Exhibit 10.1

Execution Version

PLEDGE AND SECURITY AGREEMENT

dated as of February 27, 2015

between

EACH OF THE GRANTORS PARTY HERETO

and

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Notes Collateral Trustee

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TABLE OF CONTENTS

 

         PAGE   SECTION 1.  

DEFINITIONS

     2  

1.1

 

General Definitions

     2  

1.2

 

Definitions; Interpretation

     10  

1.3

 

Intercreditor Agreement and Collateral Trust Agreement

     11   SECTION 2.  

GRANT OF SECURITY

     11  

2.1

 

Grant of Security

     11  

2.2

 

Certain Limited Exclusions

     12   SECTION 3.  

SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE

     13  

3.1

 

Security for Obligations

     13  

3.2

 

Continuing Liability Under Collateral

     13   SECTION 4.  

CERTAIN PERFECTION REQUIREMENTS

     13  

4.1

 

Delivery Requirements

     13  

4.2

 

Control Requirements

     14  

4.3

 

Intellectual Property Recording Requirements

     15  

4.4

 

Other Actions

     15  

4.5

 

Timing and Notice

     16   SECTION 5.  

REPRESENTATIONS AND WARRANTIES

     16  

5.1

 

Grantor Information and Status

     16  

5.2

 

Collateral Identification, Special Collateral

     17  

5.3

 

Ownership of Collateral and Absence of Other Liens

     17  

5.4

 

Status of Security Interest

     18  

5.5

 

Goods and Receivables

     18  

5.6

 

Pledged Equity Interests, Investment Related Property

     19  

5.7

 

Intellectual Property

     20   SECTION 6.  

COVENANTS AND AGREEMENTS

     21  

6.1

 

Grantor Information and Status

     21  

6.2

 

Collateral Identification; Special Collateral

     22  

6.3

 

Ownership of Collateral and Absence of Other Liens

     22  

6.4

 

Status of Security Interest

     23  

6.5

 

Goods and Receivables

     23  

6.6

 

Pledged Equity Interests, Investment Related Property

     24  

6.7

 

Intellectual Property

     26  

 

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SECTION 7.

FURTHER ASSURANCES; ADDITIONAL GRANTORS

  28  

7.1

Further Assurances

  28  

7.2

Additional Grantors

  29   SECTION 8.

NOTES COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT

  30  

8.1

Power of Attorney

  30  

8.2

No Duty on the Part of Notes Collateral Trustee or Secured Parties

  31  

8.3

Appointment Pursuant to Indenture and Collateral Trust Agreement

  31   SECTION 9.

REMEDIES

  31  

9.1

Generally

  31  

9.2

Application of Proceeds

  33  

9.3

Sales on Credit

  33  

9.4

Investment Related Property

  33  

9.5

Grant of Intellectual Property License

  33  

9.6

Intellectual Property

  34  

9.7

Cash Proceeds; Deposit Accounts

  36   SECTION 10.

NOTES COLLATERAL TRUSTEE

  36   SECTION 11.

CONTINUING SECURITY INTEREST; TRANSFER OF NOTES; RELEASE

  37   SECTION 12.

STANDARD OF CARE; NOTES COLLATERAL TRUSTEE MAY PERFORM

  37   SECTION 13.

UNLIMITED LIABILITY COMPANIES

  38   SECTION 14.

MISCELLANEOUS

  39  

 

SCHEDULE 5.1 — GENERAL INFORMATION SCHEDULE 5.2 — COLLATERAL IDENTIFICATION
SCHEDULE 5.4 — FINANCING STATEMENTS SCHEDULE 5.5 — LOCATION OF EQUIPMENT AND
INVENTORY EXHIBIT A — PLEDGE SUPPLEMENT EXHIBIT B — UNCERTIFICATED SECURITIES
CONTROL AGREEMENT EXHIBIT C — SECURITIES ACCOUNT CONTROL AGREEMENT

 

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EXHIBIT D — DEPOSIT ACCOUNT CONTROL AGREEMENT EXHIBIT E — TRADEMARK SECURITY
AGREEMENT EXHIBIT F — PATENT SECURITY AGREEMENT EXHIBIT G — COPYRIGHT SECURITY
AGREEMENT

 

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This PLEDGE AND SECURITY AGREEMENT, dated as of February 27, 2015 (as it may be
amended, restated, supplemented or otherwise modified from time to time, this
“Agreement”), between Real Alloy Intermediate Holding, LLC, a Delaware limited
liability company (“Holdings”), Real Alloy Holding, Inc. (f/k/a SGH Acquisition
Holdco, Inc. and a successor by merger to SGH Escrow Corporation), a Delaware
corporation (the “Issuer”), and each of the subsidiaries of Holdings or the
Issuer party hereto from time to time, whether as an original signatory hereto
or as an Additional Grantor (as herein defined) (together with Holdings and the
Issuer, each, a “Grantor”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, as notes
collateral trustee for the Secured Parties (as herein defined) (in such capacity
as notes collateral trustee, together with its successors and permitted assigns,
the “Notes Collateral Trustee”).

RECITALS:

WHEREAS, reference is made to that certain Indenture, dated as of January 8,
2015 (as supplemented by the First Supplemental Indenture, dated as of the date
hereof (the “Supplemental Indenture”), and as may be further amended, restated,
supplemented or otherwise modified from time to time, the “Indenture”), by and
among Holdings, the Issuer, the Subsidiary Guarantors (as therein defined), and
Wilmington Trust, National Association, as trustee (in such capacity, together
with its successors and permitted assigns, the “Trustee”) and the Notes
Collateral Trustee.

WHEREAS, each Grantor is executing and delivering this Agreement, pursuant to
the terms of the Indenture to induce the Trustee and the Notes Collateral
Trustee to enter into the Indenture and, pursuant to the terms of the Purchase
Agreement dated as of December 23, 2014 among the Issuer, Goldman, Sachs & Co.
and Deutsche Bank Securities Inc., as representatives of the purchasers named
therein, to induce the purchasers named therein to purchase the Notes;

WHEREAS, concurrently with the execution and delivery of the Supplemental
Indenture, the Issuer, Holdings and the other Grantors are entering into (i) the
Revolving Credit Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “North America ABL
Credit Agreement”) with the lenders from time to time party thereto and General
Electric Capital Corporation, as agent, (ii) the Intercreditor Agreement dated
as of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “Intercreditor Agreement”) with the Notes Collateral
Trustee and General Electric Capital Corporation, as agent and (iii) the
Collateral Trust Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the “Collateral Trust Agreement”), dated as of the
date hereof, with the Notes Collateral Trustee and the Trustee;

WHEREAS, in addition to the Indenture, subject to the terms and conditions of
the Collateral Trust Agreement, certain Grantors may enter into one or more
other Pari Passu Lien Debt Documents (as defined therein) and Hedge Agreements
(as defined therein) ; and

WHEREAS, in consideration of the extensions of credit and other accommodations
of the Grantors as set forth in the Indenture and as may be provided in the
future pursuant to the other Pari Passu Lien Debt Documents and Hedge
Agreements, each Grantor has agreed to secure such Grantor’s obligations under
the Indenture, the other Pari Passu Lien Debt Documents and Hedge Agreements as
set forth herein.

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NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, each Grantor and
the Notes Collateral Trustee agree as follows:

 

SECTION 1. DEFINITIONS.

1.1 General Definitions. In this Agreement, the following terms shall have the
following meanings:

“Acquisition Agreement” shall mean the Purchase and Sale Agreement, dated as of
October 17, 2014, by and among Aleris Corporation, a Delaware corporation,
Aleris International, Inc., a Delaware corporation, Aleris Holding Canada
Limited, a corporation organized under the laws of Canada, Aleris Aluminum
Netherlands B.V., a limited liability company organized under the laws of the
Netherlands, Aleris Deutschland Holding GmbH, a limited liability company
organized under the laws of Germany, Dutch Aluminum C.V., a limited partnership
organized under the laws of the Netherlands, and Aleris Deutschland Vier GmbH Co
KG, a limited partnership organized under the laws of Germany, SGH Acquisition
Holdco, Inc., a Delaware corporation, Evergreen Holding Germany GmbH, a limited
liability company organized under the laws of Germany and Signature Group
Holdings, Inc., a Delaware corporation.

“Additional Grantors” shall have the meaning assigned in Section 7.2 hereof.

“Agreement” shall have the meaning set forth in the preamble.

“Aleris IMSAMET Partnership Interest” shall mean the partnership interest in the
Excluded Subsidiary owned by Aleris Recycling.

“Aleris Recycling” shall mean Aleris Recycling, Inc., a Delaware corporation, to
be known as Real Alloy Recycling, Inc. on the Escrow Release Date.

“Cash Proceeds” shall have the meaning assigned in Section 9.7 hereof.

“Collateral” shall have the meaning assigned in Section 2.1 hereof.

“Collateral Account” shall mean any account established by the Notes Collateral
Trustee.

“Collateral Records” shall mean books, records, ledger cards, files,
correspondence, customer lists, supplier lists, blueprints, technical
specifications, manuals, computer software and related documentation, computer
printouts, tapes, disks and other electronic storage media and related data
processing software and similar items that at any time evidence or contain
information relating to any of the Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon.

 

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“Collateral Support” shall mean all property (real or personal) assigned,
hypothecated or otherwise securing any Collateral and shall include any security
agreement or other agreement granting a lien or security interest in such real
or personal property.

“Collateral Trust Agreement” shall have the meaning set forth in the recitals.

“Control” shall mean: (1) with respect to any Deposit Accounts, control within
the meaning of Section 9-104 of the UCC, (2) with respect to any Securities
Accounts, Security Entitlements, Commodity Contract or Commodity Account,
control within the meaning of Section 9-106 of the UCC, (3) with respect to any
Uncertificated Securities, control within the meaning of Section 8-106(c) of the
UCC, (4) with respect to any Certificated Security, control within the meaning
of Section 8-106(a) or (b) of the UCC, (5) with respect to any Electronic
Chattel Paper, control within the meaning of Section 9-105 of the UCC, (6) with
respect to Letter of Credit Rights, control within the meaning of Section 9-107
of the UCC and (7) with respect to any “transferable record” (as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or in Section 16 of the Uniform Electronic Transactions
Act as in effect in any relevant jurisdiction), control within the meaning of
Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in
the jurisdiction relevant to such transferable record.

“Copyright Licenses” shall mean any and all agreements, licenses and covenants
providing for the granting of any right in or to any Copyright or otherwise
providing for a covenant not to sue for infringement or other violation of any
Copyright (whether such Grantor is licensee or licensor thereunder) including,
without limitation, each agreement required to be listed in Schedule 5.2(II)
under the heading “Copyright Licenses” (as such schedule may be amended or
supplemented from time to time).

“Copyrights” shall mean all United States, and foreign copyrights (whether or
not the underlying works of authorship have been published), including but not
limited to copyrights in software and all rights in and to databases, all
designs (including but not limited to industrial designs, Protected Designs
within the meaning of 17 U.S.C. 1301 et. Seq. and Community designs), and all
Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether
registered or unregistered, as well as all moral rights, reversionary interests,
and termination rights, and, with respect to any and all of the foregoing:
(i) all registrations and applications therefor including, without limitation,
the registrations and applications required to be listed in Schedule 5.2(II)
under the heading “Copyrights” (as such schedule may be amended or supplemented
from time to time), (ii) all extensions and renewals thereof, (iii) the right to
sue or otherwise recover for any past, present and future infringement or other
violation thereof, (iv) all Proceeds of the foregoing, including, without
limitation, license fees, royalties, income, payments, claims, damages and
proceeds of suit now or hereafter due and/or payable with respect thereto, and
(v) all other rights of any kind accruing thereunder or pertaining thereto
throughout the world.

“Deposit Account Control Agreement” shall have the meaning set forth in
Section 4.2(a) hereof.

 

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“Discharge of Pari Passu Lien Obligations” shall have the meaning set forth in
the Collateral Trust Agreement.

“Event of Default” shall mean an “Event of Default” under (and as defined in)
the Indenture and any “Event of Default” (or other similar term) under (and as
defined in) any other Pari Passu Lien Debt Documents.

“Excluded Accounts” shall mean any deposit account now or hereafter owned by the
Issuer or any Grantor that is used solely by the Issuer or such Grantor (a) as a
payroll account so long as such payroll account is a zero balance account,
(b) as a petty cash account so long as the aggregate amount on deposit in all
petty cash accounts of the Issuer and all Grantors does not exceed $50,000 at
any one time for all such deposit accounts combined, (c) commodity trading
accounts or other brokerage accounts holding customary initial deposits and
margin deposits securing Hedging Obligations incurred in the ordinary course of
business and not for speculative purposes, (d) to hold amounts required to be
paid in connection with workers compensation claims, unemployment insurance,
social security benefits and other similar forms of governmental insurance
benefits, (e) to hold amounts which are required to be pledged or otherwise
provided as security as required by law or pension requirement, or (f) as a
withholding tax or fiduciary account; provided, however, that, notwithstanding
any of the foregoing to the contrary, any deposit account that is not included
in the definition of “Excluded Accounts” in the North America ABL Credit
Agreement shall also not be included in this definition.

“Excluded Asset” shall mean any asset of any Grantor excluded from the security
interest hereunder by virtue of Section 2.2 hereof but only to the extent, and
for so long as, so excluded thereunder.

“Excluded Subsidiary” shall mean IMSAMET of Arizona, an Arizona general
partnership, 70% of whose partnership interest is owned by Aleris Recycling, and
30% of whose partnership interest is owned by Magna Aluminum, Inc., a California
corporation, until and unless the Excluded Subsidiary becomes a wholly-owned
subsidiary of a Grantor.

“First-Tier Foreign Subsidiary” means a Foreign Subsidiary more than 50% of the
voting Capital Stock of which is directly owned by a Grantor.

“Governmental Authority” shall mean any federal, state, municipal, national or
other government, governmental department, commission, board, bureau, court,
agency or instrumentality or political subdivision thereof or any entity,
officer or examiner exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.

“Grantors” shall have the meaning set forth in the preamble.

“Holdings” shall have the meaning set forth in the preamble.

“Indenture” shall have the meaning set forth in the recitals.

 

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“Indenture Documents” shall mean (a) the Indenture, the Notes, the Collateral
Trust Agreement, this Agreement and the other Security Documents and (b) any
other related documents or instruments executed and delivered pursuant to or in
connection with the Indenture, in each case, as such agreements may be amended,
extended, renewed, restated, supplemented, waived, replaced, restructured,
repaid, refunded, refinanced or otherwise modified from time to time.

“Insurance” shall mean (i) all insurance policies covering any or all of the
Collateral (regardless of whether the Notes Collateral Trustee is the loss payee
thereof) and (ii) any key man life insurance policies.

“Intellectual Property” shall mean, the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under the United States, multinational or foreign laws or otherwise, including
without limitation, Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks, Trademark Licenses, Trade Secrets, and Trade Secret Licenses, and
the right to sue or otherwise recover for any past, present and future
infringement, dilution, misappropriation, or other violation or impairment
thereof, including the right to receive all Proceeds therefrom, including
without limitation license fees, royalties, income, payments, claims, damages
and proceeds of suit, now or hereafter due and/or payable with respect thereto.

“Intellectual Property Security Agreement” shall mean each intellectual property
security agreement executed and delivered by the applicable Grantors,
substantially in the form set forth in Exhibit E, Exhibit F and Exhibit G, as
applicable.

“Intercreditor Agreement” shall have the meaning set forth in the recitals.

“Investment Accounts” shall mean the Collateral Account, Securities Accounts,
Commodity Accounts and Deposit Accounts.

“Investment Related Property” shall mean: (i) all “investment property” (as such
term is defined in Article 9 of the UCC) and (ii) all of the following
(regardless of whether classified as investment property under the UCC): all
Pledged Equity Interests, Pledged Debt, the Investment Accounts and certificates
of deposit.

“Issuer” shall have the meaning set forth in the preamble.

“Material Intellectual Property” shall mean any Intellectual Property included
in the Collateral that is material to the business of any Grantor or is
otherwise of material value.

“Notes” shall mean the $305,000,000 10.000% senior secured notes due 2019 issued
under the Indenture, and any other senior secured notes issued thereunder.

“North America ABL Agent” shall mean General Electric Capital Corporation, as
the agent under the North America ABL Credit Agreement.

“North America ABL Credit Agreement” shall have the meaning set forth in the
recitals.

 

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“North America ABL Priority Collateral” shall have the meaning assigned to such
term in the Intercreditor Agreement.

“North America ABL Obligations” shall have the meaning assigned to such term in
the Intercreditor Agreement.

“Notes Collateral Trustee” shall have the meaning set forth in the preamble.

“Notes Priority Collateral” shall have the meaning assigned to such term in the
Intercreditor Agreement.

“Obligations” means all obligations of every nature of each Grantor (including
obligations from time to time owed to the Trustee or the Notes Collateral
Trustee (including any former Trustee or Notes Collateral Trustee) or any holder
of Notes) under any Indenture Document and the Pari Passu Lien Obligations,
whether for principal, premium, interest (including interest which, but for the
filing of a petition in bankruptcy with respect to such Grantor, would have
accrued on any Obligation, whether or not a claim is allowed against such
Grantor for such interest in the related bankruptcy proceeding), fees, expenses,
indemnification or any other amount due thereunder.

“Patent Licenses” shall mean all agreements, licenses and covenants providing
for the granting of any right in or to any Patent or otherwise providing for a
covenant not to sue for infringement or other violation of any Patent (whether
such Grantor is licensee or licensor thereunder) including, without limitation,
each agreement required to be listed in Schedule 5.2(II) under the heading
“Patent Licenses” (as such schedule may be amended or supplemented from time to
time).

“Patents” shall mean all United States and foreign patents and certificates of
invention, or similar industrial property rights, and applications for any of
the foregoing, including, without limitation: (i) each patent and patent
application required to be listed in Schedule 5.2(II) under the heading
“Patents” (as such schedule may be amended or supplemented from time to time),
(ii) all reissues, divisions, continuations, continuations-in-part, extensions,
renewals, and reexaminations thereof, (iii) all patentable inventions and
improvements thereto, (iv) the right to sue or otherwise recover for any past,
present and future infringement or other violation thereof, (v) all Proceeds of
the foregoing, including, without limitation, license fees, royalties, income,
payments, claims, damages, and proceeds of suit now or hereafter due and/or
payable with respect thereto, and (vi) all other rights of any kind accruing
thereunder or pertaining thereto throughout the world.

“Pledge Supplement” shall mean any supplement to this Agreement in substantially
the form of Exhibit A.

“Pledged Debt” shall mean all indebtedness for borrowed money owed to any
Grantor, whether or not evidenced by any Instrument, including, without
limitation, all indebtedness described on Schedule 5.2(I) under the heading
“Pledged Debt” (as such schedule may be amended or supplemented from time to
time), issued by the obligors named therein, the instruments, if any, evidencing
any of the foregoing, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing.

 

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“Pledged Equity Interests” shall mean all Pledged Stock, Pledged LLC Interests,
Pledged Partnership Interests and any other participation or interests in any
equity or profits of any business entity owned by any Grantor including, without
limitation, any trust and all management rights relating to any entity whose
equity interests are included as Pledged Equity Interests.

“Pledged LLC Interests” shall mean all interests in any limited liability
company owned by any Grantor and each series thereof including, without
limitation, all limited liability company interests listed on Schedule 5.2(I)
under the heading “Pledged LLC Interests” (as such schedule may be amended or
supplemented from time to time) and the certificates, if any, representing such
limited liability company interests and any interest of such Grantor on the
books and records of such limited liability company or on the books and records
of any securities intermediary pertaining to such interest and all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such limited
liability company interests and all rights as a member of the related limited
liability company.

“Pledged Partnership Interests” shall mean all interests in any general
partnership, limited partnership, limited liability partnership or other
partnership owned by an Grantor including, without limitation, if included in
the Collateral, the Aleris IMSAMET Partnership Interest and all other
partnership interests listed on Schedule 5.2(I) under the heading “Pledged
Partnership Interests” (as such schedule may be amended or supplemented from
time to time) and the certificates, if any, representing such partnership
interests and any interest of such Grantor on the books and records of such
partnership or on the books and records of any securities intermediary
pertaining to such interest and all dividends, distributions, cash, warrants,
rights, options, instruments, securities and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such partnership interests and all rights as a
partner of the related partnership.

“Pledged Stock” shall mean all shares of Capital Stock of any corporation owned
by any Grantor included in the Collateral, including, without limitation, all
shares of Capital Stock described on Schedule 5.2(I) under the heading “Pledged
Stock” (as such schedule may be amended or supplemented from time to time), and
the certificates, if any, representing such shares and any interest of such
Grantor in the entries on the books of the issuer of such shares or on the books
of any securities intermediary pertaining to such shares, and all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.

“Pari Passu Lien Obligations” shall mean, without duplication, (i) all Pari
Passu Lien Obligations (as defined in the Collateral Trust Agreement) and
(ii) all Notes Obligations (as defined in the Indenture).

 

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“Pari Passu Lien Debt Document” shall have the meaning set forth in the
Collateral Trust Agreement.

“Pari Passu Lien Debt Representative” shall have the meaning set forth in the
Collateral Trust Agreement.

“Pari Passu Lien Secured Parties” shall have the meaning set forth in the
Collateral Trust Agreement.

“Receivables” shall mean all rights to payment, whether or not earned by
performance, for goods or other property sold, leased, licensed, assigned or
otherwise disposed of, or services rendered or to be rendered, including,
without limitation all such rights constituting or evidenced by any Account,
Chattel Paper, Instrument, General Intangible or Investment Related Property,
together with all of Grantor’s rights, if any, in any goods or other property
giving rise to such right to payment and all Collateral Support and Supporting
Obligations related thereto and all Receivables Records.

“Receivables Records” shall mean (i) all original copies of all documents,
instruments or other writings or electronic records or other Records evidencing
the Receivables, (ii) all books, correspondence, credit or other files, Records,
ledger sheets or cards, invoices, and other papers relating to Receivables,
including, without limitation, all tapes, cards, computer tapes, computer discs,
computer runs, record keeping systems and other papers and documents relating to
the Receivables, whether in the possession or under the control of Grantor or
any computer bureau or agent from time to time acting for Grantor or otherwise,
(iii) all evidences of the filing of financing statements and the registration
of other instruments in connection therewith, and amendments, supplements or
other modifications thereto, notices to other creditors, secured parties or
agents thereof, and certificates, acknowledgments, or other writings, including,
without limitation, lien search reports, from filing or other registration
officers, (iv) all credit information, reports and memoranda relating thereto
and (v) all other written or non-written forms of information related in any way
to the foregoing or any Receivable.

“Specified Assigned Agreement” shall mean the Acquisition Agreement, as such
agreement may be amended, supplemented or otherwise modified from time to time.

“Secured Obligations” shall have the meaning assigned in Section 3.1 hereof.

“Secured Parties” shall mean (a) the Notes Collateral Trustee, (b) each Holder,
(c) the Trustee, (c) each other Pari Passu Lien Secured Party and (d) the
successors, replacements and assigns of each of the foregoing, and shall
include, without limitation, all former Notes Collateral Trustees, Holders,
Trustees and the Pari Passu Lien Secured Party to the extent that any
Obligations owing to such Persons were incurred while such Persons were Notes
Collateral Trustee, Holder, Trustee or Pari Passu Lien Secured Party and such
Obligations have not been paid or satisfied in full.

“Securities Account Control Agreement” shall have the meaning set forth in
Section 4.2(a) hereof.

“Supplemental Indenture” shall have the meaning set forth in the recitals.

 

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“Trademark Licenses” shall mean any and all agreements, licenses and covenants
providing for the granting of any right in or to any Trademark or otherwise
providing for a covenant not to sue for infringement dilution or other violation
of any Trademark or permitting co-existence with respect to a Trademark (whether
such Grantor is licensee or licensor thereunder) including, without limitation,
each agreement required to be listed in Schedule 5.2(II) under the heading
“Trademark Licenses” (as such schedule may be amended or supplemented from time
to time).

“Trademarks” shall mean all United States, and foreign trademarks, trade names,
trade dress, corporate names, company names, business names, fictitious business
names, Internet domain names, service marks, certification marks, collective
marks, logos, other source or business identifiers, designs and general
intangibles of a like nature, whether or not registered, and with respect to any
and all of the foregoing: (i) all registrations and applications therefor
including, without limitation, the registrations and applications required to be
listed in Schedule 5.2(II) under the heading “Trademarks”(as such schedule may
be amended or supplemented from time to time), (ii) all extensions or renewals
of any of the foregoing, (iii) all of the goodwill of the business connected
with the use of and symbolized by any of the foregoing, (iv) the right to sue or
otherwise recover for any past, present and future infringement, dilution or
other violation of any of the foregoing or for any injury to the related
goodwill, (v) all Proceeds of the foregoing, including, without limitation,
license fees, royalties, income, payments, claims, damages, and proceeds of suit
now or hereafter due and/or payable with respect thereto, and (vi) all other
rights of any kind accruing thereunder or pertaining thereto throughout the
world.

“Trade Secret Licenses” shall mean any and all agreements providing for the
granting of any right in or to Trade Secrets (whether such Grantor is licensee
or licensor thereunder) including, without limitation, each agreement required
to be listed in Schedule 5.2(II) under the heading “Trade Secret Licenses” (as
such schedule may be amended or supplemented from time to time).

“Trade Secrets” shall mean all trade secrets and all other confidential or
proprietary information and know-how whether or not the foregoing has been
reduced to a writing or other tangible form, including all documents and things
embodying, incorporating, or referring in any way to the foregoing, and with
respect to any and all of the foregoing: (i) the right to sue or otherwise
recover for any past, present and future misappropriation or other violation
thereof, (ii) all Proceeds of the foregoing, including, without limitation,
license fees, royalties, income, payments, claims, damages, and proceeds of suit
now or hereafter due and/or payable with respect thereto; and (iii) all other
rights of any kind accruing thereunder or pertaining thereto throughout the
world.

“Trustee” shall have the meaning set forth in the recitals.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, however, that in the event that, by reason of
mandatory provisions of law, any or all of the perfection or priority of, or
remedies with respect to, any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of New
York, the term “UCC” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions hereof
relating to such perfection, priority or remedies.

 

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“ULC Legislation” shall have the meaning assigned in Section 13 hereof.

“United States” shall mean the United States of America.

“Unlimited Company” means any unlimited company, unlimited liability company or
unlimited liability corporation incorporated or otherwise constituted or
continued under the laws of the Province of Alberta, the Province of British
Columbia or the Province of Nova Scotia, or any similar body corporate or other
business entity formed under the laws of any other jurisdiction whose members,
shareholders or other equity holders are, or may at any time become, responsible
for any of the obligations of that entity whether such responsibility is to the
entity or any creditor of the entity or any other person.

“Unlimited Liability Securities” means securities, other equity interests or
security entitlements relating thereto in an Unlimited Company.

1.2 Definitions; Interpretation.

(a) In this Agreement, the following capitalized terms shall have the meaning
given to them in the UCC (and, if defined in more than one Article of the UCC,
shall have the meaning given in Article 9 thereof): Account, Account Debtor,
As-Extracted Collateral, Bank, Certificated Security, Chattel Paper, Commercial
Tort Claims, Commodity Account, Commodity Contract, Commodity Intermediary,
Consignee, Consignment, Consignor, Deposit Account, Document, Entitlement Order,
Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Health-Care-Insurance Receivable, Instrument, Inventory,
Investment Property, Letter of Credit Right, Manufactured Home, Money, Payment
Intangible, Proceeds, Record, Securities Account, Securities Intermediary,
Security Certificate, Security Entitlement, Supporting Obligations, Tangible
Chattel Paper and Uncertificated Security.

(b) All other capitalized terms used herein (including the preamble and recitals
hereto) and not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture. The incorporation by reference of terms defined in the
Indenture shall survive any termination of the Indenture until this Agreement is
terminated as provided in Section 11 hereof. Any of the terms defined herein
may, unless the context otherwise requires, be used in the singular or the
plural, depending on the reference. References herein to any Section, Appendix,
Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an
Exhibit, as the case may be, hereof unless otherwise specifically provided. The
use herein of the word “include” or “including”, when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not non-limiting language (such
as “without limitation” or “but not limited to” or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that fall within the broadest possible scope of such general
statement, term or matter. The terms lease and license shall include sub-lease
and sub-license, as applicable. If any conflict or inconsistency exists between
this Agreement and the Indenture, the Indenture shall govern. All references
herein to provisions of the UCC shall include all successor provisions under any
subsequent version or amendment to any Article of the UCC.

 

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1.3 Intercreditor Agreement and Collateral Trust Agreement. Notwithstanding
anything herein to the contrary, the lien and security interest granted to the
Notes Collateral Trustee pursuant to this Agreement and the exercise of any
right or remedy by Notes Collateral Trustee hereunder are subject to the
provisions of the Intercreditor Agreement and the Collateral Trust Agreement,
from time to time. In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern and control. In the event of any conflict between the
terms of the Collateral Trust Agreement and this Agreement, the terms of the
Collateral Trust Agreement shall govern and control.

 

SECTION 2. GRANT OF SECURITY.

2.1 Grant of Security. Each Grantor hereby grants to the Notes Collateral
Trustee, for the benefit of the Secured Parties, a security interest in and
continuing lien on all of such Grantor’s right, title and interest in, to and
under all personal property of such Grantor including, but not limited to the
following, in each case whether now or hereafter existing or in which any
Grantor now has or hereafter acquires an interest and wherever the same may be
located (all of which being hereinafter collectively referred to as the
“Collateral”):

(a) Accounts;

(b) Chattel Paper;

(c) Documents;

(d) General Intangibles;

(e) Goods (including, without limitation, Inventory and Equipment);

(f) Instruments;

(g) Insurance;

(h) Intellectual Property;

(i) Investment Related Property (including, without limitation, Deposit
Accounts);

(j) Letter of Credit Rights;

(k) Money;

(l) Receivables and Receivable Records;

(m) Commercial Tort Claims now or hereafter described on Schedule 5.2;

 

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(n) the Specified Assigned Agreement, including, without limitation, (i) all
rights of such Grantor to receive moneys due and to become due under or pursuant
to the Specified Assigned Agreement, (ii) all rights of such Grantor to receive
proceeds of any insurance, bond, indemnity, warranty or guaranty with respect to
the Specified Assigned Agreement, (iii) all claims of such Grantor for damages
arising out of or for breach of or default under the Specified Assigned
Agreement and (iv) all rights of such Grantor to terminate, amend, supplement,
modify or waive performance under the Specified Assigned Agreement, to perform
thereunder and to compel performance and otherwise to exercise all remedies
thereunder;

(o) to the extent not otherwise included above, all other personal property of
any kind and all Collateral Records, Collateral Support and Supporting
Obligations relating to any of the foregoing; and

(p) to the extent not otherwise included above, all Proceeds, products,
accessions, rents and profits of or in respect of any of the foregoing.

2.2 Certain Limited Exclusions. Notwithstanding anything herein to the contrary,
in no event shall the Collateral include or the security interest granted under
Section 2.1 hereof attach to

(a) any lease, license, contract or agreement to which any Grantor is a party,
and any of its rights or interest thereunder, if and to the extent that a
security interest is prohibited by or in violation of (i) any law, rule or
regulation applicable to such Grantor, or (ii) a term, provision or condition of
any such lease, license, contract or agreement (unless such law, rule,
regulation, term, provision or condition would be rendered ineffective with
respect to the creation of the security interest hereunder pursuant to Sections
9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law (including
the Bankruptcy Code) or principles of equity); provided however that the
Collateral shall include any such lease, license, contract or agreement, and any
of such Grantor’s rights or interest thereunder (and such security interest
shall attach) immediately at such time as the contractual or legal prohibition
shall no longer be applicable and to the extent severable, shall attach
immediately to any portion of such lease, license, contract or agreement not
subject to the prohibitions specified in (i) or (ii) above; provided further
that the exclusions referred to in clause (a) of this Section 2.2 shall not
include any Proceeds of any such lease, license, contract or agreement;

(b) in any of the outstanding Capital Stock of a First-Tier Foreign Subsidiary
in excess of 65% of the voting power of all classes of Capital Stock of such
First-Tier Foreign Subsidiary entitled to vote;

(c) any “intent-to-use” application for registration of a Trademark filed
pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, prior to the
filing of a “Statement of Use” pursuant to Section 1(d) of the Lanham Act or an
“Amendment to Allege Use” pursuant to Section 1(c) of the Lanham Act with
respect thereto, solely to the extent, if any, that, and solely during the
period, if any, in which, the grant of a security interest therein would impair
the validity or enforceability of any registration that issues from such
intent-to-use application under applicable federal law;

 

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(c) assets and properties of the Excluded Subsidiary;

(d) Capital Stock of the Excluded Subsidiary, to the extent the pledge of such
Capital Stock would violate the Excluded Subsidiary’s partnership agreement or
require the consent of Magna Aluminum, Inc., a California corporation. (or any
subsequent holder of such Capital Stock other than the Issuer and Guarantor)
that has not been obtained; or

(d) Excluded Accounts.

 

SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.

3.1 Security for Obligations. This Agreement secures, and the Collateral is
collateral security for, the prompt and complete payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, redemption, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor
provision thereof)), of all Obligations (the “Secured Obligations”).

3.2 Continuing Liability Under Collateral. Notwithstanding anything herein to
the contrary, (i) each Grantor shall remain liable for all obligations under the
Collateral and nothing contained herein is intended or shall be a delegation of
duties to the Notes Collateral Trustee or any other Secured Party, (ii) each
Grantor shall remain liable under each of the agreements included in the
Collateral, including, without limitation, any agreements relating to Pledged
Partnership Interests or Pledged LLC Interests, to perform all of the
obligations undertaken by it thereunder all in accordance with and pursuant to
the terms and provisions thereof and neither the Notes Collateral Trustee nor
any Secured Party shall have any obligation or liability under any of such
agreements by reason of or arising out of this Agreement or any other document
related thereto nor shall the Notes Collateral Trustee nor any Secured Party
have any obligation to make any inquiry as to the nature or sufficiency of any
payment received by it or have any obligation to take any action to collect or
enforce any rights under any agreement included in the Collateral, including,
without limitation, any agreements relating to Pledged Partnership Interests or
Pledged LLC Interests, and (iii) the exercise by the Notes Collateral Trustee of
any of its rights hereunder shall not release any Grantor from any of its duties
or obligations under the contracts and agreements included in the Collateral.

 

SECTION 4. CERTAIN PERFECTION REQUIREMENTS

4.1 Delivery Requirements.

(a) With respect to any Certificated Securities included in the Collateral, each
Grantor shall deliver to the Notes Collateral Trustee the Security Certificates
evidencing such Certificated Securities duly indorsed by an effective
indorsement (within the meaning of Section 8-107 of the UCC), or accompanied by
share transfer powers or other instruments of transfer duly endorsed by such an
effective endorsement, in each case, to the Notes Collateral Trustee or in
blank. In addition, each Grantor shall cause any certificates evidencing any
Pledged Equity Interests, including, without limitation, any Pledged Partnership
Interests or Pledged LLC Interests, to be similarly delivered to the Notes
Collateral Trustee regardless of whether such Pledged Equity Interests
constitute Certificated Securities.

 

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(b) With respect to any Instruments or Tangible Chattel Paper included in the
Collateral, each Grantor shall deliver all such Instruments or Tangible Chattel
Paper to the Notes Collateral Trustee or the North America ABL Agent, as
applicable, in accordance with the Intercreditor Agreement, duly indorsed in
blank.

4.2 Control Requirements.

(a) With respect to any Deposit Accounts, Securities Accounts, Security
Entitlements, Commodity Accounts and Commodity Contracts included in the
Collateral, each Grantor shall ensure that the Notes Collateral Trustee has
Control thereof. With respect to any Securities Accounts or Securities
Entitlements, such Control shall be accomplished by the Grantor causing the
Securities Intermediary maintaining such Securities Account or Security
Entitlement to enter into an agreement substantially in the form of Exhibit C
hereto (or such other agreement of that type, including an agreement to which
the North America ABL Agent is also a party) pursuant to which the Securities
Intermediary shall agree to comply with the Notes Collateral Trustee’s
Entitlement Orders without further consent by such Grantor (the “Securities
Account Control Agreement”). With respect to any Deposit Account, each Grantor
shall cause the depositary institution maintaining such account to enter into an
agreement substantially in the form of Exhibit D hereto (or such other agreement
of that type, including an agreement to which the North America ABL Agent is
also a party), pursuant to which the Bank shall agree to comply with the Notes
Collateral Trustee’s instructions with respect to disposition of funds in the
Deposit Account without further consent by such Grantor (the “Deposit Account
Control Agreement”). With respect to any Commodity Accounts or Commodity
Contracts each Grantor shall cause Control in favor of the Notes Collateral
Trustee (subject to the Intercreditor Agreement).

(b) With respect to any Uncertificated Security included in the Collateral
(other than any Unlimited Liability Securities or Uncertificated Securities
credited to a Securities Account), each Grantor shall cause the issuer of such
Uncertificated Security to either (i) register the Notes Collateral Trustee as
the registered owner thereof on the books and records of the issuer or
(ii) execute an agreement substantially in the form of Exhibit B hereto (or such
other agreement of that type, including an agreement to which the North America
ABL Agent is also a party), pursuant to which such issuer agrees to comply with
the Notes Collateral Trustee’s instructions with respect to such Uncertificated
Security without further consent by such Grantor.

(c) With respect to any material Letter of Credit Rights included in the
Collateral (other than any Letter of Credit Rights constituting a Supporting
Obligation for a Receivable in which the Notes Collateral Trustee has a valid
and perfected security interest), Grantor shall ensure that Notes Collateral
Trustee has Control thereof by obtaining the written consent of each issuer of
each related letter of credit to the assignment of the proceeds of such letter
of credit to the Notes Collateral Trustee or the North America ABL Agent, as
applicable, in accordance with the Intercreditor Agreement.

(d) With respect to any Electronic Chattel Paper or “transferable record”(as
that term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction) included in the
Collateral, Grantor shall ensure that the Notes Collateral Trustee has Control
thereof (subject to the Intercreditor Agreement).

 

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4.3 Intellectual Property Recording Requirements.

(a) In the case of any Collateral (whether now owned or hereafter acquired)
consisting of issued U.S. Patents and applications therefor, each Grantor shall
execute and deliver to the Notes Collateral Trustee a Patent Security Agreement
in substantially the form of Exhibit F hereto (or a supplement thereto) covering
all such Patents in appropriate form for recordation with the U.S. Patent and
Trademark Office with respect to the security interest of the Notes Collateral
Trustee.

(b) In the case of any Collateral (whether now owned or hereafter acquired)
consisting of registered U.S. Trademarks and applications therefor, each Grantor
shall execute and deliver to the Notes Collateral Trustee a Trademark Security
Agreement in substantially the form of Exhibit E hereto (or a supplement
thereto) covering all such Trademarks in appropriate form for recordation with
the U.S. Patent and Trademark Office with respect to the security interest of
the Notes Collateral Trustee.

(c) In the case of any Collateral (whether now owned or hereafter acquired)
consisting of registered U.S. Copyrights and exclusive Copyright Licenses in
respect of registered U.S. Copyrights for which any Grantor is the licensee,
each Grantor shall execute and deliver to the Notes Collateral Trustee a
Copyright Security Agreement in substantially the form of Exhibit G hereto (or a
supplement thereto) covering all such Copyrights and Copyright Licenses in
appropriate form for recordation with the U.S. Copyright Office with respect to
the security interest of the Notes Collateral Trustee.

4.4 Other Actions.

If any issuer of any Pledged Equity Interest is organized under a jurisdiction
outside of the United States, each Grantor shall take such additional customary
actions, including, without limitation, causing the issuer to register the
pledge on its books and records or making such filings or recordings, in each
case as may be necessary or advisable, under the laws of such issuer’s
jurisdiction to ensure the validity, perfection and priority of the security
interest of the Notes Collateral Trustee.

With respect to any Pledged Partnership Interests and Pledged LLC Interests
included in the Collateral, if the Grantors own less than 100% of the equity
interests in any issuer of such Pledged Partnership Interests or Pledged LLC
Interests, Grantors shall use their commercially reasonable efforts to obtain
the consent of each other holder of partnership interest or limited liability
company interests in such issuer to the security interest of the Notes
Collateral Trustee hereunder and following an Event of Default, the transfer of
such Pledged Partnership Interests and Pledged LLC Interests to the Notes
Collateral Trustee of its designee, and to the substitution of the Notes
Collateral Trustee or its designee as a partner or member with all the rights
and powers related thereto. Each Grantor consents to the grant by each other
Grantor of a Lien in all Investment Related Property to the Notes Collateral
Trustee and without limiting the generality of the foregoing consents to the
transfer of any Pledged Partnership Interest and any Pledged

 

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LLC Interest to the Notes Collateral Trustee or its designee following and
during the continuance of an Event of Default and to the substitution of the
Notes Collateral Trustee or its designee as a partner in any partnership or as a
member in any limited liability company with all the rights and powers related
thereto.

Each Grantor shall ensure that any Unlimited Liability Securities included in
the Collateral are Certificated Securities.

4.5 Timing and Notice. With respect to any Collateral in existence on the Issue
Date, each Grantor shall comply with the requirements of Section 4 on the date
hereof and, with respect to any Collateral hereafter owned or acquired, such
Grantor shall comply with such requirements within 20 (twenty) days of Grantor
acquiring rights therein. Each Grantor shall promptly inform the Notes
Collateral Trustee of its acquisition of any Collateral for which any action is
required by Section 4 hereof (including, for the avoidance of doubt, the filing
of any applications for, or the issuance or registration of, any Patents,
Copyrights or Trademarks).

 

SECTION 5. REPRESENTATIONS AND WARRANTIES.

Each Grantor hereby represents and warrants, on the date hereof and on the date
of each Collateral Trust Joinder (as defined in the Collateral Trust Agreement),
that:

5.1 Grantor Information and Status.

(a) Schedule 5.1(A) and (B) (as such schedule may be amended or supplemented
from time to time with notice to, but without any action by or consent required
from, the Notes Collateral Trustee) sets forth under the appropriate headings:
(1) the full legal name of such Grantor, (2) all trade names or other names
under which such Grantor currently conducts business, (3) the type of
organization of such Grantor, (4) the jurisdiction of organization of such
Grantor, (5) its organizational identification number, if any, and (6) the
jurisdiction where the chief executive office or its sole place of business (or
the principal residence if such Grantor is a natural person) is located.

(b) except as provided on Schedule 5.1(C), it has not changed its name,
jurisdiction of organization, chief executive office or sole place of business
(or principal residence if such Grantor is a natural person) or its corporate
structure in any way (e.g., by merger, consolidation, change in corporate form
or otherwise) and has not done business under any other name, in each case,
within the past five (5) years;

(c) it has not within the last five (5) years become bound (whether as a result
of merger or otherwise) as debtor under a security agreement entered into by
another Person, which has not heretofore been terminated;

(d) such Grantor has been duly organized and is validly existing as an entity of
the type as set forth opposite such Grantor’s name on Schedule 5.1(A) solely
under the laws of the jurisdiction as set forth opposite such Grantor’s name on
Schedule 5.1(A) and remains duly existing as such. Such Grantor has not filed
any certificates of dissolution or liquidation, any certificates of
domestication, transfer or continuance in any other jurisdiction; and

(e) no Grantor is a “transmitting utility” (as defined in Section 9-102(a)(80)
of the UCC).

 

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5.2 Collateral Identification, Special Collateral.

(a) Schedule 5.2 (as such schedule may be amended or supplemented from time to
time with notice to, but without any action by or consent required from, the
Notes Collateral Trustee) sets forth under the appropriate headings all of such
Grantor’s: (1) Pledged Equity Interests, (2) Pledged Debt, (3) Securities
Accounts, (5) Commodity Contracts and Commodity Accounts, (6) United States and
foreign registrations and issuances of and applications for Patents, Trademarks,
and Copyrights owned by each Grantor, (7) Patent Licenses, Trademark Licenses,
Trade Secret Licenses and Copyright Licenses constituting Material Intellectual
Property, (8) Commercial Tort Claims, (9) Letter of Credit Rights for letters of
credit, and (10) the name and address of any warehouseman, bailee or other third
party in possession of any Inventory, Equipment and other tangible personal
property;

(b) none of the Collateral constitutes, or is the Proceeds of, (1) Farm
Products, (2) As-Extracted Collateral, (3) Manufactured Homes,
(4) Health-Care-Insurance Receivables; (5) timber to be cut, or (6) aircraft,
aircraft engines, satellites, ships or railroad rolling stock. No material
portion of the collateral consists of motor vehicles or other goods subject to a
certificate of title statute of any jurisdiction;

(c) all information supplied by any Grantor with respect to any of the
Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects;

(d) not more than 10% of the value of all personal property included in the
Collateral is located in any country other than the United States; and

(e) no Excluded Asset is material to the business of such Grantor.

5.3 Ownership of Collateral and Absence of Other Liens.

(a) it owns the Collateral purported to be owned by it or otherwise has the
rights it purports to have in each item of Collateral and, as to all Collateral
whether now existing or hereafter acquired, developed or created (including by
way of lease or license), will continue to own or have such rights in each item
of the Collateral (except as otherwise permitted by the Indenture, any other
Pari Passu Lien Debt Document, the Collateral Trust Agreement and the
Intercreditor Agreement), in each case free and clear of any and all Liens,
rights or claims of all other Persons, including, without limitation, liens
arising as a result of such Grantor becoming bound (as a result of merger or
otherwise) as debtor under a security agreement entered into by another Person
other than, in the case of priority only, Liens on North America ABL Priority
Collateral securing North America ABL Obligations, Permitted Notes Collateral
Liens and Permitted Liens; and

(b) other than any financing statements filed in favor of the Notes Collateral
Trustee, no effective financing statement, fixture filing or other instrument
similar in effect under any applicable law covering all or any part of the
Collateral is on file in any filing or recording

 

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office except for (x) financing statements for which duly authorized proper
termination statements have been prepared for filing by the Grantor and
(y) financing statements filed in connection with Liens securing North America
ABL Obligations, Permitted Notes Collateral Liens and Permitted Liens. Other
than the Notes Collateral Trustee, the North America ABL Agent and any automatic
control in favor of a Bank, Securities Intermediary or Commodity Intermediary
maintaining a Deposit Account, Securities Account or Commodity Contract, no
Person is in Control of any Collateral.

5.4 Status of Security Interest.

(a) upon the filing of financing statements naming each Grantor as “debtor” and
the Notes Collateral Trustee as “secured party” and describing the Collateral in
the filing offices set forth opposite such Grantor’s name on Schedule 5.4 hereof
(as such schedule may be amended or supplemented from time to time), the
security interest of the Notes Collateral Trustee in all Collateral that can be
perfected by the filing of a financing statement under the Uniform Commercial
Code as in effect in any jurisdiction will constitute a valid, perfected, first
priority Lien in such Collateral, subject in the case of priority only, to any
Permitted Notes Collateral Liens, Permitted Liens, and Liens on North America
ABL Priority Collateral securing North America ABL Obligations. Each agreement
purporting to give the Notes Collateral Trustee Control over any Collateral is
effective to establish the Notes Collateral Trustee’s Control of the Collateral
subject thereto and the Intercreditor Agreement;

(b) to the extent perfection or priority of the security interest therein is not
subject to Article 9 of the UCC, upon recordation of the security interests
granted hereunder in registered Patents, registered Trademarks, registered
Copyrights and exclusive Copyright Licenses in the applicable intellectual
property registries, including but not limited to the United States Patent and
Trademark Office and the United States Copyright Office, the security interests
granted hereunder to the Notes Collateral Trustee hereunder shall constitute
valid, perfected, first priority Liens (subject, in the case of priority only,
to Permitted Notes Collateral Liens, Permitted Liens and Liens on North America
ABL Priority Collateral securing North America ABL Obligations);

(c) no authorization, consent, approval or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body or any other Person
is required for either (i) the pledge or grant by any Grantor of the Liens
purported to be created in favor of the Notes Collateral Trustee hereunder or
(ii) subject to the Intercreditor Agreement and the Collateral Trust Agreement,
the exercise by Notes Collateral Trustee of any rights or remedies in respect of
any Collateral (whether specifically granted or created hereunder or created or
provided for by applicable law), except (A) for the filings contemplated by
clause (a) and clause (b) above, and (B) as may be required, in connection with
the disposition of any Investment Related Property, by laws generally affecting
the offering and sale of Securities; and

(d) each Grantor is in compliance with its obligations under Section 4 hereof.

 

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5.5 Goods and Receivables.

(a) each Receivable (a) is and will be the legal, valid and binding obligation
of the Account Debtor in respect thereof, representing an unsatisfied obligation
of such Account Debtor, (b) is and will be enforceable in accordance with its
terms, (c) to the best of the knowledge of each Grantor, is not and will not be
subject to any credits, rights of recoupment, setoffs, defenses, taxes,
counterclaims (except with respect to refunds, returns and allowances in the
ordinary course of business with respect to damaged merchandise) and (d) to the
best of the knowledge of each Grantor, is and will be in compliance with all
applicable laws, whether federal, state, local or foreign;

(b) none of the Account Debtors in respect of any Receivable is the government
of the United States, any agency or instrumentality thereof, any state or
municipality or any foreign sovereign. No Receivable requires the consent of the
Account Debtor in respect thereof in connection with the security interest
hereunder, except any consent which has been obtained;

(c) no Goods now or hereafter produced by any Grantor and included in the
Collateral have been or will be produced in violation of the requirements of the
Fair Labor Standards Act, as amended, or the rules and regulations promulgated
thereunder; and

(d) other than any Inventory or Equipment in transit, all of the Equipment and
Inventory included in the Collateral is located only at the locations specified
in Schedule 5.5 (as such schedule may be amended or supplemented from time to
time).

5.6 Pledged Equity Interests, Investment Related Property.

(a) it is the record and beneficial owner of the Pledged Equity Interests free
of all Liens, rights or claims of other Persons (other than, subject to the
Intercreditor Agreement, the North America ABL Agent) and the Permitted Notes
Collateral Liens and there are no outstanding warrants, options or other rights
to purchase, or shareholder, voting trust or similar agreements outstanding with
respect to, or property that is convertible into, or that requires the issuance
or sale of, any Pledged Equity Interests;

(b) except with respect to the pledge of the Aleris IMSAMET Partnership
Interest, no consent of any Person, including any other general or limited
partner, any other member of a limited liability company, any other shareholder
or any other trust beneficiary, is necessary or desirable in connection with the
creation, perfection or first priority status of the security interest of the
Notes Collateral Trustee in any Pledged Equity Interests or the exercise by the
Notes Collateral Trustee of the voting or other rights provided for in this
Agreement or the exercise of remedies in respect thereof except such as have
been obtained; and

(c) all of the Pledged LLC Interests (other than the Pledged LLC interests in
First-Tier Foreign Subsidiaries) and Pledged Partnership Interests (other than
the Aleris IMSAMET Partnership Interest) represent interests that by their terms
provide that they are securities governed by the uniform commercial code of an
applicable jurisdiction.

(d) The Aleris IMSAMET Partnership Interest does not represent interest (1) that
by its terms provides that it is securities governed by the uniform commercial
code of an applicable jurisdiction, (2) that is dealt in or traded on securities
exchanges or markets or (3) in issuers that are registered as investment
companies.

 

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5.7 Intellectual Property.

(a) it is the sole and exclusive owner of the entire right, title, and interest
in and to all Intellectual Property listed on Schedule 5.2(II) (as such schedule
may be amended or supplemented from time to time), and owns or has the valid
right to use and, where such Grantor does so, sublicense others to use, all
other Intellectual Property used in or necessary to conduct its business, free
and clear of all Liens, claims and licenses, except for, in the case of priority
only, Permitted Notes Collateral Liens, Permitted Liens, Liens on North America
ABL Priority Collateral securing North America ABL Obligations and the licenses
set forth on Schedule 5.2(II) (as such schedule may be amended or supplemented
from time to time);

(b) all Material Intellectual Property of such Grantor is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, nor, in the case of
Patents, is any of the Intellectual Property of such Grantor the subject of a
reexamination proceeding, and except as set forth on Schedule 5.2(II), such
Grantor has performed all acts and has paid all renewal, maintenance, and other
fees and taxes required to maintain each and every registration and application
of Copyrights, Patents and Trademarks of such Grantor constituting Material
Intellectual Property in full force and effect;

(c) no holding, decision, ruling, or judgment has been rendered in any action or
proceeding before any court or administrative authority challenging the
validity, enforceability, or scope of, or such Grantor’s right to register, own
or use, any Intellectual Property of such Grantor, and no such action or
proceeding is pending or, to the best of such Grantor’s knowledge, threatened;

(d) all registrations, issuances and applications for Copyrights, Patents and
Trademarks of such Grantor are standing in the name of such Grantor, and none of
the Trademarks, Patents, Copyrights or Trade Secrets owned by such Grantor has
been licensed by such Grantor to any Affiliate or third party, except as
disclosed in Schedule 5.2(II) (as such schedule may be amended or supplemented
from time to time), and all exclusive Copyright Licenses constituting Material
Intellectual Property respect of registered Copyrights have been properly
recorded in the U.S. Copyright Office or, where appropriate, any foreign
counterpart;

(e) all Copyrights owned by such Grantor that are material to the business of
such Grantor or are otherwise of material value have been registered with the
United States Copyright Office or, where appropriate, any foreign counterpart.

(f) such Grantor has not made a previous assignment, sale, transfer, exclusive
license, or similar arrangement constituting a present or future assignment,
sale, transfer, exclusive license or similar arrangement of any Material
Intellectual Property that has not been terminated or released;

(g) such Grantor has been using appropriate statutory notice of registration in
connection with its use of the Material Intellectual Property owned by such
Grantor to the extent necessary to protect such Material Intellectual Property;

 

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(h) such Grantor has taken commercially reasonable steps to protect the
confidentiality of its Trade Secrets in accordance with industry standards;

(i) such Grantor controls the nature and quality in accordance with industry
standards of all products sold and all services rendered under or in connection
with all Trademarks of such Grantor, in each case consistent with industry
standards, and has taken all action necessary to insure that all licensees of
the Trademarks owned by such Grantor comply with such Grantor’s standards of
quality, in each case, to the extent constituting Material Intellectual
Property;

(j) the conduct of such Grantor’s business does not infringe, misappropriate,
dilute or otherwise violate any Intellectual Property right of any other Person;
no claim has been made that the use of any Material Intellectual Property owned
or used by such Grantor (or any of its respective licensees) infringes,
misappropriates, dilutes or otherwise violates the asserted rights of any other
Person, and no demand that such Grantor enter into a license or co-existence
agreement has been made but not resolved;

(k) to the best of such Grantor’s knowledge, no Person is infringing,
misappropriating, diluting or otherwise violating any rights in any Material
Intellectual Property owned, licensed or used by such Grantor, including any
such Material Intellectual Property licensed by such Grantor to any of its
licensees; and

(l) no settlement or consents, covenants not to sue, co-existence agreements,
non-assertion assurances, or releases have been entered into by such Grantor or
bind such Grantor in a manner that could adversely affect such Grantor’s rights
to own, license or use any Material Intellectual Property.

 

SECTION 6. COVENANTS AND AGREEMENTS.

Each Grantor hereby covenants and agrees that:

6.1 Grantor Information and Status.

(a) Without limiting any prohibitions or restrictions on mergers or other
transactions set forth in the Indenture or any other Pari Passu Lien Debt
Document, it shall not change such Grantor’s name, identity, corporate structure
(e.g. by merger, consolidation, change in corporate form or otherwise), sole
place of business (or principal residence if such Grantor is a natural person),
chief executive office, organizational identification number, type of
organization or jurisdiction of organization or establish any trade names unless
it shall have (a) notified the Notes Collateral Trustee in writing at least
thirty (30) days (or five (5) Business Days in the case of name changes required
to be implemented pursuant to the Acquisition Agreement within 90 days after the
Closing Date and one (1) Business Day in the case of the amalgamation of Real
Alloy Canada Company and Aleris Specification Alloy Products Canada Company as
one company under the name Real Alloy Canada Ltd. and the merger of Real Alloy
Mexico S. de R.L. de C.V. with Aleris Nuevo Leon S. de R.L. de C.V, with Real
Alloy Mexico S. de R.L. de C.V. surviving the merger under the name of Real
Alloy Mexico S. de R.L. de C.V.) prior to any such change or establishment,
identifying such new proposed name, identity, corporate structure, sole place of
business (or principal residence if such Grantor is a natural person), chief
executive

 

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office, jurisdiction of organization or trade name and providing such other
information in connection therewith as the Notes Collateral Trustee may
reasonably request and (b) taken all actions necessary or advisable to maintain
the continuous validity, perfection and the same or better priority of the Notes
Collateral Trustee’s security interest in the Collateral granted or intended to
be granted and agreed to hereby, which in the case of any merger or other change
in corporate structure shall include, without limitation, executing and
delivering to the Notes Collateral Trustee a completed Pledge Supplement
together with all Supplements to Schedules thereto (with notice to but without
any action by the Notes Collateral Trustee), upon completion of such merger or
other change in corporate structure confirming the grant of the security
interest hereunder.

6.2 Collateral Identification; Special Collateral.

(a) in the event that it hereafter acquires any Collateral of a type described
in Section 5.2(b) hereof, it shall promptly notify the Notes Collateral Trustee
thereof in writing and take such actions and execute such documents and make
such filings all at Grantor’s expense as may be necessary, or as the Notes
Collateral Trustee may reasonably request in order to ensure that the Notes
Collateral Trustee has a valid, perfected, first priority security interest in
such Collateral, subject in the case of priority only to the Permitted Notes
Collateral Liens, Permitted Liens and Liens on North America ABL Priority
Collateral securing North America ABL Obligations. Notwithstanding the
foregoing, no Grantor shall be required to notify the Notes Collateral Trustee
or take any such action unless such Collateral is of a material value or is
material to such Grantor’s business.

(b) in the event that it hereafter acquires or has any Commercial Tort Claim it
shall deliver to the Notes Collateral Trustee a completed Pledge Supplement
together with all Supplements to Schedules thereto (with notice to but without
any action by or consent from the Notes Collateral Trustee), identifying such
new Commercial Tort Claims.

6.3 Ownership of Collateral and Absence of Other Liens.

(a) except for the security interest created by this Agreement, it shall not
create or suffer to exist any Lien upon or with respect to any of the
Collateral, other than Permitted Notes Collateral Liens, Permitted Liens and,
subject to the Intercreditor Agreement, Liens securing North America ABL
Obligations, and such Grantor shall defend the Collateral against all Persons at
any time claiming any interest therein;

(b) upon such Grantor or any officer of such Grantor obtaining knowledge
thereof, it shall promptly notify the Notes Collateral Trustee in writing of any
event that may have a material adverse effect on the value of the Collateral or
any portion thereof, the ability of any Grantor or the Notes Collateral Trustee
to dispose of the Collateral or any portion thereof, or the rights and remedies
of the Notes Collateral Trustee in relation thereto, including, without
limitation, the levy of any legal process against the Collateral or any portion
thereof; and

(c) it shall not sell, transfer or assign (by operation of law or otherwise) or
exclusively license to another Person any Collateral except as otherwise
permitted by the Indenture, any other Pari Passu Lien Debt Document, the
Collateral Trust Agreement or the Intercreditor Agreement.

 

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6.4 Status of Security Interest.

(a) subject to the limitations set forth in subsection (b) of this Section 6.4,
each Grantor shall maintain the security interest of the Notes Collateral
Trustee hereunder in all Collateral as valid, perfected, first priority Liens
(subject, in the case of priority only, to the Permitted Notes Collateral Liens,
Permitted Liens and Liens on North America ABL Priority Collateral securing
North America ABL Obligations).

(b) notwithstanding the foregoing, no Grantor shall be required to take any
action to perfect any Collateral that can only be perfected by (i) Control,
(ii) foreign filings with respect to Intellectual Property, or (iii) filings
with registrars of motor vehicles or similar governmental authorities with
respect to goods covered by a certificate of title, in each case except as and
to the extent specified in Section 4 hereof.

6.5 Goods and Receivables.

(a) it shall not deliver any Document evidencing any Equipment and Inventory to
any Person other than the issuer of such Document to claim the Goods evidenced
therefor, the Notes Collateral Trustee or the North America ABL Agent, as
applicable, in accordance with the Intercreditor Agreement;

(b) if any Equipment or Inventory is in possession or control of any
warehouseman, bailee or other third party (other than a Consignee under a
Consignment for which such Grantor is the Consignor), each Grantor shall notify
the third party of the Notes Collateral Trustee’s security interests and
obtaining an acknowledgment from the third party that it is holding the
Equipment and Inventory for the benefit of the Notes Collateral Trustee, and
will permit the Notes Collateral Trustee to have access to Equipment or
Inventory for purposes of inspecting such Collateral or, following an Event of
Default and subject to the Intercreditor Agreement, to remove same from such
premises if the Notes Collateral Trustee so elects; and with respect to any
Goods subject to a Consignment for which such Grantor is the Consignor, Grantor
shall file appropriate financing statements against the Consignee and take such
other action as may be necessary to ensure that the Grantor has a first priority
perfected security interest in such Goods.

(c) it shall keep and maintain at its own cost and expense satisfactory and
complete records of the Receivables, including, but not limited to, the
originals of all documentation with respect to all Receivables and records of
all payments received and all credits granted on the Receivables, all
merchandise returned and all other dealings therewith;

(d) other than in the ordinary course of business (i) it shall not amend,
modify, terminate or waive any provision of any Receivable in any manner which
could reasonably be expected to have a material adverse effect on the value of
such Receivable; (ii) following and during the continuation of an Event of
Default, such Grantor shall not (w) grant any extension or renewal of the time
of payment of any Receivable, (x) compromise or settle any dispute, claim or
legal proceeding with respect to any Receivable for less than the total unpaid
balance thereof, (y) release, wholly or partially, any Person liable for the
payment thereof, or (z) allow any credit or discount thereon; and

 

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(e) the Notes Collateral Trustee shall have the right, subject to the
Intercreditor Agreement, at any time after the occurrence of an Event of Default
to notify, or require any Grantor to notify, any Account Debtor of the Notes
Collateral Trustee’s security interest in the Receivables and any Supporting
Obligation and, in addition, the Notes Collateral Trustee may, subject to the
Intercreditor Agreement: (i) direct the Account Debtors under any Receivables to
make payment of all amounts due or to become due to such Grantor thereunder
directly to the Notes Collateral Trustee; (ii) notify, or require any Grantor to
notify, each Person maintaining a lockbox or similar arrangement to which
Account Debtors under any Receivables have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to the Notes Collateral Trustee; and (iii) enforce, at the expense of
such Grantor, collection of any such Receivables and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. If the Notes Collateral Trustee notifies
any Grantor that it has elected to collect the Receivables in accordance with
the preceding sentence, any payments of Receivables received by such Grantor
shall be forthwith (and in any event within two (2) Business Days) deposited by
such Grantor in the exact form received, duly indorsed by such Grantor to the
Notes Collateral Trustee, if required, in the Collateral Account maintained
under the sole dominion and control of the Notes Collateral Trustee, and until
so turned over, all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Receivables, any
Supporting Obligation or Collateral Support shall be received in trust for the
benefit of the Notes Collateral Trustee hereunder and shall be segregated from
other funds of such Grantor and such Grantor shall not adjust, settle or
compromise the amount or payment of any Receivable, or release wholly or partly
any Account Debtor or obligor thereof, or allow any credit or discount thereon.

6.6 Pledged Equity Interests, Investment Related Property.

(a) except as provided in the next sentence, in the event such Grantor receives
any dividends, interest or distributions on any Pledged Equity Interest or other
Investment Related Property, upon the merger, consolidation, liquidation or
dissolution of any issuer of any Pledged Equity Interest or Investment Related
Property, then (a) such dividends, interest or distributions and securities or
other property shall be included in the definition of Collateral without further
action and (b) such Grantor shall immediately take all steps, if any, necessary
or advisable to ensure the validity, perfection, priority of the Notes
Collateral Trustee’s Liens granted hereby (and, if applicable, control of the
Notes Collateral Trustee) over such Investment Related Property subject to the
Intercreditor Agreement (including, without limitation, delivery thereof to the
Notes Collateral Trustee) and pending any such action such Grantor shall be
deemed to hold such dividends, interest, distributions, securities or other
property in trust for the benefit of the Notes Collateral Trustee and shall
segregate such dividends, distributions, Securities or other property from all
other property of such Grantor. Notwithstanding the foregoing, so long as no
Event of Default shall have occurred and be continuing, the Notes Collateral
Trustee authorizes each Grantor to retain all ordinary cash dividends and
distributions paid in the normal course of the business of the issuer and
consistent with the past practice of the issuer and all scheduled payments of
interest;

 

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(b) Voting.

(i) so long as no Event of Default shall have occurred and be continuing, except
as otherwise provided under the covenants and agreements relating to Investment
Related Property in this Agreement or elsewhere herein or in the Indenture, any
other Pari Passu Lien Debt Document or the Intercreditor Agreement, each Grantor
shall be entitled to exercise or refrain from exercising any and all voting and
other consensual rights pertaining to the Investment Related Property or any
part thereof for any purpose not inconsistent with the terms of this Agreement,
the Indenture, any other Pari Passu Lien Document or the Intercreditor
Agreement; provided, that no Grantor shall exercise or refrain from exercising
any such right if such action would have a material adverse effect on the value
of the Investment Related Property or any part thereof; it being understood,
however, that neither the voting by such Grantor of any Pledged Stock for, or
such Grantor’s consent to, the election of directors (or similar governing body)
at a regularly scheduled annual or other meeting of stockholders or with respect
to incidental matters at any such meeting, nor such Grantor’s consent to or
approval of any action otherwise permitted under this Agreement, the
Intercreditor Agreement, the Indenture and any other Pari Passu Lien Debt
Document, shall be deemed inconsistent with the terms of this Agreement, the
Intercreditor Agreement, the Indenture or any other Pari Passu Lien Debt
Document within the meaning of this Section 6.6(b)(i) and no notice of any such
voting or consent need be given to the Notes Collateral Trustee; and

(ii) Upon the occurrence and during the continuation of an Event of Default and
upon two (2) Business Days prior written notice from the Notes Collateral
Trustee to such Grantor of the Notes Collateral Trustee’s intention to exercise
such rights:

(1) all rights of each Grantor to exercise or refrain from exercising the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant hereto shall cease and all such rights shall thereupon become vested in
the Notes Collateral Trustee who shall thereupon have the sole right (but shall
not be required) to exercise such voting and other consensual rights (in each
case, subject to the Intercreditor Agreement); and

(2) in order to permit the Notes Collateral Trustee to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions which it may be entitled to
receive hereunder (in each case, subject to the Intercreditor Agreement):
(1) each Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to the Notes Collateral Trustee all proxies, dividend payment orders
and other instruments as the Notes Collateral Trustee may from time to time
reasonably request and (2) each Grantor acknowledges that the Notes Collateral
Trustee may utilize the power of attorney set forth in Section 8.1.

(c) except as expressly permitted by the Indenture, any other Pari Passu Lien
Debt Document and the Intercreditor Agreement, it shall not vote to enable or
take any other action to: (i) amend or terminate any partnership agreement,
limited liability company

 

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agreement, certificate of incorporation, by-laws or other organizational
documents in any way that materially changes the rights of such Grantor with
respect to any Investment Related Property or adversely affects the validity,
perfection or priority of the Notes Collateral Trustee’s security interest,
(ii) permit any issuer of any Pledged Equity Interest to issue any additional
stock, partnership interests, limited liability company interests or other
equity interests of any nature or to issue securities convertible into or
granting the right of purchase or exchange for any stock or other equity
interest of any nature of such issuer, (iii) other than as permitted under the
Indenture and any other Pari Passu Lien Debt Document, permit any issuer of any
Pledged Equity Interest to dispose of all or a material portion of their assets,
(iv) waive any default under or breach of any terms of organizational document
relating to the issuer of any Pledged Equity Interest or the terms of any
Pledged Debt, or (v) cause any issuer of any Pledged Partnership Interests or
Pledged LLC Interests which are not securities (for purposes of the UCC) on the
date hereof to elect or otherwise take any action to cause such Pledged
Partnership Interests or Pledged LLC Interests to be treated as securities for
purposes of the UCC; provided, however, notwithstanding the foregoing, if any
issuer of any Pledged Partnership Interests or Pledged LLC Interests takes any
such action in violation of the foregoing in this clause (c), such Grantor shall
promptly notify the Notes Collateral Trustee in writing of any such election or
action and, in such event, shall take all steps necessary or advisable to ensure
the validity, perfection and priority of the Notes Collateral Trustee’s Liens
purported to be granted hereby (or establish “control” of the Notes Collateral
Trustee) over such Investment Related Property (subject to the Intercreditor
Agreement).

(d) except as expressly permitted by the Indenture, any other Pari Passu Lien
Debt Document and the Intercreditor Agreement, it shall not permit any issuer of
any Pledged Equity Interest to merge or consolidate unless (i) such issuer
creates a security interest that is perfected by a filed financing statement
(that is not effective solely under section 9-508 of the UCC) in collateral in
which such new debtor has or acquires rights, (ii) all the outstanding capital
stock or other equity interests of the surviving or resulting corporation,
limited liability company, partnership or other entity is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding equity interests of any other
constituent Grantor; provided that if the surviving or resulting Grantors upon
any such merger or consolidation involving an issuer which is a Foreign
Subsidiary, then such Grantor shall only be required to pledge equity interests
in accordance with Section 2.2 and (iii) Grantor promptly complies with the
delivery and control requirements of Section 4 hereof.

6.7 Intellectual Property.

(a) it shall not do any act or omit to do any act whereby any of the Material
Intellectual Property may lapse, or become abandoned, canceled, dedicated to the
public, forfeited, unenforceable or otherwise impaired, or which would adversely
affect the validity, grant, or enforceability of the security interest granted
therein;

(b) it shall not, with respect to any Trademarks constituting Material
Intellectual Property, cease the use of any of such Trademarks or fail to
maintain the level of the quality of products sold and services rendered under
any of such Trademark at a level at least substantially consistent with the
quality of such products and services as of the date hereof, and such Grantor
shall take all steps necessary to ensure that licensees of such Trademarks use
such consistent standards of quality;

 

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(c) it shall, (i) within sixty (60) days of the acquisition of any exclusive
license of any registered Copyright that is material to the business of such
Grantor or otherwise of material value, record such license in the United States
Copyright Office, or where appropriate, any foreign counterpart and (ii) within
sixty (60) days of the creation or acquisition of any copyrightable work that is
material to the business of such Grantor or otherwise of material value, apply
to register the Copyright in the United States Copyright Office or, where
appropriate, any foreign counterpart;

(d) it shall promptly notify the Notes Collateral Trustee if it knows or has
reason to know that any item of the registered Intellectual Property or Material
Intellectual Property may become (i) abandoned or dedicated to the public or
placed in the public domain, (ii) invalid or unenforceable, (iii) subject to any
adverse determination or development regarding such Grantor’s ownership,
registration or use or the validity or enforceability of such item of
Intellectual Property (including the institution of, or any adverse development
with respect to, any action or proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, any state registry, any
foreign counterpart of the foregoing, or any court) or (iv) the subject of any
reversion or termination rights;

(e) it shall take all reasonable steps, including in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office,
any state registry or any foreign counterpart of the foregoing, to pursue any
application and maintain any registration or issuance of each Trademark, Patent,
and Copyright owned by or exclusively licensed to any Grantor and constituting
Material Intellectual Property, including, but not limited to, those items on
Schedule 5.2(II) (as such schedule may be amended or supplemented from time to
time);

(f) it shall use best efforts so as not to permit the inclusion in any contract
to which it hereafter becomes a party of any provision that could or may in any
way materially impair or prevent the creation of a security interest in, or the
assignment of, such Grantor’s rights and interests in any property included
within the definitions of any Intellectual Property acquired under such
contracts;

(g) in the event that any Material Intellectual Property owned by or exclusively
licensed to any Grantor is infringed, misappropriated, diluted or otherwise
violated by a third party, such Grantor shall promptly take all reasonable
actions (in the case of Intellectual Property exclusively licensed to a Grantor,
solely to the extent that the terms of such license permit such actions) to stop
such infringement, misappropriation, dilution or other violation and protect its
rights in such Intellectual Property including, but not limited to, the
initiation of a suit for injunctive relief and to recover damages;

(h) it shall take all steps reasonably necessary to protect the secrecy of all
Trade Secrets, including, without limitation, entering into confidentiality
agreements with employees and consultants and labeling and restricting access to
secret information and documents;

 

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(i) it shall use proper statutory notice in connection with its use of any of
the Intellectual Property; and

(j) it shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor in respect of the Material Intellectual Property or
any portion thereof. In connection with such collections, such Grantor may take
(and, at the Notes Collateral Trustee’s reasonable direction, shall take) such
action as such Grantor may deem reasonably necessary or advisable to enforce
collection of such amounts. Notwithstanding the foregoing, the Notes Collateral
Trustee shall have the right at any time, to notify, or require any Grantor to
notify, any obligors with respect to any such amounts of the existence of the
security interest created hereby.

 

SECTION 7. FURTHER ASSURANCES; ADDITIONAL GRANTORS.

7.1 Further Assurances.

(a) Subject to the Intercreditor Agreement and the Collateral Trust Agreement,
each Grantor agrees that from time to time, at the expense of such Grantor, that
it shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the Notes
Collateral Trustee may reasonably request, in order to create and/or maintain
the validity, perfection or priority of and protect any security interest
granted or purported to be granted hereby or to enable the Notes Collateral
Trustee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral. Without limiting the generality of the foregoing, each
Grantor (subject to the Intercreditor Agreement and the Collateral Trust
Agreement):

(i) authorizes the Notes Collateral Trustee to file such financing or
continuation statements, or amendments thereto, record security interests in
Intellectual Property and execute and deliver such other agreements,
instruments, endorsements, powers of attorney or notices, as may be necessary or
desirable, or as the Notes Collateral Trustee may reasonably request, in order
to effect, reflect, perfect and preserve the security interests granted or
purported to be granted hereby;

(ii) authorizes the Notes Collateral Trustee to take all actions necessary to
ensure the recordation of appropriate evidence of the liens and security
interest granted hereunder in any Intellectual Property with any intellectual
property registry in which said Intellectual Property is registered or issued or
in which an application for registration or issuance is pending, including,
without limitation, the United States Patent and Trademark Office, the United
States Copyright Office, the various Secretaries of State, and the foreign
counterparts on any of the foregoing;

(iii) subject to the Intercreditor Agreement and the Collateral Trust Agreement,
at any reasonable time, upon request by the Notes Collateral Trustee, shall
assemble the Collateral and allow inspection of the Collateral by the Notes
Collateral Trustee, or persons designated by the Notes Collateral Trustee;

 

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(iv) at the Notes Collateral Trustee’s request, shall appear in and defend any
action or proceeding that may affect such Grantor’s title to or the Notes
Collateral Trustee’s security interest in all or any part of the Collateral; and

(v) shall furnish the Notes Collateral Trustee with such information regarding
the Collateral, including, without limitation, the location thereof, as the
Notes Collateral Trustee may reasonably request from time to time.

(b) Each Grantor hereby authorizes the Notes Collateral Trustee to file a Record
or Records, including, without limitation, financing or continuation statements,
Intellectual Property Security Agreements and amendments and supplements to any
of the foregoing, in any jurisdictions and with any filing offices as the Notes
Collateral Trustee may determine, in its sole discretion, are necessary or
advisable to perfect or otherwise protect the security interest granted to the
Notes Collateral Trustee herein. Such financing statements may describe the
Collateral in the same manner as described herein or may contain an indication
or description of collateral that describes such property in any other manner as
the Notes Collateral Trustee may determine, in its sole discretion, is
necessary, advisable or prudent to ensure the perfection of the security
interest in the Collateral granted to the Notes Collateral Trustee herein,
including, without limitation, describing such property as “all assets, whether
now owned or hereafter acquired, developed or created” or words of similar
effect. Each Grantor shall furnish to the Notes Collateral Trustee from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Notes Collateral
Trustee may reasonably request, all in reasonable detail.

(c) Each Grantor hereby authorizes the Notes Collateral Trustee to modify this
Agreement after obtaining such Grantor’s approval of or signature to such
modification by amending Schedule 5.2 (as such schedule may be amended or
supplemented from time to time) to include reference to any right, title or
interest in any existing Intellectual Property or any Intellectual Property
acquired or developed by any Grantor after the execution hereof or to delete any
reference to any right, title or interest in any Intellectual Property in which
any Grantor no longer has or claims any right, title or interest.

7.2 Additional Grantors. From time to time subsequent to the date hereof,
additional Persons may become parties hereto as additional Grantors (each, an
“Additional Grantor”), by executing a Pledge Supplement, with notice to, but
without further action by or consent required from, the Notes Collateral
Trustee. Upon delivery of any such Pledge Supplement to the Notes Collateral
Trustee, notice of which is hereby waived by Grantors, each Additional Grantor
shall be a Grantor and shall be as fully a party hereto as if Additional Grantor
were an original signatory hereto. Each Grantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of Notes
Collateral Trustee not to cause any Subsidiary of the Issuer, Holdings or any
Subsidiary Guarantor to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.

 

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SECTION 8. NOTES COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT.

8.1 Power of Attorney. Each Grantor hereby irrevocably appoints the Notes
Collateral Trustee (such appointment being coupled with an interest) as such
Grantor’s attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, the Notes Collateral Trustee or
otherwise, from time to time in the Notes Collateral Trustee’s discretion to
take any action and to execute any instrument that the Notes Collateral Trustee
may deem reasonably necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, the following (but subject, in each
case, to the Intercreditor Agreement and the Collateral Trust Agreement):

(a) upon the occurrence and during the continuance of any Event of Default, to
obtain and adjust insurance required to be maintained by such Grantor or paid to
the Notes Collateral Trustee pursuant to the Indenture or any other Pari Passu
Lien Debt Document;

(b) upon the occurrence and during the continuance of any Event of Default, to
ask for, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;

(c) upon the occurrence and during the continuance of any Event of Default, to
receive, endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (b) above;

(d) upon the occurrence and during the continuance of any Event of Default, to
file any claims or take any action or institute any proceedings that the Notes
Collateral Trustee may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Notes Collateral
Trustee with respect to any of the Collateral;

(e) to prepare and file any UCC financing statements against such Grantor as
debtor;

(f) to prepare, sign, and file for recordation in any intellectual property
registry, appropriate evidence of the lien and security interest granted herein
in any Intellectual Property in the name of such Grantor as debtor;

(g) to take or cause to be taken all actions necessary to perform or comply or
cause performance or compliance with the terms of this Agreement, including,
without limitation, access to pay or discharge taxes or Liens (other than Liens
securing North America ABL Obligations, Permitted Notes Collateral Liens and
Permitted Liens) levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by the Notes Collateral Trustee in its sole discretion, any such
payments made by the Notes Collateral Trustee to become obligations of such
Grantor to the Notes Collateral Trustee, due and payable immediately without
demand; and

(h) (i) upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, lease, license, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Notes Collateral

 

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Trustee were the absolute owner thereof for all purposes, and (ii) to do, at the
Notes Collateral Trustee’s option and such Grantor’s expense, at any time or
from time to time, whether or not an Event of Default has occurred and is
continuing, generally all acts and things that the Notes Collateral Trustee
deems reasonably necessary to protect, preserve or realize upon the Collateral
and the Notes Collateral Trustee’s security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor might
do.

8.2 No Duty on the Part of Notes Collateral Trustee or Secured Parties. The
powers conferred on the Notes Collateral Trustee hereunder are solely to protect
the interests of the Secured Parties in the Collateral and shall not impose any
duty upon the Notes Collateral Trustee or any other Secured Party to exercise
any such powers. The Notes Collateral Trustee and the other Secured Parties
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.

8.3 Appointment Pursuant to Indenture and Collateral Trust Agreement. The Notes
Collateral Trustee has been appointed as notes collateral trustee pursuant to
the Indenture and the Collateral Trust Agreement. The rights, duties,
privileges, immunities and indemnities of the Notes Collateral Trustee hereunder
are subject to the provisions of the Indenture and the Collateral Trust
Agreement.

 

SECTION 9. REMEDIES.

9.1 Generally.

(a) If any Event of Default shall have occurred and be continuing (subject, in
each case, to the Intercreditor Agreement and the Collateral Trust Agreement),
the Notes Collateral Trustee, at the expense of Grantors, may exercise in
respect of the Collateral, in addition to all other rights and remedies provided
for herein or otherwise available to it at law or in equity, all the rights and
remedies of the Notes Collateral Trustee on default under the UCC (whether or
not the UCC applies to the affected Collateral) to collect, enforce or satisfy
any Secured Obligations then owing, whether by acceleration or otherwise, and
also may pursue any of the following separately, successively or simultaneously:

(i) require any Grantor to, and each Grantor hereby agrees that it shall at its
expense and promptly upon request of the Notes Collateral Trustee forthwith,
assemble all or part of the Collateral as directed by the Notes Collateral
Trustee and make it available to the Notes Collateral Trustee at a place to be
designated by the Notes Collateral Trustee that is reasonably convenient to both
parties;

(ii) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process;

(iii) prior to the disposition of the Collateral, store, process, repair or
recondition the Collateral or otherwise prepare the Collateral for disposition
in any manner to the extent the Notes Collateral Trustee deems appropriate; and

(iv) without notice except as specified below or under the UCC, sell, assign,
lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Notes Collateral Trustee’s offices or elsewhere, for cash,
on credit or for future delivery, at such time or times and at such price or
prices and upon such other terms as the Notes Collateral Trustee may deem
commercially reasonable.

 

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(b) The Notes Collateral Trustee or any other Secured Party may be the purchaser
of any or all of the Collateral at any public or private (to the extent the
portion of the Collateral being privately sold is of a kind that is customarily
sold on a recognized market or the subject of widely distributed standard price
quotations) sale in accordance with the UCC and the Notes Collateral Trustee, as
notes collateral trustee for and representative of the Secured Parties, shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such sale
made in accordance with the UCC, to use and apply any of the Secured Obligations
as a credit on account of the purchase price for any Collateral payable by the
Notes Collateral Trustee at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days’ notice to such Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Notes Collateral
Trustee shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Notes Collateral Trustee may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Each Grantor agrees that it would not be
commercially unreasonable for the Notes Collateral Trustee to dispose of the
Collateral or any portion thereof by using Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets.
Each Grantor hereby waives any claims against the Notes Collateral Trustee
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if the Notes Collateral Trustee accepts the
first offer received and does not offer such Collateral to more than one
offeree. Subject to the Intercreditor Agreement and the Collateral Trust
Agreement, if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be liable
for the deficiency and the fees of any attorneys or other agents employed by the
Notes Collateral Trustee to collect such deficiency. Each Grantor further agrees
that a breach of any of the covenants contained in this Section will cause
irreparable injury to the Notes Collateral Trustee, that the Notes Collateral
Trustee has no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no default has occurred giving rise
to the Secured Obligations becoming due and payable prior to their stated
maturities. Nothing in this Section shall in any way limit the rights of the
Notes Collateral Trustee hereunder.

 

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(c) The Notes Collateral Trustee may sell the Collateral without giving any
warranties as to the Collateral. The Notes Collateral Trustee may specifically
disclaim or modify any warranties of title or the like. This procedure will not
be considered to adversely affect the commercial reasonableness of any sale of
the Collateral.

(d) The Notes Collateral Trustee shall have no obligation to marshal any of the
Collateral.

9.2 Application of Proceeds. All proceeds received by the Notes Collateral
Trustee in respect of any sale of, any collection from, or other realization
upon all or any part of the Collateral shall be applied by the Notes Collateral
Trustee as provided in the Collateral Trust Agreement.

9.3 Sales on Credit. If the Notes Collateral Trustee sells any of the Collateral
upon credit, Grantor will be credited only with payments actually made by
purchaser and received by the Notes Collateral Trustee and applied to
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, the Notes Collateral Trustee may resell the Collateral and Grantor
shall be credited with proceeds of the sale.

9.4 Investment Related Property. Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, the Notes Collateral Trustee may be compelled, with respect to
any sale of all or any part of the Investment Related Property conducted without
prior registration or qualification of such Investment Related Property under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Investment Related
Property for their own account, for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges that any such private
sale may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, each Grantor agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and
that the Notes Collateral Trustee shall have no obligation to engage in public
sales and no obligation to delay the sale of any Investment Related Property for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it. If the Notes Collateral Trustee determines to exercise its right
to sell any or all of the Investment Related Property, upon written request,
each Grantor shall and shall cause each issuer of any Pledged Stock to be sold
hereunder, each partnership and each limited liability company from time to time
to furnish to the Notes Collateral Trustee all such information as the Notes
Collateral Trustee may request in order to determine the number and nature of
interest, shares or other instruments included in the Investment Related
Property which may be sold by the Notes Collateral Trustee in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.

9.5 Grant of Intellectual Property License. For the purpose of enabling the
Notes Collateral Trustee, during the continuance of an Event of Default, to
exercise rights and remedies under Section 9 hereof at such time as the Notes
Collateral Trustee shall be lawfully entitled to

 

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exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Notes Collateral Trustee, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to such Grantor), subject, in the case of Trademarks, to
sufficient rights to quality control and inspection in favor of such Grantor to
avoid the risk of invalidation of such Trademarks, to use, assign, license or
sublicense any of the Intellectual Property now owned or hereafter acquired,
developed or created by such Grantor, wherever the same may be located. Such
license shall include access to all media in which any of the licensed items may
be recorded or stored and to all computer programs used for the compilation or
printout thereof.

9.6 Intellectual Property.

(a) Anything contained herein to the contrary notwithstanding, in addition to
the other rights and remedies provided herein, upon the occurrence and during
the continuation of an Event of Default:

(i) the Notes Collateral Trustee shall have the right (but not the obligation)
to bring suit or otherwise commence any action or proceeding in the name of any
Grantor, the Notes Collateral Trustee or otherwise, in the Notes Collateral
Trustee’s sole discretion, to enforce any Intellectual Property rights of such
Grantor, in which event such Grantor shall, at the request of the Notes
Collateral Trustee, do any and all lawful acts and execute any and all documents
required by the Notes Collateral Trustee in aid of such enforcement, and such
Grantor shall promptly, upon demand, reimburse and indemnify the Notes
Collateral Trustee as provided in Section 12 hereof in connection with the
exercise of its rights under this Section 9.6, and, to the extent that the Notes
Collateral Trustee shall elect not to bring suit to enforce any Intellectual
Property rights as provided in this Section 9.6, each Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement, misappropriation, dilution or other violation of any
of such Grantor’s rights in the Intellectual Property by others and for that
purpose agrees to diligently maintain any action, suit or proceeding against any
Person so infringing, misappropriating, diluting or otherwise violating as shall
be necessary to prevent such infringement, misappropriation, dilution or other
violation;

(ii) upon written demand from the Notes Collateral Trustee, each Grantor shall
grant, assign, convey or otherwise transfer to the Notes Collateral Trustee or
such Notes Collateral Trustee’s designee all of such Grantor’s right, title and
interest in and to any Intellectual Property and shall execute and deliver to
the Notes Collateral Trustee such documents as are necessary or appropriate to
carry out the intent and purposes of this Agreement;

(iii) each Grantor agrees that such an assignment and/or recording shall be
applied to reduce the Secured Obligations outstanding only to the extent that
the Notes Collateral Trustee (or any other Secured Party) receives cash proceeds
in respect of the sale of, or other realization upon, any such Intellectual
Property;

 

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(iv) within ten (10) Business Days after written notice from the Notes
Collateral Trustee, each Grantor shall make available to the Notes Collateral
Trustee, to the extent within such Grantor’s power and authority, such personnel
in such Grantor’s employ on the date of such Event of Default as the Notes
Collateral Trustee may reasonably designate, by name, title or job
responsibility, to permit such Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by such
Grantor under or in connection with any Trademarks or Trademark Licenses, such
persons to be available to perform their prior functions on the Notes Collateral
Trustee’s behalf and to be compensated by the Notes Collateral Trustee at such
Grantor’s expense on a per diem, pro-rata basis consistent with the salary and
benefit structure applicable to each as of the date of such Event of Default;
and

(v) the Notes Collateral Trustee shall have the right to notify, or require each
Grantor to notify, any obligors with respect to amounts due or to become due to
such Grantor in respect of any Intellectual Property of such Grantor (including
any licensees of such Intellectual Property), of the existence of the security
interest created herein, to direct such obligors to make payment of all such
amounts directly to the Notes Collateral Trustee, and, upon such notification
and at the expense of such Grantor, to enforce collection of any such amounts
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as such Grantor might have done;

(1) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of amounts due to such Grantor in respect of the
Collateral or any portion thereof shall be received in trust for the benefit of
the Notes Collateral Trustee hereunder, shall be segregated from other funds of
such Grantor and shall be forthwith paid over or delivered to the Notes
Collateral Trustee in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by
Section 9.7 hereof; and

(2) Grantor shall not adjust, settle or compromise the amount or payment of any
such amount or release wholly or partly any obligor with respect thereto or
allow any credit or discount thereon.

(b) If (i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing, (ii) no
other Event of Default shall have occurred and be continuing, (iii) an
assignment or other transfer to the Notes Collateral Trustee of any rights,
title and interests in and to any Intellectual Property of such Grantor shall
have been previously made and shall have become absolute and effective, and
(iv) the Secured Obligations shall not have become immediately due and payable,
upon the written request of any Grantor, the Notes Collateral Trustee shall
promptly execute and deliver to such Grantor, at such Grantor’s sole cost and
expense, such assignments or other instruments of transfer as may be necessary
to reassign to such Grantor any such rights, title and interests as may have
been assigned to the Notes Collateral Trustee under Section 9.6(a), subject to
any disposition thereof that may have been made by the Notes Collateral Trustee
pursuant to the terms thereof; provided, after giving effect to such
reassignment, the Notes Collateral Trustee’s

 

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security interest granted pursuant hereto, as well as all other rights and
remedies of the Notes Collateral Trustee granted hereunder, shall continue to be
in full force and effect; and provided further, the rights, title and interests
so reassigned shall be free and clear of any other Liens granted by or on behalf
of the Notes Collateral Trustee and the Secured Parties.

9.7 Cash Proceeds; Deposit Accounts.

(a) The Issuer hereby designates the Issuer’s account number 3801318633
maintained at Wintrust Bank as the “Notes Priority Collateral Account” (such
account and any other account that is subject to a Deposit Account Control
Agreement or a Securities Account Control Agreement and that is designated from
time to time by the Issuer as such account, the “Notes Priority Collateral
Account”). All proceeds of any Notes Priority Collateral received by any Grantor
consisting of cash, checks and other near-cash items (collectively, “Cash
Proceeds”) shall be held by such Grantor in trust for the Notes Collateral
Trustee, segregated from other funds of such Grantor, and shall, forthwith upon
receipt by such Grantor, be deposited in the Notes Priority Collateral Account.

(b) If any Event of Default shall have occurred and be continuing, in addition
to the rights of the Notes Collateral Trustee specified in Section 6.5 with
respect to payments of Receivables and subject to the Intercreditor Agreement
and the Collateral Trust Agreement, all proceeds of any Notes Priority
Collateral received by any Grantor consisting of Cash Proceeds shall be held by
such Grantor in trust for the Notes Collateral Trustee, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Notes Collateral Trustee in the exact form received by such
Grantor (duly indorsed by such Grantor to the Notes Collateral Trustee, if
required) and held by the Notes Collateral Trustee in the Collateral Account.
Subject to the Intercreditor Agreement and the Collateral Trust Agreement, any
Cash Proceeds received by the Notes Collateral Trustee (whether from a Grantor
or otherwise) may, in the sole discretion of the Notes Collateral Trustee,
(A) be held by the Notes Collateral Trustee for the ratable benefit of the
Secured Parties, as collateral security for the Secured Obligations (whether
matured or unmatured) and/or (B) then or at any time thereafter may be applied
by the Notes Collateral Trustee against the Secured Obligations then due and
owing.

(c) If any Event of Default shall have occurred and be continuing, the Notes
Collateral Trustee may apply the balance from any Deposit Account or instruct
the bank at which any Deposit Account is maintained to pay the balance of any
Deposit Account to or for the benefit of the Notes Collateral Trustee.

 

SECTION 10. NOTES COLLATERAL TRUSTEE.

The Notes Collateral Trustee has been appointed to act as Notes Collateral
Trustee hereunder by each Pari Passu Lien Debt Representative and, by their
acceptance of the benefits hereof, the other Secured Parties. The Notes
Collateral Trustee shall be obligated, and shall have the right hereunder, to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including, without
limitation, the release or substitution of Collateral), solely in accordance
with this Agreement, the Intercreditor Agreement and the Collateral Trust
Agreement. In furtherance of the foregoing provisions of

 

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this Section, each Secured Party, by its acceptance of the benefits hereof,
agrees that it shall have no right individually to realize upon any of the
Collateral hereunder, it being understood and agreed by such Secured Party that
all rights and remedies hereunder may be exercised solely by the Notes
Collateral Trustee for the benefit of Secured Parties in accordance with the
terms of this Section. The provisions of the Collateral Trust Agreement relating
to the Notes Collateral Trustee including, without limitation, the provisions
relating to resignation or removal of the Notes Collateral Trustee and the
powers and duties and immunities of the Notes Collateral Trustee are
incorporated herein by this reference and shall survive any termination of the
Collateral Trust Agreement. The Notes Collateral Trustee shall be entitled to
all rights, protections and indemnities provided to it under the Collateral
Trust Agreement with respect to its actions hereunder.

 

SECTION 11. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES; RELEASE.

This Agreement shall create a continuing security interest in the Collateral and
shall remain in full force and effect until the Discharge of Pari Passu Lien
Obligations, be binding upon each Grantor, its successors and assigns, and
inure, together with the rights and remedies of the Notes Collateral Trustee
hereunder, to the benefit of the Notes Collateral Trustee and its successors,
transferees and assigns. Without limiting the generality of the foregoing, but
subject to the terms of the Collateral Trust Agreement, any Holder may assign or
otherwise transfer any Notes held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Holders herein or otherwise. Upon the consummation of any transaction
permitted by the Indenture and any other Pari Passu Lien Debt Document as a
result of which any Grantor ceases to be a Subsidiary of the Issuer and is
released from its Guarantee of the Notes, such Grantor shall automatically be
released from its obligations hereunder and the Liens granted herein in the
Collateral of such Grantor shall be deemed to be automatically released, in each
case, with no further action on the part of any Person. All other releases of
Collateral shall be made in accordance with the terms of the Intercreditor
Agreement and the Collateral Trust Agreement.

 

SECTION 12. STANDARD OF CARE; NOTES COLLATERAL TRUSTEE MAY PERFORM.

The powers conferred on the Notes Collateral Trustee hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Notes Collateral Trustee shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.
The Notes Collateral Trustee shall be deemed to have exercised reasonable care
in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Notes
Collateral Trustee accords its own property. Neither the Notes Collateral
Trustee nor any of its directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon all or any part of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any Grantor or
otherwise. If any Grantor fails to perform any agreement contained herein, the

 

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Notes Collateral Trustee may itself perform, or cause performance of, such
agreement, and the expenses of the Notes Collateral Trustee incurred in
connection therewith shall be payable by each Grantor under the Collateral Trust
Agreement.

 

SECTION 13. UNLIMITED LIABILITY COMPANIES.

Notwithstanding any other provision in this Agreement or any other document or
agreement among all or some of the parties hereto, to the extent that any
Unlimited Liability Securities constitute Collateral, each Grantor thereof is
the sole registered and beneficial holder of any such Unlimited Liability
Securities and will remain so until such time as such Unlimited Liability
Securities are effectively transferred into the name of the Notes Collateral
Trustee, any other Secured Party or any other person on the books and records of
the issuer of such pledged Unlimited Liability Securities. Accordingly, each
such Grantor shall be entitled to receive and retain for its own account any
dividends, property or other distributions, if any, in respect of such Unlimited
Liability Securities (except insofar as the Grantor has granted a security
interest in such dividends, property or other distributions, and any shares
which are Unlimited Liability Securities shall be delivered to the Notes
Collateral Trustee to hold as Collateral hereunder) and shall have the right to
vote such Unlimited Liability Securities and to control the direction,
management and policies of the issuer of such Unlimited Liability Securities to
the same extent as the Grantor would if such Unlimited Liability Securities were
not pledged to the Notes Collateral Trustee pursuant hereto. Nothing in this
Agreement or any other document or agreement among all or some of the parties
hereto is intended to, and nothing in this Agreement, or any other document or
agreement among all or some of the parties hereto shall constitute Notes
Collateral Trustee nor any other Secured Party as a member, shareholder or other
equity holder for the purposes of the Companies Act (Nova Scotia) or other
applicable legislation governing the formation of an Unlimited Company (“ULC
Legislation”) or provide to them the right to obtain any other indicia of
ownership of any Unlimited Company until such time as notice is given to the
Grantor and further steps are taken thereunder so as to register the Notes
Collateral Trustee, or any other person as holder of Collateral which are
Unlimited Liability Securities. No provision in this Agreement (except this
Section 13) or actions taken by the Notes Collateral Trustee pursuant to this
Agreement which might provide or be deemed to provide otherwise, in whole or in
part, shall, without the express written consent of the Notes Collateral
Trustee, apply in respect of Unlimited Liability Securities. To the extent any
provision hereof or of any other document or agreement would have the effect of
constituting the Notes Collateral Trustee, any other Secured Party, or any other
person as a shareholder or member of an issuer of Unlimited Liability Securities
for the purposes of the ULC Legislation prior to such time, such provision shall
be severed herefrom or therefrom and ineffective with respect to the Collateral
which are Unlimited Liability Securities without otherwise invalidating or
rendering unenforceable this Agreement or such other agreement or invalidating
or rendering unenforceable such provision insofar as it relates to Collateral
which is not Unlimited Liability Securities. For the avoidance of doubt, and
except as otherwise provided in the last sentence of this Section 13, no
provision of this Agreement or actions taken by the Notes Collateral Trustee
pursuant to this Agreement shall apply, or be deemed to apply, so as to cause
the Notes Collateral Trustee or any other Secured Party to be, and the Notes
Collateral Trustee and each other Secured Party shall not be or be deemed to be
or entitled to, and no Grantor shall cause or permit the Notes Collateral
Trustee or any other Secured Party to:

(a) be registered as a shareholder, member or other equity holder, or apply to
be registered as a shareholder, member or other equity holder, of any Unlimited
Company;

 

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(b) have a notation, or request or assent to a notation, being entered in its
favor in the share or equity register in respect of Unlimited Liability
Securities;

(c) be held out, or hold itself out, as a shareholder, member or other equity
holder of any Unlimited Company;

(d) receive, directly or indirectly, any dividends, property or other
distributions from such Unlimited Company by reason of the Notes Collateral
Trustee or any other Secured Party holding a security interest in such Unlimited
Company; or

(e) act or purport to act as a shareholder, member or other equity holder of any
Unlimited Company, or obtain, exercise or attempt to exercise any rights of a
shareholder, member or other equity holder, including the right to attend a
meeting of, or to vote any Unlimited Liability Securities or to be entitled to
receive or receive any dividend, property or other distribution in respect of
Unlimited Liability Securities.

The foregoing limitation shall not restrict the Notes Collateral Trustee from
exercising the rights which it is entitled to exercise hereunder in respect of
any Unlimited Liability Securities constituting Collateral at any time that the
Notes Collateral Trustee shall be entitled to realize on all or any portion of
the Collateral and upon notice being given of the intention to realize upon such
Collateral and in the course of exercising upon such Collateral.

 

SECTION 14. MISCELLANEOUS.

Any notice required or permitted to be given under this Agreement shall be given
in accordance with the Collateral Trust Agreement. No failure or delay on the
part of the Notes Collateral Trustee in the exercise of any power, right or
privilege hereunder or under the Collateral Trust Agreement shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege. All rights and remedies existing under this
Agreement and the Collateral Trust Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available. In case any provision
in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists. This Agreement
shall be binding upon and inure to the benefit of the Notes Collateral Trustee
and the Grantors and their respective successors and assigns. No Grantor shall,
without the prior written consent of the Notes Collateral Trustee given in
accordance with the Collateral Trust Agreement, assign any right, duty or
obligation hereunder. This Agreement and the Collateral Trust Agreement embody
the entire agreement and

 

39

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understanding between the Grantors and the Notes Collateral Trustee and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof. Accordingly, the Collateral Trust
Agreement may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
(INCLUDING, WITHOUT LIMITATION, ANY CLAIMS SOUNDING IN CONTRACT LAW OR TORT LAW
ARISING OUT OF THE SUBJECT MATTER HEREOF) SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD RESULT IN THE
APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK (OTHER THAN
ANY MANDATORY PROVISIONS OF THE UCC RELATING TO THE LAW GOVERNING PERFECTION AND
THE EFFECT OF PERFECTION OF THE SECURITY INTEREST).

THE PROVISIONS OF THE COLLATERAL TRUST AGREEMENT UNDER THE HEADINGS “CONSENT TO
JURISDICTION” AND “WAIVER OF JURY TRIAL” ARE INCORPORATED HEREIN BY THIS
REFERENCE AND SUCH INCORPORATION SHALL SURVIVE ANY TERMINATION OF THE COLLATERAL
TRUST AGREEMENT.

 

40

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IN WITNESS WHEREOF, each Grantor and the Notes Collateral Trustee have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

 

REAL ALLOY INTERMEDIATE HOLDING, LLC, as Grantor By:

 

Name: Title: REAL ALLOY HOLDING, INC., as Grantor By:

 

Name: Title: ALERIS RECYCLING, INC., as Grantor By:

 

Name: Title: Effective upon the change of name from “Aleris Recycling, Inc.” to
“Real Alloy Recycling, Inc.”: REAL ALLOY RECYCLING, INC., as Grantor By:

 

Name: Title:

[Signature Page to Pledge and Security Agreement]

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

ALERIS RECYCLING BENS RUN, as Grantor By:

 

Name: Title: Effective upon the change of name from “Aleris Recycling Bens Runs,
LLC” to “Real Alloy Bens Run, LLC”: REAL ALLOY BENS RUN, LLC, as Grantor By:

 

Name: Title: ALERIS SPECIALTY PRODUCTS, INC., as Grantor By:

 

Name: Title: Effective upon the change of name from “Aleris Specialty Products,
Inc.” to “Real Alloy Specialty Products, Inc.”: REAL ALLOY SPECIALTY PRODUCTS,
INC., as Grantor By:

 

Name: Title:

[Signature Page to Pledge and Security Agreement]

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

ALERIS SPECIFICATION ALLOYS, INC., as Grantor By:

 

Name: Title: Effective upon the change of name from “Aleris Specification
Alloys, Inc.” to “Real Alloy Specification, Inc.”: REAL ALLOY SPECIFICATION,
INC., as Grantor By:

 

Name: Title: ETS SCHAEFER, LLC, as Grantor By:

 

Name: Title: RA MEXICO HOLDING, LLC, as Grantor By:

 

Name: Title:

[Signature Page to Pledge and Security Agreement]

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WILMINGTON TRUST, NATIONAL ASSOCIATION, as Notes Collateral Trustee By:

 

Authorized Signatory

[Signature Page to Pledge and Security Agreement]