Exhibit 10.3

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time, this “Security Agreement”)
is entered into as of July 30, 2012 by and among THE ADVISORY BOARD COMPANY, a
Delaware corporation (the “Borrower”), the Domestic Subsidiaries of the Borrower
listed on the signature pages hereto (together with the Borrower, the “Initial
Grantors,” and together with any additional Domestic Subsidiaries, whether now
existing or hereafter formed or acquired which become parties to this Security
Agreement from time to time, in accordance with the terms of the Credit
Agreement (as defined below), by executing a Security Agreement Supplement
hereto in substantially the form of Annex I, the “Grantors”), and JPMORGAN CHASE
BANK, N.A., a national banking association, in its capacity as administrative
agent (the “Administrative Agent”) for itself and for the Secured Parties (as
defined in the Credit Agreement identified below).

PRELIMINARY STATEMENT

The Borrower, the Administrative Agent and the Lenders are entering into a
Credit Agreement dated as of the date hereof (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). The Grantors are entering into this Security Agreement in order to
induce the Lenders to enter into and extend credit to the Borrower under the
Credit Agreement.

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

ARTICLE I

DEFINITIONS

1.1. Terms Defined in the Credit Agreement. All capitalized terms used in this
Security Agreement and not otherwise defined herein 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 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:

“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.

“Collateral” means all Accounts, Chattel Paper, Commercial Tort Claims,
Copyrights, Deposit Accounts, Documents, Equipment, Farm Products, Fixtures,
General Intangibles, Goods, Instruments, Inventory, Investment Property, letters
of credit, Letter-of-Credit Rights, Licenses, Patents, Pledged

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Deposits, Supporting Obligations, Trademarks and Other Collateral, wherever
located, in which any Grantor now has or hereafter acquires any right or
interest, and the proceeds (including Stock Rights), insurance proceeds and
products thereof, together with all books and records, customer lists, credit
files, computer files, programs, printouts and other computer materials and
records related thereto; provided that, notwithstanding the foregoing,
Collateral shall expressly exclude the Excluded Assets and shall be subject to
the limitations contained in Article II of this Security Agreement.

“Commercial Tort Claims” means commercial tort claims, as defined in the UCC of
any Grantor, including each commercial tort claim specifically described in
Exhibit “F”.

“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.

“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 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.

“Default” means an event described in Section 5.1 hereof.

“Deposit Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, and each applicable
Grantor, among any Grantor, a banking institution holding such Grantor’s funds,
and the Administrative Agent with respect to collection and Control of all
deposits and balances held in a deposit account maintained by such Grantor with
such banking institution.

“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.

“Excluded Deposit Accounts” shall mean (a) any Deposit Account the balance of
which is transferred at the end of each day to a Deposit Account that is subject
to the Control of the Administrative Agent, (b) escrow and trust accounts,
(c) Deposit Accounts used for payroll, payroll taxes and other employee wage and
benefit payments for the benefit of any Grantor’s salaried employees, and
(d) any Deposit Accounts in which the balance thereof, together with the balance
of all other Deposit Accounts excluded pursuant to this clause (d), at no time
exceeds $1,000,000.

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

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

“Fixtures” shall have the meaning set forth in the UCC.

“General Intangibles” shall have the meaning set forth in Article 9 of the UCC
and, in any event, includes payment intangibles, contract rights, rights to
payment, rights arising under common law,

 

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statutes, or regulations, choses or things in action, goodwill (including the
goodwill associated with any Trademark), Patents, Trademarks, Copyrights, URLs
and domain names, Industrial Designs, other industrial or Intellectual Property
or rights therein or applications therefor, whether under license or otherwise,
programs, programming materials, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists, rights to
payment and other rights under any royalty or licensing agreements, including
Licenses, infringement claims, computer programs, information contained on
computer disks or tapes, software, literature, reports, catalogs, pension plan
refunds, pension plan refund claims, insurance premium rebates, tax refunds, and
tax refund claims, interests in a partnership or limited liability company which
do not constitute a security under Article 8 of the Code, and any other personal
property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
Deposit Accounts, Goods, Investment Property, negotiable Collateral, and oil,
gas, or other minerals before extraction.

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

“Industrial Designs” means (a) registered industrial designs and industrial
design applications, and also includes registered industrial designs and
industrial design applications listed in Exhibit “B”, (b) all renewals,
divisions and any industrial design registrations issuing thereon and any and
all foreign applications corresponding thereto, (c) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements thereof,
(d) the right to sue for past, present and future infringements thereof, and
(e) all of each Grantor’s rights corresponding thereto throughout the world.

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

“Intellectual Property” means all Patents, Trademarks, Copyrights and any other
intellectual property.

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

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

“Knowledge” when used with respect to any Grantor, means the actual knowledge of
the chief executive officer, president, chief financial officer, principal
accounting officer, treasurer, controller, chief marketing officer or, in the
case of Intellectual Property, such other individual responsible for
Intellectual Property matters of such Grantor or of the Borrower.

“Letter-of-Credit Right” 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.

“Other Collateral” means any property of the Grantors, not included within the
defined terms Accounts, Chattel Paper, Commercial Tort Claims, Copyrights,
Deposit Accounts, Documents, Equipment, Fixtures, Farm Products, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Licenses, Patents, Pledged Deposits, Supporting
Obligations and Trademarks, including, without limitation, all cash on hand,
letters of credit, Stock Rights or any other

 

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deposits (general or special, time or demand, provisional or final) with any
bank or other financial institution, it being intended that the Collateral
include all real and personal property of the Grantors, provided that “Other
Collateral” shall exclude all Excluded Assets and shall be subject to the
limitations contained in Article II of this Security Agreement.

“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 licenses of the foregoing whether as licensee or licensor;
(e) all income, royalties, damages, claims, and payments now or hereafter due or
payable under and with respect thereto, including, without limitation, damages
and payments for past and future infringements thereof; (f) all rights to sue
for past, present, and future infringements thereof; and (g) all rights
corresponding to any of the foregoing throughout the world.

“Payment Event of Default or Acceleration Event” means the occurrence of (a) an
Event of Default (as defined in the Credit Agreement) under clause (a) or (b) of
Article VII of the Credit Agreement, or (b) the termination of the Commitments
and the Loans and the other Obligations becoming due and payable pursuant to
Article VII of the Credit Agreement.

“Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the
Administrative Agent pursuant to this Security Agreement, but excluding the
Excluded Assets.

“Pledged Deposits” means all time deposits of money (other than Deposit Accounts
and Instruments), whether or not evidenced by certificates, which a Grantor may
from time to time designate as pledged to the Administrative Agent or to any
Secured Party as security for any Secured Obligations, and all rights to receive
interest on such deposits.

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

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

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

“Securities Account” has the meaning set forth in Article 8 of the UCC.

“Securities Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent and each applicable Grantor,
among any Grantor, a securities intermediary holding such Grantor’s investments,
and the Administrative Agent with respect to collection and Control of all
investments held in a Securities Account maintained by such Grantor with such
securities intermediary.

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

 

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

“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.

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

ARTICLE II

GRANT OF SECURITY INTEREST

Each of the Grantors hereby pledges, assigns and grants to the Administrative
Agent, on behalf of and for the benefit of the Secured Parties, a security
interest in all of such Grantor’s right, title and interest, whether now owned
or hereafter acquired, in and to the Collateral to secure the prompt and
complete payment and performance of the Secured Obligations; provided that,
notwithstanding anything to the contrary contained in this Article II, (a) the
security interest created by this Security Agreement shall not extend to, and
the term “Collateral” shall not include, any Excluded Assets or any Equity
Interest in any Subsidiary that is not a Domestic Subsidiary, or a First Tier
Foreign Subsidiary that is a Material Subsidiary and (b) the amount of Equity
Interests in any First Tier Foreign Subsidiary pledged or required to be pledged
to the Administrative Agent hereunder or under any other Collateral Document
shall be automatically limited to the Applicable Pledge Percentage of the Voting
Stock of such First Tier Foreign Subsidiary (and the term “Collateral” shall not
include any other Equity Interests in such First Tier Foreign Subsidiary). For
the avoidance of doubt, the grant of a security interest herein shall not be
deemed to be an assignment of intellectual property rights owned by the
Grantors. In addition, for the avoidance of doubt, (i) neither the Borrower nor
any Subsidiary shall be required to obtain bailee or landlord waivers in respect
of any location where Inventory is stored and (ii) no Equity Interest in any
Subsidiary may be pledged unless such Subsidiary is a Domestic Subsidiary or a
First Tier Foreign Subsidiary that is a Material Subsidiary.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each of the Initial Grantors represents and warrants to the Administrative Agent
and the Secured Parties as of the Effective Date, and each Grantor that becomes
a party to this Security Agreement pursuant to the execution of a Security
Agreement Supplement in substantially the form of Annex I represents and
warrants as of the date of such Security Agreement Supplement (after giving
effect to supplements to each of the Exhibits hereto with respect to such
subsequent Grantor as attached to such Security Agreement Supplement), that:

3.1. Title, Authorization, Validity and Enforceability. Such Grantor has
marketable title to the Collateral owned by it that is material to its business,
except for minor defects in title that do not interfere in any material respect
with such Grantor’s ability to conduct its business as currently conducted

 

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or to utilize such Collateral owned by it for its intended purposes, and has the
power to transfer the Collateral owned by it 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 4.1.6 hereof,
and has full corporate, limited liability company or partnership, as applicable,
power and authority to grant to the Administrative Agent the security interest
in such Collateral pursuant hereto. The execution and delivery by such Grantor
of this Security Agreement have been duly authorized by proper corporate,
limited liability company, limited partnership or partnership, as applicable,
proceedings, and this Security Agreement constitutes a legal, valid and binding
obligation of such Grantor and creates a security interest which is enforceable
against such Grantor in all Collateral, except (a) to the extent the Collateral
is not reasonably identified herein as required under Section 9-108 of the UCC,
and (b) as enforceability may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws relating to or affecting
the enforcement of creditors’ rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law), and
(iii) requirements of reasonableness, good faith and fair dealing. When
financing statements have been filed in the appropriate offices against such
Grantor in the locations listed in Exhibit “E” in accordance with Section 4.1.4
hereof, the Administrative Agent will have a fully perfected first priority
security interest in the Collateral owned by such Grantor in which a security
interest may be perfected by filing of a financing statement under the UCC,
subject only to Liens permitted under Section 6.02 of the Credit Agreement.

3.2. Conflicting Laws and Contracts. Neither the execution and delivery by such
Grantor of this Security Agreement, the creation and perfection of the security
interest in the Collateral granted hereunder, nor compliance with the terms and
provisions hereof will violate (i) in any material respect any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on such
Grantor, or (ii) such Grantor’s charter, articles or certificate of
incorporation, partnership agreement or by-laws (or similar constitutive
documents), or (iii) in any material respect the provisions of any indenture,
material instrument or material agreement to which such Grantor is a party or is
subject, or by which it, or its property may be bound or affected, or conflict
with or constitute a default thereunder, or result in or require the creation or
imposition of any Lien in, of or on the property of such Grantor pursuant to the
terms of any such indenture, instrument or agreement (other than any Lien of the
Administrative Agent on behalf of the Secured Parties and other Liens permitted
under Section 6.02 of the Credit Agreement).

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”; such Grantor has
no other places of business except those set forth in Exhibit “A”.

3.4. Property Locations. The Inventory, Equipment and Fixtures of each Grantor
are located solely at the locations of such Grantor described in Exhibit “A”.
All of such locations are owned by such Grantor except for locations (i) which
are leased by such Grantor as lessee and designated in Part 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 by such Grantor as designated in Part C of Exhibit “A”.

3.5. No Other Names; Etc. Within the five-year period ending as of the date such
Person becomes a Grantor hereunder, such Grantor has not conducted business
under any name, changed its jurisdiction of formation, merged with or into or
consolidated with any other Person, except as disclosed in Exhibit “A”. The name
in which such Grantor 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 as of the date such Person becomes a
Grantor hereunder.

3.6. No Default. No Default has occurred and is continuing.

 

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3.7. Accounts and Chattel Paper. To the Knowledge of such Grantor, except as
disclosed to the Administrative Agent, the names of the obligors, amounts owing,
due dates and other information with respect to the Accounts and Chattel Paper
owned by such Grantor are correctly stated in all material respects in all
records of such Grantor relating thereto and in all invoices and reports with
respect thereto furnished to the Administrative Agent by such Grantor from time
to time.

3.8. Filing Requirements. None of the Collateral owned by such Grantor 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 “B”.

3.9. 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 financing statements (i) naming the
Administrative Agent on behalf of the Secured Parties as the secured party and
(ii) in respect of Liens permitted under Section 6.02 of the Credit Agreement;
provided, that nothing herein shall be deemed to constitute an agreement to
subordinate any of the Liens of the Administrative Agent under the Loan
Documents to any Liens otherwise permitted under Section 6.02 of the Credit
Agreement except as may be required under Section 9.02(d) of the Credit
Agreement.

3.10. Federal Employer Identification Number; State Organization Number;
Jurisdiction of Organization. Such Grantor’s federal employer identification
number is, and if such Grantor is a registered organization, such Grantor’s
State of organization, type of organization and State of organization
identification number are, listed in Exhibit “G”.

3.11. Pledged Securities and Other Investment Property. Exhibit “D” sets forth a
complete and accurate list of the Instruments, Securities and other Investment
Property constituting Pledged Collateral and delivered to the Administrative
Agent, provided that, for the avoidance of doubt, (i) with respect to the Equity
Interests in the Subsidiaries, only the Pledged Collateral in the form of Equity
Interests in Subsidiaries that constitute Collateral in accordance with Article
II of this Security Agreement shall be delivered to the Administrative Agent and
no Equity Interests in any other Persons shall be so delivered, and (ii) no
physical instruments, securities or other physical Investment Property held in
any of the accounts identified in Exhibit D shall be delivered to the
Administrative Agent; provided further that the Equity Interests in the First
Tier Foreign Subsidiaries required to be delivered hereunder may be delivered
after the Closing Date in accordance with Section 5.09 of the Credit Agreement.
Each Grantor is the direct and beneficial owner of each Instrument, Security and
other type of Investment Property listed in Exhibit “D” as being owned by it,
free and clear of any Liens, except for the security interest granted to the
Administrative Agent for the benefit of the Secured Parties hereunder or as
permitted under Section 6.02 of the Credit Agreement. Each Grantor further
represents and warrants that (i) all Pledged Collateral owned by it constituting
an Equity Interest in a Subsidiary has been (to the extent such concepts are
relevant with respect to such Pledged Collateral) duly authorized and validly
issued, are fully paid and non-assessable and constitute the percentage of the
issued and outstanding shares of stock (or other Equity Interests) of the
respective issuers thereof indicated in Exhibit “D” hereto, (ii) with respect to
any certificates delivered to the Administrative Agent representing an Equity
Interest, either such certificates are Securities as defined in Article 8 of the
UCC of the applicable jurisdiction as a result of actions by the issuer or
otherwise, or, if such certificates are not Securities, such Grantor has so
informed the Administrative Agent so that the Administrative Agent may take
steps to perfect its security interest therein as a General Intangible and
(iii) to the extent, such Pledged Collateral is held by a securities
intermediary in a Securities Account, such account shall be subject to a
Securities Account Control Agreement to the extent required by Section 4.7
hereof.

 

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3.12. Intellectual Property.

3.12.1 Exhibit “B” contains a complete and accurate listing as of the Effective
Date of all Intellectual Property included in the Collateral of each of the
Grantors, including, but not limited to the following: (i) state, U.S. and
foreign trademark registrations, applications for trademark registration and
common law trademarks, (ii) U.S. and foreign patents and patents applications,
together with all reissuances, continuations, continuations in part, revisions,
extensions, and reexaminations thereof, (iii) U.S. and foreign copyright
registrations and applications for registration, (iv) foreign industrial design
registrations and industrial design applications, (v) trade secrets, (vi) domain
names, (vii) proprietary computer software, (viii) all forms of Intellectual
Property described in clauses (i)-(iii) above that are owned by a third party
and licensed to the Grantors or otherwise used by the Grantors under contract,
and (ix) the names of any Person who has been granted rights in respect thereof
outside of the ordinary course of business. All of the U.S. registrations,
applications for registration or applications for issuance of the Intellectual
Property are valid and subsisting, in good standing and are recorded or in the
process of being recorded in the name of the applicable Grantor, except as could
not be reasonably expected to result in a Material Adverse Effect.

3.12.2 Such Intellectual Property is valid, subsisting, unexpired (where
registered) and enforceable and has not been abandoned or adjudged invalid or
unenforceable, in whole or in part, except as could not be reasonably expected
to result in a Material Adverse Effect.

3.12.3 No Person other than the respective Grantor has any right or interest of
any kind or nature in or to the Intellectual Property included in the
Collateral, including any right to sell, license, lease, transfer, distribute,
use or otherwise exploit the Intellectual Property or any portion thereof
outside of the ordinary course of the respective Grantor’s business. Each
Grantor has good, marketable and exclusive title to, and the valid and
enforceable power and right to sell, license, transfer, distribute, use and
otherwise exploit, its Intellectual Property, except as could not be reasonably
expected to result in a Material Adverse Effect.

3.12.4 To the Knowledge of each Grantor, each Grantor has taken or caused to be
taken steps so that none of its Intellectual Property included in the
Collateral, the value of which to the Grantors are contingent upon maintenance
of the confidentiality thereof, have been disclosed by such Grantor to any
Person other than employees, contractors, customers, representatives and agents
of the Grantors who are parties to customary confidentiality and nondisclosure
agreements with the Grantors, except as could not be reasonably expected to
result in a Material Adverse Effect.

3.12.5 To the Knowledge of each Grantor, no Person has violated, infringed upon
or breached, or is currently violating, infringing upon or breaching, any of the
rights of such Grantor to the Intellectual Property included in the Collateral
or has breached or is breaching any duty or obligation owed to such Grantor in
respect of the Intellectual Property included in the Collateral except where
those breaches, individually or in the aggregate, could not be reasonably
expected to result in a Material Adverse Effect.

3.12.6 No settlement or consents, covenants not to sue, nonassertion assurances,
or releases have been entered into by any Grantor or to which any Grantor is
bound that adversely affects its rights to own or use any Intellectual Property
included in the Collateral included in the Collateral except as could not be
reasonably expected to result in a Material Adverse Effect, in each case
individually or in the aggregate.

 

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3.12.7 No Grantor has received any written notice that remains outstanding
challenging the validity, enforceability, or ownership of any Intellectual
Property included in the Collateral except where those challenges could not
reasonably be expected to result in a Material Adverse Effect, and to such
Grantor’s knowledge at the date hereof there are no facts upon which such a
challenge could be made.

3.12.8 Each Grantor owns directly or is entitled to use, by license or
otherwise, all Intellectual Property included in the Collateral necessary for
the conduct of such Grantor’s business in all material respects.

3.12.9 Each Grantor uses adequate standards of quality in the manufacture,
distribution, and sale of all products sold and in the provision of all services
rendered under or in connection with all trademarks and has taken all
commercially reasonable action necessary to insure that all licensees of the
trademarks owned or licensed by such Grantor use such adequate standards of
quality, except where the failure to use adequate standards of quality could not
reasonably be expected to result in a Material Adverse Effect.

3.12.10 The consummation of the transactions contemplated by the Loan Documents
will not result in the termination or material impairment of any of the
Intellectual Property included in the Collateral.

3.13. Deposit Accounts and Securities Accounts. All of such Grantor’s Deposit
Accounts and Securities Accounts are listed on Exhibit “H”.

ARTICLE IV

COVENANTS

From the date of this Security Agreement and thereafter until this Security
Agreement is terminated, each of the Initial Grantors agrees, and from and after
the effective date of any Security Agreement Supplement applicable to any
Grantor (and after giving effect to supplements to each of the Exhibits hereto
with respect to such subsequent Grantor as attached to such Security Agreement
Supplement) and thereafter until this Security Agreement is terminated each such
subsequent Grantor agrees:

4.1. General.

4.1.1 Inspection. Such Grantor will permit the Administrative Agent or any
Secured Party, by its representatives and agents, to inspect the Collateral in
the manner set forth in Section 5.06 of the Credit Agreement as if it were a
party thereto.

4.1.2 Taxes. Such Grantor will comply with Section 5.04 of the Credit Agreement
as if it were a party thereto.

4.1.3 Records and Reports; Notification of Default. Such Grantor will comply
with Section 5.06 of the Credit Agreement as if it were a party thereto.

4.1.4 Financing Statements and Other Actions; Defense of Title. Each Grantor
hereby authorizes the Administrative Agent to file, and if requested will
execute and deliver to the Administrative Agent, all financing statements
describing the Collateral owned by such Grantor and other documents and each
Grantor agrees to take such other actions as may from time to time reasonably be
requested by the Administrative Agent in order to maintain a first priority,
perfected security interest in and, if applicable, Control of, the Collateral
owned by such Grantor,

 

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subject to Liens permitted under Section 6.02 of the Credit Agreement and to the
provisions of Section 4.7 hereof, provided that nothing herein shall be deemed
to constitute an agreement to subordinate any of the Liens of the Administrative
Agent under the Loan Documents to any Liens otherwise permitted under
Section 6.02 of the Credit Agreement except as may be required under
Section 9.02(d) of the Credit Agreement. Such financing statements may describe
the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as the Administrative Agent may determine, in its sole discretion,
is necessary, advisable or prudent to ensure that the perfection of the security
interest in the Collateral granted to the Administrative Agent herein,
including, without limitation, describing such property as “all assets of the
debtor whether now owned or hereafter acquired and wheresoever located,
including all accessions thereto and proceeds thereof.” Each Grantor will take
any and all actions necessary to defend title to the Collateral owned by such
Grantor against all Persons and to defend the security interest of the
Administrative Agent in such Collateral and the priority thereof against any
Lien not expressly permitted hereunder or under any other Loan Document;
provided that it is understood and agreed that no Grantor will be required to
obtain bailee or landlord waivers in respect of any location where Inventory is
stored.

4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise
dispose of the Collateral owned by such Grantor except in transactions permitted
under Section 6.03 of the Credit Agreement.

4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on the
Collateral owned by such Grantor except Liens permitted under Section 6.02 of
the Credit Agreement, provided that nothing herein shall be deemed to constitute
an agreement to subordinate any of the Liens of the Administrative Agent under
the Loan Documents to any Liens otherwise permitted under Section 6.02 of the
Credit Agreement except to the extent provided in Section 9.02(d) of the Credit
Agreement.

4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization,
Location, Name. Each Grantor will:

 

  (i) preserve its existence and corporate, limited liability company or
partnership, as applicable, structure as in effect on the Effective Date (except
to the extent otherwise permitted under the Credit Agreement);

 

  (ii) not change its name or jurisdiction of organization;

 

  (iii) not maintain its place of business (if it has only one) or its chief
executive office (if it has more than one place of business) at a location other
than a location specified in Exhibit “A”;

 

  (iv) not (i) change its name or taxpayer identification number or (ii) change
its mailing address; and

 

  (v) continue to record properly its Inventory and Equipment on the internal
books and records of the Borrower and the Grantors;

unless, in each such case, such Grantor shall have given the Administrative
Agent not less than fifteen (15) days’ prior written notice of such event or
occurrence and, to the extent reasonably requested by the Administrative Agent,
shall have taken such steps as are necessary or advisable to properly maintain
the validity, perfection and priority of the Administrative Agent’s security
interest in the Collateral owned by such Grantor.

 

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4.1.8 Other Financing Statements. No Grantor will suffer to exist or authorize
the filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by such Grantor, except any financing statement
authorized under Section 4.1.4 hereof or any financing statement evidencing such
Liens as are permitted under Section 6.02 of the Credit Agreement (including,
without limitation, a financing statement of a third party financing source in
connection with the sale or discount of accounts receivable permitted under
Section 6.03(a)(iv)(E) of the Credit Agreement). Each Grantor acknowledges that
it is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement filed in connection herewith
without the prior written consent of the Administrative Agent (such consent not
to be unreasonably withheld), subject to such Grantor’s rights under
Section 9-509(d)(2) of the UCC.

4.2. Receivables.

4.2.1 Certain Agreements on Receivables. During the occurrence and continuation
of a Default, no Grantor will 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; provided
that prior to the occurrence and continuation of a Default, such Grantor may
reduce the amount of Accounts arising from the sale of Inventory or the
rendering of services in accordance with its present policies and in the
ordinary course of business and as otherwise permitted under the Credit
Agreement.

4.2.2 Delivery of Invoices. Upon the occurrence of a Default and during the
continuance thereof, each Grantor will deliver to the Administrative Agent
immediately upon its request duplicate invoices with respect to each Account
owned by such Grantor bearing such language of assignment as the Administrative
Agent shall specify.

4.2.3 Disclosure of Counterclaims on Receivables. If (i) any discount, credit or
agreement to make a rebate or to otherwise reduce the amount owing on a
Receivable owned by such Grantor exists or (ii) if, to the Knowledge of such
Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to a Receivable, and such reduction,
defense, setoff, claim, counterclaim or defense could reasonably be expected to
have a Material Adverse Effect, such Grantor will disclose such fact to the
Administrative Agent in writing in connection with the inspection by the
Administrative Agent of any record of such Grantor relating to such Receivable
and in connection with any invoice or report furnished by such Grantor to the
Administrative Agent relating to such Receivable.

4.2.4 Electronic Chattel Paper. Each Grantor shall take all steps necessary to
grant the Administrative 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, in each case with a face value in excess of $1,000,000.

4.3. Maintenance of Goods. Each Grantor shall comply with Section 5.05 of the
Credit Agreement as if it were a party thereto.

4.4. Instruments, Securities, Chattel Paper, Documents and Pledged Deposits.
Each Grantor will (i) deliver to the Administrative Agent immediately upon
execution of this Security Agreement the

 

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originals of all Chattel Paper, Securities (to the extent certificated) and
Instruments constituting Collateral (if any then exist), (ii) hold in trust for
the Administrative Agent upon receipt and immediately thereafter deliver to the
Administrative Agent any Chattel Paper, Securities (to the extent certificated)
and Instruments constituting Collateral, (iii) upon the Administrative Agent’s
request, after the occurrence and during the continuance of a Default, deliver
to the Administrative Agent (and thereafter hold in trust for the Administrative
Agent upon receipt and immediately deliver to the Administrative Agent) any
Document evidencing or constituting Collateral in an amount greater than
$1,000,000, and (iv) upon the Administrative Agent’s request, deliver to the
Administrative Agent a duly executed amendment to this Security Agreement, in
the form of Exhibit “I” hereto (the “Amendment”), pursuant to which such Grantor
will pledge such additional Collateral. Such Grantor hereby authorizes the
Administrative Agent to attach each Amendment to this Security Agreement and
agrees that all additional Collateral owned by it set forth in such Amendments
shall be considered to be part of the Collateral; provided that, for the
avoidance of doubt, with respect to any delivery of Equity Interests in the
Subsidiaries required under this Section 4.4, only the Equity Interests in
Subsidiaries that constitute Collateral in accordance with Article II of this
Security Agreement will be delivered to the Administrative Agent; provided
further that the Equity Interests in the First Tier Foreign Subsidiaries
required to be delivered hereunder may be delivered after the Closing Date in
accordance with Section 5.09 of the Credit Agreement.

4.5. Uncertificated Securities and Certain Other Investment Property. Each
Grantor will permit the Administrative Agent from time to time to cause
Subsidiaries of such Grantor that are issuers (and, if held with a securities
intermediary, such securities intermediary) of uncertificated securities or
other types of Investment Property not represented by certificates which are
Collateral owned by such Grantor to mark their books and records with the
numbers and face amounts of all such uncertificated securities or other types of
Investment Property not represented by certificates and all rollovers and
replacements therefor to reflect the Lien of the Administrative Agent granted
pursuant to this Security Agreement.

4.6. Stock and Other Ownership Interests.

4.6.1 Reserved,

4.6.2 Issuance of Additional Securities. Except as permitted under the Credit
Agreement, no Grantor will permit or suffer any Subsidiary of such Grantor (the
corporate securities or other ownership interests in which Subsidiary constitute
Collateral) to issue any such securities or other ownership interests, any right
to receive any such securities or other ownership interests, or any right to
receive earnings, except to such Grantor.

4.6.3 Registration of Pledged Securities and other Investment Property. Each
Grantor will permit any registrable Collateral owned by such Grantor to be
registered in the name of the Administrative Agent or its nominee at any time at
the option of the Required Lenders following the occurrence and during the
continuance of a Payment Default or Acceleration Event and without any further
consent of such Grantor.

4.6.4 Exercise of Rights in Pledged Securities and other Investment Property.
Each Grantor will permit the Administrative Agent or its nominee at any time
following the occurrence and during the continuance of a Payment Event of
Default or Acceleration Event, without notice, to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the
Collateral owned by such Grantor or any part thereof, and to receive all
dividends and interest in respect of such Collateral.

 

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4.7. Deposit Accounts and Securities Accounts. Upon the Administrative Agent’s
request, each Grantor will use commercially reasonable efforts to cause each
bank or other financial institution in which it maintains a Deposit Account or
Securities Account to enter into a control agreement with the Administrative
Agent, in form and substance reasonably satisfactory to the Administrative
Agent, in order to give the Administrative Agent Control of such Deposit Account
or Securities Account. The Administrative Agent agrees that it will not give any
notice of sole control under any Deposit Account Control Agreement or Securities
Account Control Agreement unless and until a Default has occurred and is
continuing. If exclusive dominion and control of any Deposit Account or
Securities Account or dominion and control of any other deposit or investment
has been obtained by the Administrative Agent and no Default continues to exist,
the Administrative Agent will send notice to the bank or financial institution
at which such Deposit Account or Securities Account or other deposit or
investment is maintained to (a) terminate the Administrative Agent’s exclusive
dominion and control of such Deposit Account or Securities Account or other
deposit or investment and (b) reinstate Grantor’s access to such Deposit Account
or Securities Account or other deposit or investment. In the case of deposits
and investments maintained with Lenders, the terms of such notice shall be
subject to the provisions of the Credit Agreement regarding setoffs. The
provisions of this Section 4.7 shall not apply to Deposit Accounts which are
Excluded Deposit Accounts, it being understood and agreed that the
Administrative Agent shall not take, and no Grantor shall be required to take,
any action to establish the Control of the Administrative Agent in and to any of
the Excluded Deposit Accounts.

4.8. Letter-of-Credit Rights. Upon the Administrative Agent’s request, each
Grantor will use commercially reasonable efforts to cause each issuer of a
letter of credit (in respect of which such Grantor is the beneficiary) with a
face value in excess of $1,000,000 to consent to the assignment of proceeds of
such letter of credit in order to give the Administrative Agent Control of the
Letter-of-Credit Rights to such letter of credit.

4.9. Federal, State or Municipal Claims. Each Grantor will notify the
Administrative Agent of any Collateral owned by such Grantor which constitutes a
claim in an amount greater than $1,000,000 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.
Furthermore, each Grantor will execute and deliver to the Administrative Agent
such documents, agreements and instruments, and will take such further actions
(including, without limitation, the taking of necessary actions under the
Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.
and 41 U.S.C. § 15 et seq.)), which the Administrative Agent may, from time to
time, reasonably request, to ensure perfection and priority of the Liens
hereunder in respect of Accounts and General Intangibles owing by any government
or instrumentality or agency thereof, all at the expense of the Borrower.
Notwithstanding anything to the contrary in this Section 4.9, no Grantor will be
required to provide any notice or take any action hereunder if and to the extent
prohibited by any federal, state or municipal law.

4.10. No Interference. Each Grantor agrees that it will not interfere with any
right, power and remedy of the Administrative 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
Administrative Agent of any one or more of such rights, powers or remedies.

4.11. Insurance. 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,” each Grantor shall purchase and maintain flood insurance on such
Collateral (including any personal property which is located on any real
property leased by such Grantor within a “Special Flood Hazard Area”). The
amount of flood insurance required by this Section 4.11 shall be in an amount
equal to the lesser of the total Commitment or the total replacement cost value
of the improvements.

 

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4.12. Intellectual Property.

4.12.1 If, after the date hereof, any Grantor obtains rights to, including, but
not limited to filing and acceptance of a statement of use or an amendment to
allege use with the United States Patent and Trademark Office, or applies for or
seeks registration of, any new patentable invention, Trademark or Copyright in
addition to the Patents, Trademarks and Copyrights described in Exhibit “B”,
then such Grantor shall give the Administrative Agent notice thereof to the
extent such additional rights and/or applications constitute Collateral, as part
of each compliance certificate provided to the Administrative Agent pursuant to
the Credit Agreement. Each Grantor agrees promptly upon request by the
Administrative Agent to execute and deliver to the Administrative Agent any
supplement to this Security Agreement or any other document reasonably requested
by the Administrative Agent to evidence such security interest in a form
appropriate for recording in the applicable federal office. Each Grantor also
hereby authorizes the Administrative Agent to modify this Security Agreement
unilaterally (i) by amending Exhibit “B” to include any future Patents,
Trademarks and/or Copyrights of which the Administrative Agent receives
notification from such Grantor pursuant hereto and (ii) by recording, in
addition to and not in substitution for this Security Agreement, a duplicate
original of this Security Agreement containing in Exhibit “B” a description of
such future Patents, Trademarks and/or Copyrights.

4.12.2 As of the Effective Date, no Grantor has any interest in, or title to,
any Copyrights, Licenses, Patents or Trademarks except as set forth in Exhibit
“B”. This Agreement is effective to create a valid and continuing Lien on such
Copyrights, Licenses, Patents and Trademarks and, upon filing of the
Confirmatory Grant of Security Interest in Copyrights with the United States
Copyright Office, filing of the Confirmatory Grant of Security Interest in
Patents in the United States Patent and Trademark Office, filing of the
Confirmatory Grant of Security Interest in Trademarks with the United States
Patent and Trademark Office and the filing of appropriate financing statements
in the jurisdictions listed in Exhibit “E” hereto, all action necessary or
desirable to protect and perfect the security interest in, to and on each
Grantor’s Patents, Trademarks or Copyrights identified on Exhibit B has been
taken and such perfected security interest is enforceable as such as against any
and all creditors of and purchasers from any Grantor. As of the Effective Date,
no Grantor has any interest in any Copyright that is necessary in connection
with the operation of such Grantor’s business, except for those Copyrights
identified in Exhibit “B” attached hereto which have been registered with the
United States Copyright Office.

4.13. Commercial Tort Claims. If, after the date hereof, any Grantor identifies
the existence of a Commercial Tort Claim belonging to such Grantor in an amount
greater than $1,000,000 that has arisen in the course of such Grantor’s business
in addition to the Commercial Tort Claims described in Exhibit “F”, which are
all of such Grantor’s Commercial Tort Claims as of the Effective Date, then such
Grantor shall give the Administrative Agent prompt notice thereof, but in any
event not less frequently than quarterly. Each Grantor agrees promptly upon
request by the Administrative Agent to execute and deliver to the Administrative
Agent any supplement to this Security Agreement or any other document reasonably
requested by the Administrative Agent to evidence the grant of a security
interest therein in favor of the Administrative Agent.

4.14. Updating of Exhibits to Security Agreement. The Borrower will provide to
the Administrative Agent, concurrently with the delivery of the certificate of a
Financial Officer of the Borrower as required by Section 5.01(c) of the Credit
Agreement, updated versions of the Exhibits to this Security Agreement (provided
that if there have been no changes to any such Exhibits since the previous
updating thereof required hereby, the Borrower shall indicate that there has
been “no change” to the applicable Exhibit(s)).

 

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ARTICLE V

DEFAULT

5.1. The occurrence of any one or more of the following events shall constitute
a Default:

5.1.1 Any representation or warranty made by or on behalf of any Grantor under
or in connection with this Security Agreement shall be materially false as of
the date on which made.

5.1.2 The occurrence of any “Event of Default” under, and as defined in, the
Credit Agreement.

5.2. Remedies.

5.2.1 If any Default has occurred and is continuing then the Administrative
Agent may, and at the direction of the Required Lenders shall, exercise any or
all of the following rights and remedies (provided that the Administrative Agent
shall endeavor, to the extent commercially reasonable, to notify the Borrower
prior to the exercise of the initial such right and remedy and provided further
that any failure by the Administrative Agent to deliver any such notice shall
not be deemed to be a breach by the Administrative Agent of this Security
Agreement or give rise to any liability of the Administrative Agent or otherwise
affect the Administrative Agent’s exercise of the rights and remedies hereunder
in any manner):

 

  (i) Those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Loan Document, provided that this clause (i) shall not
be understood to limit any rights or remedies available to the Administrative
Agent and the Secured Parties prior to a 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 Deposit
Account Control Agreement or Securities Account Control Agreement and take any
action therein with respect to such Collateral, provided that if no Default
shall continue to exist, the Administrative Agent shall promptly notify the
bank, financial institution or securities intermediary that the applicable
Grantor’s access to the Deposit Account or Securities Account shall be
reinstated.

 

  (iv)

Only to the extent that a Payment Event of Default or Acceleration Event has
occurred and is continuing, without notice (except as specifically provided in
Section 8.1 hereof 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

 

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  without notice and may take place at any Grantor’s premises of elsewhere), for
cash, on credit or for future delivery without assumption of any credit risk,
and upon such other terms as the Administrative Agent may deem commercially
reasonable.

 

  (v) Only to the extent that a Payment Event of Default or Acceleration Event
has occurred and is continuing, 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 Administrative Agent was the outright owner thereof.

5.2.2 The Administrative 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 such compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.

5.2.3 The Administrative 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 Administrative Agent and the other 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.

5.2.4 Until the Administrative Agent is able to effect a sale, lease, or other
disposition of Collateral, the Administrative 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 Administrative Agent. The Administrative 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 Administrative Agent’s remedies (for the
benefit of the Administrative Agent and other Secured Parties), with respect to
such appointment without prior notice or hearing as to such appointment.

5.2.5 If, after the Credit Agreement has terminated by its terms and all of the
Secured Obligations have been paid in full, there remain outstanding Swap
Obligations or Banking Services Obligations, the Required Lenders may exercise
the remedies provided in this Section 5.2 upon the occurrence of any event which
would allow or require the termination or acceleration of any Swap Obligations
or Banking Services Obligations.

5.2.6 Notwithstanding the foregoing, neither the Administrative Agent nor any
other Secured Party 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
Secured 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 Secured Obligations or to
resort to the Collateral or any such guarantee in any particular order, or
(iii) effect a public sale of any Collateral.

5.2.7 Each Grantor recognizes that the Administrative 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 Section 5.2.1
above. Each Grantor also acknowledges

 

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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 Administrative 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.

5.3. Grantors’ Obligations Upon a Payment Default or Acceleration Event. Upon
the request of the Administrative Agent following the occurrence and during the
continuance of a Payment Event of Default or Acceleration Event, each Grantor
will:

5.3.1 Assembly of Collateral. Assemble and make available to the Administrative
Agent the Collateral and all books and records relating thereto at any place or
places specified by the Administrative Agent.

5.3.2 Secured Party Access. Permit the Administrative Agent, by the
Administrative 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.

5.3.3 Prepare and file, or cause an issuer of Pledged Collateral to prepare and
file, with the SEC or any other applicable government agency, registration
statements, a prospectus and such other documentation in connection with the
Pledged Collateral as the Administrative Agent may request, all in form and
substance satisfactory to the Administrative Agent, and furnish to the
Administrative Agent, or cause an issuer of Pledged Collateral to furnish to the
Administrative Agent, any information regarding the Pledged Collateral in such
detail as the Administrative Agent may specify.

5.3.4 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
Administrative Agent to consummate a public sale or other disposition of the
Pledged Collateral.

5.4. License. The Administrative Agent is hereby granted a license or other
right to use, following the occurrence and during the continuance of a Payment
Event of Default or Acceleration Event, without charge, each Grantor’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, customer lists and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral. In addition,
each Grantor hereby irrevocably (until the Credit Agreement has terminated in
accordance with its terms) agrees that the Administrative Agent may, following
the occurrence and during the continuance of a Payment Event of Default or
Acceleration Event, sell any of such Grantor’s Inventory directly to any Person,
including, without limitation, Persons who have previously purchased such
Grantor’s Inventory from such Grantor, and in connection with any such sale or
other enforcement of the Administrative 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 Administrative Agent may (but shall have no
obligation to) finish any work in process and affix any trademark owned by or
licensed to such Grantor and sell such Inventory as provided herein.

 

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ARTICLE VI

WAIVERS, AMENDMENTS AND REMEDIES

No delay or omission of the Administrative Agent or any Secured Party 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
terms, conditions or provisions of this Security Agreement whatsoever shall be
valid unless in writing signed by the Administrative Agent and each Grantor, and
then only to the extent in such writing specifically set forth, provided that
the addition of any Domestic Subsidiary as a Grantor hereunder by execution of a
Security Agreement Supplement in the form of Annex I (with such modifications as
shall be acceptable to the Administrative Agent) shall not require receipt of
any consent from or execution of any documentation by any other Grantor party
hereto. All rights and remedies contained in this Security Agreement or by law
afforded shall be cumulative and all shall be available to the Administrative
Agent and the Secured Parties until the Secured Obligations have been paid in
full or, in the case of Letters of Credit, cash-collateralized on terms
reasonably satisfactory to the Administrative Agent.

ARTICLE VII

PROCEEDS; COLLECTION OF RECEIVABLES

7.1. Lockboxes. Upon request of the Administrative Agent following the
occurrence and during the continuance of a Payment Event of Default or
Acceleration Event, each Grantor shall execute and deliver to the Administrative
Agent irrevocable lockbox agreements in the form provided by or otherwise
acceptable to the Administrative Agent, which agreements shall be accompanied by
an acknowledgment by the bank where the lockbox is located of the Lien of the
Administrative Agent granted hereunder and of irrevocable instructions to wire
all amounts collected therein to a special collateral account with the
Administrative Agent.

7.2. Collection of Receivables. The Administrative Agent may at any time
following the occurrence and during the continuance of a Payment Event of
Default or Acceleration Event, by giving each Grantor written notice, elect to
require that the Receivables be paid directly to the Administrative Agent for
the benefit of the Secured Parties. In such event, each Grantor shall, and shall
permit the Administrative Agent to, promptly notify the account debtors or
obligors under the Receivables owned by such Grantor of the Administrative
Agent’s interest therein and direct such account debtors or obligors to make
payment of all amounts then or thereafter due under such Receivables directly to
the Administrative Agent. Upon receipt of any such notice from the
Administrative Agent, each Grantor shall thereafter hold in trust for the
Administrative Agent, on behalf of the Secured Parties, all amounts and proceeds
received by it with respect to the Receivables and Other Collateral and
immediately and at all times thereafter deliver to the Administrative Agent all
such amounts and proceeds in the same form as so received, whether by cash,
check, draft or otherwise, with any necessary endorsements. The Administrative
Agent shall hold and apply funds so received as provided by the terms of
Sections 7.3 and 7.4 hereof.

7.3. Special Collateral Account. Following the occurrence and during the
continuance of a Payment Event of Default or Acceleration Event, the
Administrative Agent may require all cash proceeds of the Collateral to be
deposited in a special non-interest bearing cash collateral account with the
Administrative Agent and held there as security for the Secured Obligations. No
Grantor shall have any control whatsoever over such cash collateral account. If
no Default has occurred or is continuing, the Administrative Agent shall from
time to time deposit the collected balances in such cash collateral

 

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account into the applicable Grantor’s general operating account with the
Administrative Agent. If any Payment Event of Default or Acceleration Event has
occurred and is continuing, the Administrative Agent may (and shall, at the
direction of the Required Lenders), from time to time, apply the collected
balances in such cash collateral account to the payment of the Secured
Obligations whether or not the Secured Obligations shall then be due.

7.4. Application of Proceeds. The proceeds of the Collateral shall be applied by
the Administrative Agent to payment of the Secured Obligations as provided under
Section 2.18 of the Credit Agreement.

ARTICLE VIII

GENERAL PROVISIONS

8.1. Notice of Disposition of Collateral; Condition of Collateral. Each Grantor
hereby waives notice 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 Borrower, addressed as
set forth in Article IX of this Security Agreement, at least ten (10) 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. The Administrative Agent shall
have no obligation to clean-up or otherwise prepare the Collateral for sale. To
the maximum extent permitted by applicable law, each Grantor waives all claims,
damages, and demands against the Administrative Agent or any other Secured Party
arising out of the repossession, retention or sale of the Collateral, except
such as arise solely out of the bad faith, gross negligence or willful
misconduct of the Administrative Agent or such other Secured Party 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 Administrative
Agent or any other Secured Party, 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 (other than the defense that the
Secured Obligations shall have been fully paid in cash and performed in full)
which, but for this provision, might be applicable to the 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 or in any other Loan Document, 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 Administrative Agent’s and other Secured Parties’ Duty with
Respect to the Collateral. The Administrative Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Administrative Agent
and each other Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither the Administrative
Agent nor any other Secured Party 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 Administrative Agent or such other Secured Party, 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 Administrative Agent to exercise remedies in a commercially reasonable
manner, each Grantor acknowledges and agrees that it is commercially reasonable
for the Administrative Agent (i) to fail to incur expenses deemed significant by
the Administrative 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

 

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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 Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Administrative Agent, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Administrative 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 Administrative Agent would be commercially reasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative 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 Administrative 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. Each Grantor and the
Administrative 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 such Receivable. In view of the foregoing, each Grantor agrees
that the Administrative Agent may at any time and from time to time, if a
Payment Event of Default or Acceleration Event has occurred and is continuing,
compromise with the obligor on any Receivable, accept in full payment of any
Receivable such amount as the Administrative Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Administrative
Agent shall be commercially reasonable so long as the Administrative 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 Grantor’s Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed (but has failed) to perform or pay in this Security
Agreement and such Grantor shall reimburse the Administrative Agent for any
reasonable amounts paid by the Administrative Agent pursuant to this
Section 8.4. Each Grantor’s obligation to reimburse the Administrative Agent
pursuant to the preceding sentence shall be a Secured Obligation payable within
fifteen (15) days after demand.

8.5. Authorization for Secured Party to Take Certain Action. Each Grantor
irrevocably authorizes the Administrative Agent at any time and from time to
time in the sole discretion of the Administrative Agent and appoints the
Administrative 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
Administrative Agent’s sole discretion to perfect and to maintain the perfection
and priority of the Administrative Agent’s security interest in the Collateral,
(ii) following the occurrence and during the continuance of a Default, to
indorse 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

 

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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 Administrative Agent in its sole discretion deems necessary
or desirable to perfect and to maintain the perfection and priority of the
Administrative Agent’s security interest in the Collateral, (iv) upon and during
the continuance of a Default, to contact and enter into one or more agreements
with the issuers of uncertificated securities which are Collateral owned by such
Grantor and which are Securities or with financial intermediaries holding other
Investment Property as may be necessary or advisable to give the Administrative
Agent Control over such Securities or other Investment Property, (v) following
the occurrence and during the continuance of a Payment Event of Default or
Acceleration Event and subject to the terms of Section 4.1.5 hereof, to enforce
payment of the Instruments, Accounts and Receivables in the name of the
Administrative Agent or such Grantor, (vi) to apply the proceeds of any
Collateral received by the Administrative Agent to the Secured Obligations as
provided in Article VII of this Security Agreement and (vii) to discharge past
due taxes, assessments, charges, fees or Liens on the Collateral (except for
such Liens as are specifically permitted hereunder or under any other Loan
Document), and each Grantor agrees to reimburse the Administrative Agent within
fifteen (15) days after demand for any reasonable payment made or any reasonable
expense incurred by the Administrative Agent in connection therewith, provided
that this authorization shall not relieve any Grantor of any of its obligations
under this Security Agreement or under the Credit Agreement.

8.6. Specific Performance of Certain Covenants. Each Grantor acknowledges and
agrees that a breach of any of the covenants contained in Section 4.1.5, 4.1.6,
4.4, 5.3, or 8.8 hereof or in Article VII of this Security Agreement will cause
irreparable injury to the Administrative Agent and the Secured Parties, that the
Administrative Agent and the Secured Parties have no adequate remedy at law in
respect of such breaches and therefore agrees, without limiting the right of the
Administrative Agent or the Secured Parties 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 8.6 shall be specifically enforceable against the Grantors.

8.7. Use and Possession of Certain Premises. Following the occurrence and during
the continuance of a Payment Event of Default or Acceleration Event, the
Administrative Agent shall be entitled to occupy and use any premises owned or
leased by the Grantors where any of the Collateral or any records relating to
the Collateral are located until the Secured Obligations are paid or the
Collateral is removed therefrom, whichever first occurs, without any obligation
to pay any Grantor for such use and occupancy.

8.8. Reserved.

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 Secured 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 Secured
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 Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

 

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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
Administrative Agent and the Secured Parties and their respective successors and
assigns (including all Persons who become bound as a debtor to this Security
Agreement), except that the Grantors shall not have the right to assign their
rights or delegate their obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent.
No sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to the Administrative Agent,
for the benefit of the Administrative Agent and the other 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 (other than Excluded Taxes) payable or ruled
payable by a 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 Administrative Agent for any and all reasonable
out-of-pocket expenses and internal charges (including reasonable attorney’s
fees, but excluding time charges of attorneys, paralegals, auditors and
accountants who may be employees of the Administrative Agent) paid or incurred
by the Administrative 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). Any and all costs and expenses incurred by
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
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) any and all commitments to extend credit
under the Loan Documents have terminated, and the Credit Agreement has
terminated pursuant to its express terms, and (ii) all of the Secured
Obligations (other than Unliquidated Obligations) have been paid in cash and
performed in full (or with respect to any outstanding Letters of Credit, a cash
deposit or backup Letter of Credit has been delivered to the Administrative
Agent as required by the Credit Agreement). Upon any sale or other disposition
by any Grantor of any Collateral in a transaction permitted under the Credit
Agreement, or upon the effectiveness in accordance with the Credit Agreement of
any written consent to the release of the security interest in any Collateral,
the security interests in such Collateral shall be automatically released
without further action by any party. In connection with any termination or
release pursuant to this Section 8.14, the Administrative Agent shall execute
and deliver to any Grantor, at such Grantor’s expense and without recourse to or
warranty by the Administrative Agent, all documents that such Grantor shall
reasonably request to evidence such termination or release, including UCC
termination statements and terminations of Deposit Account Control Agreements
and Securities Account Control Agreements.

8.15. Entire Agreement. This Security Agreement, together with the Credit
Agreement, embodies the entire agreement and understanding between the Grantors
and the Administrative Agent relating to the Collateral and supersedes all prior
agreements and understandings among the Grantors and the Administrative Agent
relating to the Collateral.

 

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8.16. Governing Law; Jurisdiction; Waiver of Jury Trial.

8.16.1 THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

8.16.2 Each Grantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this Security
Agreement or any other Loan Document, or for recognition or enforcement of any
judgment, and each Grantor hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each Grantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Security Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Security Agreement or any other Loan
Document against any Grantor or its properties in the courts of any
jurisdiction.

8.16.3 Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Security Agreement or any other Loan Document
in any court referred to in Section 8.16.2 hereof. Each Grantor hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

8.16.4 Each party to this Security Agreement irrevocably consents to service of
process in the manner provided for notices in Article IX of this Security
Agreement, and each of the Grantors hereby appoints the Borrower as its agent
for service of process. Nothing in this Security Agreement or any other Loan
Document will affect the right of any party to this Security Agreement to serve
process in any other manner permitted by law.

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

8.17. Indemnity. Each Grantor hereby agrees, jointly with the other Grantors and
severally, to indemnify the Administrative Agent and the Secured Parties, and
their respective successors, assigns, agents and employees, from and against any
and all liabilities, damages, penalties, suits, costs, and expenses of any kind
and nature (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Administrative Agent or any Secured
Party is a party thereto) imposed on,

 

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incurred by or asserted against the Administrative Agent or the Secured Parties,
or their respective successors, assigns, agents and employees, in any way
relating to or arising out of this Security Agreement or any other Loan
Document, or the manufacture, purchase, acceptance, rejection, 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 Administrative Agent or the Secured
Parties or any Grantor, and any claim for patent, trademark or copyright
infringement); provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, damages, penalties, suits or
related costs and expenses are determined by a court of competent jurisdiction
by final and nonappealable judgment to have resulted from (x) the bad faith,
gross negligence or willful misconduct of such Indemnitee or its Related Parties
or (y) a material breach in bad faith by such Indemnitee or its Related Parties
of their express obligations under the Loan Documents pursuant to a claim
initiated by the Borrower.

8.18. Subordination of Intercompany Indebtedness. Each Grantor agrees that any
and all claims of such Grantor against any other Grantor (each an “Obligor”)
with respect to any “Intercompany Indebtedness” (as hereinafter defined), any
endorser, obligor or any other guarantor of all or any part of the Secured
Obligations, or against any of its properties shall be subordinate and subject
in right of payment to the prior payment, in full and in cash, of all Secured
Obligations, provided that, and not in contravention of the foregoing, so long
as no Payment Event of Default or Acceleration Event has occurred and is
continuing, such Grantor may make loans to and receive payments with respect to
such Intercompany Indebtedness from each such Obligor to the extent not
prohibited by the terms of this Security Agreement and the other Loan Documents.
Notwithstanding any right of any Grantor to ask, demand, sue for, take or
receive any payment from any Obligor, all rights, liens and security interests
of such Grantor, whether now or hereafter arising and howsoever existing, in any
assets of any other Obligor shall be and are subordinated to the rights of the
Secured Parties and the Administrative Agent in those assets. No Grantor shall
have any right to possession of any such asset or to foreclose upon any such
asset, whether by judicial action or otherwise, unless and until this Security
Agreement has terminated in accordance with Section 8.14 hereof. If all or any
part of the assets of any Obligor, or the proceeds thereof, are subject to any
distribution, division or application to the creditors of such Obligor, whether
partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding, or if the business of any such
Obligor is dissolved or if substantially all of the assets of any such Obligor
are sold, then, and in any such event (such events being herein referred to as
an “Insolvency Event”), any payment or distribution of any kind or character,
either in cash, securities or other property, which shall be payable or
deliverable upon or with respect to any indebtedness of any Obligor to any
Grantor (“Intercompany Indebtedness”) shall be paid or delivered directly to the
Administrative Agent for application on any of the Secured Obligations, due or
to become due, until such Secured Obligations (other than contingent indemnity
obligations) shall have first been fully paid and satisfied (or, in the case of
Letters of Credit, cash-collateralized pursuant to terms reasonably acceptable
to the Administrative Agent). Should any payment, distribution, security or
instrument or proceeds thereof be received by the applicable Grantor upon or
with respect to the Intercompany Indebtedness after any Insolvency Event and
prior to the termination of this Security Agreement in accordance with
Section 8.14 hereof, such Grantor shall receive and hold the same in trust, as
trustee, for the benefit of the Secured Parties and shall forthwith deliver the
same to the Administrative Agent, for the benefit of the Secured Parties, in
precisely the form received (except for the endorsement or assignment of the
Grantor where necessary), for application to any of the Secured Obligations, due
or not due, and, until so delivered, the same shall be held in trust by the
Grantor as the property of the Secured Parties. If any such Grantor fails to
make any such endorsement or assignment to the Administrative Agent, the
Administrative Agent or any of its officers or employees is irrevocably
authorized to make the same. Each Grantor agrees that until the termination of
this Security Agreement in accordance with Section 8.14 hereof, no Grantor will
assign or transfer to any Person (other than the Administrative Agent or the
Borrower or another Grantor) any claim any such Grantor has or may have against
any Obligor.

 

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8.19. Severability. 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.

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

ARTICLE IX

NOTICES

9.1. Sending Notices. Any notice required or permitted to be given under this
Security Agreement shall be sent (and deemed received) in the manner and to the
addresses set forth in Section 9.01 of the Credit Agreement. Any notice
delivered to the Borrower shall be deemed to have been delivered to all of the
Grantors.

9.2. Change in Address for Notices. Each of the Grantors, the Administrative
Agent and the Lenders may change the address for service of notice upon it in
the manner set forth in Section 9.01 of the Credit Agreement.

ARTICLE X

THE ADMINISTRATIVE AGENT

JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the
Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It
is expressly understood and agreed by the parties to this Security Agreement
that any authority conferred upon the Administrative Agent hereunder is subject
to the terms of the delegation of authority made by the Secured Parties to the
Administrative Agent pursuant to the Credit Agreement, and that the
Administrative Agent has agreed to act (and any successor Administrative Agent
shall act) as such hereunder only on the express conditions contained in such
Article VIII. Any successor Administrative Agent appointed pursuant to Article
VIII of the Credit Agreement shall be entitled to all the rights, interests and
benefits of the Administrative Agent hereunder.

[Signature Pages Follow]

 

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

 

THE ADVISORY BOARD COMPANY,

as a Grantor

By:    /s/ Evan Farber  

Name: Evan Farber

Title: General Counsel

 

ADVISORY BOARD INVESTMENTS, INC.,

as a Grantor

By:    /s/ Michael Kirshbaum  

Name: Michael Kirshbaum

Title: President

 

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JPMORGAN CHASE BANK, N.A., as Administrative Agent By:    /s/ James A. Knight  

Name: James A. Knight

Title: Vice President

 

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ANNEX I

to

PLEDGE AND SECURITY AGREEMENT

Reference is hereby made to the Pledge and Security Agreement (as amended,
restated, supplemented or otherwise modified from time to time, the
“Agreement”), dated as of July 30, 2012, made by each of THE ADVISORY BOARD
COMPANY, a Delaware corporation (the “Borrower”) and the other Subsidiaries of
the Borrower listed on the signature pages thereto (together with the Borrower,
the “Initial Grantors”, and together with any additional Subsidiaries, including
the undersigned, which become parties thereto by executing a Supplement in
substantially the form hereof, the “Grantors”), in favor of the Administrative
Agent. Capitalized terms used herein and not defined herein shall have the
meanings given to them in the Agreement.

By its execution below, the undersigned, [NAME OF NEW GRANTOR], a
[                    ] [corporation/limited liability company/limited
partnership] (the “New Grantor”) agrees to become, and does hereby become, a
Grantor under the Agreement and agrees to be bound by the Agreement as if
originally a party thereto. The New Grantor hereby collaterally assigns and
pledges to the Administrative Agent for the benefit of the Secured Parties, and
grants to the Administrative Agent for the benefit of the Secured Parties, a
security interest in all of the New Grantor’s right, title and interest in and
to the Collateral, whether now owned or hereafter acquired, to secure the prompt
and complete payment and performance of the Secured Obligations. For the
avoidance of doubt, the grant of a security interest herein shall not be deemed
to be an assignment of intellectual property rights owned by the New Grantor.

By its execution below, the undersigned represents and warrants as to itself
that all of the representations and warranties contained in the Agreement with
respect to the New Grantor and the Collateral owned by it, after giving effect
to the supplements to the Exhibits to the Agreement attached hereto, are true
and correct in all material respects as of the date hereof. The New Grantor
represents and warrants that the supplements to the Exhibits to the Agreement
attached hereto are true and correct in all respects and that such supplements
set forth all information required to be scheduled under the Agreement with
respect to the New Grantor. The New Grantor shall take all steps necessary and
required under the Agreement to perfect, in favor of the Administrative Agent, a
first-priority security interest in and lien against the New Grantor’s
Collateral, subject only to Liens permitted under Section 6.02 of the Credit
Agreement.

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

IN WITNESS WHEREOF, the New Grantor has executed and delivered this Security
Agreement Supplement as of this      day of             , 20    .

 

[NAME OF NEW GRANTOR] By:  

 

Title: