Exhibit 10.3
Execution Copy
FIRST LIEN PLEDGE AND SECURITY AGREEMENT
by and between
DAY INTERNATIONAL, INC.
DAY INTERNATIONAL GROUP, INC.
VARN INTERNATIONAL, INC.
DAY INTERNATIONAL FINANCE, INC.
NETWORK DISTRIBUTION INTERNATIONAL
NETWORK DISTRIBUTION INTERNATIONAL, INC.
as Grantors
and
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Collateral Agent

 

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

 

TABLE OF CONTENTS

              PAGE  
SECTION 1. DEFINITIONS; GRANT OF SECURITY
    1  
1.1 General Definitions
    1  
1.2 Definitions; Interpretation
    9  
 
       
SECTION 2. GRANT OF SECURITY
    9  
2.1 Grant of Security
    9  
2.2 Certain Limited Exclusions
    10  
 
       
SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE
    10  
3.1 Security for Obligations
    10  
3.2 Continuing Liability Under Collateral
    11  
 
       
SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS
    11  
4.1 Generally
    11  
4.2 Equipment and Inventory
    14  
4.3 Receivables
    15  
4.4 Investment Related Property
    17  
4.5 Material Contracts
    23  
4.6 Letter of Credit Rights
    24  
4.7 Intellectual Property
    25  
4.8 Commercial Tort Claims
    28  
 
       
SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL
GRANTORS
    28  
5.1 Access; Right of Inspection
    29  
5.2 Further Assurances
    29  
5.3 Additional Grantors
    30  
 
       
SECTION 6. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT
    30  
6.1 Power of Attorney
    30  
6.2 No Duty on the Part of Collateral Agent or Secured Parties
    31  
 
       
SECTION 7. REMEDIES
    31  
7.1 Generally
    31  
7.2 Application of Proceeds
    33  
7.3 Sales on Credit
    33  
7.4 Deposit Accounts
    33  
7.5 Investment Related Property
    33  
7.6 Intellectual Property
    34  
7.7 Cash Proceeds
    36  
 
       
SECTION 8. COLLATERAL AGENT
    36  
 
       
SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS
    37  
 
       
SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM
    37  

i

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

 

              PAGE  
SECTION 11. MISCELLANEOUS
    38  
 
       
SCHEDULE 4.1 — GENERAL INFORMATION
       
 
       
SCHEDULE 4.2 — LOCATION OF EQUIPMENT AND INVENTORY
       
 
       
SCHEDULE 4.4 — INVESTMENT RELATED PROPERTY
       
 
       
SCHEDULE 4.6 — DESCRIPTION OF LETTERS OF CREDIT
       
 
       
SCHEDULE 4.7 — INTELLECTUAL PROPERTY — EXCEPTIONS
       
 
       
SCHEDULE 4.8 — COMMERCIAL TORT CLAIMS
       
 
       
EXHIBIT A — PLEDGE SUPPLEMENT
       
 
       
EXHIBIT B — UNCERTIFICATED SECURITIES CONTROL AGREEMENT
       
 
       
EXHIBIT C — SECURITIES ACCOUNT CONTROL AGREEMENT
       
 
       
EXHIBIT D — DEPOSIT ACCOUNT CONTROL AGREEMENT
       
 
       
EXHIBIT E — TRADEMARK SECURITY AGREEMENT
       
 
       
EXHIBIT F — COPYRIGHT SECURITY AGREEMENT
       
 
       
EXHIBIT G — PATENT SECURITY AGREEMENT
       

ii

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

 

          This FIRST LIEN PLEDGE AND SECURITY AGREEMENT (as amended, restated,
supplemented or otherwise modified from time to time, this “Agreement”), dated
as of December 5, 2005, is made by and between DAY INTERNATIONAL, INC., a
Delaware corporation (the “Company”), DAY INTERNATIONAL GROUP, INC., a Delaware
corporation (“Holdings”) and CERTAIN SUBSIDIARIES OF THE COMPANY, as Guarantors
(described below) (each of the Guarantors, the Company and Holdings are referred
to hereinafter individually as a “Grantor”, and collectively as the “Grantors”),
and GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as collateral agent for the
Secured Parties described below (together with its successors, designees and
permitted assigns in such capacity, the “Collateral Agent”).
RECITALS:
     WHEREAS, reference is made to that certain Credit and Guaranty Agreement,
dated as of the date hereof (as it may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), by and among the
COMPANY, HOLDINGS AND CERTAIN AFFILIATES OF THE COMPANY as guarantors party
thereto (the “Guarantors”), the financial institutions from time to time parties
thereto (such financial institutions, together with their respective successors
and assigns, are referred to hereinafter each individually as a “Lender” and
collectively as the “Lenders”), GSCP as Sole Lead Arranger, Sole Bookrunner and
Sole Syndication Agent (in each such capacity, the “Arranger”), and as
Administrative Agent (in such capacity, the “Administrative Agent”) and as
Collateral Agent;
     WHEREAS, subject to the terms and conditions of the Credit Agreement,
certain Grantors may enter into one or more Hedge Agreements with one or more
Lender Counterparties;
     WHEREAS, in order to induce the Secured Parties (as hereinafter defined) to
provide Loans and other financial accommodations under the Credit Agreement and
Hedge Agreements, each Guarantor has agreed pursuant to the Credit Agreement to
guaranty all of the Obligations (as hereinafter defined) and have agreed to
cause certain future Affiliates of the Company to guaranty all of the
Obligations (the “First Lien Guaranty”); and
     WHEREAS, in order to induce the Collateral Agent and the Secured Parties to
enter into the Credit Agreement and other Hedge Agreements and to induce the
Secured Parties to make the Loans and provide other financial accommodations,
Grantors have agreed to grant a continuing Lien on the Collateral (as
hereinafter defined) to secure all of the Obligations;
     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and mutual covenants herein contained, each Grantor and the
Collateral Agent and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS; GRANT OF SECURITY.
     1.1 General Definitions. In this Agreement, the following terms shall have
the following meanings:
          “Account Debtor” shall mean each Person who is obligated on a
Receivable or any Supporting Obligation related thereto.
          “Accounts” shall mean all “accounts” as defined in Article 9 of the
UCC.

 

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

 

          “Additional Grantors” shall have the meaning assigned in Section 5.3.
          “Agreement” shall have the meaning set forth in the preamble.
          “Assigned Agreements” shall mean all agreements and contracts to which
such Grantor is a party as of the date hereof, or to which such Grantor becomes
a party after the date hereof, including, without limitation, each Material
Contract, as each such agreement may be amended, supplemented or otherwise
modified from time to time.
          “Bankruptcy Code” shall mean Title 11 of the United States Code
entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.
          “Cash Proceeds” shall have the meaning assigned in Section 7.7.
          “Chattel Paper” shall mean all “chattel paper” as defined in Article 9
of the UCC, including, without limitation, “electronic chattel paper” or
“tangible chattel paper”, as each term is defined in Article 9 of the UCC.
          “Collateral” shall have the meaning assigned in Section 2.1.
          “Collateral Account” shall mean any account established by the
Collateral Agent.
          “Collateral Agent” shall have the meaning set forth in the preamble.
          “Collateral Records” shall mean books, records, ledger cards, files,
correspondence, customer lists, blueprints, technical specifications, manuals,
computer software, computer printouts, tapes, disks 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.
          “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.
          “Commercial Tort Claims” shall mean all “commercial tort claims” as
defined in Article 9 of the UCC, including, without limitation, all commercial
tort claims listed on Schedule 4.8 (as such schedule may be amended or
supplemented from time to time).
          “Commodities Accounts” (i) shall mean all “commodity accounts” as
defined in Article 9 of the UCC and (ii) shall include, without limitation, all
of the accounts listed on Schedule 4.4 under the heading “Commodities Accounts”
(as such schedule may be amended or supplemented from time to time).
          “Company” shall have the meaning set forth in the recitals.
          “Controlled Foreign Corporation” shall mean “controlled foreign
corporation” as defined in the Tax Code.
          “Copyright Licenses” shall mean any and all agreements providing for
the granting of any right in or to Copyrights (whether such Grantor is licensee
or licensor thereunder)

2

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

 

including, without limitation, each agreement referred to in Schedule 4.7(B) (as
such schedule may be amended or supplemented from time to time).
          “Copyrights” shall mean all United States, and foreign copyrights
(including Community designs), including but not limited to copyrights in
software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of
the U.S. Copyright Act), whether registered or unregistered, and, with respect
to any and all of the foregoing: (i) all registrations and applications therefor
including, without limitation, the registrations and applications referred to in
Schedule 4.7(A) (as such schedule may be amended or supplemented from time to
time), (ii) all extensions and renewals thereof, (iii) all rights corresponding
thereto throughout the world, (iv) all rights to sue for past, present and
future infringements thereof, and (v) all Proceeds of the foregoing, including,
without limitation, licenses, royalties, income, payments, claims, damages and
proceeds of suit.
          “Credit Agreement” shall have the meaning set forth in the recitals.
          “Deposit Accounts” (i) shall mean all “deposit accounts” as defined in
Article 9 of the UCC and (ii) shall include, without limitation, all of the
accounts listed on Schedule 4.4 under the heading “Deposit Accounts” (as such
schedule may be amended or supplemented from time to time).
          “Documents” shall mean all “documents” as defined in Article 9 of the
UCC.
          “Equipment” shall mean: (i) all “equipment” as defined in Article 9 of
the UCC, (ii) all machinery, manufacturing equipment, data processing equipment,
computers, office equipment, furnishings, furniture, appliances, fixtures and
tools (in each case, regardless of whether characterized as equipment under the
UCC) and (iii) all accessions or additions thereto, all parts thereof, whether
or not at any time of determination incorporated or installed therein or
attached thereto, and all replacements therefor, wherever located, now or
hereafter existing, including any fixtures.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
          “Event of Default” shall mean an Event of Default under any of the
First Lien Credit Document.
          “First Lien Credit Documents” shall mean the Credit Agreement, the
Credit Documents and any Hedge Agreements entered into with a Lender
Counterparty, and each of the other agreements, documents and instruments
providing for or evidencing any other Obligation, and any other document or
instrument executed or delivered at any time in connection with any Obligations,
including any intercreditor or joinder agreement among holders of Obligations,
to the extent such are effective at the relevant time, as each may be amended,
restated, supplemented, modified, renewed or extended from time to time in
accordance with the provisions of the Intercreditor Agreement.
          “First Lien Guaranty” shall have the meaning set forth in the recitals
to this Agreement.

3

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

 

          “Foreign Deposit Accounts” shall mean the Company’s existing Deposit
Accounts on the date hereof in China, Japan and the U.K., in an aggregate amount
not to exceed $1,000,000 on the date hereof and at any time thereafter.
          “General Intangibles” (i) shall mean all “general intangibles” as
defined in Article 9 of the UCC, including “payment intangibles” also as defined
in Article 9 of the UCC and (ii) shall include, without limitation, all interest
rate or currency protection or hedging arrangements, all tax refunds, all
licenses, permits, concessions and authorizations, all Assigned Agreements and
all Intellectual Property (in each case, regardless of whether characterized as
general intangibles under the UCC).
          “Goods” (i) shall mean all “goods” as defined in Article 9 of the UCC
and (ii) shall include, without limitation, all Inventory and Equipment (in each
case, regardless of whether characterized as goods under the UCC).
          “Grantors” shall have the meaning set forth in the preamble.
          “Guarantors” shall have the meaning set forth in the recitals.
          “Hedge Agreement” shall mean any (i) interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
hedging agreement or other similar agreement or arrangement, each of which is
for the purpose of hedging the interest rate exposure associated with Grantors’
operations or (ii) foreign exchange contract, currency swap agreement, futures
contract, option contract, synthetic cap or other similar agreement or
arrangement, each of which is for the purpose of hedging the foreign currency
risk associated with Grantors’ operations.
          “Indemnitee” shall mean the Collateral Agent, and its and its
Affiliates’ officers, partners, directors, trustees, employees and agents.
          “Instruments” shall mean all “instruments” as defined in Article 9 of
the UCC.
          “Insurance” shall mean (i) all insurance policies covering any or all
of the Collateral (regardless of whether the Collateral Agent is the loss payee
thereof) and (ii) any key man life insurance policies.
          “Intellectual Property” shall mean, collectively, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the
Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.
          “Inventory” shall mean (i) all “inventory” as defined in Article 9 of
the UCC and (ii) all goods held for sale or lease or to be furnished under
contracts of service or so leased or furnished, all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in any Grantor’s business; all
goods in which any Grantor has an interest in mass or a joint or other interest
or right of any kind; and all goods which are returned to or repossessed by any
Grantor, all computer programs embedded in any goods and all accessions thereto
and products thereof (in each case, regardless of whether characterized as
inventory under the UCC).

4

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

 

          “Investment Accounts” shall mean the Collateral Account, Securities
Accounts, Commodities 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.
          “Lender” shall have the meaning set forth in the recitals.
          “Letter of Credit Right” shall mean “letter-of-credit right” as
defined in Article 9 of the UCC.
          “Lien” shall mean (i) any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, and
any lease in the nature thereof) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing and (ii) in the
case of Pledged Equity Interests, any purchase option, call or similar right of
a third party with respect to such Pledged Equity Interests.
          “Material Adverse Effect” shall mean a material adverse effect on
(i) the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company and its subsidiaries taken as a whole;
(ii) the ability of any Grantor to fully and timely perform its Obligations;
(iii) the legality, validity, binding effect or enforceability against a Grantor
of a First Lien Credit Document to which it is a party; or (iv) the rights,
remedies and benefits available to, or conferred upon, any agent and any Lender
or any Secured Party under any First Lien Credit Document.
          “Material Contract” shall mean any contract or other arrangement to
which any Grantor is a party (other than the Credit Documents) for which breach,
nonperformance, cancellation or failure to renew could reasonably be expected to
have a Material Adverse Effect.
          “Money” shall mean “money” as defined in the UCC.
          “Non-Assignable Contract” shall mean any agreement, contract or
license to which any Grantor is a party that by its terms purports to restrict
or prevent the assignment or granting of a security interest therein (either by
its terms or by any federal or state statutory prohibition or otherwise
irrespective of whether such prohibition or restriction is enforceable under
Section 9-406 through 409 of the UCC).
          “Obligations” shall mean all obligations of every nature of each
Grantor from time to time owed to the Secured Parties or any of them under the
Credit Agreement, Hedge Agreements and other First Lien Credit Documents,
whether for principal or interest, and shall include all interest accrued or
accruing (or which would, absent commencement of an Insolvency or Liquidation
Proceeding (as defined in the Intercreditor Agreement) accrue) after
commencement of an Insolvency or Liquidation Proceeding in accordance with the
rate specified in the relevant First Lien Credit Document whether or not the
claim for such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding, reimbursement of amounts drawn under letters of credit, payments for
early termination of Hedge Agreements, fees, expenses, indemnification or
otherwise.

5

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

 

          “Patent Licenses” shall mean all agreements providing for the granting
of any right in or to Patents (whether such Grantor is licensee or licensor
thereunder) including, without limitation, each agreement referred to in
Schedule 4.7(D) (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, but not limited to: (i) each
patent and patent application referred to in Schedule 4.7(C) hereto (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 rights corresponding thereto throughout the
world, (iv) all inventions and improvements described therein, (v) all rights to
sue for past, present and future infringements thereof, (vi) all licenses,
claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds
of the foregoing, including, without limitation, licenses, royalties, income,
payments, claims, damages, and proceeds of suit.
          “Pledge Supplement” shall mean any supplement to this agreement in
substantially the form of Exhibit A.
          “Pledged Debt” shall mean all Indebtedness owed to such Grantor,
including, without limitation, all Indebtedness described on Schedule 4.4(A)
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 evidencing such Indebtedness, 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 such
Indebtedness.
          “Pledged Equity Interests” shall mean all Pledged Stock, Pledged LLC
Interests, Pledged Partnership Interests and Pledged Trust Interests.
          “Pledged LLC Interests” shall mean all interests in any limited
liability company including, without limitation, all limited liability company
interests listed on Schedule 4.4(A) 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.
          “Pledged Partnership Interests” shall mean all interests in any
general partnership, limited partnership, limited liability partnership or other
partnership including, without limitation, all partnership interests listed on
Schedule 4.4(A) 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.

6

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

 

          “Pledged Stock” shall mean all shares of capital stock owned by such
Grantor, including, without limitation, all shares of capital stock described on
Schedule 4.4(A) 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.
          “Pledged Trust Interests” shall mean all interests in a Delaware
business trust or other trust including, without limitation, all trust interests
listed on Schedule 4.4(A) under the heading “Pledged Trust Interests” (as such
schedule may be amended or supplemented from time to time) and the certificates,
if any, representing such trust interests and any interest of such Grantor on
the books and records of such trust 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 trust interests.
          “Proceeds” shall mean: (i) all “proceeds” as defined in Article 9 of
the UCC, (ii) payments or distributions made with respect to any Investment
Related Property and (iii) whatever is receivable or received when Collateral or
proceeds are sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary.
          “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 or secured parties, 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 nonwritten forms of information
related in any way to the foregoing or any Receivable.
          “Record” shall have the meaning specified in Article 9 of the UCC.
          “Secured Obligations” shall have the meaning assigned in Section 3.1.

7

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

 

          “Secured Parties” shall mean the Agents, the Lenders and the Lender
Counterparties and shall include, without limitation, all former Agents, Lenders
and Lender Counterparties to the extent that any Obligations owing to such
Persons were incurred while such Persons were Agents, Lenders or Lender
Counterparties and such Obligations have not been paid or satisfied in full.
          “Securities” shall mean any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
“securities” or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
          “Securities Accounts” (i) shall mean all “securities accounts” as
defined in Article 8 of the UCC and (ii) shall include, without limitation, all
of the accounts listed on Schedule 4.4(A) under the heading “Securities
Accounts” (as such schedule may be amended or supplemented from time to time).
          “Supporting Obligation” shall mean all “supporting obligations” as
defined in Article 9 of the UCC.
          “Tax Code” shall mean the United States Internal Revenue Code of 1986,
as amended from time to time.
          “Trademark Licenses” shall mean any and all agreements providing for
the granting of any right in or to Trademarks (whether such Grantor is licensee
or licensor thereunder) including, without limitation, each agreement referred
to in Schedule 4.7(F) (as such schedule may be amended or supplemented from time
to time).
          “Trademarks” shall mean all United States, and foreign trademarks,
trade names, 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, all registrations and applications for any of the
foregoing including, but not limited to: (i) the registrations and applications
referred to in Schedule 4.7(E) (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 the foregoing, (iv) the right to sue for past, present and future
infringement or dilution of any of the foregoing or for any injury to goodwill,
and (v) all Proceeds of the foregoing, including, without limitation, licenses,
royalties, income, payments, claims, damages, and proceeds of suit.
          “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
referred to in Schedule 4.7(G) (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 such Trade
Secret has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating, or referring in any way to such
Trade Secret, including but not limited to: (i) the right to sue for past,

8

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

 

present and future misappropriation or other violation of any Trade Secret, and
(ii) all Proceeds of the foregoing, including, without limitation, licenses,
royalties, income, payments, claims, damages, and proceeds of suit.
          “UCC” shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York or, when the context implies, the Uniform
Commercial Code as in effect from time to time in any other applicable
jurisdiction.
          “United States” shall mean the United States of America.
     1.2 Definitions; Interpretation. All capitalized terms used herein
(including the preamble and recitals hereto) and not otherwise defined herein
shall have the meanings ascribed thereto in the Credit Agreement or, if not
defined therein, in the UCC. References to “Sections,” “Exhibits” and
“Schedules” shall be to Sections, Exhibits and Schedules, as the case may be, of
this Agreement unless otherwise specifically provided. Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. 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 nonlimiting
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. If any conflict or inconsistency
exists between this Agreement and the Credit Agreement, the Credit Agreement
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.
SECTION 2. GRANT OF SECURITY.
     2.1 Grant of Security. Each Grantor hereby grants to the Collateral Agent 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 owned or existing or
hereafter acquired or arising and wherever located (all of which being
hereinafter collectively referred to as the “Collateral”):
          (a) Accounts;
          (b) Chattel Paper;
          (c) Documents;
          (d) General Intangibles;
          (e) Goods;
          (f) Instruments;
          (g) Insurance;

9

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

 

          (h) Intellectual Property;
          (i) Investment Related Property;
          (j) Letter of Credit Rights;
          (k) Money;
          (l) Receivables and Receivable Records;
          (m) Commercial Tort Claims;
          (n) to the extent not otherwise included above, all Collateral
Records, Collateral Support and Supporting Obligations relating to any of the
foregoing; and
          (o) 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 Intellectual Property, lease,
license, contract, property rights or agreement to which any Grantor is a party
or any of its rights or interests thereunder if and for so long as the grant of
such security interest shall constitute or result in (i) the abandonment,
invalidation or unenforceability of any right, title or interest of any Grantor
therein or (ii) in a breach or termination pursuant to the terms of, or a
default under, any such lease, license, contract property rights or agreement
(other than to the extent that any such term would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor
provision or provisions) of any relevant jurisdiction or any other applicable
law (including the Bankruptcy Code) or principles of equity), provided however
that the Collateral shall include and such security interest shall attach
immediately at such time as the condition causing such abandonment, invalidation
or unenforceability shall be remedied and to the extent severable, shall attach
immediately to any portion of such Lease, license, contract, property rights or
agreement that does not result in any of the consequences specified in (i) or
(ii) above; or (b) any of the outstanding capital stock of a Controlled Foreign
Corporation in excess of 65% of the voting power of all classes of capital stock
of such Controlled Foreign Corporation entitled to vote; provided that
immediately upon the amendment of the Tax Code to allow the pledge of a greater
percentage of the voting power of capital stock in a Controlled Foreign
Corporation without adverse tax consequences, the Collateral shall include, and
the security interest granted by each Grantor shall attach to, such greater
percentage of capital stock of each Controlled Foreign Corporation.
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, 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 with respect to every Grantor (the “Secured Obligations”).

10

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

 

     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 Collateral Agent or any 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 Collateral Agent 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 Collateral
Agent 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 Collateral Agent 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. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
     4.1 Generally.
          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) 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, will continue to own or
have such rights in each item of the Collateral, in each case free and clear of
any and all Liens, rights or claims of all other Persons other than Permitted
Liens;
          (ii) it has indicated on Schedule 4.1(A)(as such schedule may be
amended or supplemented from time to time): (w) the type of organization of such
Grantor, (x) the jurisdiction of organization of such Grantor, (y) its
organizational identification number and (z) the jurisdiction where the chief
executive office or its sole place of business is (or the principal residence if
such Grantor is a natural person), and for the one-year period preceding the
date hereof has been, located.
          (iii) the full legal name of such Grantor is as set forth on
Schedule 4.1(A) and it has not done in the last five (5) years, and does not do,
business under any other name (including any trade name or fictitious business
name) except for those names set forth on Schedule 4.1(B) (as such schedule may
be amended or supplemented from time to time);
          (iv) except as provided on Schedule 4.1(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) within the past five (5) years;
          (v) except in connection with Permitted Liens, it has not within the
last five (5) years become bound (whether as a result of merger or otherwise) as

11

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

 

debtor under a security agreement entered into by another Person, which has not
heretofore been terminated;
          (vi) (u) upon the filing of all UCC financing statements naming each
Grantor as “debtor” and the Collateral Agent as “secured party” and describing
the Collateral in the filing offices set forth opposite such Grantor’s name on
Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from
time to time) and other filings delivered by each Grantor, (v) upon delivery of
all Instruments, Chattel Paper and certificated Pledged Equity Interests and
Pledged Debt, (w) upon sufficient identification of Commercial Tort Claims,
(x) upon execution of a control agreement establishing the Collateral Agent’s
“control” (within the meaning of Section 8-106, 9-106 or 9-104 of the UCC, as
applicable) with respect to any Investment Account, (y) upon consent of the
issuer with respect to Letter of Credit Rights, and (z) to the extent not
subject to Article 9 of the UCC, upon recordation of the security interests
granted hereunder in Patents, Trademarks and Copyrights 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 to the Collateral Agent hereunder constitute valid and
perfected first priority Liens (subject in the case of priority only to
Permitted Liens and to the rights of the United States government (including any
agency or department thereof) with respect to United States government
Receivables) on all of the Collateral;
          (vii) all actions and consents, including all filings, notices,
registrations and recordings necessary or desirable for the exercise by the
Collateral Agent of the voting or other rights provided for in this Agreement or
the exercise of remedies in respect of the Collateral have been made or
obtained;
          (viii) other than the financing statements filed in favor of the
Collateral Agent, no effective UCC 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 office except for
(x) financing statements for which proper termination statements have been
delivered to the Collateral Agent for filing and (y) financing statements filed
in connection with Permitted Liens;
          (ix) no authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority or regulatory body is required for
either (i) the pledge or grant by any Grantor of the Liens purported to be
created in favor of the Collateral Agent hereunder or (ii) the exercise by
Collateral Agent 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 (vii) 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;
          (x) 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;
          (xi) none of the Collateral constitutes, or is the Proceeds of, “farm
products” (as defined in the UCC);

12

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

 

          (xii) it does not own any “as extracted collateral” (as defined in the
UCC) or any timber to be cut; and
          (xiii) such Grantor has been duly organized as an entity of the type
as set forth opposite such Grantor’s name on Schedule 4.1(A) solely under the
laws of the jurisdiction as set forth opposite such Grantor’s name on
Schedule 4.1(A) and remains duly existing as such. Such Grantor has not filed
any certificates of domestication, transfer or continuance in any other
jurisdiction.
          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees
that until the payment in full of all Obligations (other than unmatured
contingent obligations), the cancellation or termination of all Commitments, the
expiration or termination of all Hedge Agreements and the cancellation or
expiration of all outstanding Letters of Credit:
          (i) 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, except Permitted Liens, and such Grantor shall defend the Collateral
against all Persons at any time claiming any interest therein;
          (ii) it shall not produce, use or permit any Collateral to be used
unlawfully or in violation of any provision of this Agreement or any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral;
          (iii) 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, type of organization or jurisdiction of
organization or establish any trade names unless it shall have (a) notified the
Collateral Agent in writing, by executing and delivering to the Collateral Agent
a completed Pledge Supplement, substantially in the form of Exhibit A attached
hereto, together with all Supplements to Schedules thereto, at least thirty (30)
days 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 office,
jurisdiction of organization or trade name and providing such other information
in connection therewith as the Collateral Agent 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 Collateral Agent’s
security interest in the Collateral intended to be granted and agreed to hereby;
          (iv) if the Collateral Agent or any Secured Party gives value to
enable Grantor to acquire rights in or the use of any Collateral, it shall use
such value for such purposes and such Grantor further agrees that repayment of
any Obligation shall apply on a “first-in, first-out” basis so that the portion
of the value used to acquire rights in any Collateral shall be paid in the
chronological order such Grantor acquired rights therein;
          (v) it shall pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith;
provided, such Grantor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five (5) days prior to

13

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

 

the date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against such Grantor or any of the Collateral as a result of
the failure to make such payment;
          (vi) upon such Grantor or any officer of such Grantor obtaining
knowledge thereof, it shall promptly notify the Collateral Agent 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 Collateral Agent to
dispose of the Collateral or any portion thereof, or the rights and remedies of
the Collateral Agent in relation thereto, including, without limitation, the
levy of any legal process against the Collateral or any portion thereof;
          (vii) it shall not take or permit any action which could impair the
Collateral Agent’s rights in the Collateral; and
          (viii) it shall not sell, transfer or assign (by operation of law or
otherwise) any Collateral except as otherwise permitted in accordance with the
Credit Agreement.
     4.2 Equipment and Inventory.
          (a) Representations and Warranties. Each Grantor represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) all of the Equipment and Inventory included in the Collateral with
a fair market value of $100,000 or more is kept for the past four (4) years only
at the locations specified in Schedule 4.2 (as such schedule may be amended or
supplemented from time to time);
          (ii) any Goods now or hereafter produced by any Grantor included in
the Collateral have been and will be produced in compliance with the
requirements of the Fair Labor Standards Act, as amended; and
          (iii) except as set forth in Schedule 4.2 (as such schedule may be
amended or supplemented from time to time), none of the Inventory or Equipment
included in the Collateral with a fair market value of $100,000 or more is in
the possession of an issuer of a negotiable document (as defined in
Section 7-104 of the UCC) therefor or otherwise in the possession of a bailee or
a warehouseman.
          (b) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit:
          (i) it shall keep the Equipment, Inventory and any Documents
evidencing any Equipment and Inventory in the locations specified on
Schedule 4.2 (as such schedule may be amended or supplemented from time to time)
unless it shall have (a) notified the Collateral Agent in writing, by executing
and delivering to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, at least thirty (30) days prior to any change
in locations, identifying such new locations and providing such other

14

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

 

information in connection therewith as the Collateral Agent 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
Collateral Agent’s security interest in the Collateral intended to be granted
and agreed to hereby, or to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder, with respect to such Equipment and Inventory;
          (ii) it shall keep correct and accurate records of the Inventory, as
is customarily maintained under similar circumstances by Persons of established
reputation engaged in similar business, and in any event in conformity with
GAAP;
          (iii) 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 or the Collateral Agent;
          (iv) if any Equipment or Inventory is in possession or control of any
third party, each Grantor shall join with the Collateral Agent in notifying the
third party of the Collateral Agent’s security interest and obtaining an
acknowledgment from the third party that it is holding the Equipment and
Inventory for the benefit of the Collateral Agent; and
          (v) with respect to any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law of which
indication of a security interest on such certificate is required as a condition
of perfection thereof, upon the reasonable request of the Collateral Agent,
(A) provide information with respect to any such Equipment in excess of $50,000
individually or $500,000 in the aggregate, (B) execute and file with the
registrar of motor vehicles or other appropriate authority in such jurisdiction
an application or other document requesting the notation or other indication of
the security interest created hereunder on such certificate of title, and
(C) deliver to the Collateral Agent copies of all such applications or other
documents filed during such calendar quarter and copies of all such certificates
of title issued during such calendar quarter indicating the security interest
created hereunder in the items of Equipment covered thereby.
     4.3 Receivables.
          (a) Representations and Warranties. Each Grantor represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) 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) is not and will not be subject to any 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) is
and will be in compliance with all applicable laws, whether federal, state,
local or foreign;
          (ii) none of the Account Debtors in respect of any Receivable in
excess of $30,000 individually or $100,000 in the aggregate is the government of
the United States, any agency or instrumentality thereof, any state or
municipality or any foreign sovereign. No Receivable in excess of $30,000
individually or $100,000 in the

15

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

 

aggregate requires the consent of the Account Debtor in respect thereof in
connection with the pledge hereunder, except any consent which has been
obtained;
          (iii) no Receivable is evidenced by, or constitutes, an Instrument or
Chattel Paper which has not been delivered to, or otherwise subjected to the
control of, the Collateral Agent to the extent required by, and in accordance
with Section 4.3(c); and
          (iv) each Grantor has delivered to the Collateral Agent a complete and
correct copy of each standard form of document under which a Receivable may
arise.
          (b) Covenants and Agreements: Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit:
          (i) it shall keep and maintain at its own cost and expense
satisfactory and complete records of the Receivables in accordance with its
ordinary commercial practice;
          (ii) it shall mark conspicuously, in form and manner reasonably
satisfactory to the Collateral Agent, all Chattel Paper and Instruments (other
than any delivered to the Collateral Agent as provided herein), with an
appropriate reference to the fact that the Collateral Agent has a security
interest therein;
          (iii) it shall perform in all material respects all of its obligations
with respect to the Receivables;
          (iv) 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 as Collateral. Other
than in the ordinary course of business as generally conducted by it on and
prior to the date hereof, and except as otherwise provided in subsection
(v) below, following 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;
          (v) except as otherwise provided in this subsection, each Grantor
shall continue to collect all amounts due or to become due to such Grantor under
the Receivables and any Supporting Obligation and diligently exercise each
material right it may have under any Receivable any Supporting Obligation or
Collateral Support, in each case, at its own expense, and in connection with
such collections and exercise, such Grantor shall take such action as such
Grantor or the Collateral Agent may deem necessary or advisable. Notwithstanding
the foregoing, the Collateral Agent shall have the right at any time following
the occurrence and during the continuation of an Event of Default, the
Collateral Agent may: (1) 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 Collateral Agent; (2) notify, or require any Grantor to notify,
each Person maintaining a lockbox or similar arrangement to which Account
Debtors under any

16

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

 

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 Collateral Agent;
and (3) 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 Collateral Agent 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 Collateral Agent if required, in the
Collateral Account maintained under the sole dominion and control of the
Collateral Agent, 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 Collateral Agent 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; and
          (vi) it shall use its reasonable efforts to keep in full force and
effect any Supporting Obligation or Collateral Support relating to any
Receivable.
          (c) Delivery and Control of Receivables. With respect to any
Receivables in excess of $30,000 individually or $100,000 in the aggregate that
is evidenced by, or constitutes, Chattel Paper or Instruments, each Grantor
shall cause each originally executed copy thereof to be delivered to the
Collateral Agent (or its agent or designee) appropriately indorsed to the
Collateral Agent or indorsed in blank: (i) with respect to any such Receivables
in existence on the date hereof, on or prior to the date hereof and (ii) with
respect to any such Receivables hereafter arising, within ten (10) days of such
Grantor acquiring rights therein. With respect to any Receivables in excess of
$30,000 individually or $100,000 in the aggregate which would constitute
“electronic chattel paper” under Article 9 of the UCC, each Grantor shall take
all steps necessary to give the Collateral Agent control over such Receivables
(within the meaning of Section 9-105 of the UCC): (i) with respect to any such
Receivables in existence on the date hereof, on or prior to the date hereof and
(ii) with respect to any such Receivables hereafter arising, within ten
(10) days of such Grantor acquiring rights therein. Any Receivable not otherwise
required to be delivered or subjected to the control of the Collateral Agent in
accordance with this subsection (c) shall be delivered or subjected to such
control upon request of the Collateral Agent during the continuance of an Event
of Default.
     4.4 Investment Related Property.
          4.4.1 Investment Related Property Generally
          (a) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit:
          (i) in the event it acquires rights in any Investment Related Property
after the date hereof, it shall deliver to the Collateral Agent a completed
Pledge Supplement, substantially in the form of Exhibit A attached hereto,
together with all Supplements to Schedules thereto, reflecting such new
Investment Related Property and

17

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

 

all other Investment Related Property. Notwithstanding the foregoing, it is
understood and agreed that the security interest of the Collateral Agent shall
attach to all Investment Related Property immediately upon any Grantor’s
acquisition of rights therein and shall not be affected by the failure of any
Grantor to deliver a supplement to Schedule 4.4 as required hereby;
          (ii) except as provided in the next sentence, in the event such
Grantor receives any dividends, interest or distributions on any Investment
Related Property, or any securities or other property upon the merger,
consolidation, liquidation or dissolution of any issuer of any 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 and, if
applicable, control of the Collateral Agent over such Investment Related
Property (including, without limitation, delivery thereof to the Collateral
Agent) 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 Collateral Agent 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 Collateral Agent 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;
          (iii) each Grantor consents to the grant by each other Grantor of a
Security Interest in all Investment Related Property to the Collateral Agent.
          (b) Delivery and Control.
          (i) Each Grantor agrees that with respect to any Investment Related
Property in which it currently has rights it shall comply with the provisions of
this Section 4.4.1(b) on or before the Credit Date and with respect to any
Investment Related Property hereafter acquired by such Grantor it shall comply
with the provisions of this Section 4.4.1(b) within (5) Business Days upon
acquiring rights therein, in each case in form and substance satisfactory to the
Collateral Agent. With respect to any Investment Related Property that is
represented by a certificate or that is an “instrument” (other than any
Investment Related Property credited to a Securities Account) it shall cause
such certificate or instrument to be delivered to the Collateral Agent, indorsed
in blank by an “effective indorsement” (as defined in Section 8-107 of the UCC),
regardless of whether such certificate constitutes a “certificated security” for
purposes of the UCC. With respect to any Investment Related Property that is an
“uncertificated security” for purposes of the UCC (other than any
“uncertificated securities” credited to a Securities Account), it shall cause
the issuer of such uncertificated security to either (i) register the Collateral
Agent 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,
pursuant to which such issuer agrees to comply with the Collateral Agent’s
instructions with respect to such uncertificated security without further
consent by such Grantor.
          (c) Voting and Distributions.

18

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

 

          (i) So long as no Event of Default shall have occurred and be
continuing:

  (1)   except as otherwise provided under the covenants and agreements relating
to Investment Related Property in this Agreement or elsewhere herein or in the
First Lien Credit Documents, 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 or the First Lien
Credit Documents; provided, no Grantor shall exercise or refrain from exercising
any such right if the Collateral Agent shall have notified such Grantor that, in
the Collateral Agent’s reasonable judgment, 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 and the Credit Agreement, shall be deemed
inconsistent with the terms of this Agreement or the Credit Agreement within the
meaning of this Section 4.4(c)(i)(1), and no notice of any such voting or
consent need be given to the Collateral Agent; and     (2)   the Collateral
Agent, at Grantor’s expense, shall promptly execute and deliver (or cause to be
executed and delivered) to each Grantor all proxies, and other instruments as
such Grantor may from time to time reasonably request for the purpose of
enabling such Grantor to exercise the voting and other consensual rights when
and to the extent which it is entitled to exercise pursuant to clause (1) above;
    (3)   upon the occurrence and during the continuation of an Event of
Default:

  (A)   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 Collateral Agent who shall thereupon have the sole right to
exercise such voting and other consensual rights; and     (B)   in order to
permit the Collateral Agent 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:
(1) each Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to the Collateral Agent all proxies, dividend payment orders and
other instruments as the Collateral Agent may from time to time reasonably
request and (2) each Grantor acknowledges that the Collateral Agent may utilize
the power of attorney set forth in Section 6.1.

          4.4.2 Pledged Equity Interests

19

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

 

          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) Schedule 4.4(A) (as such schedule may be amended or supplemented
from time to time) sets forth under the headings “Pledged Stock, “Pledged LLC
Interests,” “Pledged Partnership Interests” and “Pledged Trust Interests,”
respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged
Partnership Interests and Pledged Trust Interests owned by any Grantor and such
Pledged Equity Interests constitute the percentage of issued and outstanding
shares of stock, percentage of membership interests, percentage of partnership
interests or percentage of beneficial interest of the respective issuers thereof
indicated on such Schedule;
          (ii) except as set forth on Schedule 4.4(B), it has not acquired any
equity interests of another entity or substantially all the assets of another
entity within the past five (5) years;
          (iii) it is the record and beneficial owner of the Pledged Equity
Interests free of all Liens, rights or claims of other Persons other than
Permitted 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;
          (iv) without limiting the generality of Section 4.1(a)(v), 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 Collateral
Agent in any Pledged Equity Interests or the exercise by the Collateral Agent of
the voting or other rights provided for in this Agreement or the exercise of
remedies in respect thereof;
          (v) none of the Pledged LLC Interests nor Pledged Partnership
Interests are or represent interests in issuers that: (a) are registered as
investment companies or (b) are dealt in or traded on securities exchanges or
markets; and
          (vi) except as otherwise set forth on Schedule 4.4(C), all of the
Pledged LLC Interests and Pledged Partnership Interests are or represent
interests in issuers that have opted to be treated as securities under the
uniform commercial code of any jurisdiction.
          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees
that until the payment in full of all Obligations (other than unmatured
contingent obligations), the cancellation or termination of all Commitments, the
expiration or termination of all Hedge Agreements and the cancellation or
expiration of all outstanding Letters of Credit:
          (i) without the prior written consent of the Collateral Agent, it
shall not vote to enable or take any other action to: (a) amend or terminate any
partnership agreement, limited liability company agreement, certificate of
incorporation, by-laws or other organizational documents in any way that
adversely affects the validity, perfection or priority of the Collateral Agent’s
security interest, (b) 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

20

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

 

convertible into or granting the right of purchase or exchange for any stock or
other equity interest of any nature of such issuer unless such stock or interest
is pledged hereunder, (c) other than as permitted under the Credit Agreement,
permit any issuer of any Pledged Equity Interest to dispose of all or a material
portion of their assets, (d) 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 that would individually or in the aggregate cause
a Material Adverse Effect, or (e) 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; unless such Grantor shall promptly notify
the Collateral Agent in writing of any such election or action and, in such
event, shall take all steps necessary or advisable to establish the Collateral
Agent’s “control” thereof;
          (ii) it shall comply with all of its material obligations under any
partnership agreement or limited liability company agreement relating to Pledged
Partnership Interests or Pledged LLC Interests and shall enforce all of its
material rights with respect to any Investment Related Property;
          (iii) without the prior written consent of the Collateral Agent, it
shall not permit any issuer of any Pledged Equity Interest to merge or
consolidate unless the covenants of the First Lien Documents are complied with;
and
          (iv) each Grantor consents to the grant by each other Grantor of a
security interest in all Investment Related Property to the Collateral Agent
and, without limiting the foregoing, consents to the transfer of any Pledged
Partnership Interest and any Pledged LLC Interest to the Collateral Agent or its
nominee following an Event of Default and to the substitution of the Collateral
Agent or its nominee as a partner in any partnership or as a member in any
limited liability company with all the rights and powers related thereto.
          4.4.3 Pledged Debt
          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and each Credit Date, that Schedule 4.4 (as such
schedule may be amended or supplemented from time to time) sets forth under the
heading “Pledged Debt” all of the Pledged Debt owned by any Grantor and all of
such Pledged Debt has been duly authorized, authenticated or issued, and
delivered and is the legal, valid and binding obligation of the issuers thereof
and is not in default and constitutes all of the issued and outstanding
inter-company Indebtedness; and
          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees
that until the payment in full of all Obligations (other than unmatured
contingent obligations), the cancellation or termination of all Commitments, the
expiration or termination of all Hedge Agreements and the cancellation or
expiration of all outstanding Letters of Credit, it shall notify the Collateral
Agent of any default under any Pledged Debt that has caused, either in any
individual case or in the aggregate, a Material Adverse Effect.
          4.4.4 Investment Accounts

21

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

 

          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and immediately after the payment in full of all
obligations outstanding pursuant to Existing Indebtedness, and on each Credit
Date, that:
          (i) Schedule 4.4 hereto (as such schedule may be amended or
supplemented from time to time) sets forth under the headings “Securities
Accounts” and “Commodities Accounts,” respectively, all of the Securities
Accounts and Commodities Accounts in which each Grantor has an interest. Each
Grantor is the sole entitlement holder of each such Securities Account and
Commodity Account, and such Grantor has not consented to, and is not otherwise
aware of, any Person (other than the Collateral Agent pursuant hereto) having
“control” (within the meanings of Sections 8-106 and 9-106 of the UCC) over, or
any other interest in, any such Securities Account or Commodity Account or
securities or other property credited thereto;
          (ii) Schedule 4.4 hereto (as such schedule may be amended or
supplemented from time to time) sets forth under the headings “Deposit Accounts”
all of the Deposit Accounts in which each Grantor has an interest. Each Grantor
is the sole account holder of each such Deposit Account and such Grantor has not
consented to, and is not otherwise aware of, any Person (other than the
Collateral Agent pursuant hereto) having either sole dominion and control
(within the meaning of common law) or “control” (within the meanings of
Section 9-104 of the UCC) over, or any other interest in, any such Deposit
Account or any money or other property deposited therein; and
          (iii) Each Grantor has taken all actions necessary or reasonably
desirable, including those specified in Section 4.4.4(c), to: (a) establish
Collateral Agent’s “control” (within the meanings of Sections 8-106 and 9-106 of
the UCC) over any portion of the Investment Related Property constituting
Certificated Securities, Uncertificated Securities, Securities Accounts,
Securities Entitlements or Commodities Accounts (each as defined in the UCC);
(b) establish the Collateral Agent’s “control” (within the meaning of Section
9-104 of the UCC) over all Deposit Accounts (other than Foreign Deposit
Accounts); and (c) deliver all Instruments to the Collateral Agent.
          (b) Covenant and Agreement. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit, it shall not permit any Investment Account to
exist unless a control agreement with respect to any such Investment Account has
been entered into by the appropriate Grantor, Collateral Agent and securities
intermediary or depository institution at which such successor or replacement
account is to be maintained in accordance with the provisions of
Section 4.4.4(c).
          (c) Delivery and Control
          (i) With respect to any Investment Related Property consisting of
Securities Accounts or Securities Entitlements, it shall cause the securities
intermediary maintaining such Securities Account or Securities Entitlement to
enter into an agreement substantially in the form of Exhibit C hereto pursuant
to which it shall agree to comply with the Collateral Agent’s “entitlement
orders” without further consent by such Grantor. With respect to any Investment
Related Property that is a “Deposit Account” (other than Foreign Deposit
Accounts), it shall cause the depositary institution maintaining such account to
enter into an agreement substantially in the form of Exhibit

22

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

 

D hereto, pursuant to which the Collateral Agent shall have both sole dominion
and control over such Deposit Account (within the meaning of the common law) and
“control” (within the meaning of Section 9-104 of the UCC) over such Deposit
Account. Each Grantor shall have entered into such control agreement or
agreements with respect to: (i) any Securities Accounts, Securities Entitlements
or Deposit Accounts (other than Foreign Deposit Accounts) that exist on the
Credit Date, as of or prior to the Credit Date and (ii) any Securities Accounts,
Securities Entitlements or Deposit Accounts (other than Foreign Deposit
Accounts) that are created or acquired after the Credit Date, as of or prior to
the deposit or transfer of any such Securities Entitlements or funds, whether
constituting moneys or investments, into such Securities Accounts or Deposit
Accounts.
In addition to the foregoing, if any issuer of any Investment Related Property
is located in a jurisdiction outside of the United States, each Grantor shall
take such additional 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 insure the validity, perfection and priority of
the security interest of the Collateral Agent. Upon the occurrence and during
the continuance of an Event of Default, the Collateral Agent shall have the
right, without notice to any Grantor, to transfer all or any portion of the
Investment Related Property to its name or the name of its nominee or agent. In
addition, the Collateral Agent shall have the right at any time, without notice
to any Grantor, to exchange any certificates or instruments representing any
Investment Related Property for certificates or instruments of smaller or larger
denominations.
     4.5 Material Contracts.
          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) the Material Contracts, true and complete copies (including any
amendments or supplements thereof) of which have been furnished to the
Collateral Agent, have been duly authorized, executed and delivered by all
parties thereto, are in full force and effect and are binding upon and
enforceable against all parties thereto in accordance with their respective
terms. There exists no default under any Material Contract by any party thereto
and neither such Grantor, nor to its best knowledge, any other Person party
thereto is likely to become in default thereunder and no Person party thereto
has any defenses, counterclaims or right of set-off with respect to any Material
Contract. Each Person party to a Material Contract (other than any Grantor) has
executed and delivered to the applicable Grantor a consent to the assignment of
such Material Contract to the Collateral Agent pursuant to this Agreement; and
          (ii) no Material Contract prohibits assignment or requires consent of
or notice to any Person in connection with the assignment to the Collateral
Agent hereunder, except such as has been given or made or is currently sought
pursuant to Section 4.5 (b)(vii) hereof.
          (b) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit:

23

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

 

          (i) in addition to any rights under the Section of this Agreement
relating to Receivables, the Collateral Agent may at any time notify, or require
any Grantor to so notify, the counterparty on any Material Contract of the
security interest of the Collateral Agent therein. In addition, after the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may upon written notice to the applicable Grantor, notify, or require any
Grantor to notify, the counterparty to make all payments under the Material
Contracts directly to the Collateral Agent;
          (ii) each Grantor shall deliver promptly to the Collateral Agent a
copy of each material demand, notice or document received by it relating in any
way to any Material Contract;
          (iii) each Grantor shall deliver promptly to the Collateral Agent, and
in any event within ten (10) Business Days, after (1) any Material Contract of
such Grantor is terminated or amended in a manner that is materially adverse to
such Grantor or (2) any new Material Contract is entered into by such Grantor, a
written statement describing such event, with copies of such material amendments
or new contracts, delivered to the Collateral Agent (to the extent such delivery
is permitted by the terms of any such Material Contract, provided, no
prohibition on delivery shall be effective if it were bargained for by such
Grantor with the intent of avoiding compliance with this Section 4.5(b)(iii)),
and an explanation of any actions being taken with respect thereto;
          (iv) it shall perform in all material respects all of its obligations
with respect to the Material Contracts;
          (v) it shall promptly and diligently exercise each material right
(except the right of termination) it may have under any Material Contract, any
Supporting Obligation or Collateral Support, in each case, at its own expense,
and in connection with such collections and exercise, such Grantor shall take
such action as such Grantor or the Collateral Agent may deem necessary or
advisable;
          (vi) it shall use its reasonable best efforts to keep in full force
and effect any Supporting Obligation or Collateral Support relating to any
Material Contract; and
          (vii) each Grantor shall, within thirty (30) days after entering into
any Non-Assignable Contract that is a Material Contract after the Closing Date,
request in writing the consent of the counterparty or counterparties to such
Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or
applicable law to the assignment or granting of a security interest in such
Non-Assignable Contract to Secured Party and use its best efforts to obtain such
consent as soon as practicable thereafter.
     4.6 Letter of Credit Rights.
          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that:
          (i) all material letters of credit to which such Grantor has rights is
listed on Schedule 4.6 (as such schedule may be amended or supplemented from
time to time) hereto; and

24

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

 

          (ii) it has obtained the consent of each issuer of any material letter
of credit (other than Supporting Obligations) to the assignment of the proceeds
of the letter of credit to the Collateral Agent .
          (b) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit, with respect to any material letter of credit
(other than Supporting Obligations) hereafter arising it shall obtain the
consent of the issuer thereof to the assignment of the proceeds of the letter of
credit to the Collateral Agent and shall deliver to the Collateral Agent a
completed Pledge Supplement, substantially in the form of Exhibit A attached
hereto, together with all Supplements to Schedules thereto.
     4.7 Intellectual Property.
          (a) Representations and Warranties. Except as disclosed in
Schedule 4.7(H) (as such schedule may be amended or supplemented from time to
time), each Grantor hereby represents and warrants, on the Closing Date and on
each Credit Date, that:
          (i) Schedule 4.7 (as such schedule may be amended or supplemented from
time to time) sets forth a true and complete list of (i) all United States,
state and foreign registrations of and applications for Patents, Trademarks, and
Copyrights owned by each Grantor and (ii) all Patent Licenses, Trademark
Licenses, Trade Secret Licenses and Copyright Licenses material to the business
of such Grantor other than by and among Subsidiaries of Holdings;
          (ii) it is the sole and exclusive owner of the entire right, title,
and interest in or is a licensee to all Intellectual Property listed on
Schedule 4.7 (as such schedule may be amended or supplemented from time to
time), and owns or has the valid right to use all other Intellectual Property
used in or necessary to conduct its business, free and clear of all Liens,
claims, encumbrances and licenses, except for Permitted Liens and the licenses
set forth on Schedule 4.7(B), (D), (F) and (G) (as each may be amended or
supplemented from time to time);
          (iii) all Intellectual Property is subsisting and has not been
adjudged invalid or unenforceable, in whole or in part, and each 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 in full force and effect;
          (iv) all Intellectual Property is valid and enforceable; no holding,
decision, or judgment has been rendered in any action or proceeding before any
court or administrative authority challenging the validity of, such Grantor’s
right to register, or such Grantor’s rights to own or use, any Intellectual
Property and no such action or proceeding is pending or, to such Grantor’s
knowledge, threatened;
          (v) all registrations and applications for Copyrights, Patents and
Trademarks are standing in the name of each Grantor, and none of the Trademarks,
Patents, Copyrights or Trade Secrets has been licensed by any Grantor to any
Affiliate or

25

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

 

third party (other than a Subsidiary of the Company), except as disclosed in
Schedule 4.7(B), (D), (F), or (G) (as each may be amended or supplemented from
time to time);
          (vi) each Grantor has been using appropriate statutory notice of
registration in connection with its use of registered Trademarks, proper marking
practices in connection with the use of Patents, and appropriate notice of
copyright in connection with the publication of Copyrights material to the
business of such Grantor;
          (vii) each Grantor uses commercially reasonable standards of quality
in the manufacture, distribution, and sale of all products sold and in the
provision of all services rendered under or in connection with all Trademark
Collateral and has taken commercially reasonable measures to insure that all
licensees of the Trademark Collateral owned by such Grantor use such adequate
standards of quality;
          (viii) the conduct of each Grantor’s business, to such Grantor’s
knowledge, does not infringe upon or otherwise violate any trademark, patent,
copyright, trade secret or other intellectual property right owned or controlled
by a third party; no claim has been made that the use of any Intellectual
Property owned, licensed or used by Grantor (or any of its respective licensees)
violates the asserted rights of any third party;
          (ix) to each Grantor’s knowledge, no third party is infringing upon or
otherwise violating any rights in any Intellectual Property owned or used by
such Grantor, or any of its respective licensees;
          (x) no settlement or consents, covenants not to sue, nonassertion
assurances, or releases have been entered into by Grantor or to which Grantor is
bound that adversely affect Grantor’s rights to own or use any Intellectual
Property; and
          (xi) each Grantor has not made a previous assignment, sale, transfer
or agreement constituting a present or future assignment, sale, transfer or
agreement of any Intellectual Property that has not been terminated or released.
There is no effective financing statement or other document or instrument now
executed, or on file or recorded in any public office, granting a security
interest in or otherwise encumbering any part of the Intellectual Property,
other than in favor of the Collateral Agent or Permitted Liens.
          (b) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit:
          (i) it shall not do any act or omit to do any act whereby any of the
Intellectual Property which is material to the business of Grantor may lapse, or
become abandoned, dedicated to the public, or unenforceable, or which would
adversely affect the validity, grant, or enforceability of the security interest
granted therein;
          (ii) it shall not, with respect to any Trademarks which are material
to the business of any Grantor, cease the use of any of such Trademarks, unless
the products or services rendered under any such Trademark are being
discontinued in the reasonable business judgment of the applicable Grantor, or
fail to maintain the level of the quality of products sold and services rendered
under any such Trademark at a level at

26

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

 

least substantially consistent with the quality of such products and services as
of the date hereof, and each Grantor shall take commercially reasonable measures
to insure that licensees of such Trademarks use such consistent standards of
quality;
          (iii) it shall, within thirty (30) days of the creation or acquisition
of any Copyrightable work which is material to the business of Grantor, apply to
register the Copyright in the United States Copyright Office;
          (iv) it shall promptly notify the Collateral Agent if it knows or has
reason to know that any item of the Intellectual Property that is material to
the business of any Grantor may become (a) abandoned or dedicated to the public
or placed in the public domain (except, in the case of Patents or Copyrights,
due to the expiration of the statutory term of such item of Intellectual
Property), (b) invalid or unenforceable, or (c) subject to any adverse
determination or the institution of adverse proceedings in 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;
          (v) it shall take all reasonable steps in 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 of each Trademark, Patent, and Copyright owned by any Grantor and
material to its business which is now or shall become included in the
Intellectual Property including, but not limited to, those items on
Schedule 4.7(A), (C) and (E) (as each may be amended or supplemented from time
to time);
          (vi) in the event that any Intellectual Property owned by or
exclusively licensed to any Grantor is infringed, misappropriated, or diluted by
a third party, such Grantor shall promptly take reasonable action to stop such
infringement, misappropriation, or dilution 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;
          (vii) it shall promptly (but in no event more than thirty (30) days
after any Grantor obtains knowledge thereof) report to the Collateral Agent
(i) the filing of any application to register any Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office,
or any state registry or foreign counterpart of the foregoing (whether such
application is filed by such Grantor or through any agent, employee, licensee,
or designee thereof) and (ii) the registration of any Intellectual Property by
any such office, in each case by executing and delivering to the Collateral
Agent a completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto;
          (viii) it shall, promptly upon the reasonable request of the
Collateral Agent, execute and deliver to the Collateral Agent any document
required to acknowledge, confirm, register, record, or perfect the Collateral
Agent’s interest in any part of the Intellectual Property, whether now owned or
hereafter acquired;
          (ix) except with the prior consent of the Collateral Agent or as
permitted under the Credit Agreement, each Grantor shall not execute, and there
will not be on file in any public office, any financing statement or other
document or instruments, except financing statements or other documents or
instruments filed or to be filed in favor

27

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

 

of the Collateral Agent and each Grantor shall not sell, assign, transfer,
license, grant any option, or create or suffer to exist any Lien upon or with
respect to the Intellectual Property, except for the Lien created by and under
this Agreement and the other Credit Documents and sales, assignments, transfers,
licenses and grants of options to Subsidiaries of the Company;
          (x) it shall hereafter use commercially reasonable efforts so as not
to permit the inclusion in any contract to which it hereafter becomes a party of
any provision that could or might 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;
          (xi) it shall take commercially reasonable measures to protect the
secrecy of all Trade Secrets, including, without limitation, entering into
confidentiality agreements with employees and labeling and restricting access to
secret information and documents;
          (xii) it shall use proper statutory notice in connection with its use
of any of the Intellectual Property; and
          (xiii) it shall continue to collect, at its own expense, all amounts
due or to become due to such Grantor in respect of the Intellectual Property or
any portion thereof. In connection with such collections, each Grantor may take
(and, at the Collateral Agent’s reasonable direction, shall take) such action as
such Grantor or the Collateral Agent may deem reasonably necessary or advisable
to enforce collection of such amounts. Notwithstanding the foregoing, the
Collateral Agent 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.
     4.8 Commercial Tort Claims
          (a) Representations and Warranties. Each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that Schedule 4.8 (as
such schedule may be amended or supplemented from time to time) sets forth all
material Commercial Tort Claims of each Grantor which could reasonably be
expected to be determined in favor of such Grantor; and
          (b) Covenants and Agreements. Each Grantor covenants and agrees that
until the payment in full of all Obligations (other than unmatured contingent
obligations), the cancellation or termination of all Commitments, the expiration
or termination of all Hedge Agreements and the cancellation or expiration of all
outstanding Letters of Credit, with respect to any material Commercial Tort
Claim hereafter arising which could reasonably be expected to be determined in
favor of such Grantor, it shall deliver to the Collateral Agent a completed
Pledge Supplement, substantially in the form of Exhibit A attached hereto,
together with all Supplements to Schedules thereto, identifying such new
Commercial Tort Claims.

SECTION 5.   ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL
GRANTORS.

28

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

 

     5.1 Access; Right of Inspection. Subject to the terms and conditions set
forth in Section 5.6 of the Credit Agreement, the Collateral Agent shall at all
times have full and free access during normal business hours to all the books,
correspondence and records of each Grantor, and the Collateral Agent and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and each Grantor agrees to render to the Collateral Agent,
at such Grantor’s cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Subject to the terms and conditions
set forth in Section 5.6 of the Credit Agreement, the Collateral Agent and its
representatives shall at all times also have the right to enter any premises of
each Grantor and inspect any property of each Grantor where any of the
Collateral of such Grantor granted pursuant to this Agreement is located for the
purpose of inspecting the same, observing its use or otherwise protecting its
interests therein.
     5.2 Further Assurances.
          (a) 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 reasonably
desirable, or that the Collateral Agent may reasonably request, in order to
create and/or maintain the validity, perfection or priority of and protect any
security interest granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Grantor shall:
          (i) file such financing or continuation statements, or amendments
thereto, and execute and deliver such other agreements, instruments,
endorsements, powers of attorney or notices, as may be necessary or desirable,
or as the Collateral Agent may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby;
          (ii) take all actions necessary to ensure the recordation of
appropriate evidence of the liens and security interest granted hereunder in the
Intellectual Property with any intellectual property registry in which said
Intellectual Property is registered or in which an application for registration
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) upon the occurrence and during the continuance of an Event of
Default, and upon request by the Collateral Agent, assemble the Collateral and
allow inspection of the Collateral by the Collateral Agent, or persons
designated by the Collateral Agent; and
          (iv) at the Collateral Agent’s request, appear in and defend any
action or proceeding that could reasonably be expected to have a Material
Adverse Effect with respect to such Grantor’s title to or the Collateral Agent’s
security interest in all or any part of the Collateral.
          (b) Each Grantor hereby authorizes the Collateral Agent to file a
Record or Records, including, without limitation, financing or continuation
statements, and amendments thereto, in any jurisdictions and with any filing
offices as the Collateral Agent may determine, in its sole discretion, are
necessary or advisable to perfect the security interest granted to the

29

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

 

Collateral Agent 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 Collateral Agent 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 Collateral Agent herein, including, without
limitation, describing such property as “all assets” or “all personal property,
whether now owned or hereafter acquired.” Each Grantor shall furnish to the
Collateral Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
          (c) Each Grantor hereby authorizes the Collateral Agent to modify this
Agreement after obtaining such Grantor’s written approval of or signature to
such modification by amending Schedule 4.7 (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.
     5.3 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 Counterpart Agreement. Upon delivery of
any such counterpart agreement to the Collateral Agent, 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 Collateral Agent not to cause any
Subsidiary of Company 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.
SECTION 6. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
     6.1 Power of Attorney. Each Grantor hereby irrevocably appoints the
Collateral Agent (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 Collateral Agent or otherwise, from
time to time in the Collateral Agent’s discretion to take any action and to
execute any instrument that the Collateral Agent may deem reasonably necessary
or advisable to accomplish the purposes of this Agreement, including, without
limitation, the following:
          (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 Collateral Agent pursuant to the Credit Agreement;
          (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;

30

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

 

          (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 Collateral Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Collateral Agent
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 the Intellectual Property in the name of such Grantor as
debtor;
          (g) upon the occurrence and during the continuance of an Event of
Default, 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
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 Collateral Agent in its sole discretion, any such payments
made by the Collateral Agent to become obligations of such Grantor to the
Collateral Agent, due and payable immediately without demand; and
          (h) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
the Collateral Agent were the absolute owner thereof for all purposes, and to
do, at the Collateral Agent’s option and such Grantor’s expense, at any time or
from time to time, all acts and things that the Collateral Agent deems
reasonably necessary to protect, preserve or realize upon the Collateral and the
Collateral Agent’s security interest therein in order to effect the intent of
this Agreement, all as fully and effectively as such Grantor might do.
     6.2 No Duty on the Part of Collateral Agent or Secured Parties. The powers
conferred on the Collateral Agent hereunder are solely to protect the interests
of the Secured Parties in the Collateral and shall not impose any duty upon the
Collateral Agent or any Secured Party to exercise any such powers. The
Collateral Agent and the 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.
SECTION 7. REMEDIES.
     7.1 Generally.
          (a) If any Event of Default shall have occurred and be continuing, the
Collateral Agent may, subject to the terms of and in the manner contemplated by
the Intercreditor Agreement, 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 Collateral Agent 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

31

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

 

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 Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place to be designated
by the Collateral Agent 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 Collateral Agent 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 Collateral Agent’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 Collateral Agent may deem
commercially reasonable.
          (b) The Collateral Agent or any Secured Party may be the purchaser of
any or all of the Collateral at any public or private (to the extent to 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 Collateral Agent, as
collateral agent 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
Collateral Agent 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 Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Grantor agrees that it would not be commercially unreasonable
for the Collateral Agent 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 Collateral Agent 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
Collateral Agent accepts the first offer received and does not offer such
Collateral to more than one offeree. 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

32

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

 

employed by the Collateral Agent 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 Collateral Agent, that the Collateral Agent
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 alter the rights of the Collateral
Agent hereunder.
          (c) The Collateral Agent may sell the Collateral without giving any
warranties as to the Collateral. The Collateral Agent 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 Collateral Agent shall have no obligation to marshal any of
the Collateral.
     7.2 Application of Proceeds. Except as expressly provided elsewhere in this
Agreement, the Credit Agreement or the Intercreditor Agreement, all proceeds
received by the Collateral Agent in respect of any sale, any collection from, or
other realization upon all or any part of the Collateral shall be applied in
full or in part by the Collateral Agent against, the Secured Obligations in the
following order of priority: first, to the payment of all costs and expenses of
such sale, collection or other realization, including reasonable compensation to
the Collateral Agent and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by the Collateral Agent in connection
therewith, and all amounts for which the Collateral Agent is entitled to
indemnification hereunder (in its capacity as the Collateral Agent and not as a
Lender) and all advances made by the Collateral Agent hereunder for the account
of the applicable Grantor, and to the payment of all costs and expenses paid or
incurred by the Collateral Agent in connection with the exercise of any right or
remedy hereunder or under the Credit Agreement, all in accordance with the terms
hereof or thereof; second, to the extent of any excess of such proceeds, to the
payment of all other Secured Obligations for the ratable benefit of the Secured
Parties; and third, to the extent of any excess of such proceeds, to the payment
to or upon the order of such Grantor or to whosoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
     7.3 Sales on Credit. If Collateral Agent sells any of the Collateral upon
credit, Grantor will be credited only with payments actually made by purchaser
and received by Collateral Agent and applied to indebtedness of the purchaser.
In the event the purchaser fails to pay for the Collateral, Collateral Agent may
resell the Collateral and Grantor shall be credited with proceeds of the sale.
     7.4 Deposit Accounts.
     If any Event of Default shall have occurred and be continuing, the
Collateral Agent may apply the balance from any Deposit Account (other than
Foreign Deposit Accounts) or instruct the bank at which any Deposit Account
(other than Foreign Deposit Accounts) is maintained to pay the balance of any
Deposit Account (other than Foreign Deposit Accounts) to or for the benefit of
the Collateral Agent.
     7.5 Investment Related Property.

33

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

 

     Each Grantor recognizes that, by reason of certain prohibitions contained
in the Securities Act and applicable state securities laws, the Collateral Agent
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 Collateral Agent 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 Collateral Agent
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 Collateral Agent all such
information as the Collateral Agent 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 Collateral Agent 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.
     7.6 Intellectual Property.
          (a) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default:
          (i) the Collateral Agent 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 Collateral Agent or otherwise, in the Collateral Agent’s sole
discretion, to enforce any Intellectual Property, in which event such Grantor
shall, at the request of the Collateral Agent, do any and all lawful acts and
execute any and all documents required by the Collateral Agent in aid of such
enforcement and such Grantor shall promptly, upon written demand, reimburse and
indemnify the Collateral Agent as provided in Section 10 hereof in connection
with the exercise of its rights under this Section, and, to the extent that the
Collateral Agent shall elect not to bring suit to enforce any Intellectual
Property as provided in this Section, each Grantor agrees to use commercially
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement 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 as
shall be necessary to prevent such infringement or violation;
          (ii) upon written demand from the Collateral Agent, each Grantor shall
grant, assign, convey or otherwise transfer to the Collateral Agent or such
Collateral Agent’s designee all of such Grantor’s right, title and interest in
and to the Intellectual Property and shall execute and deliver to the Collateral
Agent such documents as are necessary or appropriate to carry out the intent and
purposes of this Agreement;

34

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

 

          (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 Collateral Agent (or any Secured Party) receives cash proceeds
in respect of the sale of, or other realization upon, the Intellectual Property;
          (iv) within five (5) Business Days after written notice from the
Collateral Agent, each Grantor shall make available to the Collateral Agent, 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 Collateral Agent
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 the Trademarks, Trademark Licenses, such persons to be available to perform
their prior functions on the Collateral Agent’s behalf and to be compensated by
the Collateral Agent 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 Collateral Agent 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 the 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 Collateral Agent, 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 Collateral Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to the Collateral Agent in
the same form as so received (with any necessary endorsement) to be held as cash
Collateral and applied as provided by Section 7.7 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 Collateral Agent of any rights, title and
interests in and to the Intellectual Property 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 Collateral Agent shall promptly execute and deliver to such
Grantor, at such Grantor’s sole cost and expense, such assignments or other
transfer as may be necessary to reassign to such Grantor any such rights, title
and interests as may have been assigned to the Collateral Agent as aforesaid,
subject to any disposition thereof that may have been made by the Collateral
Agent; provided, after giving effect to such reassignment, the Collateral
Agent’s security interest granted pursuant hereto, as well as all other rights
and remedies of the Collateral Agent granted hereunder, shall continue to be in
full force and effect; and provided further, the

35

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

 

rights, title and interests so reassigned shall be free and clear of any other
Liens granted by or on behalf of the Collateral Agent and the Secured Parties.
          (c) Solely for the purpose of enabling the Collateral Agent to
exercise rights and remedies under this Section 7 and at such time as the
Collateral Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to the Collateral Agent, to the extent it
has the right to do so, an irrevocable (except by reason of cure of an Event of
Default), nonexclusive 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 said Trademarks, to use, operate under, license, or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located.
     7.7 Cash Proceeds. In addition to the rights of the Collateral Agent
specified in Section 4.3 with respect to payments of Receivables, upon the
occurrence and during the continuance of an Event of Default all proceeds of any
Collateral received by any Grantor consisting of cash, checks and other non-cash
items (collectively, “Cash Proceeds”) shall be held by such Grantor in trust for
the Collateral Agent, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, unless otherwise provided pursuant to
Section 4.4.1(a)(ii), be turned over to the Collateral Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Collateral Agent,
if required) and held by the Collateral Agent in the Collateral Account. Upon
the occurrence and during the continuance of an Event of Default any Cash
Proceeds received by the Collateral Agent (whether from a Grantor or otherwise)
may, in the sole discretion of the Collateral Agent, (A) be held by the
Collateral Agent 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 Collateral Agent
against the Secured Obligations then due and owing.
SECTION 8. COLLATERAL AGENT.
     The Collateral Agent has been appointed to act as Collateral Agent
hereunder by Lenders and, by their acceptance of the benefits hereof, the other
Secured Parties. The Collateral Agent 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 and the First Lien Credit Documents. In
furtherance of the foregoing provisions of 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 Collateral Agent for the benefit of
Secured Parties in accordance with the terms of this Section. Collateral Agent
may resign at any time by giving thirty (30) days’ prior written notice thereof
to Lenders and the Grantors, and Collateral Agent may be removed at any time
with or without cause by an instrument or concurrent instruments in writing
delivered to the Grantors and Collateral Agent signed by the Requisite Lenders.
Upon any such notice of resignation or any such removal, Requisite Lenders shall
have the right, upon five (5) Business Days’ notice to the Administrative Agent,
to appoint a successor Collateral Agent. Upon the acceptance of any appointment
as Collateral Agent hereunder by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Collateral
Agent under this Agreement, and the retiring or removed Collateral Agent under
this Agreement shall promptly (i) transfer to such successor Collateral Agent
all sums, Securities and other items of Collateral held hereunder,

36

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

 

together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Collateral Agent
under this Agreement, and (ii) execute and deliver to such successor Collateral
Agent or otherwise authorize the filing of such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Collateral Agent of the
security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent’s resignation or
removal hereunder as the Collateral Agent, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
under this Agreement while it was the Collateral Agent hereunder.

SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS; RELEASES.

     This Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until the payment in full
of all Secured Obligations, the cancellation or termination of the Commitments,
the expiration or termination of all Hedge Agreements and the cancellation or
expiration of all outstanding Letters of Credit, be binding upon each Grantor,
its successors and assigns, and inure, together with the rights and remedies of
the Collateral Agent hereunder, to the benefit of the Collateral Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing, but subject to the terms of the Credit Agreement, any Lender may
assign or otherwise transfer any Loans held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall automatically terminate hereunder and of record
and all rights to the Collateral shall revert to Grantors. Upon any such
termination the Collateral Agent shall, at Grantors’ expense, execute and
deliver to Grantors or otherwise authorize the filing of such documents as
Grantors shall reasonably request, including financing statement amendments to
evidence such termination. Upon any disposition of property permitted by the
First Lien Credit Documents, the Liens granted herein shall be deemed to be
automatically released and such property shall automatically revert to the
applicable Grantor with no further action on the part of any Person. The
Collateral Agent shall, at Grantor’s expense, execute and deliver or otherwise
authorize the filing of such documents as Grantors shall reasonably request, in
form and substance reasonably satisfactory to the Collateral Agent, including
financing statement amendments to evidence such release.
SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.
     The powers conferred on the Collateral Agent 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 Collateral Agent 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
Collateral Agent 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 Collateral Agent
accords its own property. Neither the Collateral Agent 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

37

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

 

perform any agreement contained herein, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Collateral
Agent incurred in connection therewith shall be payable by each Grantor under
Section 10.2 of the Credit Agreement.
SECTION 11. MISCELLANEOUS.
     Any notice required or permitted to be given under this Agreement shall be
given in accordance with Section 10.1 of the Credit Agreement. No failure or
delay on the part of the Collateral Agent in the exercise of any power, right or
privilege hereunder or under any other First Lien Credit Document 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 other First Lien Credit Documents 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 Collateral Agent and
Grantors and their respective successors and assigns. Except as permitted under
the First Lien Credit Documents, no Grantor shall, without the prior written
consent of the Collateral Agent given in accordance with the Credit Agreement,
assign any right, duty or obligation hereunder. This Agreement and the other
First Lien Credit Documents embody the entire agreement and understanding
between Grantors and the Collateral Agent and supersede all prior agreements and
understandings between such parties relating to the subject matter hereof and
thereof. Accordingly, the First Lien Credit Documents 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
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW
PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER STATE.
[Remainder of this page intentionally left blank]

38

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

 

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

            DAY INTERNATIONAL, INC.
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig        
Title:   Vice President and CFO     

            DAY INTERNATIONAL GROUP, INC.
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig       
Title:   Vice President and CFO     

            VARN INTERNATIONAL, INC.
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig        
Title:   Vice President and CFO     

            DAY INTERNATIONAL FINANCE, INC.
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig        
Title:   Vice President and CFO     

            NETWORK DISTRIBUTION INTERNATIONAL
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig        
Title:   Vice President and CFO     

[FIRST LIEN PLEDGE AND SECURITY AGREEMENT]

 

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

 

            NETWORK DISTRIBUTION INTERNATIONAL, INC.
as Grantor
      By:        /s/ Thomas J. Koenig         Name:   Thomas J. Koenig        
Title:   Vice President and CFO     

[FIRST LIEN PLEDGE AND SECURITY AGREEMENT]

 

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

 

                  GOLDMAN SACHS CREDIT PARTNERS L.P.         as the Collateral
Agent    
 
           
 
  By:     /s/ William W. Archer                       Name: William W. Archer  
      Title: Managing Director    

[FIRST LIEN PLEDGE AND SECURITY AGREEMENT]