Exhibit 10.4

SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of June 16, 2011 is made by and among LYDALL
THERMAL/ACOUSTICAL, INC., a Delaware corporation (the "Guarantor") and BANK OF
AMERICA, N.A., a national banking association (the “Lender”).

WHEREAS, the Lender and Lydall, Inc., a Delaware corporation (the “Borrower”),
have entered into that certain Credit Agreement dated as of even date herewith
(as amended, restated, supplemented or otherwise modified and in effect from
time to time, the "Credit Agreement"), pursuant to which the Lender, subject to
the terms and conditions contained therein, is to make loans or otherwise to
extend credit or provide financial accommodations to the Borrower;

WHEREAS, Guarantor is a party to that certain Guaranty Agreement dated as of the
date hereof by and among Lydall Filtration/Separation, Inc., a Connecticut
corporation, Lydall International, Inc., a Delaware corporation, the Guarantor
and the Lender (the “Guaranty Agreement”), pursuant to which Guarantor
guarantees certain Obligations as set forth in the Guaranty Agreement.

WHEREAS, it is a condition precedent to the Lender making any loans or otherwise
extending credit or providing financial accommodations to the Borrower under the
Credit Agreement that the Guarantor execute and deliver to the Lender a security
agreement in substantially the form hereof; and

WHEREAS, the Guarantor wishes to grant a security interest in favor of the
Lender as herein provided.

NOW, THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.           Definitions.  All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Credit
Agreement.  The term “State,” as used herein, means the State of
Connecticut.  All terms defined in the Uniform Commercial Code of the State and
used herein shall have the same definitions herein as specified
therein.  However, if a term is defined in Article 9 of the Uniform Commercial
Code of the State differently than in another Article of the Uniform Commercial
Code of the State, the term has the meaning specified in Article 9.  The term
“Obligations,” as used herein, shall have the meaning ascribed to it in the
Credit Agreement.
 
 

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2.           Grant of Security Interest.  The Guarantor hereby grants to the
Lender, to secure the payment and performance in full of all of the Obligations,
a security interest in and pledges and assigns the following properties, assets
and rights of the Guarantor, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all of the same
being hereinafter called the “Collateral”):  all assets including all personal
and fixture property of every kind and nature, including without limitation all
goods (including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables), chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, supporting obligations, any other contract
rights or rights to the payment of money, insurance claims and proceeds, all
general intangibles (including all payment intangibles), and all products and
proceeds of the foregoing.  Notwithstanding anything herein to the contrary, the
term “Collateral” shall not include more than 65% of the equity interests of a
first-tier Foreign Subsidiary (or more than 65% of the equity interests of a
Domestic Subsidiary whose sole assets are the equity interests of Foreign
Subsidiaries) or to the extent not yet paid to the Guarantor or such Domestic
Subsidiary to more than the corresponding proportion of dividends,
distributions, interest and other payments with respect to more than 65% of such
equity interests (such excluded assets herein called the “Excluded
Assets”).  The Lender acknowledges that the attachment of its security interest
in any commercial tort claim as original collateral is subject to the
Guarantor’s compliance with § 4.7.

3.           Authorization to File Financing Statements.  The Guarantor hereby
irrevocably authorizes the Lender at any time and from time to time to file in
any filing office in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Collateral (i)
as all assets or, as the case may be, all personal property of the Guarantor or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of the State or such jurisdiction specifically excluding, however, the
Excluded Assets, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdictions for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Guarantor is an organization, the type of organization
and any organizational identification number issued to the Guarantor and, (ii)
in the case of a financing statement filed as a fixture filing or indicating
Collateral as extracted collateral or timber to be cut, a sufficient description
of real property to which the Collateral relates.  The Guarantor agrees to
furnish any such information to the Lender promptly upon the Lender’s
request.  The Guarantor also ratifies its authorization for the Lender to have
filed in any Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.

4.           Other Actions. Further to insure the attachment, perfection and
first priority of, and the ability of the Lender to enforce, the Lender’s
security interest in the Collateral, the Guarantor agrees, in each case at the
Guarantor’s expense, to take the following actions with respect to the following
Collateral and without limitation on the Guarantor’s other obligations contained
in this Agreement:

4.1.           Promissory Notes and Tangible Chattel Paper. If the Guarantor
shall, now or at any time hereafter, hold or acquire any promissory notes or any
tangible chattel paper individually having a face value in excess of $2,500,000
(each, a “Material Note” or “Material Tangible Chattel Paper”, as the case may
be), the Guarantor shall forthwith endorse, assign and deliver to the Lender
each such Material Note or Material Chattel Paper, as the case may be, and, in
each case of a required endorsement, assignment and delivery, accompanied by
such instruments of transfer or assignment duly executed in blank as the Lender
may from time to time specify.
 
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4.2.           Deposit Accounts.  For each deposit account that the Guarantor
now or at any time hereafter opens or maintains, the Guarantor shall, at the
Lender’s request and option, pursuant to an agreement in form and substance
reasonably satisfactory to the Lender, either (a) cause the depositary bank to
agree to comply, without further consent of the Guarantor, at any time with
instructions from the Lender to such depositary bank directing the disposition
of funds from time to time credited to such deposit account, or (b) arrange for
the Lender to become the customer of the depositary bank with respect to the
deposit account, with the Guarantor being permitted, only with the consent of
the Lender, to exercise rights to withdraw funds from such deposit account.  The
Lender agrees with the Guarantor that the Lender shall not give any such
instructions or withhold any withdrawal rights from the Guarantor, unless an
Event of Default has occurred and is continuing, or, if effect were given to any
withdrawal not otherwise permitted by the Loan Documents, would occur.  The
provisions of this paragraph shall not apply to (i) any deposit account for
which the Guarantor, the depositary bank and the Lender have entered into a cash
collateral agreement specially negotiated among the Guarantor, the depositary
bank and the Lender for the specific purpose set forth therein, (ii) a deposit
account for which the Lender is the depositary bank and is in automatic control,
and (iii) any deposit accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of the Guarantor’s employees.  Nothing in this Section 4.2 shall be construed to
limit or otherwise derogate in any way the Guarantor’s obligations under Section
6.15 of the Credit Agreement.

4.3.           Investment Property.  Subject to the limitations set forth in
Section 2 hereof, if the Guarantor shall now or at any time hereafter hold or
acquire any certificated securities of any Subsidiary, the Guarantor shall
forthwith endorse, assign and deliver the same to the Lender, accompanied by
such instruments of transfer or assignment duly executed in blank as the Lender
may from time to time specify.  If any securities now or hereafter acquired by
the Guarantor are (a) (i) uncertificated or (ii) certificated and issued by a
Person other than a Subsidiary, (b) issued to the Guarantor or its nominee
directly by the issuer thereof, and (c) have a principal amount or value in
excess of $5,000,000 in the aggregate with respect to any one issuer (each a
“Material Security”), the Guarantor shall promptly notify the Lender thereof
and, at the Lender’s request and option pursuant to an agreement in a form and
substance reasonably satisfactory to the Lender, either (A) cause the issuer to
agree to comply, without further consent of the Guarantor, or such nominee, at
any time with instructions from the Lender as to each Material Security or (B)
arrange for the Lender to become the registered owner of the Material
Securities.  Subject to the limitations set forth in Section 2 hereof, if any
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by the Guarantor is held by the Guarantor or its
nominee through a securities intermediary or commodity intermediary and
constitute a Material Security, the Guarantor shall promptly notify the Lender
thereof and, at the Lender’s request and option, the Guarantor shall, pursuant
to an agreement in form and substance reasonably satisfactory to the Lender,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply, in each case without further consent of the
Guarantor or such nominee, at any time with entitlement orders or other
instructions from the Lender to such securities intermediary as to such a
Material Security, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Lender to such commodity
intermediary, or (ii) in the case of a Material Security held through a
securities intermediary, arrange for the Lender to become the entitlement holder
with respect to such a Material Security, with the Guarantor being permitted,
only with the consent of the Lender, to exercise rights to withdraw or otherwise
deal with such investment property.  The Lender agrees with the Guarantor that
the Lender shall not give any such entitlement orders or instructions or
directions to any such issuer, securities intermediary or commodity
intermediary, and shall not withhold its consent to the exercise of any
withdrawal or dealing rights by the Guarantor, unless an Event of Default has
occurred and is continuing, or, after giving effect to any such investment and
withdrawal rights not otherwise permitted by the Loan Documents, would
occur.  The provisions of this paragraph shall not apply to any financial assets
credited to a securities account for which the Lender is the securities
intermediary.
 
 
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4.4.           Collateral in the Possession of a Bailee.  If any Collateral
having an aggregate value of more than $1,000,000 is now or at any time
hereafter in the possession of a bailee at a particular location, the Guarantor
shall promptly notify the Lender thereof and, at the Lender’s request and
option, shall use reasonable best efforts to obtain an acknowledgement from the
bailee, in form and substance reasonably satisfactory to the Lender, that the
bailee holds such Collateral for the benefit of the Lender and such bailee’s
agreement to comply, without further consent of the Guarantor, at any time with
instructions of the Lender as to such Collateral.  The Lender agrees with the
Guarantor that the Lender shall not give any such instructions unless an Event
of Default has occurred and is continuing or would occur after taking into
account any action by the Guarantor with respect to the bailee.

4.5.           Electronic Chattel Paper and Transferable Records.  If the
Guarantor, now or at any time hereafter, holds or acquires an interest in any
electronic chattel paper, any electronic document or any “transferrable record,”
individually having a face value in excess of $2,500,000 (each a “Material
Electronic Paper”), the Guarantor shall (i) promptly notify the Lender thereof
and, (ii) at the request and option of the Lender, take such action as the
Lender may reasonably request to vest in the Lender control of such Material
Electronic Paper, under Section 9-105 of the Uniform Commercial Code of the
State or any other relevant jurisdiction, Section 7-106 of the Uniform
Commercial Code of the State or any other relevant jurisdiction, Section 201 of
the federal Electronic Signatures in Global and National Commerce Act or Section
16 of the Uniform Electronic Transactions Act, as so in effect in such
jurisdiction, as applicable.  The Lender agrees with the Guarantor that the
Lender will arrange, pursuant to procedures satisfactory to the Lender and so
long as such procedures will not result in the Lender’s loss of control, for the
Guarantor to make alterations to the electronic chattel paper, electronic
document or transferable record permitted under UCC Section 9-105, UCC Section
7-106, or, as the case may be, Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of control, unless
an Event of Default has occurred and is continuing or would occur after taking
into account any action by the Guarantor with respect to such electronic chattel
paper, electronic document or transferrable record.  The provisions of this
Section 4.6 relating to electronic documents and “control” under UCC Section
7-106 apply in the event that the 2003 revisions to Article 7, with amendments
to Article 9, of the Uniform Commercial Code, in substantially the form approved
by the American Law Institute and the National Conference of Commissioners on
Uniform State Laws, are now or hereafter adopted and become effective in the
State or in any other relevant jurisdiction.
 
 
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4.6.           Letter-of-Credit Rights.  If the Guarantor is, now or at any time
hereafter, a beneficiary under a letter of credit now or hereafter individually
having a maximum amount that may be drawn in excess of $2,500,000 (each, a
“Material Letter of Credit”), the Guarantor shall promptly notify the Lender
thereof and, at the request and option of the Lender, the Guarantor shall,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (A) arrange for the issuer and any confirmer or other nominated person of
each such Material Letter of Credit, to consent to an assignment to the Lender
of the proceeds of such Material Letter of Credit or (B) arrange for the Lender
to become the transferee beneficiary of such Material Letter of Credit.

4.7           Commercial Tort Claims.  If the Guarantor shall now or at any time
hereafter hold or acquire a commercial tort claim with respect to which the
Guarantor has commenced legal action by filing a lawsuit in court and having a
value reasonably estimated by the Guarantor to be in excess of $5,000,000, the
Guarantor shall promptly notify the Lender in a writing signed by the Guarantor
of the particulars thereof, and grant to the Lender in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to the
Lender.  Such Notice shall be deemed to be an amendment to the Guarantor’s
Perfection Certificate with respect to such commercial tort claim.

4.8.           Other Actions as to any and all Collateral.  The Guarantor
further agrees, upon request of the Lender and at the Lender’s option, to take
any and all other actions as the Lender may reasonably determine to be necessary
or useful for the attachment, perfection and first priority of (subject,
however, to Liens permitted under the Credit Agreement), and the ability of the
Lender to enforce, the Lender’s security interest in any and all of the
Collateral, including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the Uniform Commercial Code, to the extent, if any, that the Guarantor’s
signature thereon is required therefor, (b) causing the Lender’s name to be
noted as secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or ability of
the Lender to enforce, the Lender’s security interest in such Collateral, (c)
complying with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Lender to enforce, the
Lender’s security interest in such Collateral, (d) obtaining governmental and
other third party waivers, consents and approvals in form and substance
satisfactory to the Lender, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, (e) using reasonable
best efforts to obtain waivers from mortgagees and landlords in form and
substance satisfactory to the Lender and in accordance with the terms of the
Credit Agreement, and (f) taking all actions under any earlier versions of the
Uniform Commercial Code or under any other law, as reasonably determined by the
Lender to be applicable in any relevant Uniform Commercial Code or other
jurisdiction, including any foreign jurisdiction.
 
 
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5.           Relation to Other Security Documents.  The provisions of this
Agreement supplement the provisions of any real estate mortgage or deed of
trust, if any, granted by the Guarantor to the Lender and which secures the
payment or performance of any of the Obligations.  Nothing contained in any such
real estate mortgage or deed of trust shall derogate from any of the rights or
remedies of the Lender hereunder.

6.           Representations and Warranties Concerning Guarantor’s Legal Status.
The Guarantor represents and warrants to the Lender as follows:  (a) the
Guarantor’s exact legal name is that indicated on the signature page hereof, (b)
the Guarantor is an organization of the type, and is organized in the
jurisdiction, set forth on its Perfection Certificate dated the date hereof and
attached hereto as Exhibit A (the “Perfection Certificate”), (c) the Perfection
Certificate accurately sets forth the organizational identification number or
accurately states that the Guarantor has none, (d) the Perfection Certificate
accurately sets forth the Guarantor’s place of business or, if more than one,
its chief executive office, as well as the Guarantor’s mailing address, if
different, and (e) all other information set forth on the Perfection Certificate
pertaining to the Guarantor is accurate and complete in all material respects.

7.           Covenants Concerning Guarantor’s Legal Status.  The Guarantor
covenants with the Lender as follows: (a) without providing at least thirty (30)
days prior written notice to the Lender, the Guarantor will not change its name,
its place of business or, if more than one, chief executive office, or its
mailing address or organizational identification number if it has one, (b) if
the Guarantor does not have an organizational identification number and later
obtains one, the Guarantor will promptly notify the Lender of such
organizational identification number, and (c) the Guarantor will not change its
type of organization, jurisdiction of organization or other legal structure
except as permitted in the Credit Agreement.

8.           Representations and Warranties Concerning Collateral Etc.  The
Guarantor further represents and warrants to the Lender as follows:  (a) the
Guarantor is the owner of, or has other rights in, or power to transfer, the
Collateral, free from any right or claim of any person or any adverse lien,
security interest or other encumbrance, except for the security interest created
by this Agreement and Permitted Liens, (b) none of the Collateral constitutes,
or is the proceeds of, “farm products” as defined in §9-102(a)(34) of the
Uniform Commercial Code of the State, (c) none of the account debtors or other
persons obligated on any of the Collateral is a governmental authority covered
by the Federal Assignment of Claims Act or like federal, state or local statute
or rule in respect of such Collateral, (d) to the best of its knowledge, the
Guarantor holds no commercial tort claim except as indicated on the Perfection
Certificate, (e) the Guarantor has at all times operated its business in
compliance in all material respects with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances, and (f) all
other information set forth on the Perfection Certificate pertaining to the
Collateral is accurate and complete in all material respects.
 
 
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9.           Covenants Concerning Collateral, Etc.  The Guarantor further
covenants with the Lender as follows: (a) the Collateral, to the extent not
delivered to the Lender pursuant to Section 4 hereof or disposed of as permitted
by the Credit Agreement, will be kept at those locations listed on the
Perfection Certificate, as the same may be amended from time to time as herein
provided, and the Guarantor will not remove the Collateral from such locations
without providing at least fifteen (15) days prior written notice to the Lender
except (i) to another location listed on the Perfection Certificate, or (ii) to
another location of the Guarantor or one of its Subsidiaries or one of the other
Subsidiaries of Borrower, in each case, that is located within the United States
but not listed on the Perfection Certificate, as amended from time to time (any
such location, an “Unlisted Location”); provided, that the aggregate value of
the Collateral located at such Unlisted Location shall not exceed $1,000,000, or
(iii) motor vehicles or (iv) the removal of Collateral for up to thirty (30)
days to repair such Collateral, in each case, in the ordinary course of
business, (b) except for the security interest herein granted and Permitted
Liens, the Guarantor shall be the owner of, or have other rights in or power to
transfer, the Collateral free from any right or claim of any other person or any
lien, security interest or other encumbrance, and the Guarantor shall defend the
same against all claims and demands of all persons at any time claiming the same
or any interests therein adverse to the Lender, (c) the Guarantor shall not
pledge, mortgage or create, or suffer to exist any right of any person in or
claim by any person to the Collateral, or any security interest, lien or other
encumbrance in the Collateral in favor of any person, other than the Lender
except for Permitted Liens, (d) the Guarantor will keep the Collateral in good
order and repair and will not use the same in violation of law or any policy of
insurance thereon, (e) the Guarantor will permit the Lender, or its designee, to
inspect the Collateral at any reasonable time during normal business hours,
wherever located, (f) the Guarantor will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of the Collateral or incurred in connection
with this Agreement, (g) the Guarantor will continue to operate its business in
compliance in all material respects with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances, (h) the
Guarantor will not sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein except for dispositions
permitted by the Credit Agreement, and (i) with each annual Compliance
Certificate delivered by Borrower pursuant to Section 6.02 of the Credit
Agreement, the Guarantor shall cause Borrower to provide information updating
the Perfection Certificate, including without limitation any new locations at
which any Collateral is located.

10.         Insurance.

10.1.     Maintenance of Insurance.  The Guarantor will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas.   Such insurance shall be in such minimum amounts that
the Guarantor will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Lender.  In addition, all such property casualty insurance
shall be payable to the Lender as loss payee under a loss payee clause
reasonably acceptable to the Lender.  Without limiting the foregoing, the
Guarantor will (i) keep all of its physical property insured with casualty or
physical hazard insurance on an “all risks” basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a full
replacement cost endorsement and an “agreed amount” clause in an amount equal to
100% of the full replacement cost of such property, (ii) maintain all such
workers’ compensation or similar insurance as may be required by law and (iii)
maintain, in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of the Guarantor; business
interruption insurance; and product liability insurance.
 
 
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10.2.     Insurance Proceeds.  The proceeds of any casualty insurance in respect
of any casualty loss of any of the Collateral shall, subject to the rights, if
any, of other parties with an interest having priority in the property covered
thereby, (i) so long as no Event of Default has occurred and is continuing, be
disbursed to the Guarantor for direct application by the Guarantor to the repair
or replacement of the Guarantor’s property so damaged or destroyed, with any
excess proceeds to be retained by the Guarantor, and (ii) if an Event of Default
has occurred and is continuing, be distributed to the Lender to be held by the
Lender as cash collateral for the Obligations.  The Lender may, at its sole
option, disburse from time to time all or any part of such proceeds so held as
cash collateral, upon such terms and conditions as the Lender may reasonably
prescribe, for direct application by the Guarantor solely to the repair or
replacement of the Guarantor’s property so damaged or destroyed, or the Lender
may apply all or any part of such proceeds to the Obligations.

10.3.     Continuation of Insurance.  All policies of insurance shall provide
for at least thirty (30) days prior written cancellation notice to the
Lender.  In the event of failure by the Guarantor to provide and maintain
insurance as herein provided, the Lender may, at its option, provide such
insurance and charge the amount thereof to the Guarantor.  The Guarantor shall
furnish the Lender with certificates of insurance and policies evidencing
compliance with the foregoing insurance provision.

11.        Collateral Protection Expenses:  Preservation of Collateral.

11.1.     Expenses Incurred by Lender.  In the Lender’s discretion, if the
Guarantor fails to do so, the Lender may discharge taxes and other encumbrances
at any time levied or placed on any of the Collateral, make repairs thereto,
maintain any of the Collateral, and pay any necessary filing fees or insurance
premiums.  The Guarantor agrees to reimburse the Lender on demand for all
expenditures so made.  The Lender shall have no obligation to the Guarantor to
make any such expenditures, nor shall the making thereof be construed as a
waiver or cure of any Default or Event of Default.

11.2.     Lender’s Obligations and Duties.  Anything herein to the contrary
notwithstanding, the Guarantor shall remain obligated and liable under each
contract or agreement comprised in the Collateral to be observed or performed by
the Guarantor thereunder.  The Lender shall not have any obligation or liability
under any such contract or agreement by reason of, or arising out of, this
Agreement or the receipt by the Lender of any payment relating to any of the
Collateral, nor shall the Lender be obligated in any manner to perform any of
the obligations of the Guarantor under, or pursuant to, any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Lender in respect of the Collateral or as to the sufficiency of
any performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Lender or to which
the Lender may be entitled at any time or times.  The Lender’s sole duty with
respect to the custody, safe keeping and physical preservation of the Collateral
in its possession, under §9-207 of the Uniform Commercial Code of the State or
otherwise, shall be to deal with such Collateral in the same manner as the
Lender deals with similar property for its own account.
 
 
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12.        Securities and Deposits.  The Lender may at any time following the
occurrence and during the continuance of an Event of Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations.  Whether or not any Obligations are due, the Lender
may following the occurrence and during the continuance of an Event of Default
demand, sue for, collect, or make any settlement or compromise which it deems
desirable with respect to the Collateral.  Regardless of the adequacy of
Collateral or any other security for the Obligations, any deposits or other sums
at any time credited by or due from the Lender to the Guarantor may at any time
during the continuance of an Event of Default be applied to, or set off against,
any of the Obligations then due and owing.

13.         Notification to Account Debtors and Other Persons Obligated on
Collateral.  If an Event of Default shall have occurred and be continuing, the
Guarantor shall, at the request and option of the Lender, notify account debtors
and other persons obligated on any of the Collateral of the security interest of
the Lender in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Lender
or to any financial institution designated by the Lender as the Lender’s agent
therefor, and the Lender may itself, if an Event of Default shall have occurred
and be continuing, without notice to or demand upon the Guarantor, so notify
account debtors and other persons obligated on Collateral, which notice may
include the provision to such account debtors and other persons of an accounts
receivable letter which, if provided, may be (a) substantially in the form
attached hereto as Exhibit B (Lender having required Guarantor to execute an
undated accounts receivable letter in the form of Exhibit B attached hereto
which Lender agrees to hold and not release unless Lender is permitted to send
such letter as provided in this Section 13), or (b) in another form executed by
Guarantor upon request of Lender.  After the making of such a request or the
giving of any such notification, the Guarantor shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Guarantor as trustee for the Lender without
commingling the same with other funds of the Guarantor and shall turn the same
over to the Lender in the identical form received, together with any necessary
endorsements or assignments.  The Lender shall apply the proceeds of collection
of accounts, chattel paper, general intangibles, instruments and other
Collateral received by the Lender to the Obligations, such proceeds to be
immediately credited after final payment in cash or other immediately available
funds of the items giving rise to them.
 
 
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14.         Power of Attorney.

14.1.      Appointment and Powers of Lender.  The Guarantor hereby irrevocably
constitutes and appoints the Lender and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Guarantor or in
the Lender’s own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments that may be necessary or useful to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, hereby gives said attorneys the power and right, on behalf of the
Guarantor, without notice to or assent by the Guarantor, to do the following:

(a)          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 dispose of or deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code of the State and as fully and
completely as though the Lender were the absolute owner thereof for all
purposes, and to do, at the Guarantor’s expense, at any time, or from time to
time, all acts and things which the Lender deems necessary or useful to protect,
preserve or realize upon the Collateral and the Lender’s security interest
therein, in order to effect the intent of this Agreement, all no less fully and
effectively as the Guarantor might do, including, without limitation, (i) the
filing and prosecuting of registration and transfer applications with the
appropriate federal, state or local agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Guarantor, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Lender so elects, with
a view to causing the liquidation of assets of the issuer of any such securities
and (iii) the execution, delivery and recording, in connection with any sale or
other disposition of any Collateral, of the endorsements, assignments or other
instruments of conveyance or transfer with respect to such Collateral; and

(b)          to the extent that the Guarantor’s authorization given in §3 is not
sufficient, to file such financing statements with respect hereto, with or
without the Guarantor’s signature, or a photocopy of this Agreement in
substitution for a financing statement, as the Lender may deem appropriate and
to execute in the Guarantor’s name such financing statements and amendments
thereto and continuation statements which may require the Guarantor’s signature.

14.2.     Ratification by Guarantor.  To the extent permitted by law, the
Guarantor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof.  This power of attorney is a power coupled with an
interest and is irrevocable.

14.3.     No Duty on Lender.  The powers conferred on the Lender hereunder are
solely to protect its interests in the Collateral and shall not impose any duty
upon it to exercise any such powers.  The Lender shall be accountable only for
the amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Guarantor for any act or failure to act, except for
the Lender’s own gross negligence or willful misconduct.
 
 
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15.        Rights and Remedies.  If an Event of Default shall have occurred and
be continuing, the Lender, without any other notice to or demand upon the
Guarantor, shall have in any jurisdiction in which enforcement hereof is sought,
in addition to all other rights and remedies, the rights and remedies of a
secured party under the Uniform Commercial Code of the State and of such
jurisdiction and any additional rights and remedies as may be provided to a
secured party in any jurisdiction in which Collateral is located, including,
without limitation, the right to take possession of the Collateral, and for that
purpose the Lender may, so far as the Guarantor can give authority therefor,
enter upon any premises on which the Collateral may be situated and remove the
same therefrom.  The Lender may in its discretion require the Guarantor to
assemble all or any part of the Collateral at such location or locations within
the jurisdiction(s) of the Guarantor’s principal office(s) or at such other
locations as the Lender may reasonably designate.  Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Lender shall give to the Guarantor at least ten
(10) Business Days prior written notice of the time and place of any public sale
of Collateral or of the time after which any private sale or any other intended
disposition is to be made.  The Guarantor hereby acknowledges that ten (10)
Business Days prior written notice of such sale or sales shall be reasonable
notice.  In addition, the Guarantor waives any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of the Lender’s
rights and remedies hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral and
to exercise its rights and remedies with respect thereto.

16.        Standards for Exercising Rights and Remedies.  To the extent that
applicable law imposes duties on the Lender to exercise remedies in a
commercially reasonable manner, the Guarantor acknowledges and agrees that it is
not commercially unreasonable for the Lender (a) to fail to incur expenses
reasonably deemed significant by the Lender to prepare Collateral for
disposition or otherwise to fail to complete raw material or work in process
into finished goods or other finished products for disposition, (b) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (c) to fail to exercise collection remedies against account
debtors or other persons obligated on Collateral or to fail to remove liens or
encumbrances on or any adverse claims against Collateral, (d) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other persons, whether or not in the
same business as the Guarantor, for expressions of interest in acquiring all, or
any portion of, the Collateral, (g) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of
a specialized nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or
credit enhancements to insure the Lender against risks of loss, collection or
disposition of Collateral or to provide to the Lender a guaranteed return from
the collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Lender, to obtain the services of brokers, investment
bankers, consultants and other professionals to assist the Lender in the
collection, or disposition of, any of the Collateral.  The Guarantor
acknowledges that the purpose of this §16 is to provide non-exhaustive
indications of what actions or omissions by the Lender would fulfill the
Lender’s duties under the Uniform Commercial Code of the State or any other
relevant jurisdiction in the Lender’s exercise of remedies against the
Collateral and that other actions or omissions by the Lender shall not be deemed
to fail to fulfill such duties solely on account of not being indicated in this
§16.  Without limitation upon the foregoing, nothing contained in this §16 shall
be construed to grant any rights to the Guarantor or to impose any duties on the
Lender that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this §16.
 
 
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17.        No Waiver by Lender, etc.  The Lender shall not be deemed to have
waived any of its rights and remedies in respect of the Obligations or the
Collateral unless such waiver shall be in writing and signed by the Lender.  No
delay or omission on the part of the Lender in exercising any right or remedy
shall operate as a waiver of such right or remedy or any other right or
remedy.  A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.  All rights and remedies
of the Lender with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Lender deems expedient.

18.        Suretyship Waivers by Guarantor.  Except as may be otherwise
specifically provided in the Credit Agreement, the Guarantor waives demand,
notice, protest, notice of acceptance of this Agreement, notice of loans made,
credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any description.  With
respect to both the Obligations and the Collateral, the Guarantor assents to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Lender may deem advisable.  The Lender shall have no
duty as to the collection or protection of the Collateral or any income
therefrom, the preservation of rights against prior parties, or the preservation
of any rights pertaining thereto beyond the safe custody thereof as set forth in
Section 11.2.  The Guarantor further waives any and all other suretyship
defenses.

19.        Marshalling.  The Lender shall not be required to marshal any present
or future collateral security (including but not limited to the Collateral) for,
or other assurances of payment of, the Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of its rights and remedies hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights and remedies, however existing or arising.  To the
extent that it lawfully may, the Guarantor hereby agrees that it will not invoke
any law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Lender’s rights and remedies under this Agreement
or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Guarantor hereby irrevocably waives the
benefits of all such laws.
 
 
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20.        Proceeds of Dispositions; Expenses.  The Guarantor shall pay to the
Lender on demand amounts equal to any and all reasonable expenses, including,
without limitation, reasonable attorneys’ fees and disbursements, incurred or
paid by the Lender in protecting, preserving or enforcing the Lender’s rights
and remedies under, or in respect of, any of the Obligations or any of the
Collateral.  After deducting all of said expenses, the residue of any proceeds
of collection or sale or other disposition of Collateral shall, to the extent
actually received in cash, be applied to the payment of the Obligations in such
order or preference as the Lender may determine or in such order or preference
as is provided in the Credit Agreement, proper allowance and provision being
made for any Obligations not then due.  Upon the final payment and satisfaction
in full of all of the Obligations and after making any payments required by
Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Guarantor.  In the absence of final
payment and satisfaction in full of all of the Obligations, the Guarantor shall
remain liable for any deficiency.

21.        Overdue Amounts.  Until paid, all amounts which become due and
payable by the Guarantor hereunder shall be a debt secured by the Collateral and
if not otherwise paid within any applicable grace period after the same becomes
due shall bear, whether before or after judgment, interest at the rate of
interest for overdue principal set forth in the Credit Agreement.

22.        Governing Law; Consent to Jurisdiction.  THIS AGREEMENT IS INTENDED
TO TAKE EFFECT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CONNECTICUT.  The Guarantor agrees that any action or claim
arising out of any dispute in connection with this Agreement, any rights or
obligations hereunder or the performance or enforcement of such rights or
obligations may be brought in the courts of the State of Connecticut or any
federal court sitting therein and consents to the non-exclusive jurisdiction of
such court and to service of process in any such suit being made upon the
Guarantor by certified or registered mail at the address specified in the Credit
Agreement.  The Guarantor hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient forum.

23.        Waiver of Jury Trial.  EACH PARTY HERETO WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OR ENFORCEMENT OF ANY SUCH RIGHTS OR OBLIGATIONS.  Except as
prohibited by law, the Guarantor waives any right which it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages.  The Guarantor (i) certifies that neither the
Lender nor any representative, agent or attorney of the Lender has represented,
expressly or otherwise, that the Lender would not, in the event of litigation,
seek to enforce the foregoing waivers or other waivers contained in this
Agreement and (ii) acknowledges that, in entering into the Credit Agreement and
the other Loan Documents to which the Lender is a party, the Lender is relying
upon, among other things, the waivers and certifications contained in this
Section 23.
 
 
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24.        Miscellaneous.  The headings of each section of this Agreement are
for convenience only and shall not define or limit the provisions thereof.  This
Agreement and all rights and obligations hereunder shall be binding upon the
Guarantor and its successors and assigns, and shall inure to the benefit of the
Lender and its successors and assigns permitted pursuant to the Credit
Agreement.  If any term of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein.  The
Guarantor acknowledges receipt of a copy of this Agreement.
 
25.        PREJUDGMENT REMEDY WAIVER.

THE GUARANTOR HEREBY REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE FINANCING
EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF CHAPTER 903a
OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED.  THE GUARANTOR HEREBY WAIVES
ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT
GENERAL STATUTES SECTIONS 52-278A ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE
OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE LENDER MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER LOAN
DOCUMENTS.  MORE SPECIFICALLY, THE GUARANTOR ACKNOWLEDGES THAT UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT THE LENDER’S
ATTORNEY MAY, PURSUANT TO, AND IN ACCORDANCE WITH, CONN. GEN. STATE. §52-278F,
ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER, PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.  THE GUARANTOR ACKNOWLEDGES
AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A
WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE LENDER ACKNOWLEDGES THE
GUARANTOR’S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.  THE
GUARANTOR FURTHER WAIVES ITS RIGHTS TO REQUEST THAT THE LENDER POST A BOND, WITH
OR WITHOUT SURETY, TO PROTECT GUARANTOR AGAINST DAMAGES THAT MAY BE CAUSED BY
ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY THE LENDER.
 
26.        Amendments.  Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Guarantor and the Lender.

27.        Electronic Self-Help Authorization. Upon and during the continuance
of an Event of Default, the Lender shall have, in addition to all other rights
and remedies contained in this Agreement, (which the Guarantor, and, by becoming
bound by the Obligations or this Agreement, all other obligors, guarantors and
any new debtors accept and agree upon), the right to locate, disable or to take
possession of the Collateral by electronic, digital, magnetic or wireless
optical electromagnetic or similar means after giving any notices required under
applicable law.
 
 
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28.         Termination.  At such time as all of the Obligations (other than
contingent indemnification obligations for which no claim has been asserted)
have been finally paid and satisfied in full and the Commitment has been
irrevocably terminated, this Agreement shall terminate and Lender shall, upon
written request and at the expense of Guarantor, execute and deliver to
Guarantor all documents and other instruments as may be necessary or proper to
evidence the termination of Lender’s security interest in the Collateral and
Lender shall return to Guarantor any Collateral then in Lender’s possession.

[Signature page follows]
 
 
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IN WITNESS WHEREOF, intending to be legally bound, the Guarantor has caused this
Agreement to be duly executed as of the date first above written.

 
LYDALL THERMAL/ACOUSTICAL,
 
INC.
     
By:
  /s/ Dale G. Barnhart  
Name: Dale G. Barnhart
 
Title:   President

Accepted:
 
BANK OF AMERICA, N.A.
       
By:
/s/ Christopher T. Phelan
 
Name: Christopher T. Phelan
 
Title: Senior Vice President
 

 
[Signature Page to BOA-Thermal/Acoustical Security Agreement]
   
 
 

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CERTIFICATE OF ACKNOWLEDGMENT

STATE OF
Connecticut
)
           
Manchester
) ss.
         
COUNTY OF
 Hartford
)
 

 
Before me, the undersigned, personally appeared Dale G. Barnhart, to me known
personally, and who, being by me duly sworn, deposes and says that he is the
President of Lydall Thermal/Acoustical, Inc., and that said instrument was
signed and sealed on behalf of said company by authority of its Board of
Directors, and said President acknowledged said instrument to be his free act
and deed as such Officer and the free act and deed of said company.
 

 
Donna G. Tracy
     
/s/ Donna G. Tracy
 
Notary Public
 
Commissioner of the Superior Court
 
My commission expires: 3/31/13

 
[Signature page to Perfection Certificate - Lydall Thermal/Acoustical]
 
 
 

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