Exhibit 10.24
Execution Version

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended, restated, supplemented
or otherwise modified from time to time, this “Security Agreement”) is entered
into as of February 23, 2018 by and among Dril-Quip, Inc., a Delaware
corporation (the “Borrower”), TIW Corporation, a Texas corporation (“TIW”),
Honing, Inc., a Texas corporation (“Honing”), and any additional entities which
become parties to this Security Agreement by executing a Security Agreement
Supplement hereto in substantially the form of Annex I (such additional
entities, together with the Borrower, TIW and Honing, each a “Grantor”, and
collectively, the “Grantors”), and JPMorgan Chase Bank, N.A., in its capacity as
administrative agent (the “Administrative Agent”) for the lenders party to the
Credit Agreement referred to below.
PRELIMINARY STATEMENT

The Grantors, the Administrative Agent and the Lenders are entering into a
Credit Agreement dated as of February 23, 2018 (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).
Each Grantor is entering into this Security Agreement in order to induce the
Lenders to enter into and extend credit to the Borrower under the Credit
Agreement and to secure the Secured Obligations that it has agreed to guarantee
pursuant to Article X of the Credit Agreement.
ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Secured
Parties, hereby agree as follows:
ARTICLE I.

DEFINITIONS
1.1    Terms Defined in Credit Agreement. All capitalized terms used herein and
not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.
1.2    Terms Defined in UCC. Terms defined in the UCC which are not otherwise
defined in this Security Agreement are used herein as defined in the UCC.
1.3    Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the first paragraph hereof and in
the Preliminary Statement, the following terms shall have the following
meanings:
“Account” shall have the meaning set forth in Article 9 of the UCC.
“Article” means a numbered article of this Security Agreement, unless another
document is specifically referenced.
“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

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“Collateral” shall have the meaning set forth in Article II.
“Collateral Deposit Account” shall have the meaning set forth in Section 7.1(a).
“Collateral Report” means any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the
Administrative Agent or any Lender with respect to the Collateral pursuant to
any Loan Document.
“Collection Account” shall have the meaning set forth in Section 7.1(b).
“Commercial Tort Claims” means the existing commercial tort claims (as that term
is defined in Article 9 of the UCC) of the Grantors.
“Commodity Account” shall have the meaning set forth in Article 9 of the UCC.
“Commodity Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among any Grantor, a
commodity intermediary holding such Grantor’s assets, including funds and
commodity contracts, and the Administrative Agent with respect to collection and
control of all deposits, commodity contracts and other balances held in a
Commodity Account maintained by any Grantor with such commodity intermediary.
“Control” shall have the meaning set forth in Article 8 or, if applicable, in
Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.
“Copyrights” means all rights, title and interests (and all related IP Ancillary
Rights) under any Requirement of Law in or relating to copyrights and all mask
works, database and design rights, whether or not registered or published, all
registrations and recordations thereof and all applications in connection
therewith.
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
“De Minimis Accounts” means (a) any Deposit Account, Commodity Account or
Securities Account (whether maintained within or outside the United States) that
has a balance not exceeding $100,000 at any time, provided, that and the
aggregate balance of all such Deposit Accounts, Commodity Accounts and
Securities Accounts does not at any time exceed $250,000 and (b) any Deposit
Account that is a zero balance account.
“Deposit Account” shall have the meaning set forth in Article 9 of the UCC.
“Deposit Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among any Grantor, a
banking institution holding such Grantor’s funds, and the Administrative Agent
with respect to collection and control of all deposits and balances held in a
deposit account maintained by such Grantor with such banking institution.

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“Document” shall have the meaning set forth in Article 9 of the UCC.
“Equipment” shall have the meaning set forth in Article 9 of the UCC.
“Event of Default” means an event described in Section 5.1.
“Excluded Assets” means:
(a)    any Equity Interest in Domestic Subsidiaries, other than (i) 100% of the
issued and outstanding Equity Interests in each Significant Domestic Subsidiary
(other than any Excluded Domestic Subsidiary) and (ii) 65% (or such greater
percentage that (1) would not reasonably be expected to cause the undistributed
earnings of any CFC as determined for U.S. federal income tax purposes to be
treated as a deemed dividend to such CFC’s U.S. parent and (2) would not
reasonably be expected to cause any material adverse tax consequences) of the
issued and outstanding Equity Interests entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity
Interests not entitled to vote (within the meaning of Treas. Reg. Section
1.956-2(c)(2)) in each Significant Domestic Subsidiary that is a FSHCO;
(b)    any Equity Interest in Foreign Subsidiaries, other than 65% (or such
greater percentage that (1) would not reasonably be expected to cause the
undistributed earnings of any CFC as determined for U.S. federal income tax
purposes to be treated as a deemed dividend to such CFC’s U.S. parent and (2)
would not reasonably be expected to cause any material adverse tax consequences)
of the issued and outstanding Equity Interests entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and
outstanding Equity Interests not entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) in each Significant Foreign Subsidiary;
(c)    any Equipment that is subject to a Lien securing Permitted Acquisition
Debt, provided, that immediately upon the ineffectiveness, lapse or termination
of such Lien securing Permitted Acquisition Debt, such Equipment shall
automatically cease to constitute “Excluded Assets”;
(d)    any rights or interests in any agreement, lease, permit or license
agreement, in each case, not otherwise prohibited by the Credit Agreement, to
the extent the creation of a Lien on such assets would (i) under the express
terms thereof, result in a breach of the terms thereof or constitute a default
thereunder, (ii) under the express terms thereof, create a right of termination
in favor of any party thereunder (other than a Grantor) or (iii) violate any
Requirement of Law, in each case for the foregoing subclauses (i), (ii) and
(iii), other than to the extent such term has been waived by the applicable
party or Governmental Authority, as applicable or would be rendered ineffective
pursuant to Section 9-406, 9-407, 9-408, 9-409 or other applicable provisions of
the UCC of any relevant jurisdiction or any other applicable law, provided, that
immediately upon the ineffectiveness, lapse or termination or any such express
term, such asset shall automatically cease to constitute “Excluded Assets”;
(e)     any Excluded Deposit Accounts;
(f)    any Deposit Accounts maintained in a jurisdiction outside the United
States to the extent such Deposit Accounts constitute De Minimis Accounts;

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(g)    any Patents, Copyrights, Trademarks, IP License or other Intellectual
Property, or any rights thereto or interests therein;
(h)    any real property and any Fixtures attached to real property;
(i)    any property subject to a certificate of title; and
(j)    any assets with respect to which, in the sole discretion of the
Administrative Agent, the burdens, costs or consequences of obtaining and/or
perfecting a lien on such assets are excessive in view of the benefits afforded
to the Secured Parties;
provided, that “Excluded Assets” shall not include any right to receive proceeds
from the sale or other disposition of Excluded Assets, any Proceeds, products,
substitutions or replacements of any Excluded Assets (unless such rights,
Proceeds, products, substitutions or replacements otherwise constitute Excluded
Assets), all of which shall expressly be Collateral (which Collateral, for the
avoidance of doubt, may be used, reinvested or otherwise applied by the
applicable Grantors as permitted by the Credit Agreement); provided, further,
that to the extent that any property constitutes “Excluded Assets” due to the
failure of any Grantor to obtain a waiver as described in clause (d) above, such
Grantor shall use its commercially reasonable efforts to obtain such waiver,
and, upon obtaining such waiver, such property shall cease to constitute
“Excluded Assets”.
“Excluded Payments” shall have the meaning set forth in Section 4.6(c)(iii).

“Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.
“Fixtures” shall have the meaning set forth in Article 9 of the UCC.
“General Intangibles” shall have the meaning set forth in Article 9 of the UCC.
“Goods” shall have the meaning set forth in Article 9 of the UCC.
“Industrial Designs” means all right, title and interest (and all related IP
Ancillary Rights) under any Requirement of Law in or relating to registered
industrial designs and industrial design applications.
“Instruments” shall have the meaning set forth in Article 9 of the UCC.
“Intellectual Property” means all rights, title and interests in or relating to
intellectual property and industrial property and all IP Ancillary Rights
relating thereto, including all Copyrights, Patents, Industrial Designs,
Software, Trademarks, Internet Domain Names, Trade Secrets and IP Licenses.
“Internet Domain Name” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
internet domain names.
“Inventory” shall have the meaning set forth in Article 9 of the UCC.

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“Investment Property” shall have the meaning set forth in Article 9 of the UCC.
“IP Ancillary Rights” means, with respect to any Intellectual Property, as
applicable, all foreign counterparts to, and all divisionals, reversions,
continuations, continuations-in-part, reissues, reexaminations, renewals and
extensions of, such Intellectual Property and all income, royalties, proceeds
and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property
throughout the world, including all rights to sue or recover at law or in equity
for any past, present or future infringement, misappropriation, dilution,
violation or other impairment thereof, and, in each case, all rights to obtain
any other IP Ancillary Right throughout the world.
“IP License” means all contractual obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right, title and interest in or
relating to any Intellectual Property.
“Lenders” means the lenders party to the Credit Agreement and their successors
and assigns.
“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.
“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, Taxes, commissions, charges, disbursements and expenses (including those
incurred upon any appeal or in connection with the preparation for and/or
response to any subpoena or request for document production relating thereto),
in each case of any kind or nature (including interest accrued thereon or as a
result thereto and fees, charges and disbursements of financial, legal and other
advisors and consultants), whether joint or several, whether or not indirect,
contingent, consequential, actual, punitive, treble or otherwise.
“Lock Boxes” shall have the meaning set forth in Section 7.1(a).
“Lock Box Agreements” shall have the meaning set forth in Section 7.1(a).
“Patents” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to letters patent
and applications therefor.
“Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the
Administrative Agent pursuant to this Security Agreement.
“Proceeds” shall have the meaning set forth in Article 9 of the UCC.
“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property,
Instruments and any other rights or claims to receive money which are General
Intangibles or which are otherwise included as Collateral.
“Required Secured Parties” means (a) prior to an acceleration of the Obligations
under the Credit Agreement, the Required Lenders, (b) after an acceleration of
the Obligations under the Credit Agreement but prior to the date upon which the
Credit Agreement has terminated by its terms and all of the obligations
thereunder have been Paid in Full, Lenders holding in the aggregate at least a
majority of the total of the

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Aggregate Credit Exposure, and (c) after the Credit Agreement has terminated by
its terms and all of the Obligations thereunder have been Paid in Full (whether
or not the Obligations under the Credit Agreement were ever accelerated), the
Secured Parties holding in the aggregate at least a majority of the aggregate
net early termination payments and all other amounts then due and unpaid from
any Grantor to the Secured Parties in respect of the Secured Obligations, as
determined by the Administrative Agent in its reasonable discretion.
“Section” means a numbered section of this Security Agreement, unless another
document is specifically referenced.
“Securities Account” shall have the meaning set forth in Article 8 of the UCC.
“Securities Account Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among any Grantor, a
securities intermediary holding such Grantor’s assets, including funds and
securities, and the Administrative Agent with respect to collection and control
of all deposits, securities and other balances held in a securities account
maintained by any Grantor with such securities intermediary.
“Security” shall have the meaning set forth in Article 8 of the UCC.
“Security Agreement Supplement” shall mean any Security Agreement Supplement to
this Security Agreement in substantially the form of Annex I executed by a
Person that becomes a Grantor under this Security Agreement after the date
hereof.
“Software” means (a) all computer programs, including source code and object
code versions, (b) all data, databases and compilations of data, whether machine
readable or otherwise, and (c) all documentation, training materials and
configurations related to any of the foregoing.
“Stock Rights” means all dividends, instruments or other distributions and any
other right or property which the Grantors shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any Equity Interest constituting Collateral, any right to
receive an Equity Interest and any right to receive earnings, in which the
Grantors now have or hereafter acquire any right, issued by an issuer of such
Equity Interest.
“Supporting Obligations” shall have the meaning set forth in Article 9 of the
UCC.
“Trademarks” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers and, in each case, all goodwill associated therewith, all
registrations and recordations thereof and all applications in connection
therewith.
“Trade Secrets” mean all right, title and interest (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to proprietary,
confidential and/or non-public information, however

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documented, including but not limited to confidential ideas, know-how, concepts,
methods, processes, formulae, reports, data, customer lists, mailing lists,
business plans and all other trade secrets.
“UCC” means the Uniform Commercial Code, as in effect from time to time, of the
State of Texas or of any other state the laws of which are required as a result
thereof to be applied in connection with the attachment, perfection or priority
of, or remedies with respect to, Administrative Agent’s or any other Secured
Party’s Lien on any Collateral.
The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms.
ARTICLE II.

GRANT OF SECURITY INTEREST
Each Grantor hereby pledges, assigns and grants to the Administrative Agent, on
behalf of and for the ratable benefit of the Secured Parties, a security
interest in all of its right, title and interest in, to and under all personal
property, whether now owned by or owing to, or hereafter acquired by or arising
in favor of such Grantor (including under any trade name or derivations
thereof), and whether owned or consigned by or to, or leased from or to, such
Grantor, and regardless of where located (all of which will be collectively
referred to as the “Collateral”), including:
(i)    all Accounts;
(ii)    all Chattel Paper;
(iii)    all Documents;
(iv)    all Equipment;
(v)    all General Intangibles;
(vi)    all Goods;
(vii)    all Instruments;
(viii)    all Inventory;
(ix)    all Investment Property;
(x)    all cash or cash equivalents;
(xi)    all letters of credit, Letter-of-Credit Rights and Supporting
Obligations;
(xii)    all Deposit Accounts with any bank or other financial institution;

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(xiii)    all Commodity Accounts;
(xiv)    all Securities Accounts;
(xv)    all Commercial Tort Claims; and
(xvi)    except to the extent such property constitutes Excluded Assets, all
accessions to, substitutions for and replacements, proceeds (including Stock
Rights), insurance proceeds and products of the foregoing, together with all
books and records, customer lists, credit files, computer files, programs,
printouts and other computer materials and records related thereto and any
General Intangibles at any time evidencing or relating to any of the foregoing;
to secure the prompt and complete payment and performance of the Secured
Obligations; provided however, that Collateral (and each defined term used in
the definition of “Collateral”) shall not include any Excluded Assets; and
provided further, that if and when any property shall cease to be Excluded
Assets, such property shall be deemed at all times from and after such date to
constitute Collateral.
ARTICLE III.

REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants, and each Grantor that becomes a party to
this Security Agreement pursuant to the execution of a Security Agreement
Supplement represents and warrants (after giving effect to supplements, if any,
to each of the Exhibits hereto with respect to such Grantor as attached to such
Security Agreement Supplement), to the Administrative Agent and the other
Secured Parties that:
3.1    Title, Authorization, Validity, Enforceability, Perfection and Priority.
Such Grantor has good and valid rights in or the power to transfer the
Collateral and title to the Collateral with respect to which it has purported to
grant a security interest hereunder, free and clear of all Liens except for
Liens permitted under Section 4.1(e), and has full power and authority to grant
to the Administrative Agent the security interest in the Collateral pursuant
hereto. The execution and delivery by such Grantor of this Security Agreement
has been duly authorized by proper corporate, limited liability company,
partnership, or other similar organizational actions, as applicable, of such
Grantor, and this Security Agreement constitutes a legal valid and binding
obligation of such Grantor and creates a security interest which is enforceable
against such Grantor in all Collateral it now owns or hereafter acquires,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. When financing statements have been filed in the appropriate offices
against such Grantor in the locations listed on Exhibit E, the Administrative
Agent will have a fully perfected first priority security interest in that
Collateral of such Grantor in which a security interest may be perfected by
filing, and otherwise subject only to Liens permitted under Section 4.1(e);
provided, that any determination of whether an Event of Default has occurred due
to the Administrative Agent’s not having a fully perfected first priority
security interest in such Collateral shall be made in accordance with clause (p)
of Article VIII of the Credit Agreement.

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3.2    Type and Jurisdiction of Organization, Organizational and Identification
Numbers. The type of entity of such Grantor, its state of organization, the
organizational number issued to it by its state of organization and its federal
employer identification number are set forth on Exhibit A.
3.3    Principal Location. Such Grantor’s mailing address and the location of
its place of business (if it has only one) or its chief executive office (if it
has more than one place of business), are disclosed on Exhibit A; such Grantor
has no other places of business except those set forth on Exhibit A.
3.4    Collateral Locations. All of such Grantor’s locations where Collateral is
located are listed on Exhibit A. All of said locations are owned by such Grantor
except for locations (i) which are leased by the Grantor as lessee and
designated on Part VII(b) of Exhibit A and (ii) at which Inventory is held in a
public warehouse or is otherwise held by a bailee or on consignment as
designated in Part VII(c) of Exhibit A.
3.5    Deposit Accounts, Lock Boxes, Commodity Accounts and Securities Accounts.
All of such Grantor’s Deposit Accounts, Lock Boxes, Commodity Accounts and
Securities Accounts are listed on Exhibit B.
3.6    Exact Names. Such Grantor’s name in which it has executed this Security
Agreement is the exact name as it appears in such Grantor’s organizational
documents, as amended, as filed with such Grantor’s jurisdiction of
organization. Such Grantor has not, during the past five (5) years, been known
by or used any other corporate or fictitious name, or been a party to any merger
or consolidation.
3.7    Letter-of-Credit Rights and Chattel Paper. Exhibit C lists all
Letter-of-Credit Rights and Chattel Paper of such Grantor. To the extent
requested by the Administrative Agent, all action by such Grantor necessary or
desirable to protect and perfect the Administrative Agent’s Lien on each item
listed on Exhibit C (including the delivery of all originals and the placement
of a legend on all Chattel Paper as required hereunder) has been duly taken. The
Administrative Agent will have a fully perfected first priority security
interest in the Collateral listed on Exhibit C, subject only to Liens permitted
under Section 4.1(e); provided, that any determination of whether an Event of
Default has occurred due to the Administrative Agent’s not having a fully
perfected first priority security interest in such Collateral shall be made in
accordance with clause (p) of Article VIII of the Credit Agreement.
3.8    Accounts and Chattel Paper.
(a)    The names of the obligors, amounts owing, due dates and other information
with respect to its Accounts and Chattel Paper are and will be correctly stated
in all material respects in all records of such Grantor relating thereto and in
all invoices and Collateral Reports with respect thereto furnished to the
Administrative Agent by such Grantor from time to time. As of the time when each
Account or each item of Chattel Paper arises, such Grantor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, and all records relating thereto, are genuine and in all material
respects what they purport to be.
(b)    With respect to its Accounts, except as specifically disclosed on the
most recent Collateral Report, (i) all Accounts are Eligible Accounts or
Eligible Bill-And-Hold Accounts, as

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applicable; (ii) all Accounts represent bona fide sales of Inventory or
rendering of services to Account Debtors in the ordinary course of such
Grantor’s business and are not evidenced by a judgment, Instrument or Chattel
Paper; (iii) there are no setoffs, claims or disputes existing or, to such
Grantor’s Knowledge, asserted with respect thereto and such Grantor has not made
any agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by such Grantor in the ordinary
course of its business for prompt payment and disclosed to the Administrative
Agent; (iv) to such Grantor’s Knowledge, there are no facts, events or
occurrences which materially impair the validity or enforceability thereof or
could reasonably be expected to materially reduce the amount payable thereunder
as shown on such Grantor’s books and records and any invoices, statements and
Collateral Reports with respect thereto; and (v) such Grantor has no Knowledge
that any Account Debtor has become insolvent or is generally unable to pay its
debts as they become due.
(c)    In addition, except as specifically disclosed on the most recent
Collateral Report, with respect to all of its Accounts, (i) the amounts shown on
all invoices, statements and Collateral Reports with respect thereto are
actually and absolutely owing to such Grantor as indicated thereon and are not
in any way contingent; (ii) no payments have been or shall be made thereon
except payments immediately delivered to a Lock Box or a Collateral Deposit
Account as required pursuant to Section 7.1; and (iii) to such Grantor’s
Knowledge, all Account Debtors have the capacity to contract.
3.9    Inventory. With respect to any of its Inventory scheduled or listed on
the most recent Collateral Report, except as specifically disclosed on such
Collateral Report, (a) such Inventory (other than Inventory in transit) is
located at one of such Grantor’s locations set forth on Exhibit A, (b) no
Inventory (other than Inventory in transit) is now, or shall at any time or
times hereafter be stored at any other location except as permitted by Section
4.1(g), (c) such Grantor has good, indefeasible and merchantable title to such
Inventory and such Inventory is not subject to any Lien or security interest or
document whatsoever except for Liens permitted under Section 4.1(e), (d) such
Inventory is Eligible Inventory, (e) such Inventory is not subject to any
licensing, patent, royalty, trademark, trade name or copyright agreements with
any third parties which would require any consent of any third party upon sale
or disposition of that Inventory or the payment of any monies to any third party
upon such sale or other disposition (other than royalties payable pursuant to
that certain Limited Cross Technology License Agreement between the Borrower and
ABB Vetco Gray Inc., executed by such parties on September 13, 2001 and
September 10, 2001, respectively, as amended by that certain Amendment No. 1 to
Limited Cross Technology License Agreement, dated as of July 29, 2011 to be
effective on October 1, 2011) (f) such Inventory has been produced in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder and (g) the completion of manufacture, sale or
other disposition of such Inventory by the Administrative Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which such
Grantor is a party or to which such property is subject.
3.10    Filing Requirements. None of the Collateral owned by it is of a type for
which security interests or liens may be perfected by filing under any federal
statute.

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3.11    No Financing Statements, Security Agreements. No financing statement or
security agreement describing all or any portion of the Collateral which has not
lapsed or been terminated (by a filing authorized by the secured party in
respect thereof) naming such Grantor as debtor has been filed or is of record in
any jurisdiction except for financing statements or security agreements (a)
naming the Administrative Agent on behalf of the Secured Parties as the secured
party and (b) in respect of Liens permitted under Section 4.1(e).
3.12    Pledged Collateral.
(a)    Exhibit D sets forth a complete and accurate list of all Pledged
Collateral owned by such Grantor. Such Grantor is the direct, sole beneficial
owner and sole holder of record of the Pledged Collateral listed on Exhibit D as
being owned by it, free and clear of any Liens, except for any Liens permitted
under Section 4.1(e). Such Grantor further represents and warrants that (i) all
Pledged Collateral owned by it constituting an Equity Interest has been (to the
extent such concepts are relevant with respect to such Pledged Collateral) duly
authorized, validly issued, are fully paid and non-assessable, (ii) with respect
to any certificates delivered to the Administrative Agent representing an Equity
Interest, either such certificates are Securities as defined in Article 8 of the
UCC as a result of actions by the issuer or otherwise, or, if such certificates
are not Securities, such Grantor has so informed the Administrative Agent so
that the Administrative Agent may take steps to perfect its security interest
therein as a General Intangible, (iii) all such Pledged Collateral held by a
securities intermediary is covered by a Securities Account Control Agreement
among such Grantor, the securities intermediary and the Administrative Agent
pursuant to which the Administrative Agent has Control and (iv) all Pledged
Collateral which represents Indebtedness owed to such Grantor has been duly
authorized, authenticated or issued and delivered by the issuer of such
Indebtedness, is the legal, valid and binding obligation of such issuer and such
issuer is not in default thereunder.
(b)    In addition, (i) none of the Pledged Collateral owned by it has been
issued or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject, (ii) no options, warrants, calls or commitments of any
character whatsoever (A) exist relating to such Pledged Collateral or (B)
obligate the issuer of any Equity Interest included in the Pledged Collateral to
issue additional Equity Interests, and (iii) no consent, approval,
authorization, or other action by, and no giving of notice, filing with, any
governmental authority or any other Person is required for the pledge by such
Grantor of such Pledged Collateral pursuant to this Security Agreement or for
the execution, delivery and performance of this Security Agreement by such
Grantor, or for the exercise by the Administrative Agent of the voting or other
rights provided for in this Security Agreement or for the remedies in respect of
the Pledged Collateral pursuant to this Security Agreement, except as may be
required in connection with such disposition by laws affecting the offering and
sale of securities generally.
(c)    Except as set forth in Exhibit D, such Grantor owns 100% of the issued
and outstanding Equity Interests which constitute Pledged Collateral owned by it
and none of the Pledged

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Collateral which represents Indebtedness owed to such Grantor is subordinated in
right of payment to other Indebtedness or subject to the terms of an indenture.
ARTICLE IV.

COVENANTS
From the date of this Security Agreement and thereafter until this Security
Agreement is terminated pursuant to the terms hereof, each Grantor party hereto
as of the date hereof agrees, and from and after the effective date of any
Security Agreement Supplement applicable to any Grantor (and after giving effect
to supplements, if any, to each of the Exhibits hereto with respect to such
subsequent Grantor as attached to such Security Agreement Supplement) and
thereafter until this Security Agreement is terminated pursuant to the terms
hereof, each such additional Grantor agrees that:
4.1    General.
(a)    Collateral Records. Such Grantor will maintain complete and accurate
books and records with respect to the Collateral owned by it, and furnish to the
Administrative Agent such reports relating to such Collateral as the
Administrative Agent shall from time to time request, subject to the limitations
set forth in the Credit Agreement.
(b)    Authorization to File Financing Statements; Ratification. Such Grantor
hereby authorizes the Administrative Agent to file, and if requested will
deliver to the Administrative Agent, all financing statements and other
documents and take such other actions as may from time to time be requested by
the Administrative Agent in order to maintain a first perfected security
interest in and, if applicable, Control of, the Collateral owned by such
Grantor. Any financing statement filed by the Administrative Agent may be filed
in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s
Collateral by any description which reasonably approximates the description
contained in this Security Agreement, and (ii) contain any other information
required by part 5 of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement or amendment, including whether such
Grantor is an organization, the type of organization and any organization
identification number issued to such Grantor. Such Grantor also agrees to
furnish any such information described in the foregoing sentence to the
Administrative Agent promptly upon request. Such Grantor also ratifies its
authorization for the Administrative Agent to have filed in any UCC jurisdiction
any initial financing statements or amendments thereto if filed prior to the
date hereof.
(c)    Further Assurances. Subject to the limitations set forth in the Credit
Agreement, such Grantor will, upon the reasonable request of the Administrative
Agent, furnish to the Administrative Agent as often as the Administrative Agent
reasonably requests, statements and schedules further identifying and describing
the Collateral owned by it and such other reports and information in connection
with its Collateral as the Administrative Agent may reasonably request, all in
such detail as the Administrative Agent may specify. Such Grantor also agrees to
take any and all actions necessary to defend title to the Collateral against all
Persons and to defend the security

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interest of the Administrative Agent in its Collateral and the priority thereof
against any Lien not expressly permitted hereunder.
(d)    Disposition of Collateral. Such Grantor will not sell, lease or otherwise
dispose of the Collateral owned by it except for dispositions specifically
permitted pursuant to Section 6.05 of the Credit Agreement.
(e)    Liens. Such Grantor will not create, incur, or suffer to exist any Lien
on the Collateral owned by it except any Lien permitted under Section 6.02 of
the Credit Agreement.
(f)    Other Financing Statements. Such Grantor will not authorize the filing of
any financing statement naming it as debtor covering all or any portion of the
Collateral owned by it, except for financing statements (i) naming the
Administrative Agent on behalf of the Secured Parties as the secured party and
(ii) in respect of other Liens permitted under Section 4.1(e). Such Grantor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Administrative Agent, subject to such
Grantor’s rights under Section 9-509(d)(2) of the UCC.
(g)    Locations. Such Grantor will not (i) maintain any Collateral owned by it
at any location other than those locations listed on Exhibit A, (ii) otherwise
change, or add to, such locations without the Administrative Agent’s prior
written consent as required by the Credit Agreement (and if the Administrative
Agent gives such consent, such Grantor will concurrently therewith obtain a
Collateral Access Agreement for each such location to the extent required by
Section 4.12), or (iii) change its principal place of business or chief
executive office from the location identified on Exhibit A, other than as
permitted by the Credit Agreement.
(h)    Compliance with Terms. Such Grantor will perform and comply in all
material respects with all obligations in respect of the Collateral owned by it
and all agreements to which it is a party or by which it is bound relating to
such Collateral.
4.2    Receivables.
(a)    Certain Agreements on Receivables. Such Grantor will not make or agree to
make any discount, credit, rebate or other reduction in the original amount
owing on a Receivable or accept in satisfaction of a Receivable less than the
original amount thereof, except that, prior to the occurrence of an Event of
Default, such Grantor may reduce the amount of Accounts in accordance with its
present policies and in the ordinary course of business.
(b)    Collection of Receivables. Except as otherwise provided in this Security
Agreement, such Grantor will collect and enforce, at such Grantor’s sole
expense, all amounts due or hereafter due to such Grantor under the Receivables
owned by it in accordance with its present policies and in the ordinary course
of business, and at the Administrative Agent’s direction (if given) during the
continuation of an Event of Default, such Grantor will take such action as the
Administrative Agent may reasonably deem necessary or advisable to enforce
collection thereof.

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(c)    Delivery of Invoices. Promptly upon the Administrative Agent’s reasonable
request, such Grantor will deliver to the Administrative Agent duplicate
invoices with respect to each Account owned by it bearing such language of
assignment as the Administrative Agent shall specify.
(d)    Disclosure of Counterclaims on Receivables. If (i) any material discount,
credit or agreement to make a rebate or to otherwise reduce the amount owing on
any Receivable owned by such Grantor exists or (ii) if, to the Knowledge of such
Grantor, any material dispute, setoff, claim, counterclaim or defense exists or
has been asserted or threatened with respect to any such Receivable, such
Grantor will promptly disclose such fact to the Administrative Agent in writing.
Such Grantor shall send the Administrative Agent a copy of each credit
memorandum in excess of $250,000 as soon as issued, and such Grantor shall
promptly report each credit memorandum and each of the facts required to be
disclosed to the Administrative Agent in accordance with this Section 4.2(d) on
the Borrowing Base Certificates submitted by it.
(e)    Electronic Chattel Paper. Such Grantor shall take all steps necessary to
grant the Administrative Agent Control of all electronic chattel paper in
accordance with the UCC and all “transferable records” as defined in each of the
Uniform Electronic Transactions Act and the Electronic Signatures in Global and
National Commerce Act.
4.3    Inventory and Equipment.
(a)    Maintenance of Goods. Such Grantor will keep and maintain, preserve,
protect and keep its Inventory and the Equipment in good repair and working and
saleable condition in all material respects, except for damaged or defective
goods arising in the ordinary course of such Grantor’s business and except for
ordinary wear and tear in respect of the Equipment.
(b)    Returned Inventory. If an Account Debtor returns any Inventory to such
Grantor when no Event of Default exists, then such Grantor shall promptly
determine the reason for such return and may issue a credit memorandum to the
Account Debtor in the appropriate amount. Such Grantor shall immediately report
to the Administrative Agent any return involving an amount in excess of
$250,000. Each such report shall indicate the reasons for the returns and the
locations and condition of the returned Inventory. In the event any Account
Debtor returns Inventory to such Grantor when an Event of Default exists, such
Grantor, upon the request of the Administrative Agent, shall: (i) hold the
returned Inventory in trust for the Administrative Agent; (ii) segregate all
returned Inventory from all of its other property; (iii) dispose of the returned
Inventory solely according to the Administrative Agent’s written instructions;
and (iv) not issue any credits or allowances with respect thereto without the
Administrative Agent’s prior written consent. All returned Inventory shall be
subject to the Administrative Agent’s Liens thereon. Whenever any Inventory is
returned, the related Account shall be deemed ineligible to the extent of the
amount owing by the Account Debtor with respect to such returned Inventory and
such returned Inventory shall not be Eligible Inventory.
(c)    Inventory Count; Perpetual Inventory System. Such Grantor will conduct a
physical count of its Inventory at least once per fiscal year, and after and
during the continuation of an Event

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of Default, at such other times as the Administrative Agent requests. Such
Grantor, at its own expense, shall deliver to the Administrative Agent the
results of each physical verification, which such Grantor has made, or has
caused any other Person to make on its behalf, of all or any portion of its
Inventory. Such Grantor will maintain a perpetual inventory reporting system at
all times.
(d)    Equipment. Such Grantor shall promptly inform the Administrative Agent of
any deletions from its Equipment which individually or in the aggregate exceed
$250,000. Such Grantor shall not permit any Equipment to become a Fixture with
respect to real property or to become an accession with respect to other
personal property with respect to which real or personal property the
Administrative Agent does not have a Lien. Such Grantor will not, without the
Administrative Agent’s prior written consent, alter or remove any identifying
symbol or number on any of such Grantor’s Equipment constituting Collateral.
4.4    Delivery of Instruments, Securities, Chattel Paper and Documents. Such
Grantor will (a) deliver to the Administrative Agent immediately upon execution
of this Security Agreement the originals of all Chattel Paper, Securities and
Instruments constituting Collateral owned by it (if any then exist), (b) hold in
trust for the Administrative Agent upon receipt and immediately thereafter
deliver to the Administrative Agent any such Chattel Paper, Securities and
Instruments constituting Collateral, (c) upon the Administrative Agent’s
request, deliver to the Administrative Agent (and thereafter hold in trust for
the Administrative Agent upon receipt and immediately deliver to the
Administrative Agent) any Document evidencing or constituting Collateral and (d)
promptly upon the Administrative Agent’s request, deliver to the Administrative
Agent a duly executed amendment to this Security Agreement, in the form of
Exhibit F (the “Amendment”), pursuant to which such Grantor will pledge such
additional Collateral. Such Grantor hereby authorizes the Administrative Agent
to attach each Amendment to this Security Agreement and agrees that all
additional Collateral owned by it set forth in such Amendments shall be
considered to be part of the Collateral.
4.5    Uncertificated Pledged Collateral. Such Grantor will permit the
Administrative Agent from time to time to cause the appropriate issuers (and, if
held with a securities intermediary, such securities intermediary) of
uncertificated securities or other types of Pledged Collateral owned by it not
represented by certificates to mark their books and records with the numbers and
face amounts of all such uncertificated securities or other types of Pledged
Collateral not represented by certificates and all rollovers and replacements
therefor to reflect the Lien of the Administrative Agent granted pursuant to
this Security Agreement. With respect to any Pledged Collateral owned by it,
such Grantor will take any actions necessary to cause (a) the issuers of
uncertificated securities which are Pledged Collateral and (b) any securities
intermediary which is the holder of any such Pledged Collateral, to cause the
Administrative Agent to have and retain Control over such Pledged Collateral.
Without limiting the foregoing, such Grantor will, with respect to any such
Pledged Collateral held with a securities intermediary, cause such securities
intermediary to enter into a Securities Account Control Agreement with the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent, giving the Administrative Agent Control.
4.6    Pledged Collateral.
(a)    Changes in Capital Structure of Issuers. Except as permitted by the
Credit Agreement, such Grantor will not (i) permit or suffer any issuer of an
Equity Interest constituting

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Pledged Collateral owned by it to dissolve, merge, liquidate, retire any of its
Equity Interests or other Instruments or Securities evidencing ownership, reduce
its capital, sell or encumber all or substantially all of its assets (except for
Liens permitted under Section 4.1(e) and sales of assets permitted under Section
4.1(d)) or merge or consolidate with any other entity, or (ii) vote any such
Pledged Collateral in favor of any of the foregoing.
(b)    Issuance of Additional Securities. Such Grantor will not permit or suffer
the issuer of an Equity Interest constituting Pledged Collateral owned by it to
issue additional Equity Interests, any right to receive the same or any right to
receive earnings, except to such Grantor.
(c)    Exercise of Rights in Pledged Collateral.
(i)    Without in any way limiting the foregoing and subject to clause (ii)
below, such Grantor shall have the right to exercise all voting rights or other
rights relating to the Pledged Collateral owned by it for all purposes not
expressly inconsistent with this Security Agreement, the Credit Agreement or any
other Loan Document; provided however, that no vote or other right shall be
exercised or action taken which would have the effect of impairing the rights of
the Administrative Agent in respect of such Pledged Collateral, unless otherwise
permitted under the Credit Agreement;
(ii)    Such Grantor will permit the Administrative Agent or its nominee at any
time during the continuance of an Event of Default, without notice, to exercise
all voting rights or other rights relating to the Pledged Collateral owned by
it, including, without limitation, exchange, subscription or any other rights,
privileges, or options pertaining to any Equity Interest or Investment Property
constituting such Pledged Collateral as if it were the absolute owner thereof;
(iii)    Such Grantor shall be entitled to collect and receive for its own use
all cash dividends and interest paid in respect of the Pledged Collateral owned
by it to the extent not in violation of the Credit Agreement, other than any of
the following distributions and payments (collectively referred to as the
“Excluded Payments”): (A) dividends and interest paid or payable other than in
cash in respect of such Pledged Collateral, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
any Pledged Collateral; (B) dividends and other distributions paid or payable in
cash in respect of such Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in capital of an issuer, except, in each case, to the extent
permitted under the Credit Agreement; and (C) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of, or in exchange
for, such Pledged Collateral, except, in each case, to the extent permitted
under the Credit Agreement; provided however, that until actually paid, all
rights to such distributions shall remain subject to the Lien created by this
Security Agreement; and
(iv) All Excluded Payments and all other distributions in respect of any Pledged
Collateral owned by such Grantor, whenever paid or made, shall be delivered to
the

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Administrative Agent to hold as Pledged Collateral and shall, if received by
such Grantor, be received in trust for the benefit of the Administrative Agent,
be segregated from the other property or funds of such Grantor, and be forthwith
delivered to the Administrative Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).
(d)    Interests in Limited Liability Companies and Limited Partnerships. Each
Grantor agrees that no ownership interests in a limited liability company or a
limited partnership which are included within the Collateral owned by such
Grantor shall at any time constitute a Security under Article 8 of the UCC of
the applicable jurisdiction.
4.7    Commercial Tort Claims. Such Grantor shall promptly, and in any event
within five (5) Business Days after the same is acquired by it, notify the
Administrative Agent of any Commercial Tort Claim acquired by it where the
amount of damages reasonably expected to be claimed is in excess of $500,000
and, unless the Administrative Agent otherwise consents, such Grantor shall
enter into an amendment to this Security Agreement, in the form of Exhibit G,
granting to Administrative Agent a first priority security interest in such
Commercial Tort Claim.
4.8    Letter-of-Credit Rights. If such Grantor is or becomes the beneficiary of
a letter of credit with a face or stated amount in excess of $250,000, it shall
promptly, and in any event within five (5) Business Days after becoming a
beneficiary, notify the Administrative Agent thereof and use commercially
reasonable efforts to cause the issuer and/or confirmation bank to (i) consent
to the assignment of any Letter-of-Credit Rights to the Administrative Agent and
(ii) agree to direct all payments thereunder to a Deposit Account at the
Administrative Agent or subject to a Deposit Account Control Agreement for
application to the Secured Obligations, in accordance with Section 2.18 of the
Credit Agreement, all in form and substance reasonably satisfactory to the
Administrative Agent.
4.9    Federal, State or Municipal Claims. Such Grantor will promptly notify the
Administrative Agent of any Collateral which constitutes a claim against the
United States government or any state or local government or any instrumentality
or agency thereof, the assignment of which claim is restricted by federal, state
or municipal law.
4.10    No Interference. Such Grantor agrees that it will not interfere with any
right, power and remedy of the Administrative Agent provided for in this
Security Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, or the exercise or beginning of the exercise by the
Administrative Agent of any one or more of such rights, powers or remedies.
4.11    Insurance.
(a)    All insurance policies required hereunder and under Section 5.10 of the
Credit Agreement shall name the Administrative Agent (for the benefit of the
Administrative Agent and the other Secured Parties) as an additional insured or
as lender loss payee, as applicable, and shall contain lender loss payable
clauses, through endorsements in form and substance satisfactory to the
Administrative Agent, which provide that: (i) all proceeds thereunder with
respect to any Collateral shall be payable to the Administrative Agent; (ii) no
such insurance shall be affected by any act or

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neglect of the insured or owner of the property described in such policy; and
(iii) such policy and lender loss payable clauses may be canceled, amended, or
terminated only upon at least thirty (30) days’ prior written notice given to
the Administrative Agent; provided that, any insurance proceeds received by the
Administrative Agent as a result of the foregoing provisions shall be subject to
the prepayment provisions of Section 2.11(c) of the Credit Agreement, including
the Borrower’s reinvestment rights, and if not required to be prepaid
thereunder, will be promptly returned to the Borrower.
(b)    All premiums on any such insurance shall be paid when due by such Grantor
and the Borrower shall deliver copies of the policies for such insurance to the
Administrative Agent upon its reasonable request. If such Grantor fails to
obtain any insurance as required by this Section, the Administrative Agent may
obtain such insurance at the Borrower’s expense. By purchasing such insurance,
the Administrative Agent shall not be deemed to have waived any Default arising
from the Grantor’s failure to maintain such insurance or pay any premiums
therefor.
4.12    Collateral Access Agreements. Such Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement, from the lessor of
each leased property, mortgagee of owned property or bailee or consignee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located to the extent that (i) the value of
Collateral stored or located at any such individual location is in excess of
$1,000,000 or (ii) the aggregate value of Collateral stored or located at all
such locations is in excess of $2,000,000, in each case, whether on the
Effective Date or thereafter, which Collateral Access Agreement shall provide
access rights, contain a waiver or subordination of all Liens or claims that the
landlord, mortgagee, bailee or consignee may assert against the Collateral at
that location, and shall otherwise be reasonably satisfactory in form and
substance to the Administrative Agent. With respect to such locations or
warehouse space leased for which such Grantor is required to obtain and deliver
to the Administrative Agent a Collateral Access Agreement as of the Effective
Date (or, if later, as of the date such location is acquired or leased), but has
not done so, the Eligible Inventory at that location shall be subject to such
Rent Reserves as the Administrative Agent may establish in accordance with the
Credit Agreement. Such Grantor shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or third party warehouse where any Collateral is or may be located.
4.13    Control Agreements. Within sixty (60) days of the Effective Date (or
such later date as the Administrative Agent may agree to in its sole
discretion), such Grantor will provide to the Administrative Agent, a Deposit
Account Control Agreement, a Securities Account Control Agreement or a Commodity
Account Control Agreement, as applicable, for each Deposit Account, Securities
Account and Commodity Account (other than any Excluded Deposit Account or De
Minimis Account) existing on the Effective Date for which a control agreement
has not been delivered as of the Effective Date or evidence reasonably
satisfactory to the Administrative Agent that such Deposit Account, Securities
Account or Commodity Account has been closed and the remaining balance thereof,
if any, has been transferred to an account held with JPMCB. For each Deposit
Account, Securities Account or Commodity Account (other than any Excluded
Deposit Account or De Minimis Account) opened after the Effective Date, such
Grantor will provide a Deposit Account Control Agreement, a Securities Account
Control Agreement or a Commodity

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Account Control Agreement, as applicable, substantially contemporaneously with
the opening of such Deposit Account, Securities Account or Commodity Account.
Pursuant to such control agreements, in form and substance reasonably
satisfactory to the Administrative Agent, such Grantor will cause the depository
bank that maintains such Deposit Account, securities intermediary that maintains
such Securities Account, or the commodity intermediary that maintains such
Commodity Account, as applicable, to agree to comply at any time with
instructions from the Administrative Agent to such depository bank, securities
intermediary or commodities intermediary directing the disposition of funds from
time to time credited to such Deposit Account, Securities Account or Commodity
Account, without further consent of such Grantor, and take such other action as
the Administrative Agent may approve in order to perfect the Administrative
Agent’s security interest in such Deposit Account, Securities Account or
Commodity Account. The Administrative Agent agrees with such Grantor that the
Administrative Agent will not provide any instructions directing the disposition
of funds from time to time credited to any Deposit Account, Securities Account
or Commodity Account or withhold any withdrawal rights from such Grantor with
respect to funds from time to time credited to any Deposit Account, Securities
Account or Commodity Account (in each case, except as set forth in Article VII)
unless, at the time thereof, an Activation Period is in effect.
4.14    Change of Name or Location; Change of Fiscal Year. Such Grantor shall
not (a) change its name as it appears in official filings in the state of its
incorporation or organization, (b) change its chief executive office, principal
place of business, mailing address, corporate offices or warehouses or locations
at which Collateral is held or stored, or the location of its records concerning
the Collateral as set forth in this Security Agreement, (c) change the type of
entity that it is, (d) change its organization identification number, if any,
issued by its state of incorporation or other organization, or (e) change its
state of incorporation or organization, in each case, unless the Administrative
Agent shall have received at least thirty (30) days’ prior written notice of
such change and, prior to such change, any reasonable action requested by the
Administrative Agent in connection therewith has been completed or taken
(including any action to continue the perfection of any Liens in favor of the
Administrative Agent, on behalf of the Secured Parties, in any Collateral),
provided, that, for purposes of the foregoing clauses (a) (solely with respect
to such Grantor’s chief executive office) and (e), such new location shall be in
the continental U.S. Such Grantor shall not change its fiscal year which
currently ends on December 31.
4.15    Additional Grantors. Each Grantor agrees to cause each Subsidiary that
is required to become a party to this Security Agreement pursuant to Section
5.14 of the Credit Agreement to become a Grantor for all purposes of this
Security Agreement upon execution and delivery by such Subsidiary of a Security
Agreement Supplement. Upon the execution and delivery of a Security Agreement
Supplement by such Subsidiary, such Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any instrument adding an additional Grantor as a party
to this Security Agreement shall not require the consent of any other Grantor
under this Security Agreement. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor hereunder.
ARTICLE V.

EVENTS OF DEFAULT AND REMEDIES

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5.1    Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default hereunder:
(a)    The occurrence of any “Event of Default” under, and as defined in, the
Credit Agreement.
(b)    Any Equity Interest which is included within the Collateral shall at any
time constitute a Security or the issuer of any such Equity Interest shall take
any action to have such interests treated as a Security unless (i) all
certificates or other documents constituting such Security have been delivered
to the Administrative Agent and such Security is properly defined as such under
Article 8 of the UCC of the applicable jurisdiction, whether as a result of
actions by the issuer thereof or otherwise, or (ii) the Administrative Agent has
entered into a control agreement with the issuer of such Security or with a
securities intermediary relating to such Security and such Security is defined
as such under Article 8 of the UCC of the applicable jurisdiction, whether as a
result of actions by the issuer thereof or otherwise.
5.2    Remedies.
(a)    Upon the occurrence and during the continuance of an Event of Default,
the Administrative Agent may, with the concurrence or at the direction of the
Required Secured Parties, exercise any or all of the following rights and
remedies:
(i)    those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Loan Document; provided that, this Section 5.2(a) shall
not be understood to limit any rights or remedies available to the
Administrative Agent and the other Secured Parties prior to an Event of Default;
(ii)    those rights and remedies available to a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or under any other
applicable law (including, without limitation, any law governing the exercise of
a bank’s right of setoff or bankers’ lien) when a debtor is in default under a
security agreement;
(iii)    give notice of sole control or any other instruction under any Deposit
Account Control Agreement, Securities Account Control Agreement, Commodity
Account Control Agreement or and other control agreement and take any action
therein with respect to such Collateral;
(iv)    without notice (except as specifically provided in Section 8.1 or
elsewhere herein), demand or advertisement of any kind to any Grantor or any
other Person, enter the premises of any Grantor where any Collateral is located
(through self-help and without judicial process) to collect, receive, assemble,
process, appropriate, sell, lease, assign, grant an option or options to
purchase or otherwise dispose of, deliver, or realize upon, the Collateral or
any part thereof in one or more parcels at public or private sale or sales
(which sales may be adjourned or continued from time to time with or without
notice and may take

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place at any Grantor’s premises or elsewhere), for cash, on credit or for future
delivery without assumption of any credit risk, and upon such other terms as the
Administrative Agent may deem commercially reasonable; and
(v)    concurrently with written notice to the applicable Grantor, transfer and
register in its name or in the name of its nominee the whole or any part of the
Pledged Collateral and, following such transfer and registration, exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations, exercise the
voting and all other rights as a holder with respect thereto, collect and
receive all cash dividends, interest, principal and other distributions made
thereon and to otherwise act with respect to the Pledged Collateral as a holder
thereof.
(b)    The Administrative Agent, on behalf of the Secured Parties, may comply
with any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral.
(c)    The Administrative Agent shall have the right upon any such public sale
or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase for the benefit of the Administrative Agent and the other
Secured Parties, the whole or any part of the Collateral so sold, free of any
right of equity redemption, which equity redemption the Grantor hereby expressly
releases.
(d)    Until the Administrative Agent is able to effect a sale, lease, or other
disposition of Collateral, the Administrative Agent shall have the right to hold
or use Collateral, or any part thereof, to the extent that it deems appropriate
for the purpose of preserving Collateral or its value or for any other purpose
deemed appropriate by the Administrative Agent. The Administrative Agent may, if
it so elects, seek the appointment of a receiver or keeper to take possession of
Collateral and to enforce any of the Administrative Agent’s remedies (for the
benefit of the Administrative Agent and the other Secured Parties), with respect
to such appointment without prior notice or hearing as to such appointment.
(e)    If, after the Credit Agreement has terminated by its terms and all of the
Obligations have been Paid in Full, there remain Swap Agreement Obligations
outstanding, the Required Secured Parties may exercise the remedies provided in
this Section 5.2 upon the occurrence of any event which would allow or require
the termination or acceleration of any Swap Agreement Obligations pursuant to
the terms of the Swap Agreement.
(f)    Notwithstanding the foregoing, neither the Administrative Agent nor any
other Secured Party shall be required to (i) make any demand upon, or pursue or
exhaust any of its rights or remedies against, any Grantor, any other obligor,
guarantor, pledgor or any other Person with respect to the payment of the
Secured Obligations or to pursue or exhaust any of its rights or remedies with
respect to any Collateral therefor or any direct or indirect guarantee thereof,
(ii) marshal the

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Collateral or any guarantee of the Secured Obligations or to resort to the
Collateral or any such guarantee in any particular order, or (iii) effect a
public sale of any Collateral.
(g)    Each Grantor recognizes that the Administrative Agent may be unable to
effect a public sale of any or all the Pledged Collateral and may be compelled
to resort to one or more private sales thereof in accordance with clause (a)
above. Each Grantor also acknowledges that any private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall not be deemed to have been made in a commercially unreasonable manner
solely by virtue of such sale being private. The Administrative Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit any Grantor or the issuer of the Pledged
Collateral to register such securities for public sale under the Securities Act
of 1933, as amended, or under applicable state securities laws, even if the
applicable Grantor and the issuer agree or would agree to do so.
5.3    Grantor’s Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence and during the continuance of an Event
of Default, each Grantor will:
(a)    assemble and make available to the Administrative Agent the Collateral
and all books and records relating thereto at any place or places specified by
the Administrative Agent, whether at a Grantor’s premises or elsewhere;
(b)    permit the Administrative Agent, by the Administrative Agent’s
representatives and agents, to enter, occupy and use any premises where all or
any part of the Collateral, or the books and records relating thereto, or both,
are located, to take possession of all or any part of the Collateral or the
books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct
sales of the Collateral, without any obligation to pay the Grantor for such use
and occupancy; and
(c)    at its own expense, cause the independent certified public accountants
then engaged by each Grantor to prepare and deliver to the Administrative Agent,
at any time, and from time to time, promptly upon the Administrative Agent’s
reasonable request, the following reports with respect to the applicable
Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts;
(iii) trial balances; and (iv) a test verification of such Accounts.
5.4    Grant of Intellectual Property License. For the purpose of enabling the
Administrative Agent to exercise the rights and remedies under this Article V
with respect to Collateral, at such time as the Administrative Agent shall be
lawfully entitled to exercise such rights and remedies (including in order to
take possession of, collect, receive, assemble, process, appropriate, remove,
realize upon, sell, assign, convey, transfer or grant options to purchase any
Collateral), each Grantor hereby (a) grants to the Administrative Agent, for the
benefit of the Administrative Agent and the other Secured Parties, an
irrevocable, nonexclusive worldwide license (exercisable without payment of
royalty or other compensation to any Grantor), to use, license, sublicense or
practice any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
access to all media in which any of

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the licensed items may be recorded or stored and to all Software and programs
used for the compilation or printout thereof and (b) irrevocably agrees that the
Administrative Agent may sell any of such Grantor’s Inventory directly to any
Person, including, without limitation, Persons that have previously purchased
the Grantor’s Inventory from such Grantor and in connection with any such sale
or other enforcement of the Administrative Agent’s rights under this Security
Agreement, may sell Inventory which bears any Trademark owned by or licensed to
such Grantor and any Inventory that is covered by any Copyright owned by or
licensed to such Grantor and the Administrative Agent may (but shall have no
obligation to) finish any work in process and affix any Trademark owned by or
licensed to such Grantor and sell such Inventory as provided herein.
ARTICLE VI.

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY
6.1    Account Verification. The Administrative Agent may at any time in its
Permitted Discretion, in the Administrative Agent’s own name or in the name of a
nominee of the Administrative Agent, communicate (by mail, telephone, facsimile
or otherwise) with the Account Debtors of any such Grantor, parties to contracts
with any such Grantor and obligors in respect of Instruments of any such Grantor
to verify with such Persons, to the Administrative Agent’s satisfaction, the
existence, amount, terms of, and any other matter relating to, Accounts,
Instruments, Chattel Paper, payment intangibles and/or other Receivables.
6.2    Authorization for Administrative Agent to Take Certain Action.
(a)    Each Grantor irrevocably authorizes the Administrative Agent at any time
and from time to time in the sole discretion of the Administrative Agent and
appoints the Administrative Agent as its attorney in fact (i) to execute on
behalf of such Grantor as debtor and to file financing statements necessary or
desirable in the Administrative Agent’s sole discretion to perfect and to
maintain the perfection and priority of the Administrative Agent’s security
interest in the Collateral, (ii) during the continuance of an Event of Default,
to endorse and collect any cash proceeds of the Collateral, (iii) to file a
carbon, photographic or other reproduction of this Security Agreement or any
financing statement with respect to the Collateral as a financing statement and
to file any other financing statement or amendment of a financing statement
(which does not add new collateral or add a debtor) in such offices as the
Administrative Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Administrative
Agent’s security interest in the Collateral, (iv) to contact and enter into one
or more agreements with the issuers of uncertificated securities which are
Pledged Collateral or with securities intermediaries holding Pledged Collateral
as may be necessary or advisable to give the Administrative Agent Control over
such Pledged Collateral, (v) to apply the proceeds of any Collateral received by
the Administrative Agent to the Secured Obligations as provided in Section 7.3,
(vi) to discharge past due taxes, assessments, charges, fees or Liens on the
Collateral (except for such Liens that are permitted under Section 4.1(e)),
(vii) during the continuance of an Event of Default, to (A) contact Account
Debtors for any reason, (B) demand payment or enforce payment of the Receivables
in the name of the Administrative Agent

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or such Grantor and to endorse any and all checks, drafts, and other instruments
for the payment of money relating to the Receivables, (C) sign such Grantor’s
name on any invoice or bill of lading relating to the Receivables, drafts
against any Account Debtor of the Grantor, assignments and verifications of
Receivables, (D) exercise all of such Grantor’s rights and remedies with respect
to the collection of the Receivables and any other Collateral, (E) settle,
adjust, compromise, extend or renew the Receivables, (F) settle, adjust or
compromise any legal proceedings brought to collect Receivables, (G) prepare,
file and sign such Grantor’s name on a proof of claim in bankruptcy or similar
document against any Account Debtor of such Grantor, (H) prepare, file and sign
such Grantor’s name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables, and (I) change the address
for delivery of mail addressed to such Grantor to such address as the
Administrative Agent may designate and to receive, open and dispose of all mail
addressed to such Grantor, and (viii) to do all other acts and things necessary
to carry out this Security Agreement; and such Grantor agrees to reimburse the
Administrative Agent on demand for any reasonable out-of-pocket payment made or
expense incurred by the Administrative Agent in connection with any of the
foregoing; provided that, this authorization shall not relieve such Grantor of
any of its obligations under this Security Agreement or under the Credit
Agreement.
(b)    All acts of said attorney or designee are hereby ratified and approved.
The powers conferred on the Administrative Agent, for the benefit of the
Administrative Agent and the other Secured Parties, under this Section 6.2 are
solely to protect the Administrative Agent’s interests in the Collateral and
shall not impose any duty upon the Administrative Agent or any other Secured
Party to exercise any such powers.
6.3    Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
ADMINISTRATIVE AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION
6.2 ABOVE) WITH RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE
ANY OF THE PLEDGED COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN
ADDITION TO THE RIGHT TO VOTE ANY OF THE PLEDGED COLLATERAL, THE APPOINTMENT OF
THE ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT
TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER
OF ANY OF THE PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF
ANY OF THE PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY
PERSON (INCLUDING THE ISSUER OF THE PLEDGED COLLATERAL OR ANY OFFICER OR AGENT
THEREOF), UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT.
6.4    Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE
ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH

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THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.14.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NONE OF THE ADMINISTRATIVE AGENT, ANY
LENDER, ANY OTHER SECURED PARTY, ANY OF THEIR AFFILIATES, OR ANY OF THEIR OR
THEIR AFFILIATES’ RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED
HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT
SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.
ARTICLE VII.

COLLECTION AND APPLICATION OF
COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS
7.1    Collection of Receivables.
(a)    In accordance with Section 4.13, each Grantor shall (i) execute and
deliver to the Administrative Agent Deposit Account Control Agreements for each
Deposit Account (other than any Excluded Deposit Account or De Minimis Account)
maintained by such Grantor into which all cash, checks or other similar payments
relating to or constituting payments made in respect of Receivables will be
deposited (each, a “Collateral Deposit Account”), which Collateral Deposit
Accounts are identified as such on Exhibit B, and (ii) establish lock box
service (the “Lock Boxes”) with the bank(s) set forth in Exhibit B, which Lock
Boxes shall be subject to irrevocable lockbox agreements in the form provided by
or otherwise acceptable to the Administrative Agent and shall be accompanied by
an acknowledgment by the bank where the Lock Box is located of the Lien of the
Administrative Agent granted hereunder and of irrevocable instructions to wire
all amounts collected therein to the Collection Account (each, a “Lock Box
Agreement”). After the Effective Date, each Grantor will comply with the terms
of Section 7.2.
(b)    Each Grantor shall direct all of its Account Debtors to forward payments
directly to Lock Boxes subject to Lock Box Agreements. The Administrative Agent
shall have sole access to the Lock Boxes at all times and each Grantor shall
take all actions necessary to grant the Administrative Agent such sole access.
At no time shall any Grantor remove any item from a Lock Box or a Collateral
Deposit Account without the Administrative Agent’s prior written consent. If any
Grantor should refuse or neglect to notify any Account Debtor to forward
payments directly to a Lock Box subject to a Lock Box Agreement after notice
from the Administrative Agent, the Administrative Agent shall be entitled to
make such notification directly to such Account Debtor. If notwithstanding the
foregoing instructions, any Grantor receives any proceeds of any Receivables,
such Grantor shall receive such payments as the Administrative Agent’s trustee,
and shall immediately deposit all cash, checks or other similar payments related
to or constituting payments

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made in respect of Receivables received by it to a Collateral Deposit Account.
All funds deposited into any Lock Box subject to a Lock Box Agreement or a
Collateral Deposit Account will be swept on a daily basis into a collection
account maintained by the Borrower with the Administrative Agent (the
“Collection Account”). The Administrative Agent shall hold and apply funds
received into the Collection Account as provided by the terms of Section 7.3.
7.2    Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or
replacing any Collateral Deposit Account or other Deposit Account (other than an
Excluded Deposit Account or De Minimis Account), or establishing a new Lock Box,
each Grantor shall (a) obtain the Administrative Agent’s consent in writing to
the opening of such Collateral Deposit Account or other Deposit Account or
establishing of such Lock Box, and (b) cause each bank or financial institution
in which it seeks to open (i) a Collateral Deposit Account or other Deposit
Account (other than any Excluded Deposit Account or De Minimis Account), to
enter into a Deposit Account Control Agreement with the Administrative Agent in
order to give the Administrative Agent Control of such Collateral Deposit
Account or other Deposit Account and provide for a daily sweep into the
Collection Account, or (ii) a Lock Box, to enter into a Lock Box Agreement with
the Administrative Agent in order to give the Administrative Agent Control of
the Lock Box and provide for a daily sweep into the Collection Account. In the
case of Deposit Accounts or Lock Boxes maintained with Lenders, the terms of
such letter shall be subject to the provisions of the Credit Agreement regarding
setoffs.
7.3    Application of Proceeds; Deficiency. All amounts deposited in the
Collection Account shall be deemed received by the Administrative Agent in
accordance with Section 2.18 of the Credit Agreement and shall, after having
been credited to the Collection Account, be applied (and allocated) by
Administrative Agent in accordance with Section 2.10(b) of the Credit Agreement;
provided that, so long as an Activation Period is not in effect, collections
which are received into the Collection Account shall be promptly deposited into
the Borrower’s Funding Account, rather than being used to reduce amounts owing
under the Credit Agreement. Any proceeds of the Collateral shall be applied in
the order set forth in Section 2.18 of the Credit Agreement unless a court of
competent jurisdiction shall otherwise direct. The balance, if any, after all of
the Secured Obligations have been satisfied, shall be deposited by the
Administrative Agent into the Funding Account. The Grantors shall remain liable,
jointly and severally, for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Secured Obligations,
including any attorneys’ fees and other expenses incurred by Administrative
Agent or any other Secured Party to collect such deficiency.
ARTICLE VIII.

GENERAL PROVISIONS
8.1    Waivers. Each Grantor hereby waives notice of the time and place of any
public sale or the time after which any private sale or other disposition of all
or any part of the Collateral may be made. To the extent such notice may not be
waived under applicable law, any notice made shall be deemed reasonable if sent
to the Grantors, addressed as set forth in Article IX, at least ten (10) days
prior to (a) the date of any such public sale or (b) the time after which any
such private sale or other disposition may be made. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and
demands against

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the Administrative Agent or any other Secured Party arising out of the
repossession, retention or sale of the Collateral, except such as arise solely
out of the gross negligence or willful misconduct of the Administrative Agent or
such other Secured Party as finally determined by a court of competent
jurisdiction. To the extent it may lawfully do so, each Grantor absolutely and
irrevocably waives and relinquishes the benefit and advantage of, and covenants
not to assert against the Administrative Agent or any other Secured Party, any
valuation, stay, appraisal, extension, moratorium, redemption or similar laws
and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise.
Except as otherwise specifically provided herein, each Grantor hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Security Agreement or any
Collateral.
8.2    Limitation on Administrative Agent’s and Other Secured Parties’ Duty with
Respect to the Collateral. The Administrative Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Administrative Agent
and each other Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither the Administrative
Agent nor any other Secured Party shall have any other duty as to any Collateral
in its possession or control or in the possession or control of any agent or
nominee of the Administrative Agent or such other Secured Party, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. To the extent that applicable law imposes duties on
the Administrative Agent to exercise remedies in a commercially reasonable
manner, each Grantor acknowledges and agrees that it is commercially reasonable
for the Administrative Agent (a) to fail to incur expenses deemed significant by
the Administrative Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other finished
products for disposition, (b) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(d) to exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other Persons, whether or
not in the same business as such Grantor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (i) to dispose of assets in wholesale
rather than retail markets, (j) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (k) to purchase insurance or credit
enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative
Agent a guaranteed return from the collection or disposition of Collateral, or
(l) to the extent deemed appropriate by the Administrative Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose
of this Section 8.2 is to provide non-exhaustive indications of what actions or
omissions by the Administrative Agent would be commercially reasonable in

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the Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 8.2. Without limitation upon the foregoing, nothing contained in this
Section 8.2 shall be construed to grant any rights to any Grantor or to impose
any duties on the Administrative Agent that would not have been granted or
imposed by this Security Agreement or by applicable law in the absence of this
Section 8.2.
8.3    Compromises and Collection of Collateral. The Grantors and the
Administrative Agent recognize that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain of the Receivables,
that certain of the Receivables may be or become uncollectible in whole or in
part and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a Receivable. In view of the foregoing, each Grantor agrees that
the Administrative Agent may at any time and from time to time, if an Event of
Default has occurred and is continuing, compromise with the obligor on any
Receivable, accept in full payment of any Receivable such amount as the
Administrative Agent in its sole discretion shall determine or abandon any
Receivable, and any such action by the Administrative Agent shall be
commercially reasonable so long as the Administrative Agent acts in good faith
based on information known to it at the time it takes any such action.
8.4    Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to perform or pay in this Security Agreement and
which obligation such Grantor shall fail to perform or pay within five (5)
Business Days after receiving written notice from the Administrative Agent
requesting performance or payment thereof (it being understood that no such
request need be given (a) after the occurrence and during the continuance of any
Event of Default or (b) if such failure to perform or pay would materially and
adversely affect the perfection of any security interest granted under this
Security Agreement or would materially and adversely affect the value of the
applicable Collateral), and the Grantors shall reimburse the Administrative
Agent for any amounts paid by the Administrative Agent pursuant to this Section
8.4. The Grantors’ obligation to reimburse the Administrative Agent pursuant to
the preceding sentence shall be a Secured Obligation payable on demand, and in
any event, within five (5) Business Days of such demand.
8.5    Specific Performance of Certain Covenants. Each Grantor acknowledges and
agrees that a breach of any of the covenants contained in Sections 4.1(d),
4.1(e), 4.4, 4.5, 4.6, 4.7, 4.8, 4.12, 4.13, 4.15, 5.3, or 8.6 or in Article VII
will cause irreparable injury to the Administrative Agent and the other Secured
Parties, that the Administrative Agent and the other Secured Parties have no
adequate remedy at law in respect of such breaches and therefore agrees, without
limiting the right of the Administrative Agent or the other Secured Parties to
seek and obtain specific performance of other obligations of the Grantors
contained in this Security Agreement, that the covenants of the Grantors
contained in the Sections referred to in this Section 8.5 shall be specifically
enforceable against the Grantors.
8.6    Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(d) and
notwithstanding any course of dealing between any Grantor and the Administrative
Agent or other conduct of the Administrative Agent, no authorization to sell or

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otherwise dispose of the Collateral (except as set forth in Section 4.1(d))
shall be binding upon the Administrative Agent or the other Secured Parties
unless such authorization is in writing signed by the Administrative Agent with
the consent or at the direction of the Required Secured Parties.
8.7    No Waiver; Amendments; Cumulative Remedies. No delay or omission of the
Administrative Agent or any other Secured Party to exercise any right or remedy
granted under this Security Agreement shall impair such right or remedy or be
construed to be a waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right or remedy shall not preclude any
other or further exercise thereof or the exercise of any other right or remedy.
No waiver, amendment or other variation of the terms, conditions or provisions
of this Security Agreement whatsoever shall be valid unless in writing signed by
the Administrative Agent with the concurrence or at the direction of the Lenders
required under Section 9.02 of the Credit Agreement and then only to the extent
in such writing specifically set forth. All rights and remedies contained in
this Security Agreement or by law afforded shall be cumulative and all shall be
available to the Administrative Agent and the other Secured Parties until the
Secured Obligations have been Paid in Full.
8.8    Limitation by Law; Severability of Provisions. All rights, remedies and
powers provided in this Security Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law, and
all the provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be limited
to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable or not entitled to be recorded or registered, in whole or
in part. Any provision in this Security Agreement that is held to be
inoperative, unenforceable, or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation, enforceability, or
validity of that provision in any other jurisdiction, and to this end the
provisions of this Security Agreement are declared to be severable.
8.9    Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof (including a payment effected through exercise of a right of
setoff), is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise
(including pursuant to any settlement entered into by a Secured Party in its
discretion), all as though such payment or performance had not been made. In the
event that any payment, or any part thereof (including a payment effected
through exercise of a right of setoff), is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
8.10    Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the other Secured Parties and

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their respective successors and assigns (including all Persons that become bound
as a debtor to this Security Agreement), except that no Grantor shall have the
right to assign its rights or delegate its obligations under this Security
Agreement or any interest herein, without the prior written consent of the
Administrative Agent. No sales of participations, assignments, transfers, or
other dispositions of any agreement governing the Secured Obligations or any
portion thereof or interest therein shall in any manner impair the Lien granted
to the Administrative Agent, for the benefit of the Administrative Agent and the
other Secured Parties, hereunder.
8.11    Survival of Representations. All representations and warranties of the
Grantors contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.
8.12    Taxes and Expenses. Any taxes (including income taxes) other than
Excluded Taxes payable or ruled payable by Federal or State authority in respect
of this Security Agreement shall be paid by the Grantors, together with interest
and penalties, if any. The Grantors shall reimburse the Administrative Agent for
any and all reasonable out-of-pocket expenses (including reasonable attorneys’,
auditors’ and accountants’ fees) paid or incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration, collection
and enforcement of this Security Agreement and in the audit, analysis,
administration, collection, preservation or sale of the Collateral (including
reasonable expenses and charges associated with any periodic or special audit of
the Collateral). Any and all costs and expenses incurred by the Grantors in the
performance of actions required pursuant to the terms hereof shall be borne
solely by the Grantors.
8.13    Headings. The title of and section headings in this Security Agreement
are for convenience of reference only, and shall not govern the interpretation
of any of the terms and provisions of this Security Agreement.
8.14    Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been Paid in
Full.
8.15    Entire Agreement. This Security Agreement embodies the entire agreement
and understanding between the Grantors and the Administrative Agent relating to
the Collateral and supersedes all prior agreements and understandings between
the Grantors and the Administrative Agent relating to the Collateral.
8.16    CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
8.17    CONSENT TO JURISDICTION. EACH PARTY TO THIS SECURITY AGREEMENT AND EACH
OTHER SECURED PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
ANY U.S. FEDERAL OR TEXAS STATE COURT SITTING IN HOUSTON, TEXAS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT AND EACH PARTY
TO THIS SECURITY AGREEMENT

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AND EACH OTHER SECURED PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY OTHER SECURED PARTY TO BRING
PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
8.18    WAIVER OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND EACH
OTHER SECURED PARTY HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY).
8.19    Indemnity. Each Grantor hereby agrees to indemnify the Administrative
Agent and the other Secured Parties, and their respective successors, assigns,
agents and employees, from and against any and all liabilities, damages,
penalties, suits, fees, costs, and expenses of any kind and nature (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Administrative Agent or any other Secured Party is a party thereto)
imposed on, incurred by or asserted against the Administrative Agent or the
other Secured Parties, or their respective successors, assigns, agents and
employees, in any way relating to or arising out of this Security Agreement, or
the manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other defects, whether or
not discoverable by the Administrative Agent or the other Secured Parties or any
Grantor, and any claim for Patent, Trademark or Copyright infringement).
8.20    Counterparts. This Security Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Security Agreement by signing any
such counterpart. Delivery of an executed counterpart of a signature page of
this Security Agreement by facsimile or other electronic transmission
(including, without limitation, an emailed .pdf) shall be effective as delivery
of a manually executed counterpart of this Security Agreement.
ARTICLE IX.

NOTICES
9.1    Sending Notices. Any notice required or permitted to be given under this
Security Agreement shall be given in accordance with Section 9.01 of the Credit
Agreement.

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9.2    Change in Address for Notices. Each of the Grantors, the Administrative
Agent and the other Secured Parties may change the address for service of notice
upon it by a notice in writing to the other parties.
ARTICLE X.

THE ADMINISTRATIVE AGENT
JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the other
Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It
is expressly understood and agreed by the parties to this Security Agreement
that any authority conferred upon the Administrative Agent hereunder is subject
to the terms of the delegation of authority made by the Secured Parties to the
Administrative Agent pursuant to the Credit Agreement, and that the
Administrative Agent has agreed to act (and any successor Administrative Agent
shall act) as such hereunder only on the express conditions contained in such
Article VIII. Any successor Administrative Agent appointed pursuant to Article
VIII of the Credit Agreement shall be entitled to all the rights, interests and
benefits of the Administrative Agent hereunder.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the Grantors and the Administrative Agent have executed this
Security Agreement as of the date first above written.

GRANTORS:

DRIL-QUIP, INC.
By:
 /s/ Jeffrey Bird    

 
Name: Jeffrey Bird
 
Title: Vice President and Chief Financial Officer

TIW CORPORATION

By:
 /s/ Jeffrey Bird    

 
Name: Jeffrey Bird
 
Title: Vice President and Chief Financial Officer

HONING, INC.

By:
 /s/ Jeffrey Bird    

 
Name: Jeffrey Bird
 
Title: Vice President and Chief Financial Officer

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ADMINISTRATIVE AGENT:

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

By:
/s/ Ross Gilbert

 
Name: Ross Gilbert
 
Title: Authorized Officer