pursuant to Section 9.02 of
the Credit Agreement (the “Pledged Debt Securities”).

“Pledged Debt Securities” has the meaning assigned to such term in clause (b) of
the definition of Pledged Collateral.

“Pledged Equity Interests” has the meaning assigned to such term in clause
(a) of the definition of Pledged Collateral.

“Pledged Securities” means any promissory notes, stock certificates, unit
certificates, limited or unlimited liability membership certificates or other
securities (to the extent certificated) now or hereafter included in the Pledged
Collateral, including all certificates, instruments or other documents
representing or evidencing any Pledged Collateral.

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

“Secured Creditors” means (a) each Lender and LC Issuer, (b) the Administrative
Agent, (c) the Collateral Agent, (d) each Joint Lead Arrangers, each Cash
Management Bank, each Designated Hedge Creditor, (e) the beneficiaries of each
indemnification obligation undertaken by any Loan Party under any Loan Document
and (f) the permitted successors and assigns of each of the foregoing.

“Security Interest” has the meaning assigned to such term in Section 3.01(a).

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

“Term Credit Agreement” means the Term Credit Agreement dated as of the Closing
Date, by and among the Borrower, each lender party thereto and the Term Loan
Administrative Agent.

“Term Loan Documents” means “Term Loan Documents” as defined in the Term Credit
Agreement.

 

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“Term Representative” means initially, Deutsche Bank AG New York Branch, in its
capacity as administrative agent and collateral agent under the Term Credit
Agreement and the other Term Loan Documents and any other administrative agent,
collateral agent or representative of the holders of Secured Obligations
appointed as a representative for purposes related to the administration of the
security documents pursuant to the Term Credit Agreement, in such capacity as
provided in the Term Credit Agreement.

“Trademark Security Agreement” means the ABL Trademark Security Agreement
substantially in the form of Exhibit IV hereto.

“Trademarks” shall mean, with respect to any Grantor, all of such Grantor’s
right, title, and interest in and to the following: (a) all trademarks
(including service marks), trade names, trade dress, and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the foregoing; (b) all renewals of the foregoing; (c) all
income, royalties, damages, and payments now or hereafter due or payable with
respect thereto, including, without limitation, damages, claims, and payments
for past and future infringements thereof; (d) all rights to sue for past,
present, and future infringements of the foregoing, including the right to
settle suits involving claims and demands for royalties owing; and (e) all
rights corresponding to any of the foregoing throughout the world.

“UCC” shall mean the New York UCC; provided, however, that, at any time, if by
reason of mandatory provisions of law, any or all of the perfection or priority
of the Collateral Agent’s and the Secured Creditors’ security interest in any
item or portion of the 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 and for purposes of definitions relating to such provisions.

“Vehicles” shall mean all vehicles covered by a certificate to title law of any
state and all tires and other appurtenances to any of the foregoing.

ARTICLE II

Pledge of Securities

SECTION 2.01. Pledge. As security for the payment or performance, as the case
may be, in full of the Obligations, each Grantor hereby pledges, assigns and
grants to the Collateral Agent, on behalf of and for the benefit of the Secured
Creditors, a security interest in all of its right, title and interest in, to
and under all of the Pledged Collateral.

Notwithstanding the foregoing or anything herein to the contrary, in no event
shall the “Pledged Collateral” include or the security interest attach to any
Excluded Collateral or Excluded Equity Interests.

SECTION 2.02. Delivery of the Pledged Collateral.

(a) Subject to the ABL/Bond Intercreditor Agreement, each Grantor will promptly
deliver to the Collateral Agent (or its non-fiduciary agent or designee) upon
execution

 

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of this Agreement all certificates, now or hereafter acquired, if any,
representing or evidencing the Pledged Collateral to the extent such
certificates constitute certificated securities (other than checks received in
the ordinary course of business), together with duly executed instruments of
transfer or assignments in blank.

(b) Except as otherwise addressed in Section 3.03(b) herein, if any amount
payable with respect to any Indebtedness owed to any Grantor shall be or become
evidenced by any promissory note (which may be a global note), such note or
instrument shall be promptly delivered (but in any event within 45 days of
receipt (other than any promissory note in an aggregate principal amount of less
than $1,000,000 owed to the applicable Grantor by any Person) by such Grantor or
such longer period as the Collateral Agent may agree in its reasonable
discretion) to the Collateral Agent, for the benefit of the Secured Creditors,
together with an undated instrument of transfer duly executed in blank and in a
manner reasonably satisfactory to the Collateral Agent.

(c) Upon delivery to the Collateral Agent, (i) any certificate or promissory
note representing Pledged Securities shall be accompanied by undated stock or
note powers, as applicable, duly executed in blank or other undated instruments
of transfer duly executed in blank and reasonably satisfactory to the Collateral
Agent and by such other instruments and documents as the Collateral Agent may
reasonably request and (ii) all other property comprising part of the Pledged
Collateral shall be accompanied by undated proper instruments of assignment duly
executed in blank by the applicable Grantor and such other instruments and
documents as the Collateral Agent may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing such Pledged
Securities, which schedule shall be deemed attached to, and shall supplement,
Schedule II hereto and be made a part hereof; provided, that failure to provide
any such schedule hereto shall not affect the validity of such pledge of such
Pledged Securities. Each schedule so delivered shall supplement any prior
schedules so delivered.

SECTION 2.03. Representations, Warranties and Covenants. The Grantors jointly
and severally represent, warrant and covenant to and with the Collateral Agent,
for the benefit of the Secured Creditors, that:

(a) as of the Closing Date, Schedule II hereto sets forth a true and complete
list, with respect to each Grantor, of all the Pledged Equity Interests owned by
such Grantor in any Subsidiary and the percentage of the issued and outstanding
units of each class of the Equity Interests of the issuer thereof represented by
the Pledged Equity Interests owned by such Grantor and all the Pledged Debt
Securities owned by such Grantor;

(b) the Pledged Equity Interests and the Pledged Debt Securities have been duly
and validly authorized and issued by the issuers thereof and (i) in the case of
Pledged Equity Interests, are fully paid and, in the case of corporate
interests, nonassessable and (ii) in the case of Pledged Debt Securities, are
legal, valid and binding obligations of the issuers thereof, except to the
extent that enforceability of such obligations may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditor’s rights
generally; provided that the foregoing representations, insofar as they relate
to the Pledged Collateral issued by a Person other than the Borrower or any
Subsidiary, are made to the knowledge of the Grantors;

 

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(c) except for the security interests granted hereunder and under any other Loan
Documents, each of the Grantors (i) is and, subject to any transfers made in
compliance with the Credit Agreement, will continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule II
hereto as owned by such Grantor, (ii) holds the same free and clear of all
Liens, other than Liens permitted pursuant to Section 7.02 of the Credit
Agreement and transfers made in compliance with the Credit Agreement, (iii) will
make no further assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than Liens permitted pursuant to Section 7.02 of the Credit
Agreement and transfers made in compliance with the Credit Agreement, and
(iv) will use commercially reasonable efforts to defend its title or interest
thereto or therein against any and all Liens (other than the Liens created by
this Agreement and the other Loan Documents and Liens permitted pursuant to
Section 7.02 of the Credit Agreement), however arising, of all Persons
whomsoever;

(d) except for restrictions and limitations imposed by or otherwise permitted by
the Loan Documents (including pursuant to the Term Loan Documents and any Liens
permitted pursuant to Section 7.02 of the Credit Agreement) or securities laws
generally, the Pledged Equity Interests and, to the extent issued by the
Borrower or any Subsidiary, the Pledged Debt Securities are and will continue to
be freely transferable and assignable, and none of the Pledged Equity Interests
and, to the extent issued by the Borrower or any Subsidiary, none of the Pledged
Debt Securities are or will be subject to any option, right of first refusal,
shareholders agreement or Organizational Document provisions or contractual
restriction of any nature that might prohibit, impair, delay or otherwise affect
in any manner adverse to the Secured Creditors in any material respect the
pledge of such Pledged Collateral hereunder, the sale or disposition thereof
pursuant hereto or the exercise by the Collateral Agent of rights and remedies
hereunder;

(e) each of the Grantors has the power and authority to pledge the Pledged
Collateral pledged by it hereunder in the manner hereby done or contemplated;

(f) by virtue of the execution and delivery by the Grantors of this Agreement,
when any Pledged Securities constituting certificated securities are delivered
to the Collateral Agent in accordance with this Agreement, the Collateral Agent
will obtain a legal, valid and perfected lien upon and security interest in such
Pledged Securities, free of any adverse claims, under the New York UCC to the
extent such lien and security interest may be created and perfected under the
New York UCC, as security for the payment and performance of the Obligations;
and

(g) subject to the terms of this Agreement and to the extent permitted by
applicable law, each Grantor hereby agrees that upon the occurrence and during
the continuance of an Event of Default, it will comply with the instructions of
the Collateral Agent with respect to the Equity Interests in such Grantor that
constitute Pledged Equity hereunder that are not certificated without further
consent by the applicable owner or holder of such Equity Interests.

SECTION 2.04. Registration in Nominee Name; Denominations. If an Event of
Default shall have occurred and is continuing and the Collateral Agent shall
have notified the Grantors in writing of its intent to exercise such rights, the
Collateral Agent, on behalf of the Secured Creditors, shall have the right (in
its sole and absolute discretion) to hold the Pledged Securities in the name of
the applicable Grantor, endorsed or assigned in blank or in favor of the

 

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Collateral Agent or in its own name as pledgee or in the name of its nominee (as
pledgee or as sub-agent), and each Grantor will promptly give to the Collateral
Agent copies of any notices or other communications received by it with respect
to Pledged Securities registered in the name of such Grantor. Upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any reasonable purpose consistent with this Agreement.

SECTION 2.05. Voting Rights; Dividends and Interest. (a) Unless and until an
Event of Default shall have occurred and is continuing and the Collateral Agent
shall have notified the Grantors in writing that their rights under this
Section 2.05 are being suspended:

(i) each Grantor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof;

(ii) the Collateral Agent shall promptly execute and deliver to each Grantor, or
cause to be promptly executed and delivered to such Grantor, all such proxies,
powers of attorney and other instruments as such Grantor may reasonably request
for the purpose of enabling such Grantor to exercise the voting and/or
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section; and

(iii) each Grantor shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions paid on or distributed in
respect of the Pledged Securities to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and are
otherwise paid or distributed in accordance with, the terms and conditions of
the Credit Agreement, the other Loan Documents and applicable laws; provided
that any noncash dividends, interest, principal or other distributions that
would constitute Pledged Equity Interests or Pledged Debt Securities, whether
resulting from a subdivision, combination or reclassification of the outstanding
Equity Interests in the issuer of any Pledged Securities or received in exchange
for Pledged Securities or any part thereof, or in redemption thereof, or as a
result of any merger, consolidation, acquisition or other exchange of assets to
which such issuer may be a party or otherwise, shall be and become part of the
Pledged Collateral and, if received by any Grantor, shall be forthwith delivered
to the Collateral Agent in the same form as so received (with any necessary
endorsements, stock or note powers and other instruments of transfer reasonably
requested by the Collateral Agent), in each case, to the extent required
pursuant to Section 2.02 or Section 2.06. So long as no Event of Default has
occurred and is continuing, the Collateral Agent shall promptly deliver to each
Grantor any Pledged Securities in its possession if requested to be delivered to
the issuer thereof in connection with any exchange or redemption of such Pledged
Securities permitted by the Credit Agreement in accordance with this
Section 2.05(a)(iii), subject to receipt by the Collateral Agent of a
certificate of a Responsible Officer of the Borrower with respect thereto and
other documents reasonably requested by the Collateral Agent.

(b) Upon the occurrence and during the continuance of an Event of Default, after
the Collateral Agent shall have notified the Grantors, as applicable, of the
suspension of

 

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their rights under paragraph (a)(iii) of this Section 2.05, all rights of any
Grantor to dividends, interest, principal or other distributions that such
Grantor is authorized to receive pursuant to paragraph (a)(iii) of this
Section 2.05 shall cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall have the sole and exclusive right and
authority to receive and retain such dividends, interest, principal or other
distributions; provided that, to the extent directed by the Required Lenders,
the Collateral Agent shall have the right from time to time following the
occurrence and during the continuance of an Event of Default to permit the
Grantors to exercise such rights. All dividends, interest, principal or other
distributions received by any Grantor contrary to the provisions of this
Section 2.05 shall be held for the benefit of the Collateral Agent and the other
Secured Creditors and shall be forthwith delivered to the Collateral Agent upon
demand in the same form as so received (with any necessary endorsements, stock
or note powers and other instruments of transfer reasonably requested by the
Collateral Agent). Any and all money and other property paid over to or received
by the Collateral Agent pursuant to the provisions of this paragraph (b) shall
be retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and, to the extent
so received, shall, subject to any applicable Intercreditor Agreement, be
applied in accordance with the provisions of Section 4.02. After all Events of
Default have been cured or waived and the Borrower has delivered to the
Collateral Agent a certificate of a Responsible Officer of the Borrower to that
effect, the Collateral Agent shall promptly repay to each Grantor (without
interest) all dividends, interest, principal or other distributions that such
Grantor would otherwise be permitted to retain pursuant to the terms of
paragraph (a)(iii) of this Section 2.05 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default, after
the Collateral Agent shall have notified the Grantors of the suspension of their
rights under paragraph (a)(i) of this Section 2.05, all rights of any Grantor to
exercise the voting and consensual rights and powers it is entitled to exercise
pursuant to paragraph (a)(i) of this Section 2.05, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 2.05, shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers; provided that, unless otherwise directed by
the Required Lenders, the Collateral Agent shall have the right from time to
time following and during the continuance of an Event of Default to permit the
Grantors to exercise such rights. After all Events of Default have been cured or
waived and the Borrower has delivered to the Collateral Agent a certificate of a
Responsible Officer of the Borrower to that effect, all rights vested in the
Collateral Agent pursuant to this paragraph (c) shall cease, and the Grantors
shall have the exclusive right to exercise the voting and consensual rights and
powers they would otherwise be entitled to exercise pursuant to paragraph (a)(i)
of this Section 2.05.

(d) Any notice given by the Collateral Agent to the Grantors, suspending their
rights under paragraph (a) of this Section 2.05 (i) may be given by telephone if
promptly confirmed in writing, (ii) may be given with respect to one or more of
the Grantors at the same or different times and (iii) may suspend the rights of
the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without
suspending all such rights (as specified by the Collateral Agent in its sole and
absolute discretion) and without waiving or otherwise affecting the Collateral
Agent’s rights to give additional notices from time to time suspending other
rights; provided that the Collateral Agent shall only provide any such notice if
an Event of Default has occurred and is continuing.

 

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SECTION 2.06. Article 8 Opt-In. No Grantor shall take any action to cause any
membership interest, partnership interest, or other equity interest of any
limited liability company or limited partnership owned or controlled by any
Grantor comprising Collateral to be or become a “security” within the meaning
of, or to be governed by Article 8 of the UCC as in effect under the laws of any
state having jurisdiction and shall not cause or permit any such limited
liability company or limited partnership to “opt in” or to take any other action
seeking to establish any membership interest, partnership interest or other
equity interest of such limited liability company or limited partnership
comprising the Collateral as a “security” or to become a certificated security,
in each case, without delivering all certificates evidencing such interest to
the Collateral Agent in accordance with and as required by Section 2.02 or, in
the case of any uncertificated security, without taking such steps, to the
extent requested by the Collateral Agent (following notice to the Collateral
Agent of any such change, which shall be promptly provided by such Grantor), to
provide the Collateral Agent with control (as defined in Article 8-106 of the
UCC) of any such security.

ARTICLE III

Security Interests in Personal Property

SECTION 3.01. Security Interest. (a) As security for the payment or performance,
as the case may be, in full of the Obligations, each Grantor hereby pledges,
assigns and grants to the Collateral Agent, on behalf of and for the benefit of
the Secured Creditors, a security interest (the “Security Interest”) in all of
its right, title and interest in, to and under all of the following property and
other assets, whether now owned by or owing to, or hereafter acquired by or
arising in favor of, such Grantor, and regardless of where located (all of which
are collectively referred to as the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper (including Electronic Chattel Paper and Tangible Chattel
Paper);

(iii) all Intellectual Property;

(iv) all Documents;

(v) all Equipment;

(vi) all Fixtures;

(vii) all General Intangibles;

(viii) all Goods;

(ix) all Instruments;

 

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(x) all Inventory;

(xi) all Investment Property;

(xii) all Letter-of-Credit Rights and Supporting Obligations;

(xiii) all Deposit Accounts;

(xiv) all Vehicles;

(xv) all Commercial Tort Claims as specified from time to time in Schedule IV
hereto (as the same may be updated from time to time in accordance with the
terms hereof);

(xvi) all cash or other property deposited with the Collateral Agent or any
Secured Creditor or any Affiliate of the Collateral Agent or any Secured
Creditor or which the Collateral Agent, for its benefit and for the benefit of
the other Secured Creditors, or any Secured Creditor or such Affiliate is
entitled to retain or otherwise possess as collateral pursuant to the provisions
of this Agreement or the Credit Agreement;

(xvii) all books, records, files, correspondence, computer programs, tapes,
disks and related data processing software which contain information identifying
or pertaining to any of the foregoing or any Account Debtor or showing the
amounts thereof or payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof;

(xviii) As-Extracted Collateral; and

(xix) any and all accessions to, substitutions for and replacements, products
and cash and non-cash proceeds (including Stock Rights) of the foregoing
(including any claims to any items referred to in this definition and any claims
against third parties for loss of, damage to or destruction of any or all of the
Collateral or for proceeds payable under or unearned premiums with respect to
policies of insurance) in whatever form, including cash, negotiable instruments
and other instruments for the payment of money, Chattel Paper, collateral
agreements and other documents.

Notwithstanding the foregoing or anything herein to the contrary, in no event
shall the “Article 9 Collateral” include or the Security Interest attach to any
Excluded Collateral.

(b) Each Grantor hereby irrevocably authorizes the Collateral Agent for the
benefit of the Secured Creditors at any time and from time to time to file in
any relevant U.S. jurisdiction any financing statements, with respect to the
Collateral or any part thereof and amendments thereto that (i) describe the
collateral covered thereby in any manner that the Collateral Agent reasonably
determines is necessary or advisable to ensure the perfection of the security
interest in the Collateral granted under this Agreement, including indicating
the Collateral as “all assets” of such Grantor or words of similar effect, and
(ii) contain the information required by Article 9 of the UCC for the filing of
any financing statement or amendment, including whether such Grantor is an
organization, the type of organization and, if required, any organizational
identification number issued to such Grantor. Each Grantor agrees to provide
such information to the Collateral Agent promptly upon request.

 

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The Collateral Agent is further authorized to file with the United States Patent
and Trademark Office or United States Copyright Office (or any successor
office), such documents as may be reasonably necessary or advisable for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest in Article 9 Collateral consisting of Patents, Trademarks or
Copyrights granted by each Grantor and naming any Grantor or the Grantors as
debtors and the Collateral Agent as secured creditor.

(c) The Security Interest and the security interest granted pursuant to
Article II are granted as security only and shall not subject the Collateral
Agent or any other Secured Creditor to, or in any way alter or modify, any
obligation or liability of any Grantor with respect to or arising out of the
Collateral.

SECTION 3.02. Representations and Warranties. The Grantors jointly and severally
represent and warrant to the Collateral Agent, for the benefit of the Secured
Creditors, that:

(a) each Grantor has good title or valid leasehold interests in the tangible
Article 9 Collateral material to its business with respect to which it has
purported to grant a Security Interest hereunder, free and clear of any Liens,
(i) except for Liens expressly permitted pursuant to Section 7.02 of the Credit
Agreement and (ii) except for minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or as proposed to be
conducted or to utilize such properties for their intended purposes, in each
case to the extent the failure to have such good title or valid leasehold
interest could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and has full power and authority to grant
to the Collateral Agent, for the benefit of the Secured Creditors, the Security
Interest in such tangible Article 9 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 that has been obtained and except to the extent that failure
to obtain or make such consent or approval, as the case may be, individually or
in aggregate, could not reasonably be expected to have a Material Adverse
Effect;

(b) the Perfection Certificate has been duly prepared, completed and executed
and the information set forth therein, including the exact legal name and
jurisdiction of organization of each Grantor, is correct and complete in all
material respects as of the Closing Date. The Uniform Commercial Code financing
statements or other appropriate filings, recordings or registrations prepared by
the Collateral Agent based upon the information provided to the Collateral Agent
in the Perfection Certificate for filing in each governmental, municipal or
other office specified in Schedule 4 to the Perfection Certificate (or specified
by notice from the Borrower to the Collateral Agent after the Closing Date in
the case of filings, recordings or registrations required by Section 6.12 of the
Credit Agreement), are all the filings, recordings and registrations that are
necessary to establish a legal, valid and perfected security interest in favor
of the Collateral Agent, for the benefit of the Secured Creditors, in respect of
all Article 9 Collateral in which the Security Interest may be perfected by such
filing, recording or registration in the United States, and as of the date
hereof, no further or subsequent filing, refiling, recording, rerecording,

 

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registration or reregistration (other than filings, if any, which shall be made
in the United States Patent and Trademark Office and the United States Copyright
Office, as applicable, to record the Security Interest in Article 9 Collateral
consisting of filed, registered or applied-for United States Patents, Trademarks
and Copyrights) is necessary, except as provided under applicable law with
respect to the filing of continuation statements (other than such actions as are
necessary to perfect the Security Interest with respect to any Article 9
Collateral consisting of filed, registered or applied for Patents, Trademarks
and Copyrights filed, acquired or developed by a Grantor after the date hereof).
The Grantors represent and warrant that, if applicable, a fully executed Patent
Security Agreement, Trademark Security Agreement and Copyright Security
Agreement, in each case containing a list of the Article 9 Collateral consisting
of United States registered Patents, United States registered Trademarks and
United States registered Copyrights (and applications for any of the foregoing),
as applicable, and executed by each Grantor owning any such Article 9
Collateral, have been delivered to the Collateral Agent for recording with the
United States Patent and Trademark Office or the United States Copyright Office
as applicable to establish a legal, valid and perfected security interest in
favor of the Collateral Agent, for the benefit of the Secured Creditors, in
respect of all Article 9 Collateral consisting of registered and applied for
Patents, Trademarks and Copyrights in which a security interest may be filed,
recorded or registered in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable. No further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary
(other than such actions as are necessary to perfect the Security Interest with
respect to any Article 9 Collateral consisting of registered and applied for
Patents, Trademarks and Copyrights acquired or developed by a Grantor after the
date hereof);

(c) the Security Interest constitutes (i) a legal and valid security interest in
all the Article 9 Collateral securing the payment and performance of the
Obligations, (ii) subject to the filings described in paragraph (b) of this
Section 3.02 (including payment of applicable fees in connection therewith), a
perfected security interest in all Article 9 Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the applicable jurisdiction in the United
States pursuant to the Uniform Commercial Code and (iii) subject to the filings
described in paragraph (b) of this Section 3.02, a perfected security interest
in all Article 9 Collateral in which a security interest may be perfected upon
the receipt and recording of a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement with the United States Patent and
Trademark Office and the United States Copyright Office, as applicable. The
Security Interest is and shall be prior to any other Lien on any of the
Article 9 Collateral, other than Liens permitted pursuant to Section 7.02 of the
Credit Agreement;

(d) as of the Closing Date, Schedule III hereto sets forth a true and complete
list, with respect to each Grantor, of (i) all of such Grantor’s Patents and
Trademarks applied for or issued or registered with the United States Patent and
Trademark Office, including the name of the registered owner or applicant and
the registration, application, or publication number, as applicable, of each
such Patent or Trademark and (ii) all of such Grantor’s Copyrights applied for
or registered with the United States Copyright Office, including the name of the
registered owner and the registration number of each such Copyright; and

(e) none of the Grantors has filed or consented to (i) the filing of any
financing statement or analogous document, in each case with respect to a Lien,
under the Uniform

 

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Commercial Code or any other applicable laws covering any Article 9 Collateral,
or (ii) any assignment in which any Grantor assigns any Article 9 Collateral or
any security agreement or similar instrument covering any Article 9 Collateral
with the United States Patent and Trademark Office or the United States
Copyright Office, except, in each case, for Liens expressly permitted pursuant
to Section 7.02 of the Credit Agreement.

(f) The names of the obligors, amounts owing, due dates and other information
with respect to each Grantor’s Accounts and Chattel Paper that are Collateral
have been correctly stated in all material respects, at the time furnished, in
the records of such Grantor relating thereto and in all invoices and each
Borrowing Base Certificate, to the extent contained therein, with respect
thereto furnished to the Collateral Agent by such Grantor from time to time.

(g) With respect to Accounts of the Grantors, except as specifically disclosed
on the most recent Borrowing Base Certificate, (i) all such Accounts represent
bona fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of the applicable Grantor’s business and are not evidenced by a
judgment (except as would not have a Material Adverse Effect), Instrument or
Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted in writing with respect thereto and no Grantor has made any agreement
with any Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by a Grantor in the ordinary course of its
business for prompt payment and disclosed to the Collateral Agent, in each case
except as would not reasonably be expected to have a Material Adverse Effect;
(iii) there are no facts, events or occurrences that in any way impair the
validity or enforceability thereof or could reasonably be expected to reduce the
amount payable thereunder as shown on such Grantor’s books and records and any
invoices, statements and the most recent Borrowing Base Certificate with respect
thereto except as would not reasonably be expected to have a Material Adverse
Effect; (iv) no Grantor has received any notice of proceedings or actions that
are threatened or pending against any Account Debtor that might result in any
material adverse change in such Account Debtor’s financial condition except as
would not reasonably be expected to have a Material Adverse Effect; and (v) no
Grantor has knowledge that any Account Debtor is unable generally to pay its
debts as they become due except as would not reasonably be expected to have a
Material Adverse Effect.

(h) In addition, with respect to all Accounts of the Grantors, except as
specifically disclosed on the most recent Borrowing Base Certificate, the
amounts shown on all invoices, statements and the most recent Borrowing Base
Certificate with respect thereto are actually and absolutely owing to a Grantor
as indicated thereon and are not in any way contingent except as would not
reasonably be expected to have a Material Adverse Effect.

(i) With respect to any Inventory of the Grantors and that is scheduled or
listed on the most recent Borrowing Base Certificate, (i) such Inventory (other
than Inventory in transit, out for repair or in the possession of employees and
Inventory in an aggregate amount not exceeding $10,000,000) is located at one of
the Grantors’ locations set forth in Section 2(a), 2(b) or 2(c) of the
Perfection Certificate, (ii) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreement with any third
party that, to such Grantor’s knowledge, would, upon sale or other disposition
of such Inventory by the Collateral Agent

 

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in accordance with the terms hereof, infringe the rights of such third-party,
violate any contract with such third-party, or cause the Collateral Agent to
incur any liability with respect to payment of royalties other than royalties
incurred pursuant to sale of such Inventory under the current licensing
agreement related thereto in a manner that would reasonably be expected to have
a Material Adverse Effect, (iii) to such Grantor’s knowledge, such Inventory has
been produced in accordance with the Federal Fair Labor Standards Act of 1938,
as amended, and all rules, regulations and orders thereunder except as would not
reasonably be expected to have a Material Adverse Effect and (iv) to such
Grantor’s knowledge, the completion of manufacture, sale or other disposition of
such Inventory by the Collateral Agent following an Event of Default shall not
require the consent of any Person and shall not constitute a breach or default
under any contract or agreement to which any Grantor is a party or to which such
Inventory is subject except as would not reasonably be expected to have a
Material Adverse Effect.

SECTION 3.03. Covenants. (a) Each Grantor shall, at its own expense, take any
and all commercially reasonable actions necessary to (i) defend title to the
Article 9 Collateral (other than Intellectual Property, which is governed by
Section 3.05) against all Persons, except with respect to Article 9 Collateral
that such Grantor determines in its reasonable business judgment is no longer
necessary or beneficial to the conduct of such Grantor’s business, and
(ii) defend the Security Interest of the Collateral Agent in the Article 9
Collateral and the priority thereof against any Lien, in each case subject to
(x) Liens permitted pursuant to Section 7.02 of the Credit Agreement,
(y) transfers made in compliance with the Credit Agreement and (z) the rights of
such Grantor under Section 11.27 of the Credit Agreement and corresponding
provisions of the Security Documents to obtain a release of the Liens created
under the Security Documents.

(b) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions as the Collateral Agent may from time to time reasonably
request to obtain, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any reasonable and
documented or invoiced out-of-pocket 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. If any amount payable to any Grantor under or
in connection with any of the Article 9 Collateral shall be or become evidenced
by any promissory note (which may be a global note) or other instrument (other
than any promissory note or other instrument in an aggregate principal amount of
less than $1,000,000 owed to the applicable Grantor by any Person), such note or
instrument shall be promptly delivered (but in any event within 45 days of
receipt by such Grantor or such longer period as the Collateral Agent may agree
in its reasonable discretion) to the Collateral Agent, for the benefit of the
Secured Creditors, together with an undated instrument of transfer duly executed
in blank and in a manner reasonably satisfactory to the Collateral Agent.

(c) At its option, the Collateral Agent may, with three (3) Business Day’s prior
written notice to the Borrower, discharge past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time levied or
placed on the tangible Article 9 Collateral and not permitted pursuant to
Section 7.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the tangible Article 9 Collateral to the extent any Grantor
fails to do so as required by the Credit Agreement, this Agreement or any other
Loan Document

 

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and within a reasonable period of time after the Collateral Agent has reasonably
requested that it do so; provided that nothing in this paragraph shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Creditor to cure or perform,
any covenants or other promises of any 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.

(d) The exercise by the Collateral Agent of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under each
contract, agreement or instrument relating to the Article 9 Collateral unless
the Collateral Agent has expressly in writing assumed such duties and
obligations and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the other Secured Creditors from and against
any and all liability for such performance.

(e) Notwithstanding anything herein to the contrary, it is understood that no
Grantor shall be required by this Agreement to better assure, preserve, protect
or perfect the Security Interest created hereunder by any means other than
(i) filings of financing statements pursuant to the Uniform Commercial Code,
(ii) filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office), in respect of registered or applied
for Intellectual Property, (iii) in the case of Collateral that constitutes
Pledged Securities, Instruments, Tangible Chattel Paper or Negotiable Documents
(other than those Negotiable Documents held in the ordinary course of business),
delivery thereof to the Collateral Agent in accordance with the terms hereof
(together with, where applicable, undated stock or note powers or other undated
proper instruments of assignment) and (iv) other actions to the extent required
by Section 3.04 hereunder. No Grantor shall be required to (i) complete any
filings or other action with respect to the better assurance, preservation,
protection or perfection of the security interests created hereby in any
jurisdiction outside of the United States or to reimburse the Administrative
Agent for any costs incurred in connection with the same or (ii) except as
required by Section 2.21 of the Credit Agreement, deliver control agreements
with respect to, or confer perfection by “control” over, any Deposit Accounts,
Securities Accounts or Commodity Accounts.

(f) As to Eligible Credit Card Receivabless, (i) no Grantor will make or agree
to make any discount, credit, rebate or other reduction in the original amount
owing in respect thereof or accept in satisfaction thereof less than the
original amount thereof, except in the ordinary course of business consistent
with Grantor’s credit and rebate policies as in effect from time to time and
agreements with customers and its usual business practice as in effect from time
to time or as otherwise permitted by the Credit Agreement; and (ii) except as
otherwise provided in any Loan Document or as would not reasonably be expected
to have a Material Adverse Effect, each Grantor will collect and enforce, in
accordance with its policies in effect from time to time and in the ordinary
course of business, all material amounts due or hereafter due to such Grantor
thereunder; except that, any Grantor may, with respect thereto, allow in the
ordinary course of business (w) a refund or credit due as a result of ordinary
course adjustments or returned or damaged or defective merchandise, (x) such
extensions of time to pay amounts due in respect thereof and such other
modifications of payment terms or settlements in respect thereof as shall be
commercially reasonable in the circumstances, (y) a credit, rebate or refund in
accordance with such Grantor’s credit, rebate and refund policies, as in effect
from time to time, and (z) a credit or rebate in accordance with written credit
and/or rebate agreements entered into with specific customers prior to the
incurrence thereof, all in accordance with such Grantor’s ordinary course of
business consistent with its collection practices as in effect from time to
time.

 

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SECTION 3.04. Other Actions. In order to further insure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Security Interest, each Grantor agrees, in each case at such Grantor’s own
expense, to take the following actions with respect to the following Article 9
Collateral:

(a) Instruments. If any Grantor shall at any time hold or acquire any
Instruments constituting Collateral, such Grantor shall promptly (but in any
event within 45 days of receipt by such Grantor or such longer period as the
Collateral Agent may agree in its reasonable discretion) endorse, assign and
deliver the same to the Collateral Agent, accompanied by such undated
instruments of transfer or assignment duly executed in blank as the Collateral
Agent may from time to time reasonably request.

(b) Investment Property. Except to the extent otherwise provided in Article II,
if any Grantor shall at any time hold or acquire any certificated securities
constituting Collateral, such Grantor shall forthwith endorse, assign and
deliver the same to the Collateral Agent, accompanied by such undated
instruments of transfer or assignment duly executed in blank as the Collateral
Agent may from time to time reasonably request.

(c) [Reserved].

(d) Commercial Tort Claims. If any Grantor shall at any time hold or acquire a
Commercial Tort Claim (in respect of which a complaint or counterclaim has been
filed by or on behalf of such Grantor) seeking damages in an amount reasonably
estimated to exceed $1,000,000, such Grantor shall promptly notify the
Collateral Agent thereof in a writing signed by such Grantor, including a
summary description of such claim, and Schedule IV hereto shall be deemed to be
supplemented to include such description of such Commercial Tort Claim as set
forth in such writing.

SECTION 3.05. Covenants Regarding Patent, Trademark and Copyright Collateral.
(a) Except to the extent a failure to act could not reasonably be expected to
have a Material Adverse Effect of the type referred to in clause (a) or (b) of
the definition of such term in the Credit Agreement, with respect to
registration or pending application of each item of its Intellectual Property
for which such Grantor has standing and ability to do so, each Grantor agrees to
take commercially reasonable efforts to (i) take all steps to maintain the
validity and enforceability of any United States registered Intellectual
Property (or applications therefor) and to maintain such registrations and
applications of Intellectual Property in full force and effect and (ii) pursue
the registration and maintenance of each Patent, Trademark or Copyright
registration or application that is material to the conduct of such Grantor’s
business. Grantor shall take commercially reasonable steps to defend title to
and ownership of its Intellectual Property that is material to the conduct of
such Grantor’s business. Notwithstanding the foregoing, nothing in this
Section 3.05 shall prevent any Grantor from disposing of, discontinuing the use
or maintenance of, abandoning, failing to pursue or enforce or otherwise
allowing to lapse, terminate, be invalidated or put into the public domain any
of its registered or applied for Intellectual Property that is no longer used or
useful, or economically practicable to maintain, or if such Grantor determines
in its reasonable business judgment that such discontinuance is desirable in the
conduct of its business.

 

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(b) Each Grantor agrees that, should it obtain an ownership or other interest in
any Intellectual Property after the Closing Date (i) the provisions of this
Agreement shall automatically apply thereto and (ii) any such Intellectual
Property shall automatically become Intellectual Property subject to the terms
and conditions of this Agreement, except, with respect to each of (i) and
(ii) above, if such Intellectual Property is obtained under a license from a
third party under which a security interest would not be permitted. For the
avoidance of doubt, a security interest shall not be granted in any Intellectual
Property that constitutes an Excluded Asset.

(c) Each Grantor, either itself or through any agent, employee, licensee or
designee, shall (i) whenever a certificate is delivered or required to be
delivered pursuant to Section 6.03(b) of the Credit Agreement, deliver to the
Collateral Agent a schedule setting forth all of such Grantor’s registered and
applied for Patents, Trademarks and Copyrights that are not listed on Schedule
III hereto or on a schedule previously provided to the Collateral Agent pursuant
to this Section 3.05(c), and (ii) within a reasonable time following the request
of the Collateral Agent, execute and deliver a Patent Security Agreement,
Trademark Security Agreement or Copyright Security Agreement, as applicable, in
respect of such Patents, Trademarks and Copyrights, and any and all other
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence and perfect the Security Interest in such
registered or applied for Patents, Trademarks or Copyrights.

ARTICLE IV

Remedies

SECTION 4.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver, on demand,
each item of Collateral to the Collateral Agent or any Person designated by the
Collateral Agent, including all books and records relating thereto and all
tangible evidence of its Accounts and contract rights (including, without
limitation, all documents evidencing the Accounts and all Contracts evidencing
such contract rights), and if the Collateral Agent so directs, such Grantor
shall legend, in form and manner reasonably satisfactory to the Collateral
Agent, the Accounts and the Contracts, as well as books, records and documents
(if any) of such Grantor evidencing or pertaining to such Accounts and Contracts
with an appropriate reference to the fact that such Accounts and Contracts have
been assigned to the Collateral Agent and that the Collateral Agent has a
security interest therein, and it is agreed that the Collateral Agent shall have
the right to take any of or all the following actions at the same or different
times: (a) with respect to any Article 9 Collateral consisting of Intellectual
Property, on demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Article 9 Collateral by the
applicable Grantors to the Collateral Agent, for the benefit of the Secured
Creditors, or to license or sublicense, whether on an exclusive or nonexclusive
basis, any such Article 9 Collateral throughout the world on such terms and
conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any of the then existing licensing arrangements to the
extent that waivers cannot be obtained) in connection with exercise of its
remedies hereunder, and (b) with or without legal process and with or without
prior notice or demand for performance, to take

 

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possession of the Article 9 Collateral and the Pledged Collateral and occupy any
premises owned or, to the extent lawful and permitted, leased by any of the
Grantors where the Collateral or any part thereof is assembled or located for a
reasonable period in order to effectuate its rights and remedies hereunder or
under the Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law and the
notice requirements described below, to sell or otherwise dispose of all or any
part of the Collateral at a public or private sale or at any broker’s board or
on any securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale of securities (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any sale of Collateral shall hold the
property sold absolutely free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal that 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.

The Collateral Agent shall give the applicable Grantors no less than 10 days’
prior written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the New York UCC or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral or portion thereof, will first be
offered for sale at such board or exchange. Any such 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 (if any) of such sale.
At any such sale, 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. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale 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. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent and the other Secured Creditors shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by law, private) sale made pursuant to this Agreement, any Secured
Creditor may bid for or purchase, free (to the extent permitted by law) from any
right of redemption, stay, valuation or appraisal on the part of any Grantor
(all said rights being also hereby waived and released to the extent permitted
by law), 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 such
Secured Creditor from any Grantor as a credit against the purchase price, and
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sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. 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 Obligations paid in full. 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 foreclose this Agreement 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. Any sale pursuant to the provisions of this
Section 4.01 shall be deemed to conform to the commercial reasonableness
standards as provided in Section 9-610(b) of the New York UCC or its equivalent
in other jurisdictions.

SECTION 4.02. Application of Proceeds. Subject to the terms of any applicable
intercreditor agreement contemplated by the Credit Agreement, the Collateral
Agent shall apply the proceeds of any collection or sale of Collateral,
including any Collateral consisting of cash, as set forth in 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 of Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
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. The
Collateral Agent shall have no liability to any of the Secured Creditors for
actions taken in reliance on information supplied to it as to the amounts of
unpaid principal and interest and other amounts outstanding with respect to the
Obligations.

SECTION 4.03. Securities Act. In view of the position of the Grantors in
relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such act and any such similar statute as from time to time in
effect being called the “Federal Securities Laws”) with respect to any
disposition of the Pledged Collateral permitted hereunder. Each Grantor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Collateral could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Collateral under applicable
blue sky or other state securities laws or similar laws analogous in purpose or
effect. Each Grantor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Collateral, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges and
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Agent, in its sole and absolute discretion, (a) may proceed to make such a sale
whether or not a registration statement for the purpose of registering such
Pledged Collateral or part thereof shall have been filed under the Federal
Securities Laws to the extent the Collateral Agent has determined that such a
registration is not required by any Requirements of Law and (b) may approach and
negotiate with a limited number of potential purchasers (including a single
potential purchaser) to effect such sale. Each Grantor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Collateral Agent and the other Secured Creditors
shall incur no responsibility or liability for selling all or any part of the
Pledged Collateral at a price that the Collateral Agent, in its sole and
absolute discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a limited number of purchasers (or a single purchaser) were
approached. The provisions of this Section 4.03 will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.

SECTION 4.04. Grant of License to Use Intellectual Property. Upon the occurrence
and during the continuance of an Event of Default, for the purpose of enabling
the Collateral Agent to exercise rights and remedies under this Agreement, each
Grantor hereby grants to the Collateral Agent an irrevocable (until terminated
as provided below), nonexclusive license (exercisable without payment of royalty
or other compensation to the Grantors) to use or sublicense (to its contractors,
agents or representatives, or otherwise exercising its remedies hereunder) any
of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof to the extent that such non-exclusive license
(a) does not violate the express terms of any agreement between a Grantor and a
third party governing such Collateral consisting of Intellectual Property, or
gives such third party any right of acceleration, modification, termination or
cancellation therein and (b) is not prohibited by any Requirements of Law;
provided that such license and sublicenses with respect to Trademarks shall be
subject to the maintenance of quality standards with respect to the goods and
services on which such Trademarks are used sufficient to preserve the validity
of such Trademarks. The use of such license by the Collateral Agent may be
exercised solely during the continuation of an Event of Default; provided that
any license, sublicense or other transaction entered into by the Collateral
Agent in accordance with the provisions of this Agreement shall be binding upon
the Grantors, notwithstanding any subsequent cure of an Event of Default. For
the avoidance of doubt, at the time of the release of the Liens on any
Collateral as set forth in Section 5.13, the license granted to the Collateral
Agent pursuant to this Section 4.04 with respect to such Collateral shall
automatically and immediately terminate.

ARTICLE V

Miscellaneous

SECTION 5.01. Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in
Section 11.05 of the Credit Agreement. All communications and notices hereunder
to any Grantor shall be given to it in care of the Borrower as provided in
Section 11.05 of the Credit Agreement.

 

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SECTION 5.02. Waivers; Amendment. (a) No failure or delay by the Collateral
Agent, Administrative Agent or any Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent, Administrative
Agent and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Loan Party therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section 5.02, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default hereunder,
regardless of whether the Collateral Agent, Administrative Agent, any Lender may
have had notice or knowledge of such Default at the time. No notice or demand on
any Loan Party in any case shall entitle any Loan Party 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 an agreement or agreements in writing entered into
by the Collateral Agent and the Grantor or Grantors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 11.12 of the Credit Agreement; provided that the
Collateral Agent may, without the consent of any other Secured Creditor, consent
to a departure by any Grantor from any covenant of such Grantor set forth herein
to the extent such departure is consistent with the authority of the Collateral
Agent set forth in the definition of the term “Collateral and Guarantee
Requirement” in the Credit Agreement.

SECTION 5.03. Collateral Agent’s Fees and Expenses; Indemnification. The
provisions of Sections 11.01 and 11.02 of the Credit Agreement are incorporated
herein by reference, mutatis mutandis; provided that each reference therein to
the “Borrower” shall be deemed to be a reference to “each Grantor” and each
reference therein to the “Administrative Agent” shall be deemed to be a
reference to the “Collateral Agent.”

SECTION 5.04. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party, and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.

SECTION 5.05. Survival of Agreement. All covenants, agreements, representations
and warranties made by the Loan Parties in this Agreement and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of the Loan Documents and
the making of any Loans, in each case, in accordance with and subject to the
limitations set forth in 11.20 of the Credit Agreement.

 

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SECTION 5.06. Counterparts; Effectiveness; Several Agreement. 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
signature page to this Agreement by facsimile or other electronic transmission
shall be effective as delivery of a manually signed counterpart of this
Agreement. This Agreement shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Grantor and the Collateral Agent and their respective permitted successors and
assigns, and shall inure to the benefit of such Grantor, the Collateral Agent
and the other Secured Creditors 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 (and any such assignment or
transfer shall be void) except as expressly provided in this Agreement and 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 5.07. 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 5.08. Right of Set-off. If an Event of Default under the Credit
Agreement shall have occurred and be continuing, each Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender to or for
the credit or the account of any Grantor against any of and all the obligations
of such Grantor then due and owing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although (i) such obligations may be contingent or unmatured and
(ii) such obligations are owed to a branch or office of such Lender different
from the branch or office holding such deposit or obligated on such
Indebtedness. The applicable Lender shall notify the applicable Grantor and the
Collateral Agent of such setoff and application; provided that any failure to
give or any delay in giving such notice shall not affect the validity of any
such setoff and application under this Section 5.08. The rights of each Lender
under this Section 5.08 are in addition to other rights and remedies (including
other rights of setoff) that such Lender may have.

SECTION 5.09. Governing Law; Jurisdiction; Consent to Service of Process;
Appointment of Service of Process Agent. (a) This Agreement shall be construed
in accordance with and governed by the laws of the State of New York.

 

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(b) Each party hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the exclusive jurisdiction of the Supreme Court 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 for recognition or enforcement of any judgment, and each of the
parties hereto hereby 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 or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent, the Administrative
Agent or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement against any Grantor or its respective properties in
the courts of any jurisdiction.

(c) Each party hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 5.01. Nothing in any Loan Document
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.

(e) Each Grantor hereby irrevocably designates, appoints and empowers the
Borrower as its designee, appointee and agent to receive, accept and acknowledge
for and on its behalf, and in respect of its property, service of any and all
legal process, summons, notices and documents that may be served in any such
action or proceeding and the Borrower hereby accepts such designation and
appointment.

SECTION 5.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.10.

SECTION 5.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

 

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SECTION 5.12. Security Interest Absolute. All rights of the Collateral Agent
hereunder, the Security Interest, the grant of a security interest in the
Pledged Collateral and all obligations of each Grantor 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 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 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 any
guarantee securing or guaranteeing all or any of the Obligations or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.

SECTION 5.13. Termination or Release. (a) This Agreement, the Security Interest
and all other security interests granted hereby shall terminate automatically
upon the Termination Date.

(b) The Security Interest and all other security interests granted hereby shall
also automatically terminate and be released at the time or times and in the
manner set forth in Section 11.27 of the Credit Agreement.

(c) In connection with any termination or release pursuant to paragraph (a) or
(b) of this Section, the Collateral Agent shall execute and deliver to any Loan
Party, at such Loan Party’s expense, all documents that such Loan Party shall
reasonably request to evidence such termination or release so long as the
applicable Loan Party shall have provided the Collateral Agent such
certifications or documents as the Collateral Agent shall reasonably request in
order to demonstrate compliance with this Section 5.13. Any execution and
delivery of documents by the Collateral Agent pursuant to this Section shall be
without recourse to or warranty by the Collateral Agent.

SECTION 5.14. Additional Subsidiaries. The Grantors shall cause (i) each
Subsidiary of the Borrower (other than any Excluded Subsidiary) which, from time
to time, on or after the date hereof shall be required to pledge any assets) to
the Collateral Agent for the benefit of the Secured Creditors pursuant to the
Credit Agreement and (ii) consistent with the Credit Agreement, any Domestic
Subsidiary, or to the extent reasonably acceptable to the Collateral Agent, a
Subsidiary that is not a Wholly Owned Subsidiary (including any consolidated
Affiliate in which its Subsidiaries own no Equity Interests), which the
Borrower, at its option, elects to become a Grantor, to execute and deliver to
the Collateral Agent a Grantor Supplement regarding such Subsidiary (as
applicable), in each case, within the time period provided in Section 6.11 of
the Credit Agreement. Upon execution and delivery of such documents to the
Collateral Agent, any such Subsidiary shall become a Grantor hereunder with the
same force and effect as if originally named as such herein. The execution and
delivery of any such instrument shall not require the consent of any other
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.

 

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SECTION 5.15. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) the attorney-in-fact of
such Grantor for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof at any time after
and during the continuance of an Event of Default, which appointment is
irrevocable (until termination of this Agreement in accordance with
Section 5.13) and coupled with an interest. Without limiting the generality of
the foregoing, the Collateral Agent shall have the right, but only upon the
occurrence and during the continuance of an Event of Default and written notice
by the Collateral Agent to the Borrower of its intent to exercise such rights,
with full power of substitution either in the Collateral Agent’s name or in the
name of such Grantor (a) to receive, indorse, 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; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to sign the name of any Grantor on any invoice or bill of
lading relating to any of the Collateral; (d) upon prior written notice to the
Borrower, to send verifications of accounts receivable to any Account Debtor;
(e) 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; (f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to all or any of the Collateral; (g) upon
prior written notice to the Borrower, to notify, or to require any Grantor to
notify, Account Debtors to make payment directly to the Collateral Agent; (h) 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 necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes, and (i) to make, settle and adjust claims in
respect of Article 9 Collateral under policies of insurance, indorsing 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; provided that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received
by the Collateral Agent, or to present or file any claim or notice, or to take
any action with respect to the Collateral or any part thereof or the moneys due
or to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Creditors shall be accountable only for
amounts actually received as a result of the exercise of the powers granted to
them herein, and neither they nor their officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence, bad faith or willful misconduct or that
of any of their controlled Affiliates, directors, officers, employees, counsel,
agents or attorneys-in-fact.

SECTION 5.16. ABL Intercreditor Agreement Governs. Notwithstanding anything
herein to the contrary, (i) the Liens and security interests granted to the
Collateral Agent for the benefit of the Secured Creditors pursuant to this
Agreement and (ii) the exercise of any right or remedy by the Collateral Agent
hereunder or the application of proceeds (including insurance proceeds and
condemnation proceeds) of any Collateral, are subject to the provisions of the
ABL/Bond Intercreditor Agreement. In the event of any conflict between the terms
of the ABL/Bond Intercreditor Agreement and the terms of this Agreement, the
terms of the ABL/Bond Intercreditor Agreement shall govern.

 

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SECTION 5.17. Delivery of Notes First Lien Collateral. In accordance with the
terms of the ABL/Bond Intercreditor Agreement, all Notes First Lien Collateral
delivered to the Term Representative shall be held by the Term Representative as
gratuitous bailee for the Secured Creditors solely for the purpose of perfecting
the security interest granted under this Agreement. Notwithstanding anything
herein to the contrary, prior to the Discharge of Senior Secured Debt
Obligations with respect to Notes First Lien Collateral, to the extent any
Grantor is required hereunder to deliver Notes First Lien Collateral to the
Collateral Agent and is unable to do so as a result of having previously
delivered such Notes First Lien Collateral to the Term Representative in
accordance with the terms of the Pari Notes Debt Security Documents, such
Grantor’s obligations hereunder with respect to such delivery shall be deemed
satisfied by the delivery to the Term Representative, acting as gratuitous
bailee of the Collateral Agent. Terms used in this Section 5.17 and not
otherwise defined herein shall have the meanings given to such terms in the
ABL/Bond Intercreditor Agreement.

SECTION 5.18. No Liability. The Collateral Agent shall not be responsible for or
have a duty to ascertain or inquire into any representation or warranty
regarding the existence, value or collectability of the Collateral, the
existence, priority or perfection of the Collateral Agent’s Lien thereon, or any
certificate prepared by any Loan Party in connection therewith, nor shall the
Collateral Agent be responsible or liable to the Lenders for any failure to
monitor or maintain any portion of the Collateral.

SECTION 5.19. Compromises and Collection of Collateral. Each Grantor and the
Collateral Agent recognize that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain of the Receivables,
that certain of the Receivables may be or become uncollectible in whole or in
part and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a Receivable. In view of the foregoing, each Grantor agrees that
the Collateral Agent may at any time and from time to time, if an Event of
Default has occurred and is continuing, compromise with the obligor on any
Receivable, accept in full payment of any Receivable such amount as the
Collateral Agent in its sole discretion shall determine or abandon any
Receivable, and any such action by the Collateral Agent shall be commercially
reasonable so long as the Collateral Agent acts in good faith based on
information known to it at the time it takes any such action.

SECTION 5.20. Amendment and Restatement. On the Closing Date, this Agreement
shall amend and restate and supersede Existing Collateral Agreement in its
entirety. On the Closing Date, the rights and obligations of the parties
evidenced by Existing Collateral Agreement shall be evidenced by this Agreement
as amended, restated, amended and restated, supplemented or otherwise modified
and in effect on the Closing Date.

[Remainder of Page Intentionally Left Blank]

 

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

 

BUILDERS FIRSTSOURCE, INC., as Grantor By:  

/s/ Donald F. McAleenan

Name:   Donald F. McAleenan Title:   Senior Vice President and Secretary The
Grantors Listed on Schedule I: By:  

/s/ Donald F. McAleenan

Name:   Donald F. McAleenan Title:   Senior Vice President and Secretary

 

[Signature Page for ABL Collateral Agreement]

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SUNTRUST BANK, as Collateral Agent By:  

/s/ Amanda Watkins

Name:   Amanda Watkins Title:   Director

 

[Signature Page for ABL Collateral Agreement]

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Schedule I to the

Collateral Agreement

GRANTORS

 

1. Builders FirstSource Holdings, Inc., a Delaware corporation

 

2. Builders FirstSource - Northeast Group, LLC, a Delaware limited liability
company

 

3. Builders FirstSource - Texas GenPar, LLC, a Delaware limited liability
company

 

4. Builders FirstSource - MBS, LLC, a Delaware limited liability company

 

5. Builders FirstSource - Texas Group, L.P., a Texas limited partnership

 

6. BFS Texas, LLC a Delaware limited liability company

 

7. BFS IP, LLC a Delaware limited liability company

 

8. Builders FirstSource - South Texas, L.P., a Texas limited partnership

 

9. Builders FirstSource - Intellectual Property, L.P., a Texas limited
partnership

 

10. Builders FirstSource - Texas Installed Sales, L.P., a Texas limited
partnership

 

11. Builders FirstSource - Dallas, LLC, a Delaware limited liability company

 

12. Builders FirstSource - Florida, LLC, a Delaware limited liability company

 

13. Builders FirstSource - Florida Design Center, LLC, a Delaware limited
liability company

 

14. Builders FirstSource - Ohio Valley, LLC, a Delaware limited liability
company

 

15. BFS, LLC, a Delaware limited liability company

 

16. Builders FirstSource - Atlantic Group, LLC, a Delaware limited liability
company

 

17. Builders FirstSource - Southeast Group, LLC, a Delaware limited liability
company

 

18. Builders FirstSource - Raleigh, LLC, a Delaware limited liability company

 

19. Builders FirstSource - Colorado Group, LLC, a Delaware limited liability
company

 

20. Builders FirstSource - Colorado, LLC, a Delaware limited liability company

 

21. ProBuild Holdings LLC, a Delaware limited liability company

 

22. ProBuild Company LLC, a Delaware limited liability company

 

23. ProBuild North Transportation LLC, a Washington limited liability company

 

24. Timber Roots, LLC, a Washington limited liability company

 

25. Spenard Builders Supply LLC, an Alaska limited liability company

 

26. Pro-Build Real Estate Holdings, LLC, a Delaware limited liability company

 

27. Builder’s Capital, LLC, a New York limited liability company