Exhibit 10.3

EXECUTION VERSION

 

 

 

SECURITY AGREEMENT

by

FIVE BELOW, INC.

as Borrower

and

THE OTHER BORROWERS AND GUARANTORS PARTY HERETO

FROM TIME TO TIME

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Agent

Dated as of April 24, 2020

 

 

 

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TABLE OF CONTENTS

 

         Page  

PREAMBLE

     1  

RECITALS

     1  

AGREEMENT

     2  

ARTICLE I     DEFINITIONS AND INTERPRETATION

     2  

SECTION 1.1.

  Definitions      2  

SECTION 1.2.

  Interpretation      8  

SECTION 1.3.

  Information Certificate      8  

ARTICLE II     GRANT OF SECURITY AND SECURED OBLIGATIONS

     8  

SECTION 2.1.

  Pledge; Grant of Security Interest      8  

SECTION 2.2.

  Secured Obligations      9  

SECTION 2.3.

  Security Interest      10  

ARTICLE III     PERFECTION; SUPPLEMENTS; ACTIONS WITH RESPECT TO CERTAIN
COLLATERAL

     10  

SECTION 3.1.

  Delivery of Certificated Securities Collateral      10  

SECTION 3.2.

  Perfection of Uncertificated Securities Collateral      11  

SECTION 3.3.

  Financing Statements and Other Filings; Maintenance of Perfected Security
Interest      11  

SECTION 3.4.

  Other Actions      12  

SECTION 3.5.

  Joinder of Additional Borrowers or Guarantors      14  

SECTION 3.6.

  Supplements; Further Assurances      14  

ARTICLE IV     REPRESENTATIONS, WARRANTIES AND COVENANTS

     15  

SECTION 4.1.

  Title      15  

SECTION 4.2.

  Limitation on Liens; Defense of Claims; Transferability of Collateral      15
 

 

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         Page  

SECTION 4.3.

  Chief Executive Office; Change of Name; Jurisdiction of Organization      15  

SECTION 4.4.

  Location of Inventory and Equipment      16  

SECTION 4.5.

  Condition and Maintenance of Equipment      16  

SECTION 4.6.

  Due Authorization and Issuance      16  

SECTION 4.7.

  No Claims      17  

SECTION 4.8.

  No Conflicts, Consents, etc      17  

SECTION 4.9.

  Collateral Information      17  

SECTION 4.10.

  Insurance      17  

SECTION 4.11.

  Payment of Taxes; Compliance with Laws; Contested Liens; Claims      18  

SECTION 4.12.

  Access to Collateral, Books and Records; Other Information      18  

ARTICLE V     CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

     18  

SECTION 5.1.

  Pledge of Additional Securities Collateral      18  

SECTION 5.2.

  Voting Rights; Distributions; etc      18  

SECTION 5.3.

  Organization Documents      20  

SECTION 5.4.

  Defaults, Etc      20  

SECTION 5.5.

  Certain Agreements of Grantors As Issuers and Holders of Equity Interests     
20  

ARTICLE VI     CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL

     21  

SECTION 6.1.

  Grant of License      21  

SECTION 6.2.

  Registrations      21  

SECTION 6.3.

  No Violations or Proceedings      21  

SECTION 6.4.

  Protection of Agent’s Security      21  

SECTION 6.5.

  After-Acquired Property      22  

SECTION 6.6.

  Modifications      22  

SECTION 6.7.

  Litigation      22  

SECTION 6.8.

  Third Party Consents      23  

 

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         Page  

ARTICLE VII     CERTAIN PROVISIONS CONCERNING CREDIT CARD RECEIVABLES

     23  

SECTION 7.1.

  Special Representations and Warranties      23  

SECTION 7.2.

  Maintenance of Records      23  

SECTION 7.3.

  Modification of Terms, Etc      24  

ARTICLE VIII     REMEDIES

     24  

SECTION 8.1.

  Remedies      24  

SECTION 8.2.

  Notice of Sale      26  

SECTION 8.3.

  Waiver of Notice and Claims      26  

SECTION 8.4.

  Certain Sales of Collateral      27  

SECTION 8.5.

  No Waiver; Cumulative Remedies      28  

SECTION 8.6.

  Certain Additional Actions Regarding Intellectual Property      28  

SECTION 8.7.

  Application of Proceeds      28  

ARTICLE IX     MISCELLANEOUS

     28  

SECTION 9.1.

  Concerning the Agent      28  

SECTION 9.2.

  Agent May Perform; Agent Appointed Attorney-in-Fact      29  

SECTION 9.3.

  Expenses      30  

SECTION 9.4.

  Continuing Security Interest; Assignment      30  

SECTION 9.5.

  Termination; Release      30  

SECTION 9.6.

  Modification in Writing      31  

SECTION 9.7.

  Notices      31  

SECTION 9.8.

  GOVERNING LAW      31  

SECTION 9.9.

  CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL      31  

SECTION 9.10.

  Severability of Provisions      33  

SECTION 9.11.

  Execution in Counterparts; Effectiveness      33  

SECTION 9.12.

  No Release      33  

SECTION 9.13.

  Obligations Absolute      33  

 

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EXHIBIT 1             Form of Securities Pledge Amendment

 

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SECURITY AGREEMENT

SECURITY AGREEMENT dated as of April 24, 2020 (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time in accordance
with the provisions hereof, this “Security Agreement”) made by (i) FIVE BELOW,
INC., a Pennsylvania corporation, as a borrower (the “Borrower” and also
referred to herein as the “Original Borrower”), (ii) THE OTHER BORROWERS FROM
TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the “Additional
Borrowers,” and together with the Original Borrower, the “Borrowers”), and (iii)
1616 HOLDINGS, INC., a Pennsylvania corporation, as a guarantor (the “Guarantor”
and also referred to herein as the “Original Guarantor”) AND THE OTHER
GUARANTORS FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT
(the “Additional Guarantors,” and together with the Original Guarantor, the
“Guarantors”), as pledgors, assignors and debtors (the Borrowers, together with
the Guarantors, in such capacities and together with any successors in such
capacities, the “Grantors,” and each, a “Grantor”), in favor of WELLS FARGO
BANK, NATIONAL ASSOCIATION, having an office at 125 High Street, Suite 1100,
Boston, MA 02110, in its capacity as administrative agent and collateral agent
for the Credit Parties (as defined in the Credit Agreement defined below)
pursuant to the Credit Agreement, as pledgee, assignee and secured party (in
such capacities and together with any successors in such capacities, the
“Agent”).

R E C I T A L S:

A.    The Borrowers, the Agent, the Guarantors and the Lenders party thereto,
among others, have, in connection with the execution and delivery of this
Security Agreement, entered into that certain Credit Agreement dated as of the
date hereof (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”).

B.    The Original Guarantor have, pursuant to that certain Facility Guaranty
dated as of the date hereof (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, the “Guaranty”), among
other things, unconditionally guaranteed the Guaranteed Obligations (as defined
in the Guaranty).

C.    The Borrowers and the Guarantors will receive substantial benefits from
the execution, delivery and performance of the Obligations and the Guaranteed
Obligations and each is, therefore, willing to enter into this Security
Agreement.

D.    This Security Agreement is given by each Grantor in favor of the Agent for
the benefit of the Credit Parties to secure the payment and performance of all
of the Secured Obligations (as hereinafter defined).

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E.    It is a condition to the obligations of the Lenders to make the Loans
under the Credit Agreement and a condition to the L/C Issuer’s issuing Letters
of Credit under the Credit Agreement that each Grantor execute and deliver the
applicable Loan Documents, including this Security Agreement.

A G R E E M E N T:

NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor and the Agent hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.1.    Definitions.

(a)    Unless otherwise defined herein or in the Credit Agreement, capitalized
terms used herein that are defined in the UCC shall have the meanings assigned
to them in the UCC.

(b)    Capitalized terms used but not otherwise defined herein that are defined
in the Credit Agreement shall have the meanings given to them in the Credit
Agreement.

(c)    The following terms shall have the following meanings:

“Account Control Agreements” shall mean, collectively, the Deposit Account
Control Agreements and the Securities Account Control Agreements.

“Additional Guarantors” shall have the meaning assigned to such term in the
Preamble hereof.

“Agent” shall have the meaning assigned to such term in the Preamble hereof.

“Borrowers” shall have the meaning assigned to such term in the Preamble hereof.

“Claims” shall mean any and all property taxes and other taxes, assessments and
special assessments, levies, fees and all governmental charges imposed upon or
assessed against, and all claims (including, without limitation, landlords’,
carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s,
suppliers’ and warehousemen’s Liens and other claims arising by operation of
law) against, all or any portion of the Collateral.

“Collateral” shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

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“Control” shall mean (i) in the case of each DDA, “control,” as described in
Section 9-104 of the UCC, and (ii) in the case of any security entitlement,
“control,” as described in Section 8-106 of the UCC.

“Copyrights” shall mean, collectively, with respect to each Grantor, all
copyrights (whether statutory or common Law, whether established or registered
in the United States or any other country or any political subdivision thereof
whether registered or unregistered and whether published or unpublished) and all
copyright registrations and applications made by such Grantor, in each case,
whether now owned or hereafter created or acquired by or assigned to such
Grantor, including, without limitation, the registrations and applications
listed in Schedule 8.12 of the Information Certificate, together with any and
all (i) rights and privileges arising under applicable Law with respect to such
Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and
extensions thereof, (iii) income, fees, royalties, damages, claims and payments
now or hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) rights corresponding thereto throughout the world and (v) rights
to sue for past, present or future infringements thereof.

“Credit Agreement” shall have the meaning assigned to such term in Recital A
hereof.

“Deposit Account Control Agreement” means with respect to a DDA established by a
Grantor, an agreement, in form and substance satisfactory to the Agent,
establishing Control of such DDA by the Agent and whereby the bank maintaining
such DDA agrees, upon notice received by such bank from the Agent, to comply
only with the instructions originated by the Agent without the further consent
of any Grantor.

“Distributions” shall mean, collectively, with respect to each Grantor, all
Restricted Payments from time to time received, receivable or otherwise
distributed to such Grantor in respect of or in exchange for any or all of the
Pledged Securities or Intercompany Notes.

“Excluded Account” shall mean any payroll, employee benefits, workers
compensation, trust and tax withholding accounts funded by the Grantors in the
ordinary course of business.

“Excluded Property” shall mean the following:

(a)    any license, permit, lease, contract, property rights, or agreement held
by any Grantor (i) if the grant of such security interest shall constitute or
result in (A) the abandonment, invalidation or unenforceability of any right,
title or interest of such Grantor therein or result in such Grantor’s loss of
use of such asset or (B) a breach or termination pursuant to the terms of, or a
default under, any such license, permit, lease, contract, property rights or
agreement (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any
successor provision or provisions) of any relevant jurisdiction or any other
applicable Law (including any Debtor Relief Law) or principles of equity) and
(ii) to the extent that applicable Law prohibits the creation of a security
interest therein or thereon (other than

 

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to the extent that any such term would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable Law (including
any Debtor Relief Law) or principles of equity);

(b)    all foreign Intellectual Property and all Intellectual Property
consisting of intent-to-use trademark applications, prior to the filing of an
Amendment to Allege Use or a verified statement of use with accepted by the U.S.
Patent and Trademark Office, to the extent that and solely during the period
that the grant of a security interest therein would impair the enforceability of
such intent-to-use Trademark under applicable Law;

(c)    fee-owned real property and any leasehold interest;

(d)    motor vehicles and other assets subject to certificates of title;

(e)    commercial tort claims with reasonably predicted value equal to or less
than $5,000,000;

(f)    any Excluded Accounts;

(g)    any property or asset only to the extent and for so long as the grant of
a security interest in such property or asset is prohibited by any applicable
law or requires a consent not obtained, and has not been obtained after use by
the relevant Loan Party of commercially reasonable efforts to obtain such
consent, of any Governmental Authority pursuant to applicable Law (after giving
effect to Section 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor
provision or provisions) of any relevant jurisdiction);

(h)    Equity Interests of a person (other than a wholly owned Subsidiary) the
pledge of which would violate the Organization Documents of such person that is
binding on or relating to such capital stock or equity interests but solely to
the extent and for so long as such restrictions exists;

(i)    any property (and proceeds thereof) that is subject to a lien securing
purchase money Indebtedness or Capital Lease Obligations, in each case permitted
under the Credit Agreement, to the extent the documents relating to such lien
securing such purchase money Indebtedness or Capital Leases would not permit
such property (and proceeds thereof) to be subject to the liens created
hereunder (provided that immediately upon the ineffectiveness, lapse or
termination of any such restriction, the Collateral shall include, and the
security interest granted by the relevant Loan Party shall attach to, such
property (and proceeds thereof));

(j)    any assets to the extent the grant or pledge of, or perfection of a
security interest in to the extent the same would result in material and adverse
tax consequences (including, without limitation, as a result of the operation of
Section 956 of the Code or any similar law or regulation in any applicable
jurisdiction) as reasonably determined by the Borrower, in consultation with the
Agent;

 

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provided, however, that in each case described in clause (a) of this definition,
such property shall constitute “Excluded Property” only to the extent and for so
long as such license, permit, lease or applicable Law validly prohibits the
creation of a Lien on such property in favor of the Agent and, upon the
termination of such prohibition (howsoever occurring), such property shall cease
to constitute “Excluded Property”; provided further, that “Excluded Property”
shall not include the right to receive any proceeds arising therefrom or any
Proceeds, substitutions or replacements of any Excluded Property (unless such
Proceeds, substitutions or replacements would otherwise constitute Excluded
Property).

“Goodwill” shall mean, collectively, with respect to each Grantor, the goodwill
connected with such Grantor’s business including, without limitation, (i) all
goodwill connected with the use of and symbolized by any other Intellectual
Property in which such Grantor has any interest, (ii) all know-how, trade
secrets, customer and supplier lists, proprietary information, inventions,
methods, procedures, formulae, descriptions, compositions, technical data,
drawings, specifications, name plates, catalogs, confidential information and
the right to limit the use or disclosure thereof by any Person, pricing and cost
information, business and marketing plans and proposals, consulting agreements,
engineering contracts and such other assets which relate to such goodwill and
(iii) all product lines of such Grantor’s business.

“Grantor” shall have the meaning assigned to such term in the Preamble hereof.

“Guarantors” shall have the meaning assigned to such term in the Preamble
hereof.

“Guaranty” shall have the meaning assigned to such term in Recital B hereof.

“Information Certificate” shall mean that certain Information Certificate dated
as of the date hereof, executed and delivered by each Grantor in favor of the
Agent for the benefit of the Credit Parties, and each other Information
Certificate (which shall be in form and substance reasonably acceptable to the
Agent) executed and delivered by the applicable Borrower or Guarantor in favor
of the Agent for the benefit of the Credit Parties contemporaneously with the
execution and delivery of a joinder agreement executed in accordance with
Section 6.12 of the Credit Agreement, in each case, as the same may be amended,
amended and restated, restated, supplemented or otherwise modified from time to
time in accordance with the Credit Agreement.

“Instruments” shall mean, collectively, with respect to each Grantor, all
“instruments” as such term is defined in Article 9 of the UCC, and shall
include, without limitation, all promissory notes, drafts, bills of exchange or
acceptances.

“Intellectual Property” shall mean, collectively, the Patents, Trademarks,
Copyrights, Licenses and Goodwill.

“Intercompany Notes” shall mean, with respect to each Grantor, all intercompany
notes described on Schedule I to the Security Agreement Disclosure Letter and
each intercompany note hereafter acquired by such Grantor and all certificates,
instruments or

 

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agreements evidencing such intercompany notes, and all assignments, amendments,
restatements, supplements, extensions, renewals, replacements or modifications
thereof to the extent permitted pursuant to the terms hereof.

“Investment Property” shall mean a security, whether certificated or
uncertificated, security entitlement, securities account, commodity contract or
commodity account, excluding however, the Securities Collateral.

“Letters of Credit” unless the context otherwise requires, shall have the
meaning given to such term in the UCC.

“Licenses” shall mean, collectively, with respect to each Grantor, all license
and distribution agreements with any other Person with respect to any Patent,
Trademark or Copyright or any other patent, trademark or copyright, whether such
Grantor is a licensor or licensee, distributor or distributee under any such
license or distribution agreement, together with any and all (i) renewals,
extensions, supplements and continuations thereof, (ii) income, fees, royalties,
damages, claims and payments now and hereafter due and/or payable thereunder and
with respect thereto including, without limitation, damages and payments for
past, present or future infringements or violations thereof, (iii) rights to sue
for past, present and future infringements or violations thereof and (iv) other
rights to use, exploit or practice any or all of the Patents, Trademarks or
Copyrights or any other patent, trademark or copyright.

“Patents” shall mean, collectively, with respect to each Grantor, all patents
issued or assigned to and all patent applications made by such Grantor (whether
established or registered or recorded in the United States or any other country
or any political subdivision thereof), including, without limitation, those
patents and patent applications listed in Schedule 8.12 of the Information
Certificate, together with any and all (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of any patents,
(ii) inventions and improvements described and claimed therein, (iii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) income, fees, royalties, damages, claims and payments now or
hereafter due and/or payable thereunder and with respect thereto including,
without limitation, damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the world and
(vi) rights to sue for past, present or future infringements thereof.

“Pledged Interests” shall mean, collectively, with respect to each Grantor, all
Equity Interests of whatever class in any issuer held or hereafter acquired or
formed by such Grantor, including, without limitation, all shares of capital
stock and other Equity Interests of the issuers described in Schedule III to the
Security Agreement Disclosure Letter, together with all rights, privileges,
authority and powers of such Grantor relating to such Equity Interests issued by
any such issuer under the Organization Documents of any such issuer, and the
certificates, instruments and agreements representing such Equity Interests and
any and all interest of such Grantor in the entries on the books of any
financial intermediary pertaining to such Equity Interests, from time to time
acquired by such Grantor in any manner, and all other Investment Property owned
by such Grantor; provided, however, that to the extent applicable, Pledged
Interests shall not include any interest possessing more than 65% of the voting
power or control of all classes of interests entitled to vote of any CFC to the
extent such pledge would result in an adverse tax consequence to the Grantor.

 

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“Pledged Securities” shall mean, collectively, the Pledged Interests and the
Successor Interests.

“Proceeds” shall mean all “proceeds” as such term is defined in the UCC and, in
any event, shall include, without limitation, all dividends or other income from
the Pledged Securities, collections thereon or distributions or payments with
respect thereto.

“Secured Obligations” shall mean the Obligations (as defined in the Credit
Agreement) and the Guaranteed Obligations (as defined in the Guaranty).

“Securities Account Control Agreement” means with respect to a Securities
Account established by a Grantor, an agreement, in form and substance
satisfactory to the Agent, establishing Control of such Securities Account by
the Agent and whereby the Securities Intermediary maintaining such Securities
Account agrees, upon notice received by such Securities Intermediary from the
Agent, to comply only with the instructions originated by the Agent without the
further consent of any Grantor.

“Securities Act” means the Securities Exchange Act of 1934, as amended, and the
applicable regulations promulgated by the Securities and Exchange Commission
pursuant to such Act.

“Securities Collateral” shall mean, collectively, the Pledged Securities, the
Intercompany Notes and the Distributions.

“Security Agreement” shall have the meaning assigned to such in the Preamble
hereof.

“Security Agreement Disclosure Letter” means that certain Security Agreement
Disclosure Letter, dated as of the date hereof, executed by the Grantors in
favor of Agent.

“Successor Interests” shall mean, collectively, with respect to each Grantor,
all shares of each class of the capital stock of the successor corporation or
interests or certificates of the successor limited liability company,
partnership or other entity owned by such Grantor (unless such successor is such
Grantor itself) formed by or resulting from any consolidation or merger in which
a Loan Party is not the surviving entity; provided, however, that Successor
Interests shall not include shares or interests possessing more than 65% of the
voting power or control of all classes of capital stock or interests entitled to
vote of any foreign Subsidiaries to the extent such pledge would result in an
adverse tax consequence to such Grantor.

“Trademarks” shall mean, collectively, with respect to each Grantor, all
trademarks (including service marks), slogans, logos, certification marks, trade
dress, uniform resource locations (URLs), domain names, corporate names and
trade names, whether registered or unregistered, owned by or assigned to such
Grantor and all registrations and applications for the foregoing (whether
statutory or common Law and whether established or registered in the

 

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United States or any other country or any political subdivision thereof),
together, in each case, with the Goodwill exclusively symbolized thereby,
including, without limitation, the registrations and applications listed in
Schedule 8.12 of the Information Certificate, together with any and all
(i) rights and privileges arising under applicable Law with respect to such
Grantor’s use of any trademarks, (ii) reissues, continuations, extensions and
renewals thereof, (iii) income, fees, royalties, damages and payments now and
hereafter due and/or payable thereunder and with respect thereto, including,
without limitation, damages, claims and payments for past, present or future
infringements thereof, (iv) rights corresponding thereto throughout the world
and (v) rights to sue for past, present and future infringements thereof.

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy, as the case may be.

SECTION 1.2.    Interpretation. The rules of interpretation specified in the
Credit Agreement shall be applicable to this Security Agreement.

SECTION 1.3.    Information Certificate. The Agent and each Grantor agree that
the Information Certificate, and all schedules, amendments and supplements
thereto are and shall at all times remain a part of this Security Agreement.

ARTICLE II

GRANT OF SECURITY AND SECURED OBLIGATIONS

SECTION 2.1.    Pledge; Grant of Security Interest. As collateral security for
the payment and performance in full of all the Secured Obligations, each Grantor
hereby pledges and grants to the Agent for its benefit and for the benefit of
the other Credit Parties, a Lien on and security interest in and to all of the
right, title and interest of such Grantor in, to and under all personal property
and interests in such personal property, wherever located, and whether now
existing or hereafter arising or acquired from time to time (collectively, the
“Collateral”), including, without limitation:

 

  (i)

all Accounts;

 

  (ii)

all cash, money and Cash Equivalents

 

  (iii)

all Goods, Equipment, Inventory and Fixtures;

 

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  (iv)

all Documents, Instruments (including Promissory Notes) and Chattel Paper
(including Tangible Chattel Paper and Electronic Chattel Paper);

 

  (v)

all Letters of Credit and Letter-of-Credit Rights (whether or not the Letter of
Credit is evidenced by a writing);

 

  (vi)

all Securities Collateral;

 

  (vii)

all Investment Property;

 

  (viii)

all Intellectual Property;

 

  (ix)

all Commercial Tort Claims, including, without limitation, those described in
Section 26 of the Information Certificate (as may be amended or supplemented
from time to time);

 

  (x)

all General Intangibles (including but not limited to all Payment Intangibles
(as defined in Article 9 of the UCC));

 

  (xi)

all DDAs (including Deposit Accounts), Securities Accounts and Commodities
Accounts;

 

  (xii)

all Supporting Obligations;

 

  (xiii)

all books and records relating to the Collateral; and

 

  (xiv)

to the extent not covered by clauses (i) through (xiii) of this sentence, all
other personal property of such Grantor, whether tangible or intangible and all
Proceeds and products of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing, any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to such Grantor from time to time with respect to any of the
foregoing.

Notwithstanding anything to the contrary contained in clauses (i) through (xiv)
above, the security interest created by this Security Agreement shall not extend
to, and the term “Collateral” shall not include, any Excluded Property. The
Grantors shall from time to time at the request of the Agent give written notice
to the Agent identifying in reasonable detail the Excluded Property and shall
provide to the Agent such other information regarding the Excluded Property as
the Agent may reasonably request. Assets will be excluded from the Collateral in
circumstances where in the reasonable judgment and sole discretion of Agent, in
consultation with Borrower, the costs of obtaining a security interest in such
assets exceed the practical benefit to Agent afforded thereby.

SECTION 2.2.    Secured Obligations. This Security Agreement secures, and the
Collateral is collateral security for, the payment and performance in full when
due of the Secured Obligations.

 

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SECTION 2.3.    Security Interest.

(i)    Each Grantor hereby irrevocably authorizes the Agent (or its designee) at
any time and from time to time to authenticate and file in any relevant
jurisdiction any financing statements (including fixture filings) 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 relating to the Collateral, including, without
limitation, (x) whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such
Grantor, (y) a description of the Collateral as “all assets of the Grantor,
wherever located, whether now owned or hereafter acquired” and (z) in the case
of a financing statement filed as a fixture filing, a sufficient description of
the real property to which such Collateral relates. Each Grantor agrees to
provide all information described in the immediately preceding sentence to the
Agent promptly upon request.

(b)    Each Grantor hereby ratifies its prior authorization for the Agent (or
its designee) to file in any relevant jurisdiction any financing statements or
amendments thereto relating to the Collateral if filed prior to the date hereof.

(c)    Each Grantor hereby further authorizes the Agent (or its designee) to
file filings with the United States Patent and Trademark Office and United
States Copyright Office (or any successor office or any similar office in any
other country) or other necessary documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the security interest granted by
such Grantor hereunder in any Intellectual Property, without the signature of
such Grantor, and naming such Grantor, as debtor, and the Agent, as secured
party.

ARTICLE III

PERFECTION; SUPPLEMENTS;

ACTIONS WITH RESPECT TO CERTAIN COLLATERAL

SECTION 3.1.    Delivery of Certificated Securities Collateral. Each Grantor
represents and warrants that except as provided in Section 6.21 of the Credit
Agreement, all certificates, agreements or instruments representing or
evidencing the Securities Collateral in existence on the date hereof have been
delivered to the Agent in suitable form for transfer by delivery or accompanied
by duly executed instruments of transfer or assignment in blank and that the
Agent has a perfected first priority security interest therein. Each Grantor
hereby agrees that all certificates, agreements or instruments representing or
evidencing Securities Collateral acquired by such Grantor after the date hereof,
shall promptly (and in any event within ten (10) Business Days) upon receipt
thereof by such Grantor be delivered to and held by or on behalf of the Agent
pursuant hereto. All certificated Securities Collateral shall be in suitable
form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Agent. The Agent shall have the right, at any
time upon the occurrence and during the continuance of any Event of Default, to
endorse, assign or otherwise transfer to or to register in the name of the Agent
or any

 

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of its nominees or endorse for negotiation any or all of the Securities
Collateral, without any indication that such Securities Collateral is subject to
the security interest hereunder. In addition, the Agent shall have the right
with written notice to exchange certificates representing or evidencing
Securities Collateral for certificates of smaller or larger denominations,
accompanied by instruments of transfer or assignment and letters of direction
duly executed in blank.

SECTION 3.2.    Perfection of Uncertificated Securities Collateral. Each Grantor
represents and warrants that the Agent has a perfected first priority security
interest in all uncertificated Pledged Securities pledged by it hereunder that
are in existence on the date hereof and that the applicable Organization
Documents do not require the consent of the other shareholders, members,
partners or any other Person to permit the Agent or its designee to be
substituted for the applicable Grantor as a shareholder, member, partner or
other equity owner, as applicable, thereto. Each Grantor hereby agrees that if
any of the Pledged Securities are at any time not evidenced by certificates of
ownership, then each applicable Grantor shall, to the extent permitted by
applicable Law and upon the request of the Agent, cause such pledge to be
recorded on the equityholder register or the books of the issuer, execute
customary pledge forms or other documents necessary or reasonably requested to
complete the pledge and give the Agent the right to transfer such Pledged
Securities under the terms hereof and, provide to the Agent an opinion of
counsel, in form and substance reasonably satisfactory to the Agent, confirming
such pledge and perfection thereof.

SECTION 3.3.    Financing Statements and Other Filings; Maintenance of Perfected
Security Interest. Each Grantor represents and warrants that the only filings,
registrations and recordings necessary and appropriate to create, preserve,
protect, publish notice of and perfect the security interest granted by each
Grantor to the Agent (for the benefit of the Credit Parties) pursuant to this
Security Agreement in respect of the Collateral are listed on Schedule II to the
Security Agreement Disclosure Letter. Each Grantor represents and warrants that
all such filings, registrations and recordings have been delivered to the Agent
in completed and, to the extent necessary or appropriate, duly executed form for
filing in each governmental, municipal or other office specified in Schedule II
to the Security Agreement Disclosure Letter. Each Grantor agrees that at the
sole cost and expense of the Grantors, (i) such Grantor will maintain the
security interest created by this Security Agreement in the Collateral as a
perfected first priority security interest and shall defend such security
interest against the claims and demands of all Persons (other than with respect
to Permitted Encumbrances), (ii) such Grantor shall furnish to the Agent from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, and (iii) at any time and from time to time, upon the
written request of the Agent, such Grantor shall promptly and duly execute and
deliver, and file and have recorded, such further instruments and documents and
take such further action as the Agent may reasonably request, including the
filing of any financing statements, continuation statements and other documents
(including this Security Agreement) under the UCC (or other applicable Laws) in
effect in any jurisdiction with respect to the security interest created hereby
and the execution and delivery of Account Control Agreements and Collateral
Access Agreements, all in form reasonably satisfactory to the Agent and in such
offices (including, without limitation, the United States Patent and Trademark
Office and the United States Copyright Office) wherever required by applicable
Law in each case to perfect, continue and maintain a valid, enforceable, first

 

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priority security interest in the Collateral as provided herein and to preserve
the other rights and interests granted to the Agent hereunder, as against the
Grantors and third parties (other than with respect to Permitted Encumbrances),
with respect to the Collateral.

SECTION 3.4.    Other Actions. In order to further evidence the attachment,
perfection and priority of, and the ability of the Agent to enforce, the Agent’s
security interest in the Collateral, each Grantor represents, warrants and
agrees, in each case at such Grantor’s own expense, with respect to the
following Collateral that:

(a)    Instruments and Tangible Chattel Paper. As of the date hereof no amount
payable under or in connection with any of the Collateral is evidenced by any
Instrument or Tangible Chattel Paper with a face value in excess of $1,000,000
other than such Instruments and Tangible Chattel Paper listed in Section 25 of
the Information Certificate. If any amount payable under or in connection with
any of the Collateral shall be evidenced by any Instrument or Tangible Chattel
Paper, and such amount, together with all amounts payable evidenced by any
Instrument or Tangible Chattel Paper not previously delivered to Agent exceeds
$2,500,000 in the aggregate for all Grantors, the Grantor acquiring such
Instrument or Tangible Chattel Paper shall promptly endorse, assign and deliver
the same to the Agent, accompanied by such instruments of transfer or assignment
duly executed in blank.

(b)    Investment Property. (i) As of the date hereof it has no Securities
Accounts other than those listed in Schedule 8.11 of the Information Certificate
and (ii) by the date set forth in Section 6.21 of the Credit Agreement, such
Grantor shall use commercially reasonable efforts to deliver to Agent a
Securities Account Control Agreement with respect to each Securities Account
listed in Schedule 8.11 of the Information Certificate and upon the delivery of
such Securities Account Control Agreements, the Agent shall have a perfected
first priority security interest in such Securities Accounts by Control.

(ii)    If any Grantor shall at any time hold or acquire any certificated
Pledged Securities, other than any interests in any CFC not required to be
pledged hereunder, such Grantor shall promptly notify the Agent thereof and
endorse, assign and deliver the same to the Agent, accompanied by such
instruments of transfer or assignment duly executed in blank, all in form and
substance reasonably satisfactory to the Agent. Upon the occurrence and during
the continuance of an Event of Default or Cash Dominion Event, each Grantor
shall accept any cash and Investment Property which are proceeds of the Pledged
Interests in trust for the benefit of the Agent and promptly upon receipt
thereof, deposit any cash received by it into an account in which the Agent has
Control. No Grantor shall grant control over any Pledged Securities to any
Person other than the Agent.

(iii)    No Grantor shall hereafter establish and maintain any Securities
Account with any Securities Intermediary unless (1) the applicable Grantor shall
have given the Agent ten (10) Business Days’ prior written notice of its
intention to establish such new Securities Account with such Securities
Intermediary, (2) such Securities

 

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Intermediary shall be reasonably acceptable to the Agent and (3) within 120 days
after such Securities account is established, such Grantor shall use
commercially reasonable efforts to deliver to Agent a Securities Account Control
Agreement with respect to such Securities Account. The Agent agrees with each
Grantor that the Agent shall not give any entitlement orders or instructions or
directions to any Securities Intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by such Grantor, unless a Cash
Dominion Event has occurred and is continuing.

(iv)    As between the Agent and the Grantors, the Grantors shall bear the
investment risk with respect to the Investment Property and Pledged Securities,
and the risk of loss of, damage to, or the destruction of the Investment
Property and Pledged Securities, whether in the possession of, or maintained as
a security entitlement or deposit by, or subject to the control of, the Agent, a
Securities Intermediary, any Grantor or any other Person; provided, however,
that nothing contained in this SECTION 3.4(b) shall release or relieve any
Securities Intermediary of its duties and obligations to the Grantors or any
other Person under any Account Control Agreement or under applicable Law. Each
Grantor shall promptly pay all Claims and fees of whatever kind or nature with
respect to the Pledged Securities. In the event any Grantor shall fail to make
such payment contemplated in the immediately preceding sentence, the Agent may
do so for the account of such Grantor and the Grantors shall promptly reimburse
and indemnify the Agent for all costs and expenses incurred by the Agent under
this SECTION 3.4(b) and under SECTION 9.3 hereof.

(c)    Electronic Chattel Paper and Transferable Records. As of the date hereof
no amount payable under or in connection with any of the Collateral is evidenced
by any Electronic Chattel Paper or any “transferable record” (as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act, or in Section 16 of the Uniform Electronic Transactions
Act as in effect in any relevant jurisdiction) with a face value in excess of
$1,000,000. If any amount payable under or in connection with any of the
Collateral shall be evidenced by any Electronic Chattel Paper or any
transferable record with a face value in excess of $1,000,000, the Grantor
acquiring such Electronic Chattel Paper or transferable record shall promptly
notify the Agent thereof and, upon the occurrence and during the continuance of
an Event of Default, shall take such action as the Agent may reasonably request
to vest in the Agent control under UCC Section 9-105 of such Electronic Chattel
Paper or control under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. The Agent agrees with such Grantor that the Agent will
arrange, pursuant to procedures reasonably satisfactory to the Agent and so long
as such procedures will not result in the Agent’s loss of control, for the
Grantor to make alterations to the Electronic Chattel Paper or transferable
record permitted under UCC Section 9-105 or, as the case may be, Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act of
Section 16 of the Uniform Electronic Transactions Act for a party in control to
allow without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Grantor
with respect to such Electronic Chattel Paper or transferable record.

 

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(d)    Letter-of-Credit Rights. If such Grantor is at any time a beneficiary
under a Letter of Credit having a face value in excess of $1,000,000 now or
hereafter issued in favor of such Grantor (which, for the avoidance of doubt,
shall not include any Letter of Credit issued pursuant to the Credit Agreement),
such Grantor shall promptly notify the Agent thereof, and upon the occurrence
and continuance of an Event of default, such Grantor shall, at the request of
the Agent, pursuant to an agreement in form and substance reasonably
satisfactory to the Agent, either (i) arrange for the issuer and any confirmer
of such Letter of Credit to consent to an assignment to the Agent of, and to pay
to the Agent, the proceeds of, any drawing under the Letter of Credit or
(ii) arrange for the Agent to become the beneficiary of such Letter of Credit,
with the Agent agreeing, in each case, that the proceeds of any drawing under
the Letter of Credit are to be applied as provided in the Credit Agreement.

(e)    Commercial Tort Claims.    As of the date hereof, to its knowledge, it
holds no Commercial Tort Claims other than those listed in Section 26 of the
Information Certificate. If any Grantor shall at any time obtain knowledge that
it holds or has acquired a Commercial Tort Claim with reasonably predicted value
equal to or less than $1,000,000, such Grantor shall promptly notify the Agent
in writing signed by such Grantor of the brief details thereof and grant to the
Agent in such writing a security interest therein and in the Proceeds thereof,
all upon the terms of this Security Agreement, with such writing to be in form
and substance reasonably satisfactory to the Agent.

SECTION 3.5.    Joinder of Additional Borrowers or Guarantors. The Grantors
shall cause each direct or indirect Subsidiary of any Grantor that is required
to become a party to this Agreement pursuant to Section 6.12 of the Credit
Agreement to execute and deliver to the Agent a Perfection Certificate, in each
case, within sixty (60) days (or such longer period of time as may be agreed to
in writing by the Agent in its reasonable discretion) of the date on which it
was acquired or created and, upon such execution and delivery, such Subsidiary
shall constitute a “Borrower” or a “Guarantor”, as applicable, and a “Grantor”
for all purposes hereunder with the same force and effect as if originally named
as a Borrower or Guarantor, as applicable, and Grantor herein. The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Borrower or Guarantor, as applicable,
and Grantor as a party to this Security Agreement.

SECTION 3.6.     Supplements; Further Assurances Each Grantor shall take such
additional actions, and execute and deliver to the Agent such additional
assignments, agreements, supplements, powers and instruments, as the Agent may
reasonably request in writing and may in its reasonable judgment deem necessary
or appropriate, wherever required by law, in order to preserve and protect the
security interest in the Collateral, to carry into effect the purposes hereof or
better to assure and confirm unto the Agent or permit the Agent to exercise and
enforce its rights, powers and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Grantor shall
make, execute, endorse,

 

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acknowledge, file or re-file and/or deliver to the Agent from time to time upon
reasonable request such lists, descriptions and designations of the Collateral,
copies of warehouse receipts, receipts in the nature of warehouse receipts,
bills of lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, supplements, additional security agreements, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments. If an Event of Default has occurred and is
continuing, the Agent may institute and maintain, in its own name or in the name
of any Grantor, such suits and proceedings as the Agent may be advised by
counsel are necessary or desirable to prevent any material impairment of the
security interest in or the perfection thereof in the Collateral. All of the
foregoing shall be at the sole cost and expense of the Grantors, provided that
such costs and expenses shall be reasonable, documented and out-of-pocket costs
and expenses incurred by Agent. The Grantors and the Agent acknowledge that this
Security Agreement is intended to grant to the Agent, a security interest in and
Lien upon the Collateral and shall not constitute or create a present assignment
of any of the Collateral.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

In addition to, and without limitation of, each of the representations,
warranties and covenants set forth in the Credit Agreement and the other Loan
Documents, each Grantor represents, warrants and covenants as follows:

SECTION 4.1.    Title. No financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Agent pursuant to
this Security Agreement or as are permitted by the Credit Agreement. No Person
other than the Agent has control or possession of all or any part of the
Collateral, except as permitted by the Credit Agreement.

SECTION 4.2.    Limitation on Liens; Defense of Claims; Transferability of
Collateral. Each Grantor is as of the date hereof, and, as to Collateral
acquired by it from time to time after the date hereof, such Grantor will be,
the sole direct and beneficial owner of all Collateral pledged by it hereunder
free from any Lien or other right, title or interest of any Person other
than the Liens and security interest created by this Security Agreement and
Permitted Encumbrances. Each Grantor shall, at its own cost and expense, take
any and all reasonable actions to defend title to the Collateral pledged by it
hereunder and the security interest therein and Lien thereon granted to the
Agent and the priority thereof against all claims and demands of all Persons, at
its own cost and expense, at any time claiming any interest therein adverse to
the Agent or any other Credit Party other than Permitted Encumbrances. There is
no agreement, and no Grantor shall enter into any agreement or take any other
action, that would restrict the transferability of any of the Collateral or
otherwise impair or conflict with such Grantors’ obligations or the rights of
the Agent hereunder.

SECTION 4.3.    Chief Executive Office; Change of Name; Jurisdiction of
Organization

(a)    As of the Closing Date, the exact legal name, type of organization,
jurisdiction of organization, federal taxpayer identification number,
organizational identification number and chief executive office of such Grantor
is indicated in the Information Certificate. Such Grantor

 

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shall furnish to the Agent prompt written notice of any change in (i) its
corporate name, (ii) the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) its identity or type of organization or corporate structure, (iv) its
federal taxpayer identification number or organizational identification number
or (v) its jurisdiction of organization (in each case, including, without
limitation, by merging with or into any other entity, reorganizing, dissolving,
liquidating, reincorporating or incorporating in any other jurisdiction). Such
Grantor agrees (A) not to effect or permit any such change unless all filings
have been made under the UCC or otherwise that are required in order for the
Agent to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral (subject to,
with respect to priority, Permitted Encumbrances having priority by operation of
law) and (B) to take all action reasonably satisfactory to the Agent to maintain
the perfection and priority of the security interest of the Agent in the
Collateral intended to be granted hereunder. Each Grantor agrees to promptly
provide the Agent with certified Organization Documents reflecting any of the
changes described in the preceding sentence.

(b)    The Agent may rely on opinions of counsel as to whether any or all UCC
financing statements of the Grantors need to be amended as a result of any of
the changes described in SECTION 4.3(a). If any Grantor fails to provide
information to the Agent about such changes on a timely basis, the Agent shall
not be liable or responsible to any party for any failure to maintain a
perfected security interest in such Grantor’s property constituting Collateral,
for which the Agent needed to have information relating to such changes. The
Agent shall have no duty to inquire about such changes if any Grantor does not
inform the Agent of such changes, the parties acknowledging and agreeing that it
would not be feasible or practical for the Agent to search for information on
such changes if such information is not provided by any Grantor.

SECTION 4.4.    Location of Inventory and Equipment.

As of the Closing Date, all Equipment and Inventory of such Grantor (other than
Inventory in transit) is located at the chief executive office or such other
location listed in Schedule 5.08(b)(1) and Schedule 5.08(b)(2) of the Disclosure
Letter.

SECTION 4.5.    Condition and Maintenance of Equipment. The Equipment of such
Grantor is in good repair, working order and condition, reasonable wear and tear
excepted. Each Grantor shall cause the Equipment to be maintained and preserved
in good repair, working order and condition, reasonable wear and tear excepted,
and shall make or cause to be made all repairs, replacements and other
improvements which are necessary in the conduct of such Grantor’s business.

SECTION 4.6.    Due Authorization and Issuance. All of the Pledged Interests
have been, and to the extent any Pledged Interests are hereafter issued, such
shares or other equity interests will be, upon such issuance, duly authorized,
validly issued and, to the extent applicable, fully paid and non-assessable. All
of the Pledged Interests have been fully paid for, and there is no amount or
other obligation owing by any Grantor to any issuer of the Pledged Interests in
exchange for or in connection with the issuance of the Pledged Interests or any
Grantor’s status as a partner or a member of any issuer of the Pledged
Interests.

 

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SECTION 4.7.    Each Grantor owns or has rights to use all of the Collateral
pledged by it hereunder and all rights with respect to any of the foregoing used
in, necessary for or material to such Grantor’s business as currently conducted.
To each Grantor’s knowledge, the use by such Grantor of such Collateral and all
such rights with respect to the foregoing do not infringe on the rights of any
Person other than such infringement which would not, individually or in the
aggregate, result in a Material Adverse Effect. To each Grantor’s knowledge, no
claim has been made and remains outstanding that such Grantor’s use of any
Collateral does or may violate the rights of any third Person that would
individually, or in the aggregate, have a Material Adverse Effect.

SECTION 4.8.    No Conflicts, Consents, etc.

No consent of any party (including, without limitation, equity holders or
creditors of such Grantor) and no consent, authorization, approval, license or
other action by, and no notice to or filing with, any Governmental Authority or
regulatory body or other Person is required (A) for the grant of the security
interest by such Grantor of the Collateral pledged by it pursuant to this
Security Agreement or for the execution, delivery or performance hereof by such
Grantor, (B) for the exercise by the Agent of the voting or other rights
provided for in this Security Agreement or (C) for the exercise by the Agent of
the remedies in respect of the Collateral pursuant to this Security Agreement
except, in each case, for such consents which have been obtained prior to the
date hereof. Following the occurrence and during the continuation of an Event of
Default, if the Agent desires to exercise any remedies, voting or consensual
rights or attorney-in-fact powers set forth in this Security Agreement and
determines it necessary to obtain any approvals or consents of any Governmental
Authority or any other Person therefor, then, upon the reasonable request of the
Agent, such Grantor agrees to use commercially reasonable efforts to assist and
aid the Agent to promptly obtain any necessary approvals or consents for the
exercise of any such remedies, rights and powers.

SECTION 4.9.    Collateral Information.

All information set forth herein, including the schedules annexed hereto, and
all information contained in any documents, schedules and lists heretofore
delivered to the Agent in connection with this Security Agreement, in each case,
relating to the Collateral, is accurate and complete in all material respects.

SECTION 4.10.    Insurance.

Such Grantor shall (i) maintain or shall cause to be maintained such insurance
as is required pursuant to Section 6.07 of the Credit Agreement, (ii) maintain
such other insurance as may be required by applicable law, and (iii) furnish to
the Agent, such information as to the insurance carried as Agent may reasonably
request. Each Grantor hereby irrevocably makes, constitutes and appoints the
Agent (and all officers, employees or agents designated by the Agent) as such
Grantor’s true and lawful agent (and attorney-in-fact), exercisable only after
the occurrence and during the continuance of an Event of Default, for the
purpose of making, settling and adjusting claims in respect of the Collateral
under policies of insurance, endorsing the name of such Grantor 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 Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or in part relating thereto, the Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Default
or 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 Agent deems reasonably advisable. All sums disbursed by the Agent
in connection with this SECTION 4.9, including reasonable and

 

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documented out-of-pocket attorneys’ fees, court costs, expenses and other
charges relating thereto, shall be payable, upon demand, by the Grantors to the
Agent and shall be additional Secured Obligations secured hereby.

SECTION 4.11.    Payment of Taxes; Compliance with Laws; Contested Liens;
Claims. Each Grantor represents and warrants that all Claims imposed upon or
assessed against the Collateral have been paid and discharged except to the
extent such Claims constitute a Lien not yet due and payable or a Permitted
Encumbrance or are being diligently contested in good faith, and for which
appropriate reserves have been established in accordance with GAAP. Each Grantor
shall comply in all material respects with all applicable law relating to the
Collateral, except where the failure to do so, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. Each Grantor
may at its own expense contest the validity, amount or applicability of any
Claims so long as the contest thereof shall be conducted in accordance with, and
permitted pursuant to the provisions of, the Credit Agreement. Notwithstanding
the foregoing provisions of this SECTION 4.11, no contest of any such obligation
may be pursued by such Grantor if such contest would expose the Agent to (i) any
possible criminal liability or (ii) any additional civil liability for failure
to comply with such obligations unless such Grantor shall have furnished a bond
or other security therefor satisfactory to the Lender.

ARTICLE V

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

SECTION 5.1.    Pledge of Additional Securities Collateral.

Each Grantor shall, upon obtaining any Pledged Securities or Intercompany Notes
of any Person required to be pledged hereunder, accept the same in trust for the
benefit of the Agent and promptly deliver to the Agent a pledge amendment, duly
executed by such Grantor, in substantially the form of Exhibit 1 annexed hereto
(each, a “Pledge Amendment”), and the certificates and other documents required
under SECTION 3.1 and SECTION 3.2 hereof in respect of the additional Pledged
Securities or Intercompany Notes which are to be pledged pursuant to this
Security Agreement, and confirming the attachment of the Lien hereby created on
and in respect of such additional Pledged Securities or Intercompany Notes. Each
Grantor hereby authorizes the Agent to attach each Pledge Amendment to this
Security Agreement and agrees that all Pledged Securities or Intercompany Notes
listed on any Pledge Amendment delivered to the Agent shall for all purposes
hereunder be considered Collateral.

SECTION 5.2.    Voting Rights; Distributions; etc.

(i)    So long as no Event of Default shall have occurred and be continuing,
each Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Securities Collateral or any part thereof
for any purpose not inconsistent with the terms or purposes hereof, the Credit
Agreement or any other Loan Document evidencing the Secured Obligations. The
Agent shall be deemed without further action or formality to have granted to
each Grantor all necessary consents relating to voting rights and shall,
if necessary, upon written request of any Grantor and at the sole cost and
expense of the Grantors, from time to time execute and deliver (or cause to be
executed and delivered) to such Grantor all such instruments as such Grantor may
reasonably request in order to permit such Grantor to exercise the voting and
other rights which it is entitled to exercise pursuant to this SECTION 5.2(i).

 

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(ii)    Upon the occurrence and during the continuance of any Event of Default,
all rights of each Grantor to exercise the voting and other consensual rights it
would otherwise be entitled to exercise pursuant to SECTION 5.2(i) hereof shall
immediately cease without any action or the giving of any notice, and all such
rights shall thereupon become vested in the Agent, which shall thereupon have
the sole right to exercise such voting and other consensual rights; provided
that the Agent shall have the right, in its sole discretion, from time to time
following the occurrence and continuance of an Event of Default to permit such
Grantor to exercise such rights under SECTION 5.2(i). After such Event of
Default is no longer continuing, each Grantor shall have the right to exercise
the voting, managerial and other consensual rights and powers that it would
otherwise be entitled to pursuant to SECTION 5.2(i) hereof.

(iii)    So long as no Cash Dominion Event shall have occurred and be
continuing, each Grantor shall be entitled to receive and retain, and to utilize
free and clear of the Lien hereof, any and all Distributions, but only if and to
the extent made in accordance with, and to the extent permitted by, the
provisions of the Credit Agreement; provided, however, that any and all such
Distributions consisting of rights or interests in the form of securities (other
than securities constituting Excluded Property) be promptly delivered to the
Agent to hold as Collateral and shall, if received by any Grantor, be received
in trust for the benefit of the Agent, be segregated from the other property or
funds of such Grantor and be forthwith delivered to the Agent as Collateral in
the same form as so received (with any necessary endorsement). The Agent shall,
if necessary, upon written request of any Grantor and at the sole cost and
expense of the Grantors, from time to time execute and deliver (or cause to be
executed and delivered) to such Grantor all such instruments as such Grantor may
reasonably request in order to permit such Grantor to receive the Distributions
which it is authorized to receive and retain pursuant to this SECTION 5.2(iii).

(iv)    Upon the occurrence and during the continuance of any Cash Dominion
Event, all rights of each Grantor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to SECTION 5.2(iii)
hereof shall cease and all such rights shall thereupon become vested in the
Agent, which shall thereupon have the sole right to receive and hold as
Collateral such Distributions. After such Cash Dominion Event is no longer
continuing, each Grantor shall have the right to receive the Distributions which
it would be authorized to receive and retain pursuant to SECTION 5.2(ii).

(v)    Each Grantor shall, at its sole cost and expense, from time to time
execute and deliver to the Agent appropriate instruments as the Agent may
reasonably request in order to permit the Agent to exercise the voting and other
rights which it may be entitled to exercise pursuant to SECTION 5.2(ii) hereof
and to receive all Distributions which it may be entitled to receive under
SECTION 5.2(iii) hereof.

(vi)    All Distributions which are received by any Grantor contrary to the
provisions of SECTION 5.2(ii) hereof shall be received in trust for the benefit
of the Agent, shall be segregated from other funds of such Grantor and shall
immediately be paid over to the Agent as Collateral in the same form as so
received (with any necessary endorsement).

 

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SECTION 5.3.    Organization Documents. Each Grantor has delivered to the Agent
true, correct and complete copies of its Organization Documents. The
Organization Documents are in full force and effect. No Grantor will terminate
or agree to terminate any Organization Documents or make any amendment or
modification to any Organization Documents which may have a Material Adverse
Effect including electing to treat any Pledged Interests of such Grantor as a
security under Section 8-103 of the UCC. Each Grantor hereby represents and
warrants that no uncertificated Pledged Interest is a “security” for purposes of
Article 8 of the UCC of the jurisdiction of organization of the issuer of such
Pledged Interest. Each Grantor agrees that it shall not opt to have any
uncertificated Pledged Interests to be treated as a “security” for purposes of
Article 8 of the UCC in the jurisdiction of organization of the issuer of such
Pledged Interests.

SECTION 5.4.    Defaults, Etc. Each Grantor is not in default in the payment of
any portion of any mandatory capital contribution, if any, required to be made
under any agreement to which such Grantor is a party relating to the Pledged
Securities pledged by it, and such Grantor is not in violation of any other
provisions of any such agreement to which such Grantor is a party, or otherwise
in default or violation thereunder. No Securities Collateral pledged by such
Grantor is subject to any defense, offset or counterclaim, nor have any of the
foregoing been asserted or alleged against such Grantor by any Person with
respect thereto, and as of the date hereof, there are no certificates,
instruments, documents or other writings (other than the Organization Documents
and certificates, if any, delivered to the Agent) which evidence any Pledged
Securities of such Grantor.

SECTION 5.5.    Certain Agreements of Grantors As Issuers and Holders of Equity
Interests.

(i)    In the case of each Grantor which is an issuer of Securities Collateral,
such Grantor agrees to be bound by the terms of this Security Agreement relating
to the Securities Collateral issued by it and will comply with such terms
insofar as such terms are applicable to it.

(ii)    In the case of each Grantor which is a partner in a partnership, a
member of a limited liability company, or a parent or shareholder of any other
entity, such Grantor hereby consents to the extent required by the applicable
Organization Documents to the pledge by each other Grantor, pursuant to the
terms hereof, of the Pledged Interests in such partnership, limited liability
company or other entity and, upon the occurrence and during the continuance of
an Event of Default, to the transfer of such Pledged Interests to the Agent or
its nominee and to the substitution of the Agent or its nominee as a substituted
partner or member in such partnership, limited liability company or other entity
with all the rights, powers and duties of a general partner or a limited partner
or member, as the case may be.

 

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ARTICLE VI

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

SECTION 6.1.    Grant of License. Without limiting the rights of Agent as the
holder of a Lien on the Collateral constituting Intellectual Property, for the
purpose of enabling the Agent, during the continuance of an Event of Default, to
exercise rights and remedies under Article VIII hereof at such time as the Agent
shall be lawfully entitled to exercise such rights and remedies, and for no
other purpose, each Grantor hereby grants to the Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to such Grantor) to use, assign, license or
sublicense any of the Intellectual Property now owned or hereafter acquired by
such Grantor, wherever the same may be located, including in such license access
to all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout hereof.

SECTION 6.2.    Registrations. Except pursuant to licenses and other user
agreements entered into by any Grantor in the ordinary course of business that
are listed in Schedule 8.12 of the Information Certificate, on and as of the
date hereof (i) each Grantor owns and possesses the right to use, and has done
nothing to authorize or enable any other Person to use, any material Copyright,
Patent or Trademark listed in Schedule 8.12 of the Information Certificate, and
(ii) all registrations listed in Schedule 8.12 of the Information Certificate
are valid and in full force and effect.

SECTION 6.3.    No Violations or Proceedings. To each Grantor’s knowledge, on
and as of the date hereof, there is no violation by others of any right of such
Grantor with respect to any Copyright, Patent or Trademark listed in Schedule
8.12 of the Information Certificate, respectively, pledged by it under the name
of such Grantor.

SECTION 6.4.    Protection of Agent’s Security. Each Grantor shall, at its sole
cost and expense (i) promptly following its becoming aware thereof, notify the
Agent of (A) any adverse determination in any proceeding in the United States
Patent and Trademark Office or the United States Copyright Office with respect
to any Patent, Trademark or Copyright necessary for the conduct of business of
such Grantor or (B) the institution of any proceeding or any adverse
determination in any federal, state or local court or administrative body
regarding such Grantor’s claim of ownership in or right to use any of the
Intellectual Property material to the use and operation of the Collateral, its
right to register such Intellectual Property or its right to keep and maintain
such registration in full force and effect, in each case, to the extent that any
of the determinations or proceedings described in clauses (A) and (B) would
reasonably be expected to have a Material Adverse Effect; (ii) use commercially
reasonable efforts, in its prudent business judgment, to maintain and protect
the Intellectual Property necessary for the conduct of business of such Grantor,
(iii) not permit to lapse or become abandoned any Intellectual Property
necessary for the conduct of business of such Grantor and not settle or
compromise any pending or future litigation or administrative proceeding with
respect to such Intellectual Property except, in each case, (A) in the ordinary
course of such Grantor’s business, (B) if such Grantor deems it otherwise
prudent to do so in its reasonable business judgment, or (C) as otherwise
permitted under the Credit Agreement; (iv) upon such Grantor’s obtaining
knowledge thereof, promptly

 

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notify the Agent in writing of any event which may be reasonably expected to
have a materially adverse effect on the value or utility of the Intellectual
Property or any portion thereof necessary for the use and operation of the
Collateral, the ability of such Grantor or the Agent to dispose of the
Intellectual Property or any portion thereof or the rights and remedies of the
Agent in relation thereto including, without limitation, a levy or threat of
levy or any legal process against the Intellectual Property or any portion
thereof, (v) in each case, except as would not reasonably be expected to have a
Material Adverse effect, not license the Intellectual Property other than
licenses entered into by such Grantor in, or incidental to, the ordinary course
of business, or amend or permit the amendment of any of the material licenses in
a manner that would effect the right to receive payments thereunder, or in any
manner that would impair the value of the Intellectual Property or the Lien on
and security interest in the Collateral constituting Intellectual Property
intended to be granted to the Agent or the benefit of the Credit Parties,
without the consent of the Agent, (vi) until the Agent exercises its rights to
make collection, diligently keep adequate records respecting the Intellectual
Property and (vii) furnish to the Agent from time to time (but, so long as an
Event of Default has not occurred and is continuing, no more than once per
Fiscal Quarter) upon the Agent’s reasonable request therefor detailed statements
and amended schedules further identifying and describing the Intellectual
Property and such other materials evidencing or reports pertaining to the
Intellectual Property as the Agent may reasonably request. Notwithstanding the
foregoing, nothing herein shall prevent any Grantor from selling, disposing of
or otherwise using any Intellectual Property as permitted under the Credit
Agreement.

SECTION 6.5.    After-Acquired Property. If any Grantor shall, at any time
before this Security Agreement shall have been terminated in accordance with
SECTION 9.5(a), (i) obtain any rights to any additional Intellectual Property or
(ii) become entitled to the benefit of any additional Intellectual Property or
any renewal or extension thereof, including any reissue, division, continuation,
or continuation-in-part of any Intellectual Property, or any improvement on any
Intellectual Property, the provisions hereof shall automatically apply thereto
and any such item enumerated in clause (i) or (ii) of this SECTION 6.5 with
respect to such Grantor shall automatically constitute Collateral if such would
have constituted Collateral at the time of execution hereof and be subject to
the Lien and security interest created by this Security Agreement without
further action by any party. With respect to any federally registered
Intellectual Property, each Grantor shall promptly (a) provide to the Agent
written notice of any of the foregoing and (b) confirm the attachment of the
Lien and security interest created by this Security Agreement to any rights
described in clauses (i) and (ii) of the immediately preceding sentence of this
SECTION 6.5 by execution of an instrument in form reasonably acceptable to the
Agent.

SECTION 6.6.    Modifications. Each Grantor authorizes the Agent to modify this
Security Agreement by amending Schedule 8.12 of the Information Certificate to
include any Intellectual Property acquired or arising after the date hereof of
such Grantor including, without limitation, any of the items listed in SECTION
6.5 hereof.

SECTION 6.7.    Litigation. Unless there shall occur and be continuing any Event
of Default, each Grantor shall have the right to commence and prosecute in its
own name, as the party in interest, for its own benefit and at the sole cost and
expense of the Grantors, such

 

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applications for protection of Intellectual Property and suits, proceedings or
other actions to prevent the infringement, counterfeiting, unfair competition,
dilution, diminution in value or other damage as are necessary to protect the
Intellectual Property. Upon the occurrence and during the continuance of any
Event of Default, the Agent shall have the right but shall in no way be
obligated to file applications for protection of the Intellectual Property
and/or bring suit in the name of any Grantor, the Agent or the other Credit
Parties to enforce the Intellectual Property and any license thereunder. In the
event of such suit, each Grantor shall, at the reasonable request of the Agent,
do any and all lawful acts and execute any and all documents requested by the
Agent in aid of such enforcement and the Grantors shall promptly reimburse and
indemnify the Agent, as the case may be, for all reasonable and documented
out-of-pocket costs and expenses incurred by the Agent in the exercise of its
rights under this SECTION 6.7 in accordance with SECTION 9.3 hereof. In the
event that the Agent shall elect not to bring suit to enforce the Intellectual
Property, each Grantor agrees, at the request of the Agent, to take all
commercially reasonable actions necessary, whether by suit, proceeding or other
action, to prevent the infringement, counterfeiting, unfair competition,
dilution, diminution in value of or other damage to any of the Intellectual
Property by others and for that purpose agrees to diligently maintain any suit,
proceeding or other action against any Person so infringing necessary to prevent
such infringement.

SECTION 6.8.    Third Party Consents. Each Grantor shall use commercially
reasonable efforts to obtain the consent of third parties to the extent such
consent is necessary to create a valid, perfected security interest in favor of
the Agent in any Collateral constituting Intellectual Property necessary for the
conduct of business of such Grantor.

ARTICLE VII

CERTAIN PROVISIONS CONCERNING CREDIT CARD RECEIVABLES

SECTION 7.1.    Special Representations and Warranties. As of the time when any
of its Credit Card Receivables is included in the Borrowing Base as an Eligible
Credit Card Receivable, each Grantor shall be deemed to have represented and
warranted that such Credit Card Receivable and all records, papers and documents
relating thereto (i) are genuine and correct and in all material respects what
they purport to be, (ii) represent the legal, valid and binding obligation of
the account debtor, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws relating to or limiting
creditors’ rights generally or by equitable principles relating to
enforceability, evidencing indebtedness unpaid and owed by such account debtor,
arising out of the performance of labor or services or the sale, lease, license,
assignment or other disposition and delivery of the goods or other property
listed therein or out of an advance or a loan, and (iii) are in all material
respects in compliance and conform with all applicable federal, state and local
Laws and applicable Laws of any relevant foreign jurisdiction.

SECTION 7.2.    Maintenance of Records. Each Grantor shall keep and maintain at
its own cost and expense complete records of each Credit Card Receivable in a
manner consistent with prudent business practice, including, without limitation,
records of all payments

 

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received, all credits granted thereon, all merchandise returned and all other
documentation relating thereto. Each Grantor shall, at such Grantor’s sole cost
and expense, upon the Agent’s demand made at any time after the occurrence and
during the continuance of any Event of Default, deliver all tangible evidence of
all Credit Card Receivables, including, without limitation, all documents
evidencing such Credit Card Receivables and any books and records relating
thereto to the Agent or to its representatives (copies of which evidence and
books and records may be retained by such Grantor). Upon the occurrence and
during the continuance of any Event of Default, the Agent may transfer a full
and complete copy of any Grantor’s books, records, credit information, reports,
memoranda and all other writings relating to the Credit Card Receivables to and
for the use by any Person that has acquired or is contemplating acquisition of
an interest in the Credit Card Receivables, as applicable or the Agent’s
security interest therein in accordance with applicable Law without the consent
of any Grantor.

SECTION 7.3.    Modification of Terms, Etc.

No Grantor shall rescind or cancel any indebtedness evidenced by any Credit Card
Receivable or modify any term thereof or make any adjustment with respect
thereto except in the ordinary course of business consistent with prudent
business practice, or extend or renew any such indebtedness except in the
ordinary course of business consistent with prudent business practice or
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto or sell any Credit Card Receivable or interest therein except in the
ordinary course of business consistent with prudent business practice or in
accordance with the Credit Agreement without the prior written consent of the
Agent.

ARTICLE VIII

REMEDIES

SECTION 8.1.    Remedies.    Upon the occurrence and during the continuance of
any Event of Default the Agent may, and at the direction of the Required
Lenders, shall, from time to time in respect of the Collateral, in addition to
the other rights and remedies provided for herein, under applicable Law or
otherwise available to it:

(i)    Personally, or by agents or attorneys, immediately take possession of the
Collateral or any part thereof, from any Grantor or any other Person who then
has possession of any part thereof with or without notice or process of law, and
for that purpose may enter upon any Grantor’s premises where any of the
Collateral is located, remove such Collateral, remain present at such premises
to receive copies of all communications and remittances relating to the
Collateral and use in connection with such removal and possession any and all
services, supplies, aids and other facilities of any Grantor;

(ii)    Demand, sue for, collect or receive any money or property at any time
payable or receivable in respect of the Collateral including, without
limitation, instructing the obligor or obligors on any agreement, instrument or
other obligation constituting part of the Collateral to make any payment
required by the terms of such agreement, instrument or other obligation directly
to the Agent, and in connection with any of the foregoing, compromise, settle,
extend the time for payment and make other modifications with respect thereto;
provided, however, that in the event that any such payments are made directly to
any Grantor, prior to receipt by any such obligor of such instruction, such
Grantor shall segregate all amounts received pursuant thereto in trust for the
benefit of the Agent and shall promptly pay such amounts to the Agent;

 

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(iii)    Sell, assign, grant a license to use or otherwise liquidate, or direct
any Grantor to sell, assign, grant a license to use or otherwise liquidate, any
and all investments made in whole or in part with the Collateral or any part
thereof, and take possession of the proceeds of any such sale, assignment,
license or liquidation;

(iv)    Take possession of the Collateral or any part thereof, by directing any
Grantor in writing to deliver the same to the Agent at any place or places so
designated by the Agent, in which event such Grantor shall at its own expense:
(A) forthwith cause the same to be moved to the place or places designated by
the Agent and therewith delivered to the Agent, (B) store and keep any
Collateral so delivered to the Agent at such place or places pending further
action by the Agent and (C) while the Collateral shall be so stored and kept,
provide such security and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition. Each Grantor’s
obligation to deliver the Collateral as contemplated in this SECTION 8.1 is of
the essence hereof. Upon application to a court of equity having jurisdiction,
the Agent shall be entitled to a decree requiring specific performance by any
Grantor of such obligation;

(v)    Withdraw all moneys, instruments, securities and other property in any
bank, financial securities, deposit or other account of any Grantor constituting
Collateral for application to the Secured Obligations;

(vi)    Retain and apply the Distributions to the Secured Obligations;

(vii)    Exercise any and all rights as beneficial and legal owner of the
Collateral, including, without limitation, perfecting assignment of and
exercising any and all voting, consensual and other rights and powers with
respect to any Collateral; and

(viii)    Exercise all the rights and remedies of a secured party under the UCC,
and the Agent may also in its sole discretion, without notice except as
specified in SECTION 8.2 hereof, sell, assign or grant a license to use the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker’s board or at any of the Agent’s offices or elsewhere,
as part of one or more going out of business sales in the Agent’s own right or
by one or more agents and contractors, all as the Agent, in its sole discretion,
may deem advisable, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Agent may deem advisable. The
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. The Agent shall have
the right to conduct such sales on any Grantor’s premises and shall have the
right to use any Grantor’s premises without charge for such sales for such time
or times as the Agent may see fit. The Agent and any agent or contractor, in
conjunction with any such sale, may augment the Inventory with other goods (all
of which other goods shall remain the sole property of the Agent or such agent
or contractor). Any amounts realized from the sale of such goods which
constitute augmentations to the Inventory (net of an allocable share of the
costs and expenses incurred in

 

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their disposition) shall be the sole property of the Agent or such agent or
contractor and neither any Grantor nor any Person claiming under or in right of
any Grantor shall have any interest therein. The Agent or any other Credit Party
or any of their respective Affiliates may be the purchaser, licensee, assignee
or recipient of any or all of the Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold, assigned or
licensed at such sale, to use and apply any of the Secured Obligations owed to
such Person as a credit on account of the purchase price of any Collateral
payable by such Person at such sale. Each purchaser, assignee, licensee or
recipient at any such sale shall acquire the property sold, assigned or licensed
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives, to the fullest extent permitted by Law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. To the fullest extent permitted by Law, each
Grantor hereby waives any claims against the Agent arising by reason of the fact
that the price at which any Collateral may have been sold, assigned or licensed
at such a private sale was less than the price which might have been obtained at
a public sale, even if the Agent accepts the first offer received and does not
offer such Collateral to more than one offeree.

SECTION 8.2.    Notice of Sale. Each Grantor acknowledges and agrees that, to
the extent notice of sale or other disposition of Collateral shall be required
by applicable Law and unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Agent shall provide such Grantor such advance notice
as may be practicable under the circumstances), ten (10) days’ prior notice to
such Grantor of the time and place of any public sale or of the time after which
any private sale or other intended disposition is to take place shall be
commercially reasonable notification of such matters. No notification need be
given to any Grantor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying (as permitted under Law) any right
to notification of sale or other intended disposition.

SECTION 8.3.    Waiver of Notice and Claims. Each Grantor hereby waives, to the
fullest extent permitted by applicable Law, notice or judicial hearing in
connection with the Agent’s taking possession or the Agent’s disposition of any
of the Collateral, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which such
Grantor would otherwise have under law, and each Grantor hereby further waives,
to the fullest extent permitted by applicable Law: (i) all damages occasioned by
such taking of possession, (ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of the
Agent’s rights hereunder and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable Law. The Agent shall not be liable for any incorrect or improper
payment made pursuant to this Article VIII in the absence of gross negligence or
willful misconduct. Any sale of, or the grant of options to purchase, or any
other realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the applicable
Grantor therein and thereto, and shall be a perpetual bar both at law and in
equity against such Grantor and against any and all Persons claiming or
attempting to claim the Collateral so sold, optioned or realized upon, or any
part thereof, from, through or under such Grantor.

 

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SECTION 8.4.    Certain Sales of Collateral.

(i)    Each Grantor recognizes that, by reason of certain prohibitions contained
in law, rules, regulations or orders of any Governmental Authority, the Agent
may be compelled, with respect to any sale of all or any part of the Collateral,
to limit purchasers to those who meet the requirements of such Governmental
Authority. Each Grantor acknowledges that any such sales may be at prices and on
terms less favorable to the Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agrees that
any such restricted sale shall be deemed to have been made in a commercially
reasonable manner and that, except as may be required by applicable Law, the
Agent shall have no obligation to engage in public sales.

(ii)    Each Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities Laws, the Agent
may be compelled, with respect to any sale of all or any part of the Securities
Collateral and Investment Property, to limit purchasers to Persons who will
agree, among other things, to acquire such Securities Collateral or Investment
Property for their own account, for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges that any such private
sales may be at prices and on terms less favorable to the Agent than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that the Agent shall have no obligation to engage in public sales and
no obligation to delay the sale of any Securities Collateral or Investment
Property for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities Laws, even if such issuer
would agree to do so.

(iii)    If the Agent determines to exercise its right to sell any or all of the
Securities Collateral or Investment Property, upon written request, the
applicable Grantor shall from time to time furnish to the Agent all such
information as the Agent may reasonably request in order to determine the number
of securities included in the Securities Collateral or Investment Property which
may be sold by the Agent as exempt transactions under the Securities Act and the
rules of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect.

(iv)    Each Grantor further agrees that a breach of any of the covenants
contained in this SECTION 8.4 will cause irreparable injury to the Agent and the
other Credit Parties, that the Agent and the other Credit Parties have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this SECTION 8.4 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing.

 

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  SECTION

8.5. No Waiver; Cumulative Remedies.

(i)    No failure on the part of the Agent to exercise, no course of dealing
with respect to, and no delay on the part of the Agent in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy; nor shall the Agent be required to look first to, enforce or exhaust
any other security, collateral or guaranties. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.

(ii)    In the event that the Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Security Agreement by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Agent,
then and in every such case, the Grantors, the Agent and each other Credit Party
shall be restored to their respective former positions and rights hereunder with
respect to the Collateral, and all rights, remedies and powers of the Agent and
the other Credit Parties shall continue as if no such proceeding had been
instituted.

SECTION 8.6.    Certain Additional Actions Regarding Intellectual Property. If
any Event of Default shall have occurred and be continuing, upon the written
demand of Agent, each Grantor shall execute and deliver to Agent an assignment
or assignments of the registered Patents, Trademarks and/or Copyrights and such
other documents as are necessary to carry out the intent and purposes hereof to
the extent such assignment does not result in any loss of rights therein under
applicable Law. Within ten (10) Business Days of written notice thereafter from
Agent, each Grantor shall make available to Agent, to the extent within such
Grantor’s power and authority, such personnel in such Grantor’s employ on the
date of the Event of Default as Agent may reasonably designate to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell the
products and services sold by such Grantor under the registered Patents,
Trademarks and/or Copyrights, and such Persons shall be available to perform
their prior functions on Agent’s behalf.

SECTION 8.7.    Application of Proceeds. The proceeds received by the Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral pursuant to the exercise by the Agent of its remedies
shall be applied, together with any other sums then held by the Agent pursuant
to this Security Agreement, in accordance with and as set forth in Section 8.03
of the Credit Agreement.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1.    Concerning the Agent.

(i)    The Agent has been appointed as administrative agent and collateral agent
pursuant to the Credit Agreement. The actions of the Agent hereunder are subject
to the provisions of the Credit Agreement. The Agent shall have the right
hereunder to make demands, to give notices, to exercise or refrain from
exercising any

 

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rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of the Collateral), in accordance with
this Security Agreement and the Credit Agreement. The Agent may employ agents
and attorneys-in-fact in connection herewith and shall not be liable for the
negligence or misconduct of any such agents or attorneys-in-fact. The Agent may
resign and a successor Agent may be appointed in the manner provided in the
Credit Agreement. Upon the acceptance of any appointment as the Agent by a
successor Agent, that successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
under this Security Agreement, and the retiring Agent shall thereupon be
discharged from its duties and obligations under this Security Agreement. After
any retiring Agent’s resignation, the provisions hereof shall inure to its
benefit as to any actions taken or omitted to be taken by it under this Security
Agreement while it was the Agent.

(ii)    The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if such Collateral
is accorded treatment substantially equivalent to that which the Agent, in its
individual capacity, accords its own property consisting of similar instruments
or interests, it being understood that neither the Agent nor any of the other
Credit Parties shall have responsibility for, without limitation
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Securities Collateral,
whether or not the Agent or any other Credit Party has or is deemed to have
knowledge of such matters or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Collateral.

(iii)    The Agent shall be entitled to rely upon any written notice, statement,
certificate, order or other document or any telephone message believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person, and, with respect to all matters pertaining to this Security Agreement
and its duties hereunder, upon advice of counsel selected by it.

(iv)    If any item of Collateral also constitutes collateral granted to Agent
under any other deed of trust, mortgage, security agreement, pledge or
instrument of any type, in the event of any conflict between the provisions
hereof and the provisions of such other deed of trust, mortgage, security
agreement, pledge or instrument of any type in respect of such collateral,
Agent, in its sole discretion, shall select which provision or provisions shall
control.

SECTION 9.2.    Agent May Perform; Agent Appointed Attorney-in-Fact. If any
Grantor shall fail to perform any covenants contained in this Security Agreement
or in the Credit Agreement (including, without limitation, such Grantor’s
covenants to (i) pay the premiums in respect of all required insurance policies
hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay
or perform any other obligations of such Grantor with respect to any Collateral,
in each case, only to the extent required hereunder or in the Credit Agreement)
or if any warranty on the part of any Grantor contained herein shall be
breached, the Agent may (but shall not be obligated to) do the same or cause it
to be done or remedy any such breach, and may expend funds for such purpose;
provided, however, that Agent shall in no event be bound to inquire into the
validity of any tax, lien, imposition or other obligation which such Grantor
fails to pay or perform as and when required hereby. Any and all amounts so
expended by the Agent shall be paid by the Grantors in accordance with the
provisions of

 

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SECTION 9.3 hereof. Neither the provisions of this SECTION 9.2 nor any action
taken by Agent pursuant to the provisions of this SECTION 9.2 shall prevent any
such failure to observe any covenant contained in this Security Agreement nor
any breach of warranty from constituting an Event of Default. Each Grantor
hereby appoints the Agent its attorney-in-fact, with full authority in the place
and stead of such Grantor and in the name of such Grantor, or otherwise, from
time to time after the occurrence and during the continuation of an Event of
Default in the Agent’s discretion to take any action and to execute any
instrument consistent with the terms of the Credit Agreement and the other
Security Documents which the Agent may deem necessary to accomplish the purposes
hereof. The foregoing grant of authority is a power of attorney coupled with an
interest and such appointment shall be irrevocable for the term hereof. Each
Grantor hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof.

SECTION 9.3.    Expenses. Each Grantor will pay to the Agent when due the amount
of any and all amounts required to be paid pursuant to Section 10.04 of the
Credit Agreement.

SECTION 9.4.    Continuing Security Interest; Assignment. This Agreement shall
create a continuing security interest in the Collateral and shall (i) be binding
upon the Grantors, their respective successors and assigns, and (ii) inure,
together with the rights and remedies of the Agent hereunder, to the benefit of
the Agent and the other Credit Parties and each of their respective successors,
transferees and assigns. No other Persons (including, without limitation, any
other creditor of any Grantor) shall have any interest herein or any right or
benefit with respect hereto. Without limiting the generality of the foregoing
clause (ii), any Credit Party may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Credit Party, herein or otherwise, subject, however, to the provisions
of the Credit Agreement.

SECTION 9.5.    Termination; Release.

(a)    This Security Agreement, the Lien in favor of the Agent (for the benefit
of itself and the other Credit Parties) and all other security interests granted
hereby shall terminate with respect to all Secured Obligations when (i) the
Commitments shall have expired or been terminated, (ii) the principal of and
interest on each Loan and all fees and other Secured Obligations shall have been
paid in full in cash (other than unasserted contingent indemnification
Obligations and Other Liabilities), (iii) all Letters of Credit (as defined in
the Credit Agreement) shall have (A) expired or terminated and have been reduced
to zero, (B) been Cash Collateralized to the extent required by the Credit
Agreement, or (C) been supported by another letter of credit in a manner
reasonably satisfactory to the L/C Issuer and the Administrative Agent, and
(iv) all Unreimbursed Amounts shall have been paid in full in cash, provided,
however, that this Security Agreement shall continue to be in effect or be
reinstated, as context may require, if at any time payment, or any part thereof,
of any Secured Obligation is rescinded or must otherwise be restored by any
Credit Party or any Grantor upon the bankruptcy or reorganization of any Grantor
or otherwise.

(b)    The Collateral shall be released from the Lien of this Security Agreement
in accordance with the provisions of the Credit Agreement. Upon termination
hereof or

 

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any release of Collateral in accordance with the provisions of the Credit
Agreement, the Agent shall, upon the request and at the sole cost and expense of
the Grantors, assign, transfer and deliver to the Grantors, against receipt and
without recourse to or warranty by the Agent, such of the Collateral to be
released (in the case of a release) or all of the Collateral (in the case of
termination of this Security Agreement) as may be in possession of the Agent and
as shall not have been sold or otherwise applied pursuant to the terms hereof,
and, with respect to any other Collateral, proper documents and instruments
(including UCC-3 termination statements or releases and filings with the U.S.
Patent and Trademark Office or the U.S. Copyright Office, as applicable)
acknowledging the termination hereof or the release of such Collateral, as the
case may be.

(c)    At any time that the respective Grantor desires that the Agent take any
action described in clause (b) of this SECTION 9.5, such Grantor shall, upon
request of the Agent, deliver to the Agent an officer’s certificate certifying
that the release of the respective Collateral is permitted pursuant to clause
(a) or (b) of this SECTION 9.5. The Agent shall have no liability whatsoever to
any other Credit Party as the result of any release of Collateral by it as
permitted (or which the Agent in good faith believes to be permitted) by this
SECTION 9.5.

SECTION 9.6.    Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision hereof, nor consent to any
departure by any Grantor therefrom, shall be effective unless the same shall be
made in accordance with the terms of the Credit Agreement and unless in writing
and signed by the Agent and the Grantors. Any amendment, modification or
supplement of or to any provision hereof, any waiver of any provision hereof and
any consent to any departure by any Grantor from the terms of any provision
hereof shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Security Agreement or any other document evidencing the Secured
Obligations, no notice to or demand on any Grantor in any case shall entitle any
Grantor to any other or further notice or demand in similar or other
circumstances.

SECTION 9.7.    Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner and become effective as set forth in the
Credit Agreement, as to any Grantor, addressed to it at the address of the
Borrower set forth in the Credit Agreement and as to the Agent, addressed to it
at the address set forth in the Credit Agreement, or in each case at such other
address as shall be designated by such party in a written notice to the other
parties hereto complying as to delivery with the terms of this SECTION 9.7.

SECTION 9.8.    GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.9.    CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL.

(a)    EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE

 

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NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH PARTY
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 COURT
OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.
EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECURITY AGREEMENT OR IN
ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY
AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY PARTY OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.

(b)    EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN
PARAGRAPH (A) OF THIS SECTION. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(c)    EACH GRANTOR AGREES THAT ANY ACTION COMMENCED BY ANY GRANTOR ASSERTING
ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS SECURITY
AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE
STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING
THEREIN AS THE AGENT MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

(d)     EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 9.7. NOTHING IN THIS SECURITY AGREEMENT
WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW.

(e)    EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR

 

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INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY
SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
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 SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.10.    Severability of Provisions. Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

SECTION 9.11.    Execution in Counterparts; Effectiveness. This Security
Agreement any amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page of this Security Agreement by telecopy,
pdf or other electronic transmission shall be as effective as delivery of a
manually executed counterpart of this Security Agreement.

SECTION 9.12.    No Release. Nothing set forth in this Security Agreement shall
relieve any Grantor from the performance of any term, covenant, condition or
agreement on such Grantor’s part to be performed or observed under or in respect
of any of the Collateral or from any liability to any Person under or in respect
of any of the Collateral or shall impose any obligation on the Agent or any
other Credit Party to perform or observe any such term, covenant, condition or
agreement on such Grantor’s part to be so performed or observed or shall impose
any liability on the Agent or any other Credit Party for any act or omission on
the part of such Grantor relating thereto or for any breach of any
representation or warranty on the part of such Grantor contained in this
Security Agreement, the Credit Agreement or the other Loan Documents, or under
or in respect of the Collateral or made in connection herewith or therewith. The
obligations of each Grantor contained in this SECTION 9.11 shall survive the
termination hereof and the discharge of such Grantor’s other obligations under
this Security Agreement, the Credit Agreement and the other Loan Documents.

SECTION 9.13.    Obligations Absolute. All obligations of each Grantor hereunder
shall be absolute and unconditional irrespective of:

(i)    any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of any Grantor;

 

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(ii)    any lack of validity or enforceability of the Credit Agreement or any
other Loan Document, or any other agreement or instrument relating thereto;

(iii)    any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement or any other Loan
Document or any other agreement or instrument relating thereto;

(iv)    any pledge, exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;

(v)    any exercise, non-exercise or waiver of any right, remedy, power or
privilege under or in respect hereof, the Credit Agreement or any other Loan
Document except as specifically set forth in a waiver granted pursuant to the
provisions of SECTION 9.6 hereof; or

(vi)    any other circumstances which might otherwise constitute a defense
available to, or a discharge of, any Grantor (other than the termination of this
Security Agreement in accordance with SECTION 9.5(a) hereof).

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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

 

FIVE BELOW, INC.,

as a Grantor

 

By:  

/s/ Ronald J. Masciantonio

Name:   Ronald J. Masciantonio Title:   Senior Vice President, General Counsel
and Secretary

 

1616 HOLDINGS, INC.,

as a Grantor

 

By:  

/s/ Ronald J. Masciantonio

Name:   Ronald J. Masciantonio Title:   Secretary

 

[Five Below – Signature Page to Security Agreement]

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WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent

 

By:  

/s/ Peter Foley

Name:   Peter Foley Title:   Director

 

[Five Below – Signature Page to Security Agreement]

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EXHIBIT 1

[Form of]

SECURITIES PLEDGE AMENDMENT

This Securities Pledge Amendment, dated as of [                    ] is
delivered pursuant to SECTION 5.1 of that certain Security Agreement (as
amended, amended and restated, restated, supplemented or otherwise modified from
time to time, the “Security Agreement;” capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Security
Agreement), dated as of April 24, 2020, made by (i) FIVE BELOW, INC., a
Pennsylvania corporation, as a borrower (the “Borrower” and also referred to
herein as the “Original Borrower”), (ii) THE OTHER BORROWERS FROM TIME TO TIME
PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the “Additional Borrowers,”
and together with the Original Borrower, the “Borrowers”), and (iii) 1616
HOLDINGS, INC., a Pennsylvania corporation, as a guarantor (the “Guarantor” and
also referred to herein as the “Original Guarantor”) AND THE OTHER GUARANTORS
FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the
“Additional Guarantors,” and together with the Original Guarantor, the
“Guarantors”), as pledgors, assignors and debtors (the Borrowers, together with
the Guarantors, in such capacities and together with any successors in such
capacities, the “Grantors,” and each, a “Grantor”) in favor of WELLS FARGO BANK,
NATIONAL ASSOCIATION, having an office at 125 High Street, Suite 1100, Boston,
MA 02110, in its capacity as administrative agent and collateral agent for the
Credit Parties, as pledgee, assignee and secured party (in such capacities and
together with any successors in such capacities, the “Agent”). The undersigned
hereby agrees that this Securities Pledge Amendment may be attached to the
Security Agreement and that the Pledged Securities and/or Intercompany Notes
listed on this Securities Pledge Amendment shall be deemed to be and shall
become part of the Collateral and shall secure all Secured Obligations.

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

[                                                                              
      ],

as Grantor

 

By:  

                    

  Name:   Title:

 

AGREED TO AND ACCEPTED:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Agent

 

By:  

 

  Name:   Title:

 

[Five Below – Signature Page to Securities Pledge Amendment]

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

PLEDGED SECURITIES

 

ISSUER

   CLASS
OF STOCK
OR
INTERESTS      PAR
VALUE      CERTIFICATE
NO(S).      NUMBER OF
SHARES
OR
INTERESTS      PERCENTAGE OF
ALL ISSUED CAPITAL
OR OTHER EQUITY
INTERESTS OF ISSUER                                                           
                 

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

INTERCOMPANY NOTES

 

ISSUER

   PRINCIPAL
AMOUNT      DATE OF
ISSUANCE      INTEREST
RATE      MATURITY
DATE