Exhibit 10.2

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended, restated, supplemented
or otherwise modified from time to time, this “Security Agreement”) is entered
into as of January 21, 2019 by and among ESCALADE, INCORPORATED, an Indiana
corporation and INDIAN INDUSTRIES, INC., an Indiana corporation (the
“Borrowers”), and WEDCOR HOLDING, INC., an Indiana corporation, GOALSETTER
SYSTEMS, INC., an Iowa corporation, U.S. WEIGHT, INC., an Illinois corporation,
HARVARD SPORTS, INC., a California corporation, BEAR ARCHERY, INC., a Florida
corporation, ESCALADE SPORTS PLAYGROUND, INC., a North Carolina corporation,
LIFELINE PRODUCTS, LLC, an Illinois limited liability company, EIM COMPANY,
INC., a Nevada corporation, SOP SERVICES, INC., a Nevada corporation, ESCALADE
INSURANCE, INC., a Nevada corporation, VICTORY MADE, LLC, a Florida limited
liability company, and VICTORY TAILGATE, LLC, a Florida limited liability
company (collectively, the “Guarantors”), and any additional entities which
become parties to this Security Agreement by executing a Security Agreement
Supplement hereto in substantially the form of Annex I hereto (such additional
entities, together with Borrower and the Guarantors, each a “Grantor”, and
collectively, the “Grantors”), and JPMorgan Chase Bank, N.A., in its capacity as
administrative agent (the “Administrative Agent”) for the lenders party to the
Credit Agreement referred to below.

 

PRELIMINARY STATEMENT

 

The Borrowers, each Grantor as a Loan Guarantor, and the Lenders are entering
into an Amended and Restated Credit Agreement dated as of even date herewith (as
it may be amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”). Each Grantor is entering into this Security
Agreement in order to induce the Lenders to enter into and extend credit to the
Borrowers under the Credit Agreement and to secure the Secured Obligations that
it has agreed to guarantee pursuant to Article X of the Credit Agreement.

 

ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Secured
Parties, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

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

 

1.2.          Terms Defined in UCC. Terms defined in the UCC which are not
otherwise defined in this Security Agreement are used herein as defined in the
UCC. Any reference to Article 8 and/or 9 of the UCC and Sections thereof that
apply to the Indiana UCC shall refer to the applicable Article/Chapter 8.1 and
9.1 and the Sections thereof of the Indiana UCC, as applicable.

 

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

 

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

 

“Applicable IP Office” means the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or, solely
in the case of Section 4.7, outside the United States.

 

 

 

 

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

 

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

 

“Closing Date” means the date of the Credit Agreement.

 

“Collateral” shall have the meaning set forth in Article II.

 

“Collateral Access Agreement” means any landlord waiver or other agreement, in
form and substance satisfactory to the Administrative Agent, between the
Administrative Agent and any third party (including any bailee, consignee,
customs broker, or other similar Person) in possession of any Collateral or any
landlord of any real property where any Collateral is located, as such landlord
waiver or other agreement may be amended, restated, supplemented or otherwise
modified from time to time.

 

“Commercial Tort Claims” means the commercial tort claims as defined in Article
9 of the UCC, including each commercial tort claim specifically described on
Exhibit I.

 

“Confirmatory Grant” shall have the meaning set forth in Section 3.10(e).

 

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

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to copyrights and
all mask works, database and design rights, whether or not registered or
published, all registrations and recordations thereof and all applications in
connection therewith.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Deposit Account Control Agreement” means an agreement, in form and substance
satisfactory to the Administrative Agent, among any Loan Party, a banking
institution holding such Loan Party’s funds, and the Administrative Agent with
respect to collection and control of all deposits and balances held in a deposit
account maintained by such Loan Party with such banking institution.

 

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

 

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

 

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

 

“Event of Default” means an event described in Section 5.1.

 

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

 

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

 

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

 

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

 

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“Industrial Designs” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
registered industrial designs and industrial design applications.

 

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

 

“Intellectual Property” means all rights, title and interests in or relating to
intellectual property and industrial property arising under any Requirement of
Law and all IP Ancillary Rights relating thereto, including all Copyrights,
Patents, Industrial Designs, Software, Trademarks, Internet Domain Names, Trade
Secrets and IP Licenses.

 

“Internet Domain Name” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
internet domain names.

 

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

 

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

 

“IP Ancillary Rights” means, with respect to any Intellectual Property, as
applicable, all foreign counterparts to, and all divisionals, reversions,
continuations, continuations-in-part, reissues, reexaminations, renewals and
extensions of, such Intellectual Property and all income, royalties, proceeds
and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property
throughout the world, including all rights to sue or recover at law or in equity
for any past, present or future infringement, misappropriation, dilution,
violation or other impairment thereof, and, in each case, all rights to obtain
any other IP Ancillary Right throughout the world.

 

“IP License” means all contractual obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right, title and interest in or
relating to any Intellectual Property.

 

“Lenders” means the lenders party to the Credit Agreement and their successors
and assigns.

 

“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.

 

“Liabilities” mean all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, Taxes, commissions, charges, disbursements and expenses (including those
incurred upon any appeal or in connection with the preparation for and/or
response to any subpoena or request for document production relating thereto),
in each case of any kind or nature (including interest accrued thereon or as a
result thereto and fees, charges and disbursements of financial, legal and other
advisors and consultants), whether joint or several, whether or not indirect,
contingent, consequential, actual, punitive, treble or otherwise.

 

“Material Intellectual Property” means Intellectual Property that is owned by or
licensed to a Grantor and material to the conduct of such Grantor’s business.

 

“Material License Agreement” means Intellectual Property that is licensed to a
Grantor and material to the conduct of such Grantor’s business and disclosed on
Exhibit D hereto.

 

“Patents” mean all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to letters patent
and applications therefor.

 

“Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the
Administrative Agent pursuant to this Security Agreement.

 

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

 

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

 

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

 

“Security” shall have the meaning set forth in Article 8 of the UCC.

 

“Software” means (a) all computer programs, including source code and object
code versions, (b) all data, databases and compilations of data, whether machine
readable or otherwise, and (c) all documentation, training materials and
configurations related to any of the foregoing.

 

“Security Agreement Supplement” shall mean any Security Agreement Supplement to
this Security Agreement in substantially the form of Annex I hereto executed by
an entity that becomes a Grantor under this Security Agreement after the date
hereof.

 

“Stock Rights” means all dividends, instruments or other distributions and any
other right or property which the Grantors shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any Equity Interest constituting Collateral, any right to
receive an Equity Interest and any right to receive earnings, in which the
Grantors now have or hereafter acquire any right, issued by an issuer of such
Equity Interest.

 

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

 

“Trade Secrets” mean all right, title and interest (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to proprietary,
confidential and/or non-public information, however documented, including but
not limited to confidential ideas, know-how, concepts, methods, processes,
formulae, reports, data, customer lists, mailing lists, business plans and all
other trade secrets.

 

“Trademarks” mean all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers and, in each case, all goodwill associated therewith, all
registrations and recordations thereof and all applications in connection
therewith.

 

“UCC” means the Uniform Commercial Code, as in effect from time to time, of the
State of Indiana or of any other state the laws of which are required as a
result thereof to be applied in connection with the attachment, perfection or
priority of, or remedies with respect to, Administrative Agent’s or any other
Secured Party’s Lien on any Collateral.

 

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

 

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ARTICLE II

GRANT OF SECURITY INTEREST

 

Each Grantor hereby pledges, assigns and grants to the Administrative Agent, on
behalf of and for the ratable benefit of the Secured Parties, a security
interest in all of its right, title and interest in, to and under all personal
property and other assets, whether now owned by or owing to, or hereafter
acquired by or arising in favor of such Grantor (including under any trade name
or derivations thereof), and whether owned or consigned by or to, or leased from
or to, such Grantor, and regardless of where located (all of which will be
collectively referred to as the “Collateral”), including:

 

(i)all Accounts;

(ii)all Chattel Paper;

(iii)all Copyrights, Patents and Trademarks;

(iv)all Documents;

(v)all Equipment;

(vi)all General Intangibles;

(vii)all Goods;

(viii)all Instruments;

(ix)all Inventory;

(x)all Investment Property;

(xi)all cash or cash equivalents;

(xii)all letters of credit, Letter-of-Credit Rights and Supporting Obligations;

(xiii)all Deposit Accounts with any bank or other financial institution;

(xiv)all Commercial Tort Claims; and

(xv)all accessions to, substitutions for and replacements, proceeds (including
Stock Rights), insurance proceeds and products of the foregoing, together with
all books and records, customer lists, credit files, computer files, programs,
printouts and other computer materials and records related thereto and any
General Intangibles at any time evidencing or relating to any of the foregoing;

 

to secure the prompt and complete payment and performance of the Secured
Obligations; provided, that the Collateral does not include any United States
intent-to-use trademark applications to the extent that, and solely during the
period in which, the grant of a security interest therein would impair the
validity or enforceability of such intent-to-use trademark applications under
applicable federal law; provided, further that upon submission and acceptance by
the PTO of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or
any successor provision), such intent-to-use trademark application shall be
considered Collateral.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Each Grantor represents and warrants, and each Grantor that becomes a party to
this Security Agreement pursuant to the execution of a Security Agreement
Supplement represents and warrants (after giving effect to supplements, if any,
to each of the Exhibits hereto with respect to such Grantor as attached to such
Security Agreement Supplement), to the Administrative Agent and the Secured
Parties that:

 

3.1.        Title, Authorization, Validity, Enforceability, Perfection and
Priority. Such Grantor has good and valid rights in or the power to transfer the
Collateral and title to the Collateral with respect to which it has purported to
grant a security interest hereunder, free and clear of all Liens except for
Liens permitted under Section 4.1(e), and has full power and authority to grant
to the Administrative Agent the security interest in the Collateral pursuant
hereto. The execution and delivery by such Grantor of this Security Agreement
has been duly authorized by proper corporation proceedings of such Grantor, if
Grantor is a corporation, or by proper limited liability company proceedings of
such Grantor, if Grantor is a limited liability company, and this Security
Agreement constitutes a legal valid and binding obligation of such Grantor and
creates a security interest which is enforceable against such Grantor in all
Collateral it now owns or hereafter acquires, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law. When financing statements have
been filed in the appropriate offices against such Grantor in the locations
listed on Exhibit H, the Administrative Agent will have a fully perfected first
priority security interest in that Collateral of such Grantor in which a
security interest may be perfected by filing, subject only to Liens permitted
under Section 4.1(e).

 

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3.2.        Type and Jurisdiction of Organization, Organizational and
Identification Numbers. The type of entity of such Grantor, its state of
organization, the organizational number issued to it by its state of
organization and its federal employer identification number are set forth on
Exhibit A.

 

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

 

3.4.        Collateral Locations. All of such Grantor’s locations where
Collateral is located are listed on Exhibit A. All of said locations are owned
by such Grantor except for locations (i) which are leased by the Grantor as
lessee and designated in Part VII(b) of Exhibit A and (ii) at which Inventory is
held in a public warehouse or is otherwise held by a bailee or on consignment as
designated in Part VII(c) of Exhibit A.

 

3.5.        Deposit Accounts. All of such Grantor’s Deposit Accounts are listed
on Exhibit B.

 

3.6.        Exact Names. Such Grantor’s name in which it has executed this
Security Agreement is the exact name as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction
of organization. Such Grantor has not, during the past five years, been known by
or used any other corporate or fictitious name, or been a party to any merger or
consolidation, or been a party to any acquisition.

 

3.7.        Letter-of-Credit Rights and Chattel Paper. Exhibit C lists all
Letter-of-Credit Rights and Chattel Paper of such Grantor. All action by such
Grantor necessary or desirable to protect and perfect the Administrative Agent’s
Lien on each item listed on Exhibit C (including the delivery of all originals
and the placement of a legend on all Chattel Paper as required hereunder) has
been duly taken. The Administrative Agent will have a fully perfected first
priority security interest in the Collateral listed on Exhibit C, subject only
to Liens permitted under Section 4.1(e).

 

3.8.        Accounts and Chattel Paper.

 

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

 

(b)          With respect to its Accounts, all Accounts represent bona fide
sales of Inventory or rendering of services to Account Debtors in the ordinary
course of such Grantor’s business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes
existing or asserted with respect thereto in a material aggregate amount and
such Grantor has not made any agreement with any Account Debtor for any
extension of time for the payment thereof, any compromise or settlement for less
than the full amount thereof, any release of any Account Debtor from liability
therefor, or any deduction therefrom except a discount or allowance allowed by
such Grantor in the ordinary course of its business for prompt payment and
disclosed to the Administrative Agent; (iii) to such Grantor’s knowledge, there
are no facts, events or occurrences which in any way materially impair the
validity or enforceability thereof or could reasonably be expected to reduce
materially the amount payable thereunder as shown on such Grantor’s books and
records and any invoices, statements with respect thereto; (iv) such Grantor has
not received any notice of proceedings or actions which are threatened or
pending against any Account Debtor which might result in any adverse change in
such Account Debtor’s financial condition; and (v) such Grantor has no knowledge
that any Account Debtor has become insolvent or is generally unable to pay its
debts as they become due.

 

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(c)          In addition, with respect to all of its Accounts, (i) the amounts
shown on all invoices and statements with respect thereto are actually and
absolutely owing to such Grantor as indicated thereon and are not in any way
contingent, and (ii) to such Grantor’s knowledge, all Account Debtors have the
capacity to contract.

 

3.9.        Inventory. With respect to any of its Inventory, (a) such Inventory
(other than Inventory in transit) is located at one of such Grantor’s locations
set forth on Exhibit A, (b) no Inventory (other than Inventory in transit) is
now, or shall at any time or times hereafter be stored at any other location
except as permitted by Section 4.1(g), (c) such Grantor has good, indefeasible
and merchantable title to such Inventory and such Inventory is not subject to
any Lien or security interest or document whatsoever except for the security
interest granted to the Administrative Agent hereunder, for the benefit of the
Administrative Agent and Secured Parties, and Permitted Encumbrances, (d) such
Inventory is of good and merchantable quality, free from any material defects,
(e) such Inventory is not subject to any licensing, patent, royalty, trademark,
trade name or copyright agreements with any third parties which would require
any consent of any third party upon sale or disposition of that Inventory or the
payment of any monies to any third party upon such sale or other disposition,
(f) such Inventory has been produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder, and (g) the completion of manufacture, sale or other disposition of
such Inventory by the Administrative Agent following an Event of Default shall
not require the consent of any Person and shall not constitute a breach or
default under any contract or agreement to which such Grantor is a party or to
which such property is subject.

 

3.10.       Intellectual Property.

 

(a)          Exhibit D contains a complete and accurate listing of the following
Intellectual Property such Grantor owns, licenses or otherwise has the right to
use: (i) Intellectual Property that is registered or subject to applications for
registration, (ii) Internet Domain Names and (iii) Material Intellectual
Property and material Software, separately identifying that owned and licensed
to such Grantor and including for each of the foregoing items (1) the owner, (2)
the title, (3) the jurisdiction in which such item has been registered or
otherwise arises or in which an application for registration has been filed, (4)
as applicable, the registration or application number and registration or
application date and (5) any IP Licenses or other rights (including franchises)
granted by such Grantor with respect thereto. Such Grantor owns directly or is
entitled to use, by license or otherwise, all Intellectual Property necessary
for the conduct of such Grantor’s business as currently conducted. All of the
U.S. registrations, applications for registration or applications for issuance
of the Intellectual Property are in good standing and are recorded or in the
process of being recorded in the name of such Grantor.

 

(b)          On the Effective Date, all Material Intellectual Property owned by
such Grantor is valid, in full force and effect, subsisting, unexpired and
enforceable, and no Material Intellectual Property has been abandoned. No breach
or default of any Material License Agreement shall be caused by any of the
following, and none of the following shall limit or impair the ownership, use,
validity or enforceability of, or any rights of such Grantor in, any Material
Intellectual Property: (i) the consummation of the transactions contemplated by
any Loan Documents or (ii) any holding, decision, judgment or order rendered by
any Governmental Authority. There are no pending (or, to the knowledge of such
Grantor, threatened) actions, investigations, suits, proceedings, audits,
claims, demands, orders or disputes challenging the ownership, use, validity,
enforceability of, or such Grantor’s rights in, any Material Intellectual
Property of such Grantor. To such Grantor’s knowledge, no Person has been or is
infringing, misappropriating, diluting, violating or otherwise impairing any
Intellectual Property of such Grantor. Such Grantor, and to such Grantor’s
knowledge each other party thereto, is not in material breach or default of any
Material License Agreement.

 

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(c)          Such Grantor has taken or caused to be taken steps so that none of
its Intellectual Property, the value of which to such Grantor is contingent upon
maintenance of the confidentiality thereof, has been disclosed by such Grantor
to any Person other than employees, contractors, customers, representatives and
agents of such Grantor who are parties to customary confidentiality and
nondisclosure agreements with such Grantor. Each employee and contractor of such
Grantor involved in development or creation of any Material Intellectual
Property has assigned any and all inventions and ideas of such Person in and to
such Intellectual Property to such Grantor.

 

(d)          No settlement or consents, covenants not to sue, nonassertion
assurances, or releases have been entered into by such Grantor or exist to which
such Grantor is bound that adversely affect its rights to own or use any
Intellectual Property except as could not be reasonably expected to result in a
Material Adverse Effect, in each case individually or in the aggregate.

 

(e)          This Security Agreement is effective to create a valid and
continuing Lien on such Copyrights, IP Licenses, Patents and Trademarks and,
upon filing with the Applicable IP Office of the Confirmatory Grant of Security
Interest in Copyrights, the Confirmatory Grant of Security Interest in Patents
and the Confirmatory Grant of Security Interest in Trademarks (each, a
“Confirmatory Grant”), and the filing of appropriate financing statements in the
jurisdictions listed in Exhibit H hereto, all action necessary or desirable to
protect and perfect the security interest in, to and on such Grantor’s Patents,
Trademarks, Copyrights, or IP Licenses have been taken and such perfected
security interest is enforceable as such as against any and all creditors of and
purchasers from such Grantor. Such Grantor has no interest in any Copyright that
is necessary in connection with the operation of such Grantor’s business, except
for those Copyrights identified in Exhibit D attached hereto which have been
registered with the United States Copyright Office.

 

3.11.      Filing Requirements. None of the Equipment of Grantors is covered by
any certificate of title, except for the vehicles described in Part I of Exhibit
E. None of the Collateral of owned by a Grantor is of a type for which security
interests or liens may be perfected by filing under any federal statute except
for (a) the vehicles described in Part II of Exhibit E and (b) Patents,
Trademarks and Copyrights held by such Grantor and described in Exhibit D.

 

3.12.      No Financing Statements, Security Agreements. No financing statement
or security agreement describing all or any portion of the Collateral which has
not lapsed or been terminated (by a filing authorized by the secured party in
respect thereof) naming such Grantor as debtor has been filed or is of record in
any jurisdiction except for financing statements or security agreements (a)
naming the Administrative Agent on behalf of the Secured Parties as the secured
party and (b) in respect to other Liens permitted under Section 6.02 of the
Credit Agreement.

 

3.13.      Pledged Collateral.

 

(a)          Exhibit G sets forth a complete and accurate list of all of the
Pledged Collateral owned by such Grantor. Such Grantor is the direct, sole
beneficial owner and sole holder of record of the Pledged Collateral listed on
Exhibit G as being owned by it, free and clear of any Liens, except for the
security interest granted to the Administrative Agent for the benefit of the
Secured Parties hereunder and Permitted Encumbrances. Such Grantor further
represents and warrants that (i) all Pledged Collateral owned by it constituting
an Equity Interest has been (to the extent such concepts are relevant with
respect to such Pledged Collateral) duly authorized, validly issued, are fully
paid and non-assessable, (ii) with respect to any certificates delivered to the
Administrative Agent representing an Equity Interest, either such certificates
are Securities as defined in Article 8 of the UCC as a result of actions by the
issuer or otherwise, or, if such certificates are not Securities, such Grantor
has so informed the Administrative Agent so that the Administrative Agent may
take steps to perfect its security interest therein as a General Intangible,
(iii) all such Pledged Collateral held by a securities intermediary is covered
by a control agreement among such Grantor, the securities intermediary and the
Administrative Agent pursuant to which the Administrative Agent has Control and
(iv) all Pledged Collateral which represents Indebtedness owed to such Grantor
has been duly authorized, authenticated or issued and delivered by the issuer of
such Indebtedness, is the legal, valid and binding obligation of such issuer and
such issuer is not in default thereunder.

 

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(b)          In addition, (i) none of the Pledged Collateral owned by such
Grantor has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which
such issuance or transfer may be subject, (ii) no options, warrants, calls or
commitments of any character whatsoever (A) exist relating to such Pledged
Collateral or (B) obligate the issuer of any Equity Interest included in the
Pledged Collateral to issue additional Equity Interests, and (iii) no consent,
approval, authorization, or other action by, and no giving of notice, filing
with, any governmental authority or any other Person is required for the pledge
by such Grantor of such Pledged Collateral pursuant to this Security Agreement
or for the execution, delivery and performance of this Security Agreement by
such Grantor, or for the exercise by the Administrative Agent of the voting or
other rights provided for in this Security Agreement or for the remedies in
respect of the Pledged Collateral pursuant to this Security Agreement, except as
may be required in connection with such disposition by laws affecting the
offering and sale of securities generally.

 

(c)          Except as set forth in Exhibit G, such Grantor owns 100% of the
issued and outstanding Equity Interests which constitute Pledged Collateral
owned by it and none of the Pledged Collateral which represents Indebtedness
owed to such Grantor is subordinated in right of payment to other Indebtedness
or subject to the terms of an indenture.

 

ARTICLE IV

COVENANTS

 

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

 

4.1.        General.

 

(a)          Collateral Records. Such Grantor will maintain complete and
accurate books and records with respect to the Collateral owned by it, and
furnish to the Administrative Agent with sufficient copies for each of the
Lenders, such reports relating to such Collateral as the Administrative Agent
shall from time to time request.

 

(b)          Authorization to File Financing Statements; Ratification. Such
Grantor hereby authorizes the Administrative Agent to file, and if requested
will deliver to the Administrative Agent, all financing statements and other
documents and take such other actions as may from time to time be requested by
the Administrative Agent in order to maintain a first perfected security
interest in and, if applicable, Control of, the Collateral owned by such
Grantor. Any financing statement filed by the Administrative Agent may be filed
in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s
Collateral (1) as all assets of the Grantor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the UCC of such jurisdiction, or (2) by any
other description which reasonably approximates the description contained in
this Security Agreement, and (ii) contain any other information required by part
5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement or amendment, including whether such Grantor is an
organization, the type of organization and any organization identification
number issued to such Grantor. Such Grantor also agrees to furnish any such
information described in the foregoing sentence to the Administrative Agent
promptly upon request. Such Grantor also ratifies its authorization for the
Administrative Agent to have filed in any UCC jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof.

 

 9 

 

 

(c)          Further Assurances. Such Grantor will, if so requested by the
Administrative Agent, furnish to the Administrative Agent, as often as the
Administrative Agent requests, statements and schedules further identifying and
describing the Collateral owned by it and such other reports and information in
connection with its Collateral as the Administrative Agent may reasonably
request, all in such detail as the Administrative Agent may specify. Such
Grantor also agrees to take any and all actions necessary to defend title to the
Collateral against all persons and to defend the security interest of the
Administrative Agent in its Collateral and the priority thereof against any Lien
not expressly permitted hereunder.

 

(d)          Disposition of Collateral. Such Grantor will not sell, lease or
otherwise dispose of the Collateral except for dispositions specifically
permitted pursuant to Section 6.05 of the Credit Agreement.

 

(e)          Liens. Such Grantor will not create, incur, or suffer to exist any
Lien on the Collateral except (i) the security interest created by this Security
Agreement, and (ii) other Liens permitted under Section 6.02 of the Credit
Agreement.

 

(f)          Other Financing Statements. Such Grantor will not authorize the
filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by it, except for financing statements (i)
naming the Administrative Agent on behalf of the Secured Parties as the secured
party, and (ii) in respect to other Liens permitted under Section 6.02 of the
Credit Agreement. Such Grantor acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with respect to
any financing statement without the prior written consent of the Administrative
Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.

 

(g)          Locations. Such Grantor will not (i) maintain any Collateral owned
by it at any location other than those locations listed on Exhibit A or
disclosed to Administrative Agent pursuant to clause (ii) of this Section, (ii)
otherwise change, or add to, such locations without the Administrative Agent’s
prior written consent as required by the Credit Agreement (and if the
Administrative Agent gives such consent, such Grantor will concurrently
therewith obtain a Collateral Access Agreement for each such location to the
extent required by the Credit Agreement), or (iii) change its principal place of
business or chief executive office from the location identified on Exhibit A,
other than as permitted by the Credit Agreement.

 

(h)          Compliance with Terms. Such Grantor will perform and comply in all
material respects with all obligations in respect of the Collateral owned by it
and all agreements to which it is a party or by which it is bound relating to
such Collateral.

 

4.2.        Receivables.

 

(a)          Certain Agreements on Receivables. Such Grantor will not make or
agree to make any discount, credit, rebate or other reduction in the original
amount owing on a Receivable or accept in satisfaction of a Receivable less than
the original amount thereof, except that, prior to the occurrence of an Event of
Default, such Grantor may discount, credit, rebate or otherwise reduce the
amount of Accounts arising from the sale of Inventory in accordance with its
present policies and in the ordinary course of business.

 

(b)          Collection of Receivables. Except as otherwise provided in this
Security Agreement, such Grantor will collect and enforce, at such Grantor’s
sole expense, all amounts due or hereafter due to such Grantor under the
Receivables owned by it, except that, prior to the occurrence of an Event of
Default, such Grantor may choose not to enforce Receivables that have been
written off in accordance with its present policies and in the ordinary course
of business.

 

 10 

 

 

(c)          Delivery of Invoices. Such Grantor will deliver to the
Administrative Agent immediately upon its request after the occurrence and
during the continuation of an Event of Default duplicate invoices with respect
to each Account owned by it bearing such language of assignment as the
Administrative Agent shall specify.

 

(d)          Disclosure of Counterclaims on Receivables. If (i) any material
discount, credit or agreement to make a rebate or to otherwise reduce the amount
owing on any Receivable owned by such Grantor exists or (ii) if, to the
knowledge of such Grantor, any material dispute, setoff, claim, counterclaim or
defense exists or has been asserted or threatened with respect to any such
Receivable, such Grantor will promptly disclose such fact to the Administrative
Agent in writing. Such Grantor shall promptly report each credit memorandum and
each of the facts required to be disclosed to the Administrative Agent in
accordance with this Section 4.2(d) on the Borrowing Base Certificates submitted
by it.

 

(e)          Electronic Chattel Paper. Such Grantor shall take all steps
necessary to grant the Administrative Agent Control of all electronic chattel
paper in accordance with the UCC and all “transferable records” as defined in
each of the Uniform Electronic Transactions Act and the Electronic Signatures in
Global and National Commerce Act.

 

4.3.        Inventory and Equipment.

 

(a)          Maintenance of Goods. Such Grantor will do all things necessary to
maintain, preserve, protect and keep its Inventory and the Equipment in good
repair and working and saleable condition, except for damaged or defective or
obsolete goods arising in the ordinary course of such Grantor’s business and
except for ordinary wear and tear in respect of the Equipment.

 

(b)          Inventory Count; Perpetual Inventory System. Such Grantor will
conduct a physical count of its Inventory at least once per fiscal year, and
after and during the continuation of an Event of Default, at such other times as
the Administrative Agent requests. Such Grantor, at its own expense, shall
deliver to the Administrative Agent the results of each physical verification,
which such Grantor has made, or has caused any other Person to make on its
behalf, of all or any portion of its Inventory. Such Grantor will maintain a
perpetual inventory reporting system at all times.

 

(c)          Equipment. Such Grantor shall not permit any Equipment to become a
Fixture with respect to real property or to become an accession with respect to
other personal property with respect to which real or personal property the
Administrative Agent does not have a Lien. Such Grantor will not, without the
Administrative Agent’s prior written consent, alter or remove any identifying
symbol or number on any of such Grantor’s Equipment constituting Collateral.

 

(d)          Titled Vehicles. Upon the Administrative Agent’s request, deliver
to the Administrative Agent, the original of any vehicle title certificate and
provide and/or file all other documents or instruments necessary to have the
Lien of the Administrative Agent noted on any such certificate or with the
appropriate state office.

 

4.4.        Delivery of Instruments, Securities, Chattel Paper and Documents.
Such Grantor will (a) deliver to the Administrative Agent immediately upon
execution of this Security Agreement the originals of all Chattel Paper,
Securities and Instruments constituting Collateral owned by it (if any then
exist), (b) hold in trust for the Administrative Agent upon receipt and
immediately thereafter deliver to the Administrative Agent any Chattel Paper,
Securities and Instruments constituting Collateral, (c) upon the Administrative
Agent’s request, deliver to the Administrative Agent (and thereafter hold in
trust for the Administrative Agent upon receipt and immediately deliver to the
Administrative Agent) any Document evidencing or constituting Collateral.

 

 11 

 

 

4.5.          Uncertificated Pledged Collateral. Such Grantor will permit the
Administrative Agent from time to time to cause the appropriate issuers (and, if
held with a securities intermediary, such securities intermediary) of
uncertificated securities or other types of Pledged Collateral owned by it not
represented by certificates to mark their books and records with the numbers and
face amounts of all such uncertificated securities or other types of Pledged
Collateral not represented by certificates and all rollovers and replacements
therefor to reflect the Lien of the Administrative Agent granted pursuant to
this Security Agreement. With respect to any Pledged Collateral owned by it,
such Grantor will take any actions necessary to cause (a) the issuers of
uncertificated securities which are Pledged Collateral and (b) any securities
intermediary which is the holder of any such Pledged Collateral, to cause the
Administrative Agent to have and retain Control over such Pledged Collateral.
Without limiting the foregoing, such Grantor will, with respect to any such
Pledged Collateral held with a securities intermediary, cause such securities
intermediary to enter into a control agreement with the Administrative Agent, in
form and substance satisfactory to the Administrative Agent, giving the
Administrative Agent Control.

 

4.6.        Pledged Collateral.

 

(a)          Changes in Capital Structure of Issuers. Except as permitted by
Section 6.03 of the Credit Agreement, such Grantor will not (i) permit or suffer
any issuer of an Equity Interest constituting Pledged Collateral owned by it to
dissolve, merge, liquidate, retire any of its Equity Interests or other
Instruments or Securities evidencing ownership, reduce its capital, sell or
encumber all or substantially all of its assets (except for Permitted
Encumbrances and sales of assets permitted pursuant to Section 4.1(d)) or merge
or consolidate with any other entity, or (ii) vote any such Pledged Collateral
in favor of any of the foregoing.

 

(b)          Issuance of Additional Securities. Such Grantor will not permit or
suffer the issuer of an Equity Interest constituting Pledged Collateral owned by
it to issue additional Equity Interests, any right to receive the same or any
right to receive earnings, except to such Grantor.

 

(c)          Registration of Pledged Collateral. Such Grantor will permit any
registerable Pledged Collateral to be registered in the name of the
Administrative Agent or its nominee at any time at the option of the Required
Lenders.

 

(d)          Exercise of Rights in Pledged Collateral.

 

(i)          Without in any way limiting the foregoing and subject to clause
(ii) below, such Grantor shall have the right to exercise all voting rights or
other rights relating to the Pledged Collateral owned by it for all purposes not
inconsistent with this Security Agreement, the Credit Agreement or any other
Loan Document; provided however, that no vote or other right shall be exercised
or action taken which would have the effect of impairing the rights of the
Administrative Agent in respect of such Pledged Collateral.

 

(ii)         Such Grantor will permit the Administrative Agent or its nominee at
any time after the occurrence of an Event of Default, without notice, to
exercise all voting rights or other rights relating to the Pledged Collateral
owned by it, including, without limitation, exchange, subscription or any other
rights, privileges, or options pertaining to any Equity Interest or Investment
Property constituting Pledged Collateral as if it were the absolute owner
thereof.

 

(iii)        Such Grantor shall be entitled to collect and receive for its own
use all cash dividends and interest paid in respect of the Pledged Collateral
owned by it to the extent not in violation of the Credit Agreement other than
any of the following distributions and payments (collectively referred to as the
“Excluded Payments”): (A) dividends and interest paid or payable other than in
cash in respect of such Pledged Collateral, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
any Pledged Collateral; (B) dividends and other distributions paid or payable in
cash in respect of such Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in capital of an issuer; and (C) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of, or in exchange
for, such Pledged Collateral; provided however, that until actually paid, all
rights to such distributions shall remain subject to the Lien created by this
Security Agreement; and

 

 12 

 

 

(iv)        All Excluded Payments and all other distributions in respect of any
of the Pledged Collateral owned by such Grantor, whenever paid or made, shall be
delivered to the Administrative Agent to hold as Pledged Collateral and shall,
if received by such Grantor, be received in trust for the benefit of the
Administrative Agent, be segregated from the other property or funds of such
Grantor, and be forthwith delivered to the Administrative Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).

 

(e)          Interests in Limited Liability Companies and Limited Partnerships.
Each Grantor agrees that no ownership interests in a limited liability company
or a limited partnership which are included within the Collateral owned by such
Grantor shall at any time constitute a Security under Article 8 of the UCC of
the applicable jurisdiction.

 

4.7.        Intellectual Property.

 

(a)          After any change to Exhibit D (or the information required to be
disclosed thereon), the applicable Grantor shall provide the Administrative
Agent notification thereof in the next compliance certificate required to be
delivered under the Credit Agreement and the respective Confirmatory Grant as
described in this Section 4.7 and any other documents that Administrative Agent
reasonably requests with respect thereto.

 

(b)          Such Grantor shall (and shall cause all its licensees to) (i) (1)
continue to use each Trademark included in the Material Intellectual Property
owned by it in order to maintain such Trademark in full force and effect with
respect to each class of goods for which such Trademark is currently used, free
from any claim of abandonment for non-use, (2) maintain at least the same
standards of quality of products and services offered under such Trademark as
are currently maintained, (3) use such Trademark with the appropriate notice of
registration and all other notices and legends required by applicable
Requirements of Law and (4) not adopt or use any other Trademark that is
confusingly similar or a colorable imitation of such Trademark unless
Administrative Agent shall obtain a perfected security interest in such other
Trademark pursuant to this Security Agreement and (ii) not do any act or omit to
do any act whereby (w) such Trademark (or any goodwill associated therewith) may
become destroyed, invalidated, impaired or harmed in any way, (x) any Patent
included in the Material Intellectual Property may become forfeited, misused,
unenforceable, abandoned or dedicated to the public, (y) any portion of the
Copyrights included in the Material Intellectual Property may become
invalidated, otherwise impaired or fall into the public domain or (z) any Trade
Secret that is Material Intellectual Property may become publicly available or
otherwise unprotectable.

 

(c)          Such Grantor shall notify the Administrative Agent immediately if
it knows, or has reason to know, that any application or registration relating
to any Patent, Trademark, Copyright, or other Material Intellectual Property
owned by it may become forfeited, misused, unenforceable, abandoned or dedicated
to the public, or of any adverse determination or development regarding the
validity or enforceability or Such Grantor’s ownership of, interest in, right to
use, register, own or maintain any Patent, Trademark, Copyright or other
Material Intellectual Property (including the institution of, or any such
determination or development in, any proceeding relating to the foregoing in any
Applicable IP Office). Such Grantor shall take all actions that are necessary or
reasonably requested by the Administrative Agent to maintain and pursue each
application (and to obtain the relevant registration or recordation) and to
maintain each registration and recordation included in the Material Intellectual
Property owned by it.

 

(d)          Such Grantor shall not knowingly do any act or omit to do any act
to infringe, misappropriate, dilute, violate or otherwise impair the
Intellectual Property of any other Person. In the event that any Material
Intellectual Property of Such Grantor is or has been infringed, misappropriated,
violated, diluted or otherwise impaired by a third party, such Grantor shall
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and shall
take such other actions as the Administrative Agent shall deem appropriate under
the circumstances to protect such Material Intellectual Property.

 

 13 

 

 

(e)          Such Grantor shall execute and deliver to the Administrative Agent
in form and substance reasonably acceptable to Agent and suitable for (i) filing
in the Applicable IP Office the respective Confirmatory Grant in form and
substance acceptable to the Administrative Agent for all Copyrights, Trademarks,
Patents and Material License Agreements of such Grantor.

 

(f)          Such Grantor shall take all actions necessary or requested by the
Administrative Agent to maintain and pursue each application, to obtain the
relevant registration and to maintain the registration of all Material
Intellectual Property owned by it (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.

 

4.8         Commercial Tort Claims. Such Grantor shall promptly, and in any
event within two Business Days after the same is acquired by it, notify the
Administrative Agent of any commercial tort claim (as defined in the UCC)
acquired by it and, unless the Administrative Agent otherwise consents, such
Grantor shall enter into an amendment to this Security Agreement, in the form of
Exhibit J hereto, granting to Administrative Agent a first priority security
interest in such commercial tort claim.

 

4.9.        Letter-of-Credit Rights. If such Grantor is or becomes the
beneficiary of a letter of credit, it shall promptly, and in any event within
two (2) Business Days after becoming a beneficiary, notify the Administrative
Agent thereof and cause the issuer and/or confirmation bank to (i) consent to
the assignment of any Letter-of-Credit Rights to the Administrative Agent and
(ii) agree to direct all payments thereunder to a Deposit Account at the
Administrative Agent or subject to a Deposit Account Control Agreement for
application to the Secured Obligations, in accordance with Section 2.18 of the
Credit Agreement, all in form and substance reasonably satisfactory to the
Administrative Agent.

 

4.10.      Federal, State or Municipal Claims. Such Grantor will promptly notify
the Administrative Agent of any Collateral which constitutes a claim against the
United States government or any state or local government or any instrumentality
or agency thereof, the assignment of which claim is restricted by federal, state
or municipal law.

 

4.11.      No Interference. Such Grantor agrees that it will not interfere with
any right, power and remedy of the Administrative Agent provided for in this
Security Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, or the exercise or beginning of the exercise by the
Administrative Agent of any one or more of such rights, powers or remedies.

 

4.12.      Insurance. (a)          In the event any Collateral is located in any
area that has been designated by the Federal Emergency Management Agency as a
“Special Flood Hazard Area”, such Grantor shall purchase and maintain flood
insurance on such Collateral (including any personal property which is located
on any real property leased by such Loan Party within a “Special Flood Hazard
Area”). The amount of flood insurance required by this Section shall be in an
amount equal to the lesser of the total Commitment or the total replacement cost
value of the improvements.

 

(b)          All insurance policies required hereunder and under Section 5.10 of
the Credit Agreement shall name the Administrative Agent (for the benefit of the
Administrative Agent and the Secured Parties) as an additional insured or as
lender’s loss payee, as applicable, and shall contain lender loss payable
clauses or mortgagee clauses, through endorsements in form and substance
reasonably satisfactory to the Administrative Agent, which provide that: (i) all
proceeds thereunder with respect to any Collateral shall be payable to the
Administrative Agent; (ii) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy; and
(iii) such policy and lender loss payable or mortgagee clauses may be canceled,
amended, or terminated only upon at least thirty (30) days prior written notice
given to the Administrative Agent.

 

 14 

 

  

(c)         All premiums on any such insurance shall be paid when due by such
Grantor, and copies of the policies delivered to the Administrative Agent. If
such Grantor fails to obtain or maintain any insurance as required by this
Section, the Administrative Agent may obtain such insurance at the Borrower’s
expense. By purchasing such insurance, the Administrative Agent shall not be
deemed to have waived any Default arising from a Grantor’s failure to maintain
such insurance or pay any premiums therefor.

 

4.13.      Collateral Access Agreements. Such Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement from the lessor of
each leased property, mortgagee of owned property or bailee or consignee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall provide
access rights, contain a waiver or subordination of all Liens or claims that the
landlord, mortgagee, bailee or consignee may assert against the Collateral at
that location, and shall otherwise be reasonably satisfactory in form and
substance to the Administrative Agent.

 

4.14.      Deposit Account Control Agreements. Such Grantor will provide to the
Administrative Agent upon the Administrative Agent’s request, a Deposit Account
Control Agreement duly executed on behalf of each financial institution holding
a deposit account of such Grantor as set forth in this Security Agreement.

 

4.15.      Change of Name or Location; Change of Fiscal Year. Such Grantor shall
not (a) change its name as it appears in official filings in the state of its
incorporation or organization, (b) change its chief executive office, principal
place of business, mailing address, corporate offices or warehouses or locations
at which Collateral is held or stored, or the location of its records concerning
the Collateral as set forth in this Security Agreement, (c) change the type of
entity that it is, (d) change its organization identification number, if any,
issued by its state of incorporation or other organization, or (e) change its
state of incorporation or organization, in each case, unless the Administrative
Agent shall have received at least thirty (30) days prior written notice of such
change and the Administrative Agent shall have acknowledged in writing that
either (1) such change will not adversely affect the validity, perfection or
priority of the Administrative Agent’s security interest in the Collateral, or
(2) any reasonable action requested by the Administrative Agent in connection
therewith has been completed or taken (including any action to continue the
perfection of any Liens in favor of the Administrative Agent, on behalf of the
Secured Parties, in any Collateral), provided that, any new location shall be in
the continental U.S. Such Grantor shall not change its fiscal year which
currently ends on December 31.

 

ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

 

5.1.        Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:

 

(a)          Any representation or warranty made by or on behalf of any Grantor
under or in connection with this Security Agreement shall be materially false as
of the date on which made.

 

(b)          Any Grantor shall fail to observe or perform any of the terms or
provisions of Article IV.

 

(c)          Any Grantor shall fail to observe or perform any of the terms or
provisions of this Security Agreement (other than a breach which constitutes an
Event of Default under any other Section of this Article V), and such failure
shall continue unremedied for a period of ten (10) days after the earlier of
knowledge of such breach or notice thereof from the Administrative Agent.

 

 15 

 

 

(d)          The occurrence of any “Event of Default” under, and as defined in,
the Credit Agreement.

 

(e)          Any Equity Interest which is included within the Collateral shall
at any time constitute a Security or the issuer of any such Equity Interest
shall take any action to have such interests treated as a Security unless (i)
all certificates or other documents constituting such Security have been
delivered to the Administrative Agent and such Security is properly defined as
such under Article 8 of the UCC of the applicable jurisdiction, whether as a
result of actions by the issuer thereof or otherwise, or (ii) the Administrative
Agent has entered into a control agreement with the issuer of such Security or
with a securities intermediary relating to such Security and such Security is
defined as such under Article 8 of the UCC of the applicable jurisdiction,
whether as a result of actions by the issuer thereof or otherwise.

 

5.2.      Remedies.

 

(a)          Upon the occurrence of an Event of Default, the Administrative
Agent may exercise any or all of the following rights and remedies:

 

(i)          those rights and remedies provided in this Security Agreement, the
Credit Agreement, or any other Loan Document; provided that, this Section 5.2(a)
shall not be understood to limit any rights or remedies available to the
Administrative Agent and the other Secured Parties prior to an Event of Default;

 

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

 

(iii)        give notice of sole control or any other instruction under any
Deposit Account Control Agreement or any other control agreement with any
securities intermediary and take any action therein with respect to such
Collateral;

 

(iv)       without notice (except as specifically provided in Section 8.1 or
elsewhere herein), demand or advertisement of any kind to any Grantor or any
other Person, enter the premises of any Grantor where any Collateral is located
(through self-help and without judicial process) to collect, receive, assemble,
process, appropriate, sell, lease, assign, grant an option or options to
purchase or otherwise dispose of, deliver, or realize upon, the Collateral or
any part thereof in one or more parcels at public or private sale or sales
(which sales may be adjourned or continued from time to time with or without
notice and may take place at any Grantor’s premises or elsewhere), for cash, on
credit or for future delivery without assumption of any credit risk, and upon
such other terms as the Administrative Agent may deem commercially reasonable;
and

 

(v)        concurrently with written notice to the applicable Grantor, transfer
and register in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations, exercise the voting and all other rights as a holder with
respect thereto, to collect and receive all cash dividends, interest, principal
and other distributions made thereon and to otherwise act with respect to the
Pledged Collateral as though the Administrative Agent was the outright owner
thereof.

 

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

 

 16 

 

 

(c)          The Administrative Agent shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase for the benefit of the Administrative Agent and the other
Secured Parties, the whole or any part of the Collateral so sold, free of any
right of equity redemption, which equity redemption the Grantor hereby expressly
releases.

 

(d)          Until the Administrative Agent is able to effect a sale, lease, or
other disposition of Collateral, the Administrative Agent shall have the right
to hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by the Administrative Agent. The Administrative
Agent may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of the Administrative Agent’s
remedies (for the benefit of the Administrative Agent and the other Secured
Parties), with respect to such appointment without prior notice or hearing as to
such appointment.

 

(e)          If, after the Credit Agreement has terminated by its terms and all
of the Obligations have been Paid in Full, there remain Swap Agreement
Obligations outstanding, the Required Lenders may exercise the remedies provided
in this Section 5.2 upon the occurrence of any event which would allow or
require the termination or acceleration of any Swap Agreement Obligations
pursuant to the terms of the Swap Agreement.

 

(f)          Notwithstanding the foregoing, neither the Administrative Agent nor
any other Secured Party shall be required to (i) make any demand upon, or pursue
or exhaust any of its rights or remedies against, any Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of
the Secured Obligations or to pursue or exhaust any of its rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee
thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations
or to resort to the Collateral or any such guarantee in any particular order, or
(iii) effect a public sale of any Collateral.

 

(g)          Each Grantor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof in accordance with
clause (a) above. Each Grantor also acknowledges that any private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit any Grantor or the
issuer of the Pledged Collateral to register such securities for public sale
under the Securities Act of 1933, as amended, or under applicable state
securities laws, even if the applicable Grantor and the issuer would agree to do
so.

 

5.3.       Grantor’s Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence of a Default, each Grantor will:

 

(a)          assemble and make available to the Administrative Agent the
Collateral and all books and records relating thereto at any place or places
specified by the Administrative Agent, whether at a Grantor’s premises or
elsewhere;

 

(b)          permit the Administrative Agent, by the Administrative Agent’s
representatives and agents, to enter, occupy and use any premises where all or
any part of the Collateral, or the books and records relating thereto, or both,
are located, to take possession of all or any part of the Collateral or the
books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct
sales of the Collateral, without any obligation to pay the Grantor for such use
and occupancy;

 

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(c)          prepare and file, or cause an issuer of Pledged Collateral to
prepare and file, with the Securities and Exchange Commission or any other
applicable government agency, registration statements, a prospectus and such
other documentation in connection with the Pledged Collateral as the
Administrative Agent may request, all in form and substance satisfactory to the
Administrative Agent, and furnish to the Administrative Agent, or cause an
issuer of Pledged Collateral to furnish to the Administrative Agent, any
information regarding the Pledged Collateral in such detail as the
Administrative Agent may specify;

 

(d)          take, or cause an issuer of Pledged Collateral to take, any and all
actions necessary to register or qualify the Pledged Collateral to enable the
Administrative Agent to consummate a public sale or other disposition of the
Pledged Collateral; and

 

(e)          at its own expense, cause the independent certified public
accountants then engaged by each Grantor to prepare and deliver to the
Administrative Agent and each Lender, at any time, and from time to time,
promptly upon the Administrative Agent’s request, the following reports with
respect to the applicable Grantor: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) a test verification of
such Accounts.

 

5.4.        Grant of Intellectual Property License. For the purpose of enabling
the Administrative Agent to exercise the rights and remedies under this Article
V at such time as the Administrative Agent shall be lawfully entitled to
exercise such rights and remedies (including in order to take possession of,
collect, receive, assemble, process, appropriate, remove, realize upon, sell,
assign, convey, transfer or grant options to purchase any Collateral), each
Grantor hereby (a) grants to the Administrative Agent, for the benefit of the
Administrative Agent and the other Secured Parties, an irrevocable, nonexclusive
worldwide license (exercisable without payment of royalty or other compensation
to any Grantor), including in such license the right to use, license, sublicense
or practice any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer Software and programs used for the compilation or printout
thereof and (b) irrevocably agrees that the Administrative Agent may sell any of
such Grantor’s Inventory directly to any person, including without limitation
persons who have previously purchased the Grantor’s Inventory from such Grantor
and in connection with any such sale or other enforcement of the Administrative
Agent’s rights under this Security Agreement, may sell Inventory which bears any
Trademark owned by or licensed to such Grantor and any Inventory that is covered
by any Copyright owned by or licensed to such Grantor and the Administrative
Agent may (but shall have no obligation to) finish any work in process and affix
any Trademark owned by or licensed to such Grantor and sell such Inventory as
provided herein.

 

ARTICLE VI

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

 

6.1.        Account Verification. The Administrative Agent may at any time after
the occurrence of an Event of Default, in the Administrative Agent’s own name,
in the name of a nominee of the Administrative Agent, or in the name of any
Grantor communicate (by mail, telephone, facsimile or otherwise) with the
Account Debtors of any such Grantor, parties to contracts with any such Grantor
and obligors in respect of Instruments of any such Grantor to verify with such
Persons, to the Administrative Agent’s satisfaction, the existence, amount,
terms of, and any other matter relating to, Accounts, Instruments, Chattel
Paper, payment intangibles and/or other Receivables.

 

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6.2.        Authorization for Administrative Agent to Take Certain Action.

 

(a)          Each Grantor irrevocably authorizes the Administrative Agent at any
time and from time to time in the sole discretion of the Administrative Agent
and appoints the Administrative Agent as its attorney-in-fact (i) to endorse and
collect any cash proceeds of the Collateral, (ii) to file any financing
statement with respect to the Collateral and to file any other financing
statement or amendment of a financing statement (which does not add new
collateral or add a debtor) in such offices as the Administrative Agent in its
sole discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the Administrative Agent’s security interest in the
Collateral, (iii) in the case of any Intellectual Property owned by or licensed
to a Grantor, execute, deliver and have recorded any document that the
Administrative Agent may request to evidence, effect, publicize or record the
Administrative Agent’s security interest in such Intellectual Property and the
goodwill and General Intangibles of such Grantor relating thereto or represented
thereby, (vi) to contact and enter into one or more agreements with the issuers
of uncertificated securities which are Pledged Collateral or with securities
intermediaries holding Pledged Collateral as may be necessary or advisable to
give the Administrative Agent Control over such Pledged Collateral, (v) to
discharge past due taxes, assessments, charges, fees or Liens on the Collateral
(except for such Liens that are permitted under Section 6.02 of the Credit
Agreement), (vi) to contact Account Debtors for any reason, (vii) to demand
payment or enforce payment of the Receivables in the name of the Administrative
Agent or such Grantor and to endorse any and all checks, drafts, and other
instruments for the payment of money relating to the Receivables, (viii) to sign
such Grantor’s name on any invoice or bill of lading relating to the
Receivables, drafts against any Account Debtor of the Grantor, assignments and
verifications of Receivables, (ix) to exercise all of such Grantor’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral, (x) to settle, adjust, compromise, extend or renew the Receivables,
(xi) to settle, adjust or compromise any legal proceedings brought to collect
Receivables, (xii) to prepare, file and sign such Grantor’s name on a proof of
claim in bankruptcy or similar document against any Account Debtor of such
Grantor, (xiii) to prepare, file and sign such Grantor’s name on any notice of
Lien, assignment or satisfaction of Lien or similar document in connection with
the Receivables, (xiv) to change the address for delivery of mail addressed to
such Grantor to such address as the Administrative Agent may designate and to
receive, open and dispose of all mail addressed to such Grantor, and (xv) to do
all other acts and things necessary to carry out this Security Agreement; and
such Grantor agrees to reimburse the Administrative Agent on demand for any
payment made or any expense incurred by the Administrative Agent in connection
with any of the foregoing; provided that, this authorization shall not relieve
such Grantor of any of its obligations under this Security Agreement or under
the Credit Agreement.

 

(b)          All acts of said attorney or designee are hereby ratified and
approved. The powers conferred on the Administrative Agent, for the benefit of
the Administrative Agent and Secured Parties, under this Section 6.2 are solely
to protect the Administrative Agent’s interests in the Collateral and shall not
impose any duty upon the Administrative Agent or any other Secured Party to
exercise any such powers. The Administrative Agent agrees that, except for the
powers granted in Section 6.2(a)(i)-(v) and Section 6.2(a)(xv), it shall not
exercise any power or authority granted to it unless an Event of Default has
occurred and is continuing. Notwithstanding anything herein to the contrary, no
attorney acting pursuant to the authority granted herein shall have any
authority to confess judgment on behalf of a Grantor.

 

6.3.        Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
ADMINISTRATIVE AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION
6.2 ABOVE) OF THE GRANTOR WITH RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE
RIGHT TO VOTE SUCH PLEDGED COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO.
IN ADDITION TO THE RIGHT TO VOTE ANY SUCH PLEDGED COLLATERAL, THE APPOINTMENT OF
THE ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT
TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER
OF SUCH PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING
WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND
VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND
WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED
COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING
THE ISSUER OF SUCH PLEDGED COLLATERAL OR ANY OFFICER OR AGENT THEREOF), UPON THE
OCCURRENCE OF A DEFAULT.

 

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6.4.        Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE
ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 7.14. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, NONE OF THE ADMINISTRATIVE AGENT, ANY LENDER, ANY
OTHER SECURED PARTY, ANY OF THEIR RESPECTIVE AFFILIATES, OR ANY OF THEIR OR
THEIR AFFILIATES’ RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED
HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO SUCH PARTY’S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO
EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.

 

ARTICLE VII

GENERAL PROVISIONS

 

7.1         Waivers. Each Grantor hereby waives notice of the time and place of
any public sale or the time after which any private sale or other disposition of
all or any part of the Collateral may be made. To the extent such notice may not
be waived under applicable law, any notice made shall be deemed reasonable if
sent to Grantors, addressed as set forth in Article IX, at least ten days prior
to (i) the date of any such public sale or (ii) the time after which any such
private sale or other disposition may be made. To the maximum extent permitted
by applicable law, each Grantor waives all claims, damages, and demands against
the Administrative Agent or any Secured Party arising out of the repossession,
retention or sale of the Collateral, except such as arise solely out of the
gross negligence or willful misconduct of the Administrative Agent or such
Secured Party as finally determined by a court of competent jurisdiction. To the
extent it may lawfully do so, each Grantor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
the Administrative Agent or any other Secured Party, any valuation, stay,
appraisal, extension, moratorium, redemption or similar laws and any and all
rights or defenses it may have as a surety now or hereafter existing which, but
for this provision, might be applicable to the sale of any Collateral made under
the judgment, order or decree of any court, or privately under the power of sale
conferred by this Security Agreement, or otherwise. Except as otherwise
specifically provided herein, each Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Security Agreement or any Collateral.

 

7.2.        Limitation on Administrative Agent’s and Secured Parties’ Duty with
Respect to the Collateral. The Administrative Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Administrative Agent
and each other Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither the Administrative
Agent nor any other Secured Party shall have any other duty as to any Collateral
in its possession or control or in the possession or control of any agent or
nominee of the Administrative Agent or such other Secured Party, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. To the extent that applicable law imposes duties on
the Administrative Agent to exercise remedies in a commercially reasonable
manner, each Grantor acknowledges and agrees that it is commercially reasonable
for the Administrative Agent (i) to fail to incur expenses deemed significant by
the Administrative Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other finished
products for disposition, (ii) 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, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) 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, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as such Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Administrative Agent, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. The Grantor acknowledges that the purpose
of this Section 7.2 is to provide non-exhaustive indications of what actions or
omissions by the Administrative Agent would be commercially reasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 7.2. Without limitation upon the foregoing, nothing contained in this
Section 7.2 shall be construed to grant any rights to the Grantor or to impose
any duties on the Administrative Agent that would not have been granted or
imposed by this Security Agreement or by applicable law in the absence of this
Section 7.2.

 

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

 

7.4.        Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to perform or pay in this Security Agreement and
the Grantors shall reimburse the Administrative Agent for any amounts paid by
the Administrative Agent pursuant to this Section 7.4. The Grantors’ obligation
to reimburse the Administrative Agent pursuant to the preceding sentence shall
be a Secured Obligation payable on demand.

 

7.5         Specific Performance of Certain Covenants. Each Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1(d),
4.1(e), 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 4.13, 4.14, 4.15, 5.3, or 7.7
will cause irreparable injury to the Administrative Agent and the other Secured
Parties, that the Administrative Agent and the other Secured Parties have no
adequate remedy at law in respect of such breaches and therefore agrees, without
limiting the right of the Administrative Agent or the other Secured Parties to
seek and obtain specific performance of other obligations of the Grantors
contained in this Security Agreement, that the covenants of the Grantors
contained in the Sections referred to in this Section 7.5 shall be specifically
enforceable against the Grantors.

 

7.6.        Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(d) and
notwithstanding any course of dealing between any Grantor and the Administrative
Agent or other conduct of the Administrative Agent, no authorization to sell or
otherwise dispose of the Collateral (except as set forth in Section 4.1(d))
shall be binding upon the Administrative Agent or the other Secured Parties
unless such authorization is in writing signed by the Administrative Agent with
the consent or at the direction of the Required Lenders.

 

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7.7.        No Waiver; Amendments; Cumulative Remedies. No failure or delay by
the Administrative Agent or any other Secured Party in exercising any right or
power under this Security Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent and the other Secured Parties hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Security Agreement or consent
to any departure by the Grantor therefrom shall in any event be effective unless
in writing signed by the Administrative Agent with the concurrence or at the
direction of the Lenders required under Section 9.02 of the Credit Agreement and
then only to the extent in such writing specifically set forth.

 

7.8.        Limitation by Law; Severability of Provisions. All rights, remedies
and powers provided in this Security Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law, and all the provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this
Security Agreement invalid, unenforceable or not entitled to be recorded or
registered, in whole or in part. Any provision in this Security Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction, and to this end the provisions of this Security Agreement are
declared to be severable..

 

7.9         Reinstatement. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof (including a payment effected through exercise of a right of
setoff), is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise
(including pursuant to any settlement entered into by a Secured Party in its
reasonable discretion), all as though such payment or performance had not been
made. In the event that any payment, or any part thereof (including a payment
effected through exercise of a right of setoff), is rescinded, reduced, restored
or returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.

 

7.10.      Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the other Secured Parties and their respective
successors and assigns (including all persons who become bound as a debtor to
this Security Agreement), except that no Grantor shall have the right to assign
its rights or delegate its obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent.
No sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to the Administrative Agent,
for the benefit of the Administrative Agent and the other Secured Parties,
hereunder.

 

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

 

7.12.      Taxes and Expenses. Any taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security
Agreement shall be paid by the Grantors, together with interest and penalties,
if any. The Grantors shall reimburse the Administrative Agent for any and all
out-of-pocket expenses and internal charges (including reasonable attorneys’,
auditors’ and accountants’ fees and reasonable time charges of attorneys,
paralegals, auditors and accountants who may be employees of the Administrative
Agent) paid or incurred by the Administrative Agent in connection with the
preparation, execution, delivery, administration, collection and enforcement of
this Security Agreement and, to the extent provided in the Credit Agreement in
the audit, analysis, administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated with any periodic or
special audit of the Collateral). Any and all costs and expenses incurred by the
Grantors in the performance of actions required pursuant to the terms hereof
shall be borne solely by the Grantors.

 

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

 

7.14.      Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been Paid in
Full.

 

7.15.      Entire Agreement/Amendment and Restatement. This Security Agreement
and the other Loan Documents embody the entire agreement and understanding
between the Grantors and the Administrative Agent relating to the Collateral and
supersedes all prior agreements and understandings between the Grantors and the
Administrative Agent relating to the Collateral. If a Grantor has an existing
Pledge and Security Agreement in favor of the Administrative Agent securing the
Secured Obligations, this Security Agreement amends and, as so amended, restates
and replaces in its entirety such Pledge and Security Agreement from such
Grantor in favor of the Administrative Agent.

 

7.16.     CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF INDIANA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.

 

7.17.      CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR
INDIANA STATE COURT SITTING IN INDIANAPOLIS, INDIANA IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH GRANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER
TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE ADMINISTRATIVE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN INDIANAPOLIS, INDIANA.

 

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7.18.      WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OR OTHER AGENT (INCLUDING ANY
ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

7.19.      Indemnity. Each Grantor hereby agrees to indemnify the Administrative
Agent and the other Secured Parties, and their respective successors, assigns,
agents and employees, from and against any and all liabilities, damages,
penalties, suits, fees, costs, and expenses of any kind and nature (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Administrative Agent or any Secured Party is a party thereto) imposed
on, incurred by or asserted against the Administrative Agent or the other
Secured Parties, or their respective successors, assigns, agents and employees,
in any way relating to or arising out of this Security Agreement, or the
manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other defects, whether or
not discoverable by the Administrative Agent or the other Secured Parties or any
Grantor, and any claim for Patent, Trademark or Copyright infringement).

 

7.20.      Counterparts. This Security Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Security Agreement by signing any
such counterpart. Delivery of an executed counterpart of a signature page of
this Security Agreement by facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this Security
Agreement.

 

ARTICLE VIII

NOTICES

 

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

 

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

 

ARTICLE IX

THE ADMINISTRATIVE AGENT

 

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

 

[Signature Page Follows]

 

 24 

 

 

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

 

  GRANTORS:       ESCALADE, INCORPORATED       By: /s/ Stephen R. Wawrin   Name:
Stephen R. Wawrin   Title: Chief Financial Officer       INDIAN INDUSTRIES, INC.
      By: /s/ Stephen R. Wawrin   Name: Stephen R. Wawrin   Title: Chief
Financial Officer       BEAR ARCHERY, INC.       By: /s/ Stephen R. Wawrin  
Name: Stephen R. Wawrin   Title: Chief Financial Officer       EIM COMPANY, INC.
      By: /s/ Stephen R. Wawrin   Name: Stephen R. Wawrin   Title: Chief
Financial Officer       ESCALADE INSURANCE, INC.       By: /s/ Stephen R. Wawrin
  Name: Stephen R. Wawrin   Title: Chief Financial Officer       ESCALADE SPORTS
PLAYGROUND, INC.       By: /s/ Stephen R. Wawrin   Name: Stephen R. Wawrin  
Title: Chief Financial Officer       HARVARD SPORTS, INC.       By: /s/ Stephen
R. Wawrin   Name: Stephen R. Wawrin   Title: Chief Financial Officer

 

 

 

  

  SOP SERVICES, INC.       By: /s/ Stephen R. Wawrin   Name: Stephen R. Wawrin  
Title: Chief Financial Officer       U.S. WEIGHT, INC.       By: /s/ Stephen R.
Wawrin   Name: Stephen R. Wawrin   Title: Chief Financial Officer       WEDCOR
HOLDINGS, INC.       By: /s/ Stephen R. Wawrin   Name: Stephen R. Wawrin  
Title: Chief Financial Officer       GOALSETTER SYSTEMS, INC.       By: /s/
Stephen R. Wawrin   Name: Stephen R. Wawrin   Title: Chief Financial Officer    
  LIFELINE PRODUCTS, LLC       By: /s/ Stephen R. Wawrin   Name: Stephen R.
Wawrin   Title: Chief Financial Officer       VICTORY MADE, LLC       By: /s/
Stephen R. Wawrin   Name: Stephen R. Wawrin   Title: Chief Financial Officer    
  VICTORY TAILGATE, LLC       By: /s/ Stephen R. Wawrin   Name: Stephen R.
Wawrin   Title: Chief Financial Officer       ADMINISTRATIVE AGENT:      
JPMORGAN CHASE BANK, N.A.,    as Administrative Agent       By: /s/ Thomas W.
Harrison   Name: Thomas W. Harrison  

Title:

Executive Director

 2 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Escalade, Incorporated, an
Indiana corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Indian Industries, Inc., an
Indiana corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 3 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Wedcor Holding, Inc., an
Indiana corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Goalsetter Systems, Inc., an
Iowa corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 4 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of U.S. Weight, Inc., an Illinois
corporation, who acknowledged execution of the foregoing Pledge and Security
Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Harvard Sports, Inc., a
California corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 5 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Bear Archery, Inc., a Florida
corporation, who acknowledged execution of the foregoing Pledge and Security
Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Escalade Sports Playground,
Inc., a North Carolina corporation, who acknowledged execution of the foregoing
Pledge and Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 6 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Lifeline Products, LLC, an
Illinois limited liability company, who acknowledged execution of the foregoing
Pledge and Security Agreement on behalf of such limited liability company.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of EIM Company, Inc., a Nevada
corporation, who acknowledged execution of the foregoing Pledge and Security
Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 7 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of SOP Services, Inc., a Nevada
corporation, who acknowledged execution of the foregoing Pledge and Security
Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Escalade Insurance, Inc., a
Nevada corporation, who acknowledged execution of the foregoing Pledge and
Security Agreement on behalf of such corporation.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 8 

 

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Victory Made, LLC, a Florida
limited liability company, who acknowledged execution of the foregoing Pledge
and Security Agreement on behalf of such limited liability company.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

STATE OF INDIANA )     ) SS: COUNTY OF VANDERBURGH )  

 

Before me, a Notary Public in and for said County and State, personally appeared
Stephen R. Wawrin, the Chief Financial Officer of Victory Tailgate, LLC, a
Florida limited liability company, who acknowledged execution of the foregoing
Pledge and Security Agreement on behalf of such limited liability company.

 

WITNESS my hand and notarial seal this 21st day of January, 2019.

 

My Commission Expires     May 7, 2020   /s/Notary’s Signature     Notary Public
      County of Residence   Notary’s Name Vanderburgh   Name Printed

 

 9