Exhibit 10.4

EXECUTION VERSION

COLLATERAL AGREEMENT

dated and effective as of

March 28, 2013,

among

HEXION U.S. FINANCE CORP.,

as Issuer,

MOMENTIVE SPECIALTY CHEMICALS INC.,

each Subsidiary of Momentive Specialty Chemicals Inc. identified herein

and

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Collateral Agent

Notwithstanding anything herein to the contrary, (i) the liens and security
interests granted to the Collateral Agent on the ABL Priority Collateral
pursuant to this Agreement are expressly subject and subordinate to the liens
and security interests on the ABL Priority Collateral granted to the ABL
Facility Agent and (ii) the exercise of any right or remedy by the Collateral
Agent hereunder is subject to the limitations and provisions of (x) the First
Lien Intercreditor Agreement and (y) the ABL Intercreditor Agreement. In the
event of any conflict between the terms of the First Lien Intercreditor
Agreement and the terms of this Agreement or the terms of the ABL Intercreditor
Agreement and the terms of this Agreement, the terms of the First Lien
Intercreditor Agreement or the ABL Intercreditor Agreement, as applicable, shall
govern.

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TABLE OF CONTENTS

 

            Page  

ARTICLE I Definitions

     1   

Section 1.01

    

Indenture

     1   

Section 1.02

    

Other Defined Terms

     2   

ARTICLE II Pledge of Securities

     8   

Section 2.01

    

Pledge

     8   

Section 2.02

    

Delivery of the Pledged Collateral

     10   

Section 2.03

    

Representations, Warranties and Covenants

     10   

Section 2.04

    

Certification of Limited Liability Company and Limited Partnership Interests

     12   

Section 2.05

    

Registration in Nominee Name; Denominations

     12   

Section 2.06

    

Voting Rights; Dividends and Interest, etc.

     13   

ARTICLE III Security Interests in Other Personal Property

     15   

Section 3.01

    

Security Interest

     15   

Section 3.02

    

Representations and Warranties

     17   

Section 3.03

    

Covenants

     19   

Section 3.04

    

Other Actions

     21   

Section 3.05

    

Covenants Regarding Patent, Trademark and Copyright Collateral

     22   

ARTICLE IV Remedies

     24   

Section 4.01

    

Remedies Upon Default

     24   

Section 4.02

    

Application of Proceeds

     26   

Section 4.03

    

Grant of License to Use Intellectual Property

     26   

Section 4.04

    

Securities Act, etc.

     27   

Section 4.05

    

Registration, etc.

     27   

ARTICLE V Other First Priority Obligations

     28   

Section 5.01

    

Other First Priority Obligations

     28   

ARTICLE VI Miscellaneous

     29   

Section 6.01

    

Notices

     29   

Section 6.02

    

Security Interest Absolute

     29   

Section 6.03

    

Limitation By Law

     29   

Section 6.04

    

Binding Effect; Several Agreements

     30   

 

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Section 6.05

    

Successors and Assigns

     30   

Section 6.06

    

Collateral Agent’s Fees and Expenses; Indemnification

     30   

Section 6.07

    

Collateral Agent Appointed Attorney-in-Fact

     31   

Section 6.08

    

GOVERNING LAW

     32   

Section 6.09

    

Waivers; Amendment

     32   

Section 6.10

    

WAIVER OF JURY TRIAL

     33   

Section 6.11

    

Severability

     33   

Section 6.12

    

Counterparts

     33   

Section 6.13

    

Headings

     33   

Section 6.14

    

Jurisdiction; Consent to Service of Process

     33   

Section 6.15

    

Termination or Release

     34   

Section 6.16

    

Additional Subsidiaries

     35   

Section 6.17

    

ABL Facility Documents

     36   

Section 6.18

    

General Authority of the Collateral Agent

     36   

Section 6.19

    

Conflicts

     36   

Section 6.20

    

Person Serving as Applicable First Lien Agent

     36   

Section 6.21

    

ULC Shares

     37   

Section 6.22

    

Right of Set-off

     38   

Section 6.23

    

Parallel Debt

     38   

 

Schedules   

 

Schedule I

  

Subsidiary Parties

Schedule II

  

Commercial Tort Claims

Schedule III

  

Pledged Stock; Pledged Debt Securities

Schedule IV

  

Intellectual Property

 

Exhibits

 

  

Exhibit I

  

Form of Supplement to the Collateral Agreement

Exhibit II

  

Form of Perfection Certificate

Exhibit III

  

Form of Additional Secured Party Consent

 

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This COLLATERAL AGREEMENT, dated and effective as of March 28, 2013 (as amended,
restated, supplemented or otherwise modified from time to time, this
“Agreement”), is among HEXION U.S. FINANCE CORP., a Delaware corporation (the
“Issuer”), MOMENTIVE SPECIALTY CHEMICALS INC., a New Jersey corporation (the
“Company”), each Subsidiary of the Company listed on Schedule I hereto and each
Subsidiary of the Company that becomes a party hereto (each, a “Subsidiary
Party”) and WILMINGTON TRUST, NATIONAL ASSOCIATION (“Wilmington”), as collateral
agent (in such capacity, together with its successors and assigns in such
capacity, the “Collateral Agent”) for the Secured Parties (as defined below).

Reference is made to (i) that certain Indenture, dated as of March 14, 2012 (as
supplemented by that certain First Supplemental Indenture, dated as of
January 31, 2013, that certain Second Supplemental Indenture, dated as of the
date hereof, and as further amended, restated, supplemented or otherwise
modified from time to time, the “Indenture”), among the Issuer, the Company,
certain Subsidiaries of the Company party thereto and Wilmington, as trustee (in
such capacity, together with its successors and assigns in such capacity, the
“Trustee”); (ii) that certain ABL Intercreditor Agreement, dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the “ABL Intercreditor Agreement”), among the ABL Facility Agent,
Wilmington, as Applicable First-Lien Agent and First-Lien Collateral Agent (in
each case, as defined therein), the Issuer, the Company and the other parties
party thereto; and (iii) that certain First Lien Intercreditor Agreement, dated
as of May 14, 2012 (as amended, restated, supplemented or otherwise modified
from time to time, the “First Lien Intercreditor Agreement”), among Wilmington,
as Initial Other Authorized Representatives (as defined therein), and the other
additional Authorized Representative (as defined therein) from time to time
party thereto.

Pursuant to the terms of the Indenture, the Issuer has issued 6.625%
First-Priority Senior Secured Notes due 2020 (the “Notes”), and the Issuer’s
obligations under the Indenture and the Notes are guaranteed by the Company and
the Subsidiary Parties. The Issuer, the Company and the Subsidiary Parties have
derived and will continue to derive substantial benefits from the transactions
contemplated by the Indenture. Pursuant to the Indenture, the Pledgors have
agreed to grant a security interest in the Collateral for the benefit of the
Collateral Agent (for the ratable benefit of the Holders) to secure the payment
and performance of the Obligations, subject to the terms of the Intercreditor
Agreements, including with respect to the relative rights and priorities in
respect of the Collateral.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

Section 1.01 Indenture.

(a) Capitalized terms used in this Agreement and not otherwise defined herein
have the respective meanings assigned thereto in the Indenture. All terms
defined in the New York UCC (as defined herein) and not defined in this
Agreement or the Indenture shall have the meanings specified therein. The term
“instrument” shall have the meaning specified in Article 9 of the New York UCC.

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(b) The rules of construction specified in Section 1.04 of the Indenture also
apply to this Agreement.

Section 1.02 Other Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:

“1-1/2 Lien Notes Documents” has the meaning assigned to such term in the ABL
Facility.

“ABL Facility” has the meaning assigned to such term in the ABL Intercreditor
Agreement.

“ABL Facility Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent under the ABL Facility, together with its successors and
assigns in such capacity.

“ABL Intercreditor Agreement” has the meaning assigned to such term in the
preliminary statements of this Agreement.

“ABL Loan Documents” has the meaning assigned to such term in the ABL Facility.

“ABL Obligations” has the meaning assigned to such term in the ABL Intercreditor
Agreement.

“ABL Priority Collateral” has the meaning assigned to such term in the ABL
Intercreditor Agreement.

“Account Debtor” means any person who is or who may become obligated to any
Pledgor under, with respect to or on account of an Account.

“Additional Secured Party Consent” means a completed additional secured party
consent substantially in the form of Exhibit III hereto.

“Agreement” has the meaning assigned to such term in the introductory paragraph
of this Agreement.

“Applicable Agent” means, (i) with respect to the Notes Priority Collateral, the
Collateral Agent and (ii) with respect to the ABL Priority Collateral, the ABL
Facility Agent.

“Applicable First Lien Agent” means at any time the authorized representative
that is the “Applicable Authorized Representative” under and as defined in the
First Lien Intercreditor Agreement at such time. On the date hereof, the Trustee
is the Applicable First Lien Agent hereunder.

 

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“Article 9 Collateral” has the meaning assigned to such term in Section 3.01.

“Authorized Representative” means (a) the Trustee, with respect to the Notes
Obligations, and (b) any duly authorized representative of holders of Other
First Priority Obligations designated as an “Authorized Representative” pursuant
to Section 5.01 with respect to such Other First Priority Obligations.

“Collateral” means Article 9 Collateral and Pledged Collateral.

“Collateral Agent” has the meaning assigned to such term in the introductory
paragraph of this Agreement.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

“Company” has the meaning assigned to such term in the introductory paragraph of
this Agreement.

“Control Agreement” means a securities account control agreement or a commodity
account control agreement, as applicable, enabling the Applicable Agent to
obtain “control” (within the meaning of the New York UCC) of any such accounts,
in form and substance reasonably satisfactory to the Applicable Agent.

“Copyright License” means any written agreement, now or hereafter in effect,
granting any right to any Pledgor under any Copyright now or hereafter owned by
any third party, and all rights of any Pledgor under any such agreement
(including any such rights that such Pledgor has the right to license).

“Copyrights” means all of the following now owned or hereafter acquired by any
Pledgor (or, as required in the context of the definition of “Copyright
License,” any third party licensor): (a) all copyright rights in any work
subject to the copyright laws of the United States or any other country, whether
as author, assignee, transferee or otherwise; and (b) all registrations and
applications for registration of any such Copyright in the United States or any
other country, including registrations, supplemental registrations and pending
applications for registration in the United States Copyright Office, including
those listed on Schedule IV.

“Corresponding Obligations” has the meaning assigned to such term in
Section 6.23.

“Credit Agreement” means at any time any Other First Priority Agreement
designated by the Company as the “Credit Agreement” hereunder pursuant to an
Officer’s certificate delivered by the Company to the Collateral Agent and,
while it is in effect, under the Indenture. On the date hereof, there is no
Credit Agreement outstanding.

“Deductible Amount” has the meaning assigned to such term in Section 6.23.

“Designated Securities” means any securities the granting of a security interest
in which would require separate financial statements of a Subsidiary of the
Company to be filed

 

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with the SEC (or any other government agency) pursuant to Rule 3-16 of
Regulation S-X under the Securities Act and the Exchange Act (or any successor
regulation or any other law, rule or regulation), but only for so long as, and
only to the extent that, such securities are subject to such requirement
(provided that no securities of a Subsidiary of the Company for which separate
financial statements are actually filed with the SEC pursuant to such Rule 3-16
shall be Designated Securities).

“Equity Interests” of any Person means any and all shares, interests, rights to
purchase or otherwise acquire, warrants, options, participations or other
equivalents of or interests in (however designated) equity or ownership of such
person, including any preferred stock, any limited or general partnership
interest and any limited liability company membership interest, and any
securities or other rights or interests convertible into or exchangeable for any
of the foregoing.

“Event of Default” means an “Event of Default” under and as defined in the
Indenture or any Other First Priority Agreement, as applicable.

“Excluded Swap Obligations” means (as such definition may be modified from time
to time as agreed by the Company and the Applicable Agent), with respect to any
guarantor guaranteeing any of the Obligations, any obligation to pay or perform
under any agreement, contract or transaction that constitutes a “swap” within
the meaning of the Commodity Exchange Act or any rule, regulation or order
thereunder (or the application or official interpretation of any thereof) (a
“CEA Swap Obligation”), if, and to the extent that, all or a portion of the
guarantee of such guarantor of, or the grant by such guarantor of a security
interest to secure, as applicable, such CEA Swap Obligation (or any guarantee
thereof) is or becomes illegal under the Commodity Exchange Act or any rule,
regulation or order thereunder (or the application or official interpretation of
any thereof) by virtue of such guarantor’s failure for any reason to constitute
an “eligible contract participant” as defined in the Commodity Exchange Act and
the regulations thereunder, at the time the guarantee of (or grant of such
security interest by, as applicable) such guarantor becomes or would become
effective with respect to such CEA Swap Obligation. If a CEA Swap Obligation
arises under a master agreement governing more than one swap, such exclusion
shall apply only to the portion of such CEA Swap Obligation that is attributable
to swaps for which such guarantee or security interest is or becomes illegal.

“Federal Securities Laws” has the meaning assigned to such term in Section 4.04.

“First Lien Intercreditor Agreement” has the meaning assigned to such term in
the preliminary statements of this Agreement. On the date hereof, the Notes are
the only outstanding First Lien Obligations under and as defined in the First
Lien Intercreditor Agreement.

“Foreign Pledge Agreement” shall mean a pledge or charge agreement with respect
to the Equity Interests of Momentive International Holdings Coöperatief U.A.
owned by NL Coop Holdings LLC, for the benefit of the Secured Parties, as
amended, restated, supplemented or otherwise modified from time to time.

“General Intangibles” means all “General Intangibles” as defined in the New York
UCC, including all choses in action and causes of action and all other
intangible

 

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personal property of any Pledgor of every kind and nature (other than Accounts)
now owned or hereafter acquired by any Pledgor, including corporate or other
business records, indemnification claims, contract rights (including rights
under leases, whether entered into as lessor or lessee, swap agreements and
other agreements), Intellectual Property, goodwill, registrations, franchises,
tax refund claims and any letter of credit, guarantee, claim, security interest
or other security held by or granted to any Pledgor to secure payment by an
Account Debtor of any of the Accounts.

“Governmental Authority” means any federal, state, provincial, territorial,
municipal, local or foreign court or governmental agency, authority,
instrumentality or regulatory or legislative body.

“Indemnitee” has the meaning assigned to such term in Section 6.06.

“Indenture” has the meaning assigned to such term in the preliminary statements
of this Agreement.

“Indenture Documents” means (a) the Indenture, the Notes, this Agreement and
each Security Document which by its terms is for the benefit of holders of Notes
Obligations and (b) any other related documents or instruments executed and
delivered pursuant to the Indenture or any such Security Document, in each case,
as such agreements may be amended, restated, supplemented or otherwise modified
from time to time.

“Indenture Restricted Subsidiary” has the meaning assigned to such term in the
ABL Facility.

“Insolvency or Liquidation Proceeding” has the meaning assigned to such term in
the First Lien Intercreditor Agreement.

“Intellectual Property” means all intellectual and similar property of every
kind and nature now owned or hereafter acquired by any Pledgor, including
inventions, designs, Patents, Copyrights, Trademarks, Patent Licenses, Copyright
Licenses, Trademark Licenses, trade secrets, domain names, confidential or
proprietary technical and business information, know-how, show-how or other data
or information and all related documentation.

“Intercreditor Agreements” means each of the ABL Intercreditor Agreement, the
First Lien Intercreditor Agreement and any other intercreditor agreement entered
into in compliance with the Indenture and each Other First Priority Agreement.

“Issue Date” means March 14, 2012.

“Issuer” has the meaning assigned to such term in the introductory paragraph of
this Agreement.

“New York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York.

“Notes” has the meaning assigned to such term in the preliminary statements of
this Agreement.

 

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“Notes Obligations” means the due and punctual payment of (a) all principal of
and interest (including interest accruing during the pendency of any Insolvency
or Liquidation Proceeding, regardless of whether allowed or allowable in such
proceeding) and premium (if any) on all indebtedness under the Indenture, and
(b) all other monetary obligations, including obligations to pay fees, expense
reimbursement obligations and indemnification obligations, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any Insolvency or Liquidation
Proceeding, regardless of whether allowed or allowable in such proceeding), of
the Pledgors or any of their subsidiaries to the Secured Parties under the
Indenture Documents, and other amounts payable from time to time pursuant to the
Indenture Documents, in each case whether or not allowed or allowable in an
Insolvency or Liquidation Proceeding.

“Notes Priority Collateral” has the meaning assigned to such term in the ABL
Intercreditor Agreement.

“Obligations” means (a) the Notes Obligations and (b) if any Other First
Priority Obligations are incurred and designated by the Company as Obligations
pursuant to Section 5.01, the due and punctual payment of (i) the unpaid
principal of and interest (including interest accruing during the pendency of
any Insolvency or Liquidation Proceeding) owing to any holder of Other First
Priority Obligations under any Other First Priority Agreement, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, and (ii) all other monetary obligations of any Pledgor to any
holder of Other First Priority Obligations under any Other First Priority
Agreement, including obligations to pay fees, expense reimbursement obligations
and indemnification obligations, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred during the pendency
of any Insolvency or Liquidation Proceeding, in each case whether or not allowed
or allowable in such Insolvency or Liquidation Proceeding); provided, however,
that the Obligations shall not include any Excluded Swap Obligations.

“Other First Priority Agreement” shall mean any indenture, credit agreement or
other agreement, document or instrument pursuant to which any Pledgor has or
will incur Other First Priority Obligations; provided that, in each case, the
Indebtedness thereunder has been designated as Other First Priority Obligations
pursuant to and in accordance with Section 5.01.

“Other First Priority Obligations” means other Indebtedness of the Pledgors that
is equally and ratably secured with the Notes as permitted by the Indenture and
is designated by the Company as an Other First Priority Obligation pursuant to
and in accordance with Section 5.01.

“Parallel Debt” has the meaning assigned to such term in Section 6.23.

“Patent License” means any written agreement, now or hereafter in effect,
granting to any Pledgor any right to make, use or sell any invention covered by
a Patent, now or hereafter owned by any third party (including any such rights
that such Pledgor has the right to license).

 

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“Patents” means all of the following now owned or hereafter acquired by any
Pledgor (or, as required in the context of the definition of “Patent License,”
any third party licensor): (a) all letters patent of the United States or the
equivalent thereof in any other country, and all applications for letters patent
of the United States or the equivalent thereof in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part or extensions thereof, and the inventions disclosed or
claimed therein, including the right to make, use and/or sell the inventions
disclosed or claimed therein.

“Perfection Certificate” means a certificate substantially in the form of
Exhibit II, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by an officer of the Company.

“Permitted Liens” means (a) any Lien not prohibited by Section 4.12 of the
Indenture and (b) not prohibited by any Other First Priority Agreement.

“Pledged Collateral” has the meaning assigned to such term in Section 2.01.

“Pledged Debt Securities” has the meaning assigned to such term in Section 2.01.

“Pledged Securities” means any promissory notes, stock certificates or other
certificated securities now or hereafter included in the Pledged Collateral,
including all certificates, instruments or other documents representing or
evidencing any Pledged Collateral.

“Pledged Stock” has the meaning assigned to such term in Section 2.01.

“Pledged ULC Shares” means Pledged Stock which are shares of a ULC.

“Pledgor” means the Issuer, the Company and each Subsidiary Party.

“Prior Agent” has the meaning assigned to such term in Section 6.20.

“Prior Collateral Agent” has the meaning assigned to such term in Section 6.20.

“Prior First Lien Agent” has the meaning assigned to such term in Section 6.20.

“Qualified CFC Holding Company” has the meaning assigned to such term in the ABL
Facility.

“Received Amount” has the meaning assigned to such term in Section 6.23.

“Second Lien Notes Documents” has the meaning assigned to such term in the ABL
Facility.

“Secured Parties” means (a) the Applicable First Lien Agent and the Collateral
Agent, (b) the Trustee and each Holder and (c) subject to compliance with
Section 5.01, each holder of Other First Priority Obligations and its Authorized
Representative.

 

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“Security Documents” means this Agreement and each other agreement entered into
in favor of the Collateral Agent for purposes of securing any of the
Obligations, in each case as amended, restated, supplemented or otherwise
modified from time to time.

“Security Interest” has the meaning assigned to such term in Section 3.01.

“Series” has the meaning assigned to such term in the First Lien Intercreditor
Agreement.

“Subsidiary Party” has the meaning assigned to such term in the introductory
paragraph of this Agreement.

“Successor Agent” has the meaning assigned to such term in Section 6.20.

“Successor Collateral Agent” has the meaning assigned to such term in
Section 6.20.

“Successor First Lien Agent” has the meaning assigned to such term in
Section 6.20.

“Trademark License” means any written agreement, now or hereafter in effect,
granting to any Pledgor any right to use any Trademark now or hereafter owned by
any third party (including any such rights that such Pledgor has the right to
license).

“Trademarks” means all of the following now owned or hereafter acquired by any
Pledgor (or, as required in the context of the definition of “Trademark
License,” any third party licensor): (a) all trademarks, service marks,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations thereof (if any), and all registration and recording
applications filed in connection therewith, including registrations and
registration applications in the United States Patent and Trademark Office or
any similar offices in any State of the United States or any other country or
any political subdivision thereof, and all renewals thereof, including those
listed on Schedule IV and (b) all goodwill associated therewith or symbolized
thereby.

“Trustee” has the meaning assigned to such term in the preliminary statements of
this Agreement.

“ULC” means an unlimited liability company existing under the laws of the
Province of Nova Scotia, Canada.

ARTICLE II

Pledge of Securities

Section 2.01 Pledge. As security for the payment or performance, as the case may
be, in full of the Obligations, each Pledgor hereby (except in the case of
Pledged ULC Shares) assigns and (in all cases) pledges to the Collateral Agent,
its successors and permitted

 

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assigns, for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, its successors and permitted assigns, for the ratable
benefit of the Secured Parties, a security interest in all of such Pledgor’s
right, title and interest in, to and under: (a) the Equity Interests directly
owned by it (which such Equity Interests constituting Pledged Stock shall be
listed on Schedule III) and any other Equity Interests obtained in the future by
such Pledgor and any certificates representing all such Equity Interests;
provided that the Pledged Stock shall not include: (i) any Equity Interests in
excess of 65% of the outstanding voting Equity Interests of any “first tier”
Foreign Subsidiary or any “first tier” Qualified CFC Holding Company owned by
such Pledgor or any of the outstanding Equity Interests of a Foreign Subsidiary
or a Qualified CFC Holding Company that is not a “first tier” Foreign Subsidiary
or a “first tier” Qualified CFC Holding Company, respectively, owned by such
Pledgor, (ii) any Equity Interests that constitute Excluded Assets or, if any
Credit Agreement is outstanding, any Equity Interests that are not required to
be pledged as security for the Obligations under such Credit Agreement,
(iii) any Equity Interests if, and to the extent that, and for so long as
(A) doing so would violate applicable law or a contractual obligation binding on
such Equity Interests and (B) with respect to contractual obligations, such
Equity Interests are not in a Wholly Owned Subsidiary and such obligation
existed on the Issue Date or at the time of the acquisition of such Equity
Interests and was not created or made binding on such Equity Interests in
contemplation of or in connection with the acquisition of such Equity Interests,
(iv) any Equity Interests of any Indenture Restricted Subsidiary owned by the
Company or any Indenture Restricted Subsidiary, (v) any Equity Interests of a
Person that is not directly or indirectly a Subsidiary or (vi) any Designated
Securities (the Equity Interests pledged pursuant to this clause (a), the
“Pledged Stock”); (b)(i) the debt securities currently issued to any Pledgor
(which such debt securities constituting Pledged Debt Securities shall be listed
on Schedule III), (ii) any debt securities in the future issued to such Pledgor
and (iii) the promissory notes and any other instruments, if any, evidencing
such debt securities; provided that the Pledged Debt Securities shall not
include (A) debt securities issued by any Indenture Restricted Subsidiary to the
Company or any Indenture Restricted Subsidiary, (B) debt securities issued to
the Company or any Subsidiary Party for so long as a pledge of such Indebtedness
would be deemed an incurrence of Indebtedness under any of the Indenture
Documents, the 1-1/2 Lien Notes Documents or the Second Lien Notes Documents,
(C) any debt securities that constitute Excluded Assets or, if any Credit
Agreement is outstanding, any debt obligations or instruments that are not
required to be pledged as security for the Obligations under such Credit
Agreement and (D) any Designated Securities (the debt securities pledged
pursuant to this clause (b), the “Pledged Debt Securities”); (c) subject to
Section 2.06, all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the conversion of,
and all other proceeds received in respect of, the securities referred to in
clauses (a) and (b) above; (d) subject to Section 2.06, all rights and
privileges of such Pledgor with respect to the securities and other property
referred to in clauses (a), (b) and (c) above; and (e) all proceeds of any of
the foregoing (the items referred to in clauses (a) through (e) above being
collectively referred to as the “Pledged Collateral”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and permitted assigns, for the ratable
benefit of the Secured Parties, forever; subject, however, to the terms,
covenants and conditions hereinafter set forth.

 

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Section 2.02 Delivery of the Pledged Collateral.

(a) Each Pledgor agrees promptly to deliver or cause to be delivered to the
Applicable Agent, for the ratable benefit of the Secured Parties, any and all
Pledged Securities to the extent such Pledged Securities, in the case of
promissory notes or other instruments evidencing Indebtedness, are required to
be delivered pursuant to paragraph (b) of this Section 2.02.

(b) Each Pledgor will cause any Pledged Debt Security (i) having an aggregate
principal amount in excess of $15,000,000 or (ii) payable by the Company or any
Subsidiary of the Company (other than, in the case of this clause (ii), any such
Indebtedness referred to in the proviso to Section 2.01(b) and intercompany
Indebtedness incurred in the ordinary course of business in connection with the
cash management operations and intercompany sales of the Company and each
Subsidiary of the Company) owed to such Pledgor by any person to be evidenced by
a duly executed promissory note that is pledged and delivered to the Applicable
Agent, for the ratable benefit of the Secured Parties, pursuant to the terms
hereof. To the extent any such promissory note is a demand note, each Pledgor
party thereto agrees, if requested by the Applicable Agent, to immediately
demand payment thereunder upon an Event of Default specified under
Section 6.01(a), (b), (g) or (h) of the Indenture or any equivalent provision
under any Other First Priority Agreement.

(c) Upon delivery to the Applicable Agent, (i) any Pledged Securities required
to be delivered pursuant to the foregoing paragraphs (a) and (b) of this
Section 2.02 shall be accompanied by stock powers or note powers, as applicable,
duly executed in blank or other instruments of transfer reasonably satisfactory
to the Applicable Agent and by such other instruments and documents as the
Applicable Agent may reasonably request and (ii) all other property comprising
part of the Pledged Collateral delivered pursuant to the terms of this Agreement
shall be accompanied to the extent necessary to perfect the security interest in
or allow realization on the Pledged Collateral by proper instruments of
assignment duly executed by the applicable Pledgor and such other instruments or
documents (including issuer acknowledgments in respect of uncertificated
securities) as the Applicable Agent may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing the securities,
which schedule shall be attached hereto as Schedule III and made a part hereof;
provided that failure to attach any such schedule hereto shall not affect the
validity of such pledge of such Pledged Securities. Each schedule so delivered
shall supplement any prior schedules so delivered.

Section 2.03 Representations, Warranties and Covenants. The Pledgors, jointly
and severally, represent, warrant and covenant to and with the Collateral Agent,
for the ratable benefit of the Secured Parties, that:

(a) Schedule III correctly sets forth, as of the date hereof, the percentage of
the issued and outstanding shares of each class of the Equity Interests of the
issuer thereof represented by such Pledged Stock and includes (i) all Equity
Interests constituting Pledged Stock and (ii) all debt securities and promissory
notes or instruments constituting Pledged Debt Securities;

 

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(b) the Pledged Stock, to the best of each Pledgor’s knowledge, has been duly
and validly authorized and issued by the issuers thereof and is fully paid and
nonassessable, subject to the assessability of the Pledged ULC Shares under the
Companies Act (Nova Scotia);

(c) except for the security interests granted hereunder (or otherwise permitted
under the Indenture Documents and not prohibited by the Other First Priority
Agreements), each Pledgor (i) is and, subject to any transfers made in
compliance with the Indenture and any Other First Priority Agreement, will
continue to be the direct owner, beneficially and of record, of the Pledged
Collateral indicated on Schedule III as owned by such Pledgor, (ii) holds the
same free and clear of all Liens, other than Permitted Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
any security interest in or other Lien on, the Pledged Collateral, other than
pursuant to a transaction permitted by the Indenture and any Other First
Priority Agreement and other than Permitted Liens, and (iv) subject to the
rights of such Pledgor under the Indenture Documents and any Other First
Priority Agreement to dispose of Pledged Collateral, will use commercially
reasonable efforts to defend its title or interest thereto or therein against
any and all Liens (other than Permitted Liens), however arising, of all persons;

(d) other than as set forth in the Indenture or in any Other First Priority
Agreement, and except for restrictions and limitations imposed by the Indenture
Documents, any Other First Priority Agreement, the ABL Loan Documents, the 1-1/2
Lien Notes Documents, the Second Lien Notes Documents or securities laws
generally, or otherwise permitted to exist pursuant to the Indenture, any Other
First Priority Agreement, the ABL Loan Documents, the 1-1/2 Lien Notes Documents
or the Second Lien Notes Documents, the Pledged Collateral is and will continue
to be freely transferable and assignable, and none of the Pledged Collateral is
or will be subject to any option, right of first refusal, shareholders
agreement, charter, by-law, memorandum of association or articles of association
provisions or contractual restriction of any nature, other than restrictions on
transfer in the articles of association of a ULC, that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Collateral hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Collateral
Agent of rights and remedies hereunder;

(e) each Pledgor has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;

(f) other than as set forth in the Indenture, any Other First Priority Agreement
or in the ABL Facility or the schedules thereto, no consent or approval of any
Governmental Authority, any securities exchange or any other person was or is
necessary to the validity of the pledge effected hereby (other than such as have
been obtained and are in full force and effect);

(g) by virtue of the execution and delivery by the Pledgors of this Agreement
and the Foreign Pledge Agreement, when any Pledged Securities (excluding any
foreign stock not covered by the Foreign Pledge Agreement) are delivered to the
Applicable Agent, for the ratable benefit of the Secured Parties, in accordance
with this Agreement and the Intercreditor Agreements, and a financing statement
naming the Collateral Agent as the secured

 

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party and covering the Pledged Collateral to which such Pledged Securities
relate is filed in the appropriate filing office, the Collateral Agent will
obtain, for the ratable benefit of the Secured Parties, a legal, valid and
perfected lien upon and security interest in such Pledged Collateral, subject
only to Permitted Liens or Liens arising by operation of law, as security for
the payment and performance of the Obligations; and

(h) the pledge effected hereby is effective to vest in the Collateral Agent, for
the ratable benefit of the Secured Parties, the rights of the Collateral Agent
in the Pledged Collateral as set forth herein.

Section 2.04 Certification of Limited Liability Company and Limited Partnership
Interests.

(a) Each interest in any limited liability company or limited partnership
controlled by any Pledgor pledged hereunder and represented by a certificate
shall be a “security” within the meaning of Article 8 of the New York UCC and
shall be governed by Article 8 of the New York UCC, and each such interest shall
at all times hereafter be represented by a certificate.

(b) Each interest in any limited liability company or limited partnership
controlled by a Pledgor pledged hereunder and not represented by a certificate
shall not be a “security” within the meaning of Article 8 of the New York UCC
and shall not be governed by Article 8 of the New York UCC, and the Pledgors
shall at no time elect to treat any such interest as a “security” within the
meaning of Article 8 of the New York UCC or issue any certificate representing
such interest, unless the applicable Pledgor provides prior written notification
to the Applicable Agent of such election and immediately delivers any such
certificate to the Applicable Agent pursuant to the terms hereof.

Section 2.05 Registration in Nominee Name; Denominations. The Applicable Agent,
on behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold the Pledged Securities in the name of the applicable
Pledgor, endorsed or assigned in blank or, except in the case of the Pledged ULC
Shares, in favor of the Applicable Agent or, except in the case of Pledged ULC
Shares, if an Event of Default shall have occurred and be continuing, following
written instruction from the Applicable First Lien Agent, in its own name as
pledgee or the name of its nominee (as pledgee or as sub-agent). Upon the
occurrence and during the continuance of an Event of Default, each Pledgor will
promptly give to the Applicable Agent copies of any notices or other
communications received by it with respect to Pledged Securities registered in
the name of such Pledgor. If an Event of Default shall have occurred and be
continuing, the Applicable Agent shall have the right, following written
instruction from the Applicable First Lien Agent, to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Agreement. Each Pledgor shall
use its commercially reasonable efforts to cause any of its Subsidiaries that is
not a party to this Agreement to comply with a request by the Applicable Agent,
pursuant to this Section 2.05, to exchange certificates representing Pledged
Securities of such Subsidiary for certificates of smaller or larger
denominations.

 

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Section 2.06 Voting Rights; Dividends and Interest, etc.

(a) Unless and until an Event of Default shall have occurred and be continuing
and the Applicable Agent shall have given notice to the relevant Pledgors of the
Applicable Agent’s intention to exercise its rights hereunder:

(i) Each Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Collateral or any
part thereof for any purpose consistent with the terms of this Agreement, the
Indenture, the other Indenture Documents and any Other First Priority Agreement;
provided that, except as permitted under the Indenture and any Other First
Priority Agreement, such rights and powers shall not be exercised in any manner
that could materially and adversely affect the rights and remedies of any of the
Collateral Agent or the other Secured Parties under this Agreement, the
Indenture, any other Indenture Document or any Other First Priority Agreement or
the ability of the Secured Parties to exercise the same.

(ii) The Collateral Agent shall promptly execute and deliver to each Pledgor, or
cause to be executed and delivered to such Pledgor, all such proxies, powers of
attorney and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Pledgor shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions paid on or distributed in
respect of the Pledged Collateral to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of
the Indenture, the other Indenture Documents, any Other First Priority Agreement
and applicable laws; provided that any noncash dividends, interest, principal or
other distributions that would constitute Pledged Securities, whether resulting
from a subdivision, combination or reclassification of the outstanding Equity
Interests of the issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption thereof, or as a result
of any merger, consolidation, acquisition or other exchange of assets to which
such issuer may be a party or otherwise, shall be and become part of the Pledged
Collateral, and, if received by any Pledgor, shall not be commingled by such
Pledgor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Applicable Agent,
for the ratable benefit of the Secured Parties, and shall be forthwith delivered
to the Applicable Agent, for the ratable benefit of the Secured Parties, in the
same form as so received (endorsed in a manner reasonably satisfactory to the
Applicable Agent).

(b) Except in the case of Pledged ULC Shares (in which case the Pledgors shall
maintain all membership rights described herein until they cease to be
registered as members of the applicable ULC), upon the occurrence and during the
continuance of an Event of Default and after notice by the Applicable Agent to
the relevant Pledgors of the Applicable Agent’s intention to exercise its rights
hereunder, all rights of any Pledgor to dividends, interest, principal or other
distributions that such Pledgor is authorized to receive pursuant to
paragraph (a)(iii) of this Section 2.06 shall cease, and all such rights shall
thereupon become

 

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vested, for the ratable benefit of the Secured Parties, in the Applicable Agent,
which shall have the sole and exclusive right and authority to receive and
retain such dividends, interest, principal or other distributions. All
dividends, interest, principal or other distributions received by any Pledgor
contrary to the provisions of this Section 2.06 shall not be commingled by such
Pledgor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Applicable Agent,
for the ratable benefit of the Secured Parties, and shall be forthwith delivered
to the Applicable Agent, for the ratable benefit of the Secured Parties, in the
same form as so received (endorsed in a manner reasonably satisfactory to the
Applicable Agent). Any and all money and other property paid over to or received
by the Collateral Agent pursuant to the provisions of this paragraph (b) shall
be retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 4.02. After all Events of
Default have been cured or waived and the Company has delivered to the
Collateral Agent a certificate to that effect, the Collateral Agent shall
promptly repay to each Pledgor (without interest) all dividends, interest,
principal or other distributions that such Pledgor would otherwise be permitted
to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.06 and
that remain in such account.

(c) Except in the case of Pledged ULC Shares (in which case the Pledgors shall
maintain all membership rights described herein until they cease to be
registered as members of the applicable ULC), upon the occurrence and during the
continuance of an Event of Default and after notice by the Applicable Agent to
the relevant Pledgors of the Applicable Agent’s intention to exercise its rights
hereunder, all rights of any Pledgor to exercise the voting and/or consensual
rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of
this Section 2.06, and the obligations of the Applicable Agent under
paragraph (a)(ii) of this Section 2.06, shall cease, and all such rights shall
thereupon become vested in the Applicable Agent, for the ratable benefit of the
Secured Parties, which shall have the sole and exclusive right and authority to
exercise such voting and consensual rights and powers; provided that the
Applicable Agent shall have the right from time to time following and during the
continuance of an Event of Default to permit the Pledgors to exercise such
rights. After all Events of Default have been cured or waived and an Officer of
the Company has delivered to the Applicable Agent a certificate to that effect,
each Pledgor shall have the right to exercise the voting and/or consensual
rights and powers that such Pledgor would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above and the obligations of the
Applicable Agent under paragraph (a)(ii) shall be in effect.

(d) Any notice given by the Applicable Agent to the Pledgors suspending their
rights under paragraph (a) of this Section 2.06 (i) may be given by telephone if
promptly confirmed in writing, (ii) may be given to one or more of the Pledgors
at the same or different times and (iii) may suspend the rights of the Pledgors
under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such
rights (as specified by the Applicable Agent in its sole and absolute
discretion) and without waiving or otherwise affecting the Applicable Agent’s
rights to give additional notices from time to time suspending other rights so
long as an Event of Default has occurred and is continuing.

 

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ARTICLE III

Security Interests in Other Personal Property

Section 3.01 Security Interest.

(a) As security for the payment or performance when due, as the case may be, in
full of the Obligations, each Pledgor hereby assigns and pledges to the
Collateral Agent, its successors and permitted assigns, for the ratable benefit
of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and permitted assigns, for the ratable benefit of the Secured
Parties, a security interest (the “Security Interest”) in all right, title and
interest in or to any and all of the following assets and properties now owned
or at any time hereafter acquired by such Pledgor or in which such Pledgor now
has or at any time in the future may acquire any right, title or interest
(collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

(iii) all cash and Deposit Accounts;

(iv) all Documents;

(v) all Equipment;

(vi) all General Intangibles;

(vii) all Instruments;

(viii) all Intellectual Property;

(ix) all Inventory;

(x) all Investment Property;

(xi) all Letter of Credit Rights;

(xii) all Commercial Tort Claims as described on Schedule II hereto;

(xiii) all books and records pertaining to the Article 9 Collateral; and

(xiv) to the extent not otherwise included, all proceeds, Supporting Obligations
and products of any and all of the foregoing and all collateral security and
guarantees given by any person with respect to any of the foregoing.

Notwithstanding anything to the contrary in this Agreement, the other Indenture
Documents or any Other First Priority Agreement, this Agreement shall not
constitute a grant of a security

 

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interest in (and the Article 9 Collateral shall not include): (a) any vehicle,
(b) any Excluded Assets, (c) any assets owned on or acquired after the Issue
Date, to the extent that, and for long as, granting a security interest in such
assets would violate applicable law or a contractual obligation binding on such
assets that existed at the time of the acquisition thereof and was not created
or made binding on such assets in contemplation of or in connection with the
acquisition of such assets (except in the cash or assets owned on the Issue Date
or acquired with Indebtedness of the type incurred pursuant to Section 4.03(iv)
of the Indenture), (d) any Letter of Credit Rights to the extent any Pledgor is
required by applicable law to apply the proceeds of a drawing of such Letter of
Credit for a specified purpose, (e) any Equity Interests or debt securities
excluded from the pledge made pursuant to Section 2.01 hereof, (g) any Pledgor’s
right, title or interest in any license, contract or agreement to which such
Pledgor is a party or any of its right, title or interest thereunder to the
extent, but only to the extent, that such a grant would, under the terms of such
license, contract or agreement, result in a breach of the terms of, or
constitute a default under, or result in the abandonment, invalidation or
unenforceability of, that license, contract or agreement to which such Pledgor
is a party (other than to the extent that any such term would be rendered
ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the New York UCC
or any other applicable law (including, without limitation, Title 11 of the
United States Code) or principles of equity); provided that, immediately upon
the ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and such Pledgor shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been
in effect, (h) any Equipment or other asset owned by any Pledgor that is subject
to a purchase money lien or a Capitalized Lease Obligation if the contract or
other agreement in which such Lien is granted (or the documentation providing
for such Capitalized Lease Obligation) prohibits or requires the consent of any
person other than the Pledgors as a condition to the creation of any other
security interest on such Equipment or asset, (i) any intent-to-use United
States trademark applications for which an amendment to alleged use or statement
of use has not been filed under 15 U.S.C. § 1051(c) or 15 U.S.C. § 1051(d),
respectively, or, if filed, has not been deemed in conformance with 15 U.S.C.
§ 1051(a) or examined and accepted by the United States Patent and Trademark
Office, (j) if any Credit Agreement constituting First-Priority Lien Obligations
is outstanding, any assets that are not required to be pledged to secure
obligations thereunder, (k) if any ABL Facility is outstanding, any assets that
would otherwise constitute ABL Priority Collateral that are not pledged to
secure obligations thereunder, (l) any real estate held by any Pledgor, (m) any
Principal Property, (n) any assets which, if included in the Collateral, would
require the Existing Debentures to be ratably secured with the First-Priority
Lien Obligations pursuant to the terms of the indentures for the Existing
Debentures, or (o) solely with respect to any Series of Other First Priority
Obligations, any asset that is not intended to be collateral with respect to
such Series pursuant to the terms of the Other First Priority Agreement
governing such Series. In addition, notwithstanding anything to the contrary,
the requirements of this Agreement are subject to the terms of Section 4.14 of
the Indenture.

(b) Each Pledgor hereby irrevocably authorizes the Collateral Agent at any time
and from time to time to file in any relevant jurisdiction any initial financing
statements (including fixture filings) with respect to the Article 9 Collateral
or any part thereof and amendments thereto that contain the information required
by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for
the filing of any financing statement or amendment, including (i) whether such
Pledgor is an organization, the type of organization and any organizational
identification number issued to such Pledgor, (ii) in the case of a financing

 

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statement filed as a fixture filing, a sufficient description of the real
property to which such Article 9 Collateral relates and (iii) a description of
collateral that describes such property in any other manner as the Collateral
Agent may reasonably determine is necessary or advisable to ensure the
perfection of the security interest in the Article 9 Collateral granted under
this Agreement, including describing such property as “all assets” or “all
property”. Each Pledgor agrees to provide such information to the Collateral
Agent promptly upon request.

The Collateral Agent is further authorized to file with the United States Patent
and Trademark Office or United States Copyright Office (or any successor office)
such documents as may be necessary or advisable for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted by
each Pledgor, without the signature of any Pledgor, and naming any Pledgor or
the Pledgors as debtors and the Collateral Agent as secured party.

(c) The Security Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or modify,
any obligation or liability of any Pledgor with respect to or arising out of the
Article 9 Collateral.

(d) Notwithstanding anything to the contrary in this Agreement, the other
Indenture Documents or any Other First Priority Agreement, the Collateral Agent
shall not be obligated to file statements or documents necessary for perfection
of a security interest and each Pledgor is hereby obligated and directed to make
such filings on the Collateral Agent’s behalf.

Section 3.02 Representations and Warranties. The Pledgors jointly and severally
represent and warrant to the Collateral Agent and the Secured Parties that:

(a) Each Pledgor has good and valid rights in and title to the Article 9
Collateral with respect to which it has purported to grant a Security Interest
hereunder and has full power and authority to grant to the Collateral Agent the
Security Interest in such Article 9 Collateral pursuant hereto and to execute,
deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any other person other than any
consent or approval that has been obtained and is in full force and effect or
has otherwise been disclosed herein, in the Indenture, in any Other First
Priority Agreement or in any offering circular related thereto.

(b) The Perfection Certificate has been duly prepared, completed and executed
and the information set forth therein, including the exact legal name of each
Pledgor, is correct and complete, in all material respects, as of the date
hereof. Uniform Commercial Code financing statements (including fixture filings,
as applicable) or other appropriate filings, recordings or registrations
containing a description of the Article 9 Collateral have been prepared for
filing in each governmental, municipal or other office specified in Schedule 7
to the Perfection Certificate and constitute all the filings, recordings and
registrations (other than additional filings required to be made in the United
States Patent and Trademark Office and the United States Copyright Office in
order to perfect the Security Interest in Article 9 Collateral consisting of
United States Patents, United States registered Trademarks and United States
registered Copyrights) that are necessary to publish notice of and protect the
validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the

 

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ratable benefit of the Secured Parties) in respect of all Article 9 Collateral
in which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements or amendments. Each Pledgor represents and warrants
that a fully executed agreement in the form hereof (or a short form hereof which
form shall be reasonably acceptable to the Collateral Agent) containing a
description of all Article 9 Collateral consisting of Intellectual Property with
respect to issued Patents (and Patents for which registration applications are
pending), registered Trademarks (and Trademarks for which registration
applications are pending) and registered Copyrights (and Copyrights for which
registration applications are pending) has been delivered to the Collateral
Agent for recording with, in the case of United States Patents, Trademarks,
Copyrights and applications, the United States Patent and Trademark Office and
the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060
or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise
as may be reasonably requested by the Collateral Agent, to protect the validity
of and to establish a legal, valid and perfected security interest in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, in respect
of all Article 9 Collateral consisting of such Intellectual Property in which a
security interest may be perfected by recording with the United States Patent
and Trademark Office and the United States Copyright Office, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration with respect to the Security Interest in the Intellectual
Property is necessary (other than the Uniform Commercial Code financing
statements referred to above and other than such actions as are necessary to
perfect the Security Interest with respect to any Article 9 Collateral
consisting of Patents, Trademarks and Copyrights acquired or developed after the
date hereof).

(c) The Security Interest constitutes (i) a legal and valid security interest in
all the Article 9 Collateral securing the payment and performance of the
Obligations, (ii) subject to the filings described in Section 3.02(b), a
perfected security interest in all Article 9 Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the Uniform
Commercial Code or other applicable law in such jurisdictions and (iii) subject
to Section 3.02(b), a security interest that shall be perfected in all Article 9
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement (or a short form hereof) with the United States
Patent and Trademark Office and the United States Copyright Office, as
applicable. Subject to the Intercreditor Agreements, the Security Interest is
and shall be prior to any other Lien on any of the Article 9 Collateral other
than Permitted Liens (excluding Second-Priority Liens (as defined in the ABL
Facility) and the Liens securing the ABL Obligations that are subordinated to
the Liens securing the Obligations in respect of the Notes Priority Collateral)
or Liens arising by operation of law.

(d) The Article 9 Collateral is owned by the Pledgors free and clear of any
Lien, other than Permitted Liens or Liens arising by operation of law. Subject
to the Intercreditor Agreements, none of the Pledgors has filed or consented to
the filing of (i) any financing statement or analogous document under the
Uniform Commercial Code or any other applicable laws covering any Article 9
Collateral, (ii) any assignment in which any Pledgor

 

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assigns any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with the United States Patent and Trademark
Office or the United States Copyright Office or (iii) any assignment in which
any Pledgor assigns any Article 9 Collateral or any security agreement or
similar instrument covering any Article 9 Collateral with any foreign
governmental, municipal or other office, which financing statement or analogous
document, assignment, security agreement or similar instrument is still in
effect, except, in each case, for Permitted Liens.

(e) None of the Pledgors holds any Commercial Tort Claim individually in excess
of $5,000,000 as of the date hereof except as indicated on the Perfection
Certificate.

(f) Except as set forth in the Perfection Certificate, as of the date hereof,
all Accounts owned by the Pledgors have been originated by the Pledgors and all
Inventory owned by the Pledgors has been acquired by the Pledgors in the
ordinary course of business.

Section 3.03 Covenants.

(a) Each Pledgor agrees to notify the Collateral Agent promptly in writing of
any change (i) in its corporate name, (ii) in its identity or type of
organization or corporate structure, (iii) in its federal taxpayer
identification number or organizational identification number or (iv) in its
jurisdiction of organization. Each Pledgor agrees to provide the Collateral
Agent promptly with certified organizational documents reflecting any of the
changes described in the immediately preceding sentence. Each Pledgor agrees not
to effect or permit any change referred to in the first sentence of this
paragraph (a) unless all filings have been made, or will have been made within
any applicable statutory period, under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Article 9 Collateral in which a security interest may be perfected by
filing, for the ratable benefit of the Secured Parties. Each Pledgor agrees to
promptly notify the Collateral Agent if any material portion of the Article 9
Collateral owned or held by such Pledgor is damaged or destroyed.

(b) Subject to the rights of such Pledgor under the Indenture Documents or any
Other First Priority Agreement to dispose of Collateral, each Pledgor shall, at
its own expense, use commercially reasonable efforts to defend title to the
Article 9 Collateral against all persons and to defend the Security Interest of
the Collateral Agent, for the ratable benefit of the Secured Parties, in the
Article 9 Collateral and the priority thereof against any Lien that is not a
Permitted Lien and to defend the priority thereof against any Second-Priority
Lien (as defined in the ABL Facility) and the Liens securing the ABL Obligations
that are subordinated to the Liens securing the Obligations in respect of the
Notes Priority Collateral.

(c) Each Pledgor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions as the Collateral Agent may from time to time reasonably
request to better assure, preserve, protect and perfect the Security Interest
and the rights and remedies created hereby,

 

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including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement and the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Article 9 Collateral that is in excess of
$15,000,000 shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be promptly pledged and delivered to
the Applicable Agent, for the ratable benefit of the Secured Parties, duly
endorsed in a manner reasonably satisfactory to the Applicable Agent.

(d) After the occurrence of an Event of Default and during the continuance
thereof, the Applicable Agent shall have the right to verify under reasonable
procedures the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Article 9 Collateral, including, in the
case of Accounts or Article 9 Collateral in the possession of any third person,
by contacting Account Debtors or the third person possessing such Article 9
Collateral for the purpose of making such a verification. The Applicable Agent
shall have the right to share any information it gains from such inspection or
verification with any Secured Party.

(e) The Applicable Agent may discharge any past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time levied or
placed on the Article 9 Collateral and that is not a Permitted Lien, and may pay
for the maintenance and preservation of the Article 9 Collateral to the extent
any Pledgor fails to do so as required by the Indenture, this Agreement or any
Other First Priority Agreement, and each Pledgor jointly and severally agrees to
reimburse the Applicable Agent on demand for any reasonable payment made or any
reasonable expense incurred by the Applicable Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 3.03(e) shall be
interpreted as excusing any Pledgor from the performance of, or imposing any
obligation on the Applicable Agent or any Secured Party to cure or perform, any
covenants or other promises of any Pledgor with respect to taxes, assessments,
charges, fees, Liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Indenture Documents or in any Other First
Priority Agreement.

(f) Each Pledgor (rather than the Collateral Agent or any Secured Party) shall
remain liable for the observance and performance of all the conditions and
obligations to be observed and performed by it under each contract, agreement or
instrument relating to the Article 9 Collateral and each Pledgor jointly and
severally agrees to indemnify and hold harmless the Collateral Agent and the
Secured Parties from and against any and all liability for such performance.

(g) None of the Pledgors shall make or permit to be made an assignment, pledge
or hypothecation of the Article 9 Collateral or shall grant any other Lien in
respect of the Article 9 Collateral, except as permitted by the Indenture and
not prohibited by any Other First Priority Agreement. None of the Pledgors shall
make or permit to be made any transfer of the Article 9 Collateral and each
Pledgor shall remain at all times in possession of the Article 9 Collateral
owned by it, except as permitted by the Indenture or the Intercreditor
Agreements and not prohibited by any Other First Priority Agreement.

 

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(h) Each Pledgor irrevocably makes, constitutes and appoints the Applicable
Agent (and all officers, employees or agents designated by the Applicable Agent)
as such Pledgor’s true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and adjusting
claims in respect of Article 9 Collateral under policies of insurance, endorsing
the name of such Pledgor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that any Pledgor
at any time or times shall fail to obtain or maintain any of the policies of
insurance required by the Indenture, the other Indenture Documents or any Other
First Priority Agreement or to pay any premium in whole or part relating
thereto, the Applicable Agent may, without waiving or releasing any obligation
or liability of the Pledgors hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Applicable Agent
reasonably deems advisable. All sums disbursed by the Applicable Agent in
connection with this Section 3.03(h), including reasonable attorneys’ fees,
court costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Pledgors to the Applicable Agent and shall be additional
Obligations secured hereby.

Section 3.04 Other Actions. In order to further ensure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
for the ratable benefit of the Secured Parties, the Collateral Agent’s security
interest in the Article 9 Collateral, each Pledgor agrees, in each case at such
Pledgor’s own expense, to take the following actions with respect to the
following Article 9 Collateral:

(a) Instruments and Tangible Chattel Paper. If any Pledgor shall at any time own
or acquire any Instruments or Tangible Chattel Paper evidencing an amount in
excess of $10,000,000, such Pledgor shall forthwith endorse, assign and deliver
the same to the Applicable Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Applicable Agent may from time to time
reasonably request.

(b) Investment Property. Except to the extent otherwise provided in Article III,
if any Pledgor shall at any time hold or acquire any Certificated Security, such
Pledgor shall forthwith endorse, assign and deliver the same to the Applicable
Agent, accompanied by such instruments of transfer or assignment duly executed
in blank as the Applicable Agent may from time to time reasonably specify. If
any security of a domestic issuer now owned or hereafter acquired by any Pledgor
is uncertificated and is issued to such Pledgor or its nominee directly by the
issuer thereof, upon the Applicable Agent’s reasonable request or upon and
during the continuance of an Event of Default, such Pledgor shall promptly
notify the Applicable Agent of such uncertificated securities and pursuant to an
agreement in form and substance reasonably satisfactory to the Applicable Agent,
either (i) cause the issuer to agree to comply with instructions from the
Applicable Agent as to such security, without further consent of any Pledgor or
such nominee, or (ii) cause the issuer to register the Applicable Agent as the
registered owner of such security. If any security or other Investment Property,
whether certificated or uncertificated, representing an Equity Interest in a
third party and having a fair market value in excess of $10,000,000 now owned or
hereafter acquired by any Pledgor is held by such Pledgor or its nominee through
a securities intermediary or commodity intermediary, such Pledgor shall promptly
notify the Applicable Agent thereof and, at the Applicable Agent’s

 

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request and option, pursuant to a Control Agreement in form and substance
reasonably satisfactory to the Applicable Agent, either (A) cause such
securities intermediary or commodity intermediary, as applicable, to agree, in
the case of a securities intermediary, to comply with entitlement orders or
other instructions from the Applicable Agent to such securities intermediary as
to such securities or other Investment Property or, in the case of a commodity
intermediary, to apply any value distributed on account of any commodity
contract as directed by the Applicable Agent to such commodity intermediary, in
each case without further consent of any Pledgor or such nominee, or (B) in the
case of Financial Assets or other Investment Property held through a securities
intermediary, arrange for the Applicable Agent to become the entitlement holder
with respect to such Financial Assets or Investment Property, for the ratable
benefit of the Secured Parties, with such Pledgor being permitted, only with the
consent of the Applicable Agent, to exercise rights to withdraw or otherwise
deal with such Financial Assets or Investment Property. The Applicable Agent
agrees with each of the Pledgors that the Applicable Agent shall not give any
such entitlement orders or instructions or directions to any such issuer,
securities intermediary or commodity intermediary, and shall not withhold its
consent to the exercise of any withdrawal or dealing rights by any Pledgor,
unless an Event of Default has occurred and is continuing or, after giving
effect to any such withdrawal or dealing rights, would occur and, in each case,
upon written instruction from the Applicable First Lien Agent. The provisions of
this paragraph (b) shall not apply to any Financial Assets credited to a
securities account for which the Applicable Agent is the securities
intermediary.

(c) Commercial Tort Claims. If any Pledgor shall at any time hold or acquire a
Commercial Tort Claim in an amount reasonably estimated to exceed $5,000,000,
such Pledgor shall promptly notify the Collateral Agent thereof in a writing
signed by such Pledgor, including a summary description of such claim, and grant
to the Collateral Agent in writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to the Collateral Agent.

Section 3.05 Covenants Regarding Patent, Trademark and Copyright Collateral.
Except as not prohibited by the Indenture or any Other First Priority Agreement:

(a) Each Pledgor agrees that it will not knowingly do any act or omit to do any
act (and will exercise commercially reasonable efforts to prevent its licensees
from doing any act or omitting to do any act) whereby any Patent material to the
normal conduct of such Pledgor’s business may become prematurely invalidated or
dedicated to the public, and agrees that it shall take commercially reasonable
steps with respect to any material products covered by any such Patent as
necessary and sufficient to establish and preserve its rights under applicable
patent laws.

(b) Each Pledgor will, and will use its commercially reasonable efforts to cause
its licensees or its sublicensees to, for each Trademark material to the normal
conduct of such Pledgor’s business, (i) maintain such Trademark in full force
free from any adjudication of abandonment or invalidity for non-use,
(ii) maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of federal or foreign registration or
claim of trademark or service mark as required under applicable law and (iv) not
knowingly use or knowingly permit its licensees’ use of such Trademark in
violation of any third-party rights.

 

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(c) Each Pledgor will, and will use its commercially reasonable efforts to cause
its licensees or its sublicensees to, for each work covered by a material
Copyright necessary to the normal conduct of such Pledgor’s business that it
publishes, displays and distributes, use copyright notice as required under
applicable copyright laws.

(d) Each Pledgor shall notify the Collateral Agent promptly if it knows that any
Patent, Trademark or Copyright material to the normal conduct of such Pledgor’s
business may imminently become abandoned, lost or dedicated to the public, or of
any materially adverse determination or development, excluding office actions
and similar determinations or developments, in the United States Patent and
Trademark Office, United States Copyright Office or any court regarding such
Pledgor’s ownership of any such material Patent, Trademark or Copyright or its
right to register or to maintain the same.

(e) Each Pledgor, either itself or through any agent, employee, licensee or
designee, shall (i) inform the Collateral Agent on an annual basis of each
application by itself, or through any agent, employee, licensee or designee, for
any Patent with the United States Patent and Trademark Office and each
registration of any Trademark or Copyright with the United States Patent and
Trademark Office or the United States Copyright Office filed during the
preceding twelve-month period, and (ii) upon the reasonable request of the
Collateral Agent, execute and deliver any and all agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to evidence
the Collateral Agent’s security interest in such Patent, Trademark or Copyright.

(f) Each Pledgor shall exercise its reasonable business judgment consistent with
the practice in any proceeding before the United States Patent and Trademark
Office or the United States Copyright Office with respect to maintaining and
pursuing each material application relating to any Patent, Trademark and/or
Copyright (and obtaining the relevant grant or registration) material to the
normal conduct of such Pledgor’s business and to maintain (i) each issued Patent
and (ii) the registrations of each Trademark and each Copyright that is material
to the normal conduct of such Pledgor’s business, including, when applicable and
necessary in such Pledgor’s reasonable business judgment, timely filings of
applications for renewal, affidavits of use, affidavits of incontestability and
payment of maintenance fees, and, if any Pledgor believes necessary in its
reasonable business judgment, to initiate opposition, interference and
cancellation proceedings against third parties.

(g) In the event that any Pledgor knows or has reason to know that any Article 9
Collateral consisting of a Patent, Trademark or Copyright material to the normal
conduct of its business has been or is about to be materially infringed,
misappropriated or diluted by a third party, such Pledgor shall promptly notify
the Collateral Agent and shall, if such Pledgor deems it necessary in its
reasonable business judgment, promptly sue and recover any and all damages, and
take such other actions as are reasonable or appropriate under the
circumstances.

 

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(h) Upon the occurrence and during the continuance of an Event of Default, each
Pledgor shall use commercially reasonable efforts to obtain all requisite
consents or approvals from the licensor under each Copyright License, Patent
License or Trademark License to effect the assignment of all such Pledgor’s
right, title and interest thereunder to (in the Collateral Agent’s sole
discretion) the designee of the Collateral Agent or the Collateral Agent.

ARTICLE IV

Remedies

Section 4.01 Remedies Upon Default. In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreements, the Collateral Agent
may, following written instruction from the Applicable First Lien Agent, take
any action specified in this Section 4.01. Upon the occurrence and during the
continuance of an Event of Default, each Pledgor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right, following written instruction from the
Applicable First Lien Agent, to take any of or all the following actions at the
same or different times: (a) with respect to any Article 9 Collateral consisting
of Intellectual Property, on demand, to cause the Security Interest to become an
assignment, transfer and conveyance of any of or all such Article 9 Collateral
by the applicable Pledgors to the Collateral Agent or to license or sublicense,
whether general, special or otherwise, and whether on an exclusive or a
nonexclusive basis, any such Article 9 Collateral throughout the world on such
terms and conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers thereunder cannot be obtained with the use of commercially
reasonable efforts) and (b) with or without legal process and with or without
prior notice or demand for performance, to take possession of the Article 9
Collateral and without liability for trespass to the applicable Pledgor to enter
any premises where the Article 9 Collateral may be located for the purpose of
taking possession of or removing the Article 9 Collateral and, generally, to
exercise any and all rights afforded to a secured party under the applicable
Uniform Commercial Code or other applicable law. Without limiting the generality
of the foregoing, each Pledgor agrees that the Collateral Agent shall have the
right, subject to the requirements of applicable law and following written
instruction from the Applicable First Lien Agent, to sell or otherwise dispose
of all or any part of the Collateral at a public or private sale or at any
broker’s board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. The Collateral
Agent shall be authorized in connection with any sale of a security (if it deems
it advisable to do so) pursuant to the foregoing to restrict the prospective
bidders or purchasers to persons who represent and agree that they are
purchasing such security for their own account, for investment, and not with a
view to the distribution or sale thereof. Upon consummation of any such sale of
Collateral pursuant to this Section 4.01, the Collateral Agent shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of any Pledgor, and
each Pledgor hereby waives and releases (to the extent permitted by law) all
rights of redemption, stay, valuation and appraisal that such Pledgor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.

 

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The Collateral Agent shall give the applicable Pledgors ten (10) Business Days’
written notice (which each Pledgor agrees is reasonable notice within the
meaning of Section 9-611 of the New York UCC or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale.
At any such sale, the Collateral, or the portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Collateral Agent may
(in its sole and absolute discretion) determine. The Collateral Agent shall not
be obligated to make any sale of any Collateral if it shall determine not to do
so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In the case of any sale of all or any part of the Collateral made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in the event
that any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in the case of any such failure, such Collateral may be
sold again upon notice given in accordance with provisions above. At any public
(or, to the extent permitted by law, private) sale made pursuant to this
Section 4.01, any Secured Party may bid for or purchase for cash, free (to the
extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Pledgor (all such rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property in accordance with Section 4.02
hereof without further accountability to any Pledgor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and no Pledgor shall be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale
pursuant to the provisions of this Section 4.01 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-610(b) of the
New York UCC or its equivalent in other jurisdictions.

 

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Section 4.02 Application of Proceeds. The Collateral Agent shall, following
written instruction from the Applicable First Lien Agent and subject to the
Intercreditor Agreements, promptly apply the proceeds, moneys or balances of any
collection or sale of Collateral, as follows:

FIRST, to the payment of all reasonable costs and expenses incurred by the
Collateral Agent in connection with such collection or sale or otherwise in
connection with the Indenture, any other Indenture Document, any Other First
Priority Agreement or any of the Obligations, including all court costs and the
reasonable fees and expenses of its agents and legal counsel, the repayment of
all advances made by the Collateral Agent hereunder or under any other Indenture
Document or any Other First Priority Agreement on behalf of any Pledgor and any
other reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Indenture Document or any Other
First Priority Agreement;

SECOND, to the payment in full of the Obligations secured by such Collateral
(the amounts so applied to be distributed among the Secured Parties in
accordance with the order of priority set forth in Section 6.10 of the Indenture
or the equivalent provision of any Other First Priority Agreement, as
applicable, based on respective amounts of such Obligations owed to them on the
date of any such distribution); and

THIRD, to the Pledgors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

Notwithstanding the foregoing, no amount received from any guarantor, or from
the proceeds of Collateral pledged by such guarantor, shall be applied to any
Excluded Swap Obligations of such guarantor.

Following written instruction from the Applicable First Lien Agent, the
Collateral Agent shall have absolute discretion as to the time of application of
any such proceeds, moneys or balances in accordance with this Agreement. Upon
any sale of Collateral by the Collateral Agent (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the
purchase money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.

Section 4.03 Grant of License to Use Intellectual Property. For the purpose of
enabling the Collateral Agent to exercise rights and remedies under this
Agreement at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Pledgor hereby grants to (in the
Collateral Agent’s sole discretion) a designee of the Collateral Agent or the
Collateral Agent, for the ratable benefit of the Secured Parties, a
non-exclusive license (exercisable without payment of royalty or other
compensation to any Pledgor) to use, license or sublicense any of the Article 9
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Pledgor, wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof, the right to prosecute and maintain all
Intellectual Property and the right to sue for past infringement of the
Intellectual Property. The use of such license by the Collateral Agent may be
exercised, at the option of the Collateral Agent, following written instruction
from the Applicable First Lien Agent, upon the occurrence and during the
continuation of an Event of

 

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Default; provided, however, that such license (i) shall be subject to those
exclusive Patent Licenses, Trademark Licenses and Copyright Licenses granted by
the Pledgors in effect on the date hereof and those granted by any Pledgor
hereafter, as permitted under the ABL Loan Documents, the Indenture Documents
and any Other First Priority Agreement, to the extent conflicting, (ii) may be
exercised, at the option of the Collateral Agent, only upon the occurrence and
during the continuation of an Event of Default, provided that any license,
sublicense or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Pledgors notwithstanding any
subsequent cure of an Event of Default, and (iii) apply to the use of the
Trademarks in connection with goods and services of similar type and quality to
those therefore sold by such Pledgor under such Trademark.

Section 4.04 Securities Act, etc. In view of the position of the Pledgors in
relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar federal statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the “Federal Securities Laws”) with respect to any
disposition of the Pledged Collateral permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Collateral could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Collateral under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor acknowledges and agrees that in light of such restrictions
and limitations, the Collateral Agent, subject to the terms of the Intercreditor
Agreements, in its sole and absolute discretion, (a) may proceed to make such a
sale whether or not a registration statement for the purpose of registering such
Pledged Collateral or part thereof shall have been filed under the Federal
Securities Laws or, to the extent applicable, Blue Sky or other state securities
laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale. Each Pledgor acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such sale, the
Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Collateral at a price that the Collateral Agent, subject
to the terms of the Intercreditor Agreements, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this
Section 4.04 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.

Section 4.05 Registration, etc. Each Pledgor agrees that, upon the occurrence
and during the continuance of an Event of Default, if for any reason the
Collateral Agent, following written instruction from the Applicable First Lien
Agent, desires to sell any of the Pledged Collateral at a public sale, it will,
at any time and from time to time, upon the written request of the Collateral
Agent, use its commercially reasonable efforts to take or to cause the issuer of
such Pledged Collateral to take such action and prepare, distribute and/or file
such

 

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documents, as are required or advisable in the reasonable opinion of counsel for
the Collateral Agent to permit the public sale of such Pledged Collateral. Each
Pledgor further agrees to indemnify, defend and hold harmless the Collateral
Agent, each other Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all loss,
liability, expenses, costs of counsel (including reasonable fees and expenses to
the Collateral Agent of legal counsel), and claims (including the costs of
investigation) that they may incur insofar as such loss, liability, expense or
claim arises out of or is based upon any alleged untrue statement of a material
fact contained in any prospectus (or any amendment or supplement thereto) or in
any notification or offering circular, or arises out of or is based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements in any thereof not misleading, except insofar
as the same may have been caused by any untrue statement or omission based upon
information furnished in writing to such Pledgor or the issuer of such Pledged
Collateral by the Collateral Agent or any other Secured Party expressly for use
therein. Each Pledgor further agrees, upon such written request referred to
above, to use its commercially reasonable efforts to qualify, file or register,
or cause the issuer of such Pledged Collateral to qualify, file or register, any
of the Pledged Collateral under the Blue Sky or other securities laws of such
states as may be reasonably requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations. Each Pledgor will bear all costs and expenses of carrying out its
obligations under this Section 4.05. Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section 4.05 only and that such failure would not be adequately compensable in
damages and, therefore, agrees that its agreements contained in this
Section 4.05 may be specifically enforced.

ARTICLE V

Other First Priority Obligations

Section 5.01 Other First Priority Obligations. The Company may from time to time
designate Other First Priority Obligations permitted by the Indenture and not
prohibited by any Other First Priority Agreement to be secured by a Lien on the
Collateral as Obligations hereunder by delivering to the Collateral Agent (a) a
certificate signed by an Officer of the Company (i) identifying the Other First
Priority Obligations so designated and the aggregate principal amount or face
amount thereof, (ii) stating that such Other First Priority Obligations are
designated as Obligations for purposes hereof, (iii) representing that such
designation complies with the terms of the Indenture Documents and any Other
First Priority Agreements and (iv) specifying the name and address of the
Authorized Representative for the holders of such Other First Priority
Obligations and (b) a fully executed Additional Secured Party Consent. The
Collateral Agent agrees that, upon the satisfaction of all conditions set forth
in the preceding sentence, the Collateral Agent shall act as collateral agent
under and subject to the terms of this Agreement for the benefit of all Secured
Parties, including without limitation, any Secured Parties that hold any such
Other First Priority Obligations. Each Authorized Representative that executes
any Additional Secured Party Consent agrees to the appointment, and acceptance
of the appointment, of the Collateral Agent as collateral agent for the holders
of such Other First Priority Obligations and agrees, on behalf of itself and
each Secured Party it represents, to be bound by the terms of this Agreement and
the Intercreditor Agreements and, with respect to the rights, duties and
immunities of the Collateral Agent, by the Indenture. Upon

 

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the satisfaction of the conditions set forth in this Section 5.01, such Other
First Priority Obligations shall become Obligations hereunder with the same
force and effect as if originally included in the Obligations hereunder. The
rights and obligations of each party to this Agreement shall remain in full
force and effect notwithstanding the addition of any new Obligations to this
Agreement.

ARTICLE VI

Miscellaneous

Section 6.01 Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in
Section 13.02 of the Indenture or the equivalent provision of any Other First
Priority Agreement; provided that notices to the Collateral Agent shall be
effective only upon receipt and shall be made to the Collateral Agent at:

Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

Minneapolis, MN 55402

Attention: Momentive Administrator

Facsimile: (612) 217-5651

Section 6.02 Security Interest Absolute. To the extent permitted by law, all
rights of the Collateral Agent hereunder, the Security Interest, the security
interest in the Pledged Collateral and all obligations of each Pledgor hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Indenture, any other Indenture Document, any Other First
Priority Agreement, any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing, (b) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the Obligations, or any other amendment or waiver of or any consent to any
departure from the Indenture, any other Indenture Document, any Other First
Priority Agreement, the Intercreditor Agreements or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Pledgor in respect of the
Obligations or this Agreement (other than a defense of payment or performance).

Section 6.03 Limitation By Law. All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent necessary so that
they shall not render this Agreement invalid, unenforceable, in whole or in
part, or not entitled to be recorded, registered or filed under the provisions
of any applicable law.

 

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Section 6.04 Binding Effect; Several Agreements. This Agreement shall become
effective as to any party to this Agreement when a counterpart hereof executed
on behalf of such party shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such party, the Applicable First Lien Agent
and the Collateral Agent and their respective permitted successors and assigns,
and shall inure to the benefit of such party, the Applicable First Lien Agent,
the Collateral Agent and the other Secured Parties and their respective
permitted successors and assigns, except that no party shall have the right to
assign or transfer its rights or obligations hereunder or any interest herein or
in the Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement, the Indenture or any Other First
Priority Agreement. This Agreement shall be construed as a separate agreement
with respect to each party and may be amended, modified, supplemented, waived or
released with respect to any party without the approval of any other party and
without affecting the obligations of any other party hereunder.

Section 6.05 Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Pledgor, the Applicable First Lien Agent or
the Collateral Agent that are contained in this Agreement shall bind and inure
to the benefit of their respective permitted successors and assigns.

Section 6.06 Collateral Agent’s Fees and Expenses; Indemnification.

(a) The parties hereto agree that the Collateral Agent shall be entitled to
reimbursement of its expenses incurred hereunder as provided in Section 7.07 of
the Indenture and the equivalent provision of any Other First Priority
Agreement.

(b) Without limitation of its indemnification obligations under the other
Indenture Documents or any Other First Priority Agreement, each Pledgor jointly
and severally agrees to indemnify the Collateral Agent and its Affiliates, and
each of their respective directors, trustees, officers, employees, agents and
advisors (each such person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of, (i) the execution or delivery of this Agreement, any
other Indenture Document or any Other First Priority Agreement or any agreement
or instrument contemplated hereby or thereby, the performance by the parties
hereto and thereto of their respective obligations thereunder or the
consummation of the transactions contemplated hereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing, or to
the Collateral, whether or not any Indemnitee is a party thereto; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of

 

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this Section 6.06 shall remain operative and in full force and effect regardless
of the termination of this Agreement, any other Indenture Document or any Other
First Priority Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement, any other Indenture
Document or any Other First Priority Agreement, or any investigation made by or
on behalf of the Collateral Agent or any other Secured Party. All amounts due
under this Section 6.06 shall be payable on written demand therefor.

(d) For the avoidance of doubt, the provisions of Article VII of the Indenture
applicable to the Trustee thereunder shall also apply to the Collateral Agent
acting under or in connection with this Agreement. No provision of this
Agreement shall require the Collateral Agent to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers.

Section 6.07 Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby
appoints the Collateral Agent the attorney-in-fact of such Pledgor for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default (and following the Discharge (as defined in
the ABL Intercreditor Agreement) of ABL Obligations, with respect to ABL
Priority Collateral), following written instruction from the Applicable First
Lien Agent, with full power of substitution either in the Collateral Agent’s
name or in the name of such Pledgor, (i) to receive, endorse, assign or deliver
any and all notes, acceptances, checks, drafts, money orders or other evidences
of payment relating to the Collateral or any part thereof, (ii) to demand,
collect, receive payment of, give receipt for and give discharges and releases
of all or any of the Collateral; (iii) to ask for, demand, sue for, collect,
receive and give acquittance for any and all moneys due or to become due under
and by virtue of any Collateral; (iv) to sign the name of any Pledgor on any
invoice or bill of lading relating to any of the Collateral; (v) to send
verifications of Accounts to any Account Debtor; (vi) to commence and prosecute
any and all suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (vii) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (vii) to notify, or to require any
Pledgor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (ix) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received
by the Collateral Agent, or to present or file any claim or notice, or to take
any action with respect to the Collateral or any part thereof or the moneys due
or to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable only for
amounts actually received as a result of the exercise of the powers granted to
them herein, and neither they nor their officers, directors, employees or agents
shall be responsible to any Pledgor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.

 

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Section 6.08 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.

Section 6.09 Waivers; Amendment.

(a) No failure or delay by the Collateral Agent or any other Secured Party in
exercising any right, power or remedy hereunder, under any other Indenture
Document or under any Other First Priority Agreement, as applicable, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy, or any abandonment or discontinuance of steps to
enforce such a right, power or remedy, preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The rights, powers
and remedies of the Applicable First Lien Agent, the Collateral Agent and the
other Secured Parties hereunder, under the other Indenture Documents and under
any Other First Priority Agreement are cumulative and are not exclusive of any
rights, powers or remedies that they would otherwise have. No waiver of any
provision of this Agreement or any Other First Priority Agreement or consent to
any departure by any Pledgor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section 6.09, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on any Pledgor in any case shall
entitle any Pledgor to any other or further notice or demand in similar or other
circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Collateral Agent and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Article IX of the Indenture and any similar provision of
documentation relating to Other First Priority Obligations.

(c) For the purpose of Section 6.09(b) above, the Collateral Agent shall be
entitled to rely upon (i) written confirmation from the agent managing the
solicitation of consents and/or a certificate signed by two Officers of the
Company as to the receipt of valid consents from the relevant Secured Parties to
amend this Agreement, in accordance with the requirements as to such amendment
contained in the Indenture and any Other First Priority Agreement, and (ii) any
document believed by it to be genuine and to have been signed or presented by
the proper Person and the Collateral Agent need not investigate any fact or
matter stated in the document. At any time that the Company desires that this
Agreement be amended as provided in Section 6.09(b) above, the Company shall
deliver to the Collateral Agent a certificate signed by two Officers of the
Company stating that the amendment of this Agreement is permitted pursuant to
Section 6.09(b) above. If requested by the Collateral Agent (although the
Collateral Agent shall have no obligation to make any such request), the Company
shall furnish appropriate legal opinions to the effect set forth in the
immediately preceding sentence. Such officers’ certificate and legal opinion
will contain the statements required by Section 13.05 of the Indenture or, if
applicable, the equivalent provision of any Other First Priority Agreement. If

 

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requested by the Collateral Agent (although the Collateral Agent shall have no
obligation to make any such request), the Company shall furnish to the
Collateral Agent copies of officers’ certificates and legal opinions delivered
to the Trustee or the Authorized Representative under any Other First Priority
Agreement in connection with any amendment to the Indenture or any Other First
Priority Agreement, respectively, affecting the operation of this Section 6.09.
The Collateral Agent shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificates or opinions.

Section 6.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER INDENTURE DOCUMENTS OR ANY OTHER
FIRST PRIORITY AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.

Section 6.11 Severability. In the event any one or more of the provisions
contained in this Agreement, in any other Indenture Document or in any Other
First Priority Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

Section 6.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 6.04. Delivery of an executed counterpart to this Agreement
by facsimile or other electronic transmission shall be as effective as delivery
of a manually signed original.

Section 6.13 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

Section 6.14 Jurisdiction; Consent to Service of Process.

(a) Each party to this Agreement hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
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this Agreement, any other Indenture Documents or any Other First Priority
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any Other First Priority Agreement shall affect any right that the
Collateral Agent or any Secured Party may otherwise have to bring any action or
proceeding relating to this Agreement, any other Indenture Document or any Other
First Priority Agreement against any Pledgor, or its properties, in the courts
of any jurisdiction.

(b) Each party to this Agreement hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement, any other Indenture
Document or any Other First Priority Agreement in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 6.01. Nothing in this Agreement, any
other Indenture Document or any Other First Priority Agreement will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.

Section 6.15 Termination or Release.

(a) Subject to any applicable terms of the First Lien Intercreditor Agreement,
this Agreement, the pledges made herein, the Security Interest and all other
security interests granted hereby shall terminate upon the Collateral Agent’s
receipt of a notice from (i) the Trustee pursuant to Section 11.10 of the
Indenture, stating that the Trustee, on behalf of the Holders, disclaims and
gives up any and all rights it has in or to the Collateral (as defined in the
Indenture), and any rights it has under the Security Documents and (ii) each
Authorized Representative, stating that such Authorized Representative, on
behalf of the holders of the applicable Other First Priority Obligations,
disclaims and gives up any and all rights it has in or to the Collateral (as
defined in the applicable indenture or agreement governing such Other First
Priority Obligations) and any right it has under the Security Documents. In
connection with such termination, the Collateral Agent shall do or cause to be
done all acts reasonably necessary to release all such security interests as
soon as is reasonably practicable.

(b) Subject to any applicable terms of the First Lien Intercreditor Agreement, a
Subsidiary Party shall automatically be released from its obligations hereunder
and the security interests in the Collateral of such Subsidiary Party shall be
automatically released upon the consummation of any transaction permitted by the
Indenture and not prohibited by any Other First Priority Agreement as a result
of which such Subsidiary Party ceases to be a Subsidiary of the Company or
otherwise ceases to be a Pledgor; provided that the requisite Holders and/or
lenders shall have consented to such transaction (to the extent such consent is
required by the Indenture or any Other First Priority Agreement) and the terms
of such consent did not provide otherwise.

 

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(c) Subject to any applicable terms of the First Lien Intercreditor Agreement,
the Security Interest in any Collateral shall automatically be released (i) upon
any sale or other transfer by any Pledgor of any Collateral that is permitted
under the Indenture and not prohibited by any Other First Priority Agreement to
any person that is not a Pledgor or (ii) upon the effectiveness of any written
consent to the release of the security interest granted hereby in such
Collateral pursuant to the Indenture and any Other First Priority Agreement.

(d) In the case of a Pledgor making a Permitted Transfer that is permitted by
clause (y) of the last paragraph of Article V of the Indenture and not
prohibited by any Other First Priority Agreement and such Permitted Transfer is
to a Restricted Subsidiary that is not a Pledgor, the security interest in the
Collateral of such Pledgor shall be automatically released.

(e) If any Collateral shall become subject to the release provisions set forth
in Section 2.05 of the ABL Intercreditor Agreement, Section 2.04 of the First
Lien Intercreditor Agreement, Section 11.03 of the Indenture or the equivalent
provision of any Other First Priority Agreement, the Lien created hereunder on
such Collateral shall be automatically released to the extent provided therein.

(f) There shall be an automatic release of the Lien hereunder on any property
and assets of any Pledgor that would constitute ABL Priority Collateral but is
at such time not subject to a Lien securing ABL Obligations, other than any
assets or property that cease to be subject to a Lien securing ABL Obligations
in connection with a release or discharge by or as a result of payment in full
and termination of the ABL Obligations; provided that, if such property and
assets are subsequently subject to a Lien securing ABL Obligations (other than
Excluded Assets), such property and assets shall subsequently constitute
Collateral hereunder.

(g) In connection with any termination or release pursuant to this Section 6.15,
the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor’s
expense, all documents that such Pledgor shall reasonably request to evidence
such termination or release (including Uniform Commercial Code termination
statements), and will duly assign and transfer to such Pledgor, such of the
Pledged Collateral that may be in the possession of the Collateral Agent and has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement. Any execution and delivery of documents pursuant to this Section 6.15
shall be without recourse to or warranty by the Collateral Agent.

Section 6.16 Additional Subsidiaries. Upon execution and delivery by the
Collateral Agent and any Subsidiary of the Company that is required to become a
party hereto by Section 4.11 of the Indenture and the equivalent provision of
any Other First Priority Agreement, of an instrument in the form of Exhibit I
hereto, such subsidiary shall become a Subsidiary Party hereunder with the same
force and effect as if originally named as a Subsidiary Party herein. The
execution and delivery of any such instrument shall not require the consent of
any other party to this Agreement. The rights and obligations of each party to
this Agreement shall remain in full force and effect notwithstanding the
addition of any new party to this Agreement.

 

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Section 6.17 ABL Facility Documents. The Collateral Agent acknowledges and
agrees, on behalf of itself and any Secured Party, that (i) the ABL Obligations
are secured by liens on the ABL Priority Collateral that are senior in priority
to the liens on such ABL Priority Collateral that secures the Obligations and
(ii) any provision of this Agreement to the contrary notwithstanding, until the
Discharge (as defined in the ABL Intercreditor Agreement) of ABL Obligations,
the Pledgors shall not be required to act or refrain from acting pursuant to
this Agreement or with respect to any ABL Priority Collateral in any manner that
would result in a default under the terms and provisions of the ABL Facility
Documents (as defined in the ABL Intercreditor Agreement).

Section 6.18 General Authority of the Collateral Agent. By acceptance of the
benefits of this Agreement and any other Security Documents, each Secured Party
(whether or not a signatory hereto) shall be deemed irrevocably (a) to consent
to the appointment of the Collateral Agent as its agent hereunder and under such
other Security Documents, (b) to confirm that the Collateral Agent shall have
the authority to act as the exclusive agent of such Secured Party for the
enforcement of any provision of this Agreement and such other Security Documents
against any Pledgor, the exercise of remedies hereunder or thereunder and the
giving or withholding of any consent or approval hereunder thereunder relating
to any Collateral or any Pledgor’s obligations with respect thereto, (c) to
agree that it shall not individually take any action to enforce any provisions
of this Agreement or any other Security Document against any Pledgor, to
exercise any remedy hereunder or thereunder or to give any consents or approvals
hereunder or thereunder except as expressly provided in this Agreement, the
Intercreditor Agreements or any other Security Document and (d) to agree to be
bound by the terms of this Agreement, the Intercreditor Agreements and any other
Security Documents.

Section 6.19 Conflicts. In the event of any conflict between the terms of the
First Lien Intercreditor Agreement and the terms of this Agreement or the terms
of the ABL Intercreditor Agreement and the terms of this Agreement, the terms of
the First Lien Intercreditor Agreement or the ABL Intercreditor Agreement, as
applicable, shall govern.

Section 6.20 Person Serving as Applicable First Lien Agent. The Applicable First
Lien Agent shall have the sole authority hereunder to direct the Collateral
Agent’s exercise of remedies hereunder. If, after the date hereof, a Discharge
(as defined in the First Lien Intercreditor Agreement) of the Notes Obligations
shall have occurred, or if the Company incurs a Credit Agreement, the Applicable
Authorized Representative (as defined in the First Lien Intercreditor Agreement)
shall be deemed the Applicable First Lien Agent for all purposes under this
Agreement. The Applicable First Lien Agent immediately prior to such Discharge
or the incurrence of the Credit Agreement, as the case may be (the “Prior First
Lien Agent”), shall be deemed to have assigned all of its rights, powers and
duties hereunder to the Applicable Authorized Representative (the “Successor
First Lien Agent”) and such Successor First Lien Agent shall be deemed to have
accepted, assumed and succeeded to such rights, powers and duties. In addition,
effective upon any resignation of the Collateral Agent pursuant to the terms of
the First Lien Intercreditor Agreement and the appointment of a new Collateral
Agent thereunder, the resigning Collateral Agent (the “Prior Collateral Agent”
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the Prior First Lien Agent, to the extent applicable, the “Prior Agent”) shall
be deemed to have assigned all of its rights, powers and duties hereunder to
such successor Collateral Agent (the “Successor Collateral Agent” and, together
with the Successor First Lien Agent, to the extent applicable, the “Successor
Agent”) and such Successor Collateral Agent shall be deemed to have accepted,
assumed and succeeded to such rights, powers and duties. The Prior Agent shall
cooperate with the Pledgors and such Successor Agent to ensure that all actions
are taken that are necessary or reasonably requested by such Successor Agent to
vest in such Successor Agent the rights granted to the Prior Agent hereunder
with respect to the Collateral including (i) the filing of amended financing
statements in the appropriate filing offices, (ii) to the extent that the Prior
Agent holds, or a third party holds on its behalf, physical possession of or
“control” (as defined in the Uniform Commercial Code) (or any similar concept
under foreign law) over Collateral pursuant to this Agreement or any other
Security Document, the delivery, to such Successor Agent of the Collateral in
its possession or control together with any necessary endorsements to the extent
required by this Agreement and (iii) the execution and delivery of any further
documents, financing statements or agreements and the taking of all such further
action that may be required under any applicable law, or that such Successor
Agent may reasonably request, all without recourse to, or representation or
warranty by, the Prior Agent, and at the sole cost and expense of the Pledgors.

Section 6.21 ULC Shares. Notwithstanding any provisions to the contrary
contained in this Agreement or any other document or agreement among all or some
of the parties hereto, the applicable Pledgor is the sole registered and
beneficial owner of Pledged ULC Shares pledged by such Pledgor and will remain
so until such time as such Pledged ULC Shares are effectively transferred into
the name of the Collateral Agent or another person on the books and records of
the issuer of such ULC Shares. Accordingly the Pledgor shall be entitled to
receive and retain for its own account any dividend on or other distribution, if
any, in respect of such Pledged ULC Shares (except insofar as the Pledgor has
granted a security interest in such dividend on or other distribution, and any
shares that are collateral shall be delivered to the Collateral Agent to hold as
collateral hereunder) and shall have the right to vote such collateral and to
control the direction, management and policies of the issuer of such Pledged ULC
Shares to the same extent as the Pledgor would if such collateral were not
pledged to the Collateral Agent pursuant hereto. Nothing in this Agreement or
any other document or agreement among all or some of the parties hereto is
intended to, and nothing in this Agreement or any other document or agreement
among all or some of the parties hereto shall, constitute the Collateral Agent
or any person other than the relevant Pledgor, a member of the issuer of such
Pledged ULC Shares or any other ULC for the purposes of the Companies Act (Nova
Scotia) until such time as notice is given to the Pledgor (and not revoked) as
provided herein and further steps are taken thereunder so as to register the
Collateral Agent or other person as holder of such Pledged ULC Shares. To the
extent any provision hereof would have the effect of constituting the Collateral
Agent as a member of the issuer of Pledged ULC Shares prior to such time, such
provision shall be severed therefrom and ineffective with respect to collateral
that are Pledged ULC Shares without otherwise invalidating or rendering
unenforceable this Agreement or invalidating or rendering unenforceable such
provision insofar as it relates to property that is not Pledged ULC Shares.
Except upon the exercise of rights to sell or otherwise dispose of the Pledged
ULC Shares following the occurrence of an Event of Default, the Pledgor shall
not cause or permit, or enable the issuer of Pledged ULC Shares to cause or
permit, the Collateral Agent to: (a) be registered as a shareholder or member of
the issuer of Pledged ULC Shares;

 

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(b) have any notation entered in its favor in the share register of the issuer
of Pledged ULC Shares; (c) be held out as shareholder or member of the issuer of
Pledged ULC Shares; (d) receive, directly or indirectly, any dividends, property
or other distributions from the issuer of Pledged ULC Shares by reason of the
Collateral Agent holding a security interest in the Pledged ULC Shares; or
(e) act as a shareholder or member of the issuer of Pledged ULC Shares, or
exercise any rights of a shareholder or member including the right to attend a
meeting of the issuer of Pledged ULC Shares or vote the Pledged ULC Shares.

Section 6.22 Right of Set-off. If an Event of Default shall have occurred and be
continuing, each of the Collateral Agent, the Trustee, the lenders under the
Credit Agreement and the other Secured Parties under the Credit Agreement is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Collateral Agent, the Trustee, such lender or such other
Secured Party, respectively, to or for the credit or the account of any party to
this Agreement against any of and all the obligations of such party now or
hereafter existing under this Agreement owed to the Collateral Agent, the
Trustee, such lender or such other Secured Party, respectively, regardless of
whether or not the Collateral Agent, the Trustee, such lender or such other
Secured Party shall have made any demand under this Agreement and although such
obligations may be unmatured. The rights of the Collateral Agent, the Trustee,
each such lender or such other Secured Party under this Section 6.22 are in
addition to other rights and remedies (including other rights of set-off) that
the Collateral Agent, the Trustee, such lender or such other Secured Party may
have.

Section 6.23 Parallel Debt.

(a) For the purposes of creating security rights governed by Dutch law, the
Issuer hereby irrevocably and unconditionally undertakes to pay to the
Collateral Agent an amount equal to the aggregate amount payable (verschuldigd)
by it in respect of its Obligations as they may exist from time to time. The
payment undertaking of the Issuer under this Section 6.23(a) is hereinafter
referred to as its “Parallel Debt”. The Obligations other than the Parallel Debt
are referred to as the “Corresponding Obligations”.

(b) The Parallel Debt will be payable in the currency or currencies of the
Corresponding Obligations and will become due and payable as and when and to the
extent one or more of the Corresponding Obligations become due and payable. An
Event of Default in respect of the Corresponding Obligations shall constitute a
default (verzuim) within the meaning of section 3:248 of the Netherlands Civil
Code with respect to the Parallel Debt without any notice being required.

(c) Each of the Collateral Agent and the Issuer hereby acknowledges that:

(i) the Parallel Debt constitutes an undertaking, obligation and liability to
the Collateral Agent which is separate and independent from, and without
prejudice to, the Corresponding Obligations; and

 

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(ii) the Parallel Debt represents the Collateral Agent’s own separate and
independent claim to receive payment of the Parallel Debt,

it being understood, in each case, that, pursuant to this Section 6.23(c), the
amount which may become payable by the Issuer as its Parallel Debt shall never
exceed the total of the amounts which are payable under or in connection with
its Corresponding Obligations.

(d) The Collateral Agent hereby confirms and accepts that, to the extent the
Collateral Agent irrevocably receives any amount in payment of the Parallel
Debt, the Collateral Agent shall distribute that amount among the Secured
Parties that are creditors of the Corresponding Obligations in accordance with
the Intercreditor Agreements. The Collateral Agent, not only in its own name but
also on behalf of the other Secured Parties, hereby agrees and confirms that,
upon irrevocable receipt by the Collateral Agent of any amount in payment of the
Parallel Debt (a “Received Amount”), the Corresponding Obligations shall be
reduced by amounts totaling an amount (a “Deductible Amount”) equal to the
Received Amount in the manner as if the Deductible Amount were received by the
Collateral Agent as a payment of the Corresponding Obligations on the date of
receipt by the Collateral Agent of the Received Amount.

(e) For the purpose of this Section 6.23, but subject to clause (d) above, the
Collateral Agent acts in its own name and on behalf of itself and not as agent
or representative of any other Secured Party.

[Remainder of page intentionally left blank; signature pages follow.]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.

 

MOMENTIVE SPECIALTY CHEMICALS INC. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary BORDEN
CHEMICAL FOUNDRY, LLC By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary MOMENTIVE
INTERNATIONAL INC. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary MOMENTIVE
SPECIALTY CHEMICALS INVESTMENTS INC. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary HEXION U.S.
FINANCE CORP. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary

[Signature Page to Collateral Agreement (First Lien Notes)]

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HSC CAPITAL CORPORATION By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary LAWTER
INTERNATIONAL INC. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary OILFIELD
TECHNOLOGY GROUP, INC. By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary MOMENTIVE CI
HOLDING COMPANY (CHINA) LLC By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary NL COOP
HOLDINGS LLC By:  

/s/ Ellen G. Berndt

  Name:   Ellen G. Berndt   Title:   Vice President and Secretary

[Signature Page to Collateral Agreement (First Lien Notes)]

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WILMINGTON TRUST, NATIONAL ASSOCIATION, as Collateral Agent By:  

/s/ Jane Schweiger

  Name:   Jane Schweiger   Title:   Vice President

[Signature Page to Collateral Agreement (First Lien Notes)]