EXHIBIT 10.9

EXECUTION COPY

SECURITY AGREEMENT

Dated July 12, 2007

From

QUANTUM CORPORATION

and the other Grantors referred to herein,

as Grantors

to

CREDIT SUISSE,

as Collateral Agent

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TABLE OF CONTENTS

 

Section

        Page

Section 1.

   Grant of Security    2

Section 2.

   Security for Obligations    6

Section 3.

   Grantors Remain Liable    6

Section 4.

   Delivery and Control of Security Collateral    6

Section 5.

   Maintaining the Account Collateral    7

Section 6.

   Release of Amounts    8

Section 7.

   Maintaining Electronic Chattel Paper, Transferable Records and
Letter-of-Credit Rights and Giving Notice of Commercial Tort Claims    9

Section 8.

   Representations and Warranties    9

Section 9.

   Further Assurances    13

Section 10.

   As to Equipment and Inventory    14

Section 11.

   Insurance    15

Section 12.

   Post-Closing Changes; Bailees; Collections on Assigned Agreements,
Receivables and Related Contracts    15

Section 13.

   As to Intellectual Property Collateral    16

Section 14.

   Voting Rights; Dividends; Etc.    18

Section 15.

   As to the Assigned Agreements    19

Section 16.

   Payments Under the Assigned Agreements    19

Section 17.

   As to Letter-of-Credit Rights    19

Section 18.

   Transfers and Other Liens; Additional Shares    20

Section 19.

   Collateral Agent Appointed Attorney-in-Fact    20

Section 20.

   Collateral Agent May Perform    20

Section 21.

   The Collateral Agent’s Duties    20

Section 22.

   Remedies    21

Section 23.

   Indemnity and Expenses    22

Section 24.

   Amendments; Waivers; Additional Grantors; Etc.    23

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Section 25.

   Notices, Etc    23

Section 26.

   Continuing Security Interest; Assignments under the Credit Agreement    24

Section 27.

   Release; Termination    24

Section 28.

   Execution in Counterparts    24

Section 29.

   The Mortgages    25

Section 30.

   Governing Law    25

Schedules

 

Schedule I

   -      Location, Chief Executive Office, Place Where Agreements Are
Maintained, Type Of Organization, Jurisdiction Of Organization And
Organizational Identification Number   

Schedule II

   -      Pledged Interests and Pledged Debt   

Schedule III

   -      Assigned Agreements   

Schedule IV

   -      Locations of Equipment and Inventory   

Schedule V

   -      Changes in Name, Location, Etc.   

Schedule VI

   -      Patents, Trademarks and Trade Names, Copyrights and IP Agreements   

Schedule VII

   -      Account Collateral   

Schedule VIII

   -      Commercial Tort Claims   

Schedule IX

   -      Letters of Credit   

Exhibits

        

Exhibit A

   -      Form of Security Agreement Supplement   

Exhibit B

   -      Form of Account Control Agreement (Deposit Account/Securities Account)
  

Exhibit C

   -      Form of Intellectual Property Security Agreement   

Exhibit D

   -      Form of Intellectual Property Security Agreement Supplement   

 

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SECURITY AGREEMENT

SECURITY AGREEMENT dated July 12, 2007 made by QUANTUM CORPORATION, a Delaware
corporation (the “Borrower”), THE OTHER PERSONS LISTED ON THE SIGNATURE PAGES
HEREOF AND THE ADDITIONAL GRANTORS (as defined in Section 24) (the Borrower and
the Persons so listed and the Additional Grantors being, collectively, the
“Grantors”), to CREDIT SUISSE, acting through one or more of its branches, or
any Affiliate thereof (“Credit Suisse”), as collateral agent (in such capacity,
together with any successor collateral agent appointed pursuant to Article IX of
the Credit Agreement (as hereinafter defined), the “Collateral Agent”) for the
Secured Parties (as defined in the Credit Agreement).

PRELIMINARY STATEMENTS:

(1) The Borrower has entered into a Senior Secured Credit Agreement dated as of
July 12, 2007 (as may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”) with the
Lenders and Credit Suisse, as Administrative Agent, Swing Line Lender, an L/C
Issuer and as Collateral Agent (each as defined therein).

(2) Pursuant to the Credit Agreement, the Grantors are entering into this
Agreement in order to grant to the Collateral Agent for the ratable benefit of
the Secured Parties a security interest in the Collateral (as hereinafter
defined).

(3) Each Grantor is the owner of the shares of stock or other Equity Interests
(the “Initial Pledged Interests”) set forth opposite such Grantor’s name on and
as otherwise described in Part I of Schedule II hereto and issued by the Persons
named therein and of the indebtedness (the “Initial Pledged Debt”) set forth
opposite such Grantor’s name on and as otherwise described in Part II of
Schedule II hereto and issued by the obligors named therein.

(4) The Grantors have opened deposit accounts (the “Deposit Accounts”) with
banks, in the name of the applicable Grantor and subject to the terms of this
Agreement, as described in Schedule VII hereto.

(5) It is a condition precedent to the making of Loans by the Lenders and the
issuance of Letters of Credit by the L/C Issuer under the Credit Agreement and
the entry into Secured Hedge Agreements (if any) by the Hedge Banks from time to
time that the Grantors shall have granted the assignment and security interest
and made the pledge and assignment contemplated by this Agreement.

(6) Each Grantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Loan Documents.

(7) Capitalized terms used herein and not otherwise defined in this Agreement
are used in this Agreement as defined in the Credit Agreement. Further, unless
otherwise defined in this Agreement or in the Credit Agreement, terms defined in
Article 8 or 9 of the UCC (as defined below) and/or in the Federal Book Entry
Regulations (as defined below) are used in this Agreement as such terms are
defined in such Article 8 or 9 and/or the Federal Book Entry Regulations. “UCC”
means the Uniform Commercial Code as in effect, from time to time, in the State
of New York; provided that, if perfection or the effect of perfection or
non-perfection or the priority of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-

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perfection or priority. The term “Federal Book Entry Regulations” means (a) the
federal regulations contained in Subpart B (“Treasury/Reserve Automated Debt
Entry System (TRADES)”) governing book-entry securities consisting of U.S.
Treasury bills, notes and bonds and Subpart D (“Additional Provisions”) of 31
C.F.R. Part 357, 31 C.F.R. § 357.2, § 357.10 through § 357.15 and § 357.40
through § 357.45 and (b) to the extent substantially similar to the federal
regulations referred to in clause (a) above (as in effect from time to time),
the federal regulations governing other book-entry securities.

NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Loans and the L/C Issuer to issue Letters of Credit under the
Credit Agreement and to induce the Hedge Banks to enter into Secured Hedge
Agreements from time to time, each Grantor hereby agrees with the Collateral
Agent for the ratable benefit of the Secured Parties as follows:

Section 1. Grant of Security. Each Grantor hereby grants to the Collateral
Agent, for the ratable benefit of the Secured Parties, a security interest in
such Grantor’s right, title and interest in and to the following, in each case,
as to each type of property described below, whether now owned or hereafter
acquired by such Grantor, wherever located, and whether now or hereafter
existing or arising (collectively, the “Collateral”):

(a) all equipment in all of its forms, including, without limitation, all
machinery, tools, motor vehicles, vessels, aircraft, furniture and fixtures, and
all parts thereof and all accessions thereto, including, without limitation,
computer programs and supporting information that constitute equipment within
the meaning of the UCC and all software that is embedded in and is part of such
equipment (any and all such property being the “Equipment”);

(b) all inventory in all of its forms, including, without limitation, (i) all
raw materials, work in process, finished goods and materials used or consumed in
the manufacture, production, preparation or shipping thereof, (ii) goods in
which such Grantor has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped in transit by such Grantor), and all accessions thereto
and products thereof and documents therefor, including, without limitation,
computer programs and supporting information that constitute inventory within
the meaning of the UCC and all software that is embedded in and is part of such
inventory (any and all such property being the “Inventory”);

(c) all accounts, chattel paper (including, without limitation, tangible chattel
paper and electronic chattel paper), instruments (including, without limitation,
promissory notes), deposit accounts, letter-of-credit rights, general
intangibles (including, without limitation, payment intangibles) and other
obligations of any kind, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all supporting
obligations and in and to all security agreements, mortgages, Liens, leases,
letters of credit and other contracts securing or otherwise relating to the
foregoing property (any and all of such accounts, chattel paper, instruments,
deposit accounts, letter-of-credit rights, general intangibles and other
obligations, to the extent not referred to in clause (d), (e), (f) or (g) below,
being the “Receivables”, and any and all such supporting obligations, security
agreements, mortgages, Liens, leases, letters of credit and other contracts
being the “Related Contracts”);

(d) the following (the “Security Collateral”):

(i) the Initial Pledged Interests and the certificates, if any, representing the
Initial Pledged Interests, and all dividends, distributions, return of capital,
cash,

 

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instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Initial
Pledged Interests and all warrants, rights or options issued thereon or with
respect thereto;

(ii) the Initial Pledged Debt and the instruments, if any, evidencing the
Initial Pledged Debt, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Initial Pledged Debt;

(iii) all additional shares of stock and other Equity Interests from time to
time acquired by such Grantor in any manner (such shares and other Equity
Interests, together with the Initial Pledged Interests, being the “Pledged
Interests”), and the certificates, if any, representing such additional shares
or other Equity Interests, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
or other Equity Interests and all warrants, rights or options issued thereon or
with respect thereto;

(iv) all additional indebtedness from time to time owed to such Grantor (such
indebtedness, together with the Initial Pledged Debt, being the “Pledged Debt”)
and the instruments, if any, evidencing such indebtedness, and all interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and

(v) all other investment property (including, without limitation, all
(A) securities, whether certificated or uncertificated, (B) security
entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity
accounts) in which such Grantor has now, or acquires from time to time
hereafter, any right, title or interest in any manner, and the certificates or
instruments, if any, representing or evidencing such investment property, and
all dividends, distributions, return of capital, interest, distributions, value,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
investment property and all warrants, rights or options issued thereon or with
respect thereto;

(e) each of the agreements listed on Schedule III hereto, each IP Agreement (as
hereinafter defined) and each Hedge Agreement to which such Grantor is now or
may hereafter become a party, in each case as such agreements may be amended,
amended and restated, supplemented or otherwise modified from time to time
(collectively, the “Assigned Agreements”), including, without limitation,
(i) all rights of such Grantor to receive moneys due and to become due under or
pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of such Grantor for damages arising out of or
for breach of or default under the Assigned Agreements and (iv) the right of
such Grantor to terminate the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder (all such
Collateral being the “Agreement Collateral”);

(f) the following (collectively, the “Account Collateral”):

(i) the Cash Collateral Account and the Deposit Accounts and all funds and
financial assets from time to time credited thereto (including, without
limitation, all Cash Equivalents), all interest, dividends, distributions, cash,
instruments and other property

 

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from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such funds and financial assets, and all
certificates and instruments, if any, from time to time representing or
evidencing the Cash Collateral Account and the Deposit Accounts;

(ii) all promissory notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time delivered to or otherwise possessed by the
Collateral Agent for or on behalf of such Grantor, including, without
limitation, those delivered or possessed in substitution for or in addition to
any or all of the then existing Account Collateral; and

(iii) all interest, dividends, distributions, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Account
Collateral;

(g) the following (collectively, the “Intellectual Property Collateral”):

(i) all patents, patent applications, utility models and statutory invention
registrations, all inventions claimed or disclosed therein and all improvements
thereto (“Patents”);

(ii) all trademarks, service marks, domain names, trade dress, logos, designs,
slogans, trade names, business names, corporate names and other source
identifiers, whether registered or unregistered, together, in each case, with
the goodwill symbolized thereby (“Trademarks”);

(iii) all copyrights, including, without limitation, copyrights in Computer
Software (as hereinafter defined), internet web sites and the content thereof,
whether registered or unregistered (“Copyrights”);

(iv) all computer software, programs and databases (including, without
limitation, source code, object code and all related applications and data
files), firmware and documentation and materials relating thereto, together with
any and all maintenance rights, service rights, programming rights, hosting
rights, test rights, improvement rights, renewal rights and indemnification
rights and any substitutions, replacements, improvements, error corrections,
updates and new versions of any of the foregoing (“Computer Software”);

(v) all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information (collectively, “Trade Secrets”), and all other
intellectual, industrial and intangible property of any type, including, without
limitation, industrial designs and mask works;

(vi) all registrations and applications for registration for any of the
foregoing (provided that no security interest shall be granted in United States
intent-to-use trademark applications to the extent that, and solely during the
period in which, the grant of a security interest therein would impair the
validity or enforceability of such intent-to-

 

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use trademark applications under applicable federal law), including, without
limitation, those registrations and applications for registration set forth in
Schedule VI hereto (as such Schedule VI may be supplemented from time to time by
supplements to this Agreement, each such supplement being substantially in the
form of Exhibit D hereto (an “IP Security Agreement Supplement”) executed by
such Grantor to the Collateral Agent from time to time), together with all
reissues, divisions, continuations, continuations-in-part, extensions, renewals
and reexaminations thereof;

(vii) all tangible embodiments of the foregoing, all rights in the foregoing
provided by international treaties or conventions, all rights corresponding
thereto throughout the world and all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto;

(viii) all agreements, permits, consents, orders and franchises relating to the
license, development, use or disclosure of any of the foregoing to which such
Grantor, now or hereafter, is a party or a beneficiary, including, without
limitation, the agreements set forth in Schedule VI hereto (“IP Agreements”);
and

(ix) any and all claims for damages and injunctive relief for past, present and
future infringement, dilution, misappropriation, violation, misuse or breach
with respect to any of the foregoing, with the right, but not the obligation, to
sue for and collect, or otherwise recover, such damages;

(h) all commercial tort claims described in Schedule VIII hereto (collectively
the “Commercial Tort Claims Collateral”);

(i) all books and records (including, without limitation, customer lists, credit
files, printouts and other computer output materials and records) of such
Grantor pertaining to any of the Collateral; and

(j) all proceeds of, collateral for, income, royalties and other payments now or
hereafter due and payable with respect to, and supporting obligations relating
to, any and all of the Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clauses (a) through (i) of this Section 1 and this clause (j)) and,
to the extent not otherwise included, all (A) payments under insurance (whether
or not the Collateral Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral, (B) tort claims, including, without
limitation, all commercial tort claims and (C) cash;

provided, however, that (i) any pledge pursuant to the provisions of this
Section 1 of the capital stock or other Equity Interests in any Subsidiary that
is not a Domestic Subsidiary, where such Subsidiary is a “controlled foreign
corporation” under Section 957 of the U.S. Internal Revenue Code, shall be
limited to 66% of such capital stock or other Equity Interests,
(ii) notwithstanding anything to the contrary contained in clause (g) above,
Intellectual Property Collateral shall not include intellectual property in
relation to which any applicable law or regulation, or any agreement with a
domain name registrar or any other Person entered into by the Grantor in the
ordinary course of business and existing on the date hereof, prohibits the
creation of a security interest therein or would otherwise invalidate such
Grantor’s right, title or interest therein; (iii) the security interest granted
herein shall not extend to and the term “Collateral” shall not include any
lease, license, contract, property rights or agreements to which any Grantor is
a party or any of its rights (including property rights with respect to the
equipment) or interests thereunder if and for so long as the grant of such
security interest shall constitute or result in (x) the

 

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abandonment, invalidation or unenforceability of any right, title or interest of
any Debtor therein or (y) in a breach or termination pursuant to the terms of,
or a default under any such lease, license, contract or agreement (other than to
the extent that any such term would be rendered ineffective pursuant to Sections
9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law (including
the Bankruptcy Code) or principles of equity); provided, however, that such
security interest shall attach immediately at such time as the condition causing
such abandonment, invalidation or unenforceability shall be remedied and to the
extent severable, shall attach immediately to any portion of such lease,
license, contract, or agreement that does not result in any of the consequences
specified in (x) or (y) above; and (iv) the security interest granted herein
shall not extend to and the term “Collateral” shall not include the Equity
Interests of Quantum Storage Australia Pty. Ltd. held by the Borrower (the
“Quantum Storage Shares”).

Section 2. Security for Obligations. This Agreement secures, in the case of each
Grantor, the payment of all Obligations of such Grantor now or hereafter
existing under the Loan Documents, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations, interest,
fees, premiums, penalties, indemnifications, contract causes of action, costs,
expenses or otherwise (all such Obligations being the “Secured Obligations”).
Without limiting the generality of the foregoing, this Agreement secures, as to
each Grantor, the payment of all amounts that constitute part of the Secured
Obligations and would be owed by such Grantor to any Secured Party under the
Loan Documents but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
a Loan Party.

Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor’s Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Secured Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Loan Document, nor shall any Secured Party be obligated
to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.

Section 4. Delivery and Control of Security Collateral. (a) All certificates or
instruments representing or evidencing Security Collateral shall be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent. If an Event of Default shall
have occurred and be continuing, the Collateral Agent shall have the right
(i) at any time to exchange certificates or instruments representing or
evidencing Security Collateral for certificates or instruments of smaller or
larger denominations and (ii) at any time in its discretion and without notice
to any Grantor, to transfer to or to register in the name of the Collateral
Agent or any of its nominees any or all of the Security Collateral, subject only
to the revocable rights specified in Section 14(a).

(b) With respect to any Security Collateral in which any Grantor has any right,
title or interest and that constitutes an uncertificated security, such Grantor
will cause any issuer thereof that is a Loan Party or a Subsidiary of a Loan
Party, and will use commercially reasonable efforts to cause the issuer thereof
if such issuer is not a Loan Party or a Subsidiary of a Loan Party, either
(i) to register the Collateral Agent as the registered owner of such security or
(ii) to agree in an authenticated record with such Grantor and the Collateral
Agent that such issuer will comply with instructions with respect to such
security originated by the Collateral Agent without further consent of such
Grantor, such authenticated

 

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record to be in form and substance satisfactory to the Collateral Agent. With
respect to any Security Collateral in which any Grantor has any right, title or
interest and that is not an uncertificated security, upon the request of the
Collateral Agent upon the occurrence and during the continuance of an Event of
Default, such Grantor will notify each issuer of Pledged Interests pledged by
such Grantor that such Pledged Interests is subject to the security interest
granted hereunder.

(c) With respect to any Security Collateral in which any Grantor has any right,
title or interest and that constitutes a security entitlement in which the
Collateral Agent is not the entitlement holder, such Grantor will cause the
securities intermediary with respect to such security entitlement either (i) to
identify in its records the Collateral Agent as the entitlement holder of such
security entitlement against such securities intermediary or (ii) no later than
60 days after the date hereof (or such later date as may be specified by the
Collateral Agent in its sole discretion), to agree in an authenticated record
with such Grantor and the Collateral Agent that such securities intermediary
will comply with entitlement orders (that is, notifications communicated to such
securities intermediary directing transfer or redemption of the financial asset
to which such Grantor has a security entitlement) originated by the Collateral
Agent without further consent of such Grantor, such authenticated record to be
in substantially the form of Exhibit B hereto or otherwise in form and substance
reasonably satisfactory to the Collateral Agent (a “Security Account Control
Agreement”).

(d) No Grantor will change or add any securities intermediary that maintains any
securities account in which any of the Collateral is credited or carried, or
change or add any such securities account, without first complying with the
above provisions of this Section 4 in order to perfect the security interest
granted hereunder in such Collateral.

(e) Upon the request of the Collateral Agent upon the occurrence and during the
continuance of an Event of Default, such Grantor will notify each such issuer of
Pledged Debt that such Pledged Debt pledged by such Grantor is subject to the
security interest granted hereunder.

Section 5. Maintaining the Account Collateral. So long as any Loan or any other
Obligation (other than Unaccrued Indemnity Claims) of any Loan Party under any
Loan Document shall remain unpaid or unsatisfied, any Letter of Credit shall be
outstanding and not Cash Collateralized, any Secured Hedge Agreement shall be in
effect or any Lender shall have any Commitment under the Credit Agreement:

(a) No later than 60 days after the date hereof (or such later date as may be
specified by the Collateral Agent in its sole discretion) and at all times
thereafter, each Grantor will maintain all Account Collateral (other than
(i) the accounts to be closed as indicated on Schedule VII provided such
accounts are closed within nine months following the Closing Date and do not
have a balance in excess of the amount set forth on Schedule VII at any time,
and (ii) accounts specifically designated to the Administrative Agent in writing
as (x) trust accounts (to the extent of amounts held therein in trust in the
ordinary course of business on behalf of third parties who are not Loan Parties
or Subsidiaries of Loan Parties) or (y) payroll accounts (the balances in which
shall not exceed in the aggregate for all accounts referred to in this clause
(ii) $1,000,000 at any one time), such accounts in subclauses (x) and (y) of
this Section 5(a)(ii) being referred to herein as “Restricted Accounts”) only
with the Collateral Agent or with a bank (the “Pledged Account Bank”) that has
agreed, in a record authenticated by the Grantor, the Collateral Agent and such
Pledged Account Bank, to (A) comply with instructions originated by the
Collateral Agent directing the disposition of funds in the Account Collateral
without the further consent of the Grantor following the occurrence of an Event
of Default and (B) waive or subordinate in favor of the Collateral Agent all
claims of the Pledged Account Bank (including, without limitation, claims by way
of a security interest, lien or right of setoff or right of recoupment) to

 

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the Account Collateral, which authenticated record shall be substantially in the
form of Exhibit B hereto, or shall otherwise be in form and substance reasonably
satisfactory to the Collateral Agent (an “Account Control Agreement”).

(b) Each Grantor agrees that it will not add any bank that maintains a deposit
account for such Grantor or open any new deposit account with any then existing
Pledged Account Bank (in each case unless (i) in respect of a Restricted Account
or (ii) in respect of an account with a balance of less than $5,000, provided
that the aggregate amount of all such accounts excluded under this clause
(ii) shall not exceed $50,000) unless, (A) the Collateral Agent shall have
received at least 10 days’ prior written notice of such additional bank or such
new deposit account and (B) the Collateral Agent shall have received, in the
case of a bank or Pledged Account Bank that is not the Collateral Agent, an
Account Control Agreement authenticated by such new bank and such Grantor, or a
supplement to an existing Account Control Agreement with such then existing
Pledged Account Bank, covering such new deposit account (and, upon the receipt
by the Collateral Agent of such Account Control Agreement or supplement,
Schedule VII hereto shall be automatically amended to include such Deposit
Account). Upon a Grantor’s termination of any bank as a Pledged Account Bank or
termination of any Account Collateral, such Grantor shall promptly give notice
of such termination to the Collateral Agent (and, upon such termination,
Schedule VII hereto shall be automatically amended to delete such Pledged
Account Bank and Deposit Account); provided, however, that, unless the
Collateral Agent has given its express consent, no Grantor may (1) terminate any
bank as a Pledged Account Bank with respect to the Cash Collateral Account,
(2) terminate the Cash Collateral Account, or (3) terminate any bank as a
Pledged Account Bank if an Event of Default has occurred and is continuing.

(c) Upon any termination by a Grantor of any Deposit Account (other than a
Restricted Account) by such Grantor, or any Pledged Account Bank with respect
thereto, such Grantor will immediately (i) transfer all funds and property held
in such terminated Deposit Account to another Deposit Account listed in Schedule
VII or to the Cash Collateral Account and (ii) notify all Persons obligated at
any time to make any payment to such Grantor for any reason that were making
payments to such Deposit Account to make all future payments to another Deposit
Account listed in Schedule VII hereto or to the Cash Collateral Account, in each
case so that the Collateral Agent shall have a continuously perfected security
interest in such Account Collateral, funds and property. Each Grantor agrees to
terminate any or all Account Control Agreements upon request by the Collateral
Agent.

(d) The Collateral Agent shall have sole right to direct the disposition of
funds with respect to the Cash Collateral Account; and it shall be a term and
condition of the Cash Collateral Account, notwithstanding any term or condition
to the contrary in any other agreement relating to the Cash Collateral Account,
that no amount (including, without limitation, interest on Cash Equivalents
credited thereto) will, except on the Collateral Agent’s instructions, be paid
or released to or for the account of, or withdrawn by or for the account of, the
Borrower or any other Person from the Cash Collateral Account.

(e) If an Event of Default shall have occurred and be continuing, the Collateral
Agent may, at any time and without notice to, or consent from, the Grantor,
(i) transfer, or direct the transfer of, funds from the Account Collateral to
satisfy the Grantor’s obligations under the Loan Documents and (ii) transfer, or
direct the transfer of, funds from the Deposit Accounts to the Cash Collateral
Account.

Section 6. Release of Amounts. So long as no Default under Section 8.01(a) or
(f) of the Credit Agreement or Event of Default shall have occurred and be
continuing, the Collateral Agent

 

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will pay and release, or direct the applicable Pledged Account Bank to pay and
release, to the Borrower or at its order or, at the request of the Borrower, to
the Administrative Agent to be applied to the Obligations of the Borrower under
the Loan Documents, such amount, if any, as is then on deposit in the Cash
Collateral Account to the extent permitted to be released under the terms of the
Credit Agreement.

Section 7. Giving Notice of Commercial Tort Claims. So long as any Loan or any
other Obligation (other than Unaccrued Indemnity Claims) of any Loan Party under
any Loan Document shall remain unpaid or unsatisfied, any Letter of Credit shall
be outstanding and not Cash Collateralized, any Secured Hedge Agreement shall be
in effect or any Lender shall have any Commitment under the Credit Agreement
each Grantor will promptly give notice to the Collateral Agent of any commercial
tort claim greater than $100,000 that may arise in the future and will promptly
execute or otherwise authenticate a supplement to this Agreement, and otherwise
take all necessary action, to subject such commercial tort claim to the first
priority security interest created under this Agreement.

Section 8. Representations and Warranties. Each Grantor represents and warrants
as follows:

(a) Such Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC,
is correctly set forth in Schedule I hereto. Within the past 5 years, such
Grantor has only the trade names listed on Schedule VI hereto. Such Grantor is
located (within the meaning of Section 9-307 of the UCC) and has its chief
executive office in the state or jurisdiction set forth in Schedule I hereto.
The information set forth in Schedule I hereto with respect to such Grantor is
true and accurate in all respects. Such Grantor has not within the last 5 years
changed its legal name, as defined in Section 9-503(a) of the UCC, location
(within the meaning of Section 9-307 of the UCC), chief executive office, place
where it maintains its agreements, type of organization, jurisdiction of
organization or organizational identification number from those set forth in
Schedule I hereto except as disclosed in Schedule V hereto.

(b) All of the Equipment and Inventory of such Grantor, other than Equipment and
Inventory out for repair, in transit, on consignment or in the possession of
lessees in the ordinary course of business, are located at the places specified
therefor in Schedule IV hereto, as such Schedule IV may be amended from time to
time pursuant to Section 10(a). All Security Collateral consisting of Equity
Interests in any Loan Party or any Subsidiary of any Loan Party and any other
Security Collateral consisting of certificated securities and instruments with
an individual face value in excess of $500,000 have been delivered to the
Collateral Agent; provided that, Security Collateral that is not required to be
delivered to the Collateral Agent pursuant to the foregoing shall not exceed an
aggregate face value of $1,000,000. All originals of all chattel paper that
evidence Receivables individually in an amount in excess of $500,000 or in the
aggregate in an amount in excess of $1,000,000 have been delivered to the
Collateral Agent, in each case to the extent that the delivery thereof to the
Collateral Agent is required under Section 4. None of the Receivables or
Agreement Collateral is evidenced by a promissory note or other instrument that
has not been delivered to the Collateral Agent as required hereunder.

(c) Such Grantor is the legal and beneficial owner of the Collateral of such
Grantor free and clear of any Lien, claim, option, or right of others, other
than Liens permitted under the Credit Agreement. No Grantor has authorized the
filing of any effective financing statement or other instrument similar in
effect covering all or any part of such Collateral or listing such Grantor or,
to such Grantor’s knowledge, any trade name of such Grantor, as debtor in any
recording office and, to the best knowledge of such Grantor, no such financing
statement (whether or not authorized by such Grantor) is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent relating to the Loan Documents or as otherwise permitted under the Credit
Agreement.

 

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(d) Such Grantor has exclusive possession and control of the Equipment and
Inventory other than Inventory out for repair, in transit, on consignment or in
the possession of lessees in the ordinary course of business, or stored at any
leased premises or warehouse. All leased premises or warehouses storing
Inventory are so indicated by an asterisk on Schedule IV hereto, as such
Schedule IV may be amended from time to time pursuant to Section 10(a). In the
case of Equipment and Inventory located on leased premises or in warehouses, no
lessor or warehouseman of any premises or warehouse upon or in which such
Equipment or Inventory is located has (i) issued any warehouse receipt or other
receipt in the nature of a warehouse receipt in respect of any Equipment or
Inventory, (ii) issued any document for any of such Grantor’s Equipment or
Inventory, (iii) to our knowledge, received notification of any secured party’s
interest (other than the security interest granted hereunder) in such Grantor’s
Equipment or Inventory or (iv) any Lien, claim or charge (based on contract,
statute or otherwise) on such Equipment and Inventory, other than Liens
permitted under the Credit Agreement.

(e) The Pledged Interests of a Loan Party or Subsidiary of a Loan Party pledged
by such Grantor hereunder have been duly authorized and validly issued and are
fully paid and non-assessable. With respect to any Pledged Interests that are
uncertificated securities, such Grantor has caused the issuer thereof, if such
issuer is a Subsidiary of such Grantor (otherwise such Grantor shall use
commercially reasonable efforts to cause the issuer thereof) either (i) to
register the Collateral Agent as the registered owner of such securities or
(ii) to agree in an authenticated record with such Grantor and the Collateral
Agent that such issuer will comply with instructions with respect to such
securities originated by the Collateral Agent without further consent of such
Grantor. If such Grantor is an issuer of Pledged Interests, such Grantor
confirms that it has received notice of such security interest. The Pledged Debt
of a Loan Party or Subsidiary of a Loan Party pledged by such Grantor hereunder
(1) has been duly authorized, authenticated or issued and delivered, (2) is the
legal, valid and binding obligation of the issuers thereof, (3) is not in
default, and (4) if evidenced by one or more promissory notes, such notes with
an individual face value in excess of $500,000 have been delivered to the
Collateral Agent; provided that, notes that are not required to be delivered to
the Collateral Agent pursuant to the foregoing shall not exceed an aggregate
face value of $1,000,000.

(f) The Initial Pledged Interests pledged by such Grantor constitute the
percentage of the issued and outstanding Equity Interests of the issuers thereof
indicated on Schedule II hereto. The Initial Pledged Debt constitutes all of the
outstanding indebtedness owed to such Grantor by the issuers thereof and is
outstanding in the principal amount indicated on Schedule II hereto.

(g) All of the investment property (other than the Quantum Storage Shares) owned
by such Grantor is listed on Schedule II hereto.

(h) Such Grantor has no deposit accounts, other than the Account Collateral
listed on Schedule VII hereto, as such Schedule VII may be amended from time to
time pursuant to Section 5(b), and legal, binding and enforceable Account
Control Agreements are in effect for each deposit account that constitutes
Account Collateral (other than Account Collateral consisting of deposit accounts
maintained with the Collateral Agent), except to the extent such Account Control
Agreements are not required by Section 5(a).

 

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(i) Such Grantor is not a beneficiary or assignee under any letter of credit,
other than the letters of credit described in Schedule IX hereto, as such
Schedule IX may be amended from time to time.

(j) Except as otherwise agreed in Section 6.20 of the Credit Agreement, all
filings and other actions (including, without limitation, (A) actions necessary
to obtain control of Collateral as provided in Sections 9-104, 9-105 and 9-107
of the UCC and Section 16 of UETA and (B) actions necessary to perfect the
Collateral Agent’s security interest with respect to Collateral evidenced by a
certificate of ownership to the extent such actions are required by the terms of
this Agreement) necessary to perfect the security interest in the Collateral of
such Grantor created under this Agreement have been (or contemporaneously
herewith will be) duly made or taken and are (or, upon filing or taking of such
other actions, will be) in full force and effect, and this Agreement creates in
favor of the Collateral Agent for the benefit of the Secured Parties a valid
and, together with such filings and other actions, perfected first priority
security interest in the Collateral of such Grantor, subject to Liens permitted
under the Credit Agreement, securing the payment of the Secured Obligations.

(k) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for (i) the grant by such Grantor of the security interest granted
hereunder or for the execution, delivery or performance of this Agreement by
such Grantor, (ii) the perfection or maintenance of the security interest
created hereunder (including the first priority nature of such security
interest, subject to Liens permitted under the Credit Agreement to be prior to
such security interest), except for the filing of financing and continuation
statements under the UCC, which financing statements have been (or
contemporaneously herewith will be) duly filed and are (or, upon filing, will
be) in full force and effect, the recordation of the Intellectual Property
Security Agreements referred to in Section 13(f) with the U.S. Patent and
Trademark Office and the U.S. Copyright Office, which Agreements have been (or
contemporaneously herewith will be) duly submitted for recordation and are (or,
upon such submission, will be) in full force and effect, and the actions
described in Section 4 with respect to Security Collateral and Sections 5 and 7,
which actions to the extent required hereby have been (or contemporaneously
herewith will be) taken and are (or, upon the taking of such actions, will be)
in full force and effect, or (iii) the exercise by the Collateral Agent of its
voting or other rights provided for in this Agreement or the remedies in respect
of the Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Security Collateral by
laws affecting the offering and sale of securities generally.

(l) The Inventory that has been produced or distributed by such Grantor has been
produced in compliance in all material respects with the requirements of all
applicable laws, including, without limitation, the Fair Labor Standards Act.

(m) As to itself and its Intellectual Property Collateral:

(i) Except as described on Schedule VI or as would not reasonably be expected to
have a Material Adverse Effect, to each Grantor’s knowledge, the operation of
such Grantor’s business as currently conducted and the use of the Intellectual
Property Collateral in connection therewith do not infringe or misappropriate
the intellectual property rights of any third party.

(ii) Except as described on Schedule VI, such Grantor is the exclusive owner of
all right, title and interest in and to, or has the right to use, the
Intellectual Property

 

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Collateral material to such Grantor’s business, and is entitled to use all such
Intellectual Property Collateral subject only to the terms of the IP Agreements
and applicable law or regulation.

(iii) The Intellectual Property Collateral set forth on Schedule VI hereto
includes all of the patents, patent applications, domain names, trademark
registrations and applications, copyright registrations and applications and
material IP Agreements owned by such Grantor.

(iv) Except as would not reasonably be expected to have a Material Adverse
Effect, the Intellectual Property Collateral is subsisting and has not been
adjudged invalid or unenforceable in whole or part, and to such Grantor’s
knowledge, is valid and enforceable. Except as would not reasonably be expected
to have a Material Adverse Effect, such Grantor is not aware of any uses of any
item of owned and registered Intellectual Property Collateral that could
reasonably be expected to lead to such item becoming invalid or unenforceable
except as described on Schedule VI.

(v) Such Grantor has made or performed all filings, recordings and other acts
and has paid all required fees and taxes necessary to maintain and protect its
interest in each material item of owned and registered Intellectual Property
Collateral in full force and effect throughout the world (in each case, where
issued or registered). Such Grantor has used proper statutory notice in
connection with its use of each patent, trademark and copyright in the
Intellectual Property Collateral.

(vi) Except as described on Schedule VI, no claim, action, suit, investigation,
litigation or proceeding is pending or, to such Grantor’s knowledge, has been
asserted or threatened against such Grantor (i) based upon or challenging or
seeking to deny or restrict the Grantor’s rights in or use of any of the
Intellectual Property Collateral, (ii) alleging that the Grantor’s rights in or
use of the Intellectual Property Collateral or that any services provided by,
processes used by, or products manufactured or sold by, such Grantor infringe,
misappropriate, dilute, misuse or otherwise violate any patent, trademark,
copyright or any other proprietary right of any third party, or (iii) alleging
that the Intellectual Property Collateral is being licensed or sublicensed in
material violation or contravention of the terms of any license or other
agreement to which such Grantor is a party. Except as described on Schedule VI,
to such Grantor’s knowledge no Person is engaging in any activity that
infringes, misappropriates, dilutes, misuses or otherwise violates the
Intellectual Property Collateral or the Grantor’s rights in or use thereof.
Except as set forth on Schedule VI hereto or as permitted by the Credit
Agreement, such Grantor has not granted any license, release, covenant not to
sue, non-assertion assurance, or other right to any Person with respect to any
part of the Intellectual Property Collateral. Except as would not reasonably be
expected to have a Material Adverse Effect, the consummation of the transactions
contemplated by the Transaction Documents will not result in the termination or
impairment of any of the Intellectual Property Collateral.

(vii) With respect to each material IP Agreement: (A) such IP Agreement is valid
and binding and in full force and effect; (B) such IP Agreement will not cease
to be valid and binding and in full force and effect on terms identical to those
currently in effect as a result of the rights and interest granted herein, nor
will the grant of such rights and interest constitute a breach or default under
such IP Agreement or otherwise give any party thereto a right to terminate such
IP Agreement; (C) such Grantor has not received

 

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any notice of termination or cancellation under such IP Agreement; (D) such
Grantor has not received any notice of a breach or default under such IP
Agreement, which breach or default has not been cured and (E) neither such
Grantor nor, to such Grantor’s knowledge, any other party to such IP Agreement
is in breach or default thereof in any material respect, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default by such Grantor or, to Grantor’s knowledge, by any other party
thereto or permit termination, modification or acceleration under such IP
Agreement by any other party thereto or, to such Grantor’s knowledge, by such
Grantor.

(viii) To such Grantor’s knowledge, (A) none of the material Trade Secrets of
such Grantor has been used, divulged, disclosed or appropriated to the detriment
of such Grantor for the benefit of any other Person other than such Grantor;
(B) no employee, independent contractor or agent of such Grantor has
misappropriated any material Trade Secrets of any other Person in the course of
the performance of his or her duties as an employee, independent contractor or
agent of such Grantor; and (C) no employee, independent contractor or agent of
such Grantor is in material default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of inventions agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of such Grantor’s Intellectual Property Collateral.

(ix) Except as described on Schedule VI, no Grantor or Intellectual Property
Collateral is subject to any outstanding consent, settlement, decree, order,
injunction, judgment or ruling restricting the use of any material Intellectual
Property Collateral or that would impair the validity or enforceability of such
Intellectual Property Collateral.

(n) The Grantor has no commercial tort claims (as defined in Section 9-102(13)
of the UCC) for an amount greater than $100,000 other than those listed in
Schedule VIII hereto.

Section 9. Further Assurances. (a) Each Grantor agrees that from time to time,
at the expense of such Grantor, such Grantor will promptly execute and deliver,
or otherwise authenticate, all further instruments and documents, and take all
further action that may be necessary, and all further commercially reasonable
action that may be desirable or that the Collateral Agent may reasonably
request, in order to perfect and protect any pledge or security interest granted
or purported to be granted by such Grantor hereunder or to enable the Collateral
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral of such Grantor. Without limiting the generality of the
foregoing, each Grantor will promptly with respect to Collateral of such
Grantor: (i) if an Event of Default shall have occurred and be continuing and if
requested by the Collateral Agent, mark conspicuously each document included in
Inventory, with an individual face value in excess of $500,000 (the aggregate
amount of such Inventory not to exceed $1,000,000), each chattel paper included
in Receivables and each of its records pertaining to such Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such document, chattel paper, Related Contract, Assigned Agreement or
Collateral is subject to the security interest granted hereby; (ii) if any such
Collateral shall be evidenced by a promissory note or other instrument or
chattel paper individually in an amount in excess of $500,000 or in the
aggregate for such type of Collateral in an amount in excess of $1,000,000,
deliver and pledge to the Collateral Agent hereunder such note or instrument or
chattel paper duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory to the
Collateral Agent; (iii) authorize and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Collateral Agent may reasonably request, in
order to perfect and preserve the security interest granted or purported to be
granted by such Grantor hereunder; (iv) deliver and pledge

 

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to the Collateral Agent for benefit of the Secured Parties certificates
representing Security Collateral that constitutes certificated securities,
accompanied by undated stock or bond powers executed in blank; (v) take all
commercially reasonable action necessary to ensure that the Collateral Agent has
control of Collateral consisting of deposit accounts (other than accounts to be
closed listed on Schedule VII, Restricted Accounts or immaterial accounts
excluded pursuant to Section 5(b)(ii)), securities accounts, investment
property, letter-of-credit rights and, if a Default under Section 8.01(a) or
(f) of the Credit Agreement or an Event of Default shall have occurred and be
continuing, electronic chattel paper and transferable records as provided in
Sections 9-104, 9-105, 9-106 and 9-107 of the UCC and in Section 16 of UETA;
(vi) if an Event of Default shall have occurred and be continuing and at the
request of the Collateral Agent, take all commercially reasonable action to
ensure that the Collateral Agent’s security interest is noted on any certificate
of ownership related to any Collateral evidenced by a certificate of ownership;
and (vii) deliver to the Collateral Agent evidence that all other action that
the Collateral Agent may reasonably deem necessary and all further commercially
reasonable action that the Collateral Agent may deem desirable in order to
perfect and protect the security interest created by such Grantor under this
Agreement has been taken.

(b) Each Grantor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover all assets or all personal property (or words of similar
effect) of such Grantor, in each case without the signature of such Grantor, and
regardless of whether any particular asset described in such financing
statements falls within the scope of the UCC or the granting clause of this
Agreement. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law. Each Grantor ratifies its
authorization for the Collateral Agent to have filed such financing statements,
continuation statements or amendments filed prior to the date hereof.

(c) Each Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail and similar in
nature and scope to other statements and schedules required under or
constituting a part of this Agreement.

Section 10. As to Equipment and Inventory. (a) Each Grantor will keep the
material Equipment and Inventory of such Grantor (other than Inventory sold in
the ordinary course of business or pursuant to the terms of the Credit
Agreement) at the places therefor specified in Section 8(b) or, upon 15 days’
prior written notice to the Collateral Agent, at such other places designated by
the Grantor in such notice. Upon the giving of such notice, Schedule IV shall be
automatically amended to add any new locations specified in the notice.

(b) Each Grantor will cause the Equipment of such Grantor to be maintained and
preserved in the same condition, repair and working order, ordinary wear and
tear excepted, and will forthwith, or in the case of any loss or damage to any
of such Equipment as soon as practicable after the occurrence thereof, make or
cause to be made all repairs, replacements and other improvements in connection
therewith that are necessary or desirable to such end. Each Grantor will
promptly furnish to the Collateral Agent a statement respecting any loss or
damage exceeding $100,000 to any of the Equipment or Inventory of such Grantor.

(c) In producing its Inventory, each Grantor will comply with all requirements
of applicable law, including, without, limitation, the Fair Labor Standards Act.

 

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Section 11. Insurance. (a) Each Grantor will, at its own expense, maintain
insurance with respect to the Equipment and Inventory of such Grantor in such
amounts, against such risks, in such form and with such insurers, as are
required with respect to the Borrower and its Subsidiaries by Section 6.07 of
the Credit Agreement. Each policy of each Grantor for liability insurance shall
provide for all losses to be paid on behalf of the Collateral Agent and such
Grantor as their interests may appear. Each Grantor shall use commercially
reasonable efforts to ensure that (a) each policy for property damage insurance
shall provide for all losses (except for losses of less than $1,000,000 per
occurrence) to be paid directly to the Collateral Agent, and (b) each such
policy shall in addition (i) name such Grantor and the Collateral Agent as
insured parties thereunder (without any representation or warranty by or
obligation upon the Collateral Agent) as their interests may appear,
(ii) contain the agreement by the insurer that any loss thereunder shall be
payable to the Collateral Agent notwithstanding any action, inaction or breach
of representation or warranty by such Grantor, (iii) provide that there shall be
no recourse against the Collateral Agent for payment of premiums or other
amounts with respect thereto and (iv) provide that at least 30 days’ prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insurer. Each Grantor will, if so requested by the Collateral
Agent, deliver to the Collateral Agent original or duplicate policies of such
insurance and, as often as the Collateral Agent may reasonably request, a report
of a reputable insurance broker with respect to such insurance.

(b) Reimbursement under any liability insurance maintained by any Grantor
pursuant to this Section 11 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 11 is not
applicable, the applicable Grantor will make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance properly received by or released to such Grantor shall be used by such
Grantor, except as otherwise required hereunder or by the Credit Agreement, to
pay or as reimbursement for the costs of such repairs or replacements.

(c) So long as no Event of Default shall have occurred and be continuing, all
insurance payments received by the Collateral Agent in connection with any loss,
damage or destruction of any Inventory or Equipment will be released by the
Collateral Agent to the applicable Grantor for the repair, replacement or
restoration thereof, subject to such terms and conditions with respect to the
release thereof as the Collateral Agent may reasonably require. Upon the
occurrence and during the continuance of any Event of Default, all insurance
payments in respect of Equipment or Inventory shall be paid to the Collateral
Agent and shall, in the Collateral Agent’s sole discretion, (i) be released to
the applicable Grantor to be applied as set forth in the first sentence of this
subsection (c) or (ii) be held as additional Collateral hereunder or applied as
specified in Section 22(b).

Section 12. Post-Closing Changes; Bailees; Collections on Assigned Agreements,
Receivables and Related Contracts. (a) No Grantor will change its name (as
defined in Section 9-503 of the UCC), type of organization, jurisdiction of
organization, organizational identification number or location (as defined in
Section 9-307 of the UCC) from those set forth in Section 8(a) of this Agreement
without first giving at least 10 Business Days’ prior written notice to the
Collateral Agent and taking all action reasonably required by the Collateral
Agent for the purpose of perfecting or protecting the security interest granted
by this Agreement. Each Grantor agrees that it will give the Collateral Agent
notice of any change in the location of the Equipment and Inventory (other than
Equipment or Inventory out for repair, in transit or on consignment in the
ordinary course of business) or the place where it keeps the copies of the
Assigned Agreements and Related Contracts to which such Grantor is a party and
all originals of all chattel paper that evidence Receivables of such Grantor
from the locations therefor specified in Sections 8(a) and 8(b) within 10
Business Days after such change. No Grantor will authenticate a security
agreement (determined as provided in Section 9-203(d) of the UCC) for
obligations in excess of $500,000 without giving the Collateral Agent 10
Business Days’ prior written notice thereof and taking all action reasonably
required by the Collateral Agent to ensure that the

 

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perfection and first priority nature of the Collateral Agent’s security interest
in the Collateral (subject to Liens permitted under the Credit Agreement) will
be maintained. Each Grantor will hold and preserve its records relating to the
Collateral, including, without limitation, the Assigned Agreements and Related
Contracts. If the Grantor does not have an organizational identification number
and later obtains one, it will forthwith notify the Collateral Agent of such
organizational identification number.

(b) If any Collateral of any Grantor is at any time in the possession or control
of a warehouseman, bailee or agent, or if the Collateral Agent so requests, such
Grantor will notify such warehouseman, bailee or agent of the security interest
created hereunder.

(c) Except as otherwise provided in this subsection (c), each Grantor will
continue to have the right to collect, at its own expense, all amounts due or to
become due such Grantor under the Assigned Agreements, Receivables and Related
Contracts. In connection with such collections, such Grantor may take (and,
during an Event of Default at the Collateral Agent’s direction, will take) such
action as such Grantor or, during a Default, the Collateral Agent may deem
necessary or advisable to enforce collection of the Assigned Agreements,
Receivables and Related Contracts; provided, however, that the Collateral Agent
shall have the right at any time, upon the occurrence and during the continuance
of an Event of Default and upon written notice to such Grantor of its intention
to do so, to notify each person obligated under any Assigned Agreements,
Receivables and Related Contracts (each, an “Obligor”) of the assignment of such
Assigned Agreements, Receivables and Related Contracts to the Collateral Agent
and to direct such Obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to the Collateral Agent and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Assigned Agreements, Receivables and Related Contracts, to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done, and to otherwise exercise all rights
with respect to such Assigned Agreements, Receivables and Related Contracts,
including, without limitation, those set forth set forth in Section 9-607 of the
UCC. After receipt by any Grantor of the notice from the Collateral Agent
referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including, without limitation, instruments) received by such Grantor
in respect of the Assigned Agreements, Receivables and Related Contracts of such
Grantor shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of such Grantor and, if an Event
of Default shall have occurred and be continuing, shall be forthwith paid over
to the Collateral Agent in the same form as so received (with any necessary
indorsement) to be applied as provided in Section 22(b) and (ii) such Grantor
will not adjust, settle or compromise the amount or payment of any Receivable or
amount due on any Assigned Agreement or Related Contract, release wholly or
partly any Obligor thereof, or allow any credit or discount thereon. No Grantor
will permit or consent to the subordination of its right to payment under any of
the Assigned Agreements, Receivables and Related Contracts to any other
indebtedness or obligations of the Obligor thereof.

Section 13. As to Intellectual Property Collateral. (a) With respect to each
item of its material Intellectual Property Collateral, each Grantor agrees to
take, at its expense, all commercially reasonable steps, including, without
limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office
and any other governmental authority, to (i) maintain the validity and
enforceability of such Intellectual Property Collateral and maintain such
Intellectual Property Collateral in full force and effect, and (ii) pursue the
prosecution and maintenance of each patent, trademark, or copyright registration
or application now pending in the United States and in each other appropriate
jurisdiction as determined in such Grantor’s reasonable business judgment, now
or hereafter included in such Intellectual Property Collateral of such Grantor,
including, without limitation, the payment of required fees and taxes, the
filing of responses to office actions issued by the U.S. Patent and Trademark
Office, the U.S. Copyright Office or other governmental authorities, the filing
of applications for renewal or extension, the filing of affidavits under
Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional,

 

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continuation, continuation-in-part, reissue and renewal applications or
extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings. No Grantor shall, without the written consent of
the Collateral Agent, discontinue use of or otherwise abandon any material
Intellectual Property Collateral, or abandon any right to file an application
for patent, trademark, or copyright, unless such Grantor shall have previously
determined that such use or the pursuit or maintenance of such Intellectual
Property Collateral is no longer necessary or advisable in the conduct of such
Grantor’s business and that the loss thereof would not be reasonably likely to
have a Material Adverse Effect, in which case, such Grantor will give prompt
notice of any such abandonment to the Collateral Agent.

(b) Each Grantor agrees promptly to notify the Collateral Agent if such Grantor
becomes aware (i) that any item of material Intellectual Property Collateral may
have become abandoned, placed in the public domain, invalid or unenforceable, or
of any adverse determination or development regarding such Grantor’s ownership
of any material Intellectual Property Collateral or its right to register the
same or to keep and maintain and enforce the same, or (ii) of any adverse
determination or the institution of any proceeding (including, without
limitation, the institution of any proceeding in the U.S. Patent and Trademark
Office or any court) regarding any item of material Intellectual Property
Collateral.

(c) In the event that any Grantor becomes aware that any item of material
Intellectual Property Collateral is being infringed or misappropriated by a
third party, such Grantor shall promptly notify the Collateral Agent and shall
take such actions, at its expense, as such Grantor (and, if a Default shall have
occurred and be continuing, the Collateral Agent) deems reasonable and
appropriate under the circumstances to protect or enforce such Intellectual
Property Collateral, including, without limitation, suing for infringement or
misappropriation and seeking an injunction against continued infringement or
misappropriation.

(d) Each Grantor shall use commercially reasonable efforts to use proper
statutory notice in connection with its use of each item of its material
Intellectual Property Collateral. No Grantor shall do or permit any act or
knowingly omit to do any act whereby any of its Intellectual Property Collateral
may lapse or become invalid or unenforceable or placed in the public domain.

(e) Each Grantor shall take all steps which it (or, if a Default shall have
occurred and be continuing, the Collateral Agent) deems reasonable and
appropriate under the circumstances to preserve and protect each item of its
material Intellectual Property Collateral, including, without limitation,
maintaining the quality of any and all products or services used or provided in
connection with any of the Trademarks.

(f) With respect to its Intellectual Property Collateral, each Grantor agrees to
execute or otherwise authenticate an agreement, in substantially the form set
forth in Exhibit C hereto (an “Intellectual Property Security Agreement”), for
recording the security interest granted hereunder to the Collateral Agent in
such Intellectual Property Collateral with the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such Intellectual Property
Collateral.

(g) Each Grantor agrees that should it obtain an ownership interest in any item
of the type set forth in Section 1(g) that is not on the date hereof a part of
the Intellectual Property Collateral (“After-Acquired Intellectual Property”)
(i) the provisions of this Agreement shall automatically apply thereto, and
(ii) any such After-Acquired Intellectual Property and, in the case of
trademarks, the goodwill symbolized thereby, shall automatically become part of
the Intellectual Property Collateral subject to the terms and conditions of this
Agreement with respect thereto. At the end of each fiscal quarter of the
Borrower, each Grantor shall give prompt written notice to the Collateral Agent
identifying the registered

 

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or applied for registration of After-Acquired Intellectual Property, and such
Grantor shall execute and deliver to the Collateral Agent with such written
notice, or otherwise authenticate, an IP Security Agreement Supplement covering
such registered or applied for After-Acquired Intellectual Property, which IP
Security Agreement Supplement the Collateral Agent may record with the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authorities necessary to perfect the security interest hereunder in
such registered or applied for After-Acquired Intellectual Property.

Section 14. Voting Rights; Dividends; Etc. (a) So long as no Default under
Section 8.01(a) or (f) of the Credit Agreement or Event of Default shall have
occurred and be continuing:

(i) Each Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Security Collateral of such Grantor or any
part thereof for any purpose;

(ii) Each Grantor shall be entitled to receive and retain any and all dividends,
interest and other distributions paid in respect of the Security Collateral of
such Grantor if and to the extent that the payment thereof is not otherwise
prohibited by the terms of the Loan Documents; provided, however, that any and
all

(A) dividends, interest and other distributions paid or payable other than in
cash in respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Security
Collateral,

(B) dividends and other distributions paid or payable in cash in respect of any
Security Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and

(C) cash paid, payable or otherwise distributed in respect of principal of, or
in redemption of, or in exchange for, any Security Collateral,

shall be, and shall be forthwith delivered to the Collateral Agent to hold as,
Security Collateral and shall, if received by such Grantor, be received in trust
for the benefit of the Collateral Agent, be segregated from the other property
or funds of such Grantor and be forthwith delivered to the Collateral Agent as
Security Collateral in the same form as so received (with any necessary
indorsement).

(iii) The Collateral Agent will execute and deliver (or cause to be executed and
delivered) to each Grantor all such instruments as such Grantor may reasonably
request for the purpose of enabling such Grantor to exercise the voting and
other rights that it is entitled to exercise pursuant to paragraph (i) above and
to receive the dividends or interest payments that it is authorized to receive
and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of a Default under
Section 8.01(a) or (f) of the Credit Agreement or an Event of Default:

(i) All rights of each Grantor (A) to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 14(a)(i) shall, upon notice to such Grantor by the
Collateral Agent, cease and (B) to receive the dividends, interest and other
distributions that it would otherwise be authorized to receive and retain
pursuant to Section 14(a)(ii) shall automatically cease, and all such rights
shall thereupon become vested in the Collateral Agent, which shall thereupon
have the sole right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.

 

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(ii) All dividends, interest and other distributions that are received by any
Grantor contrary to the provisions of paragraph (i) of this Section 14(b) shall
be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).

(iii) The Collateral Agent shall be authorized to send to each Securities
Intermediary as defined in and under any Security Account Control Agreement a
Notice of Exclusive Control as defined in and under such Security Account
Control Agreement.

Section 15. As to the Assigned Agreements. (a) Each Grantor will at its expense
furnish to the Collateral Agent promptly upon receipt thereof copies of all
material notices, requests and other documents received by such Grantor under or
pursuant to the Assigned Agreements to which it is a party, and from time to
time (i) furnish to the Collateral Agent such information and reports regarding
the Assigned Agreements and such other Collateral of such Grantor as the
Collateral Agent may reasonably request and (ii) upon reasonable request of the
Collateral Agent, make to each other party to any Assigned Agreement to which it
is a party such demands and requests for information and reports or for action
as such Grantor is entitled to make thereunder.

(b) Each Grantor hereby consents on its behalf and on behalf of its Subsidiaries
to the pledge to the Collateral Agent for benefit of the Secured Parties of each
Assigned Agreement to which it is a party by any other Grantor hereunder.

Section 16. Payments Under the Assigned Agreements. (a) In addition to the other
provisions of this Agreement, upon the occurrence of a Default under
Section 8.01(a) or (f) of the Credit Agreement or an Event of Default, each
Grantor agrees that, at the request of the Collateral Agent, it shall instruct
each other party to each Assigned Agreement to which it is a party that all
payments due or to become due under or in connection with such Assigned
Agreement will be made directly to the Cash Collateral Account.

(b) All moneys received or collected pursuant to subsection (a) above shall be
applied as provided in Section 22(b).

Section 17. As to Letter-of-Credit Rights. (a) Each Grantor, by granting a
security interest in its Receivables consisting of letter-of-credit rights to
the Collateral Agent, intends to (and hereby does) assign to the Collateral
Agent its rights (including its contingent rights) to the proceeds of all
Related Contracts consisting of letters of credit of which it is or hereafter
becomes a beneficiary or assignee. Each Grantor will promptly use commercially
reasonable efforts to cause the issuer of each letter of credit and each
nominated person (if any) with respect thereto to consent to such assignment of
the proceeds thereof pursuant to a consent in form and substance reasonably
satisfactory to the Collateral Agent and deliver written evidence of such
consent to the Collateral Agent.

(b) Upon the occurrence of a Default under Section 8.01(a) or (f) of the Credit
Agreement or Event of Default, each Grantor will, promptly upon request by the
Collateral Agent, (i) notify (and such Grantor hereby authorizes the Collateral
Agent to notify) the issuer and each nominated person with respect to each of
the Related Contracts consisting of letters of credit that the proceeds thereof
have been assigned to the Collateral Agent hereunder and any payments due or to
become due in respect thereof are to be made directly to the Collateral Agent or
its designee and (ii) arrange for the Collateral Agent to become the transferee
beneficiary of letter of credit.

 

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Section 18. Transfers and Other Liens; Additional Shares. (a) Each Grantor
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral, other than sales, assignments and
other dispositions of Collateral, and options relating to Collateral, permitted
under the terms of the Credit Agreement, or (ii) create or suffer to exist any
Lien upon or with respect to any of the Collateral of such Grantor except for
the pledge, assignment and security interest created under this Agreement and
Liens permitted under Section 7.01 of the Credit Agreement.

(b) Each Grantor agrees that it will (i) cause each issuer of the Pledged
Interests that is a Loan Party or a Subsidiary of a Loan Party pledged by such
Grantor not to issue any Equity Interests or other securities in addition to or
in substitution for the Pledged Interests issued by such issuer, except to such
Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all additional Equity Interests or other
securities.

Section 19. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Collateral Agent such Grantor’s attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor or otherwise, from time to time, upon the occurrence and during the
continuance of an Event of Default, in the Collateral Agent’s discretion, to
take any action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:

(a) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 11,

(b) to ask for, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,

(c) to receive, indorse and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (a) or (b) above, and

(d) to file any claims or take any action or institute any proceedings that the
Collateral Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce compliance with the terms and conditions
of any Assigned Agreement or the rights of the Collateral Agent with respect to
any of the Collateral.

Section 20. Collateral Agent May Perform. If any Grantor fails to perform any
agreement contained herein, the Collateral Agent may, but without any obligation
to do so and without notice, itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by such Grantor under Section 23.

Section 21. The Collateral Agent’s Duties. (a) The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties’ interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to

 

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preserve rights against any parties or any other rights pertaining to any
Collateral. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which it accords
its own property.

(b) Anything contained herein to the contrary notwithstanding, the Collateral
Agent may from time to time, when the Collateral Agent deems it to be necessary,
appoint one or more subagents (each a “Subagent”) for the Collateral Agent
hereunder with respect to all or any part of the Collateral. In the event that
the Collateral Agent so appoints any Subagent with respect to any Collateral,
(i) the assignment and pledge of such Collateral and the security interest
granted in such Collateral by each Grantor hereunder shall be deemed for
purposes of this Agreement to have been made to such Subagent, in addition to
the Collateral Agent, for the ratable benefit of the Secured Parties, as
security for the Secured Obligations of such Grantor, (ii) such Subagent shall
automatically be vested, in addition to the Collateral Agent, with all rights,
powers, privileges, interests and remedies of the Collateral Agent hereunder
with respect to such Collateral, and (iii) the term “Collateral Agent,” when
used herein in relation to any rights, powers, privileges, interests and
remedies of the Collateral Agent with respect to such Collateral, shall include
such Subagent; provided, however, that no such Subagent shall be authorized to
take any action with respect to any such Collateral unless and except to the
extent expressly authorized in writing by the Collateral Agent.

Section 22. Remedies. If any Event of Default shall have occurred and be
continuing:

(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral) and also may:
(i) require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place and time to be designated by the Collateral
Agent that is reasonably convenient to both parties; (ii) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Collateral Agent’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable; (iii) occupy any
premises owned or leased by any of the Grantors where the Collateral or any part
thereof is assembled or located for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to such
Grantor in respect of such occupation; and (iv) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of such Grantor to demand or otherwise require payment of any
amount under, or performance of any provision of, the Assigned Agreements, the
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to the
Assigned Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section 9-607 of
the UCC. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days’ notice to such Grantor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

 

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(b) Any cash held by or on behalf of the Collateral Agent and all cash proceeds
received by or on behalf of the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 23) in whole
or in part by the Collateral Agent for the ratable benefit of the Secured
Parties against, all or any part of the Secured Obligations, as set forth in
Section 8.03 of the Credit Agreement. Any surplus of such cash or cash proceeds
held by or on behalf of the Collateral Agent and remaining after payment in full
of all of the Secured Obligations shall be paid over to the applicable Grantor
or to whomsoever may be lawfully entitled to receive such surplus.

(c) All payments received by any Grantor under or in connection with any
Assigned Agreement or otherwise in respect of the Collateral shall be received
in trust for the benefit of the Collateral Agent, shall be segregated from other
funds of such Grantor and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement).

(d) The Collateral Agent may, without notice to any Grantor except as required
by law and at any time or from time to time, charge, set-off and otherwise apply
all or any part of the Secured Obligations against any funds held with respect
to the Account Collateral or in any other deposit account.

(e) In the event of any sale or other disposition of any of the Intellectual
Property Collateral of any Grantor, the goodwill symbolized by any Trademarks
subject to such sale or other disposition shall be included therein, and such
Grantor shall supply to the Collateral Agent or its designee such Grantor’s
know-how and expertise relating to such Intellectual Property Collateral, and
documents and things relating to any Intellectual Property Collateral subject to
such sale or other disposition, and such Grantor’s customer lists and other
records and documents relating to such Intellectual Property Collateral and to
the manufacture, distribution, advertising and sale of products and services of
such Grantor that relate to such Intellectual Property Collateral.

(f) If the Collateral Agent shall determine to exercise its right to sell all or
any of the Security Collateral of any Grantor pursuant to this Section 22, each
Grantor agrees that, upon request of the Collateral Agent, such Grantor will, at
its own expense, do or cause to be done all such other acts and things as may be
necessary to make such sale of such Security Collateral or any part thereof
valid and binding and in compliance with applicable law.

(g) The Collateral Agent is authorized, in connection with any sale of the
Security Collateral pursuant to this Section 22, to deliver or otherwise
disclose to any prospective purchaser of the Security Collateral any information
in its possession relating to such Security Collateral.

Section 23. Indemnity and Expenses. (a) Each Grantor agrees to indemnify, defend
and save each Secured Party and each of their Affiliates and their respective
officers, directors, employees, agents and advisors (each, an “Indemnified
Party”) from, and hold harmless each Indemnified Party against, and shall pay on
written demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, the reasonable fees, charges and disbursements
of counsel for any Indemnified Party) incurred by or asserted against any
Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except to the extent such claim, damage, loss, liability or
expense is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party’s gross negligence or
willful misconduct.

 

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(b) Each Grantor will upon demand pay to the Collateral Agent the amount of any
and all reasonable expenses, including, without limitation, the reasonable fees
and expenses of its counsel and of any experts and agents, that the Collateral
Agent may incur in connection with (i) the preparation, execution, delivery,
administration, modification and amendment of, or any consent or waiver under
this Agreement. (ii) the custody, preservation, use or operation of, or the sale
of, collection from or other realization upon, any of the Collateral of such
Grantor and (iii) the enforcement of this Agreement or the exercise, enforcement
or protection of the rights of the Collateral Agent or the other Secured Parties
hereunder.

Section 24. Amendments; Waivers; Additional Grantors; Etc. (a) No amendment or
waiver of any provision of this Agreement, and no consent to any departure by
any Grantor herefrom, shall in any event be effective unless the same shall be
in writing and signed by the Collateral Agent and, with respect to any
amendment, such Grantor, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
failure on the part of the Collateral Agent or any other Secured Party to
exercise, and no delay in exercising any right hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.

(b) Upon the execution and delivery, or authentication, by any Person of a
security agreement supplement in substantially the form of Exhibit A hereto
(each, a “Security Agreement Supplement”), (i) such Person shall be referred to
as an “Additional Grantor” and shall be and become a Grantor hereunder, and each
reference in this Agreement and the other Loan Documents to “Grantor” shall also
mean and be a reference to such Additional Grantor, and each reference in this
Agreement and the other Loan Documents to “Collateral” shall also mean and be a
reference to the Collateral of such Additional Grantor, and (ii) the
supplemental schedules I-IX attached to each Security Agreement Supplement shall
be incorporated into and become a part of and supplement Schedules I-IX,
respectively, hereto, and the Collateral Agent may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean and
be a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.

Section 25. Notices, Etc. All notices and other communications provided for
hereunder shall be either (i) in writing (including telegraphic, telecopier or
telex communication) and mailed, telegraphed, telecopied, telexed or otherwise
delivered or (ii) by electronic mail (if electronic mail addresses are
designated as provided below) confirmed immediately in writing, in the case of
the Borrower or the Collateral Agent, addressed to it at its address specified
in the Credit Agreement and, in the case of each Grantor other than the
Borrower, addressed to it at its address set forth opposite such Grantor’s name
on the signature pages hereto or on the signature page to the Security Agreement
Supplement pursuant to which it became a party hereto; or, as to any party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and other communications shall, when mailed,
telegraphed, telecopied, telexed, sent by electronic mail or otherwise, be
effective when deposited in the mails, delivered to the telegraph company,
telecopied, confirmed by telex answerback, sent by electronic mail and confirmed
in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other
communications to the Collateral Agent shall not be effective until received by
the Collateral Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.

 

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Section 26. Continuing Security Interest; Assignments under the Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the latest of
(i) the payment in full in cash of the Secured Obligations, (ii) the termination
or expiration of all Letters of Credit (or the payment to the Administrative
Agent for the account of the L/C Issuer of amounts sufficient to fully Cash
Collateralize the aggregate undrawn amounts thereof or the making of other
arrangements satisfactory to the L/C issuer), (iii) the termination or
expiration of all Secured Hedge Agreements and (iv) the termination or
expiration of all Commitments, (b) be binding upon each Grantor, its successors
and assigns and (c) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Secured Parties and their
respective successors and permitted assigns. Without limiting the generality of
the foregoing clause (c), any Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitments, the Loans owing to it
and the Note or Notes, if any, held by it) to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to such Lender herein or otherwise, in each case as provided in
Section 10.06 of the Credit Agreement.

Section 27. Release; Termination. (a) Upon any sale, lease, transfer or other
disposition of any item of Collateral of any Grantor in accordance with the
terms of the Loan Documents (other than any Disposition among Loan Parties or to
any Subsidiary of any Loan Party and sales of Inventory and service parts in the
ordinary course of business) the Collateral Agent will, at such Grantor’s
expense, execute and deliver to such Grantor such documents as such Grantor
shall reasonably request to evidence the release of such item of Collateral from
the assignment and security interest granted hereby; provided, however, that
(i) at the time of such request and such release no Default shall have occurred
and be continuing, (ii) such Grantor shall have delivered to the Collateral
Agent, at least ten Business Days prior to the date of the proposed release, a
written request for release describing the item of Collateral and the terms of
the sale, lease, transfer or other disposition in reasonable detail, including,
without limitation, the price thereof and any expenses in connection therewith,
together with a form of release for execution by the Collateral Agent and a
certificate of such Grantor to the effect that the transaction is in compliance
with the Loan Documents and as to such other matters as the Collateral Agent may
request and (iii) the proceeds of any such sale, lease, transfer or other
disposition required to be applied, or any payment to be made in connection
therewith, in accordance with Section 2.05 of the Credit Agreement shall, to the
extent so required, be paid or made to, or in accordance with the instructions
of, the Collateral Agent when and as required under Section 2.05 of the Credit
Agreement.

(b) Upon the latest of (i) the payment in full in cash of the Secured
Obligations (other than Unaccrued Indemnity Claims), (ii) the termination or
expiration of all Letters of Credit (or the payment to the Administrative Agent
for the account of the L/C Issuer of amounts sufficient to fully Cash
Collateralize the aggregate undrawn amounts thereof or the making of other
arrangements satisfactory to the L/C issuer), (iii) the termination or
expiration of all Secured Hedge Agreements and (iv) the termination or
expiration of all Commitments, the pledge and security interest granted hereby
shall terminate and all rights to the Collateral shall automatically revert to
the applicable Grantor. Upon any such termination, the Collateral Agent will, at
the applicable Grantor’s expense, execute and deliver to such Grantor, or
authorize such Grantor to prepare and file such documents as such Grantor shall
reasonably request to evidence such termination.

Section 28. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier (or other electronic transmission) shall be effective as
delivery of an original executed counterpart of this Agreement.

 

24

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Section 29. The Mortgages. In the event that any of the Collateral hereunder is
also subject to a valid and enforceable Lien under the terms of any Mortgage and
the terms of such Mortgage are inconsistent with the terms of this Agreement,
then with respect to such Collateral, the terms of such Mortgage shall be
controlling in the case of fixtures and real estate leases, letting and licenses
of, and contracts and agreements relating to the lease of, real property, and
the terms of this Agreement shall be controlling in the case of all other
Collateral.

Section 30. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

[Remainder of page left blank]

 

25

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

 

QUANTUM CORPORATION By  

/s/ JON GACEK

Name:   Jon Gacek Title:   Chief Financial Officer & Executive Vice President,
Finance   Address for notices:   1650 Technology Drive   Suite 700   San Jose,
CA 95110 ADVANCED DIGITAL INFORMATION CORPORATION By  

/s/ JON GACEK

Name:   Jon Gacek Title:   Chief Executive Officer, President & Chief Financial
Officer   Address for notices:   1650 Technology Drive   Suite 700   San Jose,
CA 95110 CERTANCE HOLDINGS CORPORATION By  

/s/ JON GACEK

Name:   Jon Gacek Title:   Treasurer   Address for notices:   1650 Technology
Drive   Suite 700   San Jose, CA 95110

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CERTANCE (US) HOLDINGS, INC.

By  

/s/ JON GACEK

Name:   Jon Gacek Title:   Chief Financial Officer   Address for notices:   1650
Technology Drive   Suite 700   San Jose, CA 95110 CERTANCE LLC By  

/s/ JON GACEK

Name:   Jon Gacek Title:   Chief Financial Officer   Address for notices:   1650
Technology Drive   Suite 700   San Jose, CA 95110 QUANTUM INTERNATIONAL, INC. By
 

/s/ JON GACEK

Name:   Jon Gacek Title:   President and Treasurer   Address for notices:   1650
Technology Drive   Suite 700   San Jose, CA 95110