exv10w3






Exhibit 10.3




EXECUTION VERSION




 




SECURITY AGREEMENT



Dated as of January 28, 2011



among



SCORPIO MERGER SUB CORPORATION

(to be merged with and into POLYMER GROUP, INC.)



SCORPIO ACQUISITION CORPORATION,



CERTAIN OTHER SUBSIDIARIES OF SCORPIO ACQUISITION CORPORATION

IDENTIFIED HEREIN

and



CITIBANK, N.A.,

as COLLATERAL AGENT



 




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I

	 
	 	 	 	 
	Definitions

	 
	 	 	 	 
	Section 1.01 Definitions
	 	 	1	 
	Section 1.02 Other Defined Terms
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II

	 
	 	 	 	 
	Pledge of Securities

	Section 2.01 Pledge
	 	 	7	 
	Section 2.02 Delivery of the Pledged Collateral
	 	 	8	 
	Section 2.03 Representations, Warranties and Covenants
	 	 	9	 
	Section 2.04 Certification of Limited Liability Company and Limited Partnership Interests
	 	 	11	 
	Section 2.05 Registration in Nominee Name; Denominations
	 	 	11	 
	Section 2.06 Voting Rights; Dividends and Interest
	 	 	11	 
	Section 2.07 Collateral Agent Not a Partner or Limited Liability Company Member
	 	 	13	 
	 
	 	 	 	 
	ARTICLE III

	 
	 	 	 	 
	Security Interests in Personal Property

	 
	 	 	 	 
	Section 3.01 Security Interest
	 	 	14	 
	Section 3.02 Representations and Warranties
	 	 	16	 
	Section 3.03 Covenants
	 	 	18	 
	Section 3.04 Other Actions
	 	 	19	 
	 
	 	 	 	 
	ARTICLE IV

	 
	 	 	 	 
	Special Provisions Concerning Intellectual Property Collateral

	 
	 	 	 	 
	Section 4.01 Grant of License to Use Intellectual Property
	 	 	21	 
	Section 4.02 Protection of Collateral Agent’s Security
	 	 	22	 






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	 	 	Page	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	Collections
	 	 	 	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	Remedies
	 	 	 	 
	 
	 	 	 	 
	Section 6.01 Remedies Upon Default
	 	 	23	 
	Section 6.02 Application of Proceeds
	 	 	26	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	Indemnity, Subrogation and Subordination
	 	 	 	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	Miscellaneous
	 	 	 	 
	 
	 	 	 	 
	Section 8.01 Notices
	 	 	27	 
	Section 8.02 Waivers; Amendment
	 	 	27	 
	Section 8.03 Collateral Agent’s Fees and Expenses; Indemnification
	 	 	28	 
	Section 8.04 Successors and Assigns
	 	 	29	 
	Section 8.05 Survival of Agreement
	 	 	29	 
	Section 8.06 Counterparts; Effectiveness; Several Agreement
	 	 	29	 
	Section 8.07 Severability
	 	 	29	 
	Section 8.08 Right of Set-Off
	 	 	30	 
	Section 8.09 GOVERNING LAW
	 	 	30	 
	Section 8.10 WAIVER OF RIGHT TO TRIAL BY JURY
	 	 	30	 
	Section 8.11 Headings
	 	 	31	 
	Section 8.12 Security Interest Absolute
	 	 	31	 
	Section 8.13 Termination or Release
	 	 	31	 
	Section 8.14 Additional Guarantors
	 	 	32	 
	Section 8.15 Collateral Agent Appointed Attorney-in-Fact
	 	 	32	 
	Section 8.16 Recourse; Limited Obligations
	 	 	33	 
	Section 8.17 Mortgages
	 	 	33	 
	Section 8.18 Intercreditor Agreement
	 	 	33	 






SCHEDULES




	 	 	 

	Schedule I -

	 	Borrowers
	Schedule II -

	 	Guarantors
	Schedule III -

	 	Pledged Equity; Pledged Debt
	Schedule IV -

	 	Commercial Tort Claims
	Schedule V -

	 	Intellectual Property






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	EXHIBITS
	 	 
	 
	 	 
	Exhibit A -

	 	Form of Security Agreement Supplement
	Exhibit B -

	 	Form of Perfection Certificate
	Exhibit C -

	 	Form of Grant of Security Interest in Trademarks
	Exhibit D -

	 	Form of Grant of Security Interest in Patents
	Exhibit E -

	 	Form of Grant of Security Interest in Copyrights






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          SECURITY AGREEMENT (as amended, supplemented, restated or otherwise modified from time
to time pursuant to the terms hereof, this “Agreement”) is entered into as of January 28,
2011 by and among SCORPIO MERGER SUB CORPORATION (prior to the Merger (as defined below), the
“Lead Borrower”), a Delaware corporation to be merged (the “Merger”) with and into
POLYMER GROUP, INC., a Delaware corporation (upon and after the Merger, the “Lead
Borrower”), the other Borrowers set forth on Schedule I hereto (together with the Lead
Borrower, collectively, the “Borrowers”), SCORPIO ACQUISITION CORPORATION, a Delaware
corporation (“Holdings”), the Guarantors set forth on Schedule II hereto (together
with the Borrowers and Holdings, collectively, the “Grantors”), and CITIBANK, N.A., as
Administrative Agent and Collateral Agent (in such capacity, the “Collateral Agent”) for
the Secured Parties. Capitalized terms used herein and defined in Article I are used
herein as therein defined.



          Reference is made to the Credit Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among
the Borrowers, Holdings, the Collateral Agent, the other agents listed therein and the Lenders from
time to time party thereto.



          The Lenders have agreed to extend credit to the Borrowers, subject to the terms and conditions
set forth in the Credit Agreement, and each L/C Issuer has agreed to issue Letters of Credit for
the account of the Borrowers on the terms and conditions set forth therein. The obligations of the
Lenders to extend such credit, and the obligation of each L/C Issuer to issue Letters of Credit,
are, in each case, conditioned upon, among other things, the execution and delivery of this
Agreement by each of the Grantors. The Grantors are affiliates of one another, are an integral
part of a consolidated enterprise and will derive substantial direct and indirect benefits from (a)
the extensions of credit to the Borrowers pursuant to the Credit Agreement and (b) the issuance of
Letters of Credit by each L/C Issuer for the account of the Borrowers, and are willing to execute
and deliver this Agreement in order to induce the Lenders to extend such credit and each L/C Issuer
to issue such Letters of Credit. Accordingly, the parties hereto agree as follows:



ARTICLE I




Definitions



          Section 1.01 Definitions.



          (a) Capitalized terms used in this Agreement and not otherwise defined herein have the
meanings specified in the Credit Agreement. Unless otherwise defined in the Credit Agreement, all
terms defined in the UCC and used but not defined in this Agreement have the meanings specified in
the UCC; the term “instrument” shall have the meaning specified in Article 9 of the UCC.



          (b) The rules of construction specified in Article I of the Credit Agreement also apply to
this Agreement.



 









 





          Section 1.02 Other Defined Terms. As used in this Agreement, the following terms have the meanings
specified below:



          “Agreement” has the meaning assigned to such term in the preamble.



          “Article 9 Collateral” has the meaning assigned to such term in Section
3.01(a).



          “Bankruptcy Event of Default” means any Event of Default under Sections 8.01(f) or (g)
of the Credit Agreement; provided that for the purposes of this Agreement only and
notwithstanding Section 8.03 of the Credit Agreement, in determining whether such an Event of
Default has occurred, any reference in any such clause to any Restricted Subsidiary or Loan Party
shall be deemed not to include (i) any Subsidiary that is not a Material Subsidiary affected by any
event or circumstances referred to in any such clause (it being agreed that all such Restricted
Subsidiaries affected by any event or circumstance referred to in any such clause shall be
considered together, as a single consolidated Restricted Subsidiary, for purposes of determining
whether they constitute Material Subsidiaries) nor (ii) any Restricted Subsidiary that is not a
Loan Party affected by any event or circumstances referred to in any such clause.



          “Collateral” means, collectively, the Article 9 Collateral and the Pledged Collateral.



          “Collateral Account” means any cash collateral account established pursuant to, or in
connection with, any Loan Document, which cash collateral account shall be maintained with, and
under the sole dominion and control of, the Collateral Agent for the benefit of the relevant
Secured Parties.



          “Collateral Agent” has the meaning assigned to such term in the preamble.



          “Copyright License” means any written agreement, now or hereafter in effect, granting
any right to any third party under any Copyright now or hereafter owned by any Grantor or that such
Grantor otherwise has the right to license, or granting any right to any Grantor under any
Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such
agreement.



          “Copyrights” means all of the following now owned or hereafter acquired by or assigned
to any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United
States or any other country, whether as author, assignee, transferee or otherwise, whether
registered or unregistered and whether published or unpublished, (b) all registrations and
applications for registration of any such copyright in the United States or any other country,
including registrations, supplemental registrations and pending applications for registration in
the United States Copyright Office, including those copyright registrations and applications listed
on Schedule V and (c) all (i) rights and privileges arising under applicable Law with
respect to such Grantor’s use of such copyrights, (ii) renewals and extensions thereof and
amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter
due and/or payable with respect thereto, including damages and payments for past, present or future
Infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue
for past, present or future Infringements thereof.



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          “Credit Agreement” has the meaning assigned to such term in the preamble.



          “Deposit Account Control Agreement” means, with respect to a Dominion Account, a
deposit account control agreement reasonably satisfactory in form and substance to the Collateral
Agent, among one or more Loan Parties, the Collateral Agent and the bank which maintains the
Dominion Account.



          “Domain Names” means all Internet domain names and associated URL addresses in or to
which any Grantor now or hereafter has any right, title or interest.



          “Domestic Restricted Subsidiary” means any Restricted Subsidiary that is organized or
existing under the laws of the United States, any state thereof, or the District of Columbia other
than any such Restricted Subsidiary that is a Subsidiary of a Foreign Subsidiary that is a
“controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code of
1986, as amended; provided that the Lead Borrower shall in all cases be deemed a Domestic
Restricted Subsidiary.



          “Equipment” means (x) any “equipment” as such term is defined in Article 9 of the UCC
and in any event, shall include, but shall not be limited to, all machinery, equipment,
furnishings, appliances, furniture, fixtures, tools, and vehicles now or hereafter owned by any
Grantor in each case, regardless of whether characterized as equipment under the UCC (but excluding
any such items which constitute Inventory) and (y) any and all additions, substitutions and
replacements of any of the foregoing and all accessions thereto, wherever located, whether or not
at any time of determination incorporated or installed therein or attached thereto, and all
replacements therefor, together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.



          “Equipment Lease Agreement” means, collectively, that certain equipment lease
agreement, dated June 24, 2010, between Chicopee, Inc. and Gossamer Holdings, LLC, and the related
construction agency agreement, guarantees and other documentation, as amended and/or restated from
time to time.



          “Excluded Accounts” means (i) accounts, the funds in which are specifically and
exclusively used for the payment of payroll, salaries and wages, workers’ compensation, benefits
and similar expenses or taxes, including for withholding income taxes and federal, state or local
employment taxes or in escrow accounts or trust for third parties (other than another Grantor),
(ii) accounts the funds in which are specifically and exclusively required to be paid over to an
employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of
employees of one or more Grantors, (iii) accounts, the funds in which are used solely in connection
with Factoring Agreements and (iv) accounts the balance of which consists solely of Uncontrolled
Cash.



          “Excluded Contract” means at any date any rights or interest of any Grantor in any
assets or under any agreement, contract, license, instrument, document or other general intangible
(referred to solely for purposes of this definition as a “Contract”) to the extent that such
Contract by the terms of a restriction in favor of a Person who is not any Grantor, or any
requirement of law, prohibits, or requires any consent or establishes any other condition for or



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would terminate because of an assignment thereof or a grant of a security interest therein by a
Grantor; provided that: (i) rights under any such Contract otherwise constituting an Excluded
Contract by virtue of this definition shall be included in the Collateral to the extent permitted
thereby or by Section 9-406 or Section 9-408 of the UCC and (ii) all proceeds paid or payable to
any Grantor from any sale, transfer or assignment of such Contract and all rights to receive such
proceeds shall be included in the Collateral. For the avoidance of doubt, the Equipment Lease
Agreement and all assets subject thereto shall constitute an “Excluded Contract”.



          “Excluded Equipment” means at any date any equipment or other assets of any Grantor
which is subject to, or secured by, a Capitalized Lease Obligation or a purchase money obligation
if and to the extent that (i) a restriction in favor of a Person who is not Holdings or a
Subsidiary thereof contained in the agreements or documents granting or governing such Capitalized
Lease Obligation or purchase money obligation prohibits, or requires any consent or establishes any
other conditions for or would result in the termination of such agreement or document because of an
assignment thereof, or a grant of a security interest therein, by a Grantor and (ii) such
restriction relates only to the asset or assets acquired by a Grantor with the proceeds of such
Capitalized Lease Obligation or purchase money obligation and attachments thereto, improvements
thereof or substitutions therefor; provided that all proceeds paid or payable to any Grantor from
any sale, transfer or assignment or other voluntary or involuntary disposition of such assets and
all rights to receive such proceeds shall be included in the Collateral to the extent not otherwise
required to be paid to the holder of any Capitalized Lease Obligations or purchase money
obligations secured by such assets.



          “Excluded Equity Interests” has the meaning assigned to such term in Section 2.01.



          “Foreign Factoring Agreements” means factoring arrangements made for the factoring of
Accounts held by Foreign Subsidiaries.



          “General Intangibles” has the meaning provided in Article 9 of the UCC and shall in
any event include all choses in action and causes of action and all other intangible personal
property of every kind and nature (other than Accounts) now owned or hereafter acquired by any
Grantor, as the case may be, including corporate or other business records, indemnification claims,
contract rights (including rights under leases, whether entered into as lessor or lessee, Swap
Contracts and other agreements), goodwill, registrations, franchises, tax refund claims and any
letter of credit, guarantee, claim, security interest or other security held by or granted to any
Grantor.



          “Grant of Security Interest” means a Grant of Security Interest in certain
Intellectual Property in the form of Exhibit C, D or E attached hereto.



          “Grantors” has the meaning assigned to such term in the preamble.



          “Holdings” has the meaning assigned to such term in the preamble.



          “Infringement” means infringement, misappropriation, dilution, tarnishment, impairment
or other violation.



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          “Intellectual Property” means all intellectual and similar property of every kind and
nature now owned or hereafter acquired by any Grantor, including (a) inventions, designs, Domain
Names, Patents, Copyrights, Licenses, Trademarks, trade secrets, and (b) confidential or
proprietary technical and business information, know how, show how, or other proprietary data or
information relating to its business, software, databases, and all other proprietary information
relating to its business.



          “Intellectual Property Collateral” means Collateral consisting of Intellectual
Property.



          “Intercreditor Agreement” means the Lien Subordination and Intercreditor Agreement,
dated as of January 28, 2011, among the Collateral Agent, Wilmington Trust Company, as collateral
agent for the Noteholder Lien Secured Parties (as defined therein), Parent, the Company and the
subsidiaries of the Company named therein (as amended, restated, supplemented or otherwise modified
from time to time)



          “License” means any Patent License, Trademark License, Copyright License or other
written intellectual property license or sublicense agreement relating solely to Intellectual
Property to which any Grantor is a party, including those exclusive license agreements listed on
Schedule V.



          “Margin Stock” means any “margin stock” (as defined in Regulation U issued by the
Board of Governors of the Federal Reserve System).



          “Noteholder Collateral Agent” has the meaning assigned to such term in the
Intercreditor Agreement.



          “Noteholder First Lien Collateral” has the meaning assigned to such term in the
Intercreditor Agreement.



          “Noteholder Lien Security Documents” has the meaning assigned to such term in the
Intercreditor Agreement.



          “Patent License” means any written agreement, now or hereafter in effect, granting to
any third party any right to make, have made, use, sell, offer to sell or import any invention
covered in whole or in part by a Patent, now or hereafter owned by any Grantor or that any Grantor
otherwise has the right to license, or granting to any Grantor any right to make, have made, use,
sell, offer to sell or import any invention covered in whole or in part by a patent, now or
hereafter owned by any third party, and all rights of any Grantor under any such agreement.



          “Patents” means all of the following now owned or hereafter acquired by any Grantor:
(a) all letters patent of the United States or the equivalent thereof in any other country, all
registrations thereof, and all applications for letters patent of the United States or the
equivalent thereof in any other country, including registrations and pending applications in the
United States Patent and Trademark Office or any similar offices in any other country, including
those listed on Schedule V, and (b) all (i) rights and privileges arising under applicable
Law with respect to such Grantor’s use of any patents, (ii) inventions and improvements described
and



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claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, (iv) income, fees, royalties, damages, claims
and payments now or hereafter due and/or payable thereunder and with respect thereto including
damages and payments for past, present or future Infringements thereof, (v) rights corresponding
thereto throughout the world and (vi) rights to sue for past, present or future Infringements
thereof.



          “Perfection Certificate” means a certificate substantially in the form of Exhibit
B, completed and supplemented with the schedules and attachments contemplated thereby, and duly
executed on behalf of each Grantor.



          “Pledged Collateral” has the meaning assigned to such term in Section 2.01.



          “Pledged Debt” has the meaning assigned to such term in Section 2.01.



          “Pledged Equity” has the meaning assigned to such term in Section 2.01.



          “Pledged Securities” means any promissory notes, stock certificates or other
securities now or hereafter included in the Pledged Collateral, including all Pledged Equity,
Pledged Debt and all other certificates, instruments or other documents representing or evidencing
any Pledged Collateral.



          “Proceeds” means (a) all “proceeds” as defined in Article 9 of the UCC, with respect
to the Collateral, and (b) whatever is recoverable or recovered when any Collateral is sold,
exchanged, collected, or disposed of, whether voluntarily or involuntarily.



          “Secured Obligations” means the “Finance Obligations” (as defined in the Credit
Agreement); it being acknowledged and agreed that the term “Secured Obligations” as used herein
shall include each extension of credit under the Credit Agreement, in each case, whether
outstanding on the date of this Agreement or extended from time to time after the date of this
Agreement.



          “Security” means any “security” as such term is defined in Article 8 of the UCC, any
stock, shares, partnership interests, voting trust certificates, certificates of interest or
participation in any profit sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as “securities” or any certificates of
interest, shares or participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.



          “Security Agreement Supplement” means an instrument substantially in the form of
Exhibit A hereto.



          “Security Interest” has the meaning assigned to such term in Section 3.01(a).



          “Trademark License” means any written agreement, now or hereafter in effect, granting
to any third party any right to use any Trademark now or hereafter owned by any Grantor or that any
Grantor otherwise has the right to license, or granting to any Grantor any right to



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use any
trademark now or hereafter owned by any third party, and all rights of any Grantor under any such
agreement.



          “Trademarks” means all of the following now owned or hereafter acquired by any
Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, trade dress, logos, other source or business
identifiers, designs and general intangibles of like nature, now owned or hereafter adopted,
acquired or assigned to, all registrations and applications filed in connection therewith,
including registrations and applications in the United States Patent and Trademark Office or any
similar offices in any State of the United States or any other country or any political subdivision
thereof, including those listed on Schedule V and (b) any and all (i) rights and privileges
arising under applicable Law with respect to such Grantor’s use of any trademarks, (ii) renewals
thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and
hereafter due and/or payable thereunder and with respect thereto, including damages, claims and
payments for past, present or future Infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present and future Infringements thereof.



          “U.S. Factoring Agreements” means the factoring agreement between CIT Group/Commercial
Services, Inc., on the one hand, and Lead Borrower and/or one or more of its Subsidiaries, on the
other hand, existing as of the date hereof or any replacement or renewal thereof that does not have
terms, taken as a whole, that are materially more onerous to Holdings and its Subsidiaries;
provided that the U.S. Factoring Agreements shall never be comprised of more than one
factoring arrangement at any one time.



ARTICLE II




Pledge of Securities



          Section 2.01 Pledge. As security for the payment or performance, as the case may be, in full of
the Secured Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in,
all of such Grantor’s right, title and interest in, to and under:



     (i) all Equity Interests held by it and listed on Schedule III and any other Equity
Interests obtained in the future by such Grantor and the certificates representing all such Equity
Interests (the “Pledged Equity”); provided that (x) pledges of voting Equity
Interests of each Foreign Subsidiary shall be limited to 65% of the total combined voting power of
all Equity Interests of such Foreign Subsidiary at any time; and (y) the Pledged Equity shall not
include (A) Equity Interests of any Subsidiary of a Foreign Subsidiary, (B) Equity Interests of a
Person that is not a direct or indirect wholly owned Subsidiary of a Grantor to the extent
prohibited by the terms of such Subsidiary’s Organization Documents, (C) any Margin Stock owned by
such Grantor, (D) pledges prohibited by law or by agreements containing anti-assignment clauses not
overridden by the UCC or applicable Law, (E) any Equity Interests of any Restricted Subsidiary
subject to a Lien existing at the time such Restricted Subsidiary is acquired or merged with or
into or consolidated with any Grantor and not incurred in connection with such acquisition, merger
or consolidation that is permitted by the Credit Agreement to the extent and for so long as the
contract or other



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agreement in which such Lien is granted limits or prohibits the creation of any
other Lien on such Equity Interests, (F) Equity Interests of any “not-for-profit” Subsidiary, (G)
Equity Interests of any Captive Insurance Subsidiary, (H) Equity Interests of any Domestic
Restricted Subsidiary of the Borrowers that is treated as a disregarded entity for U.S. federal
income tax purposes, (I) Equity Interests of any Subsidiary with respect to which in the reasonable
judgment of the Lead Borrower the costs or other consequences (including adverse tax consequences
(including as a result of Section 956 of the Code or any similar law, rule or regulation in any
applicable jurisdiction) in the reasonable judgment of the Lead Borrower confirmed in writing by
notice to the Collateral Agent) of providing a pledge of its Equity Interests or perfection thereof
is excessive in view of the benefits to be obtained by the Secured Parties, (J) Equity Interests of
Unrestricted Subsidiaries (until such time as any Unrestricted Subsidiary becomes a Restricted
Subsidiary in accordance with the Credit Agreement, at which time, and without any further action,
this clause (y)(J) shall no longer apply to the Equity Interests of such Subsidiary), (K) Equity
Interests of Subsidiaries that are not Grantors and which are Immaterial Subsidiaries or (L) Equity
Interests of any Subsidiary which would require material or non-ministerial consent, approval,
license or authorization from a Governmental Authority, unless such consent, approval, license or
authorization has been received (clauses (A) through (K) collectively, the “Excluded Equity
Interests”); (ii)(A) the promissory notes and any instruments evidencing indebtedness owned by
it and listed opposite the name of such Grantor on Schedule III and (B) any promissory
notes and instruments evidencing indebtedness obtained in the future by such Grantor (the
“Pledged Debt”); (iii) all other property that may be delivered to and held by the
Collateral Agent pursuant to the terms of this Section 2.01; (iv) subject to Section
2.06, all payments of principal or interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of, in exchange for or
upon the conversion of, and all other Proceeds received in respect of, the securities referred to
in clauses (i) and (ii) above; (v) subject to Section 2.06, all rights and
privileges of such Grantor with respect to the securities and other property referred to in
clauses (i), (ii), (iii) and (iv) above; and (vi) all Proceeds of,
and Security Interests in, any of the foregoing (the items referred to in clauses (i)
through (vi) above, subject to the limitations set forth in the Collateral and Guarantee
Requirement, being collectively referred to as the “Pledged Collateral”).



          TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its
successors and assigns, for the benefit of the applicable Secured Parties, forever; subject,
however, to the terms, covenants and conditions hereinafter set forth.



          Section 2.02 Delivery of the Pledged Collateral.



          (a) Each Grantor agrees promptly (but in any event within 30 days of acquisition,
formation or obtaining an interest in such Pledged Securities) to deliver or cause to be delivered
to the Collateral Agent, for the benefit of the applicable Secured Parties, any and all Pledged
Securities (other than any uncertificated securities, but only for so long as such securities
remain uncertificated) (unless the Noteholder Collateral Agent is granted a prior security interest
in such Pledged Securities and the same are required to be delivered (and are delivered) to the
Noteholder Collateral Agent pursuant to the Intercreditor Agreement) and to the extent such



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Pledged
Securities are promissory notes and instruments evidencing Indebtedness, only as are required to be
delivered under clause (b) immediately below.



          (b) Each Grantor will cause any Indebtedness for borrowed money having an aggregate
principal amount equal to or in excess of $5,000,000, which for avoidance of doubt excludes
accounts receivable in the ordinary course of business, owed to such Grantor by any Person (other
than another Grantor) to be evidenced by a duly executed promissory note that is pledged and
delivered promptly (but in any event within 30 days of acquisition, issuance or obtaining an
interest in such promissory note) to the Collateral Agent, for the benefit of the applicable
Secured Parties, pursuant to the terms hereof (unless the Noteholder Collateral Agent is granted a
prior security interest in such promissory note and the same are required to be delivered (and are
delivered) to the Noteholder Collateral Agent pursuant to the Intercreditor Agreement).



          (c) Upon delivery to the Collateral Agent, (i) any Pledged Securities shall be accompanied
by stock or bond powers duly executed in blank or other instruments of transfer as may be
reasonably necessary to perfect the security interest of to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request and (ii) all other
property comprising part of the Pledged Collateral shall be accompanied by proper instruments of
assignment duly executed by the applicable Grantor and such other instruments or documents as the
Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied
by a schedule describing the securities, which schedule shall be deemed to supplement
Schedule III and be made a part hereof; provided that failure to attach any such
schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each
schedule so delivered shall supplement any prior schedules so delivered.



          Section 2.03 Representations, Warranties and Covenants. Each Grantor represents, warrants and
covenants, as to itself and the other Grantors, to and with the Collateral Agent, for the benefit
of the Secured Parties, that:




     (a) Schedule III correctly sets forth the percentage of the issued and
outstanding units of each class of the Equity Interests of the issuer thereof represented by
the Pledged Equity and includes all Equity Interests, the promissory notes and instruments
required to be pledged pursuant to the Collateral and Guarantee Requirement and Section 2.01
of this Agreement;




     (b) the Pledged Equity issued by the Grantors and Pledged Debt (solely with respect
to Pledged Debt issued by a Person other than the Lead Borrower or a Subsidiary of the Lead
Borrower, to the best of the Lead Borrower’s knowledge) have been duly and validly
authorized and issued by the issuers thereof and (i) in the case of Pledged Equity (other
than Pledged Equity consisting of limited liability company interests or partnership
interests which, pursuant to the relevant organizational or formation documents, cannot be
fully paid and non-assessable), are fully paid and non-assessable and (ii) in the case of
Pledged Debt (solely with respect to Pledged Debt issued by a Person other than the Lead
Borrower or a Subsidiary of the Lead Borrower, to the best of the Lead Borrower’s
knowledge), are legal, valid and binding obligations of the issuers thereof;



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     (c) except for the security interests granted hereunder, each of the Grantors
(i) is and, subject to any transfers made in compliance with the Credit Agreement, will
continue to be the direct owner, beneficially and of record, of the Pledged Securities
indicated on Schedule III as owned by such Grantors, (ii) holds the same free and
clear of all Liens, other than (A) Liens created by the Collateral Documents and the
Noteholder Lien Security Documents and (B) Permitted Liens, (iii) will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any security interest in
or other Lien on, the Pledged Collateral, other than (A) Liens created by the Collateral
Documents and the Noteholder Lien Security Documents and (B) nonconsensual Permitted Liens,
and (iv) will defend its title or interest thereto or therein against any and all Liens
(other than the Liens permitted pursuant to this Section 2.03(c)), however arising,
of all Persons whomsoever;




     (d) except (i) for restrictions and limitations imposed by the Loan Documents or
securities laws generally, (ii) in the case of Pledged Equity of Persons that are not wholly
owned Subsidiaries, for transfer restrictions that exist at the time of acquisition of
Equity Interests in such Persons, and (iii) as described in the Perfection Certificate, the
Pledged Collateral is and will continue to be freely transferable and assignable, and none
of the Pledged Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or by-law provisions or contractual restriction of any
nature that might prohibit, impair, delay or otherwise affect in any manner material and
adverse to the Secured Parties the pledge of such Pledged Collateral hereunder, the sale or
disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and
remedies hereunder;




     (e) each of the Grantors has the power and authority to pledge the Pledged
Collateral pledged by it hereunder in the manner hereby done or contemplated (it being
understood that such Grantor’s power and authority to pledge the Equity Interests of a
non-wholly owned Subsidiary may be limited by the Organization Documents of such
Subsidiary);




     (f) except as described in Section 2.03(d) above, no consent or approval of
any Governmental Authority, any securities exchange or any other Person was or is necessary
to the validity of the pledge effected hereby (other than such as have been obtained and are
in full force and effect);




     (g) by virtue of the execution and delivery by the Grantors of this Agreement, when
any Pledged Securities are delivered to the Collateral Agent in accordance with this
Agreement, the Collateral Agent will obtain a legal, valid and perfected lien upon and
security interest in such Pledged Securities as security for the payment and performance of
the Secured Obligations;




     (h) all certificates, agreements or instruments representing or evidencing the
Pledged Securities in existence on the date hereof have been delivered to the Collateral
Agent pursuant to and as required by Section 2.02; and



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     (i) the pledge effected hereby is effective to vest in the Collateral Agent, for
the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged
Collateral as set forth herein.



          Section 2.04 Certification of Limited Liability Company and Limited Partnership Interests. Each
interest in any limited liability company or limited partnership controlled by any Grantor and
pledged under Section 2.01, to the extent such limited liability company elects to treat
its limited liability company interests as “securities” within the meaning of Article 8 of the UCC,
shall be represented by a certificate, shall be a “security” within the meaning of Article 8 of the
UCC and shall be governed by Article 8 of the UCC.



          Section 2.05 Registration in Nominee Name; Denominations. If an Event of Default shall occur and
be continuing and the Collateral Agent shall give the Lead Borrower notice of its intent to
exercise such rights, subject to the terms of the Intercreditor Agreement, (a) the Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion)
to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or
as sub agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of
the Collateral Agent and each Grantor will promptly give to the Collateral Agent copies of any
notices or other communications received by it with respect to Pledged Securities registered in the
name of such Grantor and (b) the Collateral Agent shall have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement; provided that, notwithstanding the foregoing, if a
Bankruptcy Event of Default shall have occurred and be continuing, the Collateral Agent shall not
be required to give the notice referred to above in order to exercise the rights described above.



          Section 2.06 Voting Rights; Dividends and Interest.



          (a) Unless and until an Event of Default or a Cash Dominion Event, as applicable, shall
have occurred and be continuing and the Collateral Agent shall have notified the Lead Borrower that
the rights of the Grantors under this Section 2.06 are being suspended:




     (i) Each Grantor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any part thereof
for any purpose consistent with the terms of this Agreement, the Credit Agreement and the
other Loan Documents; provided that such rights and powers shall not be exercised in
any manner that could materially and adversely affect the rights inuring to a holder of any
Pledged Securities or the rights and remedies of any of the Collateral Agent or the other
Secured Parties under this Agreement, the Credit Agreement or any other Loan Document or the
ability of the Secured Parties to exercise the same.




     (ii) The Collateral Agent shall promptly execute and deliver to each Grantor, or
cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and
other instruments as such Grantor may reasonably request for the purpose of enabling such
Grantor to exercise the voting and/or consensual rights and powers it is entitled to
exercise pursuant to subparagraph (i) above.



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     (iii) Each Grantor shall be entitled to receive and retain any and all dividends,
interest, principal and other distributions paid on or distributed in respect of the Pledged
Securities, to the extent (and only to the extent) that such dividends, interest, principal
and other distributions are permitted by, and otherwise paid or distributed in accordance
with, the terms and conditions of the Credit Agreement, the other Loan Documents and
applicable Laws; provided that any non-cash dividends, interest, principal or other
distributions that would constitute Pledged Equity or Pledged Debt, whether resulting from a
subdivision, combination or reclassification of the outstanding Equity Interests of the
issuer of any Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition
or other exchange of assets to which such issuer may be a party or otherwise, shall be and
become part of the Pledged Collateral, and, if received by any Grantor, shall not be
commingled by such Grantor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent
and the applicable Secured Parties and shall be forthwith delivered to the Collateral Agent
(unless the same are required to be delivered (and are delivered) to the Noteholder
Collateral Agent pursuant to the Intercreditor Agreement) in the same form as so received
(with any endorsement as may be reasonably necessary to perfect the security interest of the
Collateral Agent). So long as no Default or Event of Default has occurred and is
continuing, the Collateral Agent shall promptly deliver to each Grantor any Pledged
Securities in its possession if requested to be delivered to the issuer thereof in
connection with any exchange or redemption of such Pledged Securities.



          (b) Upon the occurrence and during the continuance of a Cash Dominion Event or Event of
Default, as applicable, after the Collateral Agent shall have notified the Lead Borrower of the
suspension of the rights of the Grantors under Section 2.06(a)(iii), then all rights of any
Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to
receive pursuant to Section 2.06(a)(iii) shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall have the sole and exclusive right and authority
to receive and retain such dividends, interest, principal or other distributions, subject to the
terms of the Intercreditor Agreement. All dividends, interest, principal or other distributions
received by any Grantor contrary to the provisions of this Section 2.06 shall be held in
trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of
such Grantor and shall be forthwith delivered to the Collateral Agent upon demand (unless the same
are required to be delivered (and are delivered) to the Noteholder Collateral Agent pursuant to the
Intercreditor Agreement) in the same form as so received (with any necessary endorsement reasonably
requested by the Collateral Agent). Any and all money and other property paid over to or received
by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained
by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of
such money or other property and shall be applied in accordance with the provisions of Section
4.02. At such time as a Cash Dominion Event or Event of Default is no longer continuing, the
Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest,
principal or other distributions that such Grantor would otherwise be permitted to retain pursuant
to the terms of Section 2.06(a)(iii) in the absence of a Cash Dominion Event or an Event of
Default and that remain in such account.



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          (c) Upon the occurrence and during the continuance of an Event of Default, after the
Collateral Agent shall have notified the Lead Borrower of the suspension of the rights of the
Grantors under Section 2.06(a)(i), then all rights of any Grantor to exercise the voting
and consensual rights and powers it is entitled to exercise pursuant to Section 2.06(a)(i),
and the obligations of the Collateral Agent under Section 2.06(a)(ii), shall cease, and all
such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to exercise such voting and consensual rights and powers, subject to
the terms of the Intercreditor Agreement; provided that the Collateral Agent shall have the
right from time to time following and during the continuance of an Event of Default to permit the
Grantors to exercise such rights. After all Events of Default have been cured or waived, each
Grantor shall have the exclusive right to exercise the voting and/or consensual rights and powers
that such Grantor would otherwise be entitled to exercise pursuant to the terms of Section
2.06(a)(i), and the obligations of the Collateral Agent under Section 2.06(a)(ii) shall
be reinstated.



          (d) Any notice given by the Collateral Agent to the Lead Borrower suspending the rights of
the Grantors under Section 2.06(a)(i): (x) shall be given in writing, (y) may be given with
respect to one or more of the Grantors at the same or different times and (z) may suspend the
rights of the Grantors under Section 2.06(a)(i) or (iii) in part without suspending
all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and
without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices
from time to time suspending other rights so long as a Cash Dominion Event or an Event of Default,
as applicable, has occurred and is continuing. Notwithstanding anything to the contrary contained
in Section 2.06(a), (b) or (c), if a Bankruptcy Event of Default shall have
occurred and be continuing, the Collateral Agent shall not be required to give any notice referred
to in said Section in order to exercise any of its rights described in such Section, and the
suspension of the rights of each of the Grantors under each such Section shall be automatic upon
the occurrence of such Bankruptcy Event of Default.



          Section 2.07 Collateral Agent Not a Partner or Limited Liability Company Member. Nothing contained
in this Agreement shall be construed to make the Collateral Agent or any other Secured Party liable
as a member of any limited liability company or as a partner of any partnership and neither the
Collateral Agent nor any other Secured Party by virtue of this Agreement or otherwise (except as
referred to in the following sentence) shall have any of the duties, obligations or liabilities of
a member of any limited liability company or as a partner in any partnership. The parties hereto
expressly agree that, unless the Collateral Agent shall become the absolute owner of Pledged Equity
consisting of a limited liability company interest or a partnership interest pursuant hereto, this
Agreement shall not be construed as creating a partnership or joint venture among the Collateral
Agent, any other Secured Party, any Grantor and/or any other Person.



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ARTICLE III




Security Interests in Personal Property



          Section 3.01 Security Interest.



          (a) As security for the payment or performance, as the case may be, in full of the Secured
Obligations, including the Guaranty, each Grantor hereby assigns and pledges to the Collateral
Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security
interest (the “Security Interest”) in, all right, title or interest in or to any and all of
the following assets and properties now owned or at any time hereafter acquired by such Grantor or
in which such Grantor now has or at any time in the future may acquire any right, title or interest
(collectively, the “Article 9 Collateral”):




     (i) all Accounts;




     (ii) all Chattel Paper;




     (iii) all Documents;




     (iv) all Equipment;




     (v) all General Intangibles;




     (vi) all Instruments;




     (vii) all books and records pertaining to the Article 9 Collateral;




     (viii) all Goods and Fixtures;




     (ix) all Money and Deposit Accounts;




     (x) all Commercial Tort Claims described on Schedule IV from time to time;




     (xi) the Collateral Account, and all cash, securities and other investments
deposited therein;




     (xii) all Supporting Obligations;




     (xiii) all Security Entitlements in any or all of the foregoing and all Securities
Accounts;




     (xiv) all Intellectual Property Collateral;




     (xv) all Inventory;




     (xvi) all Investment Property; and



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     (xvii) to the extent not otherwise included, all Books and Records and all Proceeds
and products of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing;


provided that (i) this Agreement shall not constitute a grant of security interest in any
trademark application filed in the United States Patent and Trademark Office on the basis of any
Grantor’s “intent to use” such mark and for which a form evidencing use of the mark has not yet
been filed with the United States Patent and Trademark Office, to the extent that granting a
security interest in such trademark application prior to such filing would adversely affect the
enforceability or validity of such trademark application or any registration that issues therefrom
under applicable federal law and (ii) notwithstanding anything to the contrary in this Agreement,
this Agreement shall not constitute a grant of a security interest in (A) motor vehicles and other
assets subject to certificates of title except to the extent perfection of a security interest
therein may be accomplished by filing of financing statements in appropriate form in the applicable
jurisdiction under the UCC, (B) commercial tort claims in amounts less than $10,000,000, (C) the
Excluded Equity Interests, (D) any property or assets owned by any Foreign Subsidiary or an
Unrestricted Subsidiary, (E) any Excluded Equipment; (F) any Excluded Contract, (G) Excluded
Accounts, (H) Letter of Credit Rights, other than Letter of Credit Rights that are Supporting
Obligations, (I) assets as reasonably determined by the Company to the extent obtaining a security
interest in such assets or perfection thereof would result in costs or consequences (including as a
result of Section 956 of the Code or any similar law, rule or regulation in any applicable
jurisdiction) that are excessive in relation to the value to the Holders of the security to be
afforded thereby, (J) Accounts of Account Debtor subject to Factoring Agreements and (I) proceeds
and products from any and all of the foregoing excluded assets described in clauses (i) and (ii)(A)
through (J), unless such proceeds or products would otherwise constitute Collateral (the items
referred to in clauses (i) and (ii), being collectively referred to as the “Excluded
Assets”). Each Grantor shall, if requested to do so by the Collateral Agent, use commercially
reasonable efforts to obtain any such required consent referred to above that is reasonably
obtainable with respect to Collateral which the Collateral Agent reasonably determines to be
material. In addition, no Grantor shall be required (i) to take actions to perfect security
interests in commercial tort claims in amounts less than $10,000,000 or Letter of Credit Rights
(other than Letter of Credit Rights to the extent perfection of a security interest therein may be
accomplished by filing of financing statements in appropriate form in the applicable jurisdiction
under the UCC), (ii) to take actions to perfect by Control other than with respect to the Pledged
Collateral and as set forth clause (e) below or (iii) take any actions under any laws outside of
the United States to grant, perfect or enforce any security interest.




          (b) Each Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of the
Secured Parties at any time and from time to time to file in any relevant jurisdiction any
financing statements (including fixture filings) with respect to the Collateral or any part thereof
and amendments thereto that (i) indicate the Collateral as all assets of such Grantor or words of
similar effect as being of an equal or lesser scope or with greater detail, and (ii) contain the
information required by Article 9 of the UCC or the analogous legislation of each applicable
jurisdiction for the filing of any financing statement or amendment, including (A) whether such
Grantor is an organization, the type of organization and any organizational identification number
issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a
sufficient



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description of the real property to which such Article 9 Collateral relates. Each
Grantor agrees to provide copies of such financing statements to the Collateral Agent promptly upon
any such filing.



          (c) The Security Interest is granted as security only and shall not subject the Collateral
Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Article 9 Collateral.



          (d) Each Grantor hereby further authorizes the Collateral Agent to file a Grant of
Security Interest substantially in the form of Exhibit C, D or E, as
applicable, covering relevant registered or applied for Intellectual Property Collateral with the
United States Patent and Trademark Office or United States Copyright Office, as applicable, or any
similar offices in any other country and such other documents executed by any Grantor as may be
reasonably necessary or reasonably advisable for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by such Grantor hereunder, and naming such
Grantor, as debtor, and the Collateral Agent, as secured party.



          (e) Notwithstanding anything to the contrary in this Agreement or the Credit Agreement,
none of the Grantors shall be required to enter into any deposit account control agreement or
securities account control agreement (other than any Deposit Account Control Agreements
contemplated by Sections 6.15 and 6.18 of the Credit Agreement and other than with respect to any
cash collateral agreements contemplated under the Credit Agreement) with respect to any deposit
account or securities account or Money.



          Section 3.02 Representations and Warranties. Each Grantor represents and warrants, as to itself
and the other Grantors, to the Collateral Agent and the Secured Parties that:




     (a) Each Grantor has good and valid rights (not subject to any Liens other than
Permitted Liens) and/or title in the Article 9 Collateral with respect to which it has
purported to grant a Security Interest hereunder (which rights and/or title, are in any
event, sufficient under Section 9-203 of the UCC), and has full power and authority to grant
to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any other Person other than (i) any consent or
approval that has been obtained and is in full force and effect and (ii) those consents or
approvals, the failure of which to be obtained or to be made could not reasonably be
expected to have a Material Adverse Effect.




     (b) The Perfection Certificate has been duly prepared, completed, executed and
delivered to the Collateral Agent and the information set forth therein, including the exact
legal name of each Grantor, is correct and complete in all material respects as of the
Closing Date. The UCC financing statements (including fixture filings, as applicable) or
other appropriate filings, recordings or registrations prepared by the Collateral Agent
based upon the information provided to the Collateral Agent in the Perfection Certificate
for filing in each governmental, municipal or other office in the jurisdiction of
organization of each Grantor specified in Section 2(a) of the Perfection Certificate (or
specified by notice from the applicable Grantor to the Collateral Agent after the Closing
Date in the



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case of filings, recordings or registrations required by Section 6.11 of the
Credit Agreement), are all the filings, recordings and registrations that are necessary to
establish a legal, valid and perfected security interest in favor of the Collateral Agent
(for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the
Security Interest may be perfected by filing, recording or registration in the United States
(or any political subdivision thereof) and its territories and possessions, and no further
or subsequent filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable Law with respect to
the filing of continuation statements. Each Grantor represents and warrants that, as of the
Closing Date, fully executed Grants of Security Interest in the form attached as Exhibit
C, D or E, as applicable, containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents (and Patents for
which United States applications are pending), registered United States Trademarks (and
Trademarks for which United States applications to register are pending) or United States
registered Copyrights, as applicable, have been delivered to the Collateral Agent for
recording in the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and
the regulations thereunder or to any similar offices in any other country, as required by
applicable Law in such jurisdiction.




     (c) The Security Interest constitutes (i) a legal and valid security interest in
all the Article 9 Collateral securing the payment and performance of the Secured
Obligations, (ii) subject to the filings described in Section 3.02(b), a perfected
security interest in all Article 9 Collateral in which a security interest may be perfected
by filing, recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its territories and possessions
pursuant to the UCC and (iii) a security interest that shall be perfected in all Collateral
in which a security interest may be perfected upon the receipt and recording of the relevant
Grants of Security Interest substantially in the form of Exhibits C, D or
E hereto with the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, within the three month period (commencing as of the date
hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one month period (commencing
as of the date hereof) pursuant to 17 U.S.C. § 205 and otherwise as may be required pursuant
to the laws of any other necessary jurisdiction. The Security Interest is and shall be
prior to any other Lien on any of the Article 9 Collateral, other than any nonconsensual
Permitted Lien that has priority as a matter of law and other than, with respect to
Noteholder First Lien Collateral, Liens created by the Noteholder Lien Security Documents,
subject to the terms of the Intercreditor Agreement.




     (d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien,
except for Permitted Liens. None of the Grantors has filed or consented to the filing of
(i) any financing statement or analogous document under the UCC or any other applicable Laws
covering any Article
9 Collateral, (ii) any assignment in which any Grantor assigns any
Article 9 Collateral or any security agreement or similar instrument covering any Collateral
with the United States Patent and Trademark Office or the United States Copyright Office, or
(iii) any assignment in which any Grantor assigns any Article



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9 Collateral or any security
agreement or similar instrument covering any Article 9 Collateral with any foreign
governmental, municipal or other office, which financing statement or analogous document,
assignment, security agreement or similar instrument is still in effect, except, in each
case, for Permitted Liens.




     (e) All Commercial Tort Claims of each Grantor in excess of $10,000,000 in
existence on the date of this Agreement (or on the date upon which such Grantor becomes a
party to this Agreement) are described on Schedule IV hereto.



          Section 3.03 Covenants.



          (a) The Lead Borrower agrees to promptly (but in any event within 30 days) notify the
Collateral Agent of any change (i) in the legal name of any Grantor, (ii) in the identity or type
of organization or corporate structure of any Grantor, (iii) in the jurisdiction of organization of
any Grantor, (iv) in the “location” (as determined in accordance with Section 9-307 of the UCC) of
any Grantor or (v) in the organizational identification number of any Grantor. In addition, if any
Grantor does not have an organizational identification number on the Closing Date (or the date such
Grantor becomes a party to this Agreement) and later obtains one, the Lead Borrower shall promptly
thereafter notify the Collateral Agent of such organizational identification number and, in each
case, shall take all actions reasonably satisfactory to the Collateral Agent to the extent
necessary to maintain the security interests (and the priority thereof) of the Collateral Agent in
the Collateral intended to be granted hereby fully perfected and in full force and effect.



          (b) Each Grantor shall, at its own expense, take any and all commercially reasonable
actions necessary to defend title to the Article 9 Collateral against all Persons and to defend the
Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof
against any Lien that is not a Permitted Lien.



          (c) Each year, at the time of delivery of annual financial statements with respect to the
preceding fiscal year pursuant to Section 6.01 of the Credit Agreement, the Lead Borrower shall
deliver to the Collateral Agent a certificate executed by the chief financial officer and the chief
legal officer of the Lead Borrower setting forth the information required pursuant to Sections
1(a), 2(a), 2(c) and 9 of the Perfection Certificate or confirming that there has been no change in
such information since the date of such certificate or the date of the most recent certificate
delivered pursuant to this Section 3.03(c).



          (d) The Lead Borrower agrees, on its own behalf and on behalf of each other Grantor, at
its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions necessary or as the Collateral Agent may from
time to time reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of any fees and taxes
required in connection with the execution and delivery of this Agreement, the granting of the
Security Interest and the filing of any financing statements (including amendments or continuations
thereof and fixture filings) or other documents in connection herewith or therewith. If any amount
payable (other than by a Loan Party) under or in connection with any of the Article 9 Collateral
that equals or exceeds $5,000,000 shall be or become evidenced by any promissory



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note or
instrument, such note or instrument shall be promptly pledged and delivered to the Collateral Agent
(unless the same is required to be delivered (and is delivered) to the Noteholder Collateral Agent
pursuant to the Intercreditor Agreement), for the benefit of the Secured Parties, duly endorsed as
may be reasonably necessary to perfect the security interest of the Collateral Agent.



          (e) At its option, the Collateral Agent may discharge past due taxes, assessments,
charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the
Article 9 Collateral (other than Permitted Liens), and may pay for the maintenance and preservation
of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit
Agreement or any other Loan Document and within a reasonable period of time after the Collateral
Agent has requested that it do so, and each Grantor jointly and severally agrees to reimburse the
Collateral Agent within 10 days after demand for any payment made or any reasonable expense
incurred by the Collateral Agent pursuant to the foregoing authorization, provided,
however, that a Grantor shall not be obligated to reimburse the Collateral Agent with
respect to any Intellectual Property Collateral which any Grantor has failed to maintain or pursue,
or otherwise has allowed to lapse, terminate or put in the public domain, in accordance with
Section 4.02(f). Nothing in this paragraph shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to
cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein
or in the other Loan Documents.



          (f) If at any time any Grantor shall take a security interest in any property of an
Account Debtor or any other Person the value of which equals or exceeds $5,000,000 to secure
payment and performance of an Account, subject to the terms of the Intercreditor Agreement, such
Grantor shall promptly assign such security interest to the Collateral Agent for the benefit of the
applicable Secured Parties. Such assignment need not be filed of public record unless necessary to
continue the perfected status of the security interest against creditors of and transferees from
the Account Debtor or other Person granting the security interest.



          (g) Each Grantor (rather than the Collateral Agent or any Secured Party) shall remain
liable (as between itself and any relevant counterparty) to observe and perform all the conditions
and obligations to be observed and performed by it under each contract, agreement or instrument
relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and
each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and
the Secured Parties from and against any and all liability for such performance.



          Section 3.04 Other Actions. In order to further insure the attachment, perfection and priority of,
and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor agrees, in
each case at such Grantor’s own expense, to take the following actions with respect to the
following Article 9 Collateral:




     (a) Instruments. If any Grantor shall at any time hold or acquire any
Instrument constituting Collateral and evidencing an amount equal to or in excess of
$5,000,000 such Grantor shall forthwith endorse, assign and deliver the same to the
Collateral Agent for the benefit of the applicable Secured Parties (unless the same is
required



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to be delivered (and is delivered) to the Noteholder Collateral Agent pursuant to
the Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly
executed in blank as may be reasonably necessary to prefect the security interest of the
Collateral Agent.




     (b) Investment Property. Except to the extent otherwise provided in
Article II, if any Grantor shall at any time hold or acquire any certificated securities,
such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent
for the benefit of the applicable Secured Parties (unless the Noteholder Collateral Agent is
granted a prior security interest in such Investment Property and the same is required to be
delivered (and is delivered) to the Noteholder Collateral Agent pursuant to the
Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly
executed in blank as may be reasonably necessary to perfect the security interest of the
Collateral Agent. If any securities now or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof,
upon the Collateral Agent’s request and following the occurrence of an Event of Default such
Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s
reasonable request, pursuant to an agreement in form and substance reasonably satisfactory
to the Collateral Agent (unless the Noteholder Collateral Agent is granted a prior security
interest in such Investment Property and such Grantor is required to do so (and does so) in
favor of the Noteholder Collateral Agent pursuant to the Intercreditor Agreement), either
(i) cause the issuer to agree to comply with instructions from the Collateral Agent as to
such securities, without further consent of any Grantor or such nominee, or (ii) arrange for
the Collateral Agent to become the registered owner of the securities. If any securities,
whether certificated or uncertificated, or other investment property are held by any Grantor
(or its nominee through a securities intermediary or commodity intermediary) for more than
45 days and such securities or other investment property exceed $2,500,000 in value, upon
the Collateral Agent’s request and following the occurrence of an Event of Default, such
Grantor shall immediately notify the Collateral Agent thereof and at the Collateral Agent’s
request and option, pursuant to an agreement in form and substance reasonably satisfactory
to the Collateral Agent shall, unless such Grantor is required to do so (and does so) in
favor of the Noteholder Collateral Agent, either (i) cause such securities intermediary or
(as the case may be) commodity intermediary to agree to comply with entitlement orders or
other instructions from the Collateral Agent to such securities intermediary as to such
security entitlements, or (as the case may be) to apply any value distributed on account of
any commodity contract as directed by the Collateral Agent to such commodity intermediary,
in each case without further consent of any Grantor or such nominee, or (ii) in the case of
financial assets or other Investment Property held through a securities intermediary,
arrange for the Collateral Agent to become the entitlement holder with respect to such
Investment Property, with the Grantor being permitted, only with the consent of the
Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment
Property. The Collateral Agent agrees with each of the Grantors that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any such issuer,
securities intermediary or commodity intermediary, and shall not withhold its consent to the
exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has
occurred and is continuing. The provisions



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of this paragraph shall not apply to any
financial assets credited to a securities account for which the Collateral Agent is the
securities intermediary. Each Grantor that is the issuer of Pledged Equity agrees that it
will be bound by the terms of this Agreement with respect to the Pledged Equity issued by it
and will comply with such terms insofar as such terms are applicable to it.




     (c) Commercial Tort Claims. If any Grantor shall at any time after the
date of this Agreement acquire a Commercial Tort Claim in an amount (taking the greater of
the aggregate claimed damages thereunder or the reasonably estimated value thereof) of
$10,000,000 or more, such Grantor shall promptly notify the Collateral Agent thereof in a
writing signed by such Grantor and provide supplements to Schedule IV describing the
details thereof and shall grant to the Collateral Agent a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement.



ARTICLE IV




Special Provisions Concerning Intellectual Property Collateral



          Section 4.01 Grant of License to Use Intellectual Property. Without limiting the provisions of
Section 3.01 hereof or any other rights of the Collateral Agent as the holder of a Security
Interest in any Intellectual Property Collateral, for the purpose of enabling the Collateral Agent
to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor shall, upon request by the
Collateral Agent at any time after the occurrence and during the continuance of an Event of
Default, grant to the Collateral Agent to the full extent such Grantor is permitted to grant such a
license and to the extent that the Collateral Agent does not exercise its rights pursuant to
Section 6.01(vi) herein, an irrevocable, nonexclusive license (exercisable without payment
of royalty or other compensation to the Grantors) to use, license or, solely to the extent
necessary to exercise such rights and remedies, sublicense any of the Intellectual Property
Collateral now owned or hereafter acquired by such Grantor, and wherever the same may be located
(whether or not any license agreement by and between any Grantor and any other Person relating to
the use of such Intellectual Property Collateral may be terminated hereafter), and, to the extent
permitted by such Grantor’s existing contractual obligations, including in such license reasonable
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. The use of such
license by the Collateral Agent may be exercised, subject to the terms of the Intercreditor
Agreement, at the option of the Collateral Agent, during the continuation of an Event of Default;
provided that any license, sublicense or other transaction entered into by the Collateral
Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure
of an Event of Default; and provided, further, that the terms of any license or
sublicense shall include all terms and restrictions that are customarily required to ensure the
continuing validity and effectiveness of the Intellectual Property at issue, such as, without
limitation, quality control and inure provisions with regard to Trademarks, patent designation
provisions with regard to Patents, and copyright notices and restrictions or provisions on
decompilation and reverse engineering of copyrighted software. In the event the license set forth
in this Section 4.01 is exercised with regard to any Trademarks, then the following shall
apply: (i) all goodwill arising from any licensed or sublicensed



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use of any Trademark shall inure
to the Grantor; (ii) the licensed or sublicensed Trademarks shall only be used in association with
goods or services of a quality and nature consistent with the quality and reputation with which
such Trademarks were associated when used by Grantor prior to the exercise of the license rights
set forth herein; and (iii) at the Grantor’s request and expense, licensees and sublicensees shall
provide reasonable cooperation in any effort by the Grantor to maintain the registration or
otherwise secure the ongoing validity and effectiveness of such licensed Trademarks, including,
without limitation, the actions and conduct described in Section 4.02 below.



          Section 4.02 Protection of Collateral Agent’s Security.



          (a) Except to the extent that failure to act could not reasonably be expected to have a
Material Adverse Effect, with respect to any registration or pending application of each item of
its Intellectual Property Collateral for which such Grantor has standing to do so, each Grantor
agrees to take, at its expense, all reasonable steps, including, without limitation, in the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other governmental authority located
in the United States or with any similar offices in any other country, to (i) maintain the validity
and enforceability of any material registered Intellectual Property Collateral and maintain such
Intellectual Property Collateral in full force and effect, and (ii) pursue the registration and
maintenance of each material Patent, Trademark, or Copyright registration or application, now or
hereafter included in such Intellectual Property Collateral of such Grantor, including, without
limitation, the payment of required fees and taxes, the filing of responses to office actions
issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other governmental
authorities or any similar offices in any other country, the filing of applications for renewal or
extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing
of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions,
the payment of maintenance fees and the participation in interference, reexamination, opposition,
cancellation, and Infringement proceedings.



          (b) Except to the extent that failure to act could not reasonably be expected to have a
Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit to do any act
whereby any of its material Intellectual Property Collateral may prematurely lapse, be terminated,
or become invalid or unenforceable or placed in the public domain (or in case of a trade secret,
become publicly known).



          (c) Except to the extent that failure to act could not reasonably be expected to have a
Material Adverse Effect, each Grantor shall take all reasonable steps to preserve and protect each
item of its material Intellectual Property Collateral, including, without limitation, maintaining
the quality of any and all products or services used or provided in connection with any of the
material Trademarks, consistent with the quality of the products and services as of the date
hereof, and taking all reasonable steps necessary to ensure that all licensed users of any of the
material Trademarks abide by the applicable license’s terms with respect to the standards of
quality.



          (d) Each Grantor agrees that, should it obtain an ownership or other interest in any
Intellectual Property Collateral after the Closing Date (i) the provisions of this Agreement shall
automatically apply thereto, and (ii) any such Intellectual Property and, in the case of



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Trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual
Property Collateral subject to the terms and conditions of this Agreement with respect thereto.



          (e) Subject to the requirements and exclusions of Section 3.01, on December 31 of
each fiscal year of the Lead Borrower, each Grantor shall sign and deliver to the Collateral Agent
an appropriate Security Agreement Supplement or related Grant of Security Interest substantially in
the form of Exhibits A, C, D and E, as applicable, with respect to
all such registered or applied for Intellectual Property owned or exclusively licensed by it as
licensee as of the last day of such period, to the extent that such Intellectual Property is not
covered by any previous Security Agreement Supplement (or Grant of Security Interests) so signed
and delivered by it. In each case, it will promptly cooperate as reasonably necessary to enable
the Collateral Agent to make any necessary or reasonably desirable recordations with the U.S.
Copyright Office or the U.S. Patent and Trademark Office.



          (f) Notwithstanding the foregoing provisions of this Section 4.02 or elsewhere in
this Agreement, nothing in this Agreement shall prevent any Grantor from disposing of,
discontinuing the use or maintenance of, causing or permitting expiration, lapse or abandonment, or
failing to renew any applications or registrations of any of its Intellectual Property Collateral
to the extent not prohibited by the Credit Agreement or any other Loan Document if such Grantor
determines in its reasonable business judgment that such actions are desirable in the conduct of
its business.



ARTICLE V




Collections



          (a) Each Grantor, in its capacity as a Loan Party, shall at all times comply with the cash
management provisions of Section 6.18 of the Credit Agreement including, without limitation, after
the occurrence and during the continuance of a Cash Dominion Event, causing the sweep on each
Business Day of all available cash receipts into the Concentration Account as provided for in the
Credit Agreement.



          (b) Without the prior written consent of the Collateral Agent, no Grantor shall modify or
amend the instructions pursuant to any of the Deposit Account Control Agreements. So long as no
Cash Dominion Event has occurred and is continuing, each Grantor shall, and the Collateral Agent
hereby authorizes each Grantor to, enforce and collect all amounts owing on the Inventory and
Accounts, for the benefit and on behalf of the Collateral Agent and the other Secured Parties;
provided that such authorization may, at the direction of the Collateral Agent, be
terminated after the occurrence and during the continuance of any Cash Dominion Event.



ARTICLE VI




Remedies



          Section 6.01 Remedies Upon Default. Upon the occurrence and during the continuance of an Event of
Default, it is agreed that the Collateral Agent shall have the right to exercise any and all rights
afforded to a secured party with respect to the Secured Obligations, as



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applicable, under the UCC
or other applicable Law, and also may, subject to the terms of the Intercreditor Agreement, (i)
require each Grantor to, and each Grantor agrees that it will at its expense and upon request of
the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a place and time to be designated
by the Collateral Agent that is reasonably convenient to both parties; (ii) occupy any premises
owned or, to the extent lawful and permitted, leased by any of the Grantors where the Collateral or
any part thereof is assembled or located for a reasonable period in order to effectuate its rights
and remedies hereunder or under law, without obligation to such Grantor in respect of such
occupation; provided that the Collateral Agent shall provide the applicable Grantor with
notice thereof prior to or promptly after such occupancy; (iii) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect
of the Collateral; provided that the Collateral Agent shall provide the applicable Grantor
with notice thereof prior to or promptly after such exercise; (iv) withdraw any and all cash or
other Collateral from any Collateral Account and apply such cash and other Collateral to the
payment of any and all Secured Obligations in the manner provided in Section 6.02 of this
Agreement; (v) subject to the mandatory requirements of applicable Law and the notice requirements
described below, sell or otherwise dispose of all or any part of the Collateral securing the
Secured Obligations at a public or private sale or at any broker’s board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem
appropriate; and (vi) with respect to any Intellectual Property Collateral, on demand, cause the
Security Interest to become an assignment, transfer and conveyance of any of or all such
Intellectual Property Collateral by the applicable Grantors to the Collateral Agent, or license or
sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive
basis, any such Intellectual Property Collateral throughout the world on such terms and conditions
and in such manner as the Collateral Agent shall determine; provided that such terms shall
include all terms and restrictions customarily required to ensure the continuing validity and
effectiveness of the Intellectual Property at issue, such as, without limitation, quality control
and inure provisions with regard to Trademarks, patent designation provisions with regard to
Patents, and copyright notices and restrictions or decompilation and reverse engineering of
copyrighted software. The Grantors recognize that (a) the Collateral Agent may be unable to effect
a public sale of all or a part of the Collateral consisting of securities by reason of certain
prohibitions contained in the Securities Act of 1933, 15 U.S.C. §77 (as amended and in effect, the
“Securities Act”), or the securities laws of various states (the “Blue Sky Laws”),
but may be compelled to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof, (b) that private sales so
made may be at prices and upon other terms less favorable to the seller than if such securities
were sold at public sales, (c) that neither the Collateral Agent nor any other Secured Party has
any obligation to delay sale of any of the Collateral for the period of time necessary to permit
such securities to be registered for public sale under the Securities Act or the Blue Sky Laws, and
(d) that private sales made under the foregoing circumstances shall be deemed to have been made in
a commercially reasonable manner. Upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold
absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law)



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all rights of redemption, stay and appraisal which such Grantor
now has or may at any time in the future have under any rule of law or statute now existing or
hereafter enacted.



          The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each
Grantor agrees is reasonable notice within the meaning of Section 9-611 of the UCC or its
equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice (if any) of such sale. The Collateral Agent may
conduct one or more going out of business sales, in the Collateral Agent’s own right or by one or
more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by any Grantor. The Collateral Agent and any such agent or contractor, in conjunction
with any such sale, may augment the Inventory with other goods (all of which other goods shall
remain the sole property of the Collateral Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the Inventory (net of an
allocable share of the costs and expenses incurred in their disposition) shall be the sole property
of the Collateral Agent or such agent or contractor and neither any Grantor nor any Person claiming
under or in right of any Grantor shall have any interest therein. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral shall have been given.
The Collateral Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale
price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral
so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At
any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any
Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also
hereby waived and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then due and payable to
such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party
may, upon compliance with the terms of sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes of determining the Grantors’ rights
in the Collateral, a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied and the Secured
Obligations paid in



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full; provided that such terms shall include all terms and restrictions
that customarily required to ensure the continuing validity and effectiveness of the Intellectual
Property at issue, such as, without limitation, quality control and inure provisions with regard to
Trademarks, patent designation provisions with regard to patents, and copyright notices and
restrictions or decompilation and reverse engineering of copyrighted software. As an alternative
to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction
or pursuant to a proceeding by a court appointed receiver. Any sale pursuant to the provisions of
this Section 6.01 shall be deemed to conform to the commercially reasonable standards as
provided in Section 9-610(b) of the UCC or its equivalent in other jurisdictions.



          Subject to the terms of the Intercreditor Agreement, each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by
the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) during the
continuance of an Event of Default and after notice to the Lead Borrower of its intent to exercise
such rights (except in the case of a Bankruptcy Event of Default, in which case no such notice
shall be required), for the purpose of (i) making, settling and adjusting claims in respect of
Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of insurance, (ii)
making all determinations and decisions with respect thereto and (iii) obtaining or maintaining the
policies of insurance required by Section 6.07 of the Credit Agreement as they relate to Collateral
or to pay any premium in whole or in part relating thereto. All sums disbursed by the Collateral
Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs,
expenses and other charges relating thereto, shall be payable, within 10 days of demand, by the
Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.



          By accepting the benefits of this Agreement and each other Collateral Document, the Secured
Parties expressly acknowledge and agree that this Agreement and each other Collateral Document may
be enforced only by the action of the Collateral Agent and that no other Secured Party shall have
any right individually to seek to enforce or to enforce this Agreement or to realize upon the
security to be granted hereby, it being understood and agreed that such rights and remedies may be
exercised by the Collateral Agent for the benefit of the Secured Parties upon the terms of this
Agreement and the other Collateral Documents.



          Section 6.02 Application of Proceeds. The Collateral Agent shall apply the proceeds of any
collection or sale of Collateral, including any Collateral consisting of cash, in accordance with
the provisions of Section 8.04 of the Credit Agreement, subject to the terms of the Intercreditor
Agreement. The Collateral Agent shall have absolute discretion as to the time of application of any
such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral
by the Collateral Agent (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be answerable in any way



-26-









 







for
the misapplication thereof. It is understood and agreed that the Grantors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the proceeds of the
Collateral and the aggregate amount of the Secured Obligations.



ARTICLE VII




Indemnity, Subrogation and Subordination



          Each Grantor hereby unconditionally and irrevocably agrees not to exercise any rights that it
may now have or hereafter acquire against the Borrowers or any other Grantor that arise from the
existence, payment, performance or enforcement of such Grantor’s Secured Obligations under or in
respect of this Agreement or any other Finance Document, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Secured Party against the Borrowers or any other Grantor
or any Collateral, whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or receive from the
Borrowers or any other Grantor, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim, remedy or right, unless and
until all of the Secured Obligations (other than contingent indemnity obligations for then
unasserted claims) and all other amounts payable under this Agreement shall have been paid in full,
all Letters of Credit, all Secured Hedge Agreements and all Secured Cash Management Agreements
shall have expired or been terminated and the Revolving Credit Commitments shall have expired or
been terminated. If any amount shall erroneously be paid to any Borrower or any other Grantor on
account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii)
any such indebtedness of any Borrower or any other Grantor, such amount shall be held in trust for
the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be
credited against the payment of the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement and the other Loan Documents.



ARTICLE VIII




Miscellaneous



          Section 8.01 Notices. All communications and notices hereunder shall (except as otherwise
expressly permitted herein) be in writing and given as provided in Section 10.02 of the Credit
Agreement.



          Section 8.02 Waivers; Amendment.



          (a) No failure or delay by any Senior Credit Party in exercising any right, remedy, power
or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege hereunder, or any
abandonment or discontinuance of steps to enforce such a right, remedy, power or privilege,
preclude any other or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges of the Senior Credit Parties hereunder and
under the other Loan Documents are cumulative and are not exclusive of any other



-27-









 







rights, remedies,
powers and privileges that they would otherwise have. No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section 8.02, and then
such waiver or consent shall be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making of a Revolving Credit
Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event
of Default, regardless of whether any Senior Credit Party may have had notice or knowledge of such
Default or Event of Default at the time.



          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and
the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply,
subject to any consent required in accordance with Section 10.01 of the Credit Agreement. This
Agreement shall be construed as a separate agreement with respect to each Grantor and may be
amended, modified, supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.



          Section 8.03 Collateral Agent’s Fees and Expenses; Indemnification.



          (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement
of its expenses incurred hereunder as provided in Section 10.04 of the Credit Agreement.



          (b) Without limitation of its indemnification obligations under the other Loan Documents,
each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other
Indemnitees against, and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and reasonably related expenses (including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee) incurred by any Indemnitee or asserted against any
Indemnitee by any third party or by any Grantor arising out of, in connection with, or as a result
of, (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby or, in the case of the Administrative Agent (and any sub-agent thereof) and its
Related Parties only, the administration of this Agreement and the other Loan Documents or (ii) any
actual or prospective claim, litigation, investigation or proceeding relating to any of the
foregoing brought by a third party or by any Grantor or any other Loan Party or any of such
Borrower’s or such Loan Party’s directors, shareholders or creditors, and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence, fraud, bad faith or willful misconduct of such Indemnitee.



          (c) Any such amounts payable as provided hereunder shall be additional Secured Obligations
secured by the Collateral Documents. The provisions of this Section 8.03 shall remain
operative and in full force and effect regardless of the termination of this Agreement



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or any other
Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of
the Secured Obligations, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party. All amounts due under this Section 8.03 shall be payable
within 10 Business Days of written demand therefor.



          Section 8.04 Successors and Assigns. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the permitted successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral
Agent that are contained in this Agreement shall bind and inure to the benefit of their respective
successors and assigns.



          Section 8.05 Survival of Agreement. All covenants, agreements, indemnities, representations and
warranties made by the Grantors in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Revolving Credit Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party or on its behalf
and, notwithstanding that any Senior Credit Party may have had notice or knowledge of any Default
or Event of Default or incorrect representation or warranty at the time any credit is extended, and
shall continue in full force and effect until this Agreement is terminated as provided in
Section 8.13 hereof, or with respect to such Grantor or such Grantor is otherwise released
from its obligations under this Agreement in accordance with the terms hereof.



          Section 8.06 Counterparts; Effectiveness; Several Agreement. This Agreement and each other Loan
Document may be executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery by telecopier or
by electronic pdf copy of an executed counterpart of a signature page to this Agreement and each
other Loan Document shall be effective as delivery of an original executed counterpart of this
Agreement and such other Loan Document. This Agreement shall become effective when it shall have
been executed by the Grantors and the Collateral Agent and thereafter shall be binding upon and
inure to the benefit of each Grantor and the Collateral Agent and their respective permitted
successors and assigns, except that no Grantor shall have the right to assign its rights hereunder
or any interest herein except as otherwise permitted hereby or by the Credit Agreement. This
Agreement shall be construed as a separate agreement with respect to each Grantor and may be
amended, restated, modified, supplemented, waived or released with respect to any Grantor without
the approval of any other Grantor and without affecting the obligations of any other Grantor
hereunder.



          Section 8.07 Severability. If any provision of this Agreement or the other Loan Documents is held
to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining
provisions of this Agreement and the other Loan Documents shall not be affected or impaired
thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.



-29-









 





          Section 8.08 Right of Set-Off. In addition to any rights and remedies of the Lenders provided by
Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its
Affiliates and each L/C Issuer and its Affiliates is authorized at any time and from time to time,
after obtaining the prior written consent of the Administrative Agent (such consent not to be
unreasonably withheld), without prior notice to the Lead Borrower or any other Loan Party, any such
notice being waived by the Lead Borrower (on its own behalf and on behalf of each Loan Party and
its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final, in whatever currency) at
any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates or
such L/C Issuer and its Affiliates, as the case may be, to or for the credit or the account of the
respective Loan Parties and their Subsidiaries against any and all Secured Obligations owing to
such Lender and its Affiliates or such L/C Issuer and its Affiliates hereunder or under any other
Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender
and its Affiliates or such L/C Issuer and its Affiliates have made demand under this Agreement or
any other Loan Document and although such Secured Obligations may be contingent or unmatured or are
owed to a branch or office of such Lender or L/C Issuer different from the branch or office holding
such deposit or obligated on such indebtedness. Notwithstanding anything to the contrary contained
herein, no Lender or its Affiliates and no L/C Issuer or its Affiliates shall have a right to set
off and apply any deposits held or other Indebtedness owing by such Lender or its Affiliates or
such L/C Issuer or its Affiliates, as the case may be, to or for the credit or the account of any
Subsidiary of a Loan Party which is not a “United States person” within the meaning of Section
7701(a)(30) of the Code unless such Subsidiary is not a direct or indirect subsidiary of the
Borrowers. Each Lender and L/C Issuer agrees to notify the Lead Borrower and the Administrative
Agent promptly after any such set off and application made by such Lender or L/C Issuer, as the
case may be; provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Administrative Agent, each Lender and each L/C
Issuer under this Section 8.08 are in addition to other rights and remedies (including
other rights of setoff) that the Administrative Agent, such Lender and such L/C Issuer may have.



          Section 8.09 GOVERNING LAW.


THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK; PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK
SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN REGARD
TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL, SUCH LAWS OF SUCH OTHER
JURISDICTIONS SHALL CONTINUE TO APPLY TO THAT EXTENT.




          Section 8.10 WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE GRANTORS, THE COLLATERAL AGENT AND THE
SECURED PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.



-30-









 





          Section 8.11 Headings. Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this Agreement.



          Section 8.12 Security Interest Absolute. All rights of the Collateral Agent hereunder, the
Security Interest, the grant of a security interest in the Pledged Collateral and all obligations
of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with
respect to any of the Secured Obligations or any other agreement or instrument relating to any of
the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of,
all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document, or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or any release or
amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing
all or any of the Secured Obligations or (d) subject only to termination of a Grantor’s obligations
hereunder in accordance with the terms of Section 8.13, but without prejudice to
reinstatement rights under Section 2.4 of the Guaranty, any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Grantor in respect of the Secured
Obligations or this Agreement.



          Section 8.13 Termination or Release.



          (a) This Agreement, the Security Interest and all other security interests granted hereby
shall terminate with respect to all Secured Obligations when (i) the Revolving Credit Commitments
have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan
(including Swing Line Loans) and all fees and other Secured Obligations (other than (x) obligations
under Secured Hedge Agreements, (y) Cash Management Obligations and (z) contingent indemnity
obligations) shall have been paid in full, (iii) all Letters of Credit shall have expired or
terminated (or been Cash Collateralized or backstopped in an amount equal to 101.5% of the L/C
Obligations or in respect of which other arrangements reasonably satisfactory to the Administrative
Agent and L/C Issuers have been made) and (iv) all L/C Obligations have been reduced to zero (or
been Cash Collateralized or backstopped in an amount equal to 101.5% of the L/C Obligations or in
respect of which other arrangements reasonably satisfactory to the Administrative Agent and L/C
Issuers have been made); provided that in connection with the termination of this
Agreement, the Collateral Agent may require such indemnities as it shall reasonably deem necessary
or appropriate to protect the Secured Parties against loss on account of credits previously applied
to the Secured Obligations that may subsequently be reversed or revoked.



          (b) A Grantor shall automatically be released from its obligations hereunder and the
Security Interest in the Collateral of such Grantor shall be automatically released upon the
consummation of any transaction permitted by the Credit Agreement as a result of which such Grantor
(i) ceases to be a Restricted Subsidiary or is designated as an Unrestricted Subsidiary, (ii)
ceases to be a Material Domestic Subsidiary or (iii) becomes an Excluded Subsidiary;
provided that the Required Lenders shall have consented to such transaction (to the extent
required by the Credit Agreement) and the terms of such consent did not provide otherwise.



-31-









 





          (c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted
under the Credit Agreement (other than to another Grantor), or upon the effectiveness of any
written consent to the release of the security interest granted hereby in any Collateral pursuant
to Section 9.10 or 10.01 of the Credit Agreement, the security interest in such Collateral shall be
automatically released.



          (d) In connection with any termination or release pursuant to paragraph (a),
(b) or (c), the Collateral Agent shall promptly (after reasonable advance notice)
execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor
shall reasonably request to evidence such termination or release. Any execution and delivery of
documents pursuant to this Section 8.13 shall be without recourse to or warranty by the
Collateral Agent or any other Secured Party.



          (e) At any time that the respective Grantor desires that the Collateral Agent take any
action described in immediately preceding clause (d), it shall, upon request of the
Collateral Agent, deliver to the Collateral Agent an officer’s certificate certifying that the
release of the respective Collateral is permitted pursuant to paragraph (a), (b) or
(c). The Collateral Agent shall have no liability whatsoever to any Secured Party as the
result of any release of Collateral by it as permitted (or which the Collateral Agent in good faith
believes to be permitted) by this Agreement.



          Section 8.14 Additional Guarantors. Pursuant to Section 6.11 of the Credit Agreement, certain
Subsidiaries of the Loan Parties that were not in existence or not Grantors on the date of the
Credit Agreement that are required to become Guarantors pursuant to the Collateral and Guarantee
Requirement are required to enter in this Agreement as Grantors. Upon execution and delivery by
the Collateral Agent and a Restricted Subsidiary of a Security Agreement Supplement, such
Restricted Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any other Loan Party hereunder. The rights and obligations of each Loan
Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan
Party as a party to this Agreement.



          Section 8.15 Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the
Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument that the Collateral
Agent may deem necessary or advisable to accomplish the purposes hereof at any time after and
during the continuance of a Cash Dominion Event or an Event of Default, as applicable, which
appointment is irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, (i) upon the occurrence and during the
continuance of a Cash Dominion Event and (unless a Bankruptcy Event of Default has occurred and is
continuing) delivery of notice by the Collateral Agent to the Lead Borrower of its intent to
exercise such rights, with full power of substitution either in the Collateral Agent’s name or in
the name of such Grantor (a) to take actions required to be taken by the Grantors under
Article V of this Agreement; and (b) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; and (ii) upon the occurrence and during the continuance of an Event
of Default



-32-









 







and (unless a Bankruptcy Event of Default has occurred and is continuing) delivery of
notice by the Collateral Agent to the Borrower of its intent to exercise such rights, with full
power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to
demand, collect, receive payment of, give receipt for and give discharges and releases of all or
any of the Collateral; (b) to sign the name of any Grantor on any invoice or bill of lading
relating to any of the Collateral; (c) to send verifications of Accounts to any Account Debtor; (d)
to commence and prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (e) to settle, compromise, compound, adjust or
defend any actions, suits or proceedings relating to all or any of the Collateral; (f) to notify,
or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent or to a Collateral Account and adjust, settle or compromise the amount of payment of any
Account; and (g) to use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to
carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent
were the absolute owner of the Collateral for all purposes; provided that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral
Agent, or to present or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the powers granted to them
herein, and neither they nor their officers, directors, employees or agents shall be responsible to
any Grantor for any act or failure to act hereunder, except for their own gross negligence or
willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel,
agents or attorneys-in-fact.



          Section 8.16 Recourse; Limited Obligations. This Agreement is made with full recourse to each
Grantor and pursuant to and upon all the warranties, representations, covenants and agreements on
the part of such Grantor contained herein, in the Loan Documents and the other Loan Documents and
otherwise in writing in connection herewith or therewith, with respect to the Secured Obligations
of each applicable Secured Party. It is the desire and intent of each Grantor and each applicable
Secured Party that this Agreement shall be enforced against each Grantor to the fullest extent
permissible under the laws applied in each jurisdiction in which enforcement is sought.



          Section 8.17 Mortgages. In the event that any of the Collateral hereunder is also subject to a
valid and enforceable Lien under the terms of a Mortgage and the terms thereof are inconsistent
with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage
shall control in the case of Fixtures and real estate leases, letting and licenses of, and
contracts, and agreements relating to the lease of, real property, and the terms of this Agreement
shall control in the case of all other Collateral.



          Section 8.18 Intercreditor Agreement. Reference is made to the Intercreditor Agreement.
Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and
the rights, remedies, duties and obligations provided for herein are subject in all respects to the
provisions of the Intercreditor Agreement and, to the extent



-33-









 







provided therein, the applicable
Noteholder Lien Security Documents. In the event of any conflict or inconsistency between the
provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor
Agreement shall control.



[Signature Pages Follow]




-34-









 








          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date
first above written.



	 	 	 	 	 
	 	SCORPIO ACQUISITION CORPORATION

 	 
	 	By:  	/s/ Jason Giordano 	 
	 	 	Name:  	Jason Giordano 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	SCORPIO MERGER SUB CORPORATION

 	 
	 	By:  	/s/ Jason Giordano 	 
	 	 	Name:  	Jason Giordano 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 



[Signature Page to the Security Agreement]





S-1









 









          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.



	 	 	 	 	 
	 	POLYMER GROUP, INC.

 	 
	 	By:  	/s/ Dennis E. Norman 	 
	 	 	Name:  	Dennis E. Norman 	 
	 	 	Title:  	Chief Financial Officer 	 
	 



[Signature Page to the Security Agreement]




S-2









 





          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.



	 	 	 	 	 
	 	[CHICOPEE, INC.
DOMINION TEXTILE (USA), L.L.C.

FABRENE, L.L.C.

PGI EUROPE, INC.

PGI POLYMER, INC.]

 	 
	 	By:  	/s/ Dennis E. Norman 	 
	 	 	Name:  	Dennis E. Norman 	 
	 	 	Title:  	Chief Financial Officer 	 
	 



[Signature Page to the Security Agreement]





S-3









 









          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.



	 	 	 	 	 
	 	CITIBANK, N.A.

 	 
	 	By:  	/s/ Michael Smolow 	 
	 	 	Name:  	Michael Smolow 	 
	 	 	Title:  	Vice President 	 
	 



[Signature Page to the Security Agreement]





S-4









 








EXHIBIT A TO SECURITY AGREEMENT




FORM OF SECURITY AGREEMENT SUPPLEMENT




          SUPPLEMENT NO. __ dated as of ________, to the Security Agreement (as amended, restated,
supplemented or otherwise modified, the “Security Agreement”), dated as of January 28,
2011, by and among Polymer Group, Inc., a Delaware corporation and successor in interest to Scorpio
Merger Sub Corporation (the “Lead Borrower”), the other Borrowers party thereto, Holdings,
the other Guarantors party thereto (together with the Borrowers and Holdings, collectively, the
“Grantors”) and Citibank, N.A., as Administrative Agent and Collateral Agent (in such
capacity, the “Collateral Agent”) for the Secured Parties.



          A. Reference is made to the Credit Agreement, dated as of January 28, 2011 (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrowers, Holdings, the Collateral Agent, the other agents listed therein and the
Lenders from time to time party thereto.



          B. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Security Agreement referred to therein. Capitalized terms used
herein and not otherwise defined herein or in the Security Agreement shall have the meanings
assigned to such terms in the Credit Agreement.



          C. The Grantors have entered into the Security Agreement in order to induce (x) the Lenders
to make Loans and (y) each L/C Issuer to issue Letters of Credit. Section 8.14 of the Security
Agreement provides that additional Subsidiaries of the Loan Parties that are required to become
Guarantors pursuant to the Collateral and Guarantee Requirement may become Grantors under the
Security Agreement by execution and delivery of an instrument substantially in the form of this
Supplement. The undersigned Restricted Subsidiary (the “New Subsidiary”) is executing this
Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under
the Security Agreement in order to induce the Lenders to make additional Loans and as consideration
for Loans previously made.



          Accordingly, the Collateral Agent and the New Subsidiary agree as follows:




     Section 1. In accordance with Section 8.14 of the Security Agreement, the New
Subsidiary by its signature below becomes a Grantor under the Security Agreement with the
same force and effect as if originally named therein as a Grantor and the New Subsidiary
hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it
as a Grantor thereunder and (b) represents and warrants that the representations and
warranties made by it as a Grantor thereunder are true and correct on and as of the date
hereof; provided that, to the extent that such representations and warranties
specifically refer to an earlier date, they shall be true and correct in all respects as of
such earlier date. In furtherance of the foregoing, the New Subsidiary, as security for the
payment and performance in full of the Secured Obligations does hereby create and grant to
the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties,
their successors and assigns, a security interest in and lien on all of the New Subsidiary’s
right, title and interest in and to the Collateral (as defined in the Security Agreement) of
the



Exhibit A-1









 







New Subsidiary. Each reference to a “Grantor” in the Security Agreement shall be deemed
to include the New Subsidiary. The Security Agreement is hereby incorporated herein by
reference.




     Section 2. The New Subsidiary represents and warrants to the Collateral Agent and the
other Secured Parties that this Supplement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.




     Section 3. This Supplement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Supplement shall become
effective when the Collateral Agent shall have received a counterpart of this Supplement
that bears the signature of the New Subsidiary and the Collateral Agent has executed a
counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart of this
Supplement.




     Section 4. The New Subsidiary hereby represents and warrants that (a) set forth on
Schedule I attached hereto is a true and correct schedule of the location of any and all
Collateral of the New Subsidiary and (b) set forth under its signature hereto is the true
and correct legal name of the New Subsidiary, its jurisdiction of formation and the location
of its chief executive office (or if different, its “location” as determined in accordance
with Section 9-307 of the UCC).




     Section 5. Except as expressly supplemented hereby, the Security Agreement shall
remain in full force and effect.




     Section 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.




     Section 7. In case any one or more of the provisions contained in this Supplement
should be held invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and in the Security Agreement
shall not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.




     Section 8. All communications and notices hereunder shall be in writing and given as
provided in Section 8.01 of the Security Agreement.




     Section 9. The New Subsidiary agrees to reimburse the Collateral Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including all
reasonable attorneys’ fees of counsel for the Collateral Agent, court costs, expenses and
other charges relating thereto.



Exhibit A-2









 





          IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this
Supplement to the Security Agreement as of the date first above written.



	 	 	 	 	 
	 	[NAME OF NEW SUBSIDIARY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Legal Name:

Jurisdiction of Formation:

Location of Chief Executive Office:
 	 



	 	 	 	 	 
	 	CITIBANK, N.A., as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit A-3









 






	 	 	 	 	 



SCHEDULE I TO SECURITY AGREEMENT SUPPLEMENT




LOCATION OF COLLATERAL



	 	 	 

	Description
	 	Location






EQUITY INTERESTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Number and	 	 
	 	 	Number of	 	Registered	 	Class of	 	Percentage of
	Issuer	 	Certificate	 	Owner	 	Equity Interest	 	Equity Interests
	 

	 	 
	 	 
	 	 
	 	 





PROMISSORY NOTES




	 	 	 	 	 	 	 
	 	 	Principal	 	 	 	 
	 	 	Amount as of the date	 	 	 	 
	 	 	of issuance	 	Date of	 	 
	Issuer	 	(or delivery)	 	Note/Instrument	 	Maturity Date
	 

	 	 
	 	 
	 	 





COMMERCIAL TORT CLAIMS




INTELLECTUAL PROPERTY



((a) U.S. Patents, U.S. Patent Applications, (b) U.S. Trademark Registrations and Applications, (c)
U.S. Copyright Registrations and Applications and (d) exclusive Licenses of U.S. Patents, Patent
Applications, Trademark Registrations or Applications and Copyrights where the New Subsidiary is
the Licensee)




REAL PROPERTY (LEASED AND OWNED)




Schedule I-1









 








BANK ACCOUNTS



Schedule I-2









 





EXHIBIT B TO SECURITY AGREEMENT



Form of Perfection Certificate



[TO BE INSERTED]



Exhibit B-1









 





EXHIBIT C TO SECURITY AGREEMENT




GRANT OF SECURITY INTEREST

IN UNITED STATES TRADEMARKS



This Trademark Security Agreement, dated as of [____________] by and between [Name of Grantor], a [
] formed under the laws of [ ] (the “Grantor”), in favor of CITIBANK, N.A., in its
capacity as Collateral Agent pursuant to the Credit Agreement dated as of the date hereof (in such
capacity, the “Grantee”).




W I T N E S S E T H:



Whereas, the Grantor is party to a Security Agreement of even date herewith (the
“Security Agreement”) in favor of the Grantee pursuant to which the Grantor is required to
execute and deliver this Trademark Security Agreement;



Now, Therefore, in consideration of the premises and to induce the Grantee, for
the benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees
with the Grantee as follows:



SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the Security Agreement.



SECTION 2. Grant of Security Interest in Trademark Collateral. The Grantor hereby
pledges and grants to the Grantee for the benefit of the Secured Parties a lien on and security
interest in and to all of its right, title and interest in, to and under all the Trademarks of the
Grantor including, without limitation, those items listed on Schedule I attached hereto and all
Proceeds of any and all of the foregoing; provided that any United States Trademark,
applications filed in the United States Patent and Trademark Office on the basis of any Grantor’s
“intent-to-use” such Trademarks will not be deemed to be Collateral unless and until a “Statement
of Use” or “Amendment to Allege Use” has been filed and accepted in the United States Patent and
Trademark Office, whereupon such application shall be automatically subject to the security
interest granted herein and deemed to be included in the Collateral.



SECTION 3. Security Agreement. The security interest granted pursuant to this
Trademark Security Agreement is granted in connection with the Security Agreement and is expressly
subject to the terms and conditions thereof. Grantor hereby acknowledges and affirms that the
rights and remedies of the Grantee with respect to the security interest in the Trademarks made and
granted hereby are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein. The Security Agreement
(and all rights and remedies of the Lenders thereunder) shall remain in full force and effect in
accordance with its terms. In the event that any provision of this Trademark Security Agreement is
deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall
control.



SECTION 4. Purpose. This Trademark Security Agreement has been executed and delivered
by the Grantor for the purpose of recording the grant of security interest herein with the United
States Patent and Trademark Office.




Exhibit C-1









 







SECTION 5. Termination. Upon the payment in full of the Secured Obligations and
termination of the Security Agreement, the Grantee shall, at the reasonable request of the Grantor,
execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form
releasing the collateral pledge, grant, lien and security interest in the Trademarks listed on
Schedule I attached hereto.



SECTION 6. Counterparts. This Trademark Security Agreement may be executed in any
number of counterparts, all of which shall constitute one and the same instrument, and any party
hereto may execute this Trademark Security Agreement by signing and delivering one or more
counterparts.




[signature page follows]







Exhibit C-2









 







In Witness Whereof, the Grantor has caused this Trademark Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set forth above.




	 	 	 	 	 
	 	Very truly yours,



[NAME OF GRANTOR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Accepted and Agreed:





CITIBANK, N.A.,

as Collateral Agent and Grantee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit C-3









 






	 	 	 	 	 



SCHEDULE I

to

GRANT OF SECURITY INTEREST

IN UNITED STATES TRADEMARKS




	 	 	 	 	 	 	 
	Owner	 	Trademark	 	Registration No. or Serial No.
	  

	 	 





Schedule I-1









 





EXHIBIT D TO SECURITY AGREEMENT

GRANT OF SECURITY INTEREST

IN UNITED STATES PATENTS



This Patent Security Agreement, dated as of [____________], by and between [Name of Grantor], a [
] formed under the laws of [ ] (the “Grantor”), in favor of CITIBANK, N.A., in its
capacity as Collateral Agent pursuant to the Credit Agreement dated as of the date hereof (in such
capacity, the “Grantee”).




W I T N E S S E T H :



Whereas, the Grantor is party to a Security Agreement of even date herewith (the
“Security Agreement”) in favor of the Grantee pursuant to which the Grantor is required to
execute and deliver this Patent Security Agreement;



Now, Therefore, in consideration of the premises and to induce the Grantee, for the
benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees with
the Grantee as follows:



SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the Security Agreement.



SECTION 2. Grant of Security Interest in Patent Collateral. The Grantor hereby pledges
and grants to the Grantee for the benefit of the Secured Parties a lien on and security interest in
and to all of its right, title and interest in, to and under all the Patents of the Grantor
including, without limitation, those items listed on Schedule I attached hereto and all Proceeds of
any and all of the foregoing.



SECTION 3. Security Agreement. The security interest granted pursuant to this Patent
Security Agreement is granted in connection with the Security Agreement and is expressly subject to
the terms and conditions thereof. Grantor hereby acknowledges and affirms that the rights and
remedies of the Grantee with respect to the security interest in the Patents made and granted
hereby are more fully set forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein. The Security Agreement (and all
rights and remedies of the Lenders thereunder) shall remain in full force and effect in accordance
with its terms. In the event that any provision of this Patent Security Agreement is deemed to
conflict with the Security Agreement, the provisions of the Security Agreement shall control.



SECTION 4. Purpose. This Patent Security Agreement has been executed and delivered by
the Grantor for the purpose of recording the grant of security interest herein with the United
States Patent and Trademark Office.




SECTION 5. Termination. Upon the payment in full of the Secured Obligations and
termination of the Security Agreement, the Grantee shall, at the reasonable request of the Grantor,
execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form
releasing



Exhibit D-1









 







the collateral pledge, grant, lien and security interest in the Patents listed on
Schedule I attached hereto.


SECTION 6. Counterparts. This Patent Security Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument, and any party hereto
may execute this Patent Security Agreement by signing and delivering one or more counterparts.




[signature page follows]







Exhibit D-2









 







In Witness Whereof, the Grantor has caused this Patent Security Agreement to be executed
and delivered by its duly authorized officer as of the date first set forth above.




	 	 	 	 	 
	 	Very truly yours,



[NAME OF GRANTOR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Accepted and Agreed:


CITIBANK, N.A.,

as Collateral Agent and Grantee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit D-3









 






	 	 	 	 	 



SCHEDULE I

to

GRANT OF SECURITY INTEREST




IN UNITED STATES PATENTS




	 	 	 	 	 
	 	 	Patent or	 	 
	 	 	Patent	 	 
	 	 	Application	 	 
	Owner	 	Number	 	Title
	 

	 	 
	 	 





Schedule I-1









 





EXHIBIT E TO SECURITY AGREEMENT




GRANT OF SECURITY INTEREST

IN UNITED STATES COPYRIGHTS



This Copyright Security Agreement, dated as of [____________], by and between [Name of Grantor], a
[       ] formed under the laws of [       ] (the “Grantor”), in favor of CITIBANK, N.A., in
its capacity as Collateral Agent pursuant to the Credit Agreement dated as of the date hereof (in
such capacity, the “Grantee”).




W I T N E S S E T H :



Whereas, the Grantor is party to a Security Agreement of even date herewith (the
“Security Agreement”) in favor of the Grantee pursuant to which the Grantor is required to
execute and deliver this Copyright Security Agreement;



Now, Therefore, in consideration of the premises and to induce the Grantee, for the
benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees with
the Grantee as follows:



SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein have the meaning given to them in the Security Agreement.



SECTION 2. Grant of Security Interest in Copyright Collateral. The Grantor hereby
pledges and grants to the Grantee for the benefit of the Secured Parties a lien on and security
interest in and to all of its right, title and interest in, to and under all the Copyrights of the
Grantor including, without limitation, those items listed on Schedule I attached hereto and all
Proceeds of any and all of the foregoing.



SECTION 3. Security Agreement. The security interest granted pursuant to this
Copyright Security Agreement is granted in connection with the Security Agreement and is expressly
subject to the terms and conditions thereof. Grantor hereby acknowledges and affirms that the
rights and remedies of the Grantee with respect to the security interest in the Copyrights made and
granted hereby are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein. The Security Agreement
(and all rights and remedies of the Lenders thereunder) shall remain in full force and effect in
accordance with its terms. In the event that any provision of this Copyright Security Agreement is
deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall
control.



SECTION 4. Purpose. This Copyright Security Agreement has been executed and delivered
by the Grantor for the purpose of recording the grant of security interest herein with the United
States Copyright Office.



SECTION 5. Termination. Upon the payment in full of the Secured Obligations and
termination of the Security Agreement, the Grantee shall, at the reasonable request of the Grantor,
execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form
releasing


Exhibit E-1









 






the collateral pledge, grant, lien and security interest in the Copyrights listed on
Schedule I attached hereto.



SECTION 6. Counterparts. This Copyright Security Agreement may be executed in any
number of counterparts, all of which shall constitute one and the same instrument, and any party
hereto may execute this Copyright Security Agreement by signing and delivering one or more
counterparts.




[signature page follows]







Exhibit E-2









 







In Witness Whereof, the Grantor has caused this Copyright Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set forth above.




	 	 	 	 	 
	 	Very truly yours,



[NAME OF GRANTOR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Accepted and Agreed:



CITIBANK, N.A.,

as Collateral Agent and Grantee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit E-3









 






	 	 	 	 	 



SCHEDULE I

to

GRANT OF SECURITY INTEREST

IN UNITED STATES COPYRIGHTS




	 	 	 
	 	 	Registration
	Title	 	Number
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 






Exhibit E-4