Exhibit 10.15

EXECUTION VERSION

 

 

 

SECOND LIEN SECURITY AGREEMENT

Among

SHAY INTERMEDIATE HOLDING II CORPORATION,

PAE HOLDING CORPORATION,

CERTAIN OTHER SUBSIDIARIES OF PAE HOLDING CORPORATION

and

BANK OF AMERICA, N.A.,

as COLLATERAL AGENT

 

 

Dated as of October 20, 2016

 

 

 

 

 

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TABLE OF CONTENTS

 

          Page      ARTICLE I       SECURITY INTERESTS   

1.1

   Grant of Security Interests      2  

1.2

   Certain Exceptions      3  

1.3

   Power of Attorney      5  

1.4

   Perfection Certificate      5      ARTICLE II       GENERAL REPRESENTATIONS,
WARRANTIES AND COVENANTS   

2.1

   Necessary Perfection Action      5  

2.2

   No Liens      6  

2.3

   Other Financing Statements      6  

2.4

   Chief Executive Office, Record Locations      6  

2.5

   Location of Goods, Inventory and Equipment      6  

2.6

   Legal Names; Type of Organization (and Whether a Registered Organization);
Jurisdiction of Organization; Location; Organizational Identification Numbers;
Federal Employer Identification Number; Changes Thereto; etc.      6  

2.7

   [Reserved]      7  

2.8

   Certain Significant Transactions      7  

2.9

   As-Extracted Collateral; Timber-to-be-Cut      7  

2.10

   Collateral in the Possession of a Bailee      7  

2.11

   Recourse      7      ARTICLE III       SPECIAL PROVISIONS CONCERNING
ACCOUNTS; CONTRACT RIGHTS;       INSTRUMENTS; CHATTEL PAPER AND CERTAIN OTHER
COLLATERAL   

3.1

   Assignment of Claims Act      8  

3.2

   Maintenance of Records      8  

3.3

   Direction to Account Debtors; Contracting Parties; etc.      8  

3.4

   Modification of Terms; etc.      9  

3.5

   Collection      9  

3.6

   Instruments      9  

3.7

   Grantors Remain Liable Under Accounts      10  

3.8

   Grantors Remain Liable Under Contracts      10  

3.9

   Deposit Accounts; Etc.      10  

3.10

   [Reserved]      11  

3.11

   Commercial Tort Claims      11  

3.12

   Chattel Paper      11  

3.13

   Further Actions      11  

 

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   ARTICLE IV       SPECIAL PROVISIONS CONCERNING TRADEMARKS AND DOMAIN NAMES   

4.1

   Additional Representations and Warranties      11  

4.2

   Assignments      12  

4.3

   Infringements      12  

4.4

   Preservation of Marks      12  

4.5

   Maintenance of Registration      12  

4.6

   Future Registered Marks and Domain Names      13  

4.7

   Remedies      13      ARTICLE V       SPECIAL PROVISIONS CONCERNING PATENTS,
COPYRIGHTS AND TRADE SECRETS   

5.1

   Additional Representations and Warranties      13  

5.2

   Assignments      14  

5.3

   Infringements      14  

5.4

   Maintenance of Patents or Copyrights      14  

5.5

   Prosecution of Patent or Copyright Applications      14  

5.6

   Other Patents and Copyrights      14  

5.7

  

Remedies

     15      ARTICLE VI       PROVISIONS CONCERNING ALL COLLATERAL   

6.1

   Protection of Collateral Agent’s Security      15  

6.2

   Warehouse Receipts Non-Negotiable      15  

6.3

   Additional Information      15  

6.4

   Further Actions      15  

6.5

   Financing Statements      16      ARTICLE VII       REMEDIES UPON OCCURRENCE
OF AN EVENT OF DEFAULT   

7.1

   Remedies; Obtaining the Collateral Upon an Event of Default      16  

7.2

   Remedies; Disposition of the Collateral      17  

7.3

   Waiver of Claims      18  

7.4

   Application of Proceeds      18  

7.5

   Remedies Cumulative      20  

7.6

   Discontinuance of Proceedings      20      ARTICLE VIII       INDEMNITY   

8.1

   Indemnity      20  

8.2

   Indemnity Obligations Secured by Collateral; Survival      20  

 

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   ARTICLE IX       DEFINITIONS       ARTICLE X       MISCELLANEOUS   

10.1

   Notices      26  

10.2

   Waiver; Amendment      27  

10.3

   Obligations Absolute      27  

10.4

   Successors and Assigns      27  

10.5

   Headings Descriptive      27  

10.6

   GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL     
28  

10.7

   Grantor’s Duties      29  

10.8

   Termination; Release      29  

10.9

   Counterparts      30  

10.10

   Severability      30  

10.11

   The Collateral Agent and the other Secured Creditors      30  

10.12

   Additional Grantors      30  

10.13

   Intercreditor Agreements      30  

 

EXHIBIT A    Form of Second Lien Copyright Security Agreement EXHIBIT B    Form
of Second Lien Patent Security Agreement EXHIBIT C    Form of Second Lien
Trademark Security Agreement EXHIBIT D    Form of Joinder Agreement

 

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SECOND LIEN SECURITY AGREEMENT

SECOND LIEN SECURITY AGREEMENT, dated as of October 20, 2016, made by each of
the undersigned grantors (each, a “Grantor” and, together with any other entity
that becomes a grantor hereunder pursuant to Section 10.12 hereof, the
“Grantors”) in favor of Bank of America, N.A., as Collateral Agent (together
with any successor Collateral Agent, the “Collateral Agent”), for the benefit of
the Secured Creditors (as defined below). Certain capitalized terms as used
herein are defined in Article IX hereof. Except as otherwise defined herein, all
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.

W I T N E S S E T H:

WHEREAS, Shay Intermediate Holding II Corporation, a Delaware corporation
(“Holdings”), PAE Holding Corporation, a Delaware corporation (the “Lead
Borrower”), the Subsidiary Borrowers party thereto (and together with the Lead
Borrower, the “Borrowers”), the lenders party thereto from time to time (the
“Lenders”) and Bank of America, N.A., as administrative agent (together with any
successor administrative agent, the “Administrative Agent”), have entered into a
Second Lien Term Loan Credit Agreement dated as of even date herewith (as
amended, modified, restated and/or supplemented from time to time, the “Credit
Agreement”), providing for the making of Term Loans to the Borrower, as
contemplated therein (the Lenders, the Administrative Agent, the Collateral
Agent and each other Agent are herein called the “Lender Creditors”);

WHEREAS, the Lead Borrower and/or one or more of its Restricted Subsidiaries may
at any time and from time to time enter into one or more Designated Interest
Rate Protection Agreements and Designated Treasury Services Agreements with
Guaranteed Creditors (the Administrative Agent, each Lender Creditor and each
Guaranteed Creditor, together with their permitted successors and assigns, if
any, collectively, the “Secured Creditors”);

WHEREAS, pursuant to the Credit Agreement Party Guaranty, each of Holdings and
each Borrower has guaranteed to the Secured Creditors the payment when due of
all of its Relevant Guaranteed Obligations;

WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary Guarantor has
jointly and severally guaranteed to the Secured Creditors the payment when due
of all of its Relevant Guaranteed Obligations;

WHEREAS, it is a condition precedent to the making of Term Loans to the
Borrowers under the Credit Agreement and to the Guaranteed Creditors entering
into Interest Rate Protection Agreements, Other Hedging Agreements and Treasury
Services Agreements that each Grantor shall have executed and delivered to the
Collateral Agent this Agreement; and

WHEREAS, each Grantor will obtain benefits from the incurrence of Term Loans by
the Borrowers under the Credit Agreement and the entering into by the Lead
Borrower and/or one or more of its Restricted Subsidiaries of Interest Rate
Protection Agreements, Other Hedging Agreements and Treasury Services Agreements
and, accordingly, desires to execute this Agreement in order to satisfy the
condition described in the preceding paragraph and to induce the Lenders to make
Term Loans to the Lead Borrower and the Guaranteed Creditors to enter into
Interest Rate Protection Agreements, Other Hedging Agreements and Treasury
Services Agreement with the Borrower and/or one or more of its Restricted
Subsidiaries;

 

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NOW, THEREFORE, in consideration of the benefits accruing to each Grantor, the
receipt and sufficiency of which are hereby acknowledged, each Grantor hereby
makes the following representations and warranties to the Collateral Agent for
the benefit of the Secured Creditors and hereby covenants and agrees with the
Collateral Agent for the benefit of the Secured Creditors as follows:

ARTICLE I

SECURITY INTERESTS

1.1 Grant of Security Interests.

(a) As security for the prompt and complete payment or performance, as the case
may be, when due of all of the Obligations, each Grantor does hereby pledge and
grant to the Collateral Agent, for the benefit of the Secured Creditors, a
continuing security interest in all of the right, title and interest of such
Grantor in, to and under all of the following personal property and fixtures
(and all rights therein) of such Grantor, or in which or to which such Grantor
has any rights, in each case whether now existing or hereafter from time to time
acquired (but excluding any Excluded Collateral (as defined below)):

(i) each and every Account;

(ii) all cash;

(iii) [reserved];

(iv) all Chattel Paper (including, without limitation, all Tangible Chattel
Paper and all Electronic Chattel Paper);

(v) all Commercial Tort Claims set forth on Schedule 12 of the Perfection
Certificate;

(vi) all Software of such Grantor and all intellectual property rights therein
(including all Software licensing rights) and all other proprietary information
of such Grantor, including but not limited to all writings, plans,
specifications and schematics, all engineering drawings, customer lists, Domain
Names and Trade Secret Rights with respect to each of the foregoing solely to
the extent such rights or items subsist or arise under the laws of the United
States;

(vii) Contracts, together with all Contract Rights arising thereunder;

(viii) all Copyrights;

(ix) all Equipment and Fixtures;

(x) all Deposit Accounts and all other demand, deposit, time, savings, cash
management, passbook and similar accounts maintained by such Grantor with any
Person and all monies;

(xi) all Documents;

(xii) all General Intangibles;

(xiii) all Goods;

 

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(xiv) all Instruments;

(xv) all Inventory;

(xvi) all Investment Property;

(xvii) all Letter-of-Credit Rights (whether or not the respective letter of
credit is evidenced by a writing);

(xviii) all Marks, together with the goodwill of the business of such Grantor
symbolized by the Marks;

(xix) all Patents;

(xx) all Permits;

(xxi) all Supporting Obligations; and

(xxii) all Proceeds and products of any and all of the foregoing (all of the
above, the “Collateral”).

(b) The security interest of the Collateral Agent under this Agreement extends
to all Collateral that any Grantor may acquire, or with respect to which any
Grantor may obtain rights, at any time during the term of this Agreement.

1.2 Certain Exceptions. Notwithstanding Section 1.1, no security interest is or
will be granted pursuant hereto in any right, title or interest of any Grantor
in, to or under (each of (a) through (o) collectively, the “Excluded
Collateral”):

(a) any fee-owned real property with a fair market value (as determined in good
faith by the Lead Borrower) of less than $2,000,000 or any real property
leasehold interests;

(b) interest in any contracts (including Contracts and Contract Rights), permits
(including Permits), licenses, Accounts, General Intangibles (other than any
Equity Interests), Payment Intangibles, Chattel Paper, Letter-of-Credit Rights
and Promissory Notes if the grant of a security interest or Lien therein is
prohibited as a matter of law or under the terms of such contracts (including
Contracts and Contract Rights), permits (including Permits), licenses, Accounts,
General Intangibles, Payment Intangibles, Chattel Paper, Letter-of-Credit Rights
and Promissory Notes, in each case after giving effect to Article 9 of the
applicable Uniform Commercial Code, other applicable law and principles of
equity;

(c) the Voting Equity Interests of (i) any first-tier Foreign Subsidiary that is
a CFC or of a FSHCO in excess of 65% of the outstanding Voting Equity Interests
thereof and (ii) any Subsidiary of (x) a Foreign Subsidiary that is a CFC or
(y) a FSHCO;

(d) assets subject to Capitalized Lease Obligations, purchase money financing
and cash to secure letter of credit reimbursement obligations to the extent such
Capitalized Lease Obligations, purchase money financing or letters of credit are
permitted under the Credit Agreement and the terms thereof prohibit a grant of a
security interest therein;

 

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(e) assets sold to a person who is not a Credit Party in compliance with the
Credit Agreement;

(f) assets owned by a Guarantor after the release of the guaranty of the
Obligations of such Guarantor pursuant to the Credit Agreement;

(g) motor vehicles (including Vehicles) and other goods subject to certificates
of title other than to the extent a security interest therein can be perfected
by a UCC filing;

(h) any application for registration of a trademark filed with the United States
Patent and Trademark Office (“PTO”) on an intent-to-use basis until such time
(if any) as a statement of use or amendment to allege use is accepted by the
PTO, at which time such trademark shall automatically become part of the
Collateral and subject to the security interest of this Agreement;

(i) Equity Interests in any Person other than Wholly-Owned Subsidiaries to the
extent a pledge thereof is not permitted by the terms of such Subsidiary’s
organizational or joint venture documents after giving effect to the
anti-assignment provisions of the UCC of any applicable jurisdiction;

(j) Letter-of-Credit Rights with a value of less than $1,000,000 (to the extent
a security interest therein cannot be perfected by a UCC filing) and Commercial
Tort Claims with a value (as determined in good faith by the Lead Borrower) of
less than $5,000,000;

(k) those assets as to which the Administrative Agent and the Lead Borrower
reasonably and mutually agree in writing that the cost of obtaining such a
security interest or perfection thereof are excessive in relation to the benefit
to the Lenders of the security to be afforded thereby;

(l) “margin stock” (within the meaning of Regulation U);

(m) Excluded Deposit Accounts described in clauses (i) through (iii) of the
definition thereof;

(n) Equity Interests of Unrestricted Subsidiaries;

(o) any segregated deposits that constitute Permitted Liens under clause (iii),
(xii), (xiv), (xv), (xxviii), (xxxi), (xxxvi), (xxxviii) or (xlii) of
Section 10.01 of the Credit Agreement, in each case, that are prohibited from
being subject to other Liens; and

(p) any asset to the extent the granting of a security interest in such asset
results in a material adverse tax consequence to Holdings, the Lead Borrower
and/or its Subsidiaries, as reasonably determined in good faith by the Lead
Borrower in consultation with the Administrative Agent;

provided, however, that Excluded Collateral shall not include any Proceeds,
substitutions or replacements of any Excluded Collateral referred to in any of
clauses (a) through (p) (unless such Proceeds, substitutions or replacements
would constitute Excluded Collateral referred to in any of clauses (a) through
(p)). Notwithstanding anything to the contrary contained herein or in any other
Credit Document, (i) no Grantor shall be required to perfect the security
interest in Fixtures, except to the extent that the same are Equipment or are
related to or located on Material Real Property, other than by the filing of a
UCC financing statement and (ii) no Grantor shall be required to take any action
with respect to the creation or perfection of a security interest or Liens under
foreign law with respect to any Collateral.

 

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1.3 Power of Attorney. Subject to the terms of the Intercreditor Agreements,
each Grantor hereby constitutes and appoints the Collateral Agent its true and
lawful attorney, irrevocably, with full power after the occurrence of and during
the continuance of an Event of Default (in the name of such Grantor or
otherwise) to act, require, demand, receive, compound and give acquittance for
any and all moneys and claims for moneys due or to become due to such Grantor
under or arising out of the Collateral, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem to be
reasonably necessary or advisable to protect the interests of the Secured
Creditors, which appointment as attorney is coupled with an interest.

1.4 Perfection Certificate. The Collateral Agent and each Secured Creditor agree
that the Perfection Certificate and all descriptions of Collateral, schedules,
amendments and supplements thereto are and shall at all times remain a part of
this Agreement.

ARTICLE II

GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

Each Grantor represents and warrants as of the date hereof, and, until the
Termination Date, covenants, which representations, warranties and covenants
shall survive execution and delivery of this Agreement, as follows:

2.1 Necessary Perfection Action. The security interest granted to the Collateral
Agent pursuant to this Agreement in and to the Collateral for the benefit of the
Collateral Agent and the Secured Creditors creates a valid security interest and
Lien upon such Grantor’s right, title and interest in and to the Collateral.
Except to the extent perfection is not required hereunder, such security
interest will be duly perfected (A) upon the filing of the UCC financing
statements delivered to the Collateral Agent for filing in the appropriate
jurisdictions set forth on Schedule 6 of the Perfection Certificate, (B) in
Deposit Accounts upon the obtaining and maintenance of “control” (as described
in the UCC as in effect on the date hereof in the State of New York) by the
Collateral Agent (it being understood that, notwithstanding anything to the
contrary contained in this Agreement or any other Credit Document, no “control”
over any Excluded Deposit Accounts shall be required), (C) upon the recordation
of a short form security agreement with respect to the U.S. registered
intellectual property disclosed in Schedules 11(a) and 11(b) of the Perfection
Certificate in the PTO or the United States Copyright Office, as the case may
be; provided, however, that additional filings may be necessary to perfect the
Collateral Agent’s security interest in, and Lien on, any Patents, Marks,
Copyrights, Domain Names, Trade Secret Rights and other intellectual property
acquired after the date hereof, and (D) upon the receipt by the Collateral Agent
of all Instruments, Chattel Paper and certificated pledged Equity Interests that
constitute “securities” governed by Article 8 of the UCC, in each case
constituting Collateral in suitable form for transfer by delivery or accompanied
by instruments of transfer or assignment duly executed in blank.

Upon the taking of the actions under this Section 2.1, such security interest
will be superior to and prior to all other Liens of all other Persons (other
than Permitted Liens), and enforceable as such as against all other Persons
(except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors’ rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law)) other than
Ordinary Course Transferees.

 

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2.2 No Liens. Such Grantor is, and as to all Collateral acquired by it from time
to time after the date hereof such Grantor will be, the owner of, or otherwise
have the right to use, all Collateral free from any Lien of any Person (other
than Permitted Liens), and such Grantor shall, at its own expense, take all
commercially reasonable actions necessary to defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein materially adverse to the Collateral Agent (other than Permitted Liens).

2.3 Other Financing Statements. As of the date hereof, no Grantor has filed, nor
authorized the filing by any third party of any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction)
covering or purporting to cover any interest of any kind in the Collateral
(other than financing statements or other statements or instruments of
registration under the law of any jurisdiction filed in respect of Permitted
Liens), and so long as the Termination Date has not occurred, such Grantor will
not authorize to be filed in any public office any financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) relating to the Collateral, except financing statements filed or
to be filed in respect of and covering the security interests granted hereby by
such Grantor or in connection with Permitted Liens.

2.4 Chief Executive Office, Record Locations. The chief executive office of such
Grantor is, on the date of this Agreement, located at the address indicated on
Schedule 2(a) of the Perfection Certificate for such Grantor. During the period
of the four calendar months preceding the date of this Agreement, the chief
executive office of such Grantor has not been located at any address other than
that indicated on Schedule 2(a) of the Perfection Certificate in accordance with
the immediately preceding sentence, in each case unless each such other address
is also indicated on Schedule 2(a) of the Perfection Certificate for such
Grantor.

2.5 Location of Goods, Inventory and Equipment. All Goods, Inventory and
Equipment (having a fair market value in excess of $3,000,000 with respect to
Collateral comprising Goods, Inventory and Equipment only) held on the date
hereof, or held at any time during the four calendar months prior to the date
hereof, by each Grantor, other than Goods, Inventory or Equipment in transit,
out for repair or refurbishment, books and records temporarily located at the
offices of such Grantor’s attorneys or accountants, or moved in the ordinary
course of business, is located at one of the locations shown on Schedule 2(b) of
the Perfection Certificate for such Grantor.

2.6 Legal Names; Type of Organization (and Whether a Registered Organization);
Jurisdiction of Organization; Location; Organizational Identification Numbers;
Federal Employer Identification Number; Changes Thereto; etc. As of the Closing
Date, the exact legal name of each Grantor as such name appears in its public
organic record, the type of organization of such Grantor, whether or not such
Grantor is a Registered Organization, the jurisdiction of organization of such
Grantor, such Grantor’s Location, the organizational identification number (if
any) to the extent required on the relevant UCC financing statement of such
Grantor and the Federal Employer Identification Number of such Grantor (if any),
is listed on Schedule 1(a) of the Perfection Certificate for such Grantor. Such
Grantor shall not change its legal name as such name appears in its respective
public organic record, its type of organization, its status as a Registered
Organization (in the case of a Registered Organization), its jurisdiction of
organization, its Location, its organizational identification number (if any) to
the extent required on the relevant UCC financing statement of such Grantor or
its Federal Employer Identification Number (if any) from that used on Schedule
1(a) of the Perfection Certificate, except that any such changes shall be
permitted (so long as not in violation of the applicable requirements of the
Secured Debt Agreements and so long as same do not involve (x) a Registered
Organization ceasing to constitute same or (y) such Grantor changing its
jurisdiction of organization or Location from the United States or a State
thereof to a jurisdiction of organization or Location, as the case may be,
outside the United States or a State thereof) if (i) it shall have given to the
Collateral Agent written notice of each change to the

 

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information listed on Schedule 1(a) of the Perfection Certificate (as adjusted
for any subsequent changes thereto previously made in accordance with this
sentence), together with a supplement to Schedule 1(a) of the Perfection
Certificate which shall update all information contained therein for such
Grantor within 30 days of such change (or such longer period as agreed to by the
Collateral Agent) and (ii) in connection with such change or changes, it shall
take all action reasonably requested by the Collateral Agent to maintain the
security interests of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected to the extent described in
Section 2.1 and in full force and effect.

2.7 [Reserved].

2.8 Certain Significant Transactions. During the five-year period preceding the
date of this Agreement, no Person shall have merged or consolidated with or into
any Grantor, and no Person shall have liquidated into, or transferred all or
substantially all of its assets to, any Grantor, in each case except the mergers
and consolidations contemplated by the Transaction and the mergers and
consolidations described in Schedule 3 of the Perfection Certificate. With
respect to any transactions so described in Schedule 3 of the Perfection
Certificate, the respective Grantor shall have furnished such information with
respect to the Person (and the assets of the Person and locations thereof) which
merged with or into or consolidated with such Grantor, or was liquidated into or
transferred all or substantially all of its assets to such Grantor, and shall
have furnished to the Collateral Agent such UCC lien searches as may have been
reasonably requested by the Collateral Agent or Administrative Agent with
respect to such Person and its assets, to establish that no security interest
(excluding Permitted Liens) continues perfected on the date hereof with respect
to any Person described above (or the assets transferred to the respective
Grantor by such Person), including without limitation pursuant to
Section 9-316(a)(3) of the UCC.

2.9 As-Extracted Collateral; Timber-to-be-Cut. On the date hereof, such Grantor
does not own, or expect to acquire, any material property which constitutes, or
would constitute, As-Extracted Collateral or Timber-to-be-Cut.

2.10 Collateral in the Possession of a Bailee. If any Inventory or other Goods,
the aggregate fair market value of which is equal to or greater than $3,000,000,
are at any time in the possession of a bailee, such Grantor shall on or prior to
the next Quarterly Update Date furnish the Collateral Agent with written notice
thereof and, if requested by the Collateral Agent after an Event of Default has
occurred and is continuing, shall use its reasonable efforts to promptly obtain
an acknowledgment from such bailee, in form and substance reasonably
satisfactory to the Collateral Agent, that the bailee holds such Collateral for
the benefit of the Collateral Agent and shall act upon the instructions of the
Collateral Agent, without the further consent of such Grantor, subject to the
Intercreditor Agreements. The Collateral Agent agrees with such Grantor that the
Collateral Agent shall not give any such instructions unless an Event of Default
has occurred and is continuing and upon notice from the Collateral Agent of its
intent to exercise remedies.

2.11 Recourse. This Agreement is made with full recourse to each Grantor and
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of such Grantor contained herein, in the Secured Debt
Agreements and otherwise in writing in connection herewith or therewith.

 

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ARTICLE III

SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS;

INSTRUMENTS; CHATTEL PAPER AND CERTAIN OTHER COLLATERAL

3.1 Assignment of Claims Act. Subject to the terms of the Intercreditor
Agreements, upon the occurrence and during the continuance of an Event of
Default, at the Administrative Agent’s request, each Grantor shall provide a
list of all contracts with Applicable Governmental Authorities (as defined
below) which have resulted or will result in an Applicable Governmental
Authority becoming an obligor on any Receivable required to be included in
Collateral of an amount greater than $5,000,000 and, to the extent that the
aggregate Receivables from such contracts with Applicable Governmental
Authorities represent less than 90% of the aggregate revenue of the Grantors on
a consolidated basis for the trailing twelve-month period ending on the last day
of the period for which internally generated financial statements of the Lead
Borrower and its Subsidiaries are available, such additional contracts with
Applicable Governmental Authorities that would result in the Receivables under
contracts on such list representing no less than 90% of the aggregate revenue of
the Grantors on a consolidated basis for such trailing twelve-month period, and
promptly execute whatever instruments and documents are required by the
Administrative Agent in order that such Receivables shall be assigned to the
Administrative Agent and that proper notice of such assignment shall be given
under the Federal Assignment of Claims Act (or any successor statute) or any
other applicable Requirement of Law; provided that, if any contract with any
Applicable Governmental Authority requires consent by or on behalf of such
Applicable Governmental Authority in order for any such Receivable to be
assigned pursuant to the applicable Requirements of Law, such Grantor shall only
be required to exercise commercially reasonably efforts to obtain such consent
(and if such consent cannot be obtained, no Grantor shall be in breach hereof).
As used in this Section 3.1, the term “Applicable Governmental Authority” shall
mean the United States of America, or any state or political subdivision
thereof, or any department, agency or instrumentality of any of the foregoing.

3.2 Maintenance of Records. Each Grantor will keep proper books of record and
accounts in which full, true and correct entries in conformity with U.S. GAAP
and all material Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities, and such Grantor will
make the same available on such Grantor’s premises to officers and designated
representatives of the Collateral Agent for inspection in accordance with the
terms and conditions set forth in the Credit Agreement. Upon the occurrence and
during the continuance of an Event of Default and at the request of the
Collateral Agent, such Grantor shall, at its own cost and expense, deliver all
tangible evidence of its Accounts and Contract Rights (including, without
limitation, all documents evidencing the Accounts and all Contract Rights) and
such books and records to the Collateral Agent or to its representatives (copies
of which evidence and books and records may be retained by such Grantor).
Subject to the terms of the Intercreditor Agreements, upon the occurrence and
during the continuance of an Event of Default and if the Collateral Agent so
requests, such Grantor shall legend, in form and manner reasonably satisfactory
to the Collateral Agent, the Accounts and the Contracts, as well as books,
records and documents (if any) of such Grantor evidencing or pertaining to such
Accounts and Contracts with an appropriate reference to the fact that such
Accounts and Contracts have been assigned to the Collateral Agent and that the
Collateral Agent has a security interest therein.

3.3 Direction to Account Debtors; Contracting Parties; etc. Subject to the terms
of the Intercreditor Agreements, upon the occurrence and during the continuance
of an Event of Default, after giving notice to the relevant Grantor of its
intent to do so, if the Collateral Agent so directs any Grantor, such Grantor
agrees (i) [reserved], (ii) that the Collateral Agent may, at its option,
directly notify the obligors in its own name or in the name of others with
respect to any Accounts and/or under any Contracts to make payments with respect
thereto as provided in the preceding clause (i), and (iii) that the

 

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Collateral Agent may enforce collection of any such Accounts and Contracts and
may adjust, settle or compromise the amount of payment thereof, in the same
manner and to the same extent as such Grantor; provided that, (x) any failure by
the Collateral Agent to give or any delay in giving such notice to the relevant
Grantor shall not affect the effectiveness of such notice or the other rights of
the Collateral Agent created by this Section 3.3 and (y) no such notice shall be
required if an Event of Default of the type described in Section 11.05 of the
Credit Agreement has occurred and is continuing. The reasonable costs and
expenses of collection (including reasonable attorneys’ fees), whether incurred
by a Grantor or the Collateral Agent, shall be borne by the relevant Grantor.
The Collateral Agent shall deliver a copy of each notice referred to in the
preceding clause (y) to the relevant Grantor, provided that (x) the failure by
the Collateral Agent to so notify such Grantor shall not affect the
effectiveness of such notice or the other rights of the Collateral Agent created
by this Section 3.3 and (y) no such notice shall be required if an Event of
Default of the type described in Section 11.05 of the Credit Agreement has
occurred and is continuing.

3.4 Modification of Terms; etc. Except in accordance with such Grantor’s
ordinary course of business, or consistent with reasonable business judgment or
as permitted by Section 3.5 or the Credit Documents, no Grantor shall rescind or
cancel any indebtedness evidenced by any Account, or modify any material term
thereof or make any material adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Account, or interest therein, without
the prior written consent of the Collateral Agent unless such rescissions,
cancellations, modifications, adjustments, extensions, renewals, compromises,
settlements, releases, or sales would not reasonably be expected to materially
adversely affect the value of the Accounts constituting Collateral taken as a
whole.

3.5 Collection. Each Grantor shall endeavor in accordance with historical
business practices or otherwise in accordance with reasonable business judgment
to cause to be collected from the Account Debtor named in each of its Accounts
or obligor under any Contract, as and when due (including, without limitation,
amounts which are delinquent, such amounts to be collected in accordance with
generally accepted lawful collection procedures) any and all amounts owing under
or on account of such Account or Contract, and apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of such
Account or under such Contract. Except as otherwise directed by the Collateral
Agent after the occurrence and during the continuation of an Event of Default or
otherwise required pursuant to the Credit Agreement, any Grantor may allow in
the ordinary course of business as adjustments to amounts owing under its
Accounts and Contracts (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which such
Grantor finds appropriate in accordance with reasonable business judgment,
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services or for other reasons which such Grantor finds
appropriate in accordance with reasonable business judgment and (iii) any other
adjustments necessary or desirable in the Grantor’s reasonable business
judgment. The reasonable costs and expenses (including, without limitation,
reasonable attorneys’ fees) of collection, whether incurred by a Grantor or the
Collateral Agent, shall be borne by the relevant Grantor (in the case of any
such costs and expenses incurred by the Collateral Agent, in accordance with the
terms and provisions of Section 13.01 of the Credit Agreement).

3.6 Instruments. If any Grantor at any time holds or acquires any Instrument
constituting Collateral with a face value in excess of $1,000,000 individually
(other than checks received and collected in the ordinary course of business),
such Grantor shall, on or prior to the next Quarterly Update Date, notify the
Collateral Agent thereof, and upon request by the Collateral Agent (subject to
the Intercreditor Agreements), promptly deliver such Instrument to the
Collateral Agent appropriately endorsed in blank or to the order of the
Collateral Agent, provided that, so long as no Event of Default shall have
occurred and be continuing, such Grantor may retain for collection in the
ordinary course of

 

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business any Instrument received by such Grantor in the ordinary course of
business, and the Collateral Agent shall, promptly upon request of such Grantor,
make appropriate arrangements for making any Instruments in its possession and
pledged by such Grantor available to such Grantor for purposes of presentation,
collection or renewal. If such Grantor retains possession of any Instruments
pursuant to the terms hereof, upon request of the Collateral Agent, such
Instrument shall be marked with the following legend: “This writing and the
obligations evidenced or secured hereby are subject to the security interests of
Bank of America, N.A., as collateral agent, for the benefit of itself and
certain Secured Creditors.”

3.7 Grantors Remain Liable Under Accounts. Anything herein to the contrary
notwithstanding, the Grantors shall remain liable under each of the Accounts to
observe and perform all of the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise to such Accounts. Neither the Collateral Agent nor any other Secured
Creditor shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Agreement,
nor shall the Collateral Agent or any other Secured Creditor be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Account (or any agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by them or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), 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 them or to which they may be entitled at any time or
times.

3.8 Grantors Remain Liable Under Contracts. Anything herein to the contrary
notwithstanding, the Grantors shall remain liable under each of the Contracts to
observe and perform all of the conditions and obligations to be observed and
performed by them thereunder, all in accordance with and pursuant to the terms
and provisions of each Contract. Neither the Collateral Agent nor any other
Secured Creditor shall have any obligation or liability under any Contract by
reason of or arising out of this Agreement, nor shall the Collateral Agent or
any other Secured Creditor be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any
performance by any party under any Contract, 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 them or to which they may be entitled at
any time or times.

3.9 Deposit Accounts; Etc.

(a) Schedule 13 of the Perfection Certificate accurately sets forth, as of the
date of this Agreement, for each Grantor, each Deposit Account maintained by
such Grantor (including the respective account number) and the name of the
respective bank with which such Deposit Account is maintained. Prior to the
Discharge of Revolving Credit Obligations (as defined in the ABL Intercreditor
Agreement), and to the extent similar requirements exist in the Revolving Credit
Collateral Documents (as defined in the ABL Intercreditor Agreement), with
respect to any Revolving Credit Obligations (as defined in the ABL Intercreditor
Agreement), for each Deposit Account (other than the Excluded Deposit Accounts),
the respective Grantor shall use commercially reasonable efforts to cause the
bank with which the Deposit Account is maintained to execute and deliver to the
Collateral Agent, within 90 days (or such later date as the Collateral Agent may
determine in its sole discretion) after the date of this Agreement or, if later
established or acquired, within 60 days (or such later date as the Collateral
Agent may determine in its sole discretion) of the time of the establishment or
acquisition of the respective Deposit Account, a “control agreement” in a form
reasonably acceptable to the Collateral Agent.

 

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(b) After the date of this Agreement, no Grantor shall establish any new demand,
time, savings, passbook or similar account, except for Excluded Deposit Accounts
and Deposit Accounts established and maintained with banks and meeting the
requirements of the preceding clause (a).

(c) [Reserved].

3.10 [Reserved].

3.11 Commercial Tort Claims. As of the Closing Date, no Grantor has Commercial
Tort Claims with an individual claimed value of $5,000,000 or more other than
those described in Schedule 12 of the Perfection Certificate. If any Grantor
shall at any time after the date of this Agreement hold or acquire a Commercial
Tort Claim in an amount (taking the greater of the aggregate claimed damages
thereunder or the reasonably estimated value thereof) of $5,000,000 or more,
such Grantor shall, on or prior to the next Quarterly Update Date, notify the
Collateral Agent thereof in a writing signed by such Grantor and describing the
details thereof and shall grant to the Collateral Agent in such writing a
security interest therein (subject to Permitted Liens) 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 Collateral Agent.

3.12 Chattel Paper. Subject to the terms of the Intercreditor Agreements, each
Grantor will, following any reasonable request by the Collateral Agent, deliver
all of its Tangible Chattel Paper with a value in excess of $1,000,000 to the
Collateral Agent on or prior to the next Quarterly Update Date, provided that,
so long as no Event of Default shall have occurred and be continuing, such
Grantor may retain for collection in the ordinary course of business any Chattel
Paper received by such Grantor in the ordinary course of business, and the
Collateral Agent shall, promptly upon request of such Grantor, make appropriate
arrangements for making any Chattel Paper in its possession and pledged by such
Grantor available to such Grantor for purposes of presentation, collection or
renewal. If such Grantor retains possession of any Chattel Paper pursuant to the
terms hereof, subject to the terms of the Intercreditor Agreements, upon request
of the Collateral Agent, such Chattel Paper shall be marked with the following
legend: “This writing and the obligations evidenced or secured hereby are
subject to the security interests of Bank of America, N.A., as collateral agent,
for the benefit of itself and certain Secured Creditors.”

3.13 Further Actions. To the extent otherwise required by this Agreement or the
other Credit Documents, each Grantor will, at its own expense, make, execute,
endorse, acknowledge, file and/or deliver to the Collateral Agent from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, certificates, reports and other
assurances or instruments and take such further steps, including any and all
actions as may be necessary or required relating to its Accounts, Contracts,
Instruments and other property or rights which constitute Collateral, as the
Collateral Agent may reasonably require for the purpose of obtaining or
preserving the full benefits of the security interests, rights and powers herein
granted.

ARTICLE IV

SPECIAL PROVISIONS CONCERNING TRADEMARKS AND DOMAIN NAMES

4.1 Additional Representations and Warranties. Schedule 11(a) of the Perfection
Certificate sets forth a list of all active United States marks and applications
for United States marks registered or filed in the PTO and all Domain Names that
such Grantor owns. Each Grantor represents and warrants that it owns all Marks
registered or applied for with the PTO and Domain Names listed on Schedule 11(a)
of the Perfection Certificate, except for such failure to own that has not had,
and would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

 

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Each Grantor further warrants that it has no knowledge of any third party claim
received by it within the last twelve (12) months that any aspect of such
Grantor’s present business operations infringes any trademark, service mark or
trade name of any other Person other than as has not, and would not, reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect. Each Grantor represents and warrants that all material U.S. trademark
registrations and applications and Domain Name registrations listed in Schedule
11(a) of the Perfection Certificate have not been canceled and are not presently
being opposed and, to such Grantor’s knowledge, are valid and subsisting, and
that such Grantor is not aware of any pending third-party claim that any of said
registrations is invalid or unenforceable, and is not aware that there is any
reason that any of said registrations is invalid or unenforceable, and is not
aware that there is any reason that any of said applications will not mature
into registrations, other than as would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Each Grantor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
solely upon the occurrence and during the continuance of an Event of Default,
any document which may be required by the PTO or Domain Name registrar in order
to effect an assignment of all right, title and interest in each Mark and/or
Domain Name listed in Schedule 11(a) of the Perfection Certificate, and record
the same.

4.2 Assignments. Except as otherwise permitted by the Secured Debt Agreements,
each Grantor hereby agrees not to assign or otherwise transfer any rights to any
third party all or substantially all rights in any material Mark or material
Domain Name absent prior written approval of the Collateral Agent.

4.3 Infringements. Each Grantor agrees, promptly upon learning thereof, to
notify the Collateral Agent in writing of the name and address of (if available
to such Grantor), and to furnish such pertinent information that may be
available to such Grantor with respect to, any party who such Grantor reasonably
believes is infringing or diluting or otherwise violating any of such Grantor’s
rights in and to any Mark or Domain Name in any manner that would reasonably be
expected to have a Material Adverse Effect, or with respect to any party
claiming that such Grantor’s use of any Mark or Domain Name material to such
Grantor’s business violates in any material respect any intellectual property
right of that party. Each Grantor further agrees to prosecute diligently in
accordance with its reasonable business judgment, any Person infringing any Mark
or Domain Name owned by it in any manner that would reasonably be expected to
have a Material Adverse Effect.

4.4 Preservation of Marks. Each Grantor agrees to use its Marks that are
material to such Grantor’s business in interstate commerce during the time in
which this Agreement is in effect to the extent required by the laws of the
United States to maintain its rights in such Mark and to take all such other
actions as are reasonably necessary to preserve such Marks as trademarks or
service marks under the laws of the United States (other than any such material
Marks that are no longer material or are deemed by such Grantor in its
reasonable business judgment to no longer be necessary in the conduct of
Grantor’s business).

4.5 Maintenance of Registration. Each Grantor shall, at its own expense,
diligently process all documents reasonably required to maintain all material
Mark and/or Domain Name registrations, including but not limited to affidavits
of use and applications for renewals of registration in the PTO for all of its
material registered Marks, and shall pay all fees and disbursements in
connection therewith and shall not abandon any such filing of affidavit of use
or any such application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Collateral Agent, not
to be unreasonably withheld (other than with respect to registrations and
applications deemed by such Grantor in its reasonable business judgment to be no
longer prudent to pursue or as otherwise permitted by the Credit Agreement).

 

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4.6 Future Registered Marks and Domain Names. If any Mark registration is issued
hereafter prior to the Termination Date to any Grantor as a result of any
application now or hereafter prior to the Termination Date pending before the
PTO or any Domain Name is registered by Grantor prior to the Termination Date,
on or prior to the next Quarterly Update Date, such Grantor shall deliver to the
Collateral Agent an updated Schedule 11(a) of the Perfection Certificate, and,
if requested by the Collateral Agent, a grant of a security interest in such
Mark and/or Domain Name, to the Collateral Agent and at the expense of such
Grantor, confirming the grant of a security interest in such Mark and/or Domain
Name to the Collateral Agent hereunder, the form of such security to be
substantially in the form of Exhibit C hereto or in such other form as may be
reasonably satisfactory to the Collateral Agent.

4.7 Remedies. If an Event of Default shall occur and be continuing, subject to
the terms of the Intercreditor Agreements, the Collateral Agent may, by written
notice to the relevant Grantor, take any or all of the following actions:
(i) declare the entire right, title and interest of such Grantor in and to each
of the Marks and Domain Names, together with all trademark rights and rights of
protection to the same, vested in the Collateral Agent for the benefit of the
Secured Creditors, in which event such right, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged
and notarized and record said absolute assignment with the applicable agency or
registrar; (ii) take and use or sell the Marks or Domain Names and the goodwill
of such Grantor’s business symbolized by the Marks or Domain Names and the right
to carry on the business and use the assets of such Grantor in connection with
which the Marks or Domain Names have been used (provided that any license shall
be subject to reasonable quality control); and (iii) direct such Grantor to
refrain, in which event such Grantor shall refrain, from using the Marks or
Domain Names in any manner whatsoever, directly or indirectly, and such Grantor
shall execute such further documents that the Collateral Agent may reasonably
request to further confirm this and to transfer ownership of the Marks or Domain
Names owned by it and registrations and any pending trademark applications in
the PTO or applicable Domain Name registrar therefor to the Collateral Agent.
Solely for the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Section 4.7 and at such time as the Collateral Agent shall
be lawfully entitled, and permitted under the Credit Agreement, to exercise such
rights and remedies, each Grantor hereby grants to the Collateral Agent, to the
extent it has the right to do so, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such Grantor),
subject, in the case of Trademarks, to sufficient rights to quality control and
inspection in favor of such Grantor to avoid the risk of invalidation of said
Trademarks, to use, operate under, license, or sublicense any Marks and Domain
Names now owned or hereafter acquired by such Grantor to the extent constituting
Collateral hereunder.

ARTICLE V

SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS

5.1 Additional Representations and Warranties. Each Grantor represents and
warrants that it is the owner of all rights in (i) all Trade Secret Rights,
(ii) the Patents listed in Schedule 11(a) of the Perfection Certificate for such
Grantor and that said Patents include all the material registered United States
patents and applications for United States patents that such Grantor owns as of
the date hereof and (iii) the Copyrights listed in Schedule 11(b) of the
Perfection Certificate for such Grantor and that said Copyrights include all the
material United States copyrights registered with the United States Copyright
Office and applications to United States copyrights that such Grantor owns as of
the date hereof. Each Grantor further warrants that it has no knowledge of any
third party claim received by it within the past twelve (12) months that any
aspect of such Grantor’s present business operations infringes any patent or
copyright of any other Person or such Grantor has misappropriated any Trade
Secret or proprietary information which, either individually or in the
aggregate, has, or would reasonably be

 

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expected to have, a Material Adverse Effect. Each Grantor hereby grants to the
Collateral Agent a power of attorney to sign, solely upon the occurrence and
during the continuance of any Event of Default, any document which may be
required by the PTO or the United States Copyright Office in order to effect an
assignment of all right, title and interest in each Patent listed in Schedule
11(a) of the Perfection Certificate or Copyright listed in Schedule 11(b) of the
Perfection Certificate, or any other issued or applied-for United States patent
or registered or applied-for United States copyright hereinafter owned by such
Grantor, and to record the same.

5.2 Assignments. Except as otherwise permitted by the Secured Debt Agreements,
each Grantor hereby agrees not to assign or otherwise transfer to any third
party all or substantially all rights in any material Patent or material
Copyright absent prior written approval of the Collateral Agent.

5.3 Infringements. Each Grantor agrees, promptly upon learning thereof, to
furnish the Collateral Agent in writing with all pertinent information available
to such Grantor with respect to any infringement, contributing infringement or
active inducement to infringe or other violation of such Grantor’s rights in any
Patent or Copyright or to any claim that the practice of any Patent or use of
any Copyright by such Grantor violates any intellectual property right of a
third party, or with respect to any misappropriation of any Trade Secret Right
by such Grantor or any claim that practice of any Trade Secret Right by such
Grantor violates any intellectual property right of a third party, in each case,
in any manner which, either individually or in the aggregate, has, or would
reasonably be expected to have, a Material Adverse Effect. Each Grantor further
agrees to diligently prosecute, in accordance with such Grantor’s reasonable
business judgment, any Person infringing any Patent owned by it or Copyright or
any Person misappropriating any Trade Secret Right, in each case to the extent
that such infringement or misappropriation, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

5.4 Maintenance of Patents or Copyrights. At its own expense, each Grantor shall
make timely payment of all post-issuance fees required to maintain in force its
rights under each issued Patent or registered Copyright, absent prior written
consent of the Collateral Agent (other than any such Patents or Copyrights that
are no longer material or are deemed by such Grantor in its reasonable business
judgment to no longer be necessary in the conduct of Grantor’s business).

5.5 Prosecution of Patent or Copyright Applications. At its own expense, each
Grantor shall diligently prosecute all material applications for (i) United
States Patents listed in Schedule 11(a) of the Perfection Certificate and
(ii) Copyrights listed on Schedule 11(b) of the Perfection Certificate, in each
case for such Grantor and shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies (other than applications
that are no longer material or are deemed by such Grantor in its reasonable
business judgment to no longer be necessary in the conduct of Grantor’s
business), absent written consent of the Collateral Agent not to be unreasonably
withheld.

5.6 Other Patents and Copyrights. Upon acquisition or issuance of a United
States Patent, registration of a Copyright, or acquisition of a registered
Copyright, or of filing of an application for a United States Patent or
Copyright, the relevant Grantor shall deliver to the Collateral Agent an updated
Schedule 11 of the Perfection Certificate on or prior to the next Quarterly
Update Date, with, if requested by the Collateral Agent, a grant of a security
interest as to such Patent or Copyright, as the case may be, to the Collateral
Agent and at the expense of such Grantor, confirming the grant of a security
interest, the form of such grant of a security interest to be substantially in
the form of Exhibit A or B hereto, as appropriate, or in such other form as may
be reasonably satisfactory to the Collateral Agent.

 

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5.7 Remedies. If an Event of Default shall occur and be continuing, subject to
the terms of the Intercreditor Agreements, the Collateral Agent may, by written
notice to the relevant Grantor, take any or all of the following actions:
(i) declare the entire right, title, and interest of such Grantor in each of the
Patents, Copyrights and Trade Secret Rights vested in the Collateral Agent for
the benefit of the Secured Creditors, in which event such right, title, and
interest shall immediately vest in the Collateral Agent for the benefit of the
Secured Creditors, and the Collateral Agent shall be entitled to exercise the
power of attorney referred to in Section 5.1 hereof to execute, cause to be
acknowledged and notarized and to record said assignment with the applicable
agency; (ii) take and practice or sell the Patents, Copyrights and Trade
Secrets, in each case, owned by such Grantor, and exercise any other rights
vested in the Patents, Copyrights and Trade Secrets pursuant to Section 5.7(i)
above; and (iii) direct such Grantor to refrain, in which event such Grantor
shall refrain, from practicing the Patents and using the Copyrights and the
Trade Secrets directly or indirectly, and such Grantor shall execute such
further documents as the Collateral Agent may reasonably request further to
confirm this and to transfer ownership of the Patents, Copyrights and Trade
Secrets, in each case owned by it, to the Collateral Agent for the benefit of
the Secured Creditors. Solely for the purpose of enabling the Collateral Agent
to exercise rights and remedies under this Section 5.7 and at such time as the
Collateral Agent shall be lawfully entitled, and permitted under the Credit
Agreement, to exercise such rights and remedies, each Grantor hereby grants to
the Collateral Agent, to the extent it has the right to do so, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Grantor), to use, operate under, license, or sublicense any
Patents, Copyrights and Trade Secrets now owned or hereafter acquired by such
Grantor to the extent constituting Collateral hereunder.

ARTICLE VI

PROVISIONS CONCERNING ALL COLLATERAL

6.1 Protection of Collateral Agent’s Security. Except as otherwise permitted or
not prohibited by the Secured Debt Agreements, each Grantor will do nothing to
impair the rights of the Collateral Agent in the Collateral. Each Grantor or an
affiliate on behalf of such Grantor will at all times maintain insurance, at
such Grantor’s own expense to the extent and in the manner provided in the
Secured Debt Agreements. If any Event of Default shall have occurred and be
continuing, the Collateral Agent shall, at the time any proceeds of such
insurance are distributed to the Secured Creditors, apply such proceeds in
accordance with Section 7.4 hereof. Each Grantor assumes all liability and
responsibility in connection with the Collateral acquired by it and the
liability of such Grantor to pay the Obligations shall in no way be affected or
diminished by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to such Grantor.

6.2 Warehouse Receipts Non-Negotiable. To the extent practicable, each Grantor
agrees that if any warehouse receipt or receipt in the nature of a warehouse
receipt is issued with respect to any of its Inventory, such Grantor shall
request that such warehouse receipt or receipt in the nature thereof shall not
be “negotiable” (as such term is used in Section 7-104 of the UCC as in effect
in any relevant jurisdiction or under other relevant law).

6.3 Additional Information. Each Grantor will, at its own expense, from time to
time upon the reasonable request of the Collateral Agent, promptly furnish to
the Collateral Agent such information with respect to the Collateral (including
the identity of the Collateral or such components thereof as may have been
reasonably requested by the Collateral Agent, the value and location of such
Collateral, etc.) as may be requested by the Collateral Agent.

6.4 Further Actions. To the extent otherwise required by this Agreement or the
other Credit Documents, each Grantor will, at its own expense and upon the
reasonable request of the Collateral Agent, make, execute, endorse, acknowledge,
file and/or deliver to the Collateral Agent from time to time such lists,
descriptions and designations of its Collateral, warehouse receipts, receipts in
the nature of

 

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warehouse receipts, bills of lading, documents of title, vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral at least to the extent described in
Section 2.1.

6.5 Financing Statements. Each Grantor agrees to deliver to the Collateral Agent
such financing statements, in form reasonably acceptable to the Collateral
Agent, as the Collateral Agent may from time to time reasonably request to
establish and maintain a valid, enforceable, perfected security interest in the
Collateral as provided herein and for the purpose of obtaining and preserving
the full benefits of the other rights and security contemplated hereby at least
to the extent described in Section 2.1. Each Grantor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Grantor hereby authorizes the Collateral Agent to file any such financing
statements (and such authorization includes describing the Collateral as “all
assets and all personal property whether now owned or hereafter acquired” of
such Grantor or words of similar effect).

ARTICLE VII

REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT

7.1 Remedies; Obtaining the Collateral Upon an Event of Default. Each Grantor
agrees that, subject to the terms of the Intercreditor Agreements, if any Event
of Default shall have occurred and be continuing, then and in every such case,
the Collateral Agent, in addition to any rights now or hereafter existing under
applicable law and under the other provisions of this Agreement, shall have all
rights as a secured creditor under any UCC, and such additional rights and
remedies to which a secured creditor is entitled under the laws in effect in all
relevant jurisdictions and may:

(i) personally, or by agents or attorneys, immediately take possession of the
Collateral or any part thereof, from such Grantor or any other Person who then
has possession of any part thereof with or without notice or process of law, and
for that purpose may enter upon such Grantor’s premises where any of the
Collateral is located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities of such
Grantor, in each case without breach of the peace;

(ii) instruct the obligor or obligors on any agreement, instrument or other
obligation (including, without limitation, the Accounts and the Contracts)
constituting the Collateral to make any payment required by the terms of such
agreement, instrument or other obligation directly to the Collateral Agent and
may exercise any and all remedies of such Grantor in respect of such Collateral;

(iii) instruct all banks which have entered into a control agreement with the
Collateral Agent to transfer all monies, securities and instruments held by such
depositary bank to an Account designated by the Collateral Agent; it being
understood and agreed that unless an Event of Default has occurred and is
continuing, the Collateral Agent shall not deliver to such banks a “notice of
exclusive control” under, and as defined in, the respective “control agreement”
relating thereto;

(iv) sell, assign or otherwise liquidate any or all of the Collateral or any
part thereof in accordance with Section 7.2 hereof, or direct such Grantor to
sell, assign or otherwise liquidate any or all of the Collateral or any part
thereof, and, in each case, take possession of the proceeds of any such sale or
liquidation;

 

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(v) take possession of the Collateral or any part thereof, by directing such
Grantor in writing to deliver the same to the Collateral Agent at any reasonable
place or places designated by the Collateral Agent, in which event such Grantor
shall at its own expense:

(x) forthwith cause the same to be moved to the place or places so designated by
the Collateral Agent and there delivered to the Collateral Agent;

(y) store and keep any Collateral so delivered to the Collateral Agent at such
place or places pending further action by the Collateral Agent as provided in
Section 7.2 hereof; and

(z) while the Collateral shall be so stored and kept, provide such security and
maintenance services as shall be reasonably necessary to protect the same and to
preserve and maintain it in good condition;

(vi) license or sublicense, whether on an exclusive (where permissible) or
nonexclusive basis, any Marks (subject to reasonable quality control), Domain
Names, Patents or Copyrights included in the Collateral for such term and on
such conditions and in such manner as the Collateral Agent shall in its sole
judgment determine;

(vii) apply any monies constituting Collateral or proceeds thereof in accordance
with the provisions of Section 7.4; and

(viii) take any other action as specified in clauses (a)(1) through (a)(5),
inclusive, of Section 9-607 of the UCC;

it being understood that each Grantor’s obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Grantor of said obligation. By
accepting the benefits of this Agreement and each other Security Document, the
Secured Creditors expressly acknowledge and agree that this Agreement and each
other Security Document may be enforced only by the action of the Collateral
Agent and that no Secured Creditor shall have any right individually to seek to
enforce or to enforce this Agreement or to realize upon the security to be
granted hereby, it being understood and agreed that such rights and remedies may
be exercised by the Collateral Agent.

7.2 Remedies; Disposition of the Collateral. To the extent permitted by
applicable law, if any Event of Default shall have occurred and be continuing,
then any Collateral repossessed by the Collateral Agent under or pursuant to
Section 7.1 hereof and any other Collateral whether or not so repossessed by the
Collateral Agent, may be sold, assigned, leased or otherwise disposed of under
one or more contracts or as an entirety, and without the necessity of gathering
at the place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as the Collateral
Agent may, in compliance with any mandatory requirements of applicable law,
determine to be commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the same existed when
taken by the Collateral Agent or after any overhaul or repair at the expense of
the relevant Grantor which the Collateral Agent shall determine to be
commercially reasonable. Any such sale, lease or other disposition may be
effected by means of a public disposition or private disposition, effected in
accordance with the applicable requirements (in each case if and to the extent
applicable) of Sections 9-610 through 9-613 of the UCC and/or such other
mandatory requirements

 

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of applicable law as may apply to the respective disposition. The Collateral
Agent may, without notice or publication, adjourn any public or private
disposition or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the disposition, and such disposition may be
made at any time or place to which the disposition may be so adjourned. To the
extent permitted by any such requirement of law, the Collateral Agent may bid
for and become the purchaser (and may pay all or any portion of the purchase
price by crediting Obligations against the purchase price) of the Collateral or
any item thereof, offered for disposition in accordance with this Section 7.2
without accountability to the relevant Grantor. Each Grantor agrees to do or
cause to be done all such other acts and things as may be reasonably necessary
to make such disposition or dispositions of all or any portion of the Collateral
valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, having jurisdiction over
any such sale or sales, all at such Grantor’s expense.

7.3 Waiver of Claims. Except as otherwise provided in this Agreement, EACH
GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT’S TAKING POSSESSION OR
THE COLLATERAL AGENT’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES, and each Grantor hereby further waives, to the extent permitted by
law:

(a) all damages occasioned by such taking of possession or any such disposition
except any damages which are the direct result of the Collateral Agent’s gross
negligence, bad faith or willful misconduct (as determined by a court of
competent jurisdiction in a final and non-appealable decision);

(b) all other requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of the Collateral Agent’s rights
hereunder; and

(c) all rights of redemption, appraisement, valuation, stay, extension or
moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and each Grantor, for itself and all who may
claim under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Grantor therein and thereto,
and shall be a perpetual bar both at law and in equity against such Grantor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Grantor.

7.4 Application of Proceeds.

(a) Subject to the terms of the Intercreditor Agreements, all moneys collected
by the Collateral Agent (or, to the extent the Pledge Agreement or any other
Security Document requires proceeds of collateral under such other Security
Document to be applied in accordance with the provisions of this Agreement, the
Pledgee under, and as defined in, the Pledge Agreement, or collateral agent
under such other Security Document) upon any sale or other disposition of the
Collateral (or the collateral under the relevant Security Document), together
with all other moneys received by the Collateral Agent hereunder (or under the
relevant Security Document), in each case, as a result of the exercise of
remedies by the Collateral Agent after the occurrence and during the continuance
of an Event of Default, shall be applied as follows:

(i) first, to the payment of all amounts owing the Collateral Agent of the type
described in clauses (iii), (iv) and (v) of the definition of “Obligations”;

 

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(ii) second, to the extent proceeds remain after the application pursuant to the
preceding clause (i), to the payment of all amounts owing to any Agent of the
type described in clauses (v) and (vi) of the definition of “Obligations”;

(iii) third, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) and (ii), an amount equal, and payable ratably, to all
unpaid principal of, premium, if any, fees and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
similar proceeding, regardless of whether allowed or allowable in such
proceeding) on, all Term Loans, and all amounts due under each Designated
Interest Rate Protection Agreement or Designated Treasury Services Agreement
with a Guaranteed Creditor;

(iv) fourth, to the extent proceeds remain after the application pursuant to
preceding clauses (i) through (iii), inclusive, ratably to any then remaining
unpaid Obligations; and

(v) fifth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iv), inclusive, and following the termination of
this Agreement pursuant to Section 10.8(a) hereof, to the relevant Grantor or to
whomever may be lawfully entitled to receive such surplus.

(b) [Reserved].

(c) [Reserved].

(d) All payments required to be made hereunder shall be made (x) if to the
Lender Creditors, to the Administrative Agent for the account of the Lender
Creditors and (y) if to the Guaranteed Creditors, to the trustee, paying agent
or other similar representative (each, a “Representative”) for the Guaranteed
Creditors or, in the absence of such a Representative, directly to the
Guaranteed Creditors.

(e) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent and (ii) the Representative or, in the absence of such a
Representative, upon the Guaranteed Creditors for a determination (which the
Administrative Agent, each Representative and the Guaranteed Creditors agree (or
shall agree) to provide upon request of the Collateral Agent) of the outstanding
Primary Obligations and Secondary Obligations owed to the Lender Creditors or
the Guaranteed Creditors, as the case may be. Unless it has received written
notice from a Lender Creditor or a Guaranteed Creditor to the contrary, the
Administrative Agent and each Representative, in furnishing information pursuant
to the preceding sentence, and the Collateral Agent, in acting hereunder, shall
be entitled to assume that no Secondary Obligations are outstanding. Unless it
has written notice from a Guaranteed Creditor to the contrary, the Collateral
Agent, in acting hereunder, shall be entitled to assume that no Designated
Interest Rate Protection Agreements or Designated or Treasury Services
Agreements that constitute Obligations are in existence.

 

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(f) It is understood that the Grantors shall remain jointly and severally liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral and the aggregate amount of the Obligations.

7.5 Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Collateral Agent shall be in addition to every other
right, power and remedy specifically given to the Collateral Agent under this
Agreement, the other Secured Debt Agreements or now or hereafter existing at
law, in equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time or simultaneously and as often and in such order as may be deemed expedient
by the Collateral Agent. All such rights, powers and remedies shall be
cumulative and the exercise or the beginning of the exercise of one shall not be
deemed a waiver of the right to exercise any other or others. No delay or
omission of the Collateral Agent in the exercise of any such right, power or
remedy and no renewal or extension of any of the Obligations shall impair any
such right, power or remedy or shall be construed to be a waiver of any Default
or Event of Default or an acquiescence thereof. No notice to or demand on any
Grantor in any case shall entitle it to any other or further notice or demand in
similar or other circumstances or constitute a waiver of any of the rights of
the Collateral Agent to any other or further action in any circumstances without
notice or demand. In the event that the Collateral Agent shall bring any suit to
enforce any of its rights hereunder and shall be entitled to judgment, then in
such suit the Collateral Agent may recover reasonable invoiced out-of-pocket
expenses, including reasonable attorneys’ fees, and the amounts thereof shall be
included in such judgment, in each case, in accordance with the terms and
provisions of Section 13.01 of the Credit Agreement.

7.6 Discontinuance of Proceedings. In case the Collateral Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the relevant
Grantor, the Collateral Agent and each holder of any of the Obligations shall be
restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and
all rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.

ARTICLE VIII

INDEMNITY

8.1 Indemnity. The terms of Section 13.01 of the Credit Agreement are
incorporated herein by reference, mutatis mutandis, and the parties hereto agree
to such terms.

8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by
any Indemnified Person as to which such Indemnified Person has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Grantor contained in the Credit Agreement shall
continue in full force and effect notwithstanding the full payment of all of the
other Obligations and notwithstanding the full payment of all the Notes issued,
and Term Loans made, under the Credit Agreement, the termination of all
Designated Interest Rate Protection Agreements and Designated Treasury Services
Agreement entered into with the Guaranteed Creditors and the payment of all
other Obligations and notwithstanding the discharge thereof and the occurrence
of the Termination Date.

 

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ARTICLE IX

DEFINITIONS

The following terms shall have the meanings herein specified. Such definitions
shall be equally applicable to the singular and plural forms of the terms
defined.

“Account” shall mean any “account” as such term is defined in the UCC as in
effect on the date hereof in the State of New York.

“Administrative Agent” shall have the meaning provided in the recitals of this
Agreement.

“Agreement” shall mean this Security Agreement as the same may be amended,
modified, restated and/or supplemented from time to time in accordance with its
terms.

“Applicable Governmental Authority” shall have the meaning provided in
Section 3.1 of this Agreement.

“As-Extracted Collateral” shall mean “as-extracted collateral” as such term is
defined in the UCC as in effect on the date hereof in the State of New York.

“Borrowers” shall have the meaning provided in the recitals of this Agreement.

“Chattel Paper” shall mean “chattel paper” as such term is defined in the UCC as
in effect on the date hereof in the State of New York. Without limiting the
foregoing, the term “Chattel Paper” shall in any event include all Tangible
Chattel Paper and all Electronic Chattel Paper.

“Collateral” shall have the meaning provided in Section 1.1(a) of this
Agreement.

“Collateral Agent” shall have the meaning provided in the first paragraph of
this Agreement.

“Commercial Tort Claims” shall mean “commercial tort claims” as such term is
defined in the UCC as in effect on the date hereof in the State of New York,
except that it shall refer only to such claims that have been asserted in
judicial or similar proceedings.

“Contract Rights” shall mean all rights of any Grantor under each Contract,
including, without limitation, (i) any and all rights to receive and demand
payments under any or all Contracts, (ii) any and all rights to receive and
compel performance under any or all Contracts and (iii) any and all other
rights, interests and claims now existing or in the future arising in connection
with any or all Contracts.

“Contracts” shall mean all contracts between any Grantor and one or more
additional parties (including, without limitation, any Designated Interest Rate
Protection Agreements, Designated Treasury Services Agreement, licensing
agreements and any partnership agreements, joint venture agreements and limited
liability company agreements, and settlement agreements).

“Copyrights” shall mean any United States copyright now or hereafter prior to
the Termination Date owned by any Grantor, including any registrations of any
copyrights, in the United States Copyright Office, as well as any application
for a copyright registration now or hereafter prior to the Termination Date made
with the United States Copyright Office by any Grantor.

 

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“Credit Agreement” shall have the meaning provided in the recitals of this
Agreement.

“Credit Document Obligations” shall have the meaning provided in the definition
of “Obligations” in this Article IX.

“Deposit Accounts” shall mean all “deposit accounts” as such term is defined in
the UCC as in effect on the date hereof in the State of New York.

“Documents” shall mean “documents” as such term is defined in the UCC as in
effect on the date hereof in the State of New York.

“Domain Names” shall mean all Internet domain names owned by any Grantor now or
hereafter prior to the Termination Date.

“Electronic Chattel Paper” shall mean “electronic chattel paper” as such term is
defined in the UCC as in effect on the date hereof in the State of New York.

“Equipment” shall mean any “equipment” as such term is defined in the UCC as in
effect on the date hereof in the State of New York, and in any event, shall
include, but shall not be limited to, all machinery, equipment, furnishings,
fixtures and vehicles now or hereafter owned by any Grantor and any and all
additions, substitutions and replacements of any of the foregoing and all
accessions thereto, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.

“Excluded Collateral” shall have the meaning provided in Section 1.2 of this
Agreement.

“Excluded Deposit Accounts” shall mean a Deposit Account (i) which is used for
the sole purpose of making payroll and withholding tax payments related thereto
and other employee wage and benefit payments and accrued and unpaid employee
compensation (including salaries, wages, benefits and expense reimbursements),
(ii) which is used solely for paying taxes, including sales taxes, (iii) which
is used solely as an escrow account or as a fiduciary or trust account
maintained solely for the benefit of third parties, (iv) which is a zero balance
Deposit Account or (v) which, individually or together with any other Deposit
Accounts that are Excluded Deposit Accounts pursuant to this clause (v), has an
average daily balance for any fiscal month of less than $5,000,000.

“General Intangibles” shall mean “general intangibles” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.

“Goods” shall mean “goods” as such term is defined in the UCC as in effect on
the date hereof in the State of New York.

“Grantor” shall have the meaning provided in the first paragraph of this
Agreement.

“Holdings” shall have the meaning provided in the recitals hereto.

“Instrument” shall mean “instruments” as such term is defined in Article 9 of
the UCC as in effect on the date hereof in the State of New York.

“Intercreditor Agreements” means the ABL Intercreditor Agreement and the First
Lien/Second Lien Intercreditor Agreement.

 

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“Inventory” shall mean merchandise, inventory and goods, and all additions,
substitutions and replacements thereof and all accessions thereto, wherever
located, together with all goods, supplies, incidentals, packaging materials,
labels, materials and any other items used or usable in manufacturing,
processing, packaging or shipping same, in all stages of production from raw
materials through work in process to finished goods, and all products and
proceeds of whatever sort and wherever located any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Collateral Agent from any
Grantor’s customers, and shall specifically include all “inventory” as such term
is defined in the UCC as in effect on the date hereof in the State of New York.

“Investment Property” shall mean “investment property” as such term is defined
in the UCC as in effect on the date hereof in the State of New York.

“Lead Borrower” shall have the meaning provided in the recitals of this
Agreement.

“Lender Creditors” shall have the meaning provided in the recitals of this
Agreement.

“Lenders” shall have the meaning provided in the recitals of this Agreement.

“Letter-of-Credit Rights” shall mean “letter-of-credit rights” as such term is
defined in the UCC as in effect on the date hereof in the State of New York.

“Location” of any Grantor, shall mean such Grantor’s “location” as determined
pursuant to Section 9-307 of the UCC.

“Marks” shall mean all United States: trademarks, service marks and trade names
now held or hereafter prior to the Termination Date acquired by any Grantor,
including any registration or application for registration of any trademarks and
service marks now held or hereafter prior to the Termination Date acquired by
any Grantor (except for “intent to use” applications for trademark or service
mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. §
1051, unless and until an “Amendment to Allege Use” or a “Statement of Use”
under Sections 1(c) and 1(d) of said Act has been filed in, and accepted by, the
PTO), which are registered or filed in the PTO or the equivalent thereof in any
state of the United States or any equivalent foreign office or agency, as well
as any unregistered trademarks and service marks owned and used by a Grantor and
any trade dress including logos, designs, fictitious business names and other
business identifiers owned and used by any Grantor.

“Obligations” shall mean and include, as to any Grantor, all of the following:

(i) all now existing or hereafter arising debts, obligations, covenants, and
duties of payment or performance of every kind, matured or unmatured, direct or
contingent, owing, arising, due, or payable to any Lender, Agent or Indemnified
Person by any Grantor arising out of the Credit Agreement or any other Credit
Document, including, without limitation, all obligations to repay principal or
interest (including interest, fees and other amounts accruing during any
proceeding under any Debtor Relief Laws, regardless of whether allowed or
allowable in such proceeding) on the Term Loans, and to pay interest, fees,
costs, charges, expenses, professional fees, and all sums chargeable to any
Credit Party or for which any Credit Party is liable as indemnitor under the
Credit Documents, whether or not evidenced by any note or other instrument and
the due performance and compliance with all terms, conditions and agreements
contained therein (all such obligations, liabilities and indebtedness under this
clause (i) together with obligations under clauses (iii), (iv), (v) and (vi),
except to the extent consisting of obligations, liabilities or indebtedness with
respect to Designated Interest Rate Protection Agreements or Designated Treasury
Services Agreements, being herein collectively called the “Credit Document
Obligations”);

 

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(ii) liabilities and indebtedness of the Lead Borrower or any of its Restricted
Subsidiaries owing under any Designated Interest Rate Protection Agreement or
Designated Treasury Services Agreement (in each case, other than any Excluded
Swap Obligation) entered into by the Lead Borrower or any of its Restricted
Subsidiaries, whether now in existence or hereafter arising, and the due
performance and compliance with all terms, conditions and agreements contained
therein (all such obligations, liabilities and indebtedness under this clause
(ii) being herein collectively called the “Other Obligations”);

(iii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral in accordance
with the terms and provisions of this Agreement and the other Credit Documents;

(iv) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of such Grantor referred to in clauses
(i) and (ii) above, after an Event of Default shall have occurred and be
continuing, the reasonable invoiced out-of-pocket expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, or of any exercise by the Collateral Agent of its rights
hereunder, together with reasonable attorneys’ fees and court costs, in each
case, in accordance with the terms and provisions of this Agreement and
Section 13.01 of the Credit Agreement;

(v) all amounts paid by any Indemnified Person as to which such Indemnified
Person has the right to reimbursement under the Credit Agreement; and

(vi) all amounts owing to any Agent or any of its Affiliates pursuant to any of
the Credit Documents in its capacity as such;

it being acknowledged and agreed that the “Obligations” shall include extensions
of credit of the types described above, whether outstanding on the date of this
Agreement or extended from time to time after the date of this Agreement.
Notwithstanding anything to the contrary contained above, (x) obligations of any
Grantor under any Designated Interest Rate Protection Agreement or Designated
Treasury Services Agreement shall be secured and guaranteed pursuant to the
Credit Documents only to the extent that, and for so long as, the other
Obligations are so secured and guaranteed and (y) any release of Collateral or
Guarantors effected in the manner permitted by this Agreement shall not require
the consent of holders of obligations under Designated Interest Rate Protection
Agreement or Designated Treasury Services Agreement.

“Ordinary Course Transferees” shall mean: (i) with respect to Goods only, buyers
in the ordinary course of business and lessees in the ordinary course of
business to the extent provided in Section 9-320(a) and 9-321 of the UCC as in
effect from time to time in the relevant jurisdiction, (ii) with respect to
General Intangibles only, licensees in the ordinary course of business to the
extent provided in Section 9-321 of the UCC as in effect from time to time in
the relevant jurisdiction and (iii) any other Person who is entitled to take
free of the Lien pursuant to the UCC as in effect from time to time in the
relevant jurisdiction.

“Other Obligations” shall have the meaning provided in the definition of
“Obligations” in this Article IX.

 

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“Patents” shall mean any United States patent owned by any Grantor now or
hereafter prior to the Termination Date, and any divisions, continuations
(including, but not limited to, continuations-in-parts) and improvements thereof
filed or conceived, as the case may be, prior to the Termination Date, as well
as any application for a United States patent now or hereafter prior to the
Termination Date made by any Grantor.

“Perfection Certificate” shall mean that certain perfection certificate dated
October 20, 2016, executed and delivered by each Grantor party thereto in favor
of the Collateral Agent for the benefit of the Secured Creditors, and each other
Perfection Certificate (which shall be in form and substance reasonably
acceptable to the Collateral Agent) executed and delivered by the applicable
Grantor in favor of the Collateral Agent for the benefit of the Secured
Creditors contemporaneously with the execution and delivery of each Joinder
Agreement executed in accordance with Section 10.12 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 reasonable
request of the Collateral Agent.

“Permits” shall mean, to the extent permitted to be assigned by the terms
thereof or by applicable law, all licenses, permits, rights, orders, variances,
franchises or authorizations of or from any governmental authority or agency.

“Proceeds” shall mean all “proceeds” as such term is defined in the UCC as in
effect in the State of New York on the date hereof and, in any event, shall also
include, but not be limited to, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Collateral Agent or any Grantor
from time to time with respect to any of the Collateral, (ii) 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 governmental authority) and
(iii) any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.

“Promissory Note” shall have the meaning provided in the UCC as in effect in the
State of New York.

“PTO” shall have the meaning provided in Section 1.2(h) of this Agreement.

“Quarterly Update Date” means the later of (i) the date of delivery of the
compliance certificate from a Responsible Officer pursuant to Section 9.01(e) of
the Credit Agreement, (ii) thirty (30) days after the acquisition of the
applicable after-acquired Collateral or occurrence of applicable change and
(iii) the date agreed to in the sole discretion of the Collateral Agent.

“Registered Organization” shall have the meaning provided in the UCC as in
effect in the State of New York.

“Representative” shall have the meaning provided in Section 7.4(d) of this
Agreement.

“Secured Creditors” shall have the meaning provided in the recitals of this
Agreement.

“Secured Debt Agreements” shall mean and include this Agreement, the other
Credit Documents and the Designated Interest Rate Protection Agreements and
Designated Treasury Services Agreements entered into with a Guaranteed Creditor.

“Software” shall mean “software” as such term is defined in the UCC as in effect
on the date hereof in the State of New York.

 

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“Supporting Obligations” shall mean any “supporting obligation” as such term is
defined in the UCC as in effect on the date hereof in the State of New York, now
or hereafter owned by any Grantor, or in which any Grantor has any rights.

“Tangible Chattel Paper” shall mean “tangible chattel paper” as such term is
defined in the UCC as in effect on the date hereof in the State of New York.

“Termination Date” shall have the meaning provided in Section 10.8(a) of this
Agreement.

“Timber-to-be-Cut ” shall mean “timber-to-be-cut” as such term is defined in the
UCC as in effect on the date hereof in the State of New York.

“Trade Secret Rights” shall mean the rights of a Grantor in any Trade Secret it
holds.

“Trade Secrets” shall mean any of the following owned by a Grantor solely to the
extent pertaining to or applicable to the United States: secretly held existing
engineering or other proprietary data, information, production procedures and
other know-how relating to the design, manufacture, assembly, installation, use,
operation, marketing, sale and/or servicing of any products or business owned by
a Grantor whether written or not.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the relevant jurisdiction.

“Vehicles” shall mean all cars, trucks, construction and earth moving equipment
covered by a certificate of title law of any state.

“Voting Equity Interests” shall mean (i) all classes of Equity Interests
entitled to vote and (ii) any other Equity Interests treated as voting stock for
purposes of Treasury Regulation Section 1.956-2(c)(2).

ARTICLE X

MISCELLANEOUS

10.1 Notices. Except as otherwise specified herein, all notices, requests,
demands or other communications to or upon the respective parties hereto shall
be sent or delivered in accordance with Section 13.03 of the Credit Agreement.
All notices and other communications shall be in writing and addressed as
follows:

(a) if to any Grantor, c/o:

PAE Holding Corporation

c/o Platinum Equity, LLC

360 North Crescent Drive

Beverly Hills, California 90210

Facsimile: (310) 712-1863

Attention: Legal Department

 

26

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(b) if to the Collateral Agent, at:

Bank of America, N.A.

TX1-492-14-11

901 Main Street

Dallas, Texas 75202-3714

Attention: Angie Hidalgo

Tel: 972-338-3768

Fax: 214.416.0555

Email: angie.hidalgo@baml.com

(c) if to any Lender Creditor (other than the Collateral Agent), at such address
as such Lender Creditor shall have specified in the Credit Agreement;

(d) if to any Guaranteed Creditor, at such address as such Guaranteed Creditor
shall have specified in writing to each Grantor and the Collateral Agent;

or at such other address or addressed to such other individual as shall have
been furnished in writing by any Person described above to the party required to
give notice hereunder.

10.2 Waiver; Amendment. Except as provided in Sections 10.8 and 10.12, none of
the terms and conditions of this Agreement may be changed, waived, modified or
varied in any manner whatsoever unless in writing duly signed by each Grantor
directly affected thereby (it being understood that the addition or release of
any Grantor hereunder shall not constitute a change, waiver, discharge or
termination affecting any Grantor other than the Grantor so added or released)
and the Collateral Agent (with the consent required pursuant to the Credit
Agreement).

10.3 Obligations Absolute. To the maximum extent permitted by applicable law,
the obligations of each Grantor hereunder shall remain in full force and effect
without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the like
of such Grantor; (b) any exercise or non-exercise, or any waiver of, any right,
remedy, power or privilege under or in respect of this Agreement or any other
Secured Debt Agreement; or (c) any amendment to or modification of any Secured
Debt Agreement or any security for any of the Obligations; whether or not such
Grantor shall have notice or knowledge of any of the foregoing.

10.4 Successors and Assigns. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect,
subject to release and/or termination as set forth in Section 10.8, (ii) be
binding upon each Grantor, its successors and assigns; provided, however, that
no Grantor shall assign any of its rights or obligations hereunder without the
prior written consent of the Collateral Agent and (iii) inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent, the other Secured Creditors and their respective successors,
transferees and permitted assigns. All agreements, statements, representations
and warranties made by each Grantor herein or in any certificate or other
instrument delivered by such Grantor or on its behalf under this Agreement shall
be considered to have been relied upon by the Secured Creditors and shall
survive the execution and delivery of this Agreement and the other Secured Debt
Agreements regardless of any investigation made by the Secured Creditors or on
their behalf.

10.5 Headings Descriptive. The headings of the several sections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.

 

27

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10.6 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.

(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT (EXCEPT
THAT, (X) IN THE CASE OF ANY COLLATERAL LOCATED IN ANY STATE OTHER THAN NEW
YORK, PROCEEDINGS MAY BE BROUGHT BY THE ADMINISTRATIVE AGENT OR COLLATERAL AGENT
IN THE STATE IN WHICH THE RELEVANT COLLATERAL IS LOCATED OR ANY OTHER RELEVANT
JURISDICTION AND (Y) IN THE CASE OF ANY BANKRUPTCY, INSOLVENCY OR SIMILAR
PROCEEDING WITH RESPECT TO ANY GRANTOR, ACTIONS OR PROCEEDINGS RELATED TO THIS
AGREEMENT MAY BE BROUGHT IN SUCH COURT HOLDING SUCH BANKRUPTCY, INSOLVENCY OR
SIMILAR PROCEEDINGS) MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE
LOCATED IN THE COUNTY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION
OVER IT, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT
SUCH COURTS LACK PERSONAL JURISDICTION OVER IT. EACH PARTY HERETO IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY, AS THE CASE MAY BE, AT ITS
ADDRESS FOR NOTICES AS PROVIDED IN SECTION 10.1 ABOVE, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH PARTY HERETO IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER THAT
SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANY OTHER SUCH PARTY IN ANY OTHER JURISDICTION.

(b) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.

(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

 

28

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10.7 Grantor’s Duties. It is expressly agreed, anything herein contained to the
contrary notwithstanding, that each Grantor shall remain liable to perform all
of the obligations, if any, assumed by it with respect to the Collateral and the
Collateral Agent shall not have any obligations or liabilities with respect to
any Collateral by reason of or arising out of this Agreement, nor shall the
Collateral Agent be required or obligated in any manner to perform or fulfill
any of the obligations of any Grantor under or with respect to any Collateral.

10.8 Termination; Release.

(a) On the Termination Date, this Agreement shall terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantors (provided that all
indemnities set forth herein including, without limitation in Section 8.1
hereof, shall survive such termination) and the Collateral Agent, at the request
and expense of the respective Grantor, will promptly execute and deliver to such
Grantor a proper instrument or instruments (including, without limitation, UCC
termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Grantor (without recourse and without any representation or warranty) such
of the Collateral as may be in the possession of the Collateral Agent and as has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, “Termination Date” shall mean the date
upon which the Total Commitment under the Credit Agreement has been terminated
and all Credit Document Obligations have been paid in full, no Note under the
Credit Agreement is outstanding and all Term Loans thereunder have been repaid
in full (other than (x) contingent indemnification obligations and
(y) obligations and liabilities under Designated Interest Rate Protection
Agreements and Designated Treasury Services Agreements).

(b) In the event that any part of the Collateral is sold or otherwise disposed
of (to a Person other than a Credit Party) in connection with a sale or
disposition permitted by Section 10.02 of the Credit Agreement or is otherwise
released at the direction of the Required Lenders (or all the Lenders if
required by Section 13.12 of the Credit Agreement) and the proceeds of such sale
or disposition (or from such release) are applied in accordance with the terms
of the Credit Agreement, to the extent required to be so applied, the security
interest created hereby will be automatically released and the Collateral Agent
will execute and deliver such documentation, including termination or partial
release statements and the like in connection therewith at the request and
expense of such Grantor and assign, transfer and deliver to such Grantor
(without recourse and without any representation or warranty) such of the
Collateral as is then being (or has been) so sold or otherwise disposed of, or
released, and as may be in the possession of the Collateral Agent and has not
theretofore been released pursuant to this Agreement. Furthermore, upon the
release of any Subsidiary Guarantor from the Subsidiaries Guaranty in accordance
with the provisions thereof, such Grantor (and the Collateral at such time
assigned by the respective Grantor pursuant hereto) shall be released from this
Agreement.

(c) At any time that a Grantor desires that the Collateral Agent take any action
to acknowledge or give effect to any release of Collateral pursuant to the
foregoing Section 10.8(b), such Grantor shall deliver to the Collateral Agent
(and the relevant sub-agent, if any, designated hereunder) a certificate signed
by a Responsible Officer of such Grantor stating that the release of the
respective Collateral is permitted pursuant to such Section 10.8(b). At any time
that either any Borrower or the respective Grantor desires that, in connection
with a Subsidiary of the Lead Borrower which has been released from the
Subsidiaries Guaranty, the Collateral Agent take any action in connection with
the release of such Subsidiary hereunder as provided in the last sentence of
Section 10.8(b), it shall deliver to the Collateral Agent a certificate signed
by a Responsible Officer of the Lead Borrower and the respective Grantor stating
that the release of the respective Grantor (and its Collateral) is permitted
pursuant to such Section 10.8(b).

 

29

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(d) The Collateral Agent shall have no liability whatsoever to any other Secured
Creditor as the result of any release of Collateral by it in accordance with (or
which the Collateral Agent in the absence of gross negligence and willful
misconduct believes to be in accordance with) this Section 10.8.

10.9 Counterparts. This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall constitute an original, but all of which, when
taken together, shall constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the Lead
Borrower and the Collateral Agent. Delivery of an executed signature page to
this Agreement by facsimile, PDF or other electronic transmission shall be as
effective as delivery of an original executed counterpart of this Agreement.

10.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

10.11 The Collateral Agent and the other Secured Creditors. The Collateral Agent
shall hold in accordance with this Agreement all items of the Collateral at any
time received under this Agreement. Until the occurrence and continuation of an
Event of Default, the Collateral Agent shall not directly pledge any Collateral
in its possession or control to secure its own debt. It is expressly understood
and agreed that the obligations of the Collateral Agent as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement and in Article 12 of the Credit Agreement. The Collateral Agent shall
act hereunder on the terms and conditions set forth herein and in Article 12 of
the Credit Agreement.

10.12 Additional Grantors. It is understood and agreed that any Subsidiary
Borrower or Subsidiary Guarantor that desires to become a Grantor hereunder, or
is required to execute a counterpart of this Agreement after the date hereof
pursuant to the requirements of the Credit Agreement or any other Credit
Document, shall become a Grantor hereunder by executing a counterpart hereof and
delivering same to the Collateral Agent, or by executing and delivering to the
Collateral Agent a joinder agreement substantially in the form of Exhibit D
attached hereto, (y) delivering a Perfection Certificate and (z) taking all
actions as specified in this Agreement as would have been taken by such Grantor
had it been an original party to this Agreement, in each case with all documents
required above to be delivered to the Collateral Agent and with all documents
and actions required above to be taken to the reasonable satisfaction of the
Collateral Agent.

10.13 Intercreditor Agreements. This Agreement and the other Credit Documents
are subject to the terms and conditions set forth in the Intercreditor
Agreements in all respects and, in the event of any conflict between the terms
of the ABL Intercreditor Agreement or the First Lien/Second Lien Intercreditor
Agreement and this Agreement, the terms of ABL Intercreditor Agreement or the
First Lien/Second Lien Intercreditor Agreement, as applicable, shall govern.
Notwithstanding anything herein to the contrary, the Lien and security interest
granted to the Collateral Agent pursuant to any Credit Document and the exercise
of any right or remedy in respect of the Collateral by the Collateral Agent (or
any Secured Creditor) hereunder or under any other Credit Document are subject
to the provisions of the Intercreditor Agreements and in the event of any
conflict between the terms of the ABL Intercreditor Agreement, First Lien/Second
Lien Intercreditor Agreement, this Agreement and any other Credit Document, the
terms of the ABL Intercreditor or First Lien/Second Lien Intercreditor
Agreement, as applicable, shall govern and control with respect to the exercise
of any such right or remedy. Without

 

30

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limiting the generality of the foregoing, and notwithstanding anything herein to
the contrary, no Credit Party shall be required hereunder or under any Credit
Document to take any action with respect to the Collateral that is inconsistent
with such Credit Parties’ obligations under the Intercreditor Agreements. Prior
to the Discharge of Revolving Credit Obligations, the delivery or granting of
“control” (as defined in the UCC) to the extent only one Person can be granted
“control” therein under applicable law of any ABL Collateral (as defined in the
ABL Intercreditor Agreement) to the ABL Collateral Agent pursuant to the terms
of the Revolving Credit Collateral Documents (as defined in the ABL
Intercreditor Agreement) shall satisfy any such delivery or granting of
“control” requirement hereunder or under any other Credit Document with respect
to any ABL Collateral to the extent that such delivery or granting of “control”
is consistent with the terms of the ABL Intercreditor Agreement. Prior to the
Discharge of Senior Obligations (as such term is defined in the First
Lien/Second Lien Intercreditor Agreement), the delivery or granting of “control”
(as defined in the UCC) to the extent only one Person can be granted “control”
therein under applicable law of any Collateral to a Senior Priority
Representative (as such term is defined in the First Lien/Second Lien
Intercreditor Agreement) pursuant to the terms of the Senior Priority Collateral
Documents (as such term is defined in the First Lien/Second Lien Intercreditor
Agreement) shall satisfy any such delivery or granting of “control” requirement
hereunder or under any other Credit Document to the extent that such delivery or
granting of “control” is consistent with the terms of the Intercreditor
Agreements.

[Remainder of this page intentionally left blank; signature page follows]

 

31

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.

 

SHAY INTERMEDIATE HOLDING II CORPORATION, as a Grantor By:   /s/ Mary Ann Sigler
  Name:   Mary Ann Sigler   Title:   President and Treasurer

 

PAE HOLDING CORPORATION, as a Grantor By:  

/s/ Paul W. Cobb, Jr.

  Name:   Paul W. Cobb, Jr.   Title:   Vice President

 

[PAE — Signature Page to Second Lien Security Agreement]

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PACIFIC ARCHITECTS AND ENGINEERS INCORPORATED,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title: Vice
President

 

PAE GOVERNMENT SERVICES, INC.,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PACIFIC OPERATIONS MAINTENANCE COMPANY,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PAE DESIGN AND FACILITY MANAGEMENT,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PAE PROFESSIONAL SERVICES, INC.,

as a Grantor

By:   /s/ Stephanie Finn   Name: Stephanie Finn   Title: Assistant Secretary

 

PAE LABAT-ANDERSON INCORPORATED,

as a Grantor

By:   /s/ Stephanie Finn   Name: Stephanie Finn   Title: Assistant Secretary

[PAE — Signature Page to Second Lien Security Agreement]

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

A-T SOLUTIONS, INC.,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PAE JUSTICE SUPPORT,

as a Grantor

By:   /s/ Stephanie Finn   Name: Stephanie Finn   Title: Assistant Secretary

 

PAE AVIATION AND TECHNICAL SERVICES LLC,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PAE APPLIED TECHNOLOGIES LLC,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

PAE HANFORD LLC,

as a Grantor

By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title:
Treasurer

 

DYNCORP, as a Grantor By:   /s/ Richard Kirk von Seelen   Name: Richard Kirk von
Seelen   Title: Treasurer

[PAE — Signature Page to Second Lien Security Agreement]

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PAE SHIELD ACQUISITION COMPANY, INC., as a Grantor By:  

/s/ Stephanie Finn

  Name: Stephanie Finn   Title: Assistant Secretary

 

A-T SOLUTIONS CORPORATE HOLDINGS PRIME, INC., as a Grantor By:  

/s/ Richard Kirk von Seelen

  Name: Richard Kirk von Seelen   Title: Treasurer

 

A-T SOLUTIONS CORPORATE HOLDINGS, INC., as a Grantor By:  

/s/ Richard Kirk von Seelen

  Name: Richard Kirk von Seelen   Title: Treasurer

 

A-T SOLUTIONS HOLDINGS, INC., as a Grantor By:  

/s/ Richard Kirk von Seelen

  Name: Richard Kirk von Seelen   Title: Treasurer

 

PAE INTERNATIONAL, as a Grantor By:   /s/ Richard Kirk von Seelen   Name:
Richard Kirk von Seelen   Title: Treasurer

 

AFGHAN HOLDCO LLC, as a Grantor By:  

/s/ Stephanie Finn

  Name: Stephanie Finn   Title: Assistant Secretary

[PAE — Signature Page to Second Lien Security Agreement]

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DEFENSE SUPPORT SERVICES INTERNATIONAL 3 LLC, as a Grantor By:   /s/ Stephanie
Finn   Name: Stephanie Finn   Title: Assistant Secretary

 

PAE TRAINING SERVICES, LLC, as a Grantor By:   /s/ Richard Kirk von Seelen  
Name: Richard Kirk von Seelen   Title: Treasurer

 

PAE HUMANITARIAN RESPONSE LLC, as a Grantor By:  

/s/ Richard Kirk von Seelen

  Name: Richard Kirk von Seelen   Title: Treasurer

 

DEFENSE SUPPORT SERVICES INTERNATIONAL, LLC, as a Grantor By:   /s/ Stephanie
Finn   Name: Stephanie Finn   Title: Assistant Secretary

 

DEFENSE SUPPORT SERVICES INTERNATIONAL 2 LLC, as a Grantor By:   /s/ Stephanie
Finn   Name: Stephanie Finn   Title: Assistant Secretary

 

PAE LOGISTICS LLC, as a Grantor By:  

/s/ Richard Kirk von Seelen

  Name: Richard Kirk von Seelen   Title: Treasurer

[PAE — Signature Page to Second Lien Security Agreement]

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

ACCELLIGENCE LLC, as a Grantor By: A-T SOLUTIONS, INC., its sole member By:  
/s/ Richard Kirk von Seelen   Name: Richard Kirk von Seelen   Title: Treasurer

[PAE — Signature Page to Second Lien Security Agreement]

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Accepted and Agreed to:

 

BANK OF AMERICA, N.A.,
as Collateral Agent

By:   /s/ Erik M. Truette   Name: Erik M. Truette   Title: Vice President

 

[PAE — Signature Page to Second Lien Security Agreement]

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   EXHIBIT A    to    SECOND LIEN SECURITY AGREEMENT

[Form of]

Second Lien Copyright Security Agreement

Second Lien Copyright Security Agreement, dated as of October 20, 2016, made by
each of the undersigned grantors (individually, a “Grantor”, and, collectively,
the “Grantors”), in favor of BANK OF AMERICA, N.A., in its capacity as
collateral agent pursuant to the Credit Agreement (in such capacity, the
“Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Grantors are party to that certain Second Lien Security Agreement
of even date herewith (as amended, amended and restated, supplemented or
otherwise modified from time to time, the “Security Agreement”) in favor of the
Collateral Agent pursuant to which the Grantors are required to execute and
deliver this Second Lien Copyright Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Collateral
Agent, for the benefit of the Secured Creditors, to enter into the Credit
Agreement, the Grantors hereby agree with the Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the
Security Agreement.

SECTION 2. Grant of Security Interest in Copyright Collateral. Each Grantor
hereby pledges and grants to the Collateral Agent for the benefit of the Secured
Creditors a lien on and security interest in and to all of its right, title and
interest in, to and under all the following Collateral of such Grantor:

(a) Copyrights of such Grantor listed on Schedule I attached hereto; and

(b) all Proceeds of any and all of the foregoing (other than Excluded
Collateral).

SECTION 3. Security Agreement. The security interest granted pursuant to this
Second Lien Copyright Security Agreement is granted in conjunction with the
security interest granted to the Collateral Agent pursuant to the Security
Agreement and Grantors hereby acknowledge and affirm that the rights and
remedies of the Collateral Agent with respect to the security interest in the
Copyrights made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein. In the event that any provision of this
Second Lien Copyright Security Agreement is deemed to conflict with the Security
Agreement, the provisions of the Security Agreement shall control.

SECTION 4. Termination. Upon the payment in full of the Obligations and
termination of the Security Agreement, the Collateral Agent shall execute,
acknowledge, and deliver to the Grantors an instrument in writing in recordable
form releasing the collateral pledge, grant, assignment, lien and security
interest in the Copyrights under this Second Lien Copyright Security Agreement.

 

2

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SECTION 5. Counterparts. This Second Lien Copyright Security Agreement may be
executed in any number of counterparts, all of which shall constitute one and
the same instrument, and any party hereto may execute this Second Lien Copyright
Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Second Lien Copyright Security Agreement and the
transactions contemplated hereby, and all disputes between the parties under or
relating to this Second Lien Copyright Security Agreement or the facts or
circumstances leading to its execution, whether in contract, tort or otherwise,
shall be construed in accordance with and governed by the laws (including
statutes of limitation) of the State of New York, without regard to conflicts of
law principles that would require the application of the laws of another
jurisdiction.

[signature page follows]

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IN WITNESS WHEREOF, each Grantor has caused this Second Lien Copyright Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

Very truly yours, [GRANTORS]

By:       Name:   Title:

 

Accepted and Agreed:

BANK OF AMERICA, N.A.,

as Collateral Agent

By:       Name:   Title:

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SCHEDULE I

to

SECOND LIEN COPYRIGHT SECURITY AGREEMENT

COPYRIGHT REGISTRATIONS AND COPYRIGHT APPLICATIONS

Copyright Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

TITLE

 

Copyright Applications:   

OWNER

  

TITLE

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

EXHIBIT B

to

SECOND LIEN SECURITY AGREEMENT

[Form of]

Second Lien Patent Security Agreement

Second Lien Patent Security Agreement, dated as of October 20, 2016, made by
each of the undersigned grantors (individually, a “Grantor”, and, collectively,
the “Grantors”), in favor of BANK OF AMERICA, N.A., in its capacity as
collateral agent pursuant to the Credit Agreement (in such capacity, the
“Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Grantors are party to that certain Second Lien Security Agreement
of even date herewith (as amended, amended and restated, supplemented or
otherwise modified from time to time, the “Security Agreement”) in favor of the
Collateral Agent pursuant to which the Grantors are required to execute and
deliver this Second Lien Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Collateral
Agent, for the benefit of the Secured Creditors, to enter into the Credit
Agreement, the Grantors hereby agree with the Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the
Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral. Each Grantor hereby
pledges and grants to the Collateral Agent for the benefit of the Secured
Creditors a lien on and security interest in and to all of its right, title and
interest in, to and under all the following Collateral of such Grantor:

(a) Patents of such Grantor listed on Schedule I attached hereto; and

(b) all Proceeds of any and all of the foregoing (other than Excluded
Collateral).

SECTION 3. Security Agreement. The security interest granted pursuant to this
Second Lien Patent Security Agreement is granted in conjunction with the
security interest granted to the Collateral Agent pursuant to the Security
Agreement and Grantors hereby acknowledge and affirm that the rights and
remedies of the Collateral Agent with respect to the security interest in the
Patents made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein. In the event that any provision of this
Second Lien Patent Security Agreement is deemed to conflict with the Security
Agreement, the provisions of the Security Agreement shall control.

SECTION 4. Termination. Upon the payment in full of the Obligations and
termination of the Security Agreement, the Collateral Agent shall execute,
acknowledge, and deliver to the Grantors an instrument in writing in recordable
form releasing the collateral pledge, grant, assignment, lien and security
interest in the Patents under this Second Lien Patent Security Agreement.

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SECTION 5. Counterparts. This Second Lien Patent Security Agreement may be
executed in any number of counterparts, all of which shall constitute one and
the same instrument, and any party hereto may execute this Second Lien Patent
Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Second Lien Patent Security Agreement and the
transactions contemplated hereby, and all disputes between the parties under or
relating to this Second Lien Patent Security Agreement or the facts or
circumstances leading to its execution, whether in contract, tort or otherwise,
shall be construed in accordance with and governed by the laws (including
statutes of limitation) of the State of New York, without regard to conflicts of
law principles that would require the application of the laws of another
jurisdiction.

[signature page follows]

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IN WITNESS WHEREOF, each Grantor has caused this Second Lien Patent Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

Very truly yours,

[GRANTORS]

By:

     

Name:

 

Title:

 

Accepted and Agreed:

BANK OF AMERICA, N.A.,

as Collateral Agent

By:

     

Name:

 

Title:

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

SCHEDULE I

to

SECOND LIEN PATENT SECURITY AGREEMENT

PATENT REGISTRATIONS AND PATENT APPLICATIONS

Patent Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

NAME

Patent Applications:      

OWNER

  

APPLICATION

NUMBER

  

NAME

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

EXHIBIT C

to

SECOND LIEN SECURITY AGREEMENT

[Form of]

Second Lien Trademark Security Agreement

Second Lien Trademark Security Agreement, dated as of October 20, 2016, made by
each of the undersigned grantors (individually, a “Grantor”, and, collectively,
the “Grantors”), in favor of BANK OF AMERICA, N.A., in its capacity as
collateral agent pursuant to the Credit Agreement (in such capacity, the
“Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Grantors are party to that certain Second Lien Security Agreement
of even date herewith (as amended, amended and restated, supplemented or
otherwise modified from time to time, the “Security Agreement”) in favor of the
Collateral Agent pursuant to which the Grantors are required to execute and
deliver this Second Lien Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Collateral
Agent, for the benefit of the Secured Creditors, to enter into the Credit
Agreement, the Grantors hereby agree with the Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the
Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. Each Grantor
hereby pledges and grants to the Collateral Agent for the benefit of the Secured
Creditors a lien on and security interest in and to all of its right, title and
interest in, to and under all the following Collateral of such Grantor:

(a) Trademarks of such Grantor listed on Schedule I attached hereto (in no event
shall Collateral include any application for registration of a trademark filed
with the United States Patent and Trademark Office (“PTO”) on an intent-to-use
basis until such time (if any) as a statement of use or amendment to allege use
is accepted by the PTO);

(b) all Goodwill associated with such Trademarks; and

(c) all Proceeds of any and all of the foregoing (other than Excluded
Collateral).

SECTION 3. Security Agreement. The security interest granted pursuant to this
Second Lien Trademark Security Agreement is granted in conjunction with the
security interest granted to the Collateral Agent pursuant to the Security
Agreement and Grantors hereby acknowledge and affirm that the rights and
remedies of the Collateral Agent with respect to the security interest in the
Trademarks made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein. In the event that any provision of this
Second Lien Trademark Security Agreement is deemed to conflict with the Security
Agreement, the provisions of the Security Agreement shall control.

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

SECTION 4. Termination. Upon the payment in full of the Obligations and
termination of the Security Agreement, the Collateral Agent shall execute,
acknowledge, and deliver to the Grantors an instrument in writing in recordable
form releasing the collateral pledge, grant, assignment, lien and security
interest in the Trademarks under this Second Lien Trademark Security Agreement.

SECTION 5. Counterparts. This Second Lien Trademark Security Agreement may be
executed in any number of counterparts, all of which shall constitute one and
the same instrument, and any party hereto may execute this Second Lien Trademark
Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Second Lien Trademark Security Agreement and the
transactions contemplated hereby, and all disputes between the parties under or
relating to this Second Lien Trademark Security Agreement or the facts or
circumstances leading to its execution, whether in contract, tort or otherwise,
shall be construed in accordance with and governed by the laws (including
statutes of limitation) of the State of New York, without regard to conflicts of
law principles that would require the application of the laws of another
jurisdiction.

[signature page follows]

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

IN WITNESS WHEREOF, each Grantor has caused this Second Lien Trademark Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

Very truly yours, [GRANTORS] By:       Name:   Title:

 

Accepted and Agreed:

 

BANK OF AMERICA, N.A.,

as Collateral Agent

By:       Name:   Title:

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

SCHEDULE I

to

SECOND LIEN TRADEMARK SECURITY AGREEMENT

TRADEMARK REGISTRATIONS AND TRADEMARK APPLICATIONS

Trademark Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

TRADEMARK

Trademark Applications:

 

OWNER

  

APPLICATION

NUMBER

  

TRADEMARK

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

EXHIBIT D

to

SECOND LIEN SECURITY AGREEMENT

[FORM OF]

JOINDER AGREEMENT

Reference is made to (a) the Second Lien Security Agreement, dated as of
October 20, 2016 (as amended, amended and restated, modified, supplemented,
extended or renewed from time to time, the “Security Agreement”), among Shay
Intermediate Holding II Corporation, a Delaware corporation (“Holdings”), PAE
Holding Corporation, a Delaware corporation (the “Lead Borrower”), the
Subsidiary Borrowers party thereto (and together with the Lead Borrower, the
“Borrowers”), the other grantors party thereto from time to time (together with
Holdings and the Borrowers, the “Grantors”) and Bank of America, N.A., as
collateral agent (together with any successor collateral agent, the “Collateral
Agent”) and (b) the Second Lien Term Loan Credit Agreement, dated as of
October 20, 2016 (as amended, amended and restated, modified, supplemented,
extended or renewed from time to time, the “Credit Agreement”), among Holdings,
the Borrowers, the lenders party thereto from time to time (the “Lenders”), Bank
of America, N.A., as administrative agent (together with any successor
administrative agent, the “Administrative Agent”) and certain other parties
thereto. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement, or if not
defined therein, the Credit Agreement.

W I T N E S S E T H:

WHEREAS, the Grantors have entered into the Security Agreement in order to
induce the Lenders to make the Term Loans to the Borrowers and the Guaranteed
Creditors to enter into Designated Interest Rate Protection Agreements and
Designated Treasury Services Agreement with the Lead Borrower and/or one or more
of its Restricted Subsidiaries;

WHEREAS, the undersigned Subsidiary (the “New Grantor”) is required pursuant to
the terms of the Credit Agreement and the Security Agreement, or the Lead
Borrower has otherwise elected in accordance with the terms of the Credit
Agreement and the Security Agreement to cause such New Grantor, to become a
Grantor by executing this joinder agreement (“Joinder Agreement”) to the
Security Agreement;

NOW, THEREFORE, the Administrative Agent and the New Grantor hereby agree as
follows:

1. Grant of Security Interest. In accordance with Section 10.12 of the Security
Agreement, the New Grantor by its signature below becomes a Grantor under the
Security Agreement with the same force and effect as if originally named therein
as a Grantor. As security for the prompt and complete payment or performance, as
the case may be, when due of all of the Obligations, the New Grantor does hereby
pledge and grant to the Collateral Agent, for the benefit of the Secured
Creditors, a continuing security interest in all of the right, title and
interest of such Grantor in, to and under all of its Collateral, in each case
whether now existing or hereafter from time to time acquired (but excluding any
Excluded Collateral).

2. Representations and Warranties. The New Grantor hereby agrees to all the
terms and provisions of the Security Agreement applicable to it as a Grantor
thereunder. Each reference to a Grantor in the Credit Agreement and to a Grantor
in the Security Agreement shall, from and after the date hereof, be deemed to
include the New Grantor.

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

3. Severability. Any provision of this Joinder Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

4. Counterparts. This Joinder Agreement may be executed in counterparts, each of
which shall constitute an original. Delivery of an executed signature page to
this Joinder Agreement by facsimile, PDF or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this Joinder
Agreement.

5. No Waiver. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.

6. Notices. All notices, requests and demands to or upon the New Grantor, any
Agent or any Lender shall be governed by the terms of Section 10.1 of the
Security Agreement.

7. Governing Law. THIS JOINDER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

[Signature Pages Follow]

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

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly
executed and delivered by its duly authorized officer as of the day and year
first above written.

 

[                    ], as a Grantor

By:       Title:

 

Accepted and Agreed:

 

BANK OF AMERICA, N.A.,

as Collateral Agent

By:       Name:   Title: