Exhibit 10.2
SECURITY AGREEMENT
     THIS SECURITY AGREEMENT dated as of December 23, 2010 (this “Security
Agreement”) is being entered into among GRANITE CONSTRUCTION INCORPORATED, a
Delaware corporation (the “Company” and a “Borrower”), GRANITE CONSTRUCTION
COMPANY, a California corporation (“GCC” and a “Borrower”), GILC INCORPORATED, a
California corporation (“GILC” and a “Borrower”, and together with the Company
and GCC, collectively, the “Borrower”), EACH OF THE UNDERSIGNED SUBSIDIARIES OF
THE COMPANY AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION
OF A SECURITY JOINDER AGREEMENT (each a “Guarantor” and, together with the
Borrowers, collectively, the “Grantors”), and BANK OF AMERICA, N.A., as
Administrative Agent (in such capacity, the “Administrative Agent”) for each of
the Secured Parties (as defined in the Credit Agreement referenced) below.
RECITALS:
     A. Pursuant to a Credit Agreement dated as of June 22, 2010 (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrowers, the Administrative Agent, Bank of America,
N.A., as L/C Issuer, and the lenders now or hereafter party thereto (the
“Lenders”), the Lenders have agreed to provide to the Borrowers a revolving
credit facility with a letter of credit sublimit and swing line facility.
     B. Certain additional extensions of credit may be made from time to time
for the benefit of the Grantors pursuant to certain Secured Cash Management
Agreements, Secured Hedge Agreements and Secured Card Related Products
Agreements (each as defined in Section1 below).
     C. It is a condition precedent to the Secured Parties’ obligations to make
and maintain such extensions of credit that the Grantors shall have executed and
delivered this Security Agreement to the Administrative Agent.
     In order to induce the Secured Parties to from time to time make and
maintain extensions of credit under the Credit Agreement and such Secured Cash
Management Agreements, Secured Hedge Agreements and Secured Card Related
Products Agreements, the parties hereto agree as follows:
     1. Certain Definitions. All capitalized terms used but not otherwise
defined herein shall have the meanings assigned thereto in the Credit Agreement.
Terms used in this Security Agreement that are not otherwise expressly defined
herein or in the Credit Agreement, and for which meanings are provided in the
Uniform Commercial Code of the State of California (the “UCC”), shall have such
meanings unless the context requires otherwise. In addition, for purposes of
this Security Agreement, the following terms have the following definitions:
     “Card Related Products Agreement” means any agreement to provide credit,
purchasing, debit and other credit related card arrangements.

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     “Card Related Products Bank” means any Person that, (a) at the time it
enters into a Card Related Products Agreement, is a Lender or an Affiliate of a
Lender, or (b) is party to a Card Related Products Agreement on the date that
such Person or its Affiliate becomes a Lender, in each case in its capacity as a
party to such Card Related Products Agreement.
     “Cash Management Agreement” means any agreement to provide cash management
services, including treasury, depository, overdraft, electronic funds transfer
and other cash management arrangements.
     “Cash Management Bank” means any Person that, (a) at the time it enters
into a Cash Management Agreement, is a Lender or an Affiliate of a Lender, or
(b) is party to a Cash Management Agreement on the date that such Person or its
Affiliate becomes a Lender, in each case in its capacity as a party to such Cash
Management Agreement.
     “Excluded Property” means, with respect to any Grantor, (b) any owned or
leased real property subject to a Mortgage or (a) any property that would
otherwise constitute a General Intangible to the extent that the grant of a
security interest in such property is prohibited by any requirement of law of a
Governmental Authority, requires a consent not obtained from any Governmental
Authority pursuant to such requirement of law or is prohibited by, or
constitutes a breach or default under or results in the termination of or
requires any consent not obtained under, any contract, license, permit,
agreement, instrument or other document evidencing or giving rise to such
property or, in the case of any Investment Property, any applicable shareholder,
joint venture or similar agreement, except in each case to the extent that such
requirement of law or the term in such contract, license, agreement, instrument
or other document or shareholder, joint venture or similar agreement providing
for such prohibition, breach, default or termination or requiring such consent
is ineffective under applicable law; provided, however, the exclusion in this
clause (b) shall not apply to Subsidiary Securities in joint venture investments
or Subsidiaries acquired or created after the Amendment No. 1 Effective Date
unless after reasonable best efforts the relevant Grantor is unable either to
avoid the conditions set forth in this clause (b) or to obtain consents, waivers
or approvals thereof.
     “Facility Termination Date” means the date as of which all of the following
shall have occurred: (a) the Aggregate Commitments have been terminated, (b) all
Obligations have been paid in full, other than (i) contingent indemnification
obligations, (ii) the undrawn portion of Letters of Credit and (iii) all fees
relating to any Letters of Credit accruing after such date (which fees shall be
payable solely for the account of the L/C Issuer and shall be computed (based on
interest rates and the Applicable Rate then in effect) on such undrawn amounts
to the respective expiry dates of the Letters of Credit), in each case as have
been fully Cash Collateralized or as to which other arrangements with respect
thereto satisfactory to the Administrative Agent and the L/C Issuer shall have
been made, (b) the Commitments of all Lenders, if any, shall have terminated or
expired, (c) the obligations and liabilities of the Borrowers and each other
Loan Party under all Secured Hedge Agreements and Secured Cash Management
Agreements shall have been fully, finally and irrevocably paid and satisfied in
full and the Secured Hedge Agreements and Secured Cash Management Agreements
shall have expired or been terminated, or other arrangements satisfactory to the
applicable Cash Management Bank or Hedge Bank shall have been made with respect
thereto, (d) the obligations and liabilities of the Borrowers and each other
Loan Party under all Secured Cash Related Products Agreements shall have been
fully, finally and irrevocably paid and satisfied in full and the Secured Card
Related Products

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Agreements shall have expired or been terminated, or other arrangements
satisfactory to the Applicable Card Related Agreements Banks shall have been
made with respect thereto, and (e) each Guarantor shall have fully, finally and
irrevocably paid and satisfied in full its respective obligations and
liabilities arising under the Loan Documents (except for future obligations
consisting of continuing indemnities and other contingent Obligations of the
Borrowers or any Loan Party that may be owing to any Related Party of the
Administrative Agent or any Lender pursuant to the Loan Documents and expressly
survive termination of the Credit Agreement).
     “Hedge Bank” means any Person that (a) at the time that it enters into any
Swap Contract, is a Lender or an Affiliate of a Lender, or (b) is party to an
interest rate Swap Contract on the date that such Person or its Affiliate
becomes a Lender, in each case in such Person’s capacity as a party to such Swap
Contract.
     “Qualifying Control Agreement” means any such agreement in form and
substance reasonably acceptable to the Administrative Agent.
     “Secured Card Related Products Agreement” means any Card Related Products
Agreement permitted by Article VII of the Credit Agreement that is entered into
by and between any Loan Party and any Card Related Products Bank.
     “Secured Cash Management Agreement” means any Cash Management Agreement
permitted by Article VII of the Credit Agreement that is entered into by and
between any Loan Party and any Cash Management Bank.
     “Secured Hedge Agreement” means any Swap Contract permitted by Article VII
of the Credit Agreement that is entered into by and between any Loan Party and
any Hedge Bank.
     “Secured Obligations” means (a) as to the Borrowers, all of the
Obligations, including the payment and performance of its obligations and
liabilities (whether now existing or hereafter arising) (i) under Credit
Agreement and each of the other Loan Documents (including this Security
Agreement) to which it is now or hereafter becomes a party, and (ii) any Secured
Cash Management Agreements, Secured Hedge Agreements and Secured Card Related
Products Agreements to which any Loan Party is now or hereafter becomes a party,
and (b) as to each Guarantor, the payment and performance of its obligations and
liabilities (whether now existing or hereafter arising) (i) under the Guaranty
and each of the other Loan Documents (including this Security Agreement) to
which it is now or hereafter becomes a party, and (ii) any Secured Cash
Management Agreements, Secured Hedge Agreements and Secured Card Related
Products Agreements to which it is now or hereafter becomes a party.
     “Secured Parties” means, collectively, the Administrative Agent, the
Lenders, the L/C Issuer, the Hedge Banks, the Cash Management Banks, the Card
Related Products Banks, each co-agent or sub-agent appointed by the
Administrative Agent from time to time pursuant to Section 9.05 of the Credit
Agreement and the other Persons the Obligations owing to which are or are
purported to be secured by the Collateral under the terms hereof.
     2. Grant of Security Interest. Each Grantor grants as collateral security
for the payment, performance and satisfaction of the Secured Obligations, to the
Administrative Agent

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for the benefit of the Secured Parties a continuing first priority security
interest (subject to Permitted Liens) in and to, and collaterally assigns to the
Administrative Agent for the benefit of the Secured Parties, all of the assets
of such Grantor or in which such Grantor has or may have or acquire an interest
or the power to transfer rights therein, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located, including the
following:
     (a) All accounts, and including accounts receivable, contracts, bills,
acceptances, choses in action, and other forms of monetary obligations at any
time owing to such Grantor arising out of property sold, leased, licensed,
assigned or otherwise disposed of or for services rendered or to be rendered by
such Grantor and all of such Grantor’s rights with respect to any property
represented thereby, whether or not delivered, property returned by customers
and all rights as an unpaid vendor or lienor, including rights of stoppage in
transit and of recovering possession by proceedings including replevin and
reclamation (collectively referred to hereinafter as “Accounts”);
     (b) All inventory, including all goods manufactured or acquired for sale or
lease, and any piece goods, raw materials, work in process and finished
merchandise, component materials, and all supplies, goods, incidentals, office
supplies, packaging materials and any and all items used or consumed in the
operation of the business of such Grantor or which may contribute to the
finished product or to the sale, promotion and shipment thereof, in which such
Grantor now or at any time hereafter may have an interest, whether or not the
same is in transit or in the constructive, actual or exclusive occupancy or
possession of such Grantor or is held by such Grantor or by others for such
Grantor’s account (collectively referred to hereinafter as “Inventory”);
     (c) All goods, including all machinery, equipment, motor vehicles, parts,
supplies, apparatus, appliances, tools, patterns, molds, dies, blueprints,
fittings, furniture, furnishings, fixtures and articles of tangible personal
property of every description, and all computer programs embedded in any of the
foregoing and all supporting information relating to such computer programs
(collectively referred to hereinafter as “Equipment”);
     (d) All general intangibles, including all rights now or hereafter accruing
to such Grantor under contracts, leases, agreements or other instruments,
including all contracts or contract rights to perform or receive services, to
purchase or sell goods, or to hold or use land or facilities, and to enforce all
rights thereunder, all causes of action, corporate or business records,
inventions, patents and patent rights, rights in mask works, designs, trade
names and trademarks and all goodwill associated therewith, trade secrets, trade
processes, copyrights, licenses, permits, franchises, customer lists, computer
programs and software, all internet domain names and registration rights
thereto, all internet websites and the content thereof, all payment intangibles,
all claims under guaranties, tax refund claims, all rights and claims against
carriers and shippers, leases, all claims under insurance policies, all
interests in general and limited partnerships, limited liability companies, and
other Persons not constituting Investment Property (as defined below), all
rights to indemnification and all other intangible personal property and
intellectual property of every kind and nature (collectively referred to
hereinafter as “General Intangibles”);

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     (e) All deposit accounts, including demand, time, savings, passbook, or
other similar accounts maintained with any bank by or for the benefit of such
Grantor, but excluding any escrow retention accounts (collectively referred to
hereinafter as “Deposit Accounts”);
     (f) All chattel paper, including tangible chattel paper, electronic chattel
paper, or any hybrid thereof (collectively referred to hereinafter as “Chattel
Paper”);
     (g) All investment property, including all securities, security
entitlements, securities accounts, commodity contracts and commodity accounts of
or maintained for the benefit of such Grantor, but excluding Pledged Interests
subject to any Pledge Agreement (collectively referred to hereinafter as
“Investment Property”);
     (h) All instruments, including all promissory notes (collectively referred
to hereinafter as “Instruments”);
     (i) All documents, including warehouse receipts, bills of lading and other
documents of title (collectively referred to hereinafter as “Documents”);
     (j) All rights to payment or performance under letters of credit including
rights to proceeds of letters of credit (“Letter-of-Credit Rights”), and all
guaranties, endorsements, Liens, other Guarantee obligations or supporting
obligations of any Person securing or supporting the payment, performance, value
or liquidation of any of the foregoing (collectively, with Letter-of-Credit
Rights, referred to hereinafter as “Supporting Obligations”);
     (k) All books and records relating to any of the forgoing (including
customer data, credit files, ledgers, computer programs, printouts, and other
computer materials and records (and all media on which such data, files,
programs, materials and records are or may be stored)); and
     (l) All proceeds, products and replacements of, accessions to, and
substitutions for, any of the foregoing, including without limitation proceeds
of insurance policies insuring any of the foregoing.
     All of the property and interests in property described in subsections (a)
through (l) are herein collectively referred to as the “Collateral.”
Notwithstanding the foregoing, the Collateral shall not include any Excluded
Property.
     3. Perfection. As of the date of execution of this Security Agreement or
Security Joinder Agreement by each Grantor, as applicable (with respect to each
Grantor, its “Applicable Date”), such Grantor shall have:
     (a) furnished the Administrative Agent with duly authorized financing
statements in form, number and substance suitable for filing, sufficient under
applicable

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law, and satisfactory to the Administrative Agent in order that upon the filing
of the same the Administrative Agent, for the benefit of the Secured Parties,
shall have a duly perfected security interest in all Collateral in which a
security interest can be perfected by the filing of financing statements;
     (b) to the extent expressly required by the terms hereof or of the Credit
Agreement, or otherwise as the Administrative Agent may request, furnished the
Administrative Agent with properly executed Qualifying Control Agreements,
issuer acknowledgments of the Administrative Agent’s interest in
Letter-of-Credit Rights, and evidence of the placement of a restrictive legend
on tangible chattel paper (and the tangible components of electronic Chattel
Paper), and taken appropriate action acceptable to the Administrative Agent
sufficient to establish the Administrative Agent’s control of electronic Chattel
Paper (and the electronic components of hybrid Chattel Paper), as appropriate,
with respect to Collateral in which either (i) a security interest can be
perfected only by control or such restrictive legending, or (ii) a security
interest perfected by control or accompanied by such restrictive legending shall
have priority as against a lien creditor, a purchaser of such Collateral from
the applicable Grantor, or a security interest perfected by Persons not having
control or not accompanied by such restrictive legending, in each case in form
and substance acceptable to the Administrative Agent and sufficient under
applicable law so that the Administrative Agent, for the benefit of the Secured
Parties, shall have a security interest in all such Collateral perfected by
control; and
     (c) to the extent expressly required by the terms hereof or of the Credit
Agreement, or otherwise as the Administrative Agent may request, delivered to
the Administrative Agent possession of all Collateral with respect to which
either a security interest can be perfected only by possession or a security
interest perfected by possession shall have priority as against Persons not
having possession, and including in the case of Instruments, Documents, and
Investment Property in the form of certificated securities, duly executed
endorsements or stock powers in blank, as the case may be, affixed thereto in
form and substance acceptable to the Administrative Agent and sufficient under
applicable law so that the Administrative Agent, for the benefit of the Secured
Parties, shall have a security interest in all such Collateral perfected by
possession;
with the effect that the Liens conferred in favor of the Administrative Agent
shall be and remain duly perfected and of first priority subject only, to the
extent applicable, to Liens allowed to exist under Section 7.01 of the Credit
Agreement (“Permitted Liens”). All financing statements (including all
amendments thereto and continuations thereof), control agreements, certificates,
acknowledgments, stock powers and other documents, electronic identification,
restrictive legends, and instruments furnished in connection with the creation,
enforcement, protection, perfection or priority of the Administrative Agent’s
security interest in Collateral, including such items as are described above in
this Section 3, are sometimes referred to herein as “Perfection Documents”. The
delivery of possession of items of or evidencing Collateral, causing other
Persons to execute and deliver Perfection Documents as appropriate, the filing
or recordation of Perfection Documents, the establishment of control over items
of Collateral, and the taking of such other actions as may be necessary or
advisable in the determination of the Administrative

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Agent to create, enforce, protect, perfect, or establish or maintain the
priority of, the security interest of the Administrative Agent for the benefit
of the Secured Parties in the Collateral is sometimes referred to herein as
“Perfection Action”.
     4. Maintenance of Security Interest; Further Assurances.
     (a) Each Grantor will from time to time at its own expense, deliver
specific assignments of Collateral or such other Perfection Documents, and take
such other or additional Perfection Action, as may be required by the terms of
the Loan Documents or as the Administrative Agent may reasonably request in
connection with the administration or enforcement of this Security Agreement or
related to the Collateral or any part thereof in order to carry out the terms of
this Security Agreement, to perfect, protect, maintain the priority of or
enforce the Administrative Agent’s security interest in the Collateral, subject
only to Permitted Liens, or otherwise to better assure and confirm unto the
Administrative Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. Without limiting the foregoing, each Grantor hereby
irrevocably authorizes the Administrative Agent to file (with, or to the extent
permitted by applicable law, without the signature of the Grantor appearing
thereon) financing statements approved by such Grantor (including amendments
thereto and initial financing statements in lieu of continuation statements) or
other Perfection Documents (including copies thereof) showing such Grantor as
“debtor” at such time or times and in all filing offices as the Administrative
Agent may from time to time reasonably determine to be necessary or advisable to
perfect or protect the rights of the Administrative Agent and the Secured
Parties hereunder, or otherwise to give effect to the transactions herein
contemplated, any of which Perfection Documents, at the Administrative Agent’s
election, may describe the Collateral as or including all assets of the Grantor.
Each Grantor hereby irrevocably ratifies and acknowledges the Administrative
Agent’s authority to have effected filings of Perfection Documents made by the
Administrative Agent prior to its Applicable Date.
     (b) With respect to any and all Collateral, each Grantor agrees to do and
cause to be done all things necessary to perfect, maintain the priority of and
keep in full force the security interest granted in favor of the Administrative
Agent for the benefit of the Secured Parties, including, but not limited to, the
prompt payment upon demand therefor by the Administrative Agent of all fees and
expenses (including documentary stamp, excise or intangibles taxes) incurred in
connection with the preparation, delivery, or filing of any Perfection Document
or the taking of any Perfection Action to perfect, protect or enforce a security
interest in Collateral in favor of the Administrative Agent for the benefit of
the Secured Parties, subject only to Permitted Liens. All amounts not so paid
when due shall constitute additional Secured Obligations and (in addition to
other rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
     (c) Each Grantor agrees to maintain among its books and records appropriate
notations or evidence of, and to make or cause to be made appropriate disclosure
upon its

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financial statements of, the security interest granted hereunder to the
Administrative Agent for the benefit of the Secured Parties.
     (d) Each Grantor agrees that, in the event any proceeds (other than goods)
of Collateral shall be or become commingled with other property not constituting
Collateral, then such proceeds may, to the extent permitted by law, be
identified by application of the lowest intermediate balance rule to such
commingled property.
     (e) Each Grantor agrees to provide to the Administrative Agent notices
which shall be delivered to the appropriate Governmental Authority or, if
necessary, each Account Debtor (as defined herein) that is a department, agency
or authority of the United States government and is party to any contract that
could reasonably be expected to give rise to Payment Collateral (as defined
herein) in excess of $1,000,000 in any given year of such contract that such
Payment Collateral has been assigned to the Administrative Agent for the benefit
of the Secured Parties and that Administrative Agent has a security interest
therein for the benefit of the Secured Parties, and otherwise do all acts and
things and execute all documents necessary, in Administrative Agent’s sole
discretion, to collect such Payment Collateral; provided, that such notices
shall only be delivered by the Administrative Agent to such Governmental
Authority or Account Debtors if an Event of Default has occurred and is
continuing.
     5. Receipt of Payment. In the event an Event of Default shall occur and be
continuing and a Grantor (or any of its Affiliates, subsidiaries, stockholders,
directors, officers, employees or agents) shall receive any proceeds of
Collateral, including without limitation monies, checks, notes, drafts or any
other items of payment, each Grantor shall hold all such items of payment in
trust for the Administrative Agent for the benefit of the Secured Parties, and
as the property of the Administrative Agent for the benefit of the Secured
Parties, separate from the funds and other property of such Grantor, and no
later than the first Business Day following the receipt thereof, at the election
of the Administrative Agent, such Grantor shall cause such Collateral to be
forwarded to the Administrative Agent for its custody, possession and
disposition on behalf of the Secured Parties in accordance with the terms hereof
and of the other Loan Documents.
     6. Preservation and Protection of Collateral.
     (a) The Administrative Agent shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise. Each Grantor shall be responsible for the safekeeping of its
Collateral, and in no event shall the Administrative Agent have any
responsibility for (i) any loss or damage thereto or destruction thereof
occurring or arising in any manner or fashion from any cause, (ii) any
diminution in the value thereof, or (iii) any act or default of any carrier,
warehouseman, bailee or forwarding agency thereof or other Person in any way
dealing with or handling such Collateral.
     (b) Each Grantor shall keep and maintain its tangible personal property
Collateral in good operating condition and repair, ordinary wear and tear
excepted. No

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Grantor shall permit any such items to become a fixture to real property (unless
such Grantor has granted the Administrative Agent for the benefit of the Secured
Parties a Lien on such real property having a priority acceptable to the
Administrative Agent) or accessions to other personal property.
     (c) Each Grantor agrees (i) to pay when due all taxes, charges and
assessments against the Collateral in which it has any interest, unless being
contested in good faith by appropriate proceedings diligently conducted and
against which adequate reserves have been established in accordance with GAAP
applied on a basis consistent with the application of GAAP in the Audited
Financial Statements and evidenced to the satisfaction of the Administrative
Agent and provided that all enforcement proceedings in the nature of levy or
foreclosure are effectively stayed, and (ii) to cause to be terminated and
released all Liens (other than Permitted Liens) on the Collateral. Upon the
failure of any Grantor to so pay or contest such taxes, charges, or assessments,
or cause such Liens to be terminated, the Administrative Agent at its option may
pay or contest any of them or amounts relating thereto (the Administrative Agent
having the sole right to determine the legality or validity and the amount
necessary to discharge such taxes, charges, Liens or assessments) but shall not
have any obligation to make any such payment or contest. All sums so disbursed
by the Administrative Agent, including all reasonable fees and expenses of
counsel (collectively, “Attorneys’ Costs”), court costs, expenses and other
charges related thereto, shall be payable on demand by the applicable Grantor to
the Administrative Agent and shall be additional Secured Obligations secured by
the Collateral, and any amounts not so paid on demand (in addition to other
rights and remedies resulting from such nonpayment) shall bear interest from the
date of demand until paid in full at the Default Rate.
     7. Status of Grantors and Collateral Generally. Each Grantor represents and
warrants to, and covenants with, the Administrative Agent for the benefit of the
Secured Parties, with respect to itself and the Collateral as to which it has or
acquires any interest, that:
     (a) It is at its Applicable Date (or as to Collateral acquired after its
Applicable Date will be upon the acquisition of the same) and, except as
permitted by the Credit Agreement and subsection (b) of this Section 7, will
continue to be, the owner of the Collateral, free and clear of all Liens, other
than the security interest hereunder in favor of the Administrative Agent for
the benefit of the Secured Parties and Permitted Liens, and that it will at its
own cost and expense defend such Collateral and any products and proceeds
thereof against all claims and demands of all Persons (other than holders of
Permitted Liens) to the extent of their claims permitted under the Credit
Agreement at any time claiming the same or any interest therein adverse to the
Secured Parties. Upon the failure of any Grantor to so defend, the
Administrative Agent may do so at its option but shall not have any obligation
to do so. All sums so disbursed by the Administrative Agent, including
reasonable Attorneys’ Costs, court costs, expenses and other charges related
thereto, shall be payable on demand by the applicable Grantor to the
Administrative Agent and shall be additional Secured Obligations secured by the
Collateral, and any amounts not so paid on demand (in addition to other rights
and

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remedies resulting from such nonpayment) shall bear interest from the date of
demand until paid in full at the Default Rate.
     (b) It shall not (i) sell, assign, transfer, lease, license or otherwise
dispose of any of, or grant any option with respect to, the Collateral, except
for Dispositions permitted under the Credit Agreement, (ii) create or suffer to
exist any Lien upon or with respect to any of the Collateral except for the
security interests created by this Security Agreement and Permitted Liens, or
(iii) take any other action in connection with any of the Collateral that would
materially impair the value of the interest or rights of such Grantor in the
Collateral taken as a whole or that would materially impair the interest or
rights of the Administrative Agent for the benefit of the Secured Parties.
     (c) It has full power, legal right and lawful authority to enter into this
Security Agreement (and any Security Joinder Agreement applicable to it) and to
perform its terms, including the grant of the security interests in the
Collateral herein provided for.
     (d) No authorization, consent, approval or other action by, and no notice
to or filing with, any Governmental Authority or any other Person which has not
been given or obtained, as the case may be, is required either (i) for the grant
by such Grantor of the security interests granted hereby or for the execution,
delivery or performance of this Security Agreement (or any Security Joinder
Agreement) by such Grantor, or (ii) for the perfection of or the exercise by the
Administrative Agent, on behalf of the Secured Parties, of its rights and
remedies hereunder, except for action required by the Uniform Commercial Code to
perfect and exercise remedies with respect to the security interest conferred
hereunder.
     (e) No effective financing statement or other Perfection Document similar
in effect, nor any other Perfection Action, covering all or any part of the
Collateral purported to be granted or taken by or on behalf of such Grantor (or
by or on behalf of any other Person and which remains effective as against all
or any part of the Collateral) has been filed in any recording office, delivered
to another Person for filing (whether upon the occurrence of a contingency or
otherwise), or otherwise taken, as the case may be, except such as pertain to
Permitted Liens and such as may have been filed for the benefit of, delivered
to, or taken in favor of, the Administrative Agent for the benefit of the
Secured Parties in connection with the security interests conferred hereunder.
     (f) Schedule 7(f) attached hereto contains true and complete information as
to each of the following: (i) the exact legal name of each Grantor as it appears
in its Organization Documents as of its Applicable Date and at any time during
the five (5) year period ending as of its Applicable Date (the “Covered
Period”), (ii) the jurisdiction of formation and form of organization of each
Grantor, and the identification number of such Grantor in its jurisdiction of
formation (if any), (iii) each address of the chief executive office of each
Grantor as of its Applicable Date and at any time during the Covered Period,
(iv) all trade names or trade styles used by such Grantor as of its Applicable
Date and at any time during the Covered Period, (v) the address of each location
of such Grantor at which any tangible personal property Collateral (including

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Account Records and Account Documents) is located at its Applicable Date or has
been located at any time during the Covered Period, (vi) with respect to each
location described in clause (v) that is not owned beneficially and of record by
such Grantor, the name and address of the owner thereof; and (vii) the name of
each Person other than such Grantor and the address of such Person at which any
tangible personal property Collateral of such Grantor is held under any
warehouse, consignment, bailment or other arrangement as of its Applicable Date.
No Grantor shall change its name, change its jurisdiction of formation (whether
by reincorporation, merger or otherwise), change the location of its chief
executive office, or utilize any additional location where tangible personal
property Collateral (including Account Records and Account Documents) may be
located, except in each case upon giving not less than thirty (30) days’ prior
written notice to the Administrative Agent and taking or causing to be taken at
such Grantor’s expense all such Perfection Action, including the delivery of
such Perfection Documents, as may be reasonably requested by the Administrative
Agent to perfect or protect, or maintain the perfection and priority of, the
Lien of the Administrative Agent for the benefit of the Secured Parties in
Collateral contemplated hereunder.
     (g) No Grantor shall engage in any consignment transaction in respect of
any of the Collateral, whether as consignee or consignor, other than
consignments by such Grantor as consignor of Inventory at no time having an
aggregate value in excess of $5,000,000.
     (h) No Grantor shall cause, suffer or permit any of the tangible personal
property Collateral (i) to be evidenced by any document of title (except for
shipping documents as necessary or customary to effect the receipt of raw
materials or components or the delivery of inventory to customers, in each case
in the ordinary course of business) or (ii) to be in the possession, custody or
control of any warehouseman or other bailee without the prior written consent of
the Administrative Agent in each instance.
     (i) No tangible personal property Collateral is or shall be located at any
location that is leased by such Grantor from any other Person other than
Inventory the value of which, when aggregated with all other Inventory kept at
any location which is leased by all Grantors, is less than $5,000,000, unless
(x) such location and lessor is set forth on Schedule 7(f) attached hereto or
such Grantor provides not less than thirty (30) days’ prior written notice
thereof to the Administrative Agent, (y) such lessor acknowledges the Lien in
favor of the Administrative Agent for the benefit of the Secured Parties
conferred hereunder and waives its statutory and consensual liens and rights
with respect to such Collateral in form and substance acceptable to the
Administrative Agent and delivered in writing to the Administrative Agent prior
to any Collateral being located at any such location, and (z) the Grantor shall
have caused at its expense to be prepared and executed such additional
Perfection Documents and to be taken such other Perfection Action as the
Administrative Agent may deem necessary or advisable to carry out the
transactions contemplated by this Security Agreement.
     8. Inspection. The Administrative Agent (by any of its officers, employees
and agents), on behalf of the Secured Parties, shall have the right upon prior
notice to an executive

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officer of any Grantor, and at any reasonable times during such Grantor’s usual
business hours, to inspect the Collateral, all records related thereto (and to
make extracts or copies from such records), and the premises upon which any of
the Collateral is located, to discuss such Grantor’s affairs and finances with
any Person (other than Persons obligated on any Accounts (“Account Debtors”)
except as expressly otherwise permitted in the Loan Documents) and to verify
with any Person other than (except as expressly otherwise permitted in the Loan
Documents) Account Debtors the amount, quality, quantity, value and condition
of, or any other matter relating to, the Collateral and, if an Event of Default
has occurred and is continuing, to discuss such Grantor’s affairs and finances
with such Grantor’s Account Debtors and to verify the amount, quality, value and
condition of, or any other matter relating to, the Collateral with such Account
Debtors; provided, however, that (i) the Grantors shall not be obligated to
reimburse the expenses associated with more than one (1) visit and inspection
per calendar year (subject to clause (ii) below) and (ii) when an Event of
Default exists the Administrative Agent or any Lender (or any of their
respective representatives or independent contractors) may do any of the
foregoing at the expense of the Company at any time during normal business hours
and without advance notice. Upon or after the occurrence and during the
continuation of an Event of Default, the Administrative Agent may at any time
and from time to time employ and maintain on such Grantor’s premises a custodian
selected by the Administrative Agent who shall have full authority to do all
acts necessary to protect the Administrative Agent’s (for the benefit of the
Secured Parties) interest. All expenses incurred by the Administrative Agent, on
behalf of the Secured Parties, by reason of the employment of such custodian
shall be paid by such Grantor on demand from time to time and shall be added to
the Secured Obligations secured by the Collateral, and any amounts not so paid
on demand (in addition to other rights and remedies resulting from such
nonpayment) shall bear interest from the date of demand until paid in full at
the Default Rate.
     9. Specific Collateral.
     (a) Accounts. With respect to its Accounts whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
     (i) Each Grantor shall keep accurate and complete records of its Accounts
(“Account Records”) and, upon the occurrence and during the continuance of an
Event of Default, from time to time at reasonable intervals designated by the
Administrative Agent such Grantor shall provide the Administrative Agent with a
schedule of Accounts in form and substance acceptable to the Administrative
Agent describing all Accounts created or acquired by such Grantor (“Schedule of
Accounts”); provided, however, that such Grantor’s failure to execute and
deliver any such Schedule of Accounts shall not affect or limit the
Administrative Agent’s security interest or other rights in and to any Accounts
for the benefit of the Secured Parties. If requested by the Administrative
Agent, upon the occurrence and during the continuance of an Event of Default
each Grantor shall furnish the Administrative Agent with copies of proof of
delivery and other documents relating to the Accounts so scheduled, including
without limitation repayment histories and present status reports

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(collectively, “Account Documents”) and such other matter and information
relating to the status of then existing Accounts as the Administrative Agent
shall reasonably request.
     (ii) All Account Records and Account Documents are and shall at all times
be located only at such Grantor’s current chief executive office as set forth on
Schedule 7(f) attached hereto, such other locations as are specifically
identified on Schedule 7(f) attached hereto as an “Account Documents location,”
or as to which the Grantor has complied with Section 7(f) hereof.
     (iii) The Accounts are genuine, are in all respects what they purport to
be, are not evidenced by an instrument or document or, if evidenced by an
instrument or document, are only evidenced by one original instrument or
document.
     (iv) The Accounts cover bona fide sales, leases, licenses or other
dispositions of property usually dealt in by such Grantor, or the rendition by
such Grantor of services, to an Account Debtor in the ordinary course of
business.
     (v) The amounts of the face value of any Account shown or reflected on any
Schedule of Accounts, invoice statement, or certificate delivered to the
Administrative Agent, are actually owing to such Grantor and are not contingent
for any reason; and there are no setoffs, discounts, allowances, claims,
counterclaims or disputes of any kind or description in an amount greater than
$2,000,000 individually, existing or asserted with respect thereto and such
Grantor has not made any agreement with any Account Debtor thereunder for any
deduction therefrom, except as may be stated in the Schedule of Accounts and
reflected in the calculation of the face value of each respective invoice
related thereto.
     (vi) Except for conditions generally applicable to such Grantor’s industry
and markets, there are no facts, events, or occurrences known to such Grantor
pertaining particularly to any Accounts which are reasonably expected to
materially impair in any way the validity, collectibility or enforcement of
Accounts that would reasonably be likely, in the aggregate, to be of material
economic value, or in the aggregate materially reduce the amount payable
thereunder from the amount of the invoice face value shown on any Schedule of
Accounts, or on any certificate, contract, invoice or statement delivered to the
Administrative Agent with respect thereto.
     (vii) The property or services giving rise thereto are not, and were not at
the time of the sale or performance thereof, subject to any Lien, claim,
encumbrance or security interest, except those of the Administrative Agent for
the benefit of Secured Parties and Permitted Liens.

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     (viii) In the event any amounts due and owing in excess of $2,000,000 are
in dispute between any Account Debtor and a Grantor (which shall include without
limitation any dispute in which an offset claim or counterclaim may result),
such Grantor shall provide the Administrative Agent with written notice thereof
as soon as practicable, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy.
     (b) Inventory. With respect to its Inventory whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
     (i) Each Grantor shall keep accurate and complete records itemizing and
describing the kind, type, location and quantity of Inventory, its cost therefor
and the selling price of Inventory held for sale, and the daily withdrawals
therefrom and additions thereto, and, upon the occurrence and during the
continuance of an Event of Default, shall furnish to the Administrative Agent
from time to time at reasonable intervals designated by the Administrative
Agent, a current schedule of Inventory (“Schedule of Inventory”) based upon its
most recent physical inventory and its daily inventory records. Upon the
occurrence and during the continuance of an Event of Default, each Grantor shall
conduct a physical inventory no less frequently than annually, and shall furnish
to the Administrative Agent such other documents and reports thereof as the
Administrative Agent shall reasonably request with respect to the Inventory.
     (ii) All Inventory, other than Inventory having a value of less than
$5,000,000 in the aggregate for all locations, is and shall at all times be
located only at such Grantor’s locations as set forth on Schedule 7(f) attached
hereto or at such other locations as to which such Grantor has complied with
Section 7(f) hereof. No Grantor shall, other than in the ordinary course of
business in connection with its sale, lease, license or other permitted
Disposition, remove any Inventory having an aggregate value in excess of that
stated in the preceding sentence from such locations.
     (c) Equipment. With respect to its Equipment whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
     (i) The Grantors, upon the occurrence and during the continuance of an
Event of Default, as soon as practicable following a request therefor by the
Administrative Agent, shall deliver to the Administrative Agent any and all
evidence of ownership of any of the Equipment (including without limitation
certificates of title and applications for title).
     (ii) The Grantors shall maintain accurate, itemized records describing the
kind, type, quality, quantity and value of its Equipment and, upon the
occurrence and during the continuance of an Event of Default, shall furnish the

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Administrative Agent upon request with a current schedule containing the
foregoing information.
     (iii) All Equipment, other than Equipment having a value of less than
$5,000,000 in the aggregate for all locations, is and shall at all times be
located only at such Grantor’s locations as set forth on Schedule 7(f) attached
hereto or at such other locations as to which such Grantor has complied with
Section 7(f) hereof. No Grantor shall, other than as expressly permitted under
the Credit Agreement, sell, lease, transfer, dispose of or remove any Equipment
having an aggregate value in excess of that stated in the preceding sentence
from such locations.
     (d) Supporting Obligations. With respect to its Supporting Obligations
whether now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
     (i) Each Grantor shall upon the request of the Administrative Agent from
time to time following the occurrence and during the continuance of any Event of
Default, deliver to the Administrative Agent the originals of all documents
evidencing or constituting Supporting Obligations, together with such other
documentation (executed as appropriate by the Grantor) and information as may be
necessary to enable the Administrative Agent to realize upon the Supporting
Obligations in accordance with their respective terms or transfer the Supporting
Obligations as may be permitted under the Loan Documents or by applicable law.
     (ii) With respect to each letter of credit giving rise to Letter-of-Credit
Rights that has an aggregate stated amount available to be drawn in excess of
$100,000, each Grantor shall, at the request of the Administrative Agent, use
its best efforts to cause the issuer thereof to execute and deliver to the
Administrative Agent a Qualifying Control Agreement.
     (e) Investment Property. With respect to its Investment Property whether
now existing or hereafter created or acquired and wheresoever located, each
Grantor represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
     (i) Schedule 9(e) attached hereto contains a true and complete description
of (x) the name and address of each securities intermediary with which such
Grantor maintains a securities account in which Investment Property is or may at
any time be credited or maintained, and (y) all other Investment Property of
such Grantor other than interests in Subsidiaries in which such Grantor has
granted a Lien to the Administrative Agent for the benefit of the Secured
Parties pursuant to a Pledge Agreement.

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     (ii) Except with the express prior written consent of the Administrative
Agent in each instance, all Investment Property other than Excluded Property or
interests in Subsidiaries in which such Grantor has granted a Lien to the
Administrative Agent for the benefit of the Secured Parties pursuant to a Pledge
Agreement shall be maintained at all times in the form of (a) certificated
securities, which certificates shall have been delivered to the Administrative
Agent together with duly executed undated stock powers endorsed in blank
pertaining thereto, or (b) security entitlements credited to one or more
securities accounts as to each of which the Administrative Agent has received
(1) copies of the account agreement between the applicable securities
intermediary and the Grantor and the most recent statement of account pertaining
to such securities account (each certified to be true and correct by an officer
of the Grantor) and (2) a Qualifying Control Agreement from the applicable
securities intermediary which remains in full force and effect and as to which
the Administrative Agent has not received any notice of termination. Without
limiting the generality of the foregoing, no Grantor shall cause, suffer or
permit any Investment Property to be credited to or maintained in any securities
account not listed on Schedule 9(e) attached hereto except in each case upon
giving not less than thirty (30) days’ prior written notice to the
Administrative Agent and taking or causing to be taken at such Grantor’s expense
all such Perfection Action, including the delivery of such Perfection Documents,
as may be reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in Collateral
contemplated hereunder.
     (iii) All dividends and other distributions with respect to any of the
Investment Property shall be subject to the security interest conferred
hereunder, provided, however, that cash dividends paid to a Grantor as record
owner of the Investment Property may be disbursed to and retained by such
Grantor so long as no Event of Default shall have occurred and be continuing,
free from any Lien hereunder.
     (iv) So long as no Event of Default shall have occurred and be continuing,
the registration of Investment Property in the name of a Grantor as record and
beneficial owner shall not be changed and such Grantor shall be entitled to
exercise all voting and other rights and powers pertaining to Investment
Property for all purposes not inconsistent with the terms hereof or of any
Qualifying Control Agreement relating thereto.
     (v) Upon the occurrence and during the continuance of any Event of Default,
at the option of the Administrative Agent, all rights of the Grantors to
exercise the voting or consensual rights and powers which it is authorized to
exercise pursuant to clause (iv) immediately above shall cease and the
Administrative Agent may thereupon (but shall not be obligated to), at its
request, cause such Collateral to be registered in the name of the
Administrative Agent or its nominee or agent for the benefit of the Secured
Parties and/or exercise such

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voting or consensual rights and powers as appertain to ownership of such
Collateral, and to that end each Grantor hereby appoints the Administrative
Agent as its proxy, with full power of substitution, to vote and exercise all
other rights as a shareholder with respect to such Investment Property upon the
occurrence and during the continuance of any Event of Default, which proxy is
coupled with an interest and is irrevocable until the Facility Termination Date,
and each Grantor hereby agrees to provide such further proxies as the
Administrative Agent may request; provided, however, that the Administrative
Agent in its discretion may from time to time refrain from exercising, and shall
not be obligated to exercise, any such voting or consensual rights or such
proxy.
     (vi) Upon the occurrence and during the continuance of any Event of
Default, all rights of the Grantors to receive and retain cash dividends and
other distributions upon or in respect to Investment Property pursuant to clause
(iii) above shall cease and shall thereupon be vested in the Administrative
Agent for the benefit of the Secured Parties, and each Grantor shall, or shall
cause, all such cash dividends and other distributions with respect to the
Investment Property to be promptly delivered to the Administrative Agent
(together, if the Administrative Agent shall request, with any documents related
thereto) to be held, released or disposed of by it hereunder or, at the option
of the Administrative Agent, to be applied to the Secured Obligations.
     (f) Deposit Accounts. With respect to its Deposit Accounts whether now
existing or hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the benefit
of the Secured Parties that:
     (i) Schedule 9(f) attached hereto contains a true and complete description
of the name and address of each depositary institution with which such Grantor
maintains a Deposit Account in which collected balances or deposits in excess of
$100,000 are or may at any time be credited or maintained.
     (ii) Except with the express prior written consent of the Administrative
Agent in each instance, all Deposit Accounts in which collected balances or
deposits in excess of $100,000 are or may at any time be credited or maintained
shall be maintained at all times with depositary institutions as to which the
Administrative Agent shall have received a Qualifying Control Agreement. Without
limiting the generality of the foregoing, no Grantor shall cause, suffer or
permit (x) any deposit in excess of $100,000 to be evidenced by a certificate of
deposit unless such certificate of deposit is a negotiable instrument and
immediately upon receipt thereof such certificate shall have been delivered to
the Administrative Agent, together with a duly executed undated assignment in
blank affixed thereto, or (y) any Deposit Account not listed on Schedule 9(f)
attached hereto in which collected balances or deposits in excess of $100,000
are or may at any time be credited or maintained to be opened or maintained
except in each case upon giving not less than thirty (30) days’ prior written
notice to the

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Administrative Agent and taking or causing to be taken at such Grantor’s expense
all such Perfection Action, including the delivery of such Perfection Documents,
as may be reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in Collateral
contemplated hereunder.
     (g) Chattel Paper. With respect to its Chattel Paper whether now existing
or hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the benefit
of the Secured Parties that:
     (i) Each Grantor shall at all times retain sole physical possession of the
originals of all Chattel Paper having an aggregate value in excess of $1,000,000
(other than electronic Chattel Paper and the electronic components of hybrid
Chattel Paper); provided, however, that (x) upon the request of the
Administrative Agent upon the occurrence and during the continuance of any Event
of Default, such Grantor shall immediately deliver physical possession of such
Chattel Paper to the Administrative Agent or its designee, and (y) in the event
that there shall be created more than one original counterpart of any physical
document that alone or in conjunction with any other physical or electronic
document constitutes Chattel Paper, then such counterparts shall be numbered
consecutively starting with “1” and such Grantor shall retain the counterpart
numbered “1”.
     (ii) All counterparts of all tangible Chattel Paper having an aggregate
value in excess of $1,000,000 (and the tangible components of hybrid Chattel
Paper) shall immediately upon the creation or acquisition thereof by any Grantor
be conspicuously legended as follows: “A FIRST PRIORITY SECURITY INTEREST
(SUBJECT TO PERMITTED LIENS) IN THIS CHATTEL PAPER HAS BEEN GRANTED TO BANK OF
AMERICA, N.A., FOR ITSELF AND AS ADMINISTRATIVE AGENT FOR CERTAIN SECURED
PARTIES PURSUANT TO A SECURITY AGREEMENT DATED AS OF DECEMBER 23, 2010, AS
AMENDED FROM TIME TO TIME. NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF
ANY OTHER PERSON MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS
CHATTEL PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE CONSENT OF THE
AFORESAID ADMINISTRATIVE AGENT AS PROVIDED IN SUCH SECURITY AGREEMENT.” In the
case of electronic Chattel Paper (including the electronic components of hybrid
Chattel Paper), no Grantor shall create or acquire any such Chattel Paper
unless, prior to such acquisition or creation, it shall have taken such
Perfection Action as the Administrative Agent may require to perfect by control
the security interest of the Administrative Agent for the benefit of the Secured
Parties in such Collateral.
     (iii) Other than in the ordinary course of business and in keeping with
reasonable and customary practice, no Grantor shall amend, modify, waive or
terminate any provision of, or fail to exercise promptly and diligently each

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material right or remedy conferred under or in connection with, any Chattel
Paper, in any case in such a manner as could reasonably be expected to
materially adversely affect the value of affected Chattel Paper as collateral.
     (h) Instruments. With respect to its Instruments whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
     (i) Each Grantor shall upon the request of the Administrative Agent from
time to time, deliver to the Administrative Agent the originals of all
Instruments of which such Grantor is the payee or holder and having a face
amount payable in excess of $1,000,000, provided, however, that each Grantor
shall deliver to the Administrative Agent all Instruments issued in connection
with Indebtedness permitted by Section 7.03(e) of the Credit Agreement, together
with duly executed undated endorsements in blank affixed thereto and such other
documentation and information as may be necessary to enable the Administrative
Agent to realize upon the Instruments in accordance with their respective terms
or transfer the Instruments as may be permitted under the Loan Documents or by
applicable law.
     (ii) Other than in the ordinary course of business and in keeping with
reasonable and customary practice, no Grantor shall amend, modify, waive or
terminate any provision of, or fail to exercise promptly and diligently each
material right or remedy conferred under or in connection with, any Instrument,
in any case in such a manner as could reasonably be expected to materially
adversely affect the value of affected Instrument as collateral.
     10. Casualty and Liability Insurance Required.
     (a) Each Grantor will keep the Collateral continuously insured against such
risks as are customarily insured against by businesses of like size and type
engaged in the same or similar operations including:
     (i) casualty insurance on the Inventory and the Equipment in an amount not
less than the full insurable value thereof, against loss or damage by theft,
fire, lightning and other hazards ordinarily included under uniform broad form
standard extended coverage policies, limited only as may be provided in the
standard broad form of extended coverage endorsement at the time in use in the
states in which the Collateral is located;
     (ii) comprehensive general liability insurance against claims for bodily
injury, death or property damage occurring with or about such Collateral (such
coverage to include provisions waiving subrogation against the Secured Parties),
with the Administrative Agent and the Lenders as additional insureds thereunder,
in amounts as shall be reasonably satisfactory to Administrative Agent; and

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     (iii) liability insurance with respect to the operation of its facilities
under the workers’ compensation laws of the states in which such Collateral is
located, in amounts as shall be reasonably satisfactory to Administrative Agent.
     (b) Each insurance policy obtained in satisfaction of the requirements of
Section 10(a):
     (i) may be provided by blanket policies now or hereafter maintained by each
or any Grantor or by the Company;
     (ii) shall be issued by such insurer (or insurers) as shall be financially
responsible, of recognized standing and reasonably acceptable to the
Administrative Agent;
     (iii) shall be in such form and have such provisions (including without
limitation the loss payable clause, the waiver of subrogation clause, the
deductible amount, if any, and the standard mortgagee endorsement clause) as are
generally considered standard provisions for the type of insurance involved and
are reasonably acceptable in all respects to the Administrative Agent;
     (iv) shall prohibit cancellation or substantial modification, termination
or lapse in coverage by the insurer without at least thirty (30) days’ prior
written notice to the Administrative Agent, except for non-payment of premium,
as to which such policies shall provide for at least ten (10) days’ prior
written notice to the Administrative Agent;
     (v) without limiting the generality of the foregoing, all insurance
policies where applicable under Section 10(a)(i) carried on the Collateral shall
name the Administrative Agent, for the benefit of the Secured Parties, as loss
payee and the Administrative Agent and Lenders as parties insured thereunder in
respect of any claim for payment.
     (c) Prior to expiration of any such policy, such Grantor shall furnish the
Administrative Agent with evidence satisfactory to the Administrative Agent that
the policy or certificate has been renewed or replaced or is no longer required
by this Security Agreement.
     (d) Each Grantor hereby makes, constitutes and appoints the Administrative
Agent (and all officers, employees or agents designated by the Administrative
Agent), for the benefit of the Secured Parties, as such Grantor’s true and
lawful attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of such
Grantor on any check, draft, instrument or other item or payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance, which appointment is
coupled with an interest and is irrevocable; provided, however, that the

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powers pursuant to such appointment shall be exercisable only upon the
occurrence and during the continuation of an Event of Default.
     (e) In the event such Grantor shall fail to maintain, or fail to cause to
be maintained, the full insurance coverage required hereunder or shall fail to
keep any of its Collateral in good repair and good operating condition, the
Administrative Agent may (but shall be under no obligation to), without waiving
or releasing any Secured Obligation or Default or Event of Default by such
Grantor hereunder, contract for the required policies of insurance and pay the
premiums on the same or make any required repairs, renewals and replacements;
and all sums so disbursed by Administrative Agent, including reasonable
Attorneys’ Costs, court costs, expenses and other charges related thereto, shall
be payable on demand by such Grantor to the Administrative Agent, shall be
additional Secured Obligations secured by the Collateral, and (in addition to
other rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
     (f) Each Grantor agrees that to the extent that it shall fail to maintain,
or fail to cause to be maintained, the full insurance coverage required by
Section 10(a), it shall in the event of any loss or casualty pay promptly to the
Administrative Agent, for the benefit of the Secured Parties, to be held in a
separate account for application in accordance with the provisions of
Section 10(h), such amount as would have been received as Net Proceeds (as
hereinafter defined) by the Administrative Agent, for the benefit of the Secured
Parties, under the provisions of Section 10(h) had such insurance been carried
to the extent required.
     (g) The Net Proceeds of the insurance carried pursuant to the provisions of
Sections 10(a)(ii) and 10(a)(iii) shall be applied by such Grantor toward
satisfaction of the claim or liability with respect to which such insurance
proceeds may be paid.
     (h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be paid
to such Grantor and held by such Grantor in a separate account and applied, as
long as no Event of Default shall have occurred and be continuing, as follows:
after any loss under any such insurance and payment of the proceeds of such
insurance, each Grantor shall have a period of thirty (30) days after payment of
the insurance proceeds with respect to such loss to elect to either (x) repair
or replace the Collateral so damaged, (y) deliver such Net Proceeds to the
Administrative Agent, for the benefit of the Secured Parties, as additional
Collateral or (z) apply such Net Proceeds to the acquisition of tangible assets
constituting Collateral used or useful in the conduct of the business of such
Grantor, subject to the provisions of this Security Agreement. If such Grantor
elects to repair or replace the Collateral so damaged, such Grantor agrees the
Collateral shall be repaired to a condition substantially similar to or of
better quality or higher value than its condition prior to damage or replaced
with Collateral in a condition substantially similar to or of better quality or
higher value than the condition of the Collateral so replaced prior to damage.
At all times during which an Event of Default shall have occurred and be
continuing, the Administrative Agent shall be entitled to receive direct and
immediate payment of the

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proceeds of such insurance and such Grantor shall take all action as the
Administrative Agent may reasonably request to accomplish such payment.
Notwithstanding the foregoing, in the event such Grantor shall receive any such
proceeds, such Grantor shall immediately deliver such proceeds to such
Administrative Agent for the benefit of the Secured Parties as additional
Collateral, and pending such delivery shall hold such proceeds in trust for the
benefit of the Secured Parties and keep the same segregated from its other
funds.
     (i) “Net Proceeds” when used with respect to any insurance proceeds shall
mean the gross proceeds from such proceeds, award or other amount, less all
taxes, fees and expenses (including Attorneys’ Costs) incurred in the
realization thereof.
     (j) In case of any material damage to, destruction or loss of, or claim or
proceeding against, all or any material part of the Collateral pledged hereunder
by a Grantor, such Grantor shall give prompt notice thereof to the
Administrative Agent. Each such notice shall describe generally the nature and
extent of such damage, destruction, loss, claim or proceeding. Subject to
Section 10(d), each Grantor is hereby authorized and empowered to adjust or
compromise any loss under any such insurance other than losses relating to
claims made directly against any Secured Party as to which the insurance
described in Section 10(a)(ii) or (iii) is applicable.
     (k) The provisions contained in this Security Agreement pertaining to
insurance shall be cumulative with any additional provisions imposing additional
insurance requirements with respect to the Collateral or any other property on
which a Lien is conferred under any Security Instrument.
     11. Rights and Remedies Upon Event of Default. Upon and after an Event of
Default, the Administrative Agent shall have the following rights and remedies
on behalf of the Secured Parties in addition to any rights and remedies set
forth elsewhere in this Security Agreement or the other Loan Documents, all of
which may be exercised with or, if allowed by law, without notice to a Grantor:
     (a) All of the rights and remedies of a secured party under the UCC or
under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Security
Agreement or any other Loan Document;
     (b) The right to foreclose the Liens and security interests created under
this Security Agreement by any available judicial procedure or without judicial
process;
     (c) The right to (i) enter upon the premises of a Grantor through self-help
and without judicial process, without first obtaining a final judgment or giving
such Grantor notice or opportunity for a hearing on the validity of the
Administrative Agent’s claim and without any obligation to pay rent to such
Grantor, or any other place or places where any Collateral is located and kept,
and remove the Collateral therefrom to the premises of the Administrative Agent
or any agent of the Administrative Agent, for such time as the

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Administrative Agent may desire, in order effectively to collect or liquidate
the Collateral, (ii) require such Grantor or any bailee or other agent of such
Grantor to assemble the Collateral and make it available to the Administrative
Agent at a place to be designated by the Administrative Agent that is reasonably
convenient to both parties, and (iii) notify any or all Persons party to a
Qualifying Control Agreement or who otherwise have possession of or control over
any Collateral of the occurrence of an Event of Default and other appropriate
circumstances, and exercise control over and take possession or custody of any
or all Collateral in the possession, custody or control of such other Persons;
     (d) The right to (i) exercise all of a Grantor’s rights and remedies with
respect to the collection of Accounts, Chattel Paper, Instruments, Supporting
Obligations and General Intangibles (collectively, “Payment Collateral”),
including the right to demand payment thereof and enforce payment, by legal
proceedings or otherwise; (ii) settle, adjust, compromise, extend or renew all
or any Payment Collateral or any legal proceedings pertaining thereto;
(iii) discharge and release all or any Payment Collateral; (iv) take control, in
any manner, of any item of payment or proceeds referred to in Section 5 above;
(v) prepare, file and sign a Grantor’s name on any Proof of Claim in bankruptcy,
notice of Lien, assignment or satisfaction of Lien or similar document in any
action or proceeding adverse to any obligor under any Payment Collateral or
otherwise in connection with any Payment Collateral; (vi) endorse the name of a
Grantor upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to any Collateral;
(vii) use the information recorded on or contained on a Grantor’s internet
website or otherwise in any data processing equipment and computer hardware and
software relating to any Collateral to which a Grantor has access; (viii) open
such Grantor’s mail and collect any and all amounts due to such Grantor from any
Account Debtors or other obligor in respect of Payment Collateral; (ix) take
over such Grantor’s post office boxes or make other arrangements as the
Administrative Agent, on behalf of the Secured Parties, deems necessary to
receive such Grantor’s mail, including notifying the post office authorities to
change the address for delivery of such Grantor’s mail to such address as the
Administrative Agent, on behalf of the Secured Parties, may designate; (x)
notify any or all Account Debtors or other obligor on any Payment Collateral
that such Payment Collateral has been assigned to the Administrative Agent for
the benefit of the Secured Parties and that Administrative Agent has a security
interest therein for the benefit of the Secured Parties (provided that the
Administrative Agent may at any time give such notice to an Account Debtor that
is a department, agency or authority of the United States government); each
Grantor hereby agrees that any such notice, in the Administrative Agent’s sole
discretion, may (but need not) be sent on such Grantor’s stationery, in which
event such Grantor shall co-sign such notice with the Administrative Agent if
requested to do so by the Administrative Agent; and (xi) do all acts and things
and execute all documents necessary, in Administrative Agent’s sole discretion,
to collect the Payment Collateral; and
     (e) The right to sell all or any Collateral in its then existing condition,
or after any further manufacturing or processing thereof, at such time or times,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for

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cash or on credit, with or without representations and warranties, all as the
Administrative Agent, in its sole discretion, may deem advisable. The
Administrative Agent shall have the right to conduct such sales on a Grantor’s
premises or elsewhere and shall have the right to use a Grantor’s premises
without charge for such sales for such time or times as the Administrative Agent
may see fit. The Administrative Agent may, if it deems it reasonable, postpone
or adjourn any sale of the Collateral from time to time by an announcement at
the time and place of such postponed or adjourned sale, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor agrees that the Administrative Agent has no obligation
to preserve rights to the Collateral against prior parties or to marshal any
Collateral for the benefit of any Person. The Administrative Agent for the
benefit of the Secured Parties is hereby granted an irrevocable fully paid
license or other right (including each Grantor’s rights under any license or any
franchise agreement), each of which shall remain in full force and effect until
the Facility Termination Date, to use, without charge, each of the labels,
patents, copyrights, names, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature owned or licensed by any
Grantor, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral. If any of the Collateral shall
require repairs, maintenance, preparation or the like, or is in process or other
unfinished state, the Administrative Agent shall have the right, but shall not
be obligated, to perform such repairs, maintenance, preparation, processing or
completion of manufacturing for the purpose of putting the same in such saleable
form as the Administrative Agent shall deem appropriate, but the Administrative
Agent shall have the right to sell or dispose of the Collateral without such
processing and no Grantor shall have any claim against the Administrative Agent
for the value that may have been added to such Collateral with such processing.
In addition, each Grantor agrees that in the event notice is necessary under
applicable law, written notice mailed to such Grantor in the manner specified
herein ten (10) days prior to the date of public sale of any of the Collateral
or prior to the date after which any private sale or other disposition of the
Collateral will be made shall constitute commercially reasonable notice to such
Grantor. All notice is hereby waived with respect to any of the Collateral which
threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Administrative Agent may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, free from any right
of redemption which is hereby expressly waived by such Grantor and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Secured Obligations.
     The net cash proceeds resulting from the collection, liquidation, sale, or
other disposition of the Collateral shall be applied first to the expenses
(including all Attorneys’ Costs) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Secured Obligations in accordance with the terms of
Section 8.03 of the Credit Agreement. Each Grantor shall be liable to the
Administrative Agent, for the benefit of the Secured Parties, and shall pay to
the Administrative Agent, for the benefit of the Secured Parties, on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral.

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     12. Attorney-in-Fact. Each Grantor hereby appoints the Administrative Agent
as the Grantor’s attorney-in-fact for the purposes of carrying out the
provisions of this Security Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of an Event of Default. Without limiting the generality of the
foregoing, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right and power
     (a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;
     (b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
     (c) to endorse such Grantor’s name on any checks, notes, drafts or any
other payment relating to or constituting proceeds of the Collateral which comes
into the Administrative Agent’s possession or the Administrative Agent’s
control, and deposit the same to the account of the Administrative Agent, for
the benefit of the Secured Parties, on account and for payment of the Secured
Obligations.
     (d) to file any claims or take any action or institute any proceedings that
the Administrative Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Administrative
Agent, for the benefit of the Secured Parties, with respect to any of the
Collateral; and
     (e) to execute, in connection with any sale or other disposition of
Collateral provided for herein, any endorsement, assignments, or other
instruments of conveyance or transfer with respect thereto.
     13. Reinstatement. The granting of a security interest in the Collateral
and the other provisions hereof shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Secured Obligations
is rescinded or must otherwise be returned by any Secured Party or is repaid by
any Secured Party in whole or in part in good faith settlement of a pending or
threatened avoidance claim, whether upon the insolvency, bankruptcy or
reorganization of any Grantor or any other Loan Party or otherwise, all as
though such payment had not been made. The provisions of this Section 13 shall
survive repayment of all of the Secured Obligations and the termination or
expiration of this Security Agreement in any manner, including but not limited
to termination upon occurrence of the Facility Termination Date.
     14. Certain Waivers by the Grantors. Each Grantor waives to the extent
permitted by applicable law (a) any right to require any Secured Party or any
other obligee of the Secured Obligations to (x) proceed against any Person or
entity, including without limitation any Loan Party, (y) proceed against or
exhaust any Collateral or other collateral for the Secured

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Obligations, or (z) pursue any other remedy in its power; (b) any defense
arising by reason of any disability or other defense of any other Person, or by
reason of the cessation from any cause whatsoever of the liability of any other
Person or entity, (c) any right of subrogation, and (d) any right to enforce any
remedy which any Secured Party or any other obligee of the Secured Obligations
now has or may hereafter have against any other Person and any benefit of and
any right to participate in any collateral or security whatsoever now or
hereafter held by the Administrative Agent for the benefit of the Secured
Parties. Each Grantor authorizes each Secured Party and each other obligee of
the Secured Obligations without notice (except notice required by applicable
law) or demand and without affecting its liability hereunder or under the Loan
Documents from time to time to: (i) take and hold security, other than the
Collateral herein described, for the payment of such Secured Obligations or any
part thereof, and exchange, enforce, waive and release the Collateral herein
described or any part thereof or any such other security; and (ii) apply such
Collateral or other security and direct the order or manner of sale thereof as
such Secured Party or obligee in its discretion may determine.
     The Administrative Agent may at any time deliver (without representation,
recourse or warranty) the Collateral or any part thereof to a Grantor and the
receipt thereof by such Grantor shall be a complete and full acquittance for the
Collateral so delivered, and the Administrative Agent shall thereafter be
discharged from any liability or responsibility therefor.
     15. Continued Powers. Until the Facility Termination Date shall have
occurred, the power of sale and other rights, powers and remedies granted to the
Administrative Agent for the benefit of the Secured Parties hereunder shall
continue to exist and may be exercised by the Administrative Agent at any time
and from time to time irrespective of the fact that any of the Secured
Obligations or any part thereof may have become barred by any statute of
limitations or that any part of the liability of any Grantor may have ceased.
     16. Other Rights. The rights, powers and remedies given to the
Administrative Agent for the benefit of the Secured Parties by this Security
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent or any Secured Party under any other Loan Document or by
virtue of any statute or rule of law. Any forbearance or failure or delay by the
Administrative Agent in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in accordance with the terms of the Credit
Agreement.
     17. Anti-Marshaling Provisions. The right is hereby given by each Grantor
to the Administrative Agent, for the benefit of the Secured Parties, to make
releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Administrative Agent without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
Liens and security interests in the remaining Collateral conferred hereunder,
nor release any Grantor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral
held by the Administrative Agent, for the benefit of the Secured

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Parties, the Administrative Agent shall have the right to determine the order in
which any or all of the Collateral shall be subjected to the remedies provided
in this Security Agreement. Each Grantor hereby waives any and all right to
require the marshaling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein or in any other Loan
Document.
     18. Entire Agreement. This Security Agreement and each Security Joinder
Agreement, together with the Credit Agreement and other Loan Documents,
constitutes and expresses the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes all prior
negotiations, agreements and understandings, inducements, commitments or
conditions, express or implied, oral or written, except as contained in the Loan
Documents. The express terms hereof and of the Security Joinder Agreements
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof or thereof. Neither this Security
Agreement nor any Security Joinder Agreement nor any portion or provision hereof
or thereof may be changed, altered, modified, supplemented, discharged,
canceled, terminated, or amended orally or in any manner other than as provided
in the Credit Agreement.
     19. Third Party Reliance. Each Grantor hereby consents and agrees that all
issuers of or obligors in respect of any Collateral, and all securities
intermediaries, warehousemen, bailees, public officials and other Persons having
any interest in, possession of, control over or right, privilege, duty or
discretion in respect of, any Collateral shall be entitled to accept the
provisions hereof and of the Security Joinder Agreements as conclusive evidence
of the right of the Administrative Agent, on behalf of the Secured Parties, to
exercise its rights hereunder or thereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by any Grantor or any other Person to any of such Persons.
     20. Binding Agreement; Assignment. This Security Agreement and each
Security Joinder Agreement, and the terms, covenants and conditions hereof and
thereof, shall be binding upon and inure to the benefit of the parties hereto,
and to their respective successors and assigns, except that no Grantor shall be
permitted to assign this Security Agreement, any Security Joinder Agreement or
any interest herein or therein or, except as expressly permitted herein or in
the Credit Agreement, in the Collateral or any part thereof or interest therein.
Without limiting the generality of the foregoing sentence of this Section 20,
any Lender may assign to one or more Persons, or grant to one or more Persons
participations in or to, all or any part of its rights and obligations under the
Credit Agreement (to the extent permitted by the Credit Agreement); and to the
extent of any such assignment or participation such other Person shall, to the
fullest extent permitted by law, thereupon become vested with all the benefits
in respect thereof granted to such Lender herein or otherwise, subject however,
to the provisions of the Credit Agreement, including Article IX thereof
(concerning the Administrative Agent) and Section 10.06 thereof (concerning
assignments and participations). All references herein to the Administrative
Agent and to the Secured Parties shall include any successor thereof or
permitted assignee, and any other obligees from time to time of the Secured
Obligations.
     21. Secured Cash Management Agreements, Secured Hedging Agreements and
Secured Card Related Products Agreements. No Secured Party (other than the
Administrative

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Agent) that obtains the benefit of this Security Agreement shall have any right
to notice of any action or to consent to, direct or object to any action
hereunder or otherwise in respect of the Collateral (including the release or
impairment of any Collateral) other than in its capacity as a Lender and, in
such case, only to the extent expressly provided in the Loan Documents.
Notwithstanding any other provision of this Security Agreement to the contrary,
the Administrative Agent shall only be required to verify the payment of, or
that other satisfactory arrangement have been made with respect to, the Secured
Obligations arising under Secured Cash Management Agreements, Secured Hedge
Agreements and Secured Card Related Products Agreements to the extent the
Administrative Agent has received written notice of such Obligations, together
with such supporting documentation as it may request, from the applicable Cash
Management Bank, Hedge Bank or Card Related Products Bank, as the case may be.
Each Secured Party not a party to the Credit Agreement that obtains the benefit
of this Security Agreement shall be deemed to have acknowledged and accepted the
appointment of the Administrative Agent pursuant to the terms of the Credit
Agreement, and that with respect to the actions and omissions of the
Administrative Agent hereunder or otherwise relating hereto that do or may
affect such Secured Party, the Administrative Agent and each of its Related
Parties shall be entitled to all the rights, benefits and immunities conferred
under Article IX of the Credit Agreement.
     22. Severability. The provisions of this Security Agreement are independent
of and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Security Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
     23. Counterparts. This Security Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart executed by
the Grantor against whom enforcement is sought. Without limiting the foregoing
provisions of this Section 23, the provisions of Section 10.10 of the Credit
Agreement shall be applicable to this Security Agreement.
     24. Termination. Subject to the provisions of Section 13, this Security
Agreement and each Security Joinder Agreement, and all obligations of the
Grantors hereunder (excluding those obligations and liabilities that expressly
survive such termination) shall terminate without delivery of any instrument or
performance of any act by any party on the Facility Termination Date. Upon such
termination of this Security Agreement, the Administrative Agent shall, at the
request and sole expense of the Grantors, promptly deliver to the Grantors such
termination statements and take such further actions as the Grantors may
reasonably request to terminate of record, or otherwise to give appropriate
notice of the termination of, any Lien conferred hereunder.
     25. Notices. Any notice required or permitted hereunder shall be given
(a) with respect to any Borrower, at the address for the giving of notice then
in effect under the Credit Agreement, (b) with respect to any Grantor other than
any Borrower, at the address then in effect for the giving of notices to such
Grantor under the Guaranty to which it is a party, and (c) with

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respect to the Administrative Agent or a Lender, at the Administrative Agent’s
address indicated in Schedule 10.02 of the Credit Agreement. All such addresses
may be modified, and all such notices shall be given and shall be effective, as
provided in Schedule 10.02 of the Credit Agreement for the giving and
effectiveness of notices and modifications of addresses thereunder.
     26. Joinder. Each Person that shall at any time execute and deliver to the
Administrative Agent a Security Joinder Agreement substantially in the form
attached as Exhibit A hereto shall thereupon irrevocably, absolutely and
unconditionally become a party hereto and obligated hereunder as a Grantor and
shall have thereupon pursuant to Section 2 hereof granted a security interest in
and collaterally assigned to the Administrative Agent for the benefit of the
Secured Parties all Collateral in which it has at its Applicable Date or
thereafter acquires any interest or the power to transfer, and all references
herein and in the other Loan Documents to the Grantors or to the parties to this
Security Agreement shall be deemed to include such Person as a Grantor
hereunder. Each Security Joinder Agreement shall be accompanied by the
Supplemental Schedules referred to therein, appropriately completed with
information relating to the Grantor executing such Security Joinder Agreement
and its property. Each of the applicable Schedules attached hereto shall be
deemed amended and supplemented without further action by such information
reflected on the Supplemental Schedules.
     27. Rules of Interpretation. The rules of interpretation contained in
Section 1.02 of the Credit Agreement shall be applicable to this Security
Agreement and each Security Joinder Agreement and are hereby incorporated by
reference. All representations and warranties contained herein shall survive the
delivery of documents and any Credit Extensions referred to herein or secured
hereby.
     28. Governing Law; Waivers.
     (a) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA.
     (b) EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA SITTING IN THE CITY AND COUNTY OF SAN FRANCISCO AND OF THE UNITED
STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT, OR FOR RECOGNITION
OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN

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OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT SHALL
AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY
AGREEMENT OR ANY SECURITY JOINDER AGREEMENT AGAINST ANY GRANTOR OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
     (c) EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER 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 APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.
     (d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 25. NOTHING IN THIS SECURITY AGREEMENT OR
ANY SECURITY JOINDER AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
     (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE
FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE ARBITRATED IN ACCORDANCE WITH SECTION 10.15 OF THE CREDIT AGREEMENT.
[Signature pages follow]

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     IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
on the day and year first written above.

            GRANTORS:

GRANITE CONSTRUCTION INCORPORATED
      By:   /s/ Jigisha Desai         Name:   Jigisha Desai        Title:   V.P.
Treasurer        GRANITE CONSTRUCTION COMPANY
      By:   /s/ Jigisha Desai         Name:   Jigisha Desai        Title:   V.P.
Treasurer              By:   /s/ Laurel J. Krzeminski         Name:   Laurel J.
Krzeminski        Title:   V.P. CFO        GILC INCORPORATED
      By:   /s/ Jigisha Desai         Name:   Jigisha Desai        Title:   V.P.
and CFO              By:   /s/ Laurel J. Krzeminski         Name:   Laurel J.
Krzeminski        Title:   President and CEO     

SECURITY AGREEMENT
Signature Page

 

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            GRANITE CONSTRUCTION NORTHEAST, INC.
      By:   /s/ Jigisha Desai         Name:   Jigisha Desai        Title:   V.P.
Treasurer              By:   /s/ Laurel J. Krzeminski         Name:   Laurel J.
Krzeminski        Title:   VP and CFO        GRANITE NORTHWEST, INC.
      By:   /s/ Kathleen Schreckengost         Name:   Kathleen Schreckengost   
    Title:   V.P., Treasurer and Asst. Secretary              By:   /s/ Cynthia
Johnson         Name:   Cynthia Johnson        Title:   Authorized Officer     
  GRANITE LAND COMPANY
      By:   /s/ Jigisha Desai         Name:   Jigisha Desai        Title:   V.P.
Treasurer              By:   /s/ Laurel J. Krzeminski         Name:   Laurel J.
Krzeminski        Title:   V.P.     

SECURITY AGREEMENT
Signature Page

 

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            INTERMOUNTAIN SLURRY SEAL, INC.
      By:   /s/ Kathleen Schreckengost         Name:   Kathleen Schreckengost   
    Title:   V.P., Treasurer and Asst. Secretary              By:   /s/ Cynthia
Johnson         Name:   Cynthia Johnson        Title:   Authorized Officer     
  POZZOLAN PRODUCTS COMPANY (P.P.C.)
      By:   /s/ Kathleen Schreckengost         Name:   Kathleen Schreckengost   
    Title:   V.P., Treasurer and Asst. Secretary              By:   /s/ Cynthia
Johnson         Name:   Cynthia Johnson        Title:   Authorized Officer     

SECURITY AGREEMENT
Signature Page

 

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            ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A., as Administrative Agent
      By:   /s/ Aamir Saleem         Name:   Aamir Saleem        Title:   Vice
President     

SECURITY AGREEMENT
Signature Page

 

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SCHEDULE 7(f)
Grantor Information
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SCHEDULE 9(e)
Investment Property

                  Securities Accounts             Name and Address of Securities
Intermediary   Account         Grantor   Address   Number1   Security Name  
Security Type
BBVA/Compass
  71 South Wacker Dr., Ste. 500 Chicago, IL 60606       GS FST Money Market Fund
— Select   MMFUND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FIDELITY PRIME
MON MAR-I   MMFUND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERATED INV
PRIME OBLIG-I   MMFUND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERATED INV PRM
CSH OBL-I   MMFUND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       American Electric
Power Company, Inc.   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       CA CLG-TRANS-B  
MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       CA ST-RANS-A1  
MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       CA ST-RANS-A2  
MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       CA WTR   MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       Cargill,
Incorporated   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL FARM
CREDIT BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL FARM
CREDIT BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL FARM
CREDIT BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL FARM
CREDIT BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL HOME LOAN
BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL HOME LOAN
BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL HOME LOAN
BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL HOME LOAN
BANK   AGCY BOND

 

1   On file with the Administrative Agent.

 

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                  Securities Accounts             Name and Address of Securities
Intermediary   Account         Grantor   Address   Number1   Security Name  
Security Type
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       FEDERAL HOME LOAN
BANK   AGCY BOND
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       IRVINE USD-CFD
86-1   MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       Nestle Capital
Corporation   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       NYC SER K   MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       SAN ANTONIO-TAX
NTS-A   MUNI
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       Shell
International Finance B.V.   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       TOTAL CAPITAL
CANADA LTD   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       TOYOTA MOTOR
CREDIT CORP   CORP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       UnionBanCal
Corporation   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       UnionBanCal
Corporation   CP
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       US TREASURY N/B  
US GOV
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       US TREASURY N/B  
US GOV
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       US TREASURY N/B  
US GOV
Union Bank, N.A.
  350 California St., 6th Floor, San Francisco, CA 94104       WELLS FARGO BANK
NA   CORP

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SCHEDULE 9(f)
Deposit Accounts

                          Address of       Certificate of     Name of Depository
  Depository       Deposit No. (If Grantor   Institution   Institution   Account
No.2   applicable)
Granite Construction Company
  Bank of America Merrill Lynch   Building A, 10th Floor, 1655
Grant Street, Concord,
CA 94520       N/A
Granite Construction Incorporated
  Bank of America Merrill Lynch   Building A, 10th Floor, 1655
Grant Street, Concord,
CA 94520       N/A
Granite Northwest, Inc.
  Bank of America Merrill Lynch   Building A, 10th Floor, 1655
Grant Street, Concord,
CA 94520       N/A
Granite Construction Incorporated
  Bank of the West   1450 Treat Blvd., Walnut Creek,
CA 94597       N/A
Granite Construction Northeast, Inc.
  JP Morgan Chase Bank, N.A.   333 South Grand Ave, 36th Floor,
Los Angeles,
CA 90071-1504       N/A
Granite Construction Northeast, Inc.
  JP Morgan Chase Bank, N.A.   333 South Grand Ave, 36th Floor,
Los Angeles,
CA 90071-1504       N/A
Granite Construction Incorporated
  U.S. Bank National Association   2424 Santa Clara Ave., Alameda,
CA 94501       N/A
Granite Construction Incorporated
  U.S. Bank National Association   2424 Santa Clara Ave., Alameda,
CA 94501       N/A
Granite Construction Company
  Wells Fargo, N.A.   301 W. Northern Lights Blvd.,
Ste. 212, Anchorage, AK 99503       N/A

 

2   On file with the Administrative Agent

 

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EXHIBIT A
Form of Security Joinder Agreement
SECURITY JOINDER AGREEMENT
     THIS SECURITY JOINDER AGREEMENT dated as of _____________, 20__ (this
“Security Joinder Agreement”), is made by _______________________________, a
________________ (the “Joining Grantor”), in favor of BANK OF AMERICA, N.A., in
its capacity as Administrative Agent (the “ Administrative Agent”) for the
Secured Parties.
RECITALS:
     A. Granite Construction Incorporated, a Delaware corporation (the “Company”
and a “Borrower”), Granite Construction Company, a California corporation (“GCC”
and a “Borrower”), GILC Incorporated, a California corporation (“GILC” and a
“Borrower”, and together with the Company and GCC, collectively, the
“Borrower”), certain Subsidiaries of the Company and the Administrative Agent,
are party to a Security Agreement dated as of December 23, 2010 (as in effect on
the date hereof, the “Security Agreement”; all capitalized terms used but not
defined herein shall have the meanings provided therefor in such Security
Agreement).
     B. The Joining Grantor is a Subsidiary of the Company and is required by
the terms of the Credit Agreement to become a Guarantor and be joined as a party
to the Security Agreement as a Grantor.
     C. The Joining Grantor will materially benefit directly and indirectly from
the making and maintenance of the extensions of credit made from time to time
under the Credit Agreement, Secured Cash Management Agreements, Secured Hedge
Agreements and Secured Card Related Products Agreements.
     In order to induce the Secured Parties to from time to time make and
maintain extensions of credit under the Credit Agreement, Secured Cash
Management Agreements, Secured Hedge Agreements and Secured Card Related
Products Agreements, the Joining Grantor hereby agrees as follows:
     1. Joinder. The Joining Grantor hereby irrevocably, absolutely and
unconditionally becomes a party to the Security Agreement as a Grantor and bound
by all the terms, conditions, obligations, liabilities and undertakings of each
Grantor or to which each Grantor is subject thereunder, including without
limitation the grant pursuant to Section 2 of the Security Agreement of a
security interest to the Administrative Agent for the benefit of the Secured
Parties in the property and property rights constituting Collateral (as defined
in Section 2 of the Security Agreement) of such Grantor or in which such Grantor
has or may have or acquire an interest or the power to transfer rights therein,
whether now owned or existing or hereafter created, acquired or arising and
wheresoever located, as security for the payment and performance of the Secured
Obligations (as defined in the Security Agreement), all with the same force and
effect as if the Joining Grantor were a signatory to the Security Agreement.

 

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     2. Affirmations. The Joining Grantor hereby acknowledges and reaffirms as
of the date hereof with respect to itself, its properties and its affairs each
of the waivers, representations, warranties, acknowledgements and certifications
applicable to any Grantor contained in the Security Agreement.
     3. Supplemental Schedules. Attached to this Security Joinder Agreement are
duly completed schedules (the “Supplemental Schedules”) supplementing as thereon
indicated the respective Schedules to the Security Agreement. The Joining
Grantor represents and warrants that the information contained on each of the
Supplemental Schedules with respect to such Joining Grantor and its properties
and affairs is true, complete and accurate as of the date hereof.
     4. Severability. The provisions of this Security Joinder Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Joinder Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
     5. Counterparts. This Security Joinder Agreement may be executed in any
number of counterparts each of which when so executed and delivered shall be
deemed an original, and it shall not be necessary in making proof of this
Security Joinder Agreement to produce or account for more than one such
counterpart executed by the Joining Grantor. Without limiting the foregoing
provisions of this Section 5, the provisions of Section 10.10 of the Credit
Agreement shall be applicable to this Security Joinder Agreement.
     6. Delivery. Joining Grantor hereby irrevocably waives notice of acceptance
of this Security Joinder Agreement and acknowledges that the Secured Obligations
are and shall be deemed to be incurred, and credit extensions under the Loan
Documents, Secured Cash Management Agreements, Secured Hedge Agreements and
Secured Card Related Products Agreements made and maintained, in reliance on
this Security Joinder Agreement and the Grantor’s joinder as a party to the
Security Agreement as herein provided.
     7. Governing Law; Venue; Waiver of Jury Trial. The provisions of Section 28
of the Security Agreement are hereby incorporated by reference as if fully set
forth herein.
[Signature page follows.]

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     IN WITNESS WHEREOF, the Joining Grantor has duly executed and delivered
this Security Joinder Agreement as of the day and year first written above.

            JOINING GRANTOR:

      By:           Name:           Title:      

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SUPPLEMENTAL
SCHEDULE 7(f)
Grantor Information

                          I.   II.   III.   IV.   V.   VI.   VII.              
                  Name and address   Relationship of         Jurisdiction of    
              Collateral   of Owner of   Persons listed in VI         Formation/
              Locations   Collateral Location   to     Form of Equity/I.D.  
Address of Chief       (and Type   (If other than   Grantor (e.g., lessor, Name
  Number   Executive Office   Trade Styles   of Collateral)   Grantor)  
warehousemen)                                                                  
                                                                               
               

Delivered pursuant to Security Joinder Agreement of
_______________________________.
Applicable Date: __________, 20__

 

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SUPPLEMENTAL
SCHEDULE 9(e)
Investment Property

                  Securities Accounts           Other Investment Property Name
and Address of                     Securities   Account   Name and Type  
Quantity of Shares   Certificate Intermediary   Number   of Issuer   or Other
Interest   Number(s) Grantor                

Delivered pursuant to Security Joinder Agreement of
_______________________________.
Applicable Date: __________, 20__

 

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SUPPLEMENTAL
SCHEDULE 9(f)
Deposit Accounts

                                  Name and Address of           Certificate of
Deposit No. Grantor   Depository Institution   Account No.   (If applicable)

Delivered pursuant to Security Joinder Agreement of
_______________________________.
Applicable Date: __________, 20__