Ex-10.4

 

EXECUTION VERSION

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT dated as of September 30, 2010 (as it may be
amended, restated, supplemented and otherwise modified from time to time, this
“Security Agreement”), among Clopay Ames True Temper LLC, a Delaware limited
liability company (“Holdings”), Clopay Ames True Temper Holding Corp., a
Delaware corporation (the “Borrower”) and certain subsidiaries of the Borrower
listed on Schedule 1 hereto (together with Holdings and the Borrower, the
“Grantors”), and Goldman Sachs Lending Partners LLC (“GSLP”), in its capacity as
collateral agent (the “Collateral Agent”) for the Secured Parties referred to
below.

 

Notwithstanding anything herein to the contrary, the lien and security interest
granted pursuant to this Security Agreement and the exercise of any right or
remedy hereunder are subject to the provisions of the Intercreditor Agreement
dated as of September 30, 2010 (as amended, restated, supplemented or otherwise
modified from time to time, the “Intercreditor Agreement”), among the Borrower,
Holdings, certain subsidiaries of the Borrower, the Term Loan Representative (as
defined therein) and the ABL Representative (as defined therein).  In the event
of any conflict between the terms of the Intercreditor Agreement and this
Security Agreement, the terms of the Intercreditor Agreement shall govern and
control.

 

PRELIMINARY STATEMENT

 

The Grantors, GSLP, as the Administrative Agent and the Collateral Agent, and
the Lenders are entering into a Credit Agreement dated as of September 30, 2010
(as it may be amended or modified from time to time, the “Credit Agreement”). 
Each Grantor is entering into this Security Agreement in order to induce the
Lenders to enter into and extend credit to the Borrower under the Credit
Agreement and to secure the Obligations that such Grantor has agreed to
guarantee pursuant to Section 7 of the Credit Agreement.

 

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

 

ARTICLE I
DEFINITIONS

 

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

 

1.2           Terms Defined in UCC.  Terms defined in the UCC which are not
otherwise defined in this Security Agreement or the Credit Agreement are used
herein as defined in the UCC.

 

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

 

“ABL Collateral” shall have the meaning set forth in the Intercreditor
Agreement.

 

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“ABL Obligations Payment Date” shall have the meaning set forth in the
Intercreditor Agreement.

 

“Account Debtor” means any Person obligated on an Account.

 

“Accounts” shall have the meaning set forth in Article 9 of the UCC.

 

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

 

“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

 

“Closing Date” means the date of the Credit Agreement.

 

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

 

“Collateral Access Agreement” means any landlord waiver or other agreement, in
form and substance reasonably satisfactory to the Collateral Agent, between the
Collateral Agent (and prior to the ABL Obligations Payment Date, the ABL
Representative) and any third party (including any bailee, consignee, customs
broker, or other similar Person) in possession of any Collateral or any landlord
of any Credit Party for any real property where any Collateral is located, as
such landlord waiver or other agreement may be amended, restated, or otherwise
modified from time to time.

 

“Collateral Agent” means Goldman Sachs Lending Partners LLC, in its capacity as
Collateral Agent for the Secured Parties under the Credit Documents, and its
successors and assigns in such capacity as provided in Section 9 of the Credit
Agreement.

 

“Collateral Report” means any certificate, report or other document delivered by
any Grantor to the Administrative Agent or any Lender with respect to the
Collateral pursuant to any Loan Document.

 

“Collection Account” shall have the meaning set forth in Section 7.1(b).

 

“Commercial Tort Claims” shall have the meaning set forth in Article 9 of the
UCC.

 

“Commodity Account” shall have the meaning set forth in Article 9 of the UCC.

 

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

 

“Controlled Account” shall have the meaning set forth in Section 7.1.

 

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

 

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

 

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the foregoing; (d) the right to sue for past, present, and future infringements
of any of the foregoing; and (e)  all rights corresponding to any of the
foregoing throughout the world.

 

“Copyright Security Agreement” shall mean the Copyright Security Agreement
substantially in the form of Exhibit H.

 

“Deposit Accounts” shall have the meaning set forth in Article 9 of the UCC.

 

“Documents” shall have the meaning set forth in Article 9 of the UCC.

 

“Equipment” shall have the meaning set forth in Article 9 of the UCC.

 

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

 

“Existing ABL Agreement” means the credit agreement dated as of September 30,
2010, among Clopay Ames True Temper Holding Corp., as borrower, Clopay Ames True
Temper LLC, JPMorgan Chase Bank, N.A., and the other lenders party thereto, as
in effect on the date hereof.

 

“Foreign Subsidiary” means any Subsidiary of a Grantor organized under the laws
of any jurisdiction outside the United States of America.

 

“Foreign Subsidiary Voting Stock” means the voting Equity Interests in any
first-tier Foreign Subsidiary.

 

“General Intangibles” shall have the meaning set forth in Article 9 of the UCC.

 

“Goods” shall have the meaning set forth in Article 9 of the UCC.

 

“Grantors” shall have the meaning set forth in the preamble.

 

“Instruments” shall have the meaning set forth in Article 9 of the UCC.

 

“Insurance” shall mean (i) all insurance policies covering any or all of the
Collateral (regardless of whether the Collateral Agent is the loss payee
thereof) and (ii) any key man life insurance policies.

 

“Intellectual Property” means all intellectual property of every kind and nature
now owned or hereafter acquired by any Grantor, including inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secret licenses, confidential
or proprietary technical or business information, know-how, show-how or other
data or information, software and databases and all embodiments or fixations
thereof and related documentation, registrations and franchises, and all
additions, improvements and accessions to, and booked and records describing or
used in connection with, any of the foregoing.

 

“Intellectual Property Security Agreements” means the Copyright Security
Agreement, the Patent Security Agreement, and the Trademark Security Agreement.

 

“Intercompany Note” means any promissory note evidencing loans made by any
Grantor to Holdings or any of its Subsidiaries.

 

“Inventory” shall have the meaning set forth in Article 9 of the UCC.

 

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“Investment Accounts” means the Securities Accounts, Commodity Accounts and
Deposit Accounts, including any Prepayment Accounts.

 

“Investment Property” means: (i) all “investment property” as such term is
defined in Article 9 of the UCC and (ii) all of the following (regardless of
whether classified as investment property under the UCC): all Pledged Equity
Interests, Pledged Debt, the Investment Accounts and certificates of deposit.

 

“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.

 

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

 

“Lock Boxes” shall have the meaning set forth in Section 7.1(a).

 

“Lock Box Agreements” shall have the meaning set forth in Section 7.1(a).

 

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

 

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

 

“Pledged Collateral” means all Instruments (including without limitation,
Pledged Debt), Securities, Pledged Equity Interests and other Investment
Property of the Grantors, whether or not physically delivered to the Collateral
Agent pursuant to this Security Agreement; provided that in no event shall
either the stock of any Immaterial Subsidiary or more than 65% of the total
outstanding Foreign Subsidiary Voting Stock of each Foreign Subsidiary be
required to be pledged hereunder.

 

“Pledged Debt” means all Indebtedness owed to any Grantor, whether or not
evidenced by any Instrument, including, without limitation, all Indebtedness
described on Exhibit E under the heading “Pledged Debt” (as such schedule may be
amended or supplemented from time to time), issued by the obligors named
therein, the Instruments, if any, evidencing any of the foregoing, and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing.

 

“Pledged Equity Interests” means (i) all Equity Interests owned by a Grantor
(including, without limitation, all Equity Interests listed on Exhibit E, as
such schedule may be amended or supplemented from time to time), (ii) the
certificates if any, representing such Equity Interests and (iii) any other
participation or interest in any equity or profits of any business entity
including, without limitation, any trusts and all management rights relating to
any entity whose equity interests are included as Collateral.

 

“Prepayment Account” shall have the meaning set forth in the Intercreditor
Agreement.

 

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“Proceeds” shall have the meaning set forth in the Intercreditor Agreement.

 

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

 

“Requirement of Law” means, as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

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

 

“Secured Parties” the collective reference to the Administrative Agent, the
Lenders, any affiliate of any Lender to which Obligations are owed and any other
holder of Obligations.

 

“Securities Accounts” shall have the meaning set forth in Article 8 of the UCC.

 

“Security” shall have the meaning set forth in Article 8 of the UCC.

 

“Stock Rights” means all dividends, instruments or other distributions and any
other right or property which the Grantors shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any Equity Interest constituting Collateral (including
any right to receive any Equity Interest).

 

“Supporting Obligations” shall have the meaning set forth in Article 9 of the
UCC.

 

“Term Collateral” shall have the meaning set forth in the Intercreditor
Agreement.

 

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

 

“Trademark Security Agreement” means the Trademark Security Agreement
substantially in the form of Exhibit J.

 

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

 

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

 

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ARTICLE II
GRANT OF SECURITY INTEREST

 

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

 

(i)            all Accounts;

 

(ii)           all Chattel Paper;

 

(iii)          all Intellectual Property;

 

(iv)          all Documents;

 

(v)           all Equipment;

 

(vi)          all General Intangibles;

 

(vii)         all Goods;

 

(viii)        all Instruments;

 

(ix)           all Inventory;

 

(x)            all Investment Property, other than any stock of any Immaterial
Subsidiary and Foreign Subsidiary Voting Stock excluded from the definition of
Pledged Collateral;

 

(xi)           all cash or cash equivalents (including Cash Equivalents (as
defined in the Credit Agreement));

 

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

 

(xiii)         all Deposit Accounts;

 

(xiv)        Insurance;

 

(xv)         Commercial Tort Claims now or hereafter described on Exhibit E; and

 

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

 

to secure the prompt and complete payment and performance of the Obligations;
provided, however, that notwithstanding any of the other provisions set forth in
this Article II, this Security Agreement shall not

 

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constitute a grant of a security interest in (i) any leasehold interest in real
property, (ii) any property to the extent that such grant of a security interest
is prohibited by any Requirement of Law of a Governmental Authority, requires a
consent not obtained of any Governmental Authority pursuant to such Requirement
of Law or conflicts with 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, agreement, instrument or other document evidencing
or giving rise to such property or, in the case of any Equity Interests in
Persons which are not Subsidiaries of a Grantor, any applicable shareholder or
similar agreement among holders of Equity Interests in such Persons, except to
the extent that such Requirement of Law or the term in such contract, license,
agreement, instrument or other document or shareholder or similar agreement
providing for such prohibition, breach, default or termination or requiring such
consent is ineffective under applicable law, or (iii) any vehicle subject to a
certificate of title statute.  It is hereby understood and agreed that any
property described in the preceding proviso, and any property that is otherwise
expressly excluded from any clause in this section above, and any property
specifically excluded from any defined term used in any clause of this section
above, shall be excluded from the definition of “Collateral”.

 

2.2           Continuing Liability Under Collateral.  Notwithstanding anything
herein to the contrary, (i) each Grantor shall remain liable for all obligations
under the Collateral and nothing contained herein is intended or shall be a
delegation of duties to Collateral Agent or any other Secured Party, (ii) each
Grantor shall remain liable under each of the agreements included in the
Collateral, to perform all of the obligations undertaken by it thereunder all in
accordance with and pursuant to the terms and provisions thereof and neither
Collateral Agent nor any Secured Party shall have any obligation or liability
under any such agreement by reason of or arising out of this Security Agreement
or any other document related hereto nor shall Collateral Agent nor any Secured
Party have any obligation to make any inquiry as to the nature or sufficiency of
any payment received by it or have any obligation to take any action to collect
or enforce any rights under any such agreement included in the Collateral and
(iii) the exercise by Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

Each Grantor represents and warrants to the Collateral Agent and the Lenders
that:

 

3.1           Title, Perfection and Priority.  Such Grantor has good and valid
rights in or the power to transfer the Collateral and title to the Collateral
with respect to which it has purported to grant a security interest hereunder,
free and clear of all Liens except for Liens permitted under Section 4.1(f), and
has full power and authority to grant to the Collateral Agent the security
interest in such Collateral pursuant hereto.  When financing statements have
been filed in the appropriate offices against such Grantor in the locations
listed on Exhibit F, the Collateral Agent will have a fully perfected first
priority security interest in that Collateral of the Grantor in which a security
interest may be perfected by filing, subject only to Liens permitted under
Section 4.1(f).

 

3.2           Name, Type and Jurisdiction of Organization, Organizational and
Identification Numbers.  The full legal name of such Grantor, all trade names or
other names under which such Grantor currently conducts business, the type of
entity of such Grantor, its state of organization, the organizational number
issued to it by its state of organization and its federal employer
identification number are set forth on Exhibit A.

 

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3.3           Principal Location.  Such Grantor’s mailing address and the
location of its place of business (if it has only one) or its chief executive
office (if it has more than one place of business), are disclosed in Exhibit A.

 

3.4           Collateral Locations.  All of such Grantor’s locations where any
Collateral with an aggregate value in excess of $500,000 is located are listed
on Exhibit A.  All of said locations are owned by such Grantor except for
locations (i) which are leased by the Grantor as lessee and designated in
Part VII(b) of Exhibit A and (ii) at which Inventory is held in a public
warehouse or is otherwise held by a bailee or on consignment as designated in
Part VII(c) of Exhibit A.

 

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

 

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

 

3.7           Letter-of-Credit Rights and Chattel Paper.  Exhibit C lists all
Letter-of-Credit Rights and Chattel Paper of such Grantor.  All action by such
Grantor reasonably necessary to protect and perfect the Collateral Agent’s Lien
on each item listed on Exhibit C (including the delivery of all originals and
the placement of a legend on all Chattel Paper as required hereunder) has been
duly taken.  The Collateral Agent will have a fully perfected first priority
security interest in the Collateral listed on Exhibit C, subject only to Liens
permitted under Section 4.1(f).

 

3.8           Accounts and Chattel Paper.

 

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

 

(b)           With respect to its Accounts, except as specifically disclosed on
the most recent Borrowing Base Certificate (as defined in the Existing ABL
Agreement), (i) all Accounts are Eligible Accounts (as defined in the Existing
ABL Agreement); (ii) all Accounts represent bona fide sales of Inventory or
rendering of services to Account Debtors in the ordinary course of such
Grantor’s business and are not evidenced by a judgment, Instrument or Chattel
Paper; (iii) there are no setoffs, claims or disputes existing or asserted in
writing with respect thereto and such Grantor has not made any agreement with
any Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by such Grantor in the ordinary course of its
business for prompt payment or otherwise permitted pursuant to the Existing ABL
Agreement; (iv) to such Grantor’s knowledge, there are no facts, events or
occurrences which in any material way impair the validity or enforceability
thereof or would reasonably be expected to materially reduce the amount payable
thereunder as shown on such Grantor’s books and records and any invoices,
statements and Collateral Reports with respect thereto; (v) such Grantor has not
received any written notice of proceedings or actions which are threatened or
pending against any Account Debtor which might result in any material adverse
change in such Account Debtor’s financial condition; and (vi) such

 

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Grantor has no knowledge that any Account Debtor is unable generally to pay its
debts as they become due.

 

(c)           In addition, with respect to all of its Accounts, (i) the amounts
shown on all invoices, statements and Collateral Reports with respect thereto
are actually owing to such Grantor as indicated thereon and are not in any way
contingent; (ii) if applicable, no payments have been or shall be made thereon
except payments delivered to a Lock Box or Controlled Account as and to the
extent required pursuant to Section 7.1; and (iii) to such Grantor’s knowledge,
all Account Debtors have the capacity to contract.

 

3.9           Commercial Tort Claims.  All of such Grantor’s Commercial Tort
Claims, other than any Commercial Tort Claims having a value of less than
$200,000 individually and $500,000 in the aggregate, are listed on Exhibit E.

 

3.10         Inventory.  With respect to any of its Inventory scheduled or
listed on the most recent Borrowing Base Certificate, (a) such Inventory (other
than Inventory in transit) is located at one of such Grantor’s locations set
forth on Exhibit A, (b) no Inventory (other than Inventory in transit) is now,
or shall at any time or times hereafter be stored at any other location except
as permitted by Section 4.1(h), (c) such Grantor has good and merchantable title
to such Inventory and such Inventory is not subject to any Lien or security
interest or document whatsoever except for the Lien granted to the Collateral
Agent, for the benefit of the Secured Parties, and except for Permitted
Encumbrances and the Lien granted to the Revolving Collateral Agent for the
benefit of the Revolving Secured Parties (as defined in the Intercreditor
Agreement), (d) except as specifically disclosed in the most recent Borrowing
Base Certificate, such Inventory is Eligible Inventory (as defined in the
Existing ABL Agreement) of good and merchantable quality, free from any material
defects, (e) such Inventory is not subject to any licensing, patent, royalty,
trademark, trade name or copyright agreements with any third parties which would
require any consent of any third party upon sale or disposition of that
Inventory or the payment of any monies to any third party upon such sale or
other disposition, (f) such Inventory has been produced in all material respects
in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all applicable rules, regulations and orders thereunder and (g) the completion
of manufacture, sale or other disposition of such Inventory by the Collateral
Agent following an Event of Default shall not require the consent of any Person
and shall not constitute a material breach or default under any contract or
agreement to which such Grantor is a party or to which such property is subject.

 

3.11         Intellectual Property.  Other than any “off the shelf”, “shrink
wrap”, or similar license agreements, such Grantor does not have any interest
in, or title to, any License or any registration or application to register any
Patent, Trademark or Copyright, except as set forth in Exhibit D.  This Security
Agreement is effective to create a valid and continuing Lien and, upon the
giving of value and filing of appropriate financing statements in the offices
listed on Exhibit F and Intellectual Property Security Agreements substantially
in the form of Exhibit H, Exhibit I and Exhibit J with the United States
Copyright Office and the United States Patent and Trademark Office, fully
perfected first priority security interests in favor of the Collateral Agent on
such Grantor’s Patents, Trademarks, Copyrights and Licenses (other than security
interests in Patents, Trademarks, Copyrights and Licenses in which the
perfection of security interest requires filing outside of the United States),
and such perfected security interests in such collateral are enforceable as such
as against any and all creditors of and purchasers from such Grantor.

 

3.12         Filing Requirements.  None of its Equipment is covered by any
certificate of title, except for vehicles.  None of the Collateral owned by it
is of a type for which security interests or liens may be perfected by filing
under any federal statute except for Patents, Trademarks and Copyrights held by
such Grantor and described in Exhibit D.

 

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3.13         No Financing Statements, Security Agreements.  No financing
statement or security agreement describing all or any portion of the Collateral
which has not lapsed or been terminated naming such Grantor as debtor has been
filed or is of record in any jurisdiction except (a) for financing statements or
security agreements naming the Collateral Agent on behalf of the Secured Parties
as the secured party and (b) for financing statements which have been filed
without the consent of the Grantor and with respect to which no Lien has been
created and (c) as permitted by Section 4.1(f).

 

3.14         Pledged Collateral.

 

(a)           Exhibit E sets forth a complete and accurate (in all material
respects) list of all Pledged Collateral owned by such Grantor.  Such Grantor is
the direct, sole beneficial owner and sole holder of record of the Pledged
Collateral listed on Exhibit E as being owned by it, free and clear of any
Liens, except for the security interest granted to the Collateral Agent, for the
benefit of the Secured Parties hereunder, and any Liens permitted under
Section 6.2 of the Credit Agreement.  Such Grantor further represents and
warrants that (i) all Pledged Collateral owned by it constituting an Equity
Interest of a Subsidiary of a Grantor has been (to the extent such concepts are
relevant with respect to such Pledged Collateral) duly authorized and validly
issued, and is fully paid and non-assessable, (ii) with respect to any
certificates delivered to the Collateral Agent representing an Equity Interest,
either such certificates are Securities as defined in Article 8 of the UCC as a
result of actions by the issuer or otherwise, or, if such certificates are not
Securities, such Grantor has so informed the Collateral Agent so that the
Collateral Agent may take steps to perfect its security interest therein as a
General Intangible, (iii) all such Pledged Collateral held by a securities
intermediary will be covered by a control agreement among such Grantor, the
securities intermediary and the Collateral Agent pursuant to which the
Collateral Agent has Control within the time period set forth in this Security
Agreement and (iv) to such Grantor’s knowledge all Pledged Collateral which
represents Indebtedness owed to such Grantor has been duly authorized,
authenticated or issued and delivered by the issuer of such Indebtedness, is the
legal, valid and binding obligation of such issuer and such issuer is not in
default thereunder.

 

(b)           In addition, (i) to such Grantor’s knowledge none of the Pledged
Collateral owned by it has been issued or transferred in violation of the
securities registration, securities disclosure or similar laws of any
jurisdiction to which such issuance or transfer may be subject, (ii) except for
restrictions and limitations imposed by the Credit Documents or securities laws
generally, the Pledged Collateral is and will continue to be freely transferable
and assignable, (iii) there are existing no options, warrants, calls or
commitments of any character whatsoever relating to such Pledged Collateral or
which obligate the issuer of any Equity Interest included in the Pledged
Collateral to issue additional Equity Interests, and none of the Pledged
Collateral is subject to any right of first refusal, shareholders agreement,
charter or by-law provisions or contractual restriction of any nature that would
materially prohibit, impair, delay or otherwise affect the pledge of such
Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or
the exercise by the Collateral Agent of rights and remedies hereunder and
(iv) no consent, approval, authorization, or other action by, and no giving of
notice, filing with, any governmental authority or any other Person is required
for the pledge by such Grantor of such Pledged Collateral pursuant to this
Security Agreement or for the execution, delivery and performance of this
Security Agreement by such Grantor, or for the exercise by the Collateral Agent
of the voting or other rights provided for in this Security Agreement or for the
remedies in respect of the Pledged Collateral pursuant to this Security
Agreement, except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.

 

(c)           Except as set forth in Exhibit E, or as expressly permitted
pursuant to Section 6.6 of the Credit Agreement, such Grantor owns 100% of the
issued and outstanding Equity Interests which constitute Pledged Collateral
owned by it and none of the Pledged Collateral which represents

 

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Indebtedness owed to such Grantor is subordinated in right of payment to other
Indebtedness or subject to the terms of an indenture.

 

(d)           Pledged Debt.  Each Intercompany Note and, to the knowledge of
such Grantor, any other Pledged Debt constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and subject to an implied
covenant of good faith and fair dealing.

 

ARTICLE IV
COVENANTS

 

From the date of this Security Agreement, and thereafter until this Security
Agreement is terminated, each Grantor agrees that:

 

4.1           General.

 

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

 

(b)           Authorization to File Financing Statements; Ratification.  Such
Grantor hereby authorizes the Collateral Agent to file, and if requested will
deliver to the Collateral Agent all financing statements and other documents and
take such other actions as may from time to time be reasonably requested by the
Collateral Agent in order to maintain a first perfected security interest in
and, if applicable, Control of, the Collateral owned by such Grantor.  Any
financing statement filed by the Collateral Agent may be filed in any filing
office in any UCC jurisdiction and may (i) indicate such Grantor’s Collateral
(1) as all assets of the Grantor or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the UCC of such jurisdiction, or (2) by any other description
which reasonably approximates the description contained in this Security
Agreement, and (ii) contain any other information reasonably required by part 5
of Article 9 of the UCC filing office acceptance of any financing statement or
amendment, including (A) whether such Grantor is an organization, the type of
organization and any organization identification number issued to such Grantor,
and (B) in the case of a financing statement filed as a fixture filing or
indicating such Grantor’s Collateral as as-extracted collateral or timber to be
cut, a reasonably sufficient description of real property to which the
Collateral relates.  Such Grantor also agrees to furnish any such information to
the Collateral Agent promptly upon request.  Such Grantor also ratifies its
authorization for the Collateral Agent to have filed in any UCC jurisdiction any
initial financing statements or amendments thereto if filed prior to the date
hereof.

 

(c)           Intellectual Property Filings.  The Collateral Agent is further
authorized to file with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any
other country) such documents, including Intellectual Property Security
Agreements, as may be necessary or advisable for the purpose of perfecting,
confirming, continuing, enforcing or protecting the security interest granted by
each Grantor, without the signature of any Grantor, and naming any Grantor or
the Grantors as debtors and the Collateral Agent as secured party.

 

(d)           Further Assurances.  Such Grantor will, if so reasonably requested
by the Collateral Agent, furnish to the Collateral Agent, as often as the
Collateral Agent reasonably requests,

 

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statements and schedules further identifying and describing the Collateral owned
by it and such other reports and information in connection with its Collateral
as the Collateral Agent may reasonably request, in each case subject to the
terms and conditions of the Credit Agreement, all in such detail as the
Collateral Agent may specify.  Such Grantor shall, at its own expense, use
commercially reasonable efforts to defend title to the Collateral against all
persons and to defend the security interest of the Collateral Agent in the
Collateral and the priority thereof against any Lien not expressly permitted
hereunder.

 

(e)           Disposition of Collateral.  Such Grantor will not sell, lease,
license or otherwise dispose of the Collateral owned by it except for
dispositions expressly permitted pursuant to Section 6.4 of the Credit
Agreement.

 

(f)            Liens.  Except as expressly permitted pursuant to Section 6.2 of
the Credit Agreement, such Grantor will not create, incur, or suffer to exist
any Lien on the Collateral owned by it except (i) the security interest created
by this Security Agreement, and (ii) other Permitted Encumbrances.

 

(g)           Other Financing Statements.  Such Grantor will not authorize the
filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by it, except with respect to Liens permitted by
Section 4.1(f).  Such Grantor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement other than with respect to any Lien permitted by
Section 4.1(f), without the prior written consent of the Collateral Agent,
subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.

 

(h)           Locations.  Such Grantor will not (i) maintain any Collateral, in
an aggregate value in excess of $500,000, owned by it at any location other than
those locations listed on Exhibit A (ii) otherwise change, or add to, such
locations without the Collateral Agent’s prior written consent (such consent not
to be unreasonably withheld, delayed or conditioned) as required by the Credit
Agreement (and if the Collateral Agent gives such consent, such Grantor will use
commercially reasonable efforts to obtain a Collateral Access Agreement for each
such location to the extent required by the Credit Agreement), or (iii) change
its principal place of business or chief executive office from the location
identified on Exhibit A, other than as permitted by the Credit Agreement.

 

(i)            Compliance with Terms.  Such Grantor will perform and comply with
all obligations in respect of the Collateral owned by it and all agreements to
which it is a party or by which it is bound relating to such Collateral, except
where a failure to do so, individually or in the aggregate would not reasonably
be expected to result in a material adverse effect.

 

4.2           Receivables.

 

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

 

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

 

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(c)           Delivery of Invoices.  Such Grantor will deliver to the Collateral
Agent as soon as reasonably practicable upon its request after the occurrence
and during the continuation of an Event of Default duplicate invoices with
respect to each Account owned by it bearing such language of assignment as the
Collateral Agent shall reasonably specify.

 

(d)           Disclosure of Counterclaims on Receivables.  If (i) any discount,
credit or agreement to make a rebate or to otherwise reduce the amount owing on
any Receivable owned by such Grantor other than in accordance with its present
policies and in the ordinary course of business or as otherwise expressly
permitted pursuant to the Credit Agreement exists or (ii) if, to the knowledge
of such Grantor, any dispute, setoff, claim, counterclaim or defense exists or
has been asserted or threatened in writing with respect to any such Receivable,
such Grantor will promptly disclose such fact to the Collateral Agent in
writing.

 

(e)           Electronic Chattel Paper.  Such Grantor shall grant the Collateral
Agent Control of all electronic chattel paper in accordance with the UCC and all
“transferable records” as defined in each of the Uniform Electronic Transactions
Act and the Electronic Signatures in Global and National Commerce Act.

 

4.3           Inventory and Equipment.

 

(a)           Maintenance of Goods.  Such Grantor will use commercially
reasonable efforts to maintain, preserve, protect and keep its Inventory and the
Equipment in reasonably good repair and working and saleable condition, except
for damaged or defective goods arising in the ordinary course of such Grantor’s
business and except for ordinary wear and tear in respect of the Equipment.

 

(b)           Returned Inventory.  If an Account Debtor returns any Inventory to
such Grantor when no Event of Default exists, then such Grantor shall promptly
determine the reason for such return and shall issue a credit memorandum to the
Account Debtor in the appropriate amount.  Such Grantor shall immediately report
to the Collateral Agent any return involving an amount in excess of $100,000 (or
such higher amount as may be agreed to by the Collateral Agent in its Permitted
Discretion).  Each such report shall indicate the purported reasons for the
returns and the locations and condition of the returned Inventory.  In the event
any Account Debtor returns Inventory to such Grantor when an Event of Default
exists, such Grantor, upon the reasonable request of the Collateral Agent,
shall: (i) hold the returned Inventory in trust for the Collateral Agent;
(ii) segregate all returned Inventory from all of its other property;
(iii) dispose of the returned Inventory solely according to the Collateral
Agent’s written instructions; and (iv) not issue any credits or allowances with
respect thereto without the Collateral Agent’s prior written consent.  All
returned Inventory shall be subject to the Collateral Agent’s Liens thereon. 
Whenever any Inventory is returned, the related Account shall be deemed
ineligible to the extent of the amount owing by the Account Debtor with respect
to such returned Inventory.

 

(c)           Inventory Count; Perpetual Inventory System.  Such Grantor will
conduct a physical count of its Inventory at least once per fiscal year, and
after and during the continuation of an Event of Default, at such other times as
the Collateral Agent reasonably requests.  Such Grantor, at its own expense,
shall deliver to the Collateral Agent the results of each physical verification,
which such Grantor has made, or has caused any other Person to make on its
behalf, of all or any material portion of its Inventory.  Such Grantor will
maintain a perpetual inventory reporting system at all times.

 

(d)           Equipment.  Such Grantor shall promptly inform the Collateral
Agent of any additions to or deletions from its Equipment which individually
have a fair market value in excess of $1,000,000 and $2,000,000 in the
aggregate.  Such Grantor shall not permit any Equipment to become a fixture with
respect to real property or to become an accession with respect to other
personal property

 

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with respect to which real or personal property the Collateral Agent does not
have a Lien.  Such Grantor will not, without the Collateral Agent’s prior
written consent (such consent not to be unreasonably withheld or delayed), alter
or remove any identifying symbol or number on any of such Grantor’s Equipment
constituting Collateral.

 

(e)           Property.  If at any time any Grantor shall take a security
interest in any property of an Account Debtor or any other Person with a fair
market value in excess of $150,000 to secure payment and performance of an
Account, such Grantor shall promptly assign such security interest to the
Collateral Agent; provided that the aggregate fair market value of all property
in which the Grantors have taken a security interest and have not assigned such
security interests to the Collateral Agent shall not exceed $300,000.  Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other Person granting the security interest.

 

4.4           Certification of Limited Liability Company and Limited Partnership
Interests.  Each interest in any limited liability company or limited
partnership controlled by any Grantor and pledged hereunder shall be represented
by a certificate, shall be a “security” within the meaning of Article 8 of the
New York UCC and shall be governed by Article 8 of the New York UCC; provided,
however, that in the case of any limited liability company or limited
partnership that, in either case, is formed or acquired by a Grantor after the
Closing Date, Borrower shall cause interests in such limited liability company
or limited partnership to be represented by a certificate, to be a “security”
within the meaning of Article 8 of the New York UCC and to be governed by
Article 8 of the New York UCC, in each case not later than 20 Business Days (or
such later dates from time to time consented to by the Collateral Agent in its
reasonable discretion) after the date of formation or acquisition thereof, as
applicable.

 

4.5           Delivery of Instruments, Securities, Chattel Paper and Documents. 
Such Grantor will (a) deliver to the Collateral Agent promptly upon execution of
this Security Agreement the originals of all Chattel Paper, Securities and
Instruments (including certificates evidencing Pledged Debt in an aggregate
principal amount exceeding $250,000 and Pledged Equity Interests) constituting
Collateral owned by it (if any then exist), in each case duly endorsed by an
effective indorsement (within the meaning of Section 8-107 of the UCC), or
accompanied by undated instruments of transfer duly endorsed by such an
effective endorsement, in each case, to Collateral Agent or in blank, (b) hold
in trust for the Collateral Agent upon receipt and as soon as reasonably
practicable thereafter deliver to the Collateral Agent any such Chattel Paper,
Securities and Instruments (including certificates evidencing Pledged Debt in an
aggregate principal amount exceeding $250,000 and Pledged Equity Interests)
constituting Collateral in each case duly endorsed by an effective indorsement
(within the meaning of Section 8-107 of the UCC), or accompanied by undated
instruments of transfer duly endorsed by such an effective endorsement, in each
case, to Collateral Agent or in blank, (c) upon the Collateral Agent’s
reasonable request, deliver to the Collateral Agent (and thereafter hold in
trust for the Collateral Agent upon receipt and promptly deliver to the
Collateral Agent) any Document evidencing or constituting Collateral and
(d) upon the Collateral Agent’s reasonable request, deliver to the Collateral
Agent a duly executed amendment to this Security Agreement, in the form of
Exhibit G hereto (the “Amendment”), pursuant to which such Grantor will pledge
such additional Collateral.  Such Grantor hereby authorizes the Collateral Agent
to attach each Amendment to this Security Agreement and agrees that all
additional Collateral owned by it set forth in such Amendment shall be
considered to be part of the Collateral.

 

4.6           Uncertificated Pledged Collateral.

 

(a)           Such Grantor will use commercially reasonable efforts to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of Pledged
Collateral owned by it not represented by certificates to mark their

 

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books and records with the numbers and face amounts of all such uncertificated
securities or other types of Pledged Collateral not represented by certificates
and all rollovers and replacements therefor to reflect the Lien of the
Collateral Agent granted pursuant to this Security Agreement.  With respect to
any Pledged Collateral owned by it on the Closing Date, such Grantor will use
commercially reasonable efforts to cause (a) the issuers of uncertificated
securities which are Pledged Collateral and (b) any securities intermediary
which is the holder of any such Pledged Collateral, to cause the Collateral
Agent to have and retain Control over such Pledged Collateral.  Without limiting
the foregoing, such Grantor will, (i) with respect to any such Pledged
Collateral held with a securities intermediary as of the Closing Date, cause
such securities intermediary, no later than 90 days after the Closing Date (or
such later date as the Collateral Agent shall agree), to enter into a control
agreement with the Collateral Agent, in form and substance reasonably
satisfactory to the Collateral Agent, giving the Collateral Agent Control and
(ii) otherwise with respect to any Pledged Collateral, prior to the opening or
replacement of any Securities Account (including the replacement of any
Securities Account in place as of the Closing Date) or any applicable securities
intermediary receiving any Pledged Collateral, enter into a control agreement
with such securities intermediary and the Collateral Agent, in form and
substance reasonably satisfactory to the Collateral Agent, giving the Collateral
Agent Control.

 

With respect to any issuer of Pledged Collateral consisting of partnership
interests or limited liability company interests in which the Grantor owns less
than 100% of such Equity Interests, Grantor shall use its commercially
reasonable efforts to cause the partnership agreement or limited liability
company agreement of such entity to be amended to include the following
provision:  “Notwithstanding any other provision of this agreement, in the event
that an Event of Default shall have occurred under that certain Credit and
Guarantee Agreement (as such Credit and Guarantee Agreement may be amended,
modified, supplemented or restated from time to time) dated as of September 30,
2010 among Clopay Ames True Temper Holding Corp., as Borrower, Clopay Ames True
Temper LLC, certain subsidiaries of the Borrower, Goldman Sachs Lending Partners
LLC, as Administrative Agent and Collateral Agent (together with its successors
and assigns, the “Collateral Agent”), and the lenders from time to time parties
thereto, and the Collateral Agent shall exercise any of its rights and remedies
with respect to equity interests in the company, then each [member][partner]
hereby irrevocably consents to the transfer of any equity interest and all
related management and other rights in the company to the Collateral Agent or
any designee of the Collateral Agent.  The Collateral Agent is a third-party
beneficiary of this provision and this provision cannot be amended or repealed
without the consent of the Collateral Agent until the Credit Agreement has been
discharged in full.”

 

4.7           Pledged Collateral.

 

(a)           Changes in Capital Structure of Issuers.  Except as expressly
permitted pursuant to Section 6.3 of the Credit Agreement, such Grantor will not
(i) permit any issuer of an Equity Interest constituting Pledged Collateral
owned by it to dissolve, merge, liquidate, retire any of its Equity Interests or
other Instruments or Securities evidencing ownership, reduce its capital, sell
or encumber all or substantially all of its assets (except for Permitted
Encumbrances, Liens expressly permitted pursuant to Section 6.2 of the Credit
Agreement and sales of assets permitted pursuant to Section 4.1(e)) or merge or
consolidate with any other entity, or (ii) vote any such Pledged Collateral in
favor of any of the foregoing.

 

(b)           Issuance of Additional Securities.  Except as expressly permitted
pursuant to Section 6.12 of the Credit Agreement, such Grantor will not permit
the issuer of an Equity Interest constituting Pledged Collateral owned by it to
issue additional Equity Interests, any right to receive the same or any right to
receive earnings, except to such Grantor.

 

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(c)           Equity Interests.  No Grantor will permit any Equity Interest
which is included within the Collateral to constitute a Security, nor will any
Grantor allow any issuer of any such Equity Interest to take any action to have
such interests treated as a Security, unless (i) all certificates or other
documents constituting such Security have promptly been delivered to the
Collateral Agent and such Security is properly defined as such under Article 8
of the UCC of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise, or (ii) the Collateral Agent has entered into a
control agreement with the issuer of such Security or with a securities
intermediary relating to such Security and such Security is defined as such
under Article 8 of the UCC of the applicable jurisdiction whether as a result of
actions by the issuer thereof or otherwise.

 

(d)           Registration of Pledged Collateral.  Upon the occurrence and
during the continuance of an Event of Default, such Grantor will permit any
registerable Pledged Collateral owned by it to be registered in the name of the
Collateral Agent or its nominee at any time at the option of the Requisite
Lenders.

 

(e)           Exercise of Rights in Pledged Collateral.

 

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

 

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

 

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

 

(iv)          All Excluded Payments and all other distributions in respect of
any of the Pledged Collateral owned by such Grantor, whenever paid or made,
shall be  promptly made subject to the Lien of the Collateral Agent in the same
manner as if it were Collateral on the date

 

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hereof and, in the case of any Excluded Payment described in clause
4.7(d)(iii)(A), shall be forthwith delivered to the Collateral Agent in the same
form and so received with any necessary endorsement.

 

4.8           Intellectual Property.

 

(a)           Such Grantor will use its reasonable efforts to secure all
consents and approvals necessary or appropriate for the grant of the security
interest for the benefit of the Collateral Agent of any License held by such
Grantor and to enforce the security interests granted hereunder.

 

(b)           Such Grantor shall notify the Collateral Agent promptly if it
knows that any application or registration relating to any Patent, Trademark or
Copyright (now or hereafter existing) may become abandoned or dedicated
excluding the expiration by its terms of any License or the expiration at the
conclusion of its maximum statutory term of any Patent or Copyright owned by
Grantor, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court, (but excluding any non-final office actions or similar
non-final actions or proceedings) regarding such Grantor’s ownership of any
Patent, Trademark or Copyright, its right to register the same, or to keep and
maintain the same.

 

(c)           Within 30 Business Days after which, either directly or through
any agent, employee, licensee or designee, any Grantor files an application for
the registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency, such Grantor shall report such filing to the Collateral Agent,
and, upon the reasonable request of the Collateral Agent, such Grantor shall
execute and deliver any and all security agreements as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s first priority security
interest on such Patent, Trademark or Copyright, and the General Intangibles of
such Grantor relating thereto or represented thereby.

 

(d)           Such Grantor shall take all actions necessary or reasonably
requested by the Collateral Agent to maintain and pursue each application, to
obtain the relevant registration and to maintain the registration of each of its
Patents, Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings,
except as such Grantor may otherwise determine in the exercise of its reasonable
business judgment.

 

(e)           Such Grantor shall, unless it shall reasonably determine that such
Patent, Trademark or Copyright is not material to the conduct of its business or
operations, sue for infringement, misappropriation or dilution, except as such
Grantor may determine in its reasonable business judgment, to recover any and
all damages for such infringement, misappropriation or dilution, or shall take
such other reasonable and necessary actions as the Collateral Agent shall deem
appropriate under the circumstances to protect such material Patent, Trademark
or Copyright.  In the event that such Grantor institutes suit because any of its
Patents, Trademarks or Copyrights constituting Collateral is infringed upon, or
misappropriated or diluted by a third party, such Grantor shall comply with
Section 4.8.

 

4.9           Commercial Tort Claims.  Such Grantor shall promptly, and in any
event within ten Business Days after the same is acquired by it, notify the
Collateral Agent of any commercial tort claim (as defined in the UCC) in excess
of $200,000 acquired by it and, unless the Collateral Agent otherwise consents,
such Grantor shall enter into an supplement to this Security Agreement, in the
form of Exhibit G hereto, granting to Collateral Agent a first priority security
interest in such commercial tort claim.

 

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4.10         Letter-of-Credit Rights.  If such Grantor is or becomes the
beneficiary of a letter of credit, with a stated value in excess of $200,000, it
shall promptly, and in any event within ten Business Days after becoming aware
that it is a beneficiary, notify the Collateral Agent thereof and cause the
issuer and/or confirmation bank to (i) consent to the assignment of any
Letter-of-Credit Rights to the Collateral Agent and (ii) agree to direct all
payments thereunder to a Deposit Account at the Collateral Agent or subject to a
Control Agreement for application to the Obligations, in accordance with
Section 2.18 of the Credit Agreement, all in form and substance reasonably
satisfactory to the Collateral Agent.

 

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

 

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

 

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

 

(a)           All insurance policies relating to the Collateral required
hereunder and under Section 5.06 of the Credit Agreement shall name the
Collateral Agent (for the benefit of the Secured Parties) as an additional
insured or as loss payee, as applicable, and shall contain loss payable clauses
or mortgagee clauses, through endorsements in form and substance reasonably
satisfactory to the Collateral Agent, which provide that: (i) all proceeds
thereunder with respect to any Collateral shall be payable to the Collateral
Agent; (ii) no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy; and (iii) such policy
and loss payable or mortgagee clauses may be canceled, amended, or terminated
only upon at least thirty days prior written notice given to the Collateral
Agent.

 

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

 

4.14         Collateral Access Agreements.  Such Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement, from the lessor of
each leased property, mortgagee of owned property or bailee or consignee with
respect to any warehouse, processor or converter facility or other location
where Equipment or Inventory in excess of $500,000 is stored or located, which
agreement or letter shall provide access rights, contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee, bailee or
consignee may assert against the Collateral at that location, and shall
otherwise be reasonably satisfactory in form and substance to the Collateral
Agent.  Such Grantor shall timely and fully pay and perform its obligations in
all material respects under all leases and other agreements with respect to each
leased location or third party warehouse where any material Collateral is or may
be located.  Such Grantor shall enter into a Collateral Access Agreement with
the Revolving

 

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Collateral Agent only if the Collateral Agent is a party to such Collateral
Access Agreement with the same rights as the Revolving Collateral Agent unless
otherwise reasonably agreed to by the Collateral Agent.

 

4.15         Change of Name or Location; Change of Fiscal Year.  Such Grantor
shall not (a) change its name as it appears in official filings in the state of
its incorporation or organization, (b) change its chief executive office,
principal place of business, mailing address, corporate offices or warehouses or
locations at which Collateral is held or stored, or the location of its records
concerning the Collateral as set forth in the Security Agreement, (c) change the
type of entity that it is, (d) change its organization identification number, if
any, issued by its state of incorporation or other organization, or (e) change
its state of incorporation or organization, in each case, unless the Collateral
Agent shall have received at least thirty days prior written notice of such
change and the Collateral Agent shall have acknowledged in writing that either
(1) such change will not adversely affect the validity, perfection or priority
of the Collateral Agent’s security interest in the Collateral, or (2) any
reasonable action requested by the Collateral Agent in connection therewith has
been completed or taken (including any action to continue the perfection of any
Liens in favor of the Collateral Agent, on behalf of Secured Parties, in any
Collateral), provided that, any new location shall be in the continental U.S.

 

ARTICLE V
 REMEDIES

 

5.1           Remedies.

 

(a)           Upon the occurrence of an Event of Default that is continuing, the
Collateral Agent may, with the concurrence or at the direction of the Requisite
Lenders, exercise any or all of the following rights and remedies:

 

(i)            those rights and remedies provided in this Security Agreement,
the Credit Agreement, or any other Loan Document; provided that, this
Section 5.1(a) shall not be understood to limit any rights or remedies available
to the Collateral Agent and the Secured Parties prior to an Event of Default;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.2           Application of Proceeds.

 

(a)           Except as expressly provided elsewhere in this Security Agreement,
all proceeds received by the Collateral Agent in respect of any sale of, any
collection from, or other realization upon all or any part of the Collateral
shall be applied in full or in part by the Collateral Agent against the
Obligations in the following order of priority:  first, to the payment of all
costs and expenses of such sale,

 

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collection or other realization, including reasonable compensation to the
Collateral Agent or the Administrative Agent and their respective agents and
counsel, and all other expenses, liabilities and advances made or incurred by
the Collateral Agent or the Administrative Agent in connection therewith, and
all amounts for which the Collateral Agent or the Administrative Agent is
entitled to be reimbursed or indemnified hereunder or under any other Credit
Document (in its capacity as the Collateral Agent and not as a Lender) and all
advances made by the Collateral Agent or the Administrative Agent hereunder or
under any other Credit Document for the account of any, and to the payment of
all reasonable costs and expenses paid or incurred by the Collateral Agent or
the Administrative Agent in connection with the exercise of any right or remedy
hereunder or under any other Credit Documents, all in accordance with the terms
hereof or thereof; second, to the extent of any excess of such proceeds, to the
payment of all other Obligations for the ratable benefit of the Lenders and the
Secured Hedge Counterparties; and third, to the extent of any excess of such
proceeds, to the payment to or upon the order of the applicable Grantor or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.

 

(b)           Upon any sale of Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of proceeds by the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

 

5.3           Grantor’s Obligations Upon an Event of Default.  Upon the request
of the Collateral Agent after the occurrence and during the continuation of an
Event of Default, each Grantor will:

 

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

 

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

 

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

 

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

 

(e)           at its own expense, cause the independent certified public
accountants then engaged by each Grantor to prepare and deliver to the
Collateral Agent and each Lender, at any time, and

 

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from time to time, promptly upon the Collateral Agent’s request, the following
reports with respect to the applicable Grantor: (i) a reconciliation of all
Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts.

 

5.4           Grant of Intellectual Property License.  For the purpose of
enabling the Collateral Agent to exercise the rights and remedies under this
Article V at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby (a) grants to the
Collateral Agent, for the benefit of Secured Parties, an irrevocable,
nonexclusive license (exercisable after the occurrence and during the
continuance of an Event of Default without payment of royalty or other
compensation to any Grantor) to use, license or sublicense any Intellectual
Property rights now owned or hereafter acquired by such Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof and
(b) irrevocably agrees that after the occurrence and during the continuance of
an Event of Default the Collateral Agent may sell any of such Grantor’s
Inventory directly to any person, including without limitation persons who have
previously purchased the Grantor’s Inventory from such Grantor and in connection
with any such sale or other enforcement of the Collateral Agent’s rights under
this Security Agreement, may sell Inventory which bears any Trademark owned by
or licensed to such Grantor and any Inventory that is covered by any Copyright
owned by or licensed to such Grantor and the Collateral Agent may finish any
work in process and affix any Trademark owned by or licensed to such Grantor and
sell such Inventory as provided herein.

 

ARTICLE VI
ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

 

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

 

6.2           Authorization for Secured Party to Take Certain Action.

 

(a)           After the occurrence and during the continuation of an Event of
Default (except in the case of clauses (i) and (iii) below which can be
performed by the Collateral Agent at any time), each Grantor irrevocably
authorizes the Collateral Agent at any time and from time to time in the sole
discretion of the Collateral Agent and appoints the Collateral Agent as its
attorney in fact (i) to execute on behalf of such Grantor as debtor and to file
financing statements necessary or desirable in the Collateral Agent’s sole
discretion to perfect and to maintain the perfection and priority of the
Collateral Agent’s security interest in the Collateral, (ii) to endorse and
collect any cash proceeds of the Collateral, (iii) to file a carbon,
photographic or other reproduction of this Security Agreement or any financing
statement with respect to the Collateral as a financing statement and to file
any other financing statement or amendment of a financing statement (which does
not add new collateral or add a debtor) in such offices as the Collateral Agent
in its sole discretion deems necessary or desirable to perfect and to maintain
the perfection and priority of the Collateral Agent’s security interest in the
Collateral, (iv) to contact and enter into one or more agreements with the
issuers of uncertificated securities which are Pledged Collateral or with
securities intermediaries holding Pledged Collateral as may be necessary or
advisable to give the Collateral Agent Control over such Pledged Collateral,
(v) to apply the proceeds of any Collateral received by the Collateral Agent to
the Obligations as provided in Section 7.3, (vi) to discharge past due

 

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taxes, assessments, charges, fees or Liens on the Collateral (except for such
Liens as are specifically permitted hereunder), (vii) to contact Account Debtors
for any reason, (viii) to demand payment or enforce payment of the Receivables
and any other Collateral in the name of the Collateral Agent or such Grantor and
to endorse any and all checks, drafts, and other instruments for the payment of
money relating to the Receivables and any other Collateral, (ix) to sign such
Grantor’s name on any invoice or bill of lading relating to the Receivables and
any other Collateral, drafts against any Account Debtor of the Grantor,
assignments and verifications of Receivables, (x) to exercise all of such
Grantor’s rights and remedies with respect to the collection of the Receivables
and any other Collateral, (xi) to settle, adjust, compromise, extend or renew
the Receivables, (xii) to settle, adjust or compromise any legal proceedings
brought to collect Receivables, (xiii) to prepare, file and sign such Grantor’s
name on a proof of claim in bankruptcy or similar document against any Account
Debtor of such Grantor, (xiv) to prepare, file and sign such Grantor’s name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables, (xv) to change the address for delivery of mail
addressed to such Grantor to such address as the Collateral Agent may designate
and to receive, open and dispose of all mail addressed to such Grantor, and
(xvi) to do all other acts and things necessary to carry out this Security
Agreement; and such Grantor agrees to reimburse the Collateral Agent on demand
for any reasonable payment made or any reasonable expense incurred by the
Collateral Agent in connection with any of the foregoing; provided that, this
authorization shall not relieve such Grantor of any of its obligations under
this Security Agreement or under the Credit Agreement.

 

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

 

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

 

6.4           Nature of Appointment; Limitation of Duty.  THE APPOINTMENT OF THE
COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.14. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, NEITHER THE COLLATERAL AGENT, NOR ANY LENDER, NOR ANY
OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE ANY DUTY TO

 

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EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE
SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING
SO, EXCEPT  IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

ARTICLE VII
DEPOSIT ACCOUNTS

 

7.1           Deposit Accounts.

 

(a)           Within 90 days after the Closing Date (or such later date as the
Collateral Agent shall agree), each Grantor shall (i) execute and deliver to the
Collateral Agent Control Agreement for each Deposit Account (other than accounts
with a balance not exceeding $25,000 individually or $100,000 in the aggregate)
maintained by such Grantor into which all cash, checks or other similar payments
relating to or constituting payments made in respect of Receivables will be
deposited into a depositary account (such Deposit Account, a “Controlled
Account”), which Controlled Accounts are identified as such on Exhibit B, and
(ii) establish lock box service (the “Lock Boxes”) with the bank(s) set forth in
Exhibit B, which lock boxes shall be subject to irrevocable lockbox agreements
in the form provided by or otherwise reasonably acceptable to the Collateral
Agent and shall be accompanied by an acknowledgment by the bank where the Lock
Box is located of the Lien of the Collateral Agent granted hereunder and of
irrevocable instructions to wire all amounts collected therein to Controlled
Accounts (a “Lock Box Agreement”). After the Closing Date, each Grantor will
comply with the terms of Section 7.2.

 

(b)           Within 90 days after the Closing Date (or such later date as the
Collateral Agent shall agree), each Grantor shall direct all of its Account
Debtors that forward payments to such Grantor to forward payments directly to
Lock Boxes subject to Lock Box Agreements.  The Collateral Agent shall have sole
access to the Lock Boxes at all times and each Grantor shall take all actions
necessary to grant the Collateral Agent such sole access.  At no time shall any
Grantor remove any item from a Lock Box without the Collateral Agent’s prior
written consent.  If any Grantor should refuse or neglect to notify any Account
Debtor to forward payments directly to a Lock Box subject to a Lock Box
Agreement after notice from the Collateral Agent, the Collateral Agent shall,
notwithstanding the language set forth in Section 6.2(b), be entitled to make
such notification directly to Account Debtor.  If notwithstanding the foregoing
instructions, any Grantor receives any proceeds of any Receivables, such Grantor
shall receive such payments as the Collateral Agent’s trustee, and shall
immediately deposit all cash, checks or other similar payments related to or
constituting payments made in respect of Receivables received by it to a
Controlled Account.  Any such proceeds of the Collateral shall be applied in the
order set forth in Section 5.2 unless a court of competent jurisdiction shall
otherwise direct.

 

7.2           Covenant Regarding New Deposit Accounts; Lock Boxes.  Before
opening or replacing any Controlled Account or other Deposit Account (other than
accounts with a balance not exceeding $25,000 individually or $100,000 in the
aggregate), or establishing a new Lock Box, each Grantor shall  cause each bank
or financial institution in which it seeks to open (i) a Deposit Account, to
enter into a Control Agreement with the Collateral Agent in order to give the
Collateral Agent Control of such Deposit Account, or (ii) a Lock Box, to enter
into a Lock Box Agreement with the Collateral Agent Control of the Lock Box.  In
the case of Deposit Accounts or Lock Boxes maintained with Lenders, the terms of
such letter shall be subject to the provisions of the Credit Agreement regarding
setoffs.

 

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ARTICLE VIII
GENERAL PROVISIONS

 

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

 

8.2           Limitation on Collateral Agent’s and Lenders’ Duty with Respect to
the Collateral.  The Collateral Agent shall have no obligation to clean-up or
otherwise prepare the Collateral for sale.  The Collateral Agent and each Lender
shall use reasonable care with respect to the Collateral in its possession or
under its control.  Neither the Collateral Agent nor any Lender shall have any
other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Collateral Agent or such
Lender, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. To the extent that applicable
law imposes duties on the Collateral Agent to exercise remedies in a
commercially reasonable manner, each Grantor acknowledges and agrees that each
of the following, in and of itself, is commercially unreasonable for the
Collateral Agent to do: (i) to fail to incur expenses deemed significant by the
Collateral Agent to prepare Collateral for disposition or otherwise to transform
raw material or work in process into finished goods or other finished products
for disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) to exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as such Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Collateral Agent against risks of loss, collection or
disposition of Collateral or to provide to the Collateral Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent
deemed appropriate by the Collateral Agent, to obtain the services of other
brokers, investment bankers,

 

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consultants and other professionals to assist the Collateral Agent in the
collection or disposition of any of the Collateral.  Each Grantor acknowledges
that the purpose of this Section 8.2 is to provide non-exhaustive indications of
what actions or omissions by the Collateral Agent would not, in and of
themselves be commercially unreasonable in the Collateral Agent’s exercise of
remedies against the Collateral and that other actions or omissions by the
Collateral Agent shall not be deemed commercially unreasonable solely on account
of not being indicated in this Section 8.2.  Without limitation upon the
foregoing, nothing contained in this Section 8.2 shall be construed to grant any
rights to any Grantor or to impose any duties on the Collateral Agent that would
not have been granted or imposed by this Security Agreement or by applicable law
in the absence of this Section 8.2.

 

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

 

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

 

8.5           Specific Performance of Certain Covenants.  Each Grantor
acknowledges and agrees that a breach of any of the covenants contained in
Sections 4.1(e), 4.1(f), 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.13, 4.14,
4.15 or 5.3 or in Article VII will cause irreparable injury to the Collateral
Agent and the Lenders, that the Collateral Agent and the Lenders have no
adequate remedy at law in respect of such breaches and therefore agrees, without
limiting the right of the Collateral Agent or the Lenders to seek and obtain
specific performance of other obligations of the Grantors contained in this
Security Agreement, that the covenants of the Grantors contained in the Sections
referred to in this Section 8.5 shall be specifically enforceable against the
Grantors.

 

8.6           Dispositions Not Authorized.  No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(e) and
notwithstanding any course of dealing between any Grantor and the Collateral
Agent or other conduct of the Collateral Agent, no authorization to sell or
otherwise dispose of the Collateral (except as set forth in Section 4.1(e))
shall be binding upon the Collateral Agent or the Lenders unless such
authorization is in writing signed by the Collateral Agent with the consent or
at the direction of the Requisite Lenders, such consent not to be unreasonably
withheld, delayed or conditioned.

 

8.7           No Waiver; Amendments; Cumulative Remedies.  No delay or omission
of the Collateral Agent or any Secured Parties to exercise any right or remedy
granted under this Security Agreement shall impair such right or remedy or be
construed to be a waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right or remedy shall not preclude any
other or further exercise thereof or the exercise of any other right or remedy. 
No waiver, amendment or other variation of the

 

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terms, conditions or provisions of this Security Agreement whatsoever shall be
valid unless in writing signed by the Collateral Agent with the concurrence or
at the direction of the Secured Parties and then only to the extent in such
writing specifically set forth.  All rights and remedies contained in this
Security Agreement or by law afforded shall be cumulative and all shall be
available to the Collateral Agent and the Secured Parties until the Obligations
have been paid in full.

 

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

 

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

 

8.10         Benefit of Agreement.  The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Collateral Agent and the Lenders and their respective successors and assigns
(including all persons who become bound as a debtor to this Security Agreement),
except that no Grantor shall have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the
prior written consent of the Collateral Agent (such consent not to be
unreasonably withheld or delayed).  No sales of participations, assignments,
transfers, or other dispositions of any agreement governing the Obligations or
any portion thereof or interest therein shall in any manner impair the Lien
granted to the Collateral Agent, for the benefit of the Secured Parties,
hereunder.

 

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

 

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

 

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the Grantors in the performance of actions required pursuant to the terms hereof
shall be borne solely by the Grantors.

 

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

 

8.14         Termination.  This Security Agreement shall continue in effect
until the Credit Agreement has terminated pursuant to its express terms.

 

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

 

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

 

8.17         CONSENT TO JURISDICTION.  EACH GRANTOR HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AND EACH GRANTOR
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE COLLATERAL
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE
COLLATERAL AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

 

8.18         WAIVER OF JURY TRIAL. EACH GRANTOR, THE COLLATERAL AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

 

8.19         Indemnity.  Each Grantor hereby agrees to indemnify the Collateral
Agent and the Lenders, and their respective successors, assigns, agents and
employees (each an “Indemnitee”), from and against any and all liabilities,
damages, penalties, suits, costs, and expenses of any kind and nature
(including, without limitation, all reasonable expenses of litigation or
preparation therefor whether or not the Collateral Agent or any Lender is a
party thereto) imposed on, incurred by or asserted against the Collateral Agent
or the Lenders, or their respective successors, assigns, agents and employees,
in any way relating to or arising out of this Security Agreement, or the
manufacture, purchase, acceptance, rejection,

 

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ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of any Collateral (including, without limitation, latent
and other defects, whether or not discoverable by the Collateral Agent or the
Lenders or any Grantor, and any claim for Patent, Trademark or Copyright
infringement); provided, however, that no Grantor shall have any indemnity
obligation under this Section 8.19 to the extent such indemnity obligation
arises from the gross negligence or willful misconduct of an Indemnitee, in each
case, as determined by a final, non-appealable judgment of a court of competent
jurisdiction.

 

8.20         Counterparts.  This Security Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Security Agreement by
signing any such counterpart.

 

ARTICLE IX
NOTICES

 

9.1           Sending Notices.  Any notice required or permitted to be given
under this Security Agreement shall be sent by United States mail, telecopier,
personal delivery or nationally established overnight courier service, and shall
be deemed received (a) when received, if sent by hand or overnight courier
service, or mailed by certified or registered mail notices or (b) when sent, if
sent by telecopier (except that, if not given during normal business hours for
the recipient, shall be deemed to have been given at the opening of business on
the next Business Day for the recipient), in each case addressed to the Grantors
at the notice address set forth on Exhibit A, and to the Collateral Agent and
the Lenders at the addresses set forth in accordance with Section 10.1 of the
Credit Agreement.

 

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

 

ARTICLE X
THE COLLATERAL AGENT

 

Goldman Sachs Lending Partners LLC, has been appointed Collateral Agent for the
Lenders hereunder pursuant to Section 9 of the Credit Agreement.  It is
expressly understood and agreed by the parties to this Security Agreement that
any authority conferred upon the Collateral Agent hereunder is subject to the
terms of the delegation of authority made by the Lenders to the Collateral Agent
pursuant to the Credit Agreement, and that the Collateral Agent has agreed to
act (and any successor Collateral Agent shall act) as such hereunder only on the
express conditions contained in such Section 9 of the Credit Agreement.  Any
successor Collateral Agent appointed pursuant to Section 9 of the Credit
Agreement shall be entitled to all the rights, interests and benefits of the
Collateral Agent hereunder.

 

[Signature Page Follows]

 

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EXECUTION VERSION

 

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

 

 

GRANTORS:

 

 

 

 

CLOPAY AMES TRUE TEMPER HOLDING CORP.

 

 

 

 

 

 

 

By:

/s/ Tom Gibbons

 

 

Name: Tom Gibbons

 

 

Title: Treasurer

 

 

 

 

 

 

 

CLOPAY AMES TRUE TEMPER LLC

 

 

 

 

 

 

 

By:

/s/ Seth L. Kaplan

 

 

Name: Seth K. Kaplan

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

CLOPAY PLASTIC PRODUCTS COMPANY, INC.

 

 

 

 

 

 

 

By:

/s/ Tom Gibbons

 

 

Name: Tom Gibbons

 

 

Title: Treasurer

 

 

 

 

 

 

 

CLOPAY BUILDING PRODUCTS COMPANY, INC.

 

 

 

 

 

 

 

By:

/s/ Tom Gibbons

 

 

Name: Tom Gibbons

 

 

Title: Treasurer

 

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CLOPAY TRANSPORTATION COMPANY

 

 

 

 

 

 

 

By:

/s/ Tom Gibbons

 

 

Name: Tom Gibbons

 

 

Title: Treasurer

 

 

 

 

 

 

 

CLOPAY ACQUISITION CORP.

 

 

 

 

 

 

 

By:

/s/ Seth L. Kaplan

 

 

Name: Seth K. Kaplan

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

CHATT HOLDINGS INC.

 

 

 

 

 

 

 

By:

/s/ David Nuti

 

 

Name: David Nuti

 

 

Title: Vice President of Finance and CFO

 

 

 

 

 

 

 

ATT HOLDING CO.

 

 

 

 

 

 

 

By:

/s/ David Nuti

 

 

Name: David Nuti

 

 

Title: Vice President of Finance and CFO

 

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AMES TRUE TEMPER, INC.

 

 

 

 

 

 

 

By:

/s/ David Nuti

 

 

Name: David Nuti

 

 

Title: Vice President of Finance and CFO

 

 

 

 

 

 

 

AMES U.S. HOLDING CORP.

 

 

 

 

 

 

 

By:

/s/ David Nuti

 

 

Name: David Nuti

 

 

Title: Vice President, Treasurer and Secretary

 

 

 

 

 

 

 

AMES TRUE TEMPER PROPERTIES, INC.

 

 

 

 

 

 

 

By:

/s/ David Nuti

 

 

Name: David Nuti

 

 

Title: CFO and Assistant Secretary

 

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CLOPAY BUILDING PRODUCTS INTERNATIONAL SALES CORPORATION

 

 

 

 

 

 

 

By:

/s/ Tom Gibbons

 

 

Name: Tom Gibbons

 

 

Title: Vice President and Treasurer

 

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GOLDMAN SACHS LENDING PARTNERS LLC, as Collateral Agent

 

 

 

 

 

 

 

By:

/s/ Alexis Maged

 

 

Authorized Signatory

 

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