Exhibit 10.2

 

EXECUTION COPY

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) is made as of March 15, 2012, by and
among MANUFACTURERS AND TRADERS TRUST COMPANY, as agent for itself and the other
Secured Parties (as that term is defined in the Credit Agreement (as defined
below)) (together with its successors and assigns in such capacity, the
“Agent”); NEW ENTERPRISE STONE & LIME CO., INC., a Delaware corporation
(together with its successors and permitted assigns, the “Borrower”); and ASTI
TRANSPORTATION SYSTEMS, INC., a Delaware corporation and a wholly-owned
subsidiary of the Borrower (“ASTI”), EII TRANSPORT INC., a Pennsylvania
corporation and a wholly-owned subsidiary of the Borrower (“EII”), GATEWAY TRADE
CENTER INC., a New York corporation and a wholly-owned subsidiary of the
Borrower (“Gateway”), PRECISION SOLAR CONTROLS INC., a Texas corporation and a
wholly-owned subsidiary of the Borrower (“Precision”), PROTECTION SERVICES INC.,
a Pennsylvania corporation and a wholly-owned subsidiary of the Borrower
(“PSI”), SCI PRODUCTS INC., a Pennsylvania corporation and a wholly-owned
subsidiary of the Borrower (“SCI”), WORK AREA PROTECTION CORP., an Illinois
corporation and a wholly-owned subsidiary of the Borrower (“Work Area” and,
collectively with ASTI, EII, Gateway, Precision, PSI, SCI, and any other Person
that becomes a party to this Agreement pursuant to Section 4(l), together with
their successors and permitted assigns, collectively and jointly and severally,
the “Subsidiary Guarantors”, and together with the Borrower, collectively and
jointly and severally, the “Grantors”).

 

Background

 

The Agent, the Borrower and the Lenders (as defined in the Credit Agreement (as
defined below)) entered into that certain Credit Agreement dated as of the date
hereof (as the same may be amended, restated, modified, supplemented and/or
replaced from time to time, the “Credit Agreement”), pursuant to which the
Lenders agreed to extend credit to the Borrower on the terms and conditions
described therein.  The Borrower may, among other things, use the proceeds of
the loans thereunder to extend credit to, and make capital contributions in, the
Subsidiary Guarantors.  Therefore, as a result of the Credit Agreement, the
Subsidiary Guarantors can obtain capital on terms more favorable to them as part
of this borrowing group than they could acting alone.  The Subsidiary Guarantors
have guaranteed the obligations of the Borrower arising out of the Credit
Agreement and related agreements and instruments.

 

One of the conditions to the obligations of the Lenders under the Credit
Agreement is that payment shall be secured by, among other things, a security
interest in favor of the Agent and the other Secured Parties in the Collateral
(as defined below).  In order to induce the Lenders to extend the credit to the
Borrower, the Grantors are willing to grant to the Agent, for the benefit of the
Secured Parties, a security interest in the Collateral.

 

Accordingly, each Grantor, intending to be legally bound, hereby agrees with the
Agent as follows:

 

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1.             DEFINITIONS.  Capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement. 
The following terms, as used herein, shall have the following meanings:

 

“Accession” shall be used herein as defined in the Uniform Commercial Code, but
in any event shall include Goods which are physically united with other Goods in
such a manner that the identity of the original Goods is not lost.

 

“Account” shall be used herein as defined in the Uniform Commercial Code, but in
any event shall include, but not be limited to, credit card receivables, lottery
winnings, health-care-insurance receivables, any right to payment arising out of
goods or other property (including, without limitation, intellectual property)
sold or leased, licensed, assigned or disposed of or for services rendered which
is not evidenced by an instrument or chattel paper, whether or not it has been
earned by performance including all rights to payment of rents under a lease or
license and payment under a charter or other contract and all rights incident to
such lease, charter or contract.

 

“Account Debtor” shall mean each person who is obligated on a Receivable or
Supporting Obligation.

 

“Additional Grantor” shall have the meaning ascribed to such term in Section
4(l).

 

“As—Extracted Collateral” shall be used herein as defined in the Uniform
Commercial Code.

 

“Chattel Paper” shall be used herein as defined in the Uniform Commercial Code,
but in any event shall include, but not be limited to, a writing or writings
which evidence both a monetary obligation and a security interest in, or a lease
of, specific goods.

 

“Collateral” shall have the meaning ascribed to such term in Section 2.

 

“Commercial Tort Claims” shall be used herein as defined in the Uniform
Commercial Code and shall include those claims listed (including plaintiff,
defendant and a description of the claim) on Schedule 12 to the Perfection
Certificate, as such Schedule may be supplemented pursuant to the terms hereof.

 

“Commodity Account” shall be used herein as defined in the Uniform Commercial
Code.

 

“Control” shall mean (i) in the case of each Deposit Account, “control,” as such
term is defined in Section 9-104 of the Uniform Commercial Code, (ii) in the
case of any Security Entitlement, “control,” as such term is defined in Section
8-106 of the Uniform Commercial Code, and (iii) in the case of any commodity
contract, “control,” as such term is defined in Section 9-106 of the Uniform
Commercial Code.

 

“Copyrights” shall mean all copyrights, copyright applications, copyright
registrations and like protections for works of authorship and derivative works
thereof, whether arising under the laws of the United States, any other country
or any political subdivision thereof, whether registered or unregistered and
whether published or unpublished, all registrations and

 

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recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
and whether or not the same also constitutes trade secrets, now or hereafter
existing, created, acquired or held under the laws of the United States, any
other country or any political subdivision thereof, and all rights to obtain any
reissues, renewals or extensions of the foregoing together with all causes of
action arising prior to or after the date hereof for infringement,
misappropriation, or violation of the foregoing.

 

“Deposit Account” shall be used herein as defined in the Uniform Commercial
Code, but in any event shall include, but not be limited to, any demand, time,
savings, passbook or similar account.

 

“Document” shall be used herein as defined in the Uniform Commercial Code, but
in any event shall include, but not be limited to, a bill of lading, dock
warrant, dock receipt, warehouse receipt or order for the delivery of goods, and
also any other document which in the regular course of business or financing is
treated as adequately evidencing that the Person in possession of it is entitled
to receive, hold and dispose of the document and the goods it covers.

 

“Electronic Chattel Paper” shall be used herein as defined in the Uniform
Commercial Code, but in any event shall include, but not be limited to, Chattel
Paper evidenced by a record or records consisting of information stored in an
electronic medium.

 

“Equipment” shall be used herein as defined in the Uniform Commercial Code, but
in any event shall include, but not be limited to, tangible personal property
held by any Grantor for use primarily in business and shall include machinery,
equipment, fixtures, furniture, vehicles, furnishings and tools (including,
without limitation, special mobile equipment, dozers, graters, scrapers,
forklifts, loaders, drilling rigs, scales, railcars, screens, hoppers,
conveyors, generators, trailers, dollies, crushing, grinding and sizing plants,
kilns, baggers and all other machinery, equipment and fixtures used or useful in
quarrying, transporting, burning and processing limestone and related products
for sale), and all accessories and parts now or hereafter affixed thereto, as
well as all attachments, replacements, substitutes, accessories, additions and
improvements to any of the foregoing, but Equipment shall not include Inventory.

 

“Farm Products” shall be used herein as defined in the Uniform Commercial Code,
but in any event shall include, but not be limited to, crops or livestock or
supplies used or produced in farming operations or products of crops or
livestock in their unmanufactured state.

 

“Fixtures” shall be used herein as defined in the Uniform Commercial Code.

 

“General Intangibles” shall be used herein as defined in the Uniform Commercial
Code but in any event shall include, but not be limited to, all personal
property of every kind and description of any Grantor other than Goods,
Accounts, Documents, Letter-of-Credit Rights, Chattel Paper, Deposit Accounts,
Instruments, Investment Property, Commercial Tort Claims, money, and oil, gas or
other minerals before extraction, and shall include, without limitation, Payment
Intangibles, contract rights (other than Accounts), franchises, licenses, choses
in action, books, records, customer lists, tax, insurance and other kinds of
refunds, Intellectual Property, goodwill, plans, Software (to the extent it does
not constitute Goods), Water Rights and other rights in personal property.

 

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“Goods” shall be used herein as defined in the Uniform Commercial Code, but in
any event shall include, but not be limited to, all Software imbedded in goods
and any supporting information provided in connection with the transaction
relating to the program, all standing timber that is to be cut and removed under
a conveyance or contract for sale, and all other things that are movable.

 

“Instruments” shall be used herein as defined in Article 9, rather than Article
3, of the Uniform Commercial Code, but in any event shall include, but not be
limited to, promissory notes, negotiable certificates of deposit, a negotiable
instrument or a security or any other writing which evidences a right to the
payment of money and is not itself a security agreement or lease and is of a
type which is, in the ordinary course of business, transferred by delivery with
any necessary endorsement or assignment.

 

“Intellectual Property” shall mean the following owned by or licensed to any
Grantor: (a) Patents and patent applications, (b) Copyrights, including
copyrights in Software, (c) Trademarks, service marks, trade names, brand names,
trade dress, corporate names, fictitious names, slogans, domain names, designs,
and indicators of source or goodwill, together with all of the goodwill
associated therewith, (d) trade secrets, inventions (whether patented or not),
technology, know-how, data, databases and other confidential or proprietary
information, (e) all issuances, registrations and applications of the foregoing,
together with all provisionals, divisions, continuations, continuations-in-part,
re-examinations, reissues, extensions, supplemental protections, and renewals
thereof, (f) all rights therein throughout the world, (g) all Proceeds therefrom
and (h) all rights to sue for, and to obtain damages and equitable relief for,
past, present and future infringement, misappropriation, dilution or violation
thereof.

 

“Inventory” shall be used herein as defined in the Uniform Commercial Code but
in any event shall include, but not be limited to, tangible personal property
held by or on behalf of any Grantor (or in which any Grantor has an interest in
mass or a joint or other interest) for sale or lease or to be furnished under
contracts of service, tangible personal property which any Grantor has so leased
or furnished, and raw materials, work in process and materials used, produced or
consumed in any Grantor’s business, and shall include tangible personal property
returned to such Grantor by the purchaser following a sale thereof by such
Grantor and tangible personal property represented by Documents.  All equipment,
accessories and parts at any time attached or added to items of Inventory or
used in connection therewith shall be deemed to be part of the Inventory.

 

“Intercompany Notes” shall mean, with respect to each Grantor, all intercompany
notes described in Schedule 10 to the Perfection Certificate and intercompany
notes hereafter acquired by such Grantor and all certificates, instruments or
agreements evidencing such intercompany notes, and all assignments, amendments,
restatements, supplements, extensions, renewals, replacements or modifications
thereof to the extent permitted pursuant to the terms hereof.

 

“Investment Property” shall be used herein as defined in the Uniform Commercial
Code, but in any event shall include, but not be limited to, all securities,
whether certificated or uncertificated, all financial assets, all Security
Entitlements, all Securities Accounts, all commodity contracts and all Commodity
Accounts.

 

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“Letter-of-Credit Right”  shall be used herein as defined in the Uniform
Commercial Code, but in any event shall include, but not be limited to, any
right to payment or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.

 

“Patents” shall mean all United States and international patents, patent rights
and patent applications (including but not limited to divisions, continuations,
continuations-in-part, and reexaminations) and any renewals, extensions,
reissues or improvements thereof, whether in the United States, any other
country or any political subdivision thereof, and together with any other
rights, priorities and privileges relating to inventions, formulae, discoveries
and ideas (whether patentable or unpatentable and whether or not reduced to
practice), and all rights to obtain any reissues, renewals or extensions of the
foregoing together with all licenses for any of the foregoing and all causes of
action arising prior to or after the date hereof for infringement of any of the
foregoing.

 

“Payment Intangible” shall be used herein as defined in the Uniform Commercial
Code, but in any event shall include, but not be limited to, any right to
payment under which the account debtor’s principal obligation is a monetary
obligation.

 

“Perfection Certificate” shall mean that certain perfection certificate dated
March 15, 2012 executed and delivered by each Grantor in favor of the Agent for
the benefit of the Secured Parties, and each other perfection certificate (which
shall be in form and substance reasonably acceptable to the Agent) executed and
delivered by the applicable Guarantor in favor of the Agent for the benefit of
the Secured Parties contemporaneously with the execution and delivery of each
Additional Grantor Joinder executed in accordance with Section 4(l) hereof, in
each case, as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with the Credit Agreement or
upon the request of the Agent.

 

“Pledge Amendment” shall have the meaning assigned to such term in Section 5
hereof.

 

“Pledged Securities” shall mean, collectively (a) all issued and outstanding
Capital Stock of each Subsidiary Guarantor set forth on Schedule 9(a) to the
Perfection Certificate as being owned by a Grantor and all options, warrants,
rights, agreements and additional Capital Stock of whatever class of any such
Subsidiary Guarantor acquired by the Borrower or any other Grantor (including by
issuance), together with all rights, privileges, authority and powers of the
Borrower or any other Grantor relating to such Capital Stock in each such
Subsidiary Guarantor or under any Organizational Document of each such
Subsidiary Guarantor, and the certificates, instruments and agreements
representing such Capital Stock and any and all interest of the Borrower or any
other Grantor in the entries on the books of any financial intermediary
pertaining to such Capital Stock, (b) all Capital Stock of any Restricted
Subsidiary (other than Rock Solid Insurance) hereafter acquired by the Borrower
or any other Grantor (including by issuance) (including any other Restricted
Subsidiary required to become a Subsidiary Guarantor pursuant to the Credit
Agreement) and all options, warrants, rights, agreements and additional Capital
Stock of whatever class of any such Restricted Subsidiary acquired by the
Borrower or any other Grantor (including by issuance), together with all rights,

 

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privileges, authority and powers of the Borrower or any other Grantor relating
to such Capital Stock or under any Organizational Document of any such
Restricted Subsidiary, and the certificates, instruments and agreements
representing such Capital Stock and any and all interest of the Borrower or any
other Grantor in the entries on the books of any financial intermediary
pertaining to such Capital Stock, from time to time acquired by the Borrower or
any other Grantor in any manner, and (c) all Capital Stock issued in respect of
the Capital Stock referred to in clause (a) or (b) upon any consolidation or
merger of any issuer of such Capital Stock.

 

“Proceeds” shall be used herein as defined in the Uniform Commercial Code but,
in any event, shall include, but not be limited to, (a) any and all proceeds of
any insurance (whether or not the Agent is named as the loss payee thereof),
indemnity, warranty or guaranty payable to any Grantor or the Agent from time to
time with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of any Governmental Authority), (c) any and
all amounts received when Collateral is sold, leased, licensed, exchanged,
collected or disposed of, (d) any rights arising out of Collateral, and (e) any
and all other amounts from time to time paid or payable under or in connection
with any of the Collateral.

 

“Receivables” shall mean all (a) Accounts, (b) Chattel Paper, (c) Payment
Intangibles, (d) General Intangibles, (e) Instruments and (f) all other rights
to payment, whether or not earned by performance, for goods or other property
sold, leased, licensed, assigned or otherwise disposed of, or services rendered
or to be rendered, regardless of how classified under the Uniform Commercial
Code together with all of Grantors’ rights, if any, in any goods or other
property giving rise to such right to payment and all Supporting Obligations
related thereto and all Records relating thereto.

 

“Securities Account” shall be used herein as defined in the Uniform Commercial
Code.

 

“Security Entitlement” shall be used herein as defined in the Uniform Commercial
Code, but in any event shall include, but not be limited to, the rights and
property interest of an entitlement holder with respect to a financial asset
specified in Part 5 of Article 8 of the Uniform Commercial Code.

 

“Software” shall be used herein as defined in the Uniform Commercial Code but in
any event, shall include, but not be limited to, any computer program or
supporting information provided in connection with the transaction relating to
the program.

 

“Supporting Obligations” shall be used herein as defined in the Uniform
Commercial Code but in any event shall include, but not be limited to,
guarantees and letters of credit that support payment of another obligation.

 

“Tangible Chattel Paper” shall be used herein as defined in the Uniform
Commercial Code, but in any event shall include, but not be limited to, Chattel
Paper evidenced by a record or records consisting of information that is
inscribed on a tangible medium.

 

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“Trademarks” shall mean all registered and unregistered trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
dress, service marks, logos, designs, domain names and other source or business
identifiers, together with pending applications and/or registrations therefor,
all registrations and recordings thereof, whether in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof, or
otherwise, all rights to obtain any reissues, renewals or extensions of the
foregoing, all common law rights related thereto, the goodwill associated
therewith, all licenses for any of the foregoing, and all causes of action
arising prior to or after the date hereof for infringement, dilution,
misappropriation, violation and unfair competition of or regarding the same.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code in effect on
the date hereof and as amended from time to time, and as enacted in the
Commonwealth of Pennsylvania or in any state or states which, pursuant to the
Uniform Commercial Code as enacted in the Commonwealth of Pennsylvania, has
jurisdiction with respect to all, or any portion of, the Collateral or this
Agreement, from time to time.  It is the intent of the parties that the
definitions set forth above should be construed in their broadest sense so that
Collateral will be construed in its broadest sense.  Accordingly if there are,
from time to time, changes to defined terms in the Uniform Commercial Code that
broaden the definitions, they are incorporated herein and if existing
definitions in the Uniform Commercial Code are broader than the amended
definitions, the existing ones shall be controlling.  Similarly, where the
phrase “as defined in the Uniform Commercial Code, but in any event shall
include, but not be limited to . .  .” is used above, it means as defined in the
Uniform Commercial Code except that if any of the enumerated types of items
specified thereafter would not fall within the Uniform Commercial Code
definition, they shall nonetheless be included in the applicable definition for
purposes of this Agreement.

 

“Water Rights” shall have the meaning assigned to such term in the Mortgages.

 

2.             GRANT OF SECURITY INTEREST.  As security for the payment and
performance of the Secured Obligations, each Grantor hereby pledges,
hypothecates, delivers and assigns to the Agent, for the benefit of the Secured
Parties, and creates in favor of the Agent, for the benefit of the Secured
Parties, a security interest in and to, all of such Grantor’s right, title and
interest in and to all personal property and fixtures of such Grantor or in
which such Grantor has any rights including, without limitation, in the
following property, in all its forms, in each case whether now or hereafter
existing, whether now owned or hereafter acquired, created or arising, and
wherever located (collectively, but without duplication, the “Collateral”):

 

(a)           All Goods, including, without limitation, all Equipment,
Inventory, Fixtures, As-Extracted Collateral and Farm Products, and all
Accessions, additions, replacements, attachments, accretions, components and
substitutes to or for any Goods;

 

(b)           All Accounts;

 

(c)           All General Intangibles, including, without limitation, the
Patents and patent applications listed on Schedule 11(a) to the Perfection
Certificate, the U.S. trademark registrations and trademark applications listed
on Schedule 11(a) to the Perfection Certificate, the U.S. registered copyrights
listed on Schedule 11(b) to the Perfection Certificate and material

 

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licenses relating to Intellectual Property listed on Schedules 11(a), 11(b), and
11(c) to the Perfection Certificate;

 

(d)           All Documents, Letter-of-Credit Rights, and Chattel Paper;

 

(e)           All Deposit Accounts and all cash (whether or not deposited in
such Deposit Accounts);

 

(f)            All Instruments;

 

(g)           All Investment Property;

 

(h)           All Commercial Tort Claims;

 

(i)            All Supporting Obligations;

 

(j)            All books and records relating to the Collateral; and

 

(k)           All Proceeds of any and all of the foregoing.

 

Notwithstanding the foregoing, the term “Collateral” shall exclude any Excluded
Assets.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE GRANTORS.  Each Grantor
represents and warrants, jointly and severally, as follows (which
representations and warranties shall survive execution of this Agreement and
shall not be affected or waived by any examination or inspection made by the
Agent or any of the other Secured Parties):

 

(a)           Status.  Each Grantor is duly organized and validly existing as
the type of entity and in the state of formation set forth on Schedule 5.1.1 to
the Credit Agreement.  Schedule 1(a) to the Perfection Certificate sets forth
each Grantor’s organizational identification number or, if any Grantor does not
have one, states that one does not exist.  Each Grantor has perpetual existence
and the power and authority to own its property and assets and to transact the
business in which it is engaged or presently proposes to engage.

 

(b)           Authority to Execute Agreement; Binding Agreement.  Each Grantor
has the corporate, partnership, limited liability company or other power to
execute, deliver and perform its obligations under this Agreement (including,
without limitation, the right and power to give the Agent a security interest in
the Collateral) and has taken all necessary corporate, partnership, limited
liability company and other action to authorize the execution, delivery and
performance of this Agreement.  This Agreement has been duly executed by each
Grantor.  This Agreement constitutes the valid and legally binding obligation of
each Grantor, enforceable against each Grantor in accordance with its terms
except as such enforceability may be limited by applicable Debtor Relief Laws.

 

(c)           Location of Collateral.  Schedule 2(b) to the Perfection
Certificate sets forth all locations where Inventory or Equipment is located as
of the Closing Date and Schedule 2(c) to the Perfection Certificate sets forth
all locations not listed on Schedules 2(b) or 7(a) to the Perfection Certificate
where Collateral (other than Inventory and Equipment) with a fair market

 

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value equal to or greater than $1,000,000 is located as of the Closing Date, in
each case, excluding Inventory and mobile Equipment in transit, assets under
repair at third party locations, and Collateral at locations of construction
jobs in progress.  Schedule 7(a)  to the Perfection Certificate lists all (i)
real property to be encumbered, where indicated, by a Mortgage and fixture
filing as of the Closing Date (such real property, the “Mortgaged Property”),
(ii) uses of each Mortgaged Property and (iii) other information relating
thereto required by such Schedule.  There exist no mortgages or other Liens on
any such Mortgaged Property except for Liens permitted pursuant to the Credit
Agreement.  Except as disclosed on Schedule 2(b), 2(c) or 7(b) to the Perfection
Certificate, no Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

 

(d)           Location of Grantors.  The chief executive office of each Grantor
and the office where each Grantor keeps its books and records relating to the
Chattel Paper, Documents, General Intangibles, Instruments and Investment
Property are specified on Schedule 2(a) to the Perfection Certificate.

 

(e)           Instruments and Certificates.  All Instruments and all
certificates representing Pledged Securities that are included in the
Collateral, together with all necessary endorsements, have been delivered to the
Agent or to a Person that has agreed to hold such Instruments or certificates on
behalf of the Agent for the purpose of perfecting the Agent’s security interests
therein.

 

(f)            Names Used by Grantors.  The exact legal name of each Grantor is
the name set forth in the preamble above.  No Grantor has had any name other
than that stated in the preamble hereto or as set forth on Schedules 1(a), 1(b)
and 1(c) to the Perfection Certificate for the preceding five years.  No entity
has merged into any Grantor or been acquired by any Grantor within the past five
years except as set forth on Schedule 1(c) to the Perfection Certificate.

 

(g)           Perfected Security Interest.  This Agreement creates a valid,
first priority security interest in the Collateral, subject only to Liens
permitted pursuant to the Credit Agreement, securing payment of the Secured
Obligations.  Upon the filing of the Uniform Commercial Code financing
statements delivered by the Grantors to the Agent in the offices set forth on
Schedule 6 to the Perfection Certificate, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements (limited, as of the Closing Date and until such time
as the Grantors are required to deliver additional information related to
As-Extracted Collateral filings on real property other than the Mortgaged
Property pursuant to the Credit Agreement, with respect to security interests in
As-Extracted Collateral, to As-Extracted Collateral filings on the Mortgaged
Property) shall have been duly perfected.  Except for the filing of the Uniform
Commercial Code financing statements referred to in the preceding sentence, the
periodic filing of continuation statements with respect to such financing
statements, the delivery of the Instruments referred to in paragraph (e) above,
the recordation of the Intellectual Property Collateral Agreements with respect
to Intellectual Property identified on Schedules 11(a), 11(b) and 11(c) to the
Perfection Certificate in the United States Copyright Office and the United
States Patent and Trademark Office, as applicable, and the execution and
delivery of deposit account control agreements satisfying the requirements of
Section 9-104(a)(2) of the Uniform Commercial Code with respect to each Deposit
Account (other than Excluded Bank Accounts) of the Grantors that is not
maintained

 

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with the Agent (each of which deposit account control agreements is to be
entered into and delivered to the Agent to the extent required by Section 8.27
(Primary Operating Accounts; Proceeds into Blocked Account) of the Credit
Agreement), no action is necessary to create, perfect or protect such security
interest other than, with respect to As-Extracted Collateral, as may be required
pursuant to the Credit Agreement.  Without limiting the generality of the
foregoing, except for the filing of said financing statements, the recordation
of said Intellectual Property Collateral Agreements, and the execution and
delivery of said deposit account control agreements, no consent of any third
parties and no authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body is required for (i)
the execution, delivery and performance of this Agreement, (ii) the creation or
perfection of the security interest created hereunder in the Collateral or (iii)
the enforcement of the Agent’s rights hereunder, in each case other than those
which have already been obtained.

 

(h)           Intellectual Property and Licenses.  Schedules 11(a) and 11(b) to
the Perfection Certificate set forth a true, complete and accurate list of all
of the Patents, patent applications, trademark registrations, trademark
applications and registered copyrights owned by any of the Grantors as of the
date hereof.  Schedule 11(c) to the Perfection Certificate sets forth a true,
complete and accurate list of all material licenses in favor of any Grantor
relating to Intellectual Property as of the date hereof.  To the knowledge of
the Borrower, all material Intellectual Property of the Grantors are subsisting,
valid and enforceable, and have been duly issued by, registered with or are
pending application for issuance or registration with the United States Patent
and Trademark Office or at the United States Copyright Office, as applicable.

 

(i)            Filings of Record.  No Uniform Commercial Code financing
statement covering any of the Collateral is on file in any public office, other
than any such financing statements (i) filed pursuant to this Agreement; and
(ii) filed in respect of (and limited to) Permitted Liens.

 

(j)            Representations in the Credit Agreement.  Each of the
representations and warranties with respect to the Grantors set forth in the
Credit Agreement is incorporated herein by reference as though set forth herein
in its entirety and is true and correct in all material respects on and as of
the date hereof.

 

4.             COVENANTS OF GRANTORS.  Each Grantor covenants that:

 

(a)           Filing of Financing Statements and Preservation of Interests. 
Immediately upon execution hereof, each Grantor shall cause to be duly filed in
each office set forth on Schedule 6 to the Perfection Certificate Uniform
Commercial Code financing statements and all filings with the United States
Copyright Office and the United States Patent and Trademark Office, in each case
in form and substance satisfactory to the Agent.  Each Grantor agrees that at
the sole cost and expense of the Grantors, each Grantor will maintain the
security interest created by this Agreement in the Collateral as a perfected
first priority security interest subject only to Liens permitted pursuant to the
Credit Agreement and file all Uniform Commercial Code continuation statements
necessary to continue the perfection of the security interest created by this
Agreement, it being agreed that the Grantors shall not be required to perfect
against As-Extracted Collateral on real property other than Mortgaged Property
unless required to do so pursuant to the terms of the Credit Agreement or
otherwise reasonably requested by the Agent.

 

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Without limiting the obligation of the Grantors set forth in the two preceding
sentences, each Grantor hereby authorizes the Agent, and appoints the Agent as
its attorney-in-fact, to file in such office or offices as the Agent deems
necessary or desirable such financing and continuation statements and amendments
and supplements thereto (including without limitation an “all assets” filing or
similar documents required by any laws of any applicable jurisdiction), and such
other documents as the Agent may require to perfect, preserve and protect the
security interests granted herein all without signature (except to the extent
such signature is required under the laws of any applicable jurisdiction), which
financing statements may (but need not) describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such
actions taken by the Agent.

 

(b)           Delivery of Instruments, Etc.  At any time and from time to time
that any Collateral consists of Instruments, certificated Pledged Securities,
Intercompany Notes or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Grantor shall promptly (but in any event within five days after receipt thereof
by such Grantor) deliver the same to the Agent (or to a person that has agreed
to hold such Collateral on behalf of the Agent for the purpose of perfecting the
Agent’s security interests therein) in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in blank such
that the Agent has a perfected first priority security interest therein (subject
to the Liens permitted pursuant to the Credit Agreement).  The Agent shall have
the right, at any time upon the occurrence and during the continuance of any
Event of Default, to endorse, assign or otherwise transfer to or to register in
the name of the Agent or any of its nominees or endorse for negotiation any or
all of the Pledged Securities, Instruments or Intercompany Notes, without any
indication that such Collateral is subject to the security interest hereunder. 
In addition, upon the occurrence and during the continuance of an Event of
Default, the Agent shall have the right at any time to exchange certificates
representing or evidencing Pledged Securities, Instruments or Intercompany Notes
for certificates of smaller or larger denominations.

 

(c)           Uncertificated Securities.  Each Grantor hereby agrees that if any
of the Pledged Securities are at any time not evidenced by certificates of
ownership, then each applicable Grantor shall, to the extent permitted by
applicable law, (i) cause the issuer to execute and deliver to the Agent an
acknowledgment of the pledge of such Pledged Securities substantially in the
form of Annex C hereto or such other form that is reasonably satisfactory to the
Agent, (ii) if necessary to perfect a security interest in such Pledged
Securities, cause such pledge to be recorded on the equityholder register or the
books of the issuer, execute any customary pledge forms or other documents
necessary or appropriate to complete the pledge and give the Agent the right to
transfer such Pledged Securities under the terms hereof, and (iii) after the
occurrence and during the continuance of any Event of Default, upon request by
the Agent, (A) cause the Organizational Documents of each such issuer that is a
Subsidiary of the Borrower to be amended to provide that such Pledged Securities
shall be treated as “securities” for purposes of the Uniform Commercial Code and
(B) cause such Pledged Securities to become certificated and delivered to the
Agent (or to a person that has agreed to hold such Collateral on behalf of the
Agent for the purpose of perfecting the Agent’s security interests therein) in
accordance with the provisions of Section 4(b).

 

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(d)           Chattel Paper.  Each Grantor shall cause all Tangible Chattel
Paper constituting Collateral to be promptly (but in any event within five days
after receipt thereof by such Grantor) delivered to the Agent (or to a person
that has agreed to hold such Collateral on behalf of the Agent for the purpose
of perfecting the Agent’s security interests therein), or, if such delivery is
not possible, then to cause such Tangible Chattel Paper to contain a legend
noting that it is subject to the security interest created by this Agreement. 
To the extent that any Collateral consists of Electronic Chattel Paper, the
applicable Grantor shall cause the underlying Chattel Paper to be “marked”
within the meaning of Section 9-105 of the Uniform Commercial Code (or successor
section thereto).

 

(e)           Investment Property and Deposit Accounts.  Except as otherwise
provided in Section 8.27 (Primary Operating Accounts; Proceeds into Blocked
Account) of the Credit Agreement, if there is any Investment Property or Deposit
Account included as Collateral that can be perfected by “control” through an
account control agreement, the applicable Grantor shall cause such an account
control agreement, in form and substance in each case satisfactory to the Agent,
to be entered into and delivered to the Agent (i) as of the Closing Date with
respect to any such Investment Property or Deposit Accounts included on Schedule
13 to the Perfection Certificate and (ii) as of the date any such Investment
Property or Deposit Account is established or maintained in all other cases.

 

(f)            Letter-of-Credit Rights.  To the extent that any Collateral
consists of Letter-of-Credit Rights, the applicable Grantor shall promptly cause
the issuer of each underlying letter of credit to consent to an assignment of
the proceeds thereof to the Agent.

 

(g)           Collateral In Possession of Third Parties.  To the extent that any
Collateral is in the possession of any third party, the applicable Grantor shall
deliver, or make such effort to deliver, such Landlord/Warehousemen Agreements
as are required pursuant to the Credit Agreement.

 

(h)           Commercial Tort Claims.  If any Grantor shall at any time hold or
acquire a Commercial Tort Claim, such Grantor shall promptly notify the Agent in
a writing signed by such Grantor of the particulars thereof and grant to the
Agent in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to the Agent.

 

(i)            Notice of Changes in Representations.  Each Grantor shall
promptly notify the Agent of any event or condition which reasonably could cause
any representations set forth in Section 3 above applicable to such Grantor to
fail to be true, correct and complete in any material respect.  Without limiting
the generality of the foregoing:

 

(i)            without providing at least thirty (30) days’ prior written notice
to the Agent, no Grantor will change its name in any respect, its principal
place of business, its chief executive office, its mailing address or its
organizational identification number (if it has one);

 

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(ii)           if any Grantor does not have an organizational identification
number and obtains one after the date of this Agreement, such Grantor will
forthwith notify the Agent in writing of such organizational identification
number; and

 

(iii)          without providing at least thirty (30) days’ prior written notice
to the Agent, no Grantor will change its type of organization, jurisdiction of
organization or other legal structure.

 

(j)            Inventory.  No Grantor shall return any Inventory to the supplier
thereof, except for damaged or unsalable Inventory or otherwise in the ordinary
course of such Grantor’s business.  Without limiting the generality of the
foregoing, in the event any Grantor becomes a “debtor in possession” as defined
in 11 U.S.C. §1101 (or any successor thereto), such Grantor agrees, to the
extent permitted by applicable Law, not to move pursuant to 11 U.S.C. §546 (or
any successor thereto) for permission to return goods to any creditor which
shipped such goods to such Grantor without the Agent’s written consent and each
Grantor hereby waives any rights to return such Inventory arising under 11
U.S.C. §546(h), or any successor section thereto.

 

(k)           Defense of Agent’s Rights.  Each Grantor warrants and will defend
the Agent’s right, title and security interest in and to the Collateral against
the claims of any Person.

 

(l)            Additional Grantors.  The Borrower shall cause each new
Restricted Subsidiary of the Borrower to promptly (but in any event within
thirty (30) days of the date on which such Subsidiary was acquired or created)
become a party hereto (an “Additional Grantor”) or to a similar security
agreement, as appropriate, by executing and delivering an Additional Grantor
Joinder in substantially the form of Annex A attached hereto and a Perfection
Certificate, and comply with the provisions hereof applicable to the Grantors. 
The Additional Grantor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as the
Agent may reasonably request.  Upon delivery of the foregoing to the Agent, the
Additional Grantor shall be and become a party to this Agreement with the same
rights and obligations as the Grantors, for all purposes hereof as fully and to
the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein as
of the date of execution and delivery of such Additional Grantor Joinder and
thereafter at any time that such representations and covenants must be restated
pursuant to the terms of the Loan Documents, and all references herein to the
“Grantors” shall be deemed to include each Additional Grantor.  The execution
and delivery of such Additional Grantor Joinder shall not require the consent of
any Grantor hereunder.  The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.

 

(m)          Intellectual Property.  Without limiting the generality of the
other obligations of the Grantors hereunder, each Grantor shall promptly (i)
cause to be registered at the United States Copyright Office all of its material
copyrights, (ii) cause the security interest contemplated hereby with respect to
all Intellectual Property to be duly and timely recorded with the United States
Copyright Office or United States Patent and Trademark Office, as applicable,
and (iii) give the Agent notice whenever it acquires (whether absolutely or by
license) or creates any additional material Intellectual Property (and shall
comply with clause (ii) with respect

 

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thereto).  Each Grantor shall not transfer, abandon, allow to lapse, cancel or
otherwise dispose of any material Intellectual Property without the prior
written permission of the Agent.

 

(n)           Power of Attorney.  Each Grantor has duly executed and delivered
to the Agent a power of attorney (a “Power of Attorney”) in substantially the
form attached hereto as Annex B.  The power of attorney granted pursuant to the
Power of Attorney is a power coupled with an interest and shall be irrevocable
until payment in full in cash of the Secured Obligations and the termination of
any commitment of the Secured Parties to make financial accommodations to the
Borrower pursuant to the Credit Agreement (and subject to reinstatement
thereafter as provided in Section 13(a) hereof).  The powers conferred on the
Agent (for the benefit of the Agent and the Secured Parties) under the Power of
Attorney are solely to protect the Agent’s interests (for the benefit of the
Agent and the Secured Parties) in the Collateral and shall not impose any duty
upon the Agent or any Secured Party to exercise any such powers.  The Agent
agrees that (i) notwithstanding anything to the contrary in the Power of
Attorney, except for the powers granted in clause (i) of the Power of Attorney,
it shall not exercise any power or authority granted under the Power of Attorney
unless an Event of Default has occurred and is continuing, and (ii) the Agent
shall account for any moneys received by the Agent in respect of any foreclosure
on or disposition of Collateral pursuant to the Power of Attorney provided that
none of the Agent or any Secured Party shall have any duty as to any Collateral,
and the Agent and the Secured Parties shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers.  NONE OF THE
AGENT, THE LENDERS, THE OTHER SECURED PARTIES OR THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE
TO THE GRANTORS FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR
OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

 

(o)           Grant of Intellectual Property License.  In addition to and not in
limitation of the powers granted in clause (n) above, each Grantor hereby
authorizes the Agent to make, constitute and appoint any officer or agent of the
Agent as the Agent may select, in its sole discretion, as such Grantor’s true
and lawful attorney-in-fact, with power to (i) endorse such Grantor’s name on
all applications, documents, papers and instruments necessary or desirable for
the Agent in the use of the Intellectual Property or (ii) take any other actions
with respect to the Intellectual Property as the Agent deems to be in the best
interest of the Agent, or (iii) grant or issue any exclusive or non-exclusive
irrevocable or revocable, royalty-bearing or royalty-free license under the
Intellectual Property to anyone, including the Agent itself, including but not
limited to a license or other right to use such Grantor’s labels, General
Intangibles, Intellectual Property, Equipment, real estate, advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale and selling any Inventory or
other Collateral, and such Grantor’s rights under all contracts, licenses,
approvals, permits, leases and franchise agreements, to the extent assignable,
shall inure to the Agent’s benefit, or (iv) assign, pledge, convey or otherwise
transfer title in or dispose of the Intellectual Property to anyone.  Each
Grantor hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney shall be irrevocable until the
Secured

 

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Obligations shall have been paid in full and the Credit Agreement and this
Agreement have been terminated. Grantor hereby further acknowledges and agrees
that the use by the Agent of the Intellectual Property shall be worldwide,
except as limited by their terms, and without any liability for royalties or
related charges from the Agent to such Grantor.  The Agent agrees that
notwithstanding anything to the contrary in this clause (o), it shall not
exercise any power or authority granted under this clause (o) unless an Event of
Default has occurred and is continuing.  NONE OF THE AGENT, THE LENDERS, THE
OTHER SECURED PARTIES OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO THE GRANTORS FOR
ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN
RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR
ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

(p)           Certificates of Title.  Upon request of the Agent, each Grantor
shall promptly deliver to the Agent any and all certificates of title,
applications for title or similar evidences of ownership of all Equipment (other
than such Equipment that constitutes Excluded Assets) and shall cause the Agent
to be named as lienholder on any such certificates of title or other evidences
of ownership.  The Grantors shall promptly inform the Agent of any additions to
or deletions from such Equipment and shall not permit any such items to become
fixtures to real estate other than real estate described in the Mortgages.

 

(q)           Location of Inventory and Equipment.  Each Grantor shall not move
any Collateral to any location unless it has complied (i) with the notice
requirements set forth in the Credit Agreement and (ii) to the extent applicable
with respect to such new location, such Grantor shall have complied with Section
4(g) hereof; provided, that in no event shall any Equipment or Inventory be
moved to any location outside of the continental United States.

 

(r)            Other Assurances.  Each Grantor agrees that from time to time, at
the joint and several expense of the Grantors and any Additional Grantors, it
will promptly execute and deliver all such further instruments and documents,
and take all such further action as may be necessary or desirable, or as the
Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Agent to
exercise and enforce its rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.

 

5.             PLEDGE OF ADDITIONAL SECURITIES COLLATERAL.  Each Grantor shall,
upon obtaining any Pledged Securities or Intercompany Notes of any person,
accept the same in trust for the benefit of the Agent and promptly (but in any
event within five days after receipt thereof) deliver to the Agent, or to a
person that has agreed to hold such Collateral on behalf of the Agent for the
purpose of perfecting the Agent’s security interests therein, a pledge
amendment, duly executed by such Grantor, in substantially the form of Annex D
hereto (each, a “Pledge Amendment”), and the certificates and other documents
required under Sections 4(b) and (c) hereof in respect of the additional Pledged
Securities or Intercompany Notes which are to be pledged pursuant to this
Agreement, and confirming the attachment of the Lien hereby created on and in
respect of such additional Pledged Securities or Intercompany Notes.  Each
Grantor

 

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hereby authorizes the Agent to attach each Pledge Amendment to this Agreement
and agrees that all Pledged Securities or Intercompany Notes listed on any
Pledge Amendment delivered to the Agent shall for all purposes hereunder be
considered Collateral.

 

(a)           Voting Rights; Distributions; etc.  So long as no 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 Pledged Securities and Intercompany Notes or
any part thereof for any purpose not inconsistent with the terms or purposes
hereof, the Credit Agreement or any other document evidencing the Secured
Obligations; provided, however, that no Grantor shall in any event exercise such
rights in any manner which could reasonably be expected to result in a Material
Adverse Change.

 

(ii)     Each Grantor shall be entitled to receive and retain, and to utilize
free and clear of the Lien hereof, any and all distributions received in respect
of the Pledged Securities or Intercompany Notes, but only if and to the extent
made in accordance with the provisions of the Credit Agreement; provided,
however, that any and all such distributions consisting of rights or interests
in the form of securities shall be forthwith delivered to the Agent to hold as
Collateral and shall, if received by any Grantor, be received in trust for the
benefit of the Agent, be segregated from the other property or funds of such
Grantor and be promptly (but in any event within five days after receipt
thereof) delivered to the Agent as Collateral in the same form as so received
(with any necessary endorsement).

 

(b)           So long as no Event of Default shall have occurred and be
continuing, the Agent shall be deemed without further action or formality to
have granted to each Grantor all necessary consents relating to voting rights
and shall, if necessary, upon written request of any Grantor and at the sole
cost and expense of the Grantor, from time to time execute and deliver (or cause
to be executed and delivered) to such Grantor all such instruments as such
Grantor may reasonably request in order to permit such Grantor to exercise the
voting and other rights which it is entitled to exercise pursuant to this
Section 5 and to receive the distributions which it is authorized to receive and
retain pursuant to Section 5(a) hereof.

 

(c)           Upon the occurrence and during the continuance of any Event of
Default:

 

(i)      All rights of each Grantor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to Section 5(a)(i)(a)
hereof shall immediately cease, and all such rights shall thereupon become
vested in the Agent, which shall thereupon have the sole right to exercise such
voting and other consensual rights.

 

(ii)     All rights of each Grantor to receive distributions which it would
otherwise be authorized to receive and retain pursuant to Section 5(a)(i)(b)
hereof shall immediately cease and all such rights shall thereupon become vested
in the Agent, which shall thereupon have the sole right to receive and hold as
Collateral such distributions.

 

(iii)    Each Grantor shall, at its sole cost and expense, from time to time
execute and deliver to the Agent appropriate instruments as the Agent may
request in order to permit the

 

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Agent to exercise the voting and other rights which it may be entitled to
exercise pursuant to Section 5(c)(i) hereof and to receive all distributions
which it may be entitled to receive under Section 5(c)(ii) hereof.

 

(d)           All distributions which are received by any Grantor contrary to
the provisions of this Section 5 shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of such Grantor and shall
immediately be paid over to the Agent as Collateral in the same form as so
received (with any necessary endorsement).

 

(e)           In the case of each Grantor which is an issuer of Pledged
Securities or an Intercompany Note, such Grantor agrees to be bound by the terms
of this Agreement relating to such Collateral issued by it and will comply with
such terms insofar as such terms are applicable to it.  In the case of each
Grantor which is a partner, shareholder or member, as the case may be, in a
partnership, limited liability company or other entity, such Grantor hereby
consents to the extent required by the applicable Organizational Document to the
pledge by each other Grantor, pursuant to the terms hereof, of the Pledged
Securities in such partnership, limited liability company or other entity and,
upon the occurrence and during the continuance of an Event of Default, to the
transfer of such Pledged Securities to the Agent or its nominee and to the
substitution of the Agent or its nominee as a substituted partner, shareholder
or member in such partnership, limited liability company or other entity with
all the rights, powers and duties of a general partner, limited partner,
shareholder or member, as the case may be.

 

6.             REMEDIES UPON DEFAULT.  Upon the occurrence and during the
continuation of an Event of Default:

 

(a)           The Agent may exercise, in addition to any other rights and
remedies provided herein, under other contracts and under law, all the rights
and remedies of a secured party under the Uniform Commercial Code.  Without
limiting the generality of the foregoing, upon the occurrence and during the
continuation of an Event of Default, (i) at the request of the Agent, each
Grantor shall, at its cost and expense, assemble the Collateral owned or used by
it as directed by the Agent; (ii) the Agent shall have the right (but not the
obligation) to notify any Account Debtors and any obligors under Instruments or
Accounts to make payments directly to the Agent and to enforce the Grantors’
rights against such Account Debtors and obligors; (iii) the Agent may (but is
not obligated to), without notice except as provided below, sell the Collateral
at public or private sale, on such terms as the Agent deems to be commercially
reasonable; (iv) the Agent may (but is not obligated to) direct any financial
intermediary or any other Person holding Investment Property to transfer the
same to the Agent or its designee; and (v) the Agent may (but is not obligated
to) transfer any or all Intellectual Property registered in the name of any
Grantor at the United States Patent and Trademark Office and/or United States
Copyright Office into the name of the Agent or any designee or any purchaser of
any Collateral.  Each Grantor agrees that ten (10) Business Days’ notice of any
sale referred to in clause (iii) above shall constitute sufficient notice.  The
Agent or any Secured Party may purchase Collateral at any such sale.  The
Grantors shall be liable to the Agent and the other Secured Parties for any
deficiency amount.

 

(b)           The Agent may comply with any applicable Law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the

 

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commercial reasonableness of any sale of the Collateral.  The Agent may sell the
Collateral without giving any warranties and may specifically disclaim such
warranties.  If the Agent sells any of the Collateral on credit, the Borrower
will only be credited with payments actually made by the purchaser.  The Agent
or any Secured Party may purchase Collateral at any such sale.  In addition,
each Grantor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.

 

(c)           For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 6 or elsewhere provided by agreement or
applicable Law, each Grantor hereby grants to the Agent, for the benefit of the
Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to such Grantor) to use,
license or sublicense following an Event of Default, any Intellectual Property
now owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

 

7.             OBLIGATIONS ABSOLUTE.

 

(a)           Change of Circumstance.  THE RIGHTS OF THE AGENT HEREUNDER AND THE
OBLIGATIONS OF THE GRANTORS HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL, SHALL
NOT BE SUBJECT TO ANY COUNTERCLAIM, SETOFF, RECOUPMENT OR DEFENSE BASED UPON ANY
CLAIM THAT ANY GRANTOR OR ANY OTHER PERSON MAY HAVE AGAINST ANY SECURED PARTY
AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL FULL SATISFACTION OF THE SECURED
OBLIGATIONS AFTER OR CONCURRENT WITH THE TERMINATION OF ANY COMMITMENT OF THE
SECURED PARTIES TO MAKE FINANCIAL ACCOMMODATIONS TO THE BORROWER PURSUANT TO THE
CREDIT AGREEMENT (SUBJECT TO REINSTATEMENT THEREAFTER AS PROVIDED IN SECTION
13(A) HEREOF).  Without limiting the generality of the foregoing, the
obligations of the Grantors shall not be released, discharged or in any way
affected by any circumstance or condition (whether or not the applicable Grantor
shall have any notice or knowledge thereof) including, without limitation, any
amendment or modification of or supplement to the Credit Agreement, any Notes or
any other Loan Document (including, without limitation, increasing the amount or
extending the maturity of the Secured Obligations); any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreements or instruments, or any exercise or failure to exercise of any
right, remedy, power or privilege under or on respect of any such agreements or
instruments, or any exercise of or failure to exercise any right, remedy, power
or privilege under or in respect of any such agreements or instruments; any
invalidity or unenforceability, in whole or in part, of any term hereof or of
the Credit Agreement, any Notes or any other Loan Document; any failure on the
part of the Borrower or any other Person for any reason to perform or comply
with any term of the Credit Agreement, any Note or any other Loan Document; any
furnishing or acceptance of any additional security or guaranty; any release of
any Grantor or any other Person or any release of any or all security or any or
all guarantees for the Secured Obligations, whether any such release is granted
in connection with a

 

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bankruptcy or otherwise; any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or similar proceeding with
respect to any Grantor or any other Person or their respective properties or
creditors; the application of payments received by the Agent or any other
Secured Party from any source that were lawfully used for some other purpose,
but which lawfully could have been applied to the payment, in full or in part,
of the Secured Obligations; or any other occurrence whatsoever, whether similar
or dissimilar to the foregoing.  Without limiting the generality of the
foregoing, at any time that the Credit Agreement is amended to increase the
amount of the Obligations thereunder, the amount of the Secured Obligations
shall be accordingly increased.

 

(b)           No Duty To Marshal Assets.  The Agent shall have no obligation to
marshal any assets in favor of any Grantor or any other Person or against or in
payment of any or all of the Secured Obligations.

 

(c)           Waiver of Right of Subrogation, Etc.  Each Grantor hereby waives
any and all rights of subrogation, reimbursement, or indemnity whatsoever in
respect of such Grantor arising out of remedies exercised by the Agent hereunder
until payment in full in cash of the Secured Obligations and the termination of
any commitment of the Secured Parties to make financial accommodations to the
Borrower pursuant to the Credit Agreement (and subject to reinstatement
thereafter as provided in Section 13(a) hereof).

 

(d)           Other Waivers.  Each Grantor hereby waives promptness, diligence
and notice of acceptance of this Agreement.  In connection with any sale or
other disposition of Collateral, to the extent permitted by applicable Law, each
Grantor waives any right of redemption or equity of redemption in the
Collateral.  Each Grantor further waives presentment and demand for payment of
any of the Secured Obligations, protest and notice of protest, dishonor and
notice of dishonor or notice of default or any other similar notice with respect
to any of the Secured Obligations, and all other similar notices to which any
Grantor might otherwise be entitled, except as otherwise expressly provided in
the Loan Documents.  The Agent is under no obligation to pursue any rights
against third parties with respect to the Secured Obligations and each Grantor
hereby waives any right it may have to require otherwise.  Each Grantor (to the
extent that it may lawfully do so) covenants that it shall not at any time
insist upon or plead, or in any manner claim or take the benefit of, any stay,
valuation, appraisal or redemption now or at any time hereafter in force that,
but for this waiver, might be applicable to any sale made under any judgment,
order or decree based on this Agreement; and each Grantor (to the extent that it
may lawfully do so) hereby expressly waives and relinquishes all benefit of any
and all such laws and hereby covenants that it will not hinder, delay or impede
the execution of any power in this Agreement delegated to the Agent, but that it
will suffer and permit the execution of every such power as though no such law
or laws had been made or enacted.

 

(e)           Each Grantor further waives to the fullest extent permitted by law
any right it may have under the constitution of the Commonwealth of Pennsylvania
(or under the constitution of any other state in which any of the Collateral or
any Grantor may be located), or under the Constitution of the United States of
America, to notice (except for notice specifically required hereby) or to a
judicial hearing prior to the exercise of any right or remedy provided by this
Agreement to the Agent, and waives its rights, if any, to set aside or
invalidate any sale duly

 

19

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consummated in accordance with the foregoing provisions hereof on the grounds
(if such be the case) that the sale was consummated without a prior judicial
hearing.

 

(f)            EACH GRANTOR’S WAIVERS UNDER THIS SECTION 7 HAVE BEEN MADE
VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY AND AFTER SUCH GRANTOR HAS BEEN
APPRISED AND COUNSELED BY ITS ATTORNEY AS TO THE NATURE THEREOF AND ITS POSSIBLE
ALTERNATIVE RIGHTS.

 

8.             NO IMPLIED WAIVERS.  No failure or delay on the part of the Agent
in exercising any right, power or privilege under this Agreement or the other
Loan Documents and no course of dealing between the Grantor, on the one hand,
and the Agent or the Secured Parties, on the other hand, shall operate as a
waiver of any such right, power or privilege.  No single or partial exercise of
any right, power or privilege under this Agreement or the other Loan Documents
precludes any other or further exercise of any such right, power or privilege or
the exercise of any other right, power or privilege.  The rights and remedies
expressly provided in this Agreement and the other Loan Documents are cumulative
and not exclusive of any rights or remedies which the Agent or the Secured
Parties would otherwise have.  No notice to or demand on any Grantor in any case
shall entitle the Grantors to any other or further notice or demand in similar
or other circumstances or shall constitute a waiver of the right of the Agent or
the Secured Parties to take any other or further action in any circumstances
without notice or demand.  Any waiver that is given shall be effective only if
in writing and only for the limited purposes expressly stated in the applicable
waiver.

 

9.             STANDARD OF CARE.

 

(a)           In General.  No act or omission of the Agent or any Secured Party
(or agent or employee of any of the foregoing) shall give rise to any defense,
counterclaim or offset in favor of any Grantor or any claim or action against
the Agent or such Secured Party (or agent or employee thereof), in the absence
of gross negligence or willful misconduct of the Agent or such Secured Party (or
agent or employee thereof) as determined in a final, nonappealable judgment of a
court of competent jurisdiction.  The Agent and each Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords to other collateral it holds, it
being understood that neither the Agent nor any Secured Party has any duty to
take any action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral or to preserve any rights of
any parties and neither the Agent nor any Secured Party shall be liable for
losses except to the extent such losses are a result of the gross negligence or
willful misconduct of the Agent or such Secured Party as determined in a final,
nonappealable judgment of a court of competent jurisdiction.

 

(b)           No Duty to Preserve Rights.  Without limiting the generality of
the foregoing, the Agent has no duty (either before or after an Event of
Default) to collect any amounts in respect of the Collateral or to preserve any
rights relating to the Collateral.

 

(c)           No Duty to Prepare for Sale.  Without limiting the generality of
the foregoing, the Agent has no obligation to clean-up or otherwise prepare the
Collateral for sale.

 

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(d)           Duties Relative to Contracts.  Without limiting the generality of
the foregoing, each Grantor shall remain obligated and liable under each
contract or agreement included in the Collateral to be observed or performed by
such Grantor thereunder.  Neither the Agent nor any Secured Party shall have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
any Grantor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or times.

 

(e)           Reliance on Advice of Counsel.  In taking any action under this
Agreement or any other Loan Document, the Agent shall be entitled to rely upon
the advice of counsel of Agent’s choice and shall be fully protected in acting
on such advice whether or not the advice rendered is ultimately determined to
have been accurate.

 

10.           MISCELLANEOUS.

 

(a)           Successors and Assigns.  Except as otherwise provided in the
Credit Agreement, the Agent may assign or transfer this Agreement and any or all
rights or obligations hereunder without the consent of any Grantor and without
prior notice.  No Grantor shall assign or transfer this Agreement or any rights
or obligations hereunder without the prior written consent of the Agent or as
expressly provided in the Credit Agreement.  Notwithstanding the foregoing, if
there should be any assignment of any rights or obligations by operation of law
or in contravention of the terms of this Agreement or otherwise, then all
covenants, agreements, representations and warranties made herein or pursuant
hereto by or on behalf of any Grantor shall bind the successors and assigns of
such Grantor jointly and severally (if applicable), together with the
preexisting Grantor, whether or not such new or additional Persons execute a
joinder hereto or assumption hereof which condition shall not be deemed to be a
waiver of any Default or Event of Default arising out of such assignment.

 

(b)           Benefit.  The rights and privileges of Agent and Secured Parties
under this Agreement shall inure to the benefit of their respective successors
and assigns.  All promises, covenants and agreements of each Grantor contained
in this Agreement shall be binding upon the successors and assigns of such
Grantor.

 

(c)           Joint and Several Liability.  All Grantors shall jointly and
severally be liable for the obligations of each Grantor to the Agent hereunder.

 

(d)           Notices.  All notices, requests, demands, directions and other
communications provided for herein shall be in writing and shall be delivered or
mailed in the manner specified in the Credit Agreement and delivered at the
addresses set forth on Schedule 1 hereto, or to such other address as any party
hereto may have last specified by written notice to the other party or parties.

 

21

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(e)           Severability.  Every provision of this Agreement is intended to be
severable.  If any term or provision of this Agreement shall be invalid, illegal
or unenforceable for any reason, the validity, legality and enforceability of
the remaining provisions shall not be affected or impaired thereby. Any
invalidity, illegality or unenforceability of any term or provision of this
Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of any such term or provision in any other jurisdiction.

 

(f)            Costs and Expenses.  Without limiting any other cost
reimbursement provisions in the Loan Documents, upon demand, the Grantors shall
pay to the Agent the amount of any and all reasonable expenses incurred by the
Agent hereunder or in connection herewith, including, without limitation those
that may be incurred in connection with (i) the preparation of this Agreement
and all amendments, restatements, waivers and supplements hereto, (ii) the
administration of this Agreement, (iii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iv) the exercise or enforcement of any of the rights of the Agent hereunder or
(v) the failure of any Grantor to perform or observe any of the provisions
hereof.

 

(g)           Indemnification by Grantors.  Each Grantor shall indemnify,
reimburse and hold harmless all Indemnitees from and against any and all losses,
claims, liabilities, damages, penalties, suits, costs and expenses, of any kind
or nature, (including fees relating to the cost of investigating and defending
any of the foregoing) imposed on, incurred by or asserted against such
Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities,
damages, penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction.  This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in any other Loan Document.

 

(h)           Counterparts; Integration; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Agent constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  This
Agreement shall become effective when it shall have been executed by the Agent
and when the Agent shall have received counterparts hereof that when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or by e-mail (in
pdf form) shall be effective as delivery of a manually executed counterpart of
this Agreement.

 

(i)            Amendments and Waivers.  The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Grantors and the Agent.

 

22

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(j)            Descriptive Headings.  The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
affect the meaning or construction of any of the provisions of this Agreement.

 

(k)           Credit Agreement.  Each Grantor that is not a party to the Credit
Agreement hereby acknowledges receipt from the Borrower of a correct and
complete copy of the Credit Agreement and consents to all of the provisions of
the Credit Agreement as in effect on the date hereof and agrees that its consent
is not required for any amendments, modifications, restatements or waivers of it
or any of the provisions thereof.

 

11.           SPECIFIC PERFORMANCE.  Each Grantor hereby authorizes the Agent to
demand specific performance of this Agreement at any time when any Grantor shall
have failed to comply with any provision hereof, and each Grantor hereby
irrevocably waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance hereof in any
action brought therefor.

 

12.           RELATIONSHIP WITH OTHER AGREEMENTS.

 

(a)           Notwithstanding anything herein to the contrary, the lien and
security interest granted to the Agent pursuant to this Agreement and the
exercise of any right or remedy by the Agent hereunder are subject to the
provisions of the Intercreditor Agreement.  In the event of any conflict between
the terms of the Intercreditor Agreement and this Agreement, the terms of the
Intercreditor Agreement shall govern and control.

 

(b)           To the extent that any of the terms hereof is inconsistent with
any provision of the Credit Agreement, the provisions of the Credit Agreement
shall control.

 

13.           TERMINATION; PARTIAL RELEASE.

 

(a)           Termination.  At such time as no Secured Party has any commitment
to make financial accommodations to the Borrower pursuant to the terms of the
Credit Agreement and all the Secured Obligations have been paid and performed in
full, then the security provided for herein shall terminate, provided, however,
that (i) all indemnities of the Borrower and each other Grantor contained in
this Agreement or any other Loan Document shall survive and remain operative and
in full force and effect regardless of the termination of this Agreement; and
(ii) the security provided for herein shall be reinstated if at any time any
payment of any of the Secured Obligations is rescinded or must otherwise be
returned by the Agent upon the insolvency, bankruptcy or reorganization of the
Borrower or any other Grantor or otherwise, all as though such payment had not
been made.

 

(b)           Partial Release.  Effective upon the closing of a disposition of
any Collateral to any Person (other than a Grantor) and the application of the
proceeds thereof in conformity with the provisions of the Credit Agreement, and
receipt by the Agent of a certification to such effect from an authorized
officer of the Borrower, the security interest in the Collateral so disposed of
shall terminate and the Agent shall deliver such releases as may be appropriate,
provided, however, the security interest in all remaining Collateral shall
remain in full force and effect.

 

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14.           GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.

 

(a)           Governing Law.  This Agreement and the rights and obligations of
the parties hereunder shall be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania (excluding the laws applicable to
conflicts or choice of law).

 

(b)           Submission to Jurisdiction.  Each Grantor irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the courts of the Commonwealth of Pennsylvania sitting in
Philadelphia County and of the United States District Court of the Eastern
District of Pennsylvania, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or any other
Loan Document, or for recognition or enforcement of any judgment, and each of
the parties hereto irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Pennsylvania state court or, to the fullest extent permitted by applicable law,
in such federal court.  Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.  Nothing in this Agreement or in any other Loan Document shall affect any
right that the Agent or any Secured Party may otherwise have to bring any action
or proceeding relating to this Agreement or any other Loan Document against any
Grantor or its properties in the courts of any jurisdiction.

 

(c)           Waiver of Venue.  Each Grantor irrevocably and unconditionally
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (b) above.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.  Each Grantor irrevocably waives, to the fullest extent
permitted by applicable law any right to bring any action or proceeding against
(i) the Agent in any court outside the county of Philadelphia, Commonwealth of
Pennsylvania, or (ii) any other Secured Party other than in a state within the
United States designated by such Secured Party.

 

(d)           Service of Process.  Each party hereto irrevocably waives personal
service of any and all process upon it and irrevocably consents to service of
process in the manner provided for notices in Section 10 hereof.  Nothing in
this Agreement will affect the right of any party hereto to serve process in any
other manner permitted by applicable Law.

 

(e)           Waiver of Jury Trial.  EXCEPT AS PROHIBITED BY LAW, EACH PARTY
HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY PARTY HERETO, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS OR ACTIONS OF THE AGENT ON BEHALF OF ANY SECURED PARTY
RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS
AND AGREES THAT NO PARTY

 

24

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HERETO WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EXCEPT AS PROHIBITED BY LAW, EACH
GRANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  EACH GRANTOR CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY OF THE SECURED
PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY SECURED
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER.  THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE AGENT ON BEHALF
OF THE SECURED PARTIES TO ENTER INTO THIS AGREEMENT.

 

15.           NOTEHOLDER FIRST LIEN COLLATERAL.  Notwithstanding anything herein
to the contrary, prior to the Discharge of the Noteholder Obligations, the
requirements of this Agreement to deliver or grant control over Noteholder First
Lien Collateral to the Agent shall be deemed satisfied by delivery of or
granting control over such Noteholder First Lien Collateral to the Collateral
Agent as bailee for the Agent pursuant to the Intercreditor Agreement.  Prior to
the Discharge of the Noteholder Obligations, each Grantor agrees that, in the
event any Grantor, pursuant to the Noteholder Collateral Documents, takes any
action to grant or perfect a Lien in favor of the Collateral Agent in any assets
(other than Noteholder Exclusive Real Property), such Grantor shall also take
such action, subject to the cooperation of the Agent, to grant or perfect a Lien
(subject to the Intercreditor Agreement) in favor of the Agent to secure the ABL
Obligations without request of the Agent.  As used in this Section 15, the terms
“ABL Obligations,” “Discharge of the Noteholder Obligations,” “Noteholder
Collateral Documents,” “Noteholder Exclusive Real Property” and “Noteholder
First Lien Collateral” shall have the respective meanings assigned to such terms
in the Intercreditor Agreement as in effect on the date hereof or as amended
from time to time in accordance with the provisions thereof.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in the name and on behalf of the parties hereto as of the date first above
written.

 

 

GRANTORS:

 

 

 

NEW ENTERPRISE STONE & LIME CO., INC.

 

 

 

 

 

By:

/s/ Paul I. Detwiler, III

 

Name:

Paul I. Detwiler, III

 

Title:

President, Chief Financial Officer and Secretary

 

 

 

 

 

ASTI TRANSPORTATION SYSTEMS, INC.

 

EII TRANSPORT INC.

 

GATEWAY TRADE CENTER INC.

 

PRECISION SOLAR CONTROLS INC.

 

PROTECTION SERVICES INC.

 

SCI PRODUCTS INC.

 

WORK AREA PROTECTION CORP.

 

 

 

 

 

By:

/s/ Paul I. Detwiler, III

 

Name:

Paul I. Detwiler, III

 

Title:

Vice President on behalf of each of the foregoing

 

 

 

 

 

Agent:

 

 

 

MANUFACTURERS AND TRADERS

 

TRUST COMPANY, in its capacity as Agent

 

 

 

 

 

By:

/s/ Stephen A. Foreman

 

Name:

Stephen A. Foreman

 

Title:

Regional Executive

 

[Signature Page to Security Agreement]

 

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Annex A

 

ADDITIONAL GRANTOR JOINDER

 

Security Agreement dated as of                       , 2012, made by

New Enterprise Stone & Lime Co., Inc.

And certain of its subsidiaries party thereto from time to time, as Grantors

to and in favor of

Manufacturers and Traders Trust Company, as Agent (the “Security Agreement”)

 

Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement.

 

The undersigned hereby agrees that upon delivery of this Additional Grantor
Joinder to the Agent referred to above or its successor, the undersigned shall
(a) be an Additional Grantor under the Security Agreement, (b) have all the
rights and obligations of the Grantors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto and
(c) be deemed to have made the representations and warranties set forth in
Section 3 therein as of the date of execution and delivery of this Additional
Grantor Joinder and at any future dates that such representations must be
restated pursuant to the terms of the Loan Documents.  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE AGENT,
FOR THE BENEFIT OF THE SECURED PARTIES, A SECURITY INTEREST IN THE COLLATERAL AS
MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO
THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

 

Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable.

 

Each Additional Grantor that is not a party to the Credit Agreement hereby
acknowledges receipt from the Borrower of a correct and complete copy of the
Credit Agreement and consents to all of the provisions of the Credit Agreement
as in effect on the date hereof and agrees that its consent is not required for
any amendments, modifications, restatements or waivers of it or any of the
provisions thereof.

 

An executed copy of this Joinder shall be delivered to the Agent, and the Agent
and the Secured Parties may rely on the matters set forth herein on or after the
date hereof.  This Joinder shall not be modified, amended or terminated without
the prior written consent of the Agent.

 

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IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.

 

 

 

 

[Name of Additional Grantor]

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Address:

 

 

 

 

 

 

Dated:

 

 

 

 

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Annex B

 

FORM OF POWER OF ATTORNEY

 

This Power of Attorney is executed and delivered by
                                      , a
                                             (“Grantor”), to MANUFACTURERS AND
TRADERS TRUST COMPANY, as Agent for itself and the other Secured Parties as such
term is defined in the Credit Agreement referred to below (“Attorney”).  This
Power of Attorney is delivered in connection with and pursuant to a certain
Credit Agreement dated as of even date herewith, among New Enterprise Stone and
Lime Co., Inc., as borrower, the lenders party thereto, and Manufacturers and
Traders Trust Company, as administrative agent (as the same may be amended,
modified, restated and/or supplemented from time to time, the “Credit
Agreement”) and that certain Security Agreement delivered in connection
therewith (the “Security Agreement”).  Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Security
Agreement.  No person to whom this Power of Attorney is presented, as authority
for Attorney to take any action or actions contemplated hereby, shall be
required to inquire into or seek confirmation from Grantor as to the authority
of Attorney to take any action described below, or as to the existence of or
fulfillment of any condition to this Power of Attorney, which is intended to
grant to Attorney unconditionally the authority to take and perform the actions
contemplated herein, and Grantor irrevocably waives any right to commence any
suit or action, in law or equity, against any person or entity which acts in
reliance upon or acknowledges the authority granted under this Power of
Attorney.  The power of attorney granted hereby is coupled with an interest, and
may not be revoked or canceled by Grantor without Attorney’ s written consent.

 

Grantor hereby irrevocably constitutes and appoints Attorney (and all officers,
employees or agents designated by Attorney), with full power of substitution, as
Grantor’s true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Grantor and in the name of Grantor or in its
own name, from time to time in Attorney’s discretion, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
the Credit Agreement, the Security Agreement and any and all agreements,
documents and instruments executed, delivered or filed in connection therewith
from time to time (collectively, the “Loan Documents”) and, without limiting the
generality of the foregoing, Grantor hereby grants to Attorney the power and
right, on behalf of Grantor, without notice to or assent by Grantor, and at any
time, to do the following:

 

(a)           change the mailing address of Grantor, open a post office box on
behalf of Grantor, open mail for Grantor, and ask, demand, collect, give
acquittances and receipts for, take possession of, endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in connection with any property
of Grantor;

 

(b)           receive, endorse Grantor’s name on, and collect, any checks,
notes, acceptances, money orders, drafts and any other forms of payment or
security payable to

 

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Grantor, and hold all amounts or proceeds so received or collected as cash
collateral in a restricted account for the benefit of the Secured Parties, or
apply such amounts or proceeds to the Secured Obligations in accordance with the
terms of the Credit Agreement;

 

(c)           effect any repairs to any asset of Grantor, or continue or obtain
any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of
insurance, and make all determinations and decisions with respect to such
policies;

 

(d)           pay or discharge any taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against Grantor or its property;

 

(e)           defend any suit, action or proceeding brought against Grantor if
Grantor does not defend such suit, action or proceeding or if Attorney believes
that Grantor is not pursuing such defense in a manner that will maximize the
recovery to Attorney, and settle, compromise or adjust any suit, action, or
proceeding described above and, in connection therewith, give such discharges or
releases as Attorney may deem appropriate;

 

(f)            file or prosecute any claim, litigation, suit or proceeding in
any court of competent jurisdiction or before any arbitrator, or take any other
action otherwise deemed appropriate by Attorney for the purpose of collecting
any and all such moneys due to Grantor whenever payable and to enforce any other
right in respect of Grantor’s property;

 

(g)           cause the certified public accountants then engaged by Grantor to
prepare and deliver to Attorney at any time and from time to time, promptly upon
Attorney’s request, the following reports:  (i) a reconciliation of all
accounts, (ii) an aging of all accounts, (iii) trial balances, (iv) test
verifications of such accounts as Attorney may request, and (v) the results of
each physical verification of inventory;

 

(h)           communicate in its own name with any party to any contract with
regard to the assignment of the right, title and interest of Grantor in and
under the contracts and other matters relating thereto;

 

(i)            to the extent that Grantor’s authorization given in the Security
Agreement is not sufficient, to file such financing statements with respect to
the Security Agreement as Attorney may deem appropriate and to execute in
Grantor’s name such financing statements and amendments thereto and continuation
statements which may require the Grantor’s signature;

 

(j)            to transfer any Intellectual Property (including any domain
names) or provide licenses respecting any Intellectual Property; and

 

(k)           execute, deliver and/or record, as applicable, in connection with
any sale or other remedy provided for in any Loan Document, any endorsements,
assignments or other applications for or instruments of conveyance or transfer
with respect to the Collateral and to otherwise direct such sale or resale, all
as though Attorney were the absolute owner of the property of Grantor for all
purposes, and to do, at Attorney’s option and Grantor’s expense, at any time or
from time to time, all acts and other things that Attorney reasonably deems
necessary

 

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to perfect, preserve, or realize upon Grantor’s property or assets and
Attorney’s liens thereon, all as fully and effectively as Grantor might do.

 

Grantor hereby ratifies, to the extent permitted by law, all that Attorney shall
lawfully do or cause to be done by virtue hereof.  Without limiting the
generality of the foregoing, Attorney is specifically authorized to execute and
file any applications for or instruments of transfer and assignment of any
Patents, Trademarks, Copyrights or other Intellectual Property with the United
States Patent and Trademark Office and the United States Copyright Office.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, this Power of Attorney is duly executed on behalf of Grantor
this          day of                         , 20      .

 

 

 

 

 

 

 

 

By:

 

 

Name:

Paul I. Detwiler, III

 

Title:

 

 

NOTARY PUBLIC CERTIFICATE

 

On this            day of                         , 20      ,
                                   [officer’s name] who is personally known to
me appeared before me in his/her capacity as the                               
[title] of                                        [name of Grantor] (“Grantor”)
and executed on behalf of Grantor the Power of Attorney in favor of
Manufacturers and Traders Trust Company, as Agent, to which this Certificate is
attached.

 

 

 

 

Notary Public

 

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Annex C

 

ACKNOWLEDGMENT BY ISSUER OF UNCERTIFICATED SECURITIES

 

Security Agreement dated as of                  , 2012, made by

New Enterprise Stone & Lime Co., Inc.

and certain of its subsidiaries party thereto from time to time, as Grantors

to and in favor of

Manufacturers and Traders Trust Company, as Agent (the “Security Agreement”)

 

The undersigned hereby (i) acknowledges receipt of the Security Agreement, (ii)
agrees promptly to note on its books the security interests granted to the Agent
and confirmed under the Security Agreement, (iii) agrees that it will comply
with instructions of the Agent with respect to the applicable Pledged Securities
(including all Capital Stock of the undersigned) without further consent by the
applicable Grantor, (iv) agrees to notify the Agent upon obtaining knowledge of
any interest in favor of any person in the applicable Pledged Securities that is
adverse to the interest of the Agent therein and (v) waives any right or
requirement at any time hereafter to receive a copy of the Security Agreement in
connection with the registration of any Pledged Securities thereunder in the
name of the Agent or its nominee or the exercise of voting rights by the Agent
or its nominee.

 

Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in the Security Agreement.

 

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IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement to be
executed in the name and on behalf of the undersigned.

 

 

 

[Name of Issuer]

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

Address:

 

 

 

 

Dated:

 

 

 

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Annex D

 

FORM OF PLEDGE AMENDMENT FOR ADDITIONAL SECURITIES COLLATERAL

 

Security Agreement dated as of                       , 2012, made by

New Enterprise Stone & Lime Co., Inc.

and certain of its subsidiaries party thereto from time to time, as Grantors

to and in favor of

Manufacturers and Traders Trust Company, as Agent (the “Security Agreement”)

 

This Pledge Amendment, dated as of [                    ], is delivered pursuant
to Section 5 of the Security Agreement).  The undersigned hereby agrees that
this Pledge Amendment may be attached to the Security Agreement and that the
Pledged Securities and/or Intercompany Notes listed on this Pledge Amendment
shall be deemed to be and shall become part of the Collateral and shall secure
all Secured Obligations.

 

Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in the Security Agreement

 

PLEDGED SECURITIES

 

ISSUER

 

CLASS
OF STOCK
OR
INTERESTS

 

PAR
VALUE

 

CERTIFICATE
NO(S).

 

NUMBER OF
SHARES
OR
INTERESTS

 

PERCENTAGE OF
ALL ISSUED CAPITAL
OR OTHER EQUITY
INTERESTS OF ISSUER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERCOMPANY NOTES

 

ISSUER

 

PRINCIPAL
AMOUNT

 

DATE OF
ISSUANCE

 

INTEREST
RATE

 

MATURITY
DATE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

[                                                                        ],

 

as Pledgor

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

AGREED TO AND ACCEPTED:

 

 

 

MANUFACTURERS AND TRADERS TRUST COMPANY,

 

as Agent

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

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SCHEDULE 1

 

NOTICE ADDRESSES

 

(a)           If to a Grantor, to it at 3912 Brumbaugh Road, P.O. Box 77, New
Enterprise, PA 16664, Attention of Mr. Paul I. Detwiler III (Telecopier No.
814-766-4402; Telephone No. 814-776-2211) with a copy to Pepper Hamilton LLP,
3000 Two Logan Square, 18th & Arch Streets, Philadelphia, PA 19103, Attention of
Cary S. Levinson, Esquire (Telecopier No. 215-981-4750; Telephone No.
215-981-4091).

 

(b)           If to the Agent, to it at Manufacturers and Traders Trust Company,
301 W. Plank Road, Altoona, PA 16602, Attention of Robert L. Bilger (Telecopier
No. 814-947-5908; Telephone No. 814-946-6761) with a copy to Drinker Biddle &
Reath LLP, One Logan Square, 18th & Cherry Streets, Philadelphia, PA 19103,
Attention of Jill E. Bronson, Esquire (Telecopier No. 215-988-2757; Telephone
No. 215-988-2665).

 

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