Exhibit 10(e)

 

EXECUTION VERSION

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (this “Security Agreement”) is entered into
as of March 31, 2004 by and among ABX AIR, INC., a Delaware corporation (the
“Borrower”), SOUND SUPPRESSION, INC. (“SSI”), an Ohio corporation, AIRBORNE F T
Z, INC., an Ohio corporation (together with the Borrower and SSI, the “Initial
Grantors” and together with any additional Domestic Subsidiaries, whether now
existing or hereafter formed which become parties to this Security Agreement by
executing a Supplement hereto in substantially the form of Annex I, the
“Grantors”), and BANK ONE, NA (Main Office Columbus), in its capacity as
administrative agent (the “Administrative Agent”) for the lenders party to the
Credit Agreement referred to below (collectively, the “Lenders”).

 

PRELIMINARY STATEMENT

 

The Borrower, the Administrative Agent and the Lenders are entering into a
Credit Agreement dated as of the date hereof (as amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”). The Grantors
are entering into this Security Agreement in order to induce the Lenders to
enter into and extend credit to the Borrower under the Credit Agreement.

 

ACCORDINGLY, the Grantors and the Administrative Agent, for the benefit and on
behalf of the Holders of Secured Obligations, hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1. Terms Defined in Credit Agreement. All capitalized terms used herein and
not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.

 

1.2. Terms Defined in Ohio UCC. Terms defined in the Ohio UCC which are not
otherwise defined in this Security Agreement are used herein as defined in the
Ohio UCC.

 

1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:

 

“Aircraft” means all aircraft of the Grantors, now or hereafter owned, leased or
used in its business for the transportation of passengers and/or cargo and all
related components, parts and property used in the operation of the aircraft
which are attached to, connected with or located on such aircraft (including,
without limitation, all galleys, seats, instruments, avionics, electronics,
equipment, parts, attachments and accessories but excluding Engines, Simulators
and Spare Parts).

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“Accounts” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Article” means a numbered article of this Security Agreement, unless another
document is specifically referenced.

 

“Chattel Paper” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Collateral” means all Aircraft, Accounts, Chattel Paper, Commercial Tort
Claims, Documents, Equipment, Engines, Fixtures, Goods, General Intangibles,
Instruments, Inventory, Investment Property, Pledged Deposits, Simulators, Spare
Parts, Supporting Obligations and Other Collateral, wherever located, in which
any Grantor now has or hereafter acquires any right or interest, and the
proceeds (including Stock Rights), insurance proceeds and products thereof,
together with all books and records, customer lists, credit files, computer
files, programs, printouts and other computer materials and records related
thereto.

 

“Commercial Tort Claims” means those certain currently existing commercial tort
claims of any Grantor, including each commercial tort claim specifically
described in Exhibit F.

 

“Control” shall have the meaning set forth in Article 8 or, if applicable, in
Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the Ohio UCC.

 

“Default” shall have the meaning set forth in the Credit Agreement.

 

“Deposit Accounts” shall have the meaning set forth in Article 9 of the Ohio
UCC.

 

“Documents” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Engines” means goods of a Grantor consisting of aircraft engines having 750 or
more rated takeoff horsepower (or the equivalent thrust) which are owned by a
Grantor and used in connection with the operation of its Aircraft, whether now
owned or hereafter acquired and wherever located, and all related components,
parts and other property used in the operation of the aircraft engines which are
attached to, connected with or located on the aircraft engines (including,
without limitation, all equipment, parts, appliances and accessories but
excluding Aircraft, Simulators and Spare Parts).

 

“Equipment” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.

 

“Fixtures” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“General Intangibles” shall have the meaning set forth in Article 9 of the Ohio
UCC.

 

“Goods” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

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“Instruments” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Inventory” shall have the meaning set forth in Article 9 of the Ohio UCC.

 

“Investment Property” shall have the meaning set forth in Article 9 of the Ohio
UCC.

 

“Ohio UCC” means the Ohio Uniform Commercial Code as in effect from time to
time.

 

“Other Collateral” means any property of the Grantors, not included within the
defined terms Accounts, Chattel Paper, Commercial Tort Claims, Documents,
Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment
Property and Pledged Deposits, including, without limitation, all cash on hand,
letter-of-credit rights, letters of credit, Stock Rights and Deposit Accounts or
other deposits (general or special, time or demand, provisional or final) with
any bank or other financial institution, it being intended that the Collateral
include all personal property of the Grantors.

 

“Pledged Deposits” means all time deposits of money (other than Deposit Accounts
and Instruments), whether or not evidenced by certificates, which a Grantor may
from time to time designate as pledged to the Administrative Agent or to any
Holder of Secured Obligations as security for any Obligation, and all rights to
receive interest on said deposits.

 

“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property,
Instruments or Pledged Deposits, and any other rights or claims to receive money
which are General Intangibles or which are otherwise included as Collateral.

 

“Required Secured Parties” means (x) prior to an acceleration of the Secured
Obligations under the Credit Agreement, the Required Lenders, (y) after an
acceleration of the Secured Obligations under the Credit Agreement but prior to
the date upon which the Credit Agreement has terminated by its terms and all of
the Secured Obligations thereunder have been paid in full, Lenders and their
Affiliates holding in the aggregate more than 50% of the total of (i) the unpaid
principal amount of the outstanding Loans and LC Obligations and (ii) the
aggregate net early termination payments and all other amounts then due and
unpaid from the Borrower to the Lenders or their Affiliates under Rate
Management Transactions, as determined by the Administrative Agent in its
reasonable discretion, and (z) after the Credit Agreement has terminated by its
terms and all of the Secured Obligations thereunder have been paid in full
(whether or not the Secured Obligations under the Credit Agreement were ever
accelerated), Lenders and their Affiliates holding in the aggregate more than
50% of the aggregate net early termination payments and all other amounts then
due and unpaid from the Borrower to the Lenders or their Affiliates under Rate
Management Transactions, as determined by the Administrative Agent in its
reasonable discretion.

 

“Section” means a numbered section of this Security Agreement, unless another
document is specifically referenced.

 

“Security” has the meaning set forth in Article 8 of the Ohio UCC.

 

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“Simulators” means the following flight simulators owned by the Borrower and
located at the Wilmington Air Park in Wilmington, Ohio: (a) Boeing 767 Level C
simulator; (b) DC-9 Level C simulator; (c) DC-9 Level B simulator; and (d) DC-8
Level B simulator.

 

“Spare Parts” means goods of a Grantor consisting of aircraft instruments,
apparatus, parts (whether rotable, repairable or expendable, accessories,
appliances, avionics, and other components and parts, which are owned or held by
or on behalf of a Grantor in connection with the use, operation or maintenance
of Aircraft, Engines or Simulators and which are not attached to, connected with
or located on an Aircraft, Engine or Simulator, in each case, whether now owned
or hereafter acquired and wherever located, including, without limitation,
“appliances” (as such term is defined in 49 U.S.C. 40102(a)(11)) and “spare
parts” (as such term is defined in 49 U.S.C. 40102(a)(38)) but excluding
Aircraft, Engines and Simulators.

 

“Stock Rights” means any securities, dividends or other distributions and any
other right or property which any Grantor shall receive or shall become entitled
to receive for any reason whatsoever with respect to, in substitution for or in
exchange for any securities or other ownership interests in a corporation,
partnership, joint venture or limited liability company constituting Collateral
and any securities, any right to receive securities and any right to receive
earnings, in which any Grantor now has or hereafter acquires any right, issued
by an issuer of such securities.

 

“Supporting Obligation” shall have the meaning set forth in Article 9 of the
Ohio UCC.

 

The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms.

 

ARTICLE II

 

GRANT OF SECURITY INTEREST

 

Each of the Grantors hereby pledges, assigns and grants to the Administrative
Agent, on behalf of and for the ratable benefit of the Holders of Secured
Obligations and (to the extent specifically provided herein) their Affiliates, a
security interest in all of such Grantor’s right, title and interest, whether
now owned or hereafter acquired, in and to the Collateral to secure the prompt
and complete payment and performance of the Secured Obligations; notwithstanding
the foregoing or anything herein or in any other Loan Document to the contrary,
nothing hereunder or thereunder constitutes or shall be deemed to constitute the
grant of a security interest in favor of the Administrative Agent or any Holder
of Secured Obligations with respect to such Grantor’s interest in (i) the
property listed on Schedule A to this Security Agreement, (ii) any rights or
interest in the license granted by Airborne, Inc. to any Grantor to use the
logo, related design or tradename “Airborne Express”, (iii) any license,
contract right, license agreement, or any other general intangible, if the
granting of a security interest therein by such Grantor to the Administrative
Agent or any Holder of Secured Obligations is prohibited by the terms and
provisions of the agreement, document or instrument creating, evidencing or
granting a security interest in such property or rights related thereto to the
extent such prohibition is not rendered ineffective under applicable law;
provided, however, that if and when the prohibition which prevents the granting
by such Grantor to the Administrative Agent of a security interest in any

 

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property is removed or otherwise terminated, the Administrative Agent will be
deemed to have, and at all time to have had, a security interest in such
property, or (iv) any property to the extent that the granting of a security
interest therein is prohibited under applicable law or causes the loss of any
material right of Grantor thereunder; provided, further, however, the foregoing
exclusion shall in no way be construed so as to limit, impair or otherwise
affect the Administrative Agent’s or any Holder of Secured Obligations’ security
interest upon any proceeds of the excluded property.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

Each of the Initial Grantors represents and warrants to the Administrative Agent
and the Holders of Secured Obligations, and each Grantor that becomes a party to
this Security Agreement pursuant to the execution of a Security Agreement
Supplement in substantially the form of Annex I represents and warrants (after
giving effect to supplements to each of the Exhibits hereto with respect to such
subsequent Grantor as attached to such Security Agreement Supplement), that:

 

3.1. Title, Authorization, Validity and Enforceability. Such Grantor has good
and valid rights in or the power to transfer the Collateral owned by it and
title to the Collateral with respect to which it has purported to grant a
security interest hereunder, free and clear of all Liens except for Liens
permitted under Section 4.1.6 hereof, and has full corporate, limited liability
company or partnership, as applicable, power and authority to grant to the
Administrative Agent the security interest in such Collateral pursuant hereto.
The execution and delivery by such Grantor of this Security Agreement has been
duly authorized by proper corporate, limited liability company or partnership,
as applicable, other proceedings, and this Security Agreement constitutes a
legal, valid and binding obligation of such Grantor and creates a security
interest which is enforceable against such Grantor in all Collateral it now owns
or hereafter acquires, except as enforceability may be limited by (i)
bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws
relating to or affecting the enforcement of creditors’ rights generally, (ii)
general equitable principles (whether considered in a proceeding in equity or at
law), and (iii) requirements of reasonableness, good faith and fair dealing.
When financing statements have been filed in the appropriate offices against
such Grantor in the locations listed on Exhibit E, the Administrative Agent will
have a fully perfected first priority security interest in the Collateral owned
by such Grantor in which a security interest may be perfected by filing, subject
only to Liens permitted under Section 4.1.6 hereof.

 

3.2. Conflicting Laws and Contracts. Neither the execution and delivery by such
Grantor of this Security Agreement, the creation and perfection of the security
interest in the Collateral granted hereunder, nor compliance with the terms and
provisions hereof will violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on such Grantor, or (ii) such
Grantor’s charter, articles or by-laws (or similar constitutive documents), or
(iii) the provisions of any indenture, instrument or agreement to which such
Grantor is a party or is subject, or by which it, or its Property may be bound
or affected, or conflict with or constitute a default thereunder, or result in
or require the creation or imposition of any Lien in, of or on the Property of
such Grantor pursuant to the terms of any such indenture, instrument or
agreement (other than any Lien of the Administrative Agent on behalf of the
Holders of Secured Obligations).

 

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3.3. Principal Location. Such Grantor’s mailing address and the location of its
place of business (if it has only one) or its chief executive office (if it has
more than one place of business), is disclosed in Exhibit A; such Grantor has no
other material places of business except those set forth in Exhibit A.

 

3.4. Property Locations. The Inventory, Equipment and any Fixtures having a
value in excess of $100,000 of each Grantor are located solely at the locations
of such Grantor described in Exhibit A. All of said locations are owned by such
Grantor except for locations (i) which are leased by such Grantor as lessee and
designated in Part B of Exhibit A and (ii) at which Inventory is held in a
public warehouse or is otherwise held by a bailee or on consignment by such
Grantor as designated in Part C of Exhibit A. In each case, such Grantor will
use commercially reasonable efforts to deliver bailment agreements, warehouse
receipts, financing statements or other documents satisfactory to the
Administrative Agent to protect the Administrative Agent’s and the Holders of
Secured Obligations’ security interest in such Inventory and Equipment located
at any of the locations described on Part B or Part C of Exhibit A.

 

3.5. No Other Names. Except for “Airborne Express” with respect to the Borrower
and “Airborne FTZ” with respect to Airborne F T Z, Inc., such Grantor has not
conducted business under any name except the name in which it has executed this
Security Agreement, which is the exact name as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction
of organization as of the Closing Date.

 

3.6. No Default. No Default or Unmatured Default exists.

 

3.7. Accounts and Chattel Paper. The names of the obligors, amounts owing, due
dates and other information with respect to the Accounts and Chattel Paper owned
by such Grantor are and will be correctly stated in all records of such Grantor
relating thereto and in all invoices and reports with respect thereto furnished
to the Administrative Agent by such Grantor from time to time. As of the time
when each Account or each item of Chattel Paper arises, such Grantor shall be
deemed to have represented and warranted that such Account or Chattel Paper, as
the case may be, and all records relating thereto, are genuine and in all
respects what they purport to be.

 

3.8. Filing Requirements. None of the Collateral owned by such Grantor is of a
type for which security interests or liens may be perfected by filing under any
federal statute except patents, trademarks and copyrights held by such Grantor
and described in Exhibit B. The legal description, county and street address of
the property on which any Fixtures having a value in excess of $100,000 owned by
such Grantor are located is set forth in Exhibit C together with the name and
address of the record owner of each such property.

 

3.9. No Financing Statements. No financing statement describing all or any
portion of the Collateral which has not lapsed or been terminated naming such
Grantor as debtor has been filed in any jurisdiction except financing statements
(i) naming the Administrative Agent on

 

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behalf of the Holders of Secured Obligations as the secured party and (ii) in
respect of Liens permitted by Section 6.15 of the Credit Agreement; provided,
that nothing herein shall be deemed to constitute an agreement to subordinate
any of the Liens of the Administrative Agent under the Loan Documents to any
Liens otherwise permitted under Section 6.15 of the Credit Agreement.

 

3.10. Federal Employer Identification Number; State Organization Number;
Jurisdiction of Organization. Such Grantor’s federal employer identification
number is, and if such Grantor is a registered organization, such Grantor’s
State of organization, type of organization and State of organization
identification number and is, as follows:

 

GRANTOR

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Federal Employer
Identification Number

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Type of Organization

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State of Incorporation

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State Organization
Number

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ABX Air, Inc.         Corporation    Delaware    0885720 Sound Suppression, Inc.
   1140852    Corporation    Ohio    599738 Airborne F T Z, Inc.    1375411   
Corporation    Ohio    658409

 

3.11. Pledged Securities and Other Investment Property. Exhibit D sets forth a
complete and accurate list of the Instruments, Securities and other Investment
Property delivered to the Administrative Agent. Each Grantor is the direct and
beneficial owner of each Instrument, Security and other type of Investment
Property listed on Exhibit D as being owned by it, free and clear of any Liens,
except for the security interest granted to the Administrative Agent for the
benefit of the Holders of Secured Obligations hereunder or as permitted by
Section 6.15 of the Credit Agreement. Each Grantor further represents and
warrants that (i) all such Instruments, Securities or other types of Investment
Property which are shares of stock in a corporation or ownership interests in a
partnership or limited liability company have been (to the extent such concepts
are relevant with respect to such Instrument, Security or other type of
Investment Property) duly and validly issued, are fully paid and non-assessable
and constitute the percentage of the issued and outstanding shares of stock (or
other equity interests) of the respective issuers thereof indicated on Exhibit D
hereto and (ii) with respect to any certificates delivered to the Administrative
Agent representing an ownership interest in a partnership or limited liability
company, either such certificates are Securities as defined in Article 8 of the
Ohio UCC of the applicable jurisdiction as a result of actions by the issuer or
otherwise, or, if such certificates are not Securities, such Grantor has so
informed the Administrative Agent so that the Administrative Agent may take
steps to perfect its security interest therein as a General Intangible.

 

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ARTICLE IV

 

COVENANTS

 

From the date of this Security Agreement and thereafter until this Security
Agreement is terminated, each of the Initial Grantors agrees, and from and after
the effective date of any Security Agreement Supplement applicable to any
Grantor (and after giving effect to supplements to each of the Exhibits hereto
with respect to such subsequent Grantor as attached to such Security Agreement
Supplement) and thereafter until this Security Agreement is terminated each such
subsequent Grantor agrees:

 

4.1. General.

 

4.1.1 Inspection. Each Grantor will permit the Administrative Agent or any
Holder of Secured Obligations, by its representatives and agents (i) to inspect
the Collateral, (ii) to examine and make copies of the records of such Grantor
relating to the Collateral and (iii) to discuss the Collateral and the related
records of such Grantor with, and to be advised as to the same by, such
Grantor’s officers and employees (and, in the case of any Receivable, with any
person or entity which is or may be obligated thereon), all at such reasonable
times and intervals as the Administrative Agent or such Holder of Secured
Obligations may determine, and all at such Grantor’s expense.

 

4.1.2 Taxes. Such Grantor will pay when due all taxes, assessments and
governmental charges and levies upon the Collateral owned by such Grantor,
except (i) those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with Agreement Accounting Principles and with respect to which no
Lien exists, and (ii) those which by reason of the amount involved or the
remedies available to the taxing authority could not reasonably be expected to
have a Material Adverse Effect.

 

4.1.3 Records and Reports; Notification of Default. Each Grantor shall keep and
maintain complete, accurate and proper books and records with respect to the
Collateral owned by such Grantor, and furnish to the Administrative Agent, with
sufficient copies for each of the Holders of Secured Obligations, such reports
relating to the Collateral as the Administrative Agent shall from time to time
reasonably request. Each Grantor will give prompt notice in writing to the
Administrative Agent and the Lenders of the occurrence of any Default or
Unmatured Default and of any other development, financial or otherwise, which
might materially and adversely affect the Collateral.

 

4.1.4 Financing Statements and Other Actions; Defense of Title. Each Grantor
hereby authorizes the Administrative Agent to file, and if requested will
execute and deliver to the Administrative Agent, all financing statements
describing the Collateral owned by such Grantor and other documents and take
such other actions as may from time to time reasonably be requested by the
Administrative Agent in order to maintain a first perfected security interest
including, if applicable, using commercially reasonable efforts to obtain
Control of, the Collateral owned by such Grantor, subject to Liens permitted
under Section 6.15 of the Credit Agreement; provided, that nothing herein shall

 

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be deemed to constitute an agreement to subordinate any of the Liens of the
Administrative Agent under the Loan Documents to any Liens otherwise permitted
under Section 6.15 of the Credit Agreement. 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 Administrative Agent may determine, in its sole discretion,
is necessary, advisable or prudent to ensure that the perfection of the security
interest in the Collateral granted to the Administrative Agent herein,
including, without limitation, describing such property as “all assets” or “all
personal property, whether now owned or hereafter acquired.” Each Grantor will
take any and all actions reasonably necessary to defend title to the Collateral
owned by such Grantor against all persons and to defend the security interest of
the Administrative Agent in such Collateral and the priority thereof against any
Lien not expressly permitted hereunder.

 

4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise
dispose of the Collateral owned by such Grantor except (i) prior to the
occurrence of a Default or Unmatured Default, dispositions specifically
permitted pursuant to Section 6.12 of the Credit Agreement or the other Loan
Documents, (ii) until such time following the occurrence and during the
continuance of a Default as such Grantor receives a notice from the
Administrative Agent instructing such Grantor to cease such transactions, sales
or leases of Inventory in the ordinary course of business, and (iii) until such
time as such Grantor receives a notice from the Administrative Agent pursuant to
Article VII, proceeds of Inventory and Accounts collected in the ordinary course
of business.

 

4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on the
Collateral owned by such Grantor except Liens permitted pursuant to Section 6.15
of the Credit Agreement, provided, that nothing herein shall be deemed to
constitute an agreement to subordinate any of the Liens of the Administrative
Agent under the Loan Documents to any Liens otherwise permitted under Section
6.15 of the Credit Agreement.

 

4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization,
Location, Name. Each Grantor will:

 

  (i) except as otherwise permitted by the Credit Agreement, preserve its
existence and corporate structure as in effect on the Closing Date;

 

  (ii) not change its jurisdiction of organization; and

 

  (iii) not (i) have any Inventory, Equipment or any Fixtures having a value in
excess of $100,000 or proceeds or products thereof (other than Inventory and
proceeds thereof disposed of as permitted by Section 4.1.5) at a location other
than a location specified in Exhibit A, (ii) change its name or taxpayer
identification number or (iii) change its mailing address,

 

unless, in each such case, such Grantor shall have given the Administrative
Agent prior written notice of such event or occurrence.

 

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4.1.8 Other Financing Statements. No Grantor will suffer to exist or authorize
the filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by such Grantor, except any financing statement
authorized under Section 4.1.4 hereof.

 

4.2. Receivables.

 

4.2.1 Certain Agreements on Receivables. During the occurrence and continuation
of a Default, no Grantor will make or agree to make any discount, credit, rebate
or other reduction in the original amount owing on a Receivable or accept in
satisfaction of a Receivable less than the original amount thereof, except that,
prior to the occurrence and continuance of a Default, such Grantor may reduce
the amount of Accounts arising from the sale of Inventory or the rendering of
services in accordance with its present policies and in the ordinary course of
business.

 

4.2.2 Collection of Receivables. Except as otherwise provided in this Security
Agreement, each Grantor will collect and enforce, at such Grantor’s sole
expense, all amounts due or hereafter due to such Grantor under the Receivables
owned by such Grantor.

 

4.2.3 Delivery of Invoices. Each Grantor will deliver to the Administrative
Agent immediately upon its request after the occurrence and during the
continuance of a Default duplicate invoices with respect to each Account owned
by such Grantor bearing such language of assignment as the Administrative Agent
shall specify.

 

4.2.4 Disclosure of Counterclaims on Receivables. If (i) any discount, credit or
agreement to make a rebate or to otherwise reduce the amount owing on a
Receivable owned by such Grantor exists or (ii) if, to the knowledge of such
Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to a Receivable, such Grantor will disclose
such fact to the Administrative Agent in writing in connection with the
inspection by the Administrative Agent of any record of such Grantor relating to
such Receivable and in connection with any invoice or report furnished by such
Grantor to the Administrative Agent relating to such Receivable.

 

4.3. Inventory and Equipment. Each Grantor will do all things necessary to
maintain, preserve, protect and keep the Inventory and the Equipment owned by
such Grantor in good repair, working order and saleable condition (ordinary wear
and tear excepted) and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

 

4.4. Instruments, Securities, Chattel Paper, Documents and Pledged Deposits.
Each Grantor will (i) deliver to the Administrative Agent immediately upon
execution of this Security Agreement the originals of all Chattel Paper and
Instruments (excluding checks) constituting Collateral (if any then exist), (ii)
deliver to the Administrative Agent as promptly as possible, but in any event
within sixty (60) days (or by such later date as the Administrative Agent may
agree

 

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in the exercise of its reasonable discretion) originals of all Securities
constituting Collateral, (iii) hold in trust for the Administrative Agent upon
receipt and immediately thereafter deliver to the Administrative Agent any
Chattel Paper, Securities and Instruments (excluding checks) constituting
Collateral, (iv) upon the designation of any Pledged Deposits (as set forth in
the definition thereof), deliver to the Administrative Agent such Pledged
Deposits which are evidenced by certificates included in the Collateral endorsed
in blank, marked with such legends and assigned as the Administrative Agent
shall specify, and (v) upon the Administrative Agent’s request, after the
occurrence and during the continuance of a Default, deliver to the
Administrative Agent (and thereafter hold in trust for the Administrative Agent
upon receipt and immediately deliver to the Administrative Agent) any Document
evidencing or constituting Collateral. Notwithstanding the foregoing, so long as
no Default shall have occurred and be continuing, Grantors shall not be required
to deliver to the Administrative Agent (i) any Chattel Paper having a term of
less than ninety (90) days or (ii) any Instrument having a face amount of less
than $100,000.

 

4.5. Uncertificated Securities and Certain Other Investment Property. Each
Grantor will permit the Administrative Agent from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of
Investment Property not represented by certificates which are Collateral owned
by such Grantor to mark their books and records with the numbers and face
amounts of all such uncertificated securities or other types of Investment
Property not represented by certificates and all rollovers and replacements
therefor to reflect the Lien of the Administrative Agent granted pursuant to
this Security Agreement. Each Grantor will use all commercially reasonable
efforts, with respect to Investment Property constituting Collateral owned by
such Grantor held with a financial intermediary, to cause such financial
intermediary to enter into a control agreement with the Administrative Agent in
form and substance reasonably satisfactory to the Administrative Agent.

 

4.6. Stock and Other Ownership Interests.

 

4.6.1 Changes in Capital Structure of Issuers. Except as permitted under the
Credit Agreement, no Grantor will (i) permit or suffer any issuer of privately
held corporate securities or other ownership interests in a corporation,
partnership, joint venture or limited liability company constituting Collateral
owned by such Grantor to dissolve, liquidate, retire any of its capital stock or
other Instruments or Securities evidencing ownership, reduce its capital or
merge or consolidate with any other entity, or (ii) vote any of the Instruments,
Securities or other Investment Property in favor of any of the foregoing except
to the extent permitted under Section 6.11 of the Credit Agreement.

 

4.6.2 Issuance of Additional Securities. No Grantor will permit or suffer the
issuer of privately held corporate securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral to issue any such securities or other ownership
interests, any right to receive the same or any right to receive earnings,
except to such Grantor.

 

4.6.3 Registration of Pledged Securities and other Investment Property. Each
Grantor will permit any registerable Collateral owned by such Grantor to be
registered in

 

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the name of the Administrative Agent or its nominee at any time at the option of
the Required Secured Parties following the occurrence and during the continuance
of an Default and without any further consent of such Grantor.

 

4.6.4 Exercise of Rights in Pledged Securities and other Investment Property.
Each Grantor will permit the Administrative Agent or its nominee at any time
after the continuance of a Default, without notice, to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the
Collateral owned by such Grantor or any part thereof, and to receive all
dividends and interest in respect of such Collateral.

 

4.7. Deposit Accounts. Each Grantor will (i) upon the Administrative Agent’s
request, use all commercially reasonable efforts to cause each bank or other
financial institution in which it maintains (a) a Deposit Account to enter into
a control agreement with the Administrative Agent, in form and substance
satisfactory to the Administrative Agent in order to give the Administrative
Agent Control of the Deposit Account or (b) other deposits (general or special,
time or demand, provisional or final) to be notified of the security interest
granted to the Administrative Agent hereunder and cause each such bank or other
financial institution to acknowledge such notification in writing and (ii) upon
the Administrative Agent’s request after the occurrence and during the
continuance of a Default, deliver to each such bank or other financial
institution a letter, in form and substance acceptable to the Administrative
Agent, transferring ownership of the Deposit Account to the Administrative Agent
or transferring dominion and control over each such other deposit to the
Administrative Agent until such time as no Default exists. In the case of
deposits maintained with Lenders, the terms of such letter shall be subject to
the provisions of the Credit Agreement regarding setoffs. Notwithstanding the
foregoing, the terms of this Section 4.7 shall not apply to deposit accounts
specifically and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments (including workers’ compensation payments) to or for
the benefit of Grantor’s salaried employees.

 

4.8. Letter-of-Credit Rights. Each Grantor will, upon the Administrative Agent’s
request, use commercially reasonable efforts to cause each issuer of a letter of
credit, to consent to the assignment of proceeds of such letter of credit in
order to give the Administrative Agent Control of the letter-of-credit rights to
such letter of credit. Notwithstanding the foregoing, so long as no Default has
occurred and is continuing, this Section 4.8 shall not apply to any letters of
credit with a stated amount less than $100,000.

 

4.9. Federal, State or Municipal Claims. Each Grantor will notify the
Administrative Agent of any Collateral owned by such Grantor which constitutes a
claim against the United States government or any state or local government or
any instrumentality or agency thereof, the assignment of which claim is
restricted by federal, state or municipal law, other than sales in the ordinary
course of business.

 

4.10. Intellectual Property. If, after the date hereof, any Grantor obtains
rights to, or applies for or seeks registration of, any new patentable
invention, trademark or copyright in addition to the patents, trademarks and
copyrights described in Exhibit B, which are all of such Grantor’s patents,
trademarks and copyrights as of the Closing Date, then such Grantor shall give
the Administrative Agent notice thereof as part of the compliance certificate
provided to the

 

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Agent pursuant to Section 6.1.3 of the Credit Agreement, and the security
interest granted to the Administrative Agent hereunder shall automatically apply
thereto. Each Grantor agrees promptly upon request by the Administrative Agent
to execute and deliver to the Administrative Agent any supplement to this
Security Agreement or any other document reasonably requested by the
Administrative Agent to evidence such security interest in a form appropriate
for recording in the applicable federal office. Each Grantor also hereby
authorizes the Administrative Agent to modify this Security Agreement
unilaterally (i) by amending Exhibit B to include any future patents, trademarks
and/or copyrights of which the Administrative Agent receives notification from
such Grantor pursuant hereto and (ii) by recording, in addition to and not in
substitution for this Security Agreement, a duplicate original of this Security
Agreement containing in Exhibit B a description of such future patents,
trademarks and/or copyrights.

 

4.11. Commercial Tort Claims. If, after the date hereof, any Grantor identifies
the existence of a commercial tort claim belonging to such Grantor that has
arisen in the course of such Grantor’s business in addition to the commercial
tort claims described in Exhibit F, which are all of such Grantor’s commercial
tort claims as of the Closing Date, then such Grantor shall give the
Administrative Agent notice thereof as part of the compliance certificate
provided to the Agent pursuant to Section 6.1.3 of the Credit Agreement. Each
Grantor agrees promptly upon request by the Administrative Agent to execute and
deliver to the Administrative Agent any supplement to this Security Agreement or
any other document reasonably requested by the Administrative Agent to evidence
the grant of a security interest therein in favor of the Administrative Agent.

 

ARTICLE V

 

DEFAULT

 

5.1. Acceleration and Remedies. Upon the acceleration of the Secured Obligations
under the Credit Agreement pursuant to Section 8.1 thereof, the Obligations and,
to the extent provided for under the Rate Management Transactions evidencing the
same, the Rate Management Obligations, shall immediately become due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, and the Administrative Agent may, with the concurrence
or at the direction of the Required Secured Parties, exercise any or all of the
following rights and remedies:

 

5.1.1 Those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Loan Document, provided that this Section 5.2.1 shall
not be understood to limit any rights or remedies available to the
Administrative Agent and the Holders of Secured Obligations prior to a Default.

 

5.1.2 Those rights and remedies available to a secured party under the Ohio UCC
(whether or not the Ohio UCC applies to the affected Collateral) or under any
other applicable law (including, without limitation, any law governing the
exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in
default under a security agreement.

 

5.1.3 Without notice except as specifically provided in Section 8.1 hereof or
elsewhere herein, sell, lease, assign, grant an option or options to purchase or
otherwise

 

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dispose of the Collateral or any part thereof in one or more parcels at public
or private sale, for cash, on credit or for future delivery, and upon such other
terms as the Administrative Agent may deem commercially reasonable.

 

The Administrative Agent, on behalf of the Holders of Secured Obligations, may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral, and such compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.

 

If, after the Credit Agreement has terminated by its terms and all of the
Obligations have been paid in full, there remain Rate Management Obligations
outstanding, the Required Secured Parties may exercise the remedies provided in
this Section 5.2 upon the occurrence of any event which would allow or require
the termination or acceleration of any Rate Management Obligations pursuant to
the terms of the agreement governing any Rate Management Transaction.

 

5.2. Grantors’ Obligations Upon Default. Upon the request of the Administrative
Agent after the occurrence and continuance of a Default, each Grantor will:

 

5.2.1 Assembly of Collateral. Assemble and make available to the Administrative
Agent the Collateral and all records relating thereto at any place or places
specified by the Administrative Agent.

 

5.2.2 Secured Party Access. Permit the Administrative Agent, by the
Administrative Agent’s representatives and agents, to enter any premises where
all or any part of the Collateral, or the books and records relating thereto, or
both, are located, to take possession of all or any part of the Collateral and
to remove all or any part of the Collateral.

 

5.3. License. The Administrative Agent, for the benefit of the Holders of
Secured Obligations, is hereby granted a license or other right to use,
following the occurrence and during the continuance of a Default, without
charge, each Grantor’s labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, customer lists and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, following the occurrence and during the continuance of a
Default, such Grantor’s rights under all licenses and all franchise agreements
shall inure to the Administrative Agent’s and the Holders of Secured
Obligations’ benefit. In addition, each Grantor hereby irrevocably agrees that
the Administrative Agent may, following the occurrence and during the
continuance of a Default, sell any of such Grantor’s Inventory directly to any
person, including without limitation persons who have previously purchased such
Grantor’s Inventory from such Grantor and in connection with any such sale or
other enforcement of the Administrative Agent’s rights under this Security
Agreement, may sell Inventory which bears any trademark owned by or licensed to
such Grantor and any Inventory that is covered by any copyright owned by or
licensed to such Grantor and the Administrative Agent may finish any work in
process and affix any trademark owned by or licensed to such Grantor and sell
such Inventory as provided herein.

 

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ARTICLE VI

 

WAIVERS, AMENDMENTS AND REMEDIES

 

No delay or omission of the Administrative Agent or any Holder of Secured
Obligations to exercise any right or remedy granted under this Security
Agreement shall impair such right or remedy or be construed to be a waiver of
any Default or an acquiescence therein, and any single or partial exercise of
any such right or remedy shall not preclude any other or further exercise
thereof or the exercise of any other right or remedy. No waiver, amendment or
other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the
Administrative Agent with the concurrence or at the direction of the Lenders
required under Section 8.2 of the Credit Agreement and each Grantor, and then
only to the extent in such writing specifically set forth, provided that the
addition of any Domestic Subsidiary as a Grantor hereunder by execution of a
Security Agreement Supplement in the form of Annex I (with such modifications as
shall be acceptable to the Administrative Agent) shall not require receipt of
any consent from or execution of any documentation by any other Grantor party
hereto. All rights and remedies contained in this Security Agreement or by law
afforded shall be cumulative and all shall be available to the Administrative
Agent and the Holders of Secured Obligations until the Secured Obligations have
been paid in full.

 

ARTICLE VII

 

PROCEEDS; COLLECTION OF RECEIVABLES

 

7.1. Lockboxes. Upon request of the Administrative Agent after the occurrence
and during the continuance of a Default or Unmatured Default, each Grantor shall
execute and deliver to the Administrative Agent irrevocable lockbox agreements
in the form provided by or otherwise acceptable to the Administrative Agent,
which agreements shall be accompanied by an acknowledgment by the bank where the
lockbox is located of the Lien of the Administrative Agent granted hereunder and
of irrevocable instructions to wire all amounts collected therein to a special
collateral account at the Administrative Agent.

 

7.2. Collection of Receivables. The Administrative Agent may at any time after
the occurrence and during the continuance of a Default, by giving each Grantor
written notice, elect to require that the Receivables be paid directly to the
Administrative Agent for the benefit of the Holders of Secured Obligations. In
such event, each Grantor shall, and shall permit the Administrative Agent to,
promptly notify the account debtors or obligors under the Receivables owned by
such Grantor of the Administrative Agent’s interest therein and direct such
account debtors or obligors to make payment of all amounts then or thereafter
due under such Receivables directly to the Administrative Agent. Upon receipt of
any such notice from the Administrative Agent, each Grantor shall thereafter
hold in trust for the Administrative Agent, on behalf of the Holders of Secured
Obligations, all amounts and proceeds received by it with respect to the
Receivables and Other Collateral and immediately and at all times thereafter
deliver to the Administrative Agent all such amounts and proceeds in the same
form as so received, whether by cash, check, draft or otherwise, with any
necessary endorsements. The Administrative Agent shall hold and apply funds so
received as provided by the terms of Sections 7.3 and 7.4 hereof.

 

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7.3. Special Collateral Account. Following the occurrence and continuance of a
Default, the Administrative Agent may require all cash proceeds of the
Collateral to be deposited in a special non-interest bearing cash collateral
account with the Administrative Agent and held there as security for the Secured
Obligations. No Grantor shall have any control whatsoever over said cash
collateral account. The Administrative Agent may (and shall, at the direction of
the Required Secured Parties), from time to time, apply the collected balances
in said cash collateral account to the payment of the Secured Obligations
whether or not the Secured Obligations shall then be due.

 

7.4. Application of Proceeds. Upon the occurrence and continuance of a Default,
the proceeds of the Collateral shall be applied by the Administrative Agent to
payment of the Secured Obligations in the following order unless a court of
competent jurisdiction shall otherwise direct:

 

(a) FIRST, to payment of all costs and expenses of the Administrative Agent
incurred in connection with the collection and enforcement of the Secured
Obligations or of the security interest granted to the Administrative Agent
pursuant to this Security Agreement;

 

(b) SECOND, to payment of that portion of the Secured Obligations constituting
accrued and unpaid interest and fees, pro rata among the Lenders in accordance
with the amount of such accrued and unpaid interest and fees owing to each of
them;

 

(c) THIRD, to payment of the principal of the Secured Obligations and the net
early termination payments and any other Rate Management Obligations then due
and unpaid from the Borrower to any of the Lenders, pro rata among the Lenders
in accordance with the amount of such principal and such net early termination
payments and other Rate Management Obligations then due and unpaid owing to each
of them;

 

(d) FOURTH, to payment of any Secured Obligations (other than those listed
above) pro rata among those parties to whom such Secured Obligations are due in
accordance with the amounts owing to each of them; and

 

(e) FIFTH, the balance, if any, after all of the Secured Obligations have been
satisfied, shall be distributed by the Administrative Agent to the applicable
Grantor or at its direction.

 

ARTICLE VIII

 

GENERAL PROVISIONS

 

8.1. Notice of Disposition of Collateral; Condition of Collateral. Each Grantor
hereby waives notice of the time and place of any public sale or the time after
which any private sale or other disposition of all or any part of the Collateral
may be made. To the extent such notice may not be waived under applicable law,
any notice made shall be deemed reasonable if sent to the Borrower, addressed as
set forth in Article IX, at least ten days prior to (i) the date of any such
public sale or (ii) the time after which any such private sale or other
disposition may be made. Administrative Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale.

 

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8.2. Compromises and Collection of Collateral. Each Grantor and the
Administrative Agent recognize that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain of the Receivables,
that certain of the Receivables may be or become uncollectible in whole or in
part and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a Receivable. In view of the foregoing, each Grantor agrees that
the Administrative Agent may at any time and from time to time, if a Default has
occurred and is continuing, compromise with the obligor on any Receivable,
accept in full payment of any Receivable such amount as the Administrative Agent
in its sole discretion shall determine or abandon any Receivable, and any such
action by the Administrative Agent shall be commercially reasonable so long as
the Administrative Agent acts in good faith based on information known to it at
the time it takes any such action.

 

8.3. Secured Party Performance of Grantor’s Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to perform or pay in this Security Agreement and
such Grantor shall reimburse the Administrative Agent for any reasonable amounts
paid by the Administrative Agent pursuant to this Section 8.3. Each Grantor’s
obligation to reimburse the Administrative Agent pursuant to the preceding
sentence shall be a Secured Obligation payable on demand.

 

8.4. Authorization for Administrative Agent to Take Certain Action. Each Grantor
irrevocably authorizes the Administrative Agent at any time and from time to
time in the sole discretion of the Administrative Agent and appoints the
Administrative Agent as its attorney in fact (i) to file financing statements
necessary or desirable in the Administrative Agent’s sole discretion to perfect
and to maintain the perfection and priority of the Administrative Agent’s
security interest in the Collateral, (ii) upon the occurrence and during the
continuation of a Default, to indorse and collect any cash proceeds of the
Collateral, (iii) to file a carbon, photographic or other reproduction of this
Security Agreement or any financing statement with respect to the Collateral as
a financing statement and to file any other financing statement or amendment of
a financing statement (which does not add new collateral or add a debtor) in
such offices as the Administrative Agent in its sole discretion deems necessary
or desirable to perfect and to maintain the perfection and priority of the
Administrative Agent’s security interest in the Collateral, (iv) upon the
occurrence and during the continuation of a Default, to contact and enter into
one or more agreements with the issuers of uncertificated securities which are
Collateral owned by such Grantor and which are Securities or with financial
intermediaries holding other Investment Property as may be necessary or
advisable to give the Administrative Agent Control over such Securities or other
Investment Property, (v) upon the occurrence and during the continuation of a
Default, subject to the terms of the Credit Agreement, to enforce payment of the
Instruments, Accounts and Receivables in the name of the Administrative Agent or
such Grantor, (vi) upon the occurrence and during the continuation of a Default,
to apply the proceeds of any Collateral received by the Administrative Agent to
the Secured Obligations as provided in Article VII and (vii) upon the occurrence
and during the continuation of a Default, to discharge past due taxes,
assessments, charges, fees or Liens on the Collateral (except for such Liens as
are specifically permitted hereunder or under any other Loan Document), and each
Grantor agrees to

 

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reimburse the Administrative Agent on demand for any reasonable payment made or
any reasonable expense incurred by the Administrative Agent in connection
therewith, provided that this authorization shall not relieve any Grantor of any
of its obligations under this Security Agreement or under the Credit Agreement.

 

8.5. Specific Performance of Certain Covenants. Each Grantor acknowledges and
agrees that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6,
4.4, 5.3, or 8.7 or in Article VII hereof will cause irreparable injury to the
Administrative Agent and the Holders of Secured Obligations, that the
Administrative Agent and Holders of Secured Obligations have no adequate remedy
at law in respect of such breaches and therefore agrees, without limiting the
right of the Administrative Agent or the Holders of Secured Obligations to seek
and obtain specific performance of other obligations of the Grantors contained
in this Security Agreement, that the covenants of the Grantors contained in the
Sections referred to in this Section 8.5 shall be specifically enforceable
against the Grantors.

 

8.6. Use and Possession of Certain Premises. Upon the occurrence and during the
continuance of a Default, the Administrative Agent shall be entitled to occupy
and use any premises owned or leased by the Grantors where any of the Collateral
or any records relating to the Collateral are located until the Secured
Obligations are paid or the Collateral is removed therefrom, whichever first
occurs, without any obligation to pay any Grantor for such use and occupancy.

 

8.7. Dispositions Not Authorized. No Grantor is authorized to sell or otherwise
dispose of the Collateral except as set forth in Section 4.1.5 hereof and
notwithstanding any course of dealing between any Grantor and the Administrative
Agent or other conduct of the Administrative Agent, no authorization to sell or
otherwise dispose of the Collateral (except as set forth in Section 4.1.5
hereof) shall be binding upon the Administrative Agent or the Holders of Secured
Obligations unless such authorization is in writing signed by the Administrative
Agent with the consent or at the direction of the Required Lenders.

 

8.8. Benefit of Agreement. The terms and provisions of this Security Agreement
shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the Holders of Secured Obligations and their respective
successors and assigns (including all persons who become bound as a debtor to
this Security Agreement), except that the Grantors shall not have the right to
assign their rights or delegate their obligations under this Security Agreement
or any interest herein, without the prior written consent of the Administrative
Agent.

 

8.9. Survival of Representations. All representations and warranties of the
Grantors contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.

 

8.10. Headings. The title of and section headings in this Security Agreement are
for convenience of reference only, and shall not govern the interpretation of
any of the terms and provisions of this Security Agreement.

 

8.11. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the

 

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Credit Agreement has terminated pursuant to its express terms and (ii) all of
the Secured Obligations have been indefeasibly paid and performed in full and no
commitments of the Administrative Agent or the Holders of Secured Obligations
which would give rise to any Secured Obligations are outstanding.

 

8.12. Entire Agreement. This Security Agreement embodies the entire agreement
and understanding between the Grantors and the Administrative Agent relating to
the Collateral and supersedes all prior agreements and understandings between
the Grantors and the Administrative Agent relating to the Collateral.

 

8.13. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF OHIO (WITHOUT REGARD TO
THE CONFLICTS OF LAWS PROVISIONS) BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.

 

8.14. Subordination of Intercompany Indebtedness. Each Grantor agrees that any
and all claims of such Grantor against any other Grantor (each an “Obligor”)
with respect to any “Intercompany Indebtedness” (as hereinafter defined), any
endorser, obligor or any other guarantor of all or any part of the Secured
Obligations, or against any of its properties shall be subordinate and subject
in right of payment to the prior payment, in full and in cash, of all Secured
Obligations, provided that, and not in contravention of the foregoing, so long
as no Default has occurred and is continuing, such Grantor may make loans to and
receive payments in the ordinary course with respect to such Intercompany
Indebtedness from each such Obligor to the extent not prohibited by the terms of
this Security Agreement and the other Loan Documents. Notwithstanding any right
of any Grantor to ask, demand, sue for, take or receive any payment from any
Obligor, all rights, liens and security interests of such Grantor, whether now
or hereafter arising and howsoever existing, in any assets of any other Obligor
shall be and are subordinated to the rights of the Holders of Secured
Obligations and the Administrative Agent in those assets. No Grantor shall have
any right to possession of any such asset or to foreclose upon any such asset,
whether by judicial action or otherwise, unless and until all of the Secured
Obligations (other than contingent indemnity obligations) shall have been fully
paid and satisfied (in cash) and all Commitments and Facility LCs issued under
the Credit Agreement have terminated or expired. After the occurrence and during
the continuance of a Default, if all or any part of the assets of any Obligor,
or the proceeds thereof, are subject to any distribution, division or
application to the creditors of such Obligor, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, or if the business of any such Obligor is dissolved or if
substantially all of the assets of any such Obligor are sold, then, and in any
such event (such events being herein referred to as an “Insolvency Event”), any
payment or distribution of any kind or character, either in cash, securities or
other property, which shall be payable or deliverable upon or with respect to
any indebtedness of any Obligor to any Grantor (“Intercompany Indebtedness”)
shall be paid or delivered directly to the Administrative Agent for application
on any of the Secured Obligations, due or to become due, until such Secured
Obligations (other than contingent indemnity obligations) shall have first been
fully paid and satisfied (in cash). Should any payment, distribution, security
or instrument or proceeds thereof be received by the applicable Grantor upon or
with respect to the Intercompany

 

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Indebtedness after any Insolvency Event and prior to the satisfaction of all of
the Secured Obligations (other than contingent indemnity obligations) and the
termination or expiration of all Commitments of the Lenders and Facility LCs
issued pursuant to the Credit Agreement, such Grantor shall receive and hold the
same in trust, as trustee, for the benefit of the Holders of Secured Obligations
and shall forthwith deliver the same to the Administrative Agent, for the
benefit of the Holders of Secured Obligations, in precisely the form received
(except for the endorsement or assignment of the Grantor where necessary), for
application to any of the Secured Obligations, due or not due, and, until so
delivered, the same shall be held in trust by the Grantor as the property of the
Holders of Secured Obligations. If any such Grantor fails to make any such
endorsement or assignment to the Administrative Agent, the Administrative Agent
or any of its officers or employees is irrevocably authorized to make the same.
Each Grantor agrees that until the Secured Obligations (other than the
contingent indemnity obligations) have been paid in full (in cash) and satisfied
and all Commitments and Facility LCs issued under the Credit Agreement have
terminated or expired, no Grantor will assign or transfer to any Person (other
than the Administrative Agent or the Borrower or another Grantor) any claim any
such Grantor has or may have against any Obligor.

 

8.15. Specified Assets. Upon written notice of any sale or disposition of any
Specified Asset, the Administrative Agent agrees to promptly release its Lien on
such Specified Asset.

 

ARTICLE IX

 

NOTICES

 

9.1. Sending Notices. Any notice required or permitted to be given under this
Security Agreement shall be sent (and deemed received) in the manner and to the
addresses set forth in Article XIII of the Credit Agreement; and any such notice
delivered to the Borrower shall be deemed to have been delivered to all of the
Grantors.

 

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

 

ARTICLE X

 

THE ADMINISTRATIVE AGENT

 

Bank One, NA (Main Office Columbus) has been appointed Administrative Agent for
the Holders of Secured Obligations hereunder pursuant to Article X of the Credit
Agreement. It is expressly understood and agreed by the parties to this Security
Agreement that any authority conferred upon the Administrative Agent hereunder
is subject to the terms of the delegation of authority made by the Holders of
Secured Obligations to the Administrative Agent pursuant to the Credit
Agreement, and that the Administrative Agent has agreed to act (and any
successor Administrative Agent shall act) as such hereunder only on the express
conditions contained in such Article X. Any successor Administrative Agent
appointed pursuant to Article X of the Credit Agreement shall be entitled to all
the rights, interests and benefits of the Administrative Agent hereunder.

 

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[SIGNATURE PAGES TO FOLLOW]

 

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

 

ABX AIR, INC., as a Grantor

  SOUND SUPPRESSION, INC., as a Grantor By:  

 

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  By:  

 

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Name:   Name: Title:   Title: AIRBORNE F T Z, INC., as a Grantor   BANK ONE, NA
(MAIN OFFICE COLUMBUS), as Administrative Agent By:  

 

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  By:  

 

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Name:   Name: Title:   Title:

 

 

SIGNATURE PAGE TO PLEDGE AND SECURITY AGREEMENT

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ANNEX I

 

to

 

SUBSIDIARY

 

SECURITY AGREEMENT

 

Reference is hereby made to the Subsidiary Security Agreement (the “Agreement”),
dated as of March 31, 2004, made by each of ABX AIR, INC., a Delaware
corporation (the “Borrower”), SOUND SUPPRESSION, INC. (“SSI”), an Ohio
corporation, AIRBORNE F T Z, INC., an Ohio corporation (each an “Initial
Grantor”, and together with any additional Domestic Subsidiaries, including the
undersigned, which become parties thereto by executing a Supplement in
substantially the form hereof, the “Grantors”), in favor of the Administrative
Agent. Capitalized terms used herein and not defined herein shall have the
meanings given to them in the Agreement. By its execution below, the
undersigned, [NAME OF NEW GRANTOR], a [            ] [corporation/limited
liability company] agrees to become, and does hereby become, a Grantor under the
Agreement and agrees to be bound by such Agreement as if originally a party
thereto. By its execution below, the undersigned represents and warrants as to
itself that all of the representations and warranties contained in the Agreement
are true and correct in all respects as of the date hereof. [NAME OF NEW
GRANTOR] represents and warrants that the supplements to the Exhibits to the
Agreement attached hereto are true and correct in all respects and such
supplements set forth all information required to be scheduled under the
Agreement. [NAME OF NEW GRANTOR] shall take all steps necessary to perfect, in
favor of the Administrative Agent, a first-priority security interest in and
lien against [NAME OF NEW GRANTOR]’s Collateral, including, without limitation,
delivering all certificated Securities to the Administrative Agent, and taking
all steps necessary to properly perfect the Administrative Agent’s interest in
any uncertificated equity or membership interests.

 

IN WITNESS WHEREOF, [NAME OF NEW GRANTOR], a [            ] [corporation/limited
liability company] has executed and delivered this Annex I counterpart to the
Agreement as of this      day of             ,             .

 

[NAME OF NEW GRANTOR]

By:

 

 

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Title:

 

 

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