Exhibit 10.4



 






Exhibit 10.4




Execution Copy




SECOND LIEN PLEDGE AND SECURITY AGREEMENT




by and between




DAY INTERNATIONAL, INC.

DAY INTERNATIONAL GROUP, INC.

VARN INTERNATIONAL, INC.

DAY INTERNATIONAL FINANCE, INC.

NETWORK DISTRIBUTION INTERNATIONAL

NETWORK DISTRIBUTION INTERNATIONAL, INC.




as Grantors




and




THE BANK OF NEW YORK,




as Collateral Agent




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	PAGE	 
	SECTION 1. DEFINITIONS; GRANT OF SECURITY
	 	 	2	 
	1.1 General Definitions
	 	 	2	 
	1.2 Definitions; Interpretation
	 	 	9	 
	 
	 	 	 	 
	SECTION 2. GRANT OF SECURITY
	 	 	10	 
	2.1 Grant of Security
	 	 	10	 
	2.2 Certain Limited Exclusions
	 	 	10	 
	2.3 Lien Subordination
	 	 	10	 
	 
	 	 	 	 
	SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE
	 	 	11	 
	3.1 Security for Obligations
	 	 	11	 
	3.2 Continuing Liability Under Collateral
	 	 	11	 
	 
	 	 	 	 
	SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS
	 	 	12	 
	4.1 Generally
	 	 	12	 
	4.2 Equipment and Inventory
	 	 	15	 
	4.3 Receivables
	 	 	16	 
	4.4 Investment Related Property
	 	 	18	 
	4.5 Material Contracts
	 	 	24	 
	4.6 Letter of Credit Rights
	 	 	25	 
	4.7 Intellectual Property
	 	 	26	 
	4.8 Commercial Tort Claims
	 	 	29	 
	 
	 	 	 	 
	SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS
	 	 	29	 
	5.1 Access; Right of Inspection
	 	 	30	 
	5.2 Further Assurances
	 	 	30	 
	5.3 Additional Grantors
	 	 	31	 
	 
	 	 	 	 
	SECTION 6. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT
	 	 	31	 
	6.1 Power of Attorney
	 	 	31	 
	6.2 No Duty on the Part of Collateral Agent or Secured Parties
	 	 	32	 
	 
	 	 	 	 
	SECTION 7. REMEDIES
	 	 	32	 
	7.1 Generally
	 	 	32	 
	7.2 Application of Proceeds
	 	 	34	 
	7.3 Sales on Credit
	 	 	34	 
	7.4 Deposit Accounts
	 	 	34	 
	7.5 Investment Related Property
	 	 	35	 
	7.6 Intellectual Property
	 	 	35	 
	7.7 Cash Proceeds
	 	 	37	 
	 
	 	 	 	 
	SECTION 8. COLLATERAL AGENT
	 	 	37	 
	 
	 	 	 	 
	SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS
	 	 	38	 






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	SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM
	 	 	38	 
	 
	 	 	 	 
	SECTION 11. MISCELLANEOUS
	 	 	39	 
	 
	 	 	 	 
	SECTION 12. CONFLICTS WITH FIRST LIEN LOAN DOCUMENTS
	 	 	38	 
	 
	 	 	 	 
	SCHEDULE 4.1 — GENERAL INFORMATION
	 	 	 	 
	 
	 	 	 	 
	SCHEDULE 4.2 — LOCATION OF EQUIPMENT AND INVENTORY
	 	 	 	 
	 
	 	 	 	 
	SCHEDULE 4.4 — INVESTMENT RELATED PROPERTY
	 	 	 	 
	 
	 	 	 	 
	SCHEDULE 4.6 — DESCRIPTION OF LETTERS OF CREDIT
	 	 	 	 
	 
	 	 	 	 
	SCHEDULE 4.7
— INTELLECTUAL PROPERTY - EXCEPTIONS
	 	 	 	 
	 
	 	 	 	 
	SCHEDULE 4.8 — COMMERCIAL TORT CLAIMS
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT A — PLEDGE SUPPLEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT B — UNCERTIFICATED SECURITIES CONTROL AGREEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT C — SECURITIES ACCOUNT CONTROL AGREEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT D — DEPOSIT ACCOUNT CONTROL AGREEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT E — TRADEMARK SECURITY AGREEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT F — COPYRIGHT SECURITY AGREEMENT
	 	 	 	 
	 
	 	 	 	 
	EXHIBIT G — PATENT SECURITY AGREEMENT
	 	 	 	 






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          This SECOND LIEN PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or
otherwise modified from time to time, this “Agreement”), dated as of December 5, 2005, is made by
and between DAY INTERNATIONAL, INC., a Delaware corporation (the “Company”), DAY INTERNATIONAL
GROUP, INC., a Delaware corporation (“Holdings”) and CERTAIN SUBSIDIARIES OF THE COMPANY, as
Guarantors (described below) (each of the Guarantors, the Company and Holdings are referred to
hereinafter individually as a “Grantor”, and collectively as the “Grantors”), and THE BANK OF NEW
YORK, as collateral agent for the Secured Parties described below (together with its successors,
designees and permitted assigns in such capacity, the “Collateral Agent”).




RECITALS:




     WHEREAS, reference is made to that certain Credit and Guaranty Agreement, dated as of the date
hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), by and among the COMPANY, HOLDINGS AND CERTAIN AFFILIATES OF THE COMPANY as
guarantors party thereto (the “Guarantors”), the financial institutions from time to time parties
thereto (such financial institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), GOLDMAN
SACHS CREDIT PARTNERS L.P. (“GSCP”), as Sole Lead Arranger, Sole Bookrunner and Sole Syndication
Agent (in each such capacity, the “Arranger”), and THE BANK OF NEW YORK as Administrative Agent (in
such capacity, the “Administrative Agent”) and as Collateral Agent;



     WHEREAS, subject to the terms and conditions of the Credit Agreement, certain Grantors may
enter into one or more Hedge Agreements with one or more Lender Counterparties;



     WHEREAS, in order to induce the Secured Parties (as hereinafter defined) to provide Loans and
other financial accommodations under the Credit Agreement and Hedge Agreements, each Guarantor has
agreed pursuant to the Credit Agreement to guaranty all of the Obligations (as hereinafter defined)
and have agreed to cause certain future Affiliates of the Company to guaranty all of the
Obligations (the “Second Lien Guaranty”); and



     WHEREAS, in order to induce the Collateral Agent and the Secured Parties to enter into the
Credit Agreement and other Hedge Agreements and to induce the Secured Parties to make the Loans and
provide other financial accommodations, Grantors have agreed to grant a continuing Lien on the
Collateral (as hereinafter defined) to secure all of the Obligations;



     WHEREAS, as of the date hereof, Grantors have also entered into (a) that certain Credit and
Guaranty Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise
modified from time to time, the “First Lien Credit Agreement”), by and among the Grantors, the
lenders party thereto from time to time, GSCP, as sole bookrunner, sole lead arrangers and sole
syndication agent (in each such capacity, the “First Lien Arranger”), and as administrative agent
and collateral agent (together with its permitted successors and assigns, in such capacities, the
“First Lien Collateral Agent”), and (b) that certain First Lien Pledge and Security Agreement,
dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to
time, the “First Lien Security Agreement”), by and between each of the Grantors and the First Lien
Collateral Agent, pursuant to which each Grantor has granted a first priority Lien to the First
Lien Collateral Agent for the benefit of the holders of First Lien Obligations (as defined in the
Intercreditor Agreement referred to below) on the Collateral to secure such Grantor’s obligations
under the First Lien Loan Documents (as defined in the Intercreditor Agreement); and



 









 







     WHEREAS, Company, the First Lien Collateral Agent and the Collateral Agent have entered into
an Intercreditor Agreement, dated as of the date hereof (as may be amended, supplemented or
otherwise from time to time, the “Intercreditor Agreement”);



     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and mutual
covenants herein contained, each Grantor and the Collateral Agent and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:



SECTION 1. DEFINITIONS; GRANT OF SECURITY.




     1.1 General Definitions. In this Agreement, the following terms shall have the following
meanings:



          “Account Debtor” shall mean each Person who is obligated on a Receivable or any Supporting
Obligation related thereto.




          “Accounts” shall mean all “accounts” as defined in Article 9 of the UCC.




          “Additional Grantors” shall have the meaning assigned in Section 5.3.




          “Agreement” shall have the meaning set forth in the preamble.




          “Assigned Agreements” shall mean all agreements and contracts to which such Grantor is a party
as of the date hereof, or to which such Grantor becomes a party after the date hereof, including,
without limitation, each Material Contract, as each such agreement may be amended, supplemented or
otherwise modified from time to time.




          “Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as now
and hereafter in effect, or any successor statute.




          “Cash Proceeds” shall have the meaning assigned in Section 7.7.




          “Chattel Paper” shall mean all “chattel paper” as defined in Article 9 of the UCC, including,
without limitation, “electronic chattel paper” or “tangible chattel paper”, as each term is defined
in Article 9 of the UCC.




          “Collateral” shall have the meaning assigned in Section 2.1.




          “Collateral Account” shall mean any account established by the Collateral Agent.




          “Collateral Agent” shall have the meaning set forth in the preamble.




          “Collateral Records” shall mean books, records, ledger cards, files, correspondence, customer
lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes,
disks and related data processing software and similar items that at any time evidence or contain
information relating to any of the Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon.




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          “Collateral Support” shall mean all property (real or personal) assigned, hypothecated or
otherwise securing any Collateral and shall include any security agreement or other agreement
granting a lien or security interest in such real or personal property.




          “Commercial Tort Claims” shall mean all “commercial tort claims” as defined in Article 9 of
the UCC, including, without limitation, all commercial tort claims listed on Schedule 4.8 (as such
schedule may be amended or supplemented from time to time).




          “Commodities Accounts” (i) shall mean all “commodity accounts” as defined in Article 9 of the
UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under
the heading “Commodities Accounts” (as such schedule may be amended or supplemented from time to
time).




          “Company” shall have the meaning set forth in the recitals.




          “Controlled Foreign Corporation” shall mean “controlled foreign corporation” as defined in the
Tax Code.




          “Copyright Licenses” shall mean any and all agreements providing for the granting of any right
in or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, without
limitation, each agreement referred to in Schedule 4.7(B) (as such schedule may be amended or
supplemented from time to time).




          “Copyrights” shall mean all United States, and foreign copyrights (including Community
designs), including but not limited to copyrights in software and databases, and all Mask Works (as
defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and,
with respect to any and all of the foregoing: (i) all registrations and applications therefor
including, without limitation, the registrations and applications referred to in Schedule 4.7(A)
(as such schedule may be amended or supplemented from time to time), (ii) all extensions and
renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to
sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds
of suit.




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




          “Deposit Accounts” (i) shall mean all “deposit accounts” as defined in Article 9 of the UCC
and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the
heading “Deposit Accounts” (as such schedule may be amended or supplemented from time to time).




          “Documents” shall mean all “documents” as defined in Article 9 of the UCC.




          “Equipment” shall mean: (i) all “equipment” as defined in Article 9 of the UCC, (ii) all
machinery, manufacturing equipment, data processing equipment, computers, office equipment,
furnishings, furniture, appliances, fixtures and tools (in each case, regardless of whether
characterized as equipment under the UCC) and (iii) all accessions or additions thereto, all parts
thereof, whether or not at any time of determination incorporated or installed therein or attached
thereto, and all replacements therefor, wherever located, now or hereafter existing, including any
fixtures.




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          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and any successor thereto.




          “Event of Default” shall mean an Event of Default under any of the Second Lien Credit
Document.




          “First Lien Collateral Agent” shall have the meaning set forth in the recitals.




          “First Lien Credit Agreement” shall have the meaning set forth in the recitals.




          “First Lien Loan Documents” shall have the meaning set forth in the Intercreditor Agreement.




          “First Lien Security Agreement” shall have the meaning set forth in the recitals.




          “Foreign Deposit Accounts” shall mean the Company’s existing Deposit Accounts on the date
hereof in China, Japan and the U.K., in an aggregate amount not to exceed $1,000,000 on the date
hereof and at any time thereafter.




          “General Intangibles” (i) shall mean all “general intangibles” as defined in Article 9 of the
UCC, including “payment intangibles” also as defined in Article 9 of the UCC and (ii) shall
include, without limitation, all interest rate or currency protection or hedging arrangements, all
tax refunds, all licenses, permits, concessions and authorizations, all Assigned Agreements and all
Intellectual Property (in each case, regardless of whether characterized as general intangibles
under the UCC).




          “Goods” (i) shall mean all “goods” as defined in Article 9 of the UCC and (ii) shall include,
without limitation, all Inventory and Equipment (in each case, regardless of whether characterized
as goods under the UCC).




          “Grantors” shall have the meaning set forth in the preamble.




          “Guarantors” shall have the meaning set forth in the recitals.




          “Hedge Agreement” shall mean any (i) interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedging agreement or other similar
agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure
associated with Grantors’ operations or (ii) foreign exchange contract, currency swap agreement,
futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of
which is for the purpose of hedging the foreign currency risk associated with Grantors’ operations.




          “Indemnitee” shall mean the Collateral Agent, and its and its Affiliates’ officers, partners,
directors, trustees, employees and agents.




          “Instruments” shall mean all “instruments” as defined in Article 9 of the UCC.




          “Insurance” shall mean (i) all insurance policies covering any or all of the Collateral
(regardless of whether the Collateral Agent is the loss payee thereof) and (ii) any key man life
insurance policies.




4









 








          “Intellectual Property” shall mean, collectively, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the
Trade Secret Licenses.




          “Intercreditor Agreement” shall have the meaning set forth in the recitals.




          “Inventory” shall mean (i) all “inventory” as defined in Article 9 of the UCC and (ii) all
goods held for sale or lease or to be furnished under contracts of service or so leased or
furnished, all raw materials, work in process, finished goods, and materials used or consumed in
the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such
inventory or otherwise used or consumed in any Grantor’s business; all goods in which any Grantor
has an interest in mass or a joint or other interest or right of any kind; and all goods which are
returned to or repossessed by any Grantor, all computer programs embedded in any goods and all
accessions thereto and products thereof (in each case, regardless of whether characterized as
inventory under the UCC).




          “Investment Accounts” shall mean the Collateral Account, Securities Accounts, Commodities
Accounts and Deposit Accounts.




          “Investment Related Property” shall mean: (i) all “investment property” (as such term is
defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as
investment property under the UCC): all Pledged Equity Interests, Pledged Debt, the Investment
Accounts and certificates of deposit.




          “Lender” shall have the meaning set forth in the recitals.




          “Letter of Credit Right” shall mean “letter-of-credit right” as defined in Article 9 of the
UCC.




          “Lien” shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or
encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement, and any lease in the nature thereof) and any option, trust or
other preferential arrangement having the practical effect of any of the foregoing and (ii) in the
case of Pledged Equity Interests, any purchase option, call or similar right of a third party with
respect to such Pledged Equity Interests.




          “Material Adverse Effect” shall mean a material adverse effect on (i) the business,
operations, properties, assets, condition (financial or otherwise) or prospects of Company and its
subsidiaries taken as a whole; (ii) the ability of any Grantor to fully and timely perform its
Obligations; (iii) the legality, validity, binding effect or enforceability against a Grantor of a
Second Lien Credit Document to which it is a party; or (iv) the rights, remedies and benefits
available to, or conferred upon, any agent and any Lender or any Secured Party under any Second
Lien Credit Document.




          “Material Contract” shall mean any contract or other arrangement to which any Grantor is a
party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure
to renew could reasonably be expected to have a Material Adverse Effect.




          “Money” shall mean “money” as defined in the UCC.




5









 








          “Non-Assignable Contract” shall mean any agreement, contract or license to which any Grantor
is a party that by its terms purports to restrict or prevent the assignment or granting of a
security interest therein (either by its terms or by any federal or state statutory prohibition or
otherwise irrespective of whether such prohibition or restriction is enforceable under Section
9-406 through 409 of the UCC).




          “Obligations” shall mean all obligations of every nature of each Grantor from time to time
owed to the Secured Parties or any of them under the Credit Agreement, Hedge Agreements and other
Second Lien Credit Documents, whether for principal or interest, and shall include all interest
accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding
(as defined in the Intercreditor Agreement) accrue) after commencement of an Insolvency or
Liquidation Proceeding in accordance with the rate specified in the relevant Second Lien Credit
Document whether or not the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding, reimbursement of amounts drawn under letters of credit, payments for early
termination of Hedge Agreements, fees, expenses, indemnification or otherwise.




          “Patent Licenses” shall mean all agreements providing for the granting of any right in or to
Patents (whether such Grantor is licensee or licensor thereunder) including, without limitation,
each agreement referred to in Schedule 4.7(D) (as such schedule may be amended or supplemented from
time to time).




          “Patents” shall mean all United States and foreign patents and certificates of invention, or
similar industrial property rights, and applications for any of the foregoing, including, but not
limited to: (i) each patent and patent application referred to in Schedule 4.7(C) hereto (as such
schedule may be amended or supplemented from time to time), (ii) all reissues, divisions,
continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all
rights corresponding thereto throughout the world, (iv) all inventions and improvements described
therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all
licenses, claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages,
and proceeds of suit.




          “Pledge Supplement” shall mean any supplement to this agreement in substantially the form of
Exhibit A.




          “Pledged Debt” shall mean all Indebtedness owed to such Grantor, including, without
limitation, all Indebtedness described on Schedule 4.4(A) under the heading “Pledged Debt” (as such
schedule may be amended or supplemented from time to time), issued by the obligors named therein,
the instruments evidencing such Indebtedness, and all interest, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of such Indebtedness.




          “Pledged Equity Interests” shall mean all Pledged Stock, Pledged LLC Interests, Pledged
Partnership Interests and Pledged Trust Interests.




          “Pledged LLC Interests” shall mean all interests in any limited liability company including,
without limitation, all limited liability company interests listed on Schedule 4.4(A) under the
heading “Pledged LLC Interests” (as such schedule may be amended or supplemented from time to time)
and the certificates, if any, representing such limited liability company interests and any
interest of such Grantor on the books and records of such limited

6









 








liability company or on the books and records of any securities intermediary pertaining to
such interest and all dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such limited liability company
interests.




          “Pledged Partnership Interests” shall mean all interests in any general partnership, limited
partnership, limited liability partnership or other partnership including, without limitation, all
partnership interests listed on Schedule 4.4(A) under the heading “Pledged Partnership Interests”
(as such schedule may be amended or supplemented from time to time) and the certificates, if any,
representing such partnership interests and any interest of such Grantor on the books and records
of such partnership or on the books and records of any securities intermediary pertaining to such
interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities
and other property or proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such partnership interests.




          “Pledged Stock” shall mean all shares of capital stock owned by such Grantor, including,
without limitation, all shares of capital stock described on Schedule 4.4(A) under the heading
“Pledged Stock” (as such schedule may be amended or supplemented from time to time), and the
certificates, if any, representing such shares and any interest of such Grantor in the entries on
the books of the issuer of such shares or on the books of any securities intermediary pertaining to
such shares, and all dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.




          “Pledged Trust Interests” shall mean all interests in a Delaware business trust or other trust
including, without limitation, all trust interests listed on Schedule 4.4(A) under the heading
“Pledged Trust Interests” (as such schedule may be amended or supplemented from time to time) and
the certificates, if any, representing such trust interests and any interest of such Grantor on the
books and records of such trust or on the books and records of any securities intermediary
pertaining to such interest and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such trust interests.




          “Proceeds” shall mean: (i) all “proceeds” as defined in Article 9 of the UCC, (ii) payments
or distributions made with respect to any Investment Related Property and (iii) whatever is
receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary.




          “Receivables” shall mean all rights to payment, whether or not earned by performance, for
goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services
rendered or to be rendered, including, without limitation all such rights constituting or evidenced
by any Account, Chattel Paper, Instrument, General Intangible or Investment Related Property,
together with all of Grantor’s rights, if any, in any goods or other property giving rise to such
right to payment and all Collateral Support and Supporting Obligations related thereto and all
Receivables Records.




          “Receivables Records” shall mean (i) all original copies of all documents, instruments or
other writings or electronic records or other Records evidencing the Receivables, (ii) all books,
correspondence, credit or other files, Records, ledger sheets or cards, invoices, and




7









 







other papers relating to Receivables, including, without limitation, all tapes, cards,
computer tapes, computer discs, computer runs, record keeping systems and other papers and
documents relating to the Receivables, whether in the possession or under the control of Grantor or
any computer bureau or agent from time to time acting for Grantor or otherwise, (iii) all evidences
of the filing of financing statements and the registration of other instruments in connection
therewith, and amendments, supplements or other modifications thereto, notices to other creditors
or secured parties, and certificates, acknowledgments, or other writings, including, without
limitation, lien search reports, from filing or other registration officers, (iv) all credit
information, reports and memoranda relating thereto and (v) all other written or nonwritten forms
of information related in any way to the foregoing or any Receivable.




          “Record” shall have the meaning specified in Article 9 of the UCC.




          “Second Lien Credit Documents” shall mean the Credit Agreement, the Credit Documents and any
Hedge Agreements entered into with a Lender Counterparty, and each of the other agreements,
documents and instruments providing for or evidencing any other Obligation, and any other document
or instrument executed or delivered at any time in connection with any Obligations, including any
intercreditor or joinder agreement among holders of Obligations, to the extent such are effective
at the relevant time, as each may be amended, restated, supplemented, modified, renewed or extended
from time to time in accordance with the provisions of the Intercreditor Agreement




          “Secured Obligations” shall have the meaning assigned in Section 3.1.




          “Secured Parties” shall mean the Agents, the Lenders and the Lender Counterparties and shall
include, without limitation, all former Agents, Lenders and Lender Counterparties to the extent
that any Obligations owing to such Persons were incurred while such Persons were Agents, Lenders or
Lender Counterparties and such Obligations have not been paid or satisfied in full.




          “Securities” shall mean any stock, shares, partnership interests, voting trust certificates,
certificates of interest or participation in any profit-sharing agreement or arrangement, options,
warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly known as
“securities” or any certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.




          “Securities Accounts” (i) shall mean all “securities accounts” as defined in Article 8 of the
UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4(A) under
the heading “Securities Accounts” (as such schedule may be amended or supplemented from time to
time).




          “Supporting Obligation” shall mean all “supporting obligations” as defined in Article 9 of the
UCC.




          “Tax Code” shall mean the United States Internal Revenue Code of 1986, as amended from time to
time.




          “Trademark Licenses” shall mean any and all agreements providing for the granting of any right
in or to Trademarks (whether such Grantor is licensee or licensor

8









 








thereunder) including, without limitation, each agreement referred to in Schedule 4.7(F) (as
such schedule may be amended or supplemented from time to time).




          “Trademarks” shall mean all United States, and foreign trademarks, trade names, corporate
names, company names, business names, fictitious business names, Internet domain names, service
marks, certification marks, collective marks, logos, other source or business identifiers, designs
and general intangibles of a like nature, all registrations and applications for any of the
foregoing including, but not limited to: (i) the registrations and applications referred to in
Schedule 4.7(E) (as such schedule may be amended or supplemented from time to time), (ii) all
extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected
with the use of and symbolized by the foregoing, (iv) the right to sue for past, present and future
infringement or dilution of any of the foregoing or for any injury to goodwill, and (v) all
Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments,
claims, damages, and proceeds of suit.




          “Trade Secret Licenses” shall mean any and all agreements providing for the granting of any
right in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including,
without limitation, each agreement referred to in Schedule 4.7(G) (as such schedule may be amended
or supplemented from time to time).




          “Trade Secrets” shall mean all trade secrets and all other confidential or proprietary
information and know-how whether or not such Trade Secret has been reduced to a writing or other
tangible form, including all documents and things embodying, incorporating, or referring in any way
to such Trade Secret, including but not limited to: (i) the right to sue for past, present and
future misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages,
and proceeds of suit.




          “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of
New York or, when the context implies, the Uniform Commercial Code as in effect from time to time
in any other applicable jurisdiction.




          “United States” shall mean the United States of America.




     1.2 Definitions; Interpretation. All capitalized terms used herein (including the preamble
and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement or, if not defined therein, in the UCC. References to “Sections,” “Exhibits”
and “Schedules” shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement
unless otherwise specifically provided. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on the reference. The
use herein of the word “include” or “including”, when following any general statement, term or
matter, shall not be construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as “without limitation” or “but not limited to” or words of similar
import) is used with reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement, term or matter. If
any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit
Agreement
shall govern. Notwithstanding anything herein to the contrary, the lien and security interest
granted to the Collateral Agent pursuant to this Agreement and the



9









 




exercise of any right or remedy
by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In
the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the
terms of the Intercreditor Agreement shall govern and control. All references herein to provisions
of the UCC shall include all successor provisions under any subsequent version or amendment to any
Article of the UCC.




SECTION 2. GRANT OF SECURITY.




     2.1 Grant of Security. Each Grantor hereby grants to the Collateral Agent a security interest
in and continuing lien on all of such Grantor’s right, title and interest in, to and under all
personal property of such Grantor including, but not limited to the following, in each case whether
now owned or existing or hereafter acquired or arising and wherever located (all of which being
hereinafter collectively referred to as the “Collateral”):



          (a) Accounts;




          (b) Chattel Paper;




          (c) Documents;




          (d) General Intangibles;




          (e) Goods;




          (f) Instruments;




          (g) Insurance;




          (h) Intellectual Property;




          (i) Investment Related Property;




          (j) Letter of Credit Rights;




          (k) Money;




          (l) Receivables and Receivable Records;




          (m) Commercial Tort Claims;




          (n) to the extent not otherwise included above, all Collateral Records, Collateral Support and
Supporting Obligations relating to any of the foregoing; and




          (o) to the extent not otherwise included above, all Proceeds, products, accessions, rents and
profits of or in respect of any of the foregoing.




     2.2 Certain Limited Exclusions. Notwithstanding anything herein to the contrary, in no event shall the Collateral include
or the security interest granted under Section 2.1 hereof attach to (a) any Intellectual Property,
lease, license, contract, property rights or agreement to which any Grantor is a party or any of
its rights or interests thereunder if and for so long as the grant of such security interest shall
constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title
or interest of any Grantor therein or (ii) in a breach or



10









 




termination pursuant to the terms of, or
a default under, any such lease, license, contract property rights or agreement (other than to the
extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or
9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any
other applicable law (including the Bankruptcy Code) or principles of equity), provided however
that the Collateral shall include and such security interest shall attach immediately at such time
as the condition causing such abandonment, invalidation or unenforceability shall be remedied and
to the extent severable, shall attach immediately to any portion of such Lease, license, contract,
property rights or agreement that does not result in any of the consequences specified in (i) or
(ii) above; or (b) any of the outstanding capital stock of a Controlled Foreign Corporation in
excess of 65% of the voting power of all classes of capital stock of such Controlled Foreign
Corporation entitled to vote; provided that immediately upon the amendment of the Tax Code to allow
the pledge of a greater percentage of the voting power of capital stock in a Controlled Foreign
Corporation without adverse tax consequences, the Collateral shall include, and the security
interest granted by each Grantor shall attach to, such greater percentage of capital stock of each
Controlled Foreign Corporation.




     2.3 Lien Subordination. Notwithstanding anything herein to the contrary, it is the
understanding of the parties that the Liens granted pursuant to Section 2.1 herein shall, prior to
the Discharge of First Lien Obligations (as defined in the Intercreditor Agreement), be subject and
subordinate to the Liens granted to the First Lien Collateral Agent for the benefit of the holders
of the First Lien Obligations to secure the First Lien Obligations pursuant to the First Lien
Security Agreement. All other rights and remedies of the Collateral Agent and the other Secured
Parties are further subject to the provisions of the Intercreditor Agreement.



SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.




     3.1 Security for Obligations. This Agreement secures, and the Collateral is collateral
security for, the prompt and complete payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor provision thereof)), of all
Obligations with respect to every Grantor (the “Secured Obligations”).



     3.2 Continuing Liability Under Collateral. Notwithstanding anything herein to the contrary,
(i) each Grantor shall remain liable for all obligations under the Collateral and nothing contained
herein is intended or shall be a delegation of duties to the Collateral Agent or any Secured Party,
(ii) each Grantor shall remain liable under each of the agreements included in the Collateral,
including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged
LLC Interests, to perform all of the obligations undertaken by it thereunder all in accordance with
and pursuant to the terms and provisions thereof and neither the Collateral Agent nor any Secured
Party shall have any obligation or liability under any of such agreements by reason of or arising
out of this Agreement
or any other document related thereto nor shall the Collateral Agent nor any Secured Party
have any obligation to make any inquiry as to the nature or sufficiency of any payment received by
it or have any obligation to take any action to collect or enforce any rights under any agreement
included in the Collateral, including, without limitation, any agreements relating to Pledged
Partnership Interests or Pledged LLC Interests, and (iii) the exercise by the Collateral Agent of
any of its rights hereunder shall not release any Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral.



11









 





SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS.




     4.1 Generally.



          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and on each Credit Date, that:





          (i) it owns the Collateral purported to be owned by it or otherwise has the rights it
purports to have in each item of Collateral and, as to all Collateral whether now existing
or hereafter acquired, will continue to own or have such rights in each item of the
Collateral, in each case free and clear of any and all Liens, rights or claims of all other
Persons other than Permitted Liens;




          (ii) it has indicated on Schedule 4.1(A)(as such schedule may be amended or
supplemented from time to time): (w) the type of organization of such Grantor, (x) the
jurisdiction of organization of such Grantor, (y) its organizational identification number
and (z) the jurisdiction where the chief executive office or its sole place of business is
(or the principal residence if such Grantor is a natural person), and for the one-year
period preceding the date hereof has been, located.




          (iii) the full legal name of such Grantor is as set forth on Schedule 4.1(A) and it
has not done in the last five (5) years, and does not do, business under any other name
(including any trade name or fictitious business name) except for those names set forth on
Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time);




          (iv) except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction
of organization, chief executive office or sole place of business (or principal residence
if such Grantor is a natural person) or its corporate structure in any way (e.g., by
merger, consolidation, change in corporate form or otherwise) within the past five (5)
years;




          (v) except in connection with Permitted Liens, it has not within the last five (5)
years become bound (whether as a result of merger or otherwise) as debtor under a security
agreement entered into by another Person, which has not heretofore been terminated;




          (vi) (u) upon the filing of all UCC financing statements naming each Grantor as
“debtor” and the Collateral Agent as “secured party” and describing the Collateral in the
filing offices set forth opposite such Grantor’s name on Schedule 4.1(E) hereof (as such
schedule may be amended or supplemented from time to time) and other filings delivered by
each Grantor, (v) upon delivery of all Instruments, Chattel Paper and certificated Pledged
Equity Interests and Pledged Debt to the First Lien Collateral Agent
or the Collateral Agent in accordance with the Intercreditor Agreement, (w) upon
sufficient identification of Commercial Tort Claims, (x) upon execution of a control
agreement establishing the Collateral Agent’s “control” (within the meaning of Section
8-106, 9-106 or 9-104 of the UCC, as applicable) with respect to any Investment Account,
(y) upon consent of the issuer with respect to Letter of Credit Rights, and (z) to the
extent not subject to Article 9 of the UCC, upon recordation of the security interests
granted hereunder in Patents, Trademarks and Copyrights in the applicable intellectual
property registries, including but not limited to the United States Patent and Trademark
Office and



12









 







the United States Copyright Office, the security interests granted to the
Collateral Agent hereunder constitute valid and perfected first priority Liens (subject in
the case of priority only to (i) Permitted Liens and to the rights of the United States
government (including any agency or department thereof) with respect to United States
government Receivables and (ii) Liens granted to the First Lien Collateral Agent) on all of
the Collateral;




          (vii) all actions and consents, including all filings, notices, registrations and
recordings necessary or desirable for the exercise by the Collateral Agent of the voting or
other rights provided for in this Agreement or the exercise of remedies in respect of the
Collateral have been made or obtained;




          (viii) other than the financing statements filed in favor of the Collateral Agent, no
effective UCC financing statement, fixture filing or other instrument similar in effect
under any applicable law covering all or any part of the Collateral is on file in any
filing or recording office except for (x) financing statements for which proper termination
statements have been delivered to the Collateral Agent for filing and (y) financing
statements filed in connection with Permitted Liens;




          (ix) no authorization, approval or other action by, and no notice to or filing with,
any Governmental Authority or regulatory body is required for either (i) the pledge or
grant by any Grantor of the Liens purported to be created in favor of the Collateral Agent
hereunder or (ii) the exercise by Collateral Agent of any rights or remedies in respect of
any Collateral (whether specifically granted or created hereunder or created or provided
for by applicable law), except (A) for the filings contemplated by clause (vii) above and
(B) as may be required, in connection with the disposition of any Investment Related
Property, by laws generally affecting the offering and sale of Securities;




          (x) all information supplied by any Grantor with respect to any of the Collateral (in
each case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects;




          (xi) none of the Collateral constitutes, or is the Proceeds of, “farm products” (as
defined in the UCC);




          (xii) it does not own any “as extracted collateral” (as defined in the UCC) or any
timber to be cut; and




          (xiii) such Grantor has been duly organized as an entity of the type as set forth
opposite such Grantor’s name on Schedule 4.1(A) solely under the laws of the jurisdiction
as set forth opposite such Grantor’s name on Schedule 4.1(A) and remains duly existing as
such. Such Grantor has not filed any certificates of domestication, transfer or
continuance in any other jurisdiction.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:





          (i) except for the security interest created by this Agreement, it shall not create or
suffer to exist any Lien upon or with respect to any of the Collateral,



13









 







except Permitted
Liens, and such Grantor shall defend the Collateral against all Persons at any time
claiming any interest therein;




          (ii) it shall not produce, use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute, regulation or
ordinance or any policy of insurance covering the Collateral;




          (iii) it shall not change such Grantor’s name, identity, corporate structure (e.g., by
merger, consolidation, change in corporate form or otherwise) sole place of business (or
principal residence if such Grantor is a natural person), chief executive office, type of
organization or jurisdiction of organization or establish any trade names unless it shall
have (a) notified the Collateral Agent in writing, by executing and delivering to the
Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto, at least thirty (30)
days prior to any such change or establishment, identifying such new proposed name,
identity, corporate structure, sole place of business (or principal residence if such
Grantor is a natural person), chief executive office, jurisdiction of organization or trade
name and providing such other information in connection therewith as the Collateral Agent
may reasonably request and (b) taken all actions necessary or advisable to maintain the
continuous validity, perfection and the same or better priority of the Collateral Agent’s
security interest in the Collateral intended to be granted and agreed to hereby;




          (iv) if the Collateral Agent or any Secured Party gives value to enable Grantor to
acquire rights in or the use of any Collateral, it shall use such value for such purposes
and such Grantor further agrees that repayment of any Obligation shall apply on a
“first-in, first-out” basis so that the portion of the value used to acquire rights in any
Collateral shall be paid in the chronological order such Grantor acquired rights therein;




          (v) it shall pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Collateral, except to the extent the validity thereof
is being contested in good faith; provided, such Grantor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five (5) days prior to the date of
any proposed sale under any judgment, writ or warrant of attachment entered or filed
against such Grantor or any of the Collateral as a result of the failure to make such
payment;




          (vi) upon such Grantor or any officer of such Grantor obtaining knowledge thereof, it
shall promptly notify the Collateral Agent in writing of any event that may have a Material
Adverse Effect on the value of the Collateral or any portion thereof, the ability of any
Grantor or the Collateral Agent to dispose of the Collateral or any portion thereof, or the
rights and remedies of the Collateral Agent in relation thereto,
including, without limitation, the levy of any legal process against the Collateral or
any portion thereof;




          (vii) it shall not take or permit any action which could impair the Collateral Agent’s
rights in the Collateral; and



14









 






          (viii) it shall not sell, transfer or assign (by operation of law or otherwise) any
Collateral except as otherwise permitted in accordance with the Credit Agreement.



     4.2 Equipment and Inventory.



          (a) Representations and Warranties. Each Grantor represents and warrants, on the
Closing Date and on each Credit Date, that:





          (i) all of the Equipment and Inventory included in the Collateral with a fair market
value of $100,000 or more is kept for the past four (4) years only at the locations
specified in Schedule 4.2 (as such schedule may be amended or supplemented from time to
time);




          (ii) any Goods now or hereafter produced by any Grantor included in the Collateral
have been and will be produced in compliance with the requirements of the Fair Labor
Standards Act, as amended; and




          (iii) except as set forth in Schedule 4.2 (as such schedule may be amended or
supplemented from time to time), none of the Inventory or Equipment included in the
Collateral with a fair market value of $100,000 or more is in the possession of an issuer
of a negotiable document (as defined in Section 7-104 of the UCC) therefor or otherwise in
the possession of a bailee or a warehouseman.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:





          (i) it shall keep the Equipment, Inventory and any Documents evidencing any Equipment
and Inventory in the locations specified on Schedule 4.2 (as such schedule may be amended
or supplemented from time to time) unless it shall have (a) notified the Collateral Agent
in writing, by executing and delivering to the Collateral Agent a completed Pledge
Supplement, substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, at least thirty (30) days prior to any change in
locations, identifying such new locations and providing such other information in
connection therewith as the Collateral Agent may reasonably request and (b) taken all
actions necessary or advisable to maintain the continuous validity, perfection and the same
or better priority of the Collateral Agent’s security interest in the Collateral intended
to be granted and agreed to hereby, or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder, with respect to such Equipment and Inventory;




          (ii) it shall keep correct and accurate records of the Inventory, as is customarily
maintained under similar circumstances by Persons of established reputation engaged in
similar business, and in any event in conformity with GAAP;




          (iii) it shall not deliver any Document evidencing any Equipment and Inventory to any
Person other than the issuer of such Document to claim the Goods evidenced therefor or the
Collateral Agent;



15









 






          (iv) if any Equipment or Inventory is in possession or control of any third party,
each Grantor shall join with the Collateral Agent in notifying the third party of the
Collateral Agent’s security interest and obtaining an acknowledgment from the third party
that it is holding the Equipment and Inventory for the benefit of the Collateral Agent; and




          (v) with respect to any item of Equipment which is covered by a certificate of title
under a statute of any jurisdiction under the law of which indication of a security
interest on such certificate is required as a condition of perfection thereof, upon the
reasonable request of the Collateral Agent, (A) provide information with respect to any
such Equipment in excess of $50,000 individually or $500,000 in the aggregate, (B) execute
and file with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other indication
of the security interest created hereunder on such certificate of title, and (C) deliver to
the Collateral Agent copies of all such applications or other documents filed during such
calendar quarter and copies of all such certificates of title issued during such calendar
quarter indicating the security interest created hereunder in the items of Equipment
covered thereby.



     4.3 Receivables.



          (a) Representations and Warranties. Each Grantor represents and warrants, on the
Closing Date and on each Credit Date, that:





          (i) each Receivable (a) is and will be the legal, valid and binding obligation of the
Account Debtor in respect thereof, representing an unsatisfied obligation of such Account
Debtor, (b) is and will be enforceable in accordance with its terms, (c) is not and will
not be subject to any setoffs, defenses, taxes, counterclaims (except with respect to
refunds, returns and allowances in the ordinary course of business with respect to damaged
merchandise) and (d) is and will be in compliance with all applicable laws, whether
federal, state, local or foreign;




          (ii) none of the Account Debtors in respect of any Receivable in excess of $30,000
individually or $100,000 in the aggregate is the government of the United States, any
agency or instrumentality thereof, any state or municipality or any foreign sovereign. No
Receivable in excess of $30,000 individually or $100,000 in the aggregate requires the
consent of the Account Debtor in respect thereof in connection with the pledge hereunder,
except any consent which has been obtained;




          (iii) no Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper
which has not been delivered to, or otherwise subjected to the control of, the Collateral
Agent to the extent required by, and in accordance with Section 4.3(c); and




          (iv) each Grantor has delivered to the Collateral Agent a complete and correct copy of
each standard form of document under which a Receivable may arise.



          (b) Covenants and Agreements: Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:




16









 









          (i) it shall keep and maintain at its own cost and expense satisfactory and complete
records of the Receivables in accordance with its ordinary commercial practice;




          (ii) it shall mark conspicuously, in form and manner reasonably satisfactory to the
Collateral Agent, all Chattel Paper and Instruments (other than any delivered to the
Collateral Agent as provided herein), with an appropriate reference to the fact that the
Collateral Agent has a security interest therein;




          (iii) it shall perform in all material respects all of its obligations with respect to
the Receivables;




          (iv) it shall not amend, modify, terminate or waive any provision of any Receivable in
any manner which could reasonably be expected to have a Material Adverse Effect on the
value of such Receivable as Collateral. Other than in the ordinary course of business as
generally conducted by it on and prior to the date hereof, and except as otherwise provided
in subsection (v) below, following an Event of Default, such Grantor shall not (w) grant
any extension or renewal of the time of payment of any Receivable, (x) compromise or settle
any dispute, claim or legal proceeding with respect to any Receivable for less than the
total unpaid balance thereof, (y) release, wholly or partially, any Person liable for the
payment thereof, or (z) allow any credit or discount thereon;




          (v) except as otherwise provided in this subsection, each Grantor shall continue to
collect all amounts due or to become due to such Grantor under the Receivables and any
Supporting Obligation and diligently exercise each material right it may have under any
Receivable any Supporting Obligation or Collateral Support, in each case, at its own
expense, and in connection with such collections and exercise, such Grantor shall take such
action as such Grantor or the Collateral Agent may deem necessary or advisable.
Notwithstanding the foregoing, the Collateral Agent shall have the right at any time
following the occurrence and during the continuation of an Event of Default, the Collateral
Agent may, subject to the terms of the Intercreditor Agreement: (1) direct the Account
Debtors under any Receivables to make payment of all amounts due or to become due to such
Grantor thereunder directly to the Collateral Agent; (2) notify, or require any Grantor to
notify, each Person maintaining a lockbox or similar arrangement to which Account Debtors
under any Receivables have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or deposited in
such lockbox or other arrangement directly to the Collateral Agent; and (3) enforce, at the
expense of such Grantor,
collection of any such Receivables and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such Grantor might have done.
If the Collateral Agent notifies any Grantor that it has elected to collect the
Receivables in accordance with the preceding sentence, any payments of Receivables received
by such Grantor shall be forthwith (and in any event within two (2) Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the
Collateral Agent if required, in the Collateral Account maintained under the sole dominion
and control of the Collateral Agent, and until so turned over, all amounts and proceeds
(including checks and other instruments) received by such Grantor in respect of the
Receivables, any Supporting Obligation or Collateral Support shall be received in trust for
the benefit of the Collateral Agent hereunder and shall be segregated from other funds of
such Grantor and such Grantor shall not adjust, settle or compromise



17









 







the amount or payment
of any Receivable, or release wholly or partly any Account Debtor or obligor thereof, or
allow any credit or discount thereon; and




          (vi) it shall use its reasonable efforts to keep in full force and effect any
Supporting Obligation or Collateral Support relating to any Receivable.



          (c) Delivery and Control of Receivables. With respect to any Receivables in excess of
$30,000 individually or $100,000 in the aggregate that is evidenced by, or constitutes, Chattel
Paper or Instruments, each Grantor shall cause each originally executed copy thereof to be
delivered to the First Lien Collateral Agent or the Collateral Agent (or its respective agent or
designee), as applicable, in accordance with the Intercreditor Agreement, appropriately indorsed to
the First Lien Collateral Agent or the Collateral Agent, as applicable, or indorsed in blank: (i)
with respect to any such Receivables in existence on the date hereof, on or prior to the date
hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of
such Grantor acquiring rights therein. With respect to any Receivables in excess of $30,000
individually or $100,000 in the aggregate which would constitute “electronic chattel paper” under
Article 9 of the UCC, each Grantor shall take all steps necessary to give the Collateral Agent
control over such Receivables (within the meaning of Section 9-105 of the UCC): (i) with respect
to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii)
with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor
acquiring rights therein. Subject to the Intercreditor Agreement, any Receivable not otherwise
required to be delivered or subjected to the control of the First Lien Collateral Agent or the
Collateral Agent, as applicable, in accordance with this subsection (c) shall be delivered or
subjected to such control upon request of the First Lien Collateral Agent or the Collateral Agent,
as applicable, in accordance with the Intercreditor Agreement, during the continuance of an Event
of Default.




     4.4 Investment Related Property.



          4.4.1 Investment Related Property Generally




          (a) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:





          (i) in the event it acquires rights in any Investment Related Property after the date
hereof, it shall deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto, reflecting such new Investment Related Property and
all other Investment Related Property. Notwithstanding the foregoing, it is understood and
agreed that the security interest of the Collateral Agent shall attach to all Investment
Related Property immediately upon any Grantor’s acquisition of rights therein and shall not
be affected by the failure of any Grantor to deliver a supplement to Schedule 4.4 as
required hereby;




          (ii) except as provided in the next sentence, in the event such Grantor receives any
dividends, interest or distributions on any Investment Related Property, or any securities
or other property upon the merger, consolidation, liquidation or dissolution of any issuer
of any Investment Related Property, then (a) such dividends, interest or distributions and
securities or other property shall be included in the definition of Collateral without
further action and (b) such Grantor shall immediately take all steps, if any, necessary or
advisable to ensure the validity, perfection, priority and, if applicable,



18









 







control of the
Collateral Agent (subject to the terms of the Intercreditor Agreement) over such Investment
Related Property (including, without limitation, delivery thereof to the Collateral Agent)
and pending any such action such Grantor shall be deemed to hold such dividends, interest,
distributions, securities or other property in trust for the benefit of the Collateral
Agent (subject to the terms of the Intercreditor Agreement) and shall segregate such
dividends, distributions, Securities or other property from all other property of such
Grantor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred
and be continuing, the Collateral Agent authorizes each Grantor to retain all ordinary cash
dividends and distributions paid in the normal course of the business of the issuer and
consistent with the past practice of the issuer and all scheduled payments of interest;




          (iii) each Grantor consents to the grant by each other Grantor of a Security Interest
in all Investment Related Property to the Collateral Agent.



          (b) Delivery and Control.





          (i) Each Grantor agrees that with respect to any Investment Related Property in which
it currently has rights it shall comply with the provisions of this Section 4.4.1(b) on or
before the Credit Date and with respect to any Investment Related Property hereafter
acquired by such Grantor it shall comply with the provisions of this Section 4.4.1(b)
within (5) Business Days upon acquiring rights therein, in each case in form and substance
satisfactory to the Collateral Agent. With respect to any Investment Related Property that
is represented by a certificate or that is an “instrument” (other than any Investment
Related Property credited to a Securities Account) it shall cause such certificate or
instrument to be delivered to the First Lien Collateral Agent or the Collateral Agent, as
applicable, in accordance with the Intercreditor Agreement, indorsed in blank by an
“effective indorsement” (as defined in Section 8-107 of the UCC), regardless of whether
such certificate constitutes a “certificated security” for purposes of the UCC. With
respect to any Investment Related Property that is an “uncertificated security” for
purposes of the UCC (other than any “uncertificated securities” credited to a Securities
Account), it shall cause the issuer of such uncertificated security to either (i) register
the First Lien Collateral Agent (or the Collateral Agent if there has been a Discharge of
the First Lien Obligations or as expressly provided in the proviso in clause (ii) of
Section 3.1(a)(1) of the Intercreditor Agreement) as the registered owner thereof on the
books and records of the issuer or (ii) execute an agreement substantially in the form of
Exhibit B hereto, pursuant to which
such issuer agrees to comply with the Collateral Agent’s instructions with respect to
such uncertificated security without further consent by such Grantor.



          (c) Voting and Distributions.





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




	 	(1)	 	except as otherwise provided under the covenants and agreements relating to
Investment Related Property in this Agreement or elsewhere herein or in the Second
Lien Credit Documents, each Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the Investment
Related Property or any part thereof for any purpose not inconsistent with the terms
of this Agreement or the Second Lien Credit




19









 






	 	 	 	Documents; provided, no Grantor shall
exercise or refrain from exercising any such right if the Collateral Agent shall have
notified such Grantor (in accordance with the terms of the Intercreditor Agreement)
that, in the Collateral Agent’s reasonable judgment, such action would have a Material
Adverse Effect on the value of the Investment Related Property or any part thereof; it
being understood, however, that neither the voting by such Grantor of any Pledged
Stock for, or such Grantor’s consent to, the election of directors (or similar
governing body) at a regularly scheduled annual or other meeting of stockholders or
with respect to incidental matters at any such meeting, nor such Grantor’s consent to
or approval of any action otherwise permitted under this Agreement and the Credit
Agreement, shall be deemed inconsistent with the terms of this Agreement or the Credit
Agreement within the meaning of this Section 4.4(c)(i)(1), and no notice of any such
voting or consent need be given to the Collateral Agent; and
	 
	 	(2)	 	the Collateral Agent, at Grantor’s expense, shall promptly execute and
deliver (or cause to be executed and delivered) to each Grantor all proxies, and other
instruments as such Grantor may from time to time reasonably request for the purpose
of enabling such Grantor to exercise the voting and other consensual rights when and
to the extent which it is entitled to exercise pursuant to clause (1) above;
	 
	 	(3)	 	subject to the Intercreditor Agreement, upon the occurrence and during the
continuation of an Event of Default:






	 	(A)	 	all rights of each Grantor to exercise or refrain from
exercising the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant hereto shall cease and all such rights shall
thereupon become vested in the Collateral Agent who shall thereupon have the
sole right to exercise such voting and other consensual rights; and
	 
	 	(B)	 	in order to permit the Collateral Agent to exercise the
voting and other consensual rights which it may be entitled to exercise
pursuant hereto and to receive all dividends and other distributions which it
may be entitled to receive hereunder: (1) each Grantor shall promptly execute
and deliver (or cause to be executed and delivered) to the Collateral Agent
all proxies, dividend payment orders and other instruments as the Collateral
Agent may from time to time reasonably request and (2) each
Grantor acknowledges that the Collateral Agent may utilize the power of
attorney set forth in Section 6.1.





          4.4.2 Pledged Equity Interests




          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and on each Credit Date, that:





          (i) Schedule 4.4(A) (as such schedule may be amended or supplemented from time to
time) sets forth under the headings “Pledged Stock, “Pledged LLC Interests,” “Pledged
Partnership Interests” and “Pledged Trust Interests,” respectively, all of the Pledged
Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests
owned by any Grantor and such Pledged Equity



20









 







Interests constitute the percentage of issued
and outstanding shares of stock, percentage of membership interests, percentage of
partnership interests or percentage of beneficial interest of the respective issuers
thereof indicated on such Schedule;




          (ii) except as set forth on Schedule 4.4(B), it has not acquired any equity interests
of another entity or substantially all the assets of another entity within the past five
(5) years;




          (iii) it is the record and beneficial owner of the Pledged Equity Interests free of
all Liens, rights or claims of other Persons other than Permitted Liens and there are no
outstanding warrants, options or other rights to purchase, or shareholder, voting trust or
similar agreements outstanding with respect to, or property that is convertible into, or
that requires the issuance or sale of, any Pledged Equity Interests;




          (iv) without limiting the generality of Section 4.1(a)(v), no consent of any Person
including any other general or limited partner, any other member of a limited liability
company, any other shareholder or any other trust beneficiary is necessary or desirable in
connection with the creation, perfection or first priority status of the security interest
of the Collateral Agent (in the case of priority, subject to Liens granted to the First
Lien Collateral Agent) in any Pledged Equity Interests or the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or the exercise of
remedies in respect thereof;




          (v) none of the Pledged LLC Interests nor Pledged Partnership Interests are or
represent interests in issuers that: (a) are registered as investment companies or (b) are
dealt in or traded on securities exchanges or markets; and




          (vi) except as otherwise set forth on Schedule 4.4(C), all of the Pledged LLC
Interests and Pledged Partnership Interests are or represent interests in issuers that have
opted to be treated as securities under the uniform commercial code of any jurisdiction.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:





          (i) without the prior written consent of the First Lien Collateral Agent or the
Collateral Agent, as applicable, in accordance with the Intercreditor Agreement, it shall
not vote to enable or take any other action to: (a) amend or terminate any partnership
agreement, limited liability company agreement, certificate of incorporation, by-laws or
other organizational documents in any way that adversely affects the validity, perfection
or priority of the Collateral Agent’s security interest, (b) permit any issuer of any
Pledged Equity Interest to issue any additional stock, partnership interests, limited
liability company interests or other equity interests of any nature or to issue securities
convertible into or granting the right of purchase or exchange for any stock or other
equity interest of any nature of such issuer unless such stock or interest is pledged
hereunder, (c) other than as permitted under the Credit Agreement, permit any issuer of any
Pledged Equity Interest to dispose of all or a material portion of their assets, (d) waive
any default under or breach of any terms of organizational document relating to the issuer
of any Pledged Equity Interest or the terms of any Pledged Debt that would individually or
in the aggregate cause a Material Adverse Effect, or (e) cause any issuer



21









 







of any Pledged
Partnership Interests or Pledged LLC Interests which are not securities (for purposes of
the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged
Partnership Interests or Pledged LLC Interests to be treated as securities for purposes of
the UCC; unless such Grantor shall promptly notify the Collateral Agent in writing of any
such election or action and, in such event, shall take all steps necessary or advisable to
establish the Collateral Agent’s “control” thereof;




          (ii) it shall comply with all of its material obligations under any partnership
agreement or limited liability company agreement relating to Pledged Partnership Interests
or Pledged LLC Interests and shall enforce all of its material rights with respect to any
Investment Related Property;




          (iii) without the prior written consent of the First Lien Collateral Agent or the
Collateral Agent, as applicable, in accordance with the Intercreditor Agreement, it shall
not permit any issuer of any Pledged Equity Interest to merge or consolidate unless the
covenants of the Second Lien Documents are complied with; and




          (iv) each Grantor consents to the grant by each other Grantor of a security interest
in all Investment Related Property to the Collateral Agent and, without limiting the
foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC
Interest to the First Lien Collateral Agent or the Collateral Agent (or its respective
nominee), as applicable, in accordance with the Intercreditor Agreement following an Event
of Default and to the substitution of the First Lien Collateral Agent or the Collateral
Agent (or its respective nominee), as applicable, in accordance with the Intercreditor
Agreement, as a partner in any partnership or as a member in any limited liability company
with all the rights and powers related thereto.



          4.4.3 Pledged Debt




          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and each Credit Date, that Schedule 4.4 (as such schedule may be amended or
supplemented from time to time) sets forth under the heading “Pledged Debt” all of the Pledged Debt
owned by any Grantor and all of such Pledged Debt has been duly authorized, authenticated or
issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is
not in default and constitutes all of the issued and outstanding inter-company Indebtedness; and




          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements, it shall notify the Collateral Agent of any default under
any Pledged Debt that has caused, either in any individual case or in the aggregate, a Material
Adverse Effect.




          4.4.4 Investment Accounts




          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and immediately after the payment in full of all obligations outstanding pursuant
to Existing Indebtedness, and on each Credit Date, that:





          (i) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to
time) sets forth under the headings “Securities Accounts” and



22









 







“Commodities Accounts,”
respectively, all of the Securities Accounts and Commodities Accounts in which each Grantor
has an interest. Each Grantor is the sole entitlement holder of each such Securities
Account and Commodity Account, and such Grantor has not consented to, and is not otherwise
aware of, any Person (other than the Collateral Agent pursuant hereto or the First Lien
Collateral Agent pursuant to the First Lien Security Agreement) having “control” (within
the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other interest in, any
such Securities Account or Commodity Account or securities or other property credited
thereto;




          (ii) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to
time) sets forth under the headings “Deposit Accounts” all of the Deposit Accounts in which
each Grantor has an interest. Each Grantor is the sole account holder of each such Deposit
Account and such Grantor has not consented to, and is not otherwise aware of, any Person
(other than the Collateral Agent pursuant hereto or the First Lien Collateral Agent
pursuant to the First Lien Security Agreement) having either sole dominion and control
(within the meaning of common law) or “control” (within the meanings of Section 9-104 of
the UCC) over, or any other interest in, any such Deposit Account or any money or other
property deposited therein; and




          (iii) Subject to Section 4.4.4(a)(iii) of the First Lien Pledge and Security Agreement
and the Intercreditor Agreement, each Grantor has taken all actions necessary or reasonably
desirable, including those specified in Section 4.4.4(c), to: (a) establish Collateral
Agent’s “control” (within the meanings of Sections 8-106 and 9-106 of the UCC) over any
portion of the Investment Related Property constituting Certificated Securities,
Uncertificated Securities, Securities Accounts, Securities Entitlements or Commodities
Accounts (each as defined in the UCC); (b) establish the Collateral Agent’s “control”
(within the meaning of Section 9-104 of the UCC) over all Deposit Accounts (other than
Foreign Deposit Accounts); and (c) deliver all Instruments to the Collateral Agent.



          (b) Covenant and Agreement. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements, it shall not permit any Investment Account to exist unless
a control agreement with respect to any such Investment Account has been entered into by the
appropriate Grantor, Collateral Agent and securities intermediary or depository institution at
which such successor or replacement account is to be maintained in accordance with the provisions
of Section 4.4.4(c).




          (c) Delivery and Control





          (i) With respect to any Investment Related Property consisting of Securities Accounts
or Securities Entitlements, it shall cause the securities intermediary maintaining such
Securities Account or Securities Entitlement to enter into an agreement substantially in
the form of Exhibit C hereto pursuant to which it shall agree to comply (subject to Section
4.4.4(c)(i) of the First Lien Pledge and Security Agreement and the Intercreditor
Agreement) with the Collateral Agent’s “entitlement orders” without further consent by such
Grantor. With respect to any Investment Related Property that is a “Deposit Account”
(other than Foreign Deposit Accounts), it shall cause the depositary institution
maintaining such account to enter into an agreement substantially in the form of Exhibit D
hereto, pursuant to which the Collateral Agent shall have (subject to Section 4.4.4(c)(i)
of the First Lien Pledge and Security Agreement and



23









 







the Intercreditor Agreement) both sole
dominion and control over such Deposit Account (within the meaning of the common law) and
“control” (within the meaning of Section 9-104 of the UCC) over such Deposit Account. Each
Grantor shall have entered into such control agreement or agreements with respect to: (i)
any Securities Accounts, Securities Entitlements or Deposit Accounts (other than Foreign
Deposit Accounts) that exist on the Credit Date, as of or prior to the Credit Date and (ii)
any Securities Accounts, Securities Entitlements or Deposit Accounts (other than Foreign
Deposit Accounts) that are created or acquired after the Credit Date, as of or prior to the
deposit or transfer of any such Securities Entitlements or funds, whether constituting
moneys or investments, into such Securities Accounts or Deposit Accounts.




In addition to the foregoing, if any issuer of any Investment Related Property is located
in a jurisdiction outside of the United States, each Grantor shall (subject to Section
4.4.4(c) of the First Lien Pledge and Security Agreement and the Intercreditor Agreement)
take such additional actions, including, without limitation, causing the issuer to register
the pledge on its books and records or making such filings or recordings, in each case as
may be necessary or advisable, under the laws of such issuer’s jurisdiction to insure the
validity, perfection and priority of the security interest of the Collateral Agent. Upon
the occurrence and during the continuance of an Event of Default, the Collateral Agent
shall have the right, subject to the Intercreditor Agreement, without notice to any
Grantor, to transfer all or any portion of the Investment Related Property to its name or
the name of its nominee or agent. In addition, the Collateral Agent shall have the right
at any time, subject to the Intercreditor Agreement, without notice to any Grantor, to
exchange any certificates or instruments representing any Investment Related Property for
certificates or instruments of smaller or larger denominations.



     4.5 Material Contracts.



          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and on each Credit Date, that:





          (i) the Material Contracts, true and complete copies (including any amendments or
supplements thereof) of which have been furnished to the Collateral Agent, have been duly
authorized, executed and delivered by all parties thereto, are in full force and effect and
are binding upon and enforceable against all parties thereto in accordance with their
respective terms. There exists no default under any Material
Contract by any party thereto and neither such Grantor, nor to its best knowledge, any
other Person party thereto is likely to become in default thereunder and no Person party
thereto has any defenses, counterclaims or right of set-off with respect to any Material
Contract. Each Person party to a Material Contract (other than any Grantor) has executed
and delivered to the applicable Grantor a consent to the assignment of such Material
Contract to the Collateral Agent pursuant to this Agreement; and




          (ii) no Material Contract prohibits assignment or requires consent of or notice to any
Person in connection with the assignment to the Collateral Agent hereunder, except such as
has been given or made or is currently sought pursuant to Section 4.5 (b)(vii) hereof.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:




24









 









          (i) in addition to any rights under the Section of this Agreement relating to
Receivables, the Collateral Agent may at any time notify, or require any Grantor to so
notify, the counterparty on any Material Contract of the security interest of the
Collateral Agent therein. In addition, after the occurrence and during the continuance of
an Event of Default, the Collateral Agent may (subject to the First Lien Pledge and
Security Agreement and the Intercreditor Agreement) upon written notice to the applicable
Grantor, notify, or require any Grantor to notify, the counterparty to make all payments
under the Material Contracts directly to the Collateral Agent;




          (ii) each Grantor shall deliver promptly to the Collateral Agent a copy of each
material demand, notice or document received by it relating in any way to any Material
Contract;




          (iii) each Grantor shall deliver promptly to the Collateral Agent, and in any event
within ten (10) Business Days, after (1) any Material Contract of such Grantor is
terminated or amended in a manner that is materially adverse to such Grantor or (2) any new
Material Contract is entered into by such Grantor, a written statement describing such
event, with copies of such material amendments or new contracts, delivered to the
Collateral Agent (to the extent such delivery is permitted by the terms of any such
Material Contract, provided, no prohibition on delivery shall be effective if it were
bargained for by such Grantor with the intent of avoiding compliance with this Section
4.5(b)(iii)), and an explanation of any actions being taken with respect thereto;




          (iv) it shall perform in all material respects all of its obligations with respect to
the Material Contracts;




          (v) it shall promptly and diligently exercise each material right (except the right of
termination) it may have under any Material Contract, any Supporting Obligation or
Collateral Support, in each case, at its own expense, and in connection with such
collections and exercise, such Grantor shall take such action as such Grantor or the
Collateral Agent may deem necessary or advisable;




          (vi) it shall use its reasonable best efforts to keep in full force and effect any
Supporting Obligation or Collateral Support relating to any Material Contract; and




          (vii) each Grantor shall, within thirty (30) days after entering into any
Non-Assignable Contract that is a Material Contract after the Closing Date, request in
writing the consent of the counterparty or counterparties to such Non-Assignable Contract
pursuant to the terms of such Non-Assignable Contract or applicable law to the assignment
or granting of a security interest in such Non-Assignable Contract to Secured Party and use
its best efforts to obtain such consent as soon as practicable thereafter.



     4.6 Letter of Credit Rights.



          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and on each Credit Date, that:





          (i) all material letters of credit to which such Grantor has rights is listed on
Schedule 4.6 (as such schedule may be amended or supplemented from time to time) hereto;
and



25









 






          (ii) it has obtained the consent of each issuer of any material letter of credit
(other than Supporting Obligations) to the assignment of the proceeds of the letter of
credit to the First Lien Collateral Agent or the Collateral Agent, as applicable, in
accordance with the Intercreditor Agreement.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements, with respect to any material letter of credit (other than
Supporting Obligations) hereafter arising it shall obtain the consent of the issuer thereof to the
assignment of the proceeds of the letter of credit to the First Lien Collateral Agent or the
Collateral Agent, as applicable, in accordance with the Intercreditor Agreement, and shall deliver
to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto.




     4.7 Intellectual Property.



          (a) Representations and Warranties. Except as disclosed in Schedule 4.7(H) (as such
schedule may be amended or supplemented from time to time), each Grantor hereby represents and
warrants, on the Closing Date and on each Credit Date, that:





          (i) Schedule 4.7 (as such schedule may be amended or supplemented from time to time)
sets forth a true and complete list of (i) all United States, state and foreign
registrations of and applications for Patents, Trademarks, and Copyrights owned by each
Grantor and (ii) all Patent Licenses, Trademark Licenses, Trade Secret Licenses and
Copyright Licenses material to the business of such Grantor other than by and among
Subsidiaries of Holdings;




          (ii) it is the sole and exclusive owner of the entire right, title, and interest in or
is a licensee to all Intellectual Property listed on Schedule 4.7 (as such schedule may be
amended or supplemented from time to time), and owns or has the valid right to use all
other Intellectual Property used in or necessary to conduct its business, free and clear of
all Liens, claims, encumbrances and licenses, except for Permitted Liens
and the licenses set forth on Schedule 4.7(B), (D), (F) and (G) (as each may be
amended or supplemented from time to time);




          (iii) all Intellectual Property is subsisting and has not been adjudged invalid or
unenforceable, in whole or in part, and each Grantor has performed all acts and has paid
all renewal, maintenance, and other fees and taxes required to maintain each and every
registration and application of Copyrights, Patents and Trademarks in full force and
effect;




          (iv) all Intellectual Property is valid and enforceable; no holding, decision, or
judgment has been rendered in any action or proceeding before any court or administrative
authority challenging the validity of, such Grantor’s right to register, or such Grantor’s
rights to own or use, any Intellectual Property and no such action or proceeding is pending
or, to such Grantor’s knowledge, threatened;




          (v) all registrations and applications for Copyrights, Patents and Trademarks are
standing in the name of each Grantor, and none of the Trademarks, Patents, Copyrights or
Trade Secrets has been licensed by any Grantor to any Affiliate or



26









 







third party (other than
a Subsidiary of the Company), except as disclosed in Schedule 4.7(B), (D), (F), or (G) (as
each may be amended or supplemented from time to time);




          (vi) each Grantor has been using appropriate statutory notice of registration in
connection with its use of registered Trademarks, proper marking practices in connection
with the use of Patents, and appropriate notice of copyright in connection with the
publication of Copyrights material to the business of such Grantor;




          (vii) each Grantor uses commercially reasonable standards of quality in the
manufacture, distribution, and sale of all products sold and in the provision of all
services rendered under or in connection with all Trademark Collateral and has taken
commercially reasonable measures to insure that all licensees of the Trademark Collateral
owned by such Grantor use such adequate standards of quality;




          (viii) the conduct of each Grantor’s business, to such Grantor’s knowledge, does not
infringe upon or otherwise violate any trademark, patent, copyright, trade secret or other
intellectual property right owned or controlled by a third party; no claim has been made
that the use of any Intellectual Property owned, licensed or used by Grantor (or any of its
respective licensees) violates the asserted rights of any third party;




          (ix) to each Grantor’s knowledge, no third party is infringing upon or otherwise
violating any rights in any Intellectual Property owned or used by such Grantor, or any of
its respective licensees;




          (x) no settlement or consents, covenants not to sue, nonassertion assurances, or
releases have been entered into by Grantor or to which Grantor is bound that adversely
affect Grantor’s rights to own or use any Intellectual Property; and




          (xi) each Grantor has not made a previous assignment, sale, transfer or agreement
constituting a present or future assignment, sale, transfer or agreement of any
Intellectual Property that has not been terminated or released. There is no effective
financing statement or other document or instrument now executed, or on file or recorded in
any public office, granting a security interest in or otherwise encumbering
any part of the Intellectual Property, other than in favor of the Collateral Agent or
Permitted Liens.



          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements:





          (i) it shall not do any act or omit to do any act whereby any of the Intellectual
Property which is material to the business of Grantor may lapse, or become abandoned,
dedicated to the public, or unenforceable, or which would adversely affect the validity,
grant, or enforceability of the security interest granted therein;




          (ii) it shall not, with respect to any Trademarks which are material to the business
of any Grantor, cease the use of any of such Trademarks, unless the products or services
rendered under any such Trademark are being discontinued in the reasonable business
judgment of the applicable Grantor, or fail to maintain the level of the quality of
products sold and services rendered under any such Trademark at a level at least
substantially consistent with the quality of such products and services as of the date



27









 







hereof, and each Grantor shall take commercially reasonable measures to insure that
licensees of such Trademarks use such consistent standards of quality;




          (iii) it shall, within thirty (30) days of the creation or acquisition of any
Copyrightable work which is material to the business of Grantor, apply to register the
Copyright in the United States Copyright Office;




          (iv) it shall promptly notify the Collateral Agent if it knows or has reason to know
that any item of the Intellectual Property that is material to the business of any Grantor
may become (a) abandoned or dedicated to the public or placed in the public domain (except,
in the case of Patents or Copyrights, due to the expiration of the statutory term of such
item of Intellectual Property), (b) invalid or unenforceable, or (c) subject to any adverse
determination or the institution of adverse proceedings in any action or proceeding in the
United States Patent and Trademark Office, the United States Copyright Office, any state
registry, any foreign counterpart of the foregoing, or any court;




          (v) it shall take all reasonable steps in the United States Patent and Trademark
Office, the United States Copyright Office, any state registry or any foreign counterpart
of the foregoing, to pursue any application and maintain any registration of each
Trademark, Patent, and Copyright owned by any Grantor and material to its business which is
now or shall become included in the Intellectual Property including, but not limited to,
those items on Schedule 4.7(A), (C) and (E) (as each may be amended or supplemented from
time to time);




          (vi) in the event that any Intellectual Property owned by or exclusively licensed to
any Grantor is infringed, misappropriated, or diluted by a third party, such Grantor shall
promptly take reasonable action to stop such infringement, misappropriation, or dilution
and protect its rights in such Intellectual Property including, but not limited to, the
initiation of a suit for injunctive relief and to recover damages;




          (vii) it shall promptly (but in no event more than thirty (30) days after any Grantor
obtains knowledge thereof) report to the Collateral Agent (i) the filing
of any application to register any Intellectual Property with the United States Patent
and Trademark Office, the United States Copyright Office, or any state registry or foreign
counterpart of the foregoing (whether such application is filed by such Grantor or through
any agent, employee, licensee, or designee thereof) and (ii) the registration of any
Intellectual Property by any such office, in each case by executing and delivering to the
Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A
attached hereto, together with all Supplements to Schedules thereto;




          (viii) it shall, promptly upon the reasonable request of the Collateral Agent, subject
to the Intercreditor Agreement, execute and deliver to the Collateral Agent any document
required to acknowledge, confirm, register, record, or perfect the Collateral Agent’s
interest in any part of the Intellectual Property, whether now owned or hereafter acquired;




          (ix) except with the prior consent of the Collateral Agent or as permitted under the
Credit Agreement, each Grantor shall not execute, and there will not be on file in any
public office, any financing statement or other document or instruments, except financing
statements or other documents or instruments filed or to be filed in favor



28









 







of the
Collateral Agent and each Grantor shall not sell, assign, transfer, license, grant any
option, or create or suffer to exist any Lien upon or with respect to the Intellectual
Property, except for the Lien created by and under this Agreement and the other Credit
Documents and sales, assignments, transfers, licenses and grants of options to Subsidiaries
of the Company;




          (x) it shall hereafter use commercially reasonable efforts so as not to permit the
inclusion in any contract to which it hereafter becomes a party of any provision that could
or might in any way materially impair or prevent the creation of a security interest in, or
the assignment of, such Grantor’s rights and interests in any property included within the
definitions of any Intellectual Property acquired under such contracts;




          (xi) it shall take commercially reasonable measures to protect the secrecy of all
Trade Secrets, including, without limitation, entering into confidentiality agreements with
employees and labeling and restricting access to secret information and documents;




          (xii) it shall use proper statutory notice in connection with its use of any of the
Intellectual Property; and




          (xiii) it shall continue to collect, at its own expense, all amounts due or to become
due to such Grantor in respect of the Intellectual Property or any portion thereof. In
connection with such collections, each Grantor may take (and, at the Collateral Agent’s
reasonable direction, shall take) such action as such Grantor or the Collateral Agent may
deem reasonably necessary or advisable to enforce collection of such amounts.
Notwithstanding the foregoing, the Collateral Agent shall have the right at any time, to
notify, or require any Grantor to notify, any obligors with respect to any such amounts of
the existence of the security interest created hereby.



     4.8 Commercial Tort Claims



          (a) Representations and Warranties. Each Grantor hereby represents and warrants, on
the Closing Date and on each Credit Date, that Schedule 4.8 (as such schedule may be amended or
supplemented from time to time) sets forth all material Commercial Tort Claims of each Grantor
which could reasonably be expected to be determined in favor of such Grantor; and




          (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that until the
payment in full of all Obligations (other than unmatured contingent obligations) and the expiration
or termination of all Hedge Agreements, with respect to any material Commercial Tort Claim
hereafter arising which could reasonably be expected to be determined in favor of such Grantor, it
shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of
Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new
Commercial Tort Claims.




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




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     5.1 Access; Right of Inspection. Subject to the terms and conditions set forth in Section 5.6
of the Credit Agreement, the Collateral Agent shall at all times have full and free access during
normal business hours to all the books, correspondence and records of each Grantor, and the
Collateral Agent and its representatives may examine the same, take extracts therefrom and make
photocopies thereof, and each Grantor agrees to render to the Collateral Agent, at such Grantor’s
cost and expense, such clerical and other assistance as may be reasonably requested with regard
thereto. Subject to the terms and conditions set forth in Section 5.6 of the Credit Agreement, the
Collateral Agent and its representatives shall at all times also have the right to enter any
premises of each Grantor and inspect any property of each Grantor where any of the Collateral of
such Grantor granted pursuant to this Agreement is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.



     5.2 Further Assurances.



          (a) Each Grantor agrees that from time to time, at the expense of such Grantor, that it shall
promptly execute and deliver all further instruments and documents, and take all further action,
that may be necessary or reasonably desirable, or that the Collateral Agent may reasonably request
(such request, in all events, shall not be in contravention of the Intercreditor Agreement), in
order to create and/or maintain the validity, perfection or priority of and protect any security
interest granted hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor shall:





          (i) file such financing or continuation statements, or amendments thereto, and execute
and deliver such other agreements, instruments, endorsements, powers of attorney or
notices, as may be necessary or desirable, or as the Collateral Agent may reasonably
request, in order to perfect and preserve the security interests granted or purported to be
granted hereby;




          (ii) take all actions necessary to ensure the recordation of appropriate evidence of
the liens and security interest granted hereunder in the Intellectual Property with any
intellectual property registry in which said Intellectual Property is registered or in
which an application for registration is pending including, without limitation, the United
States Patent and Trademark Office, the United States Copyright Office, the various
Secretaries of State, and the foreign counterparts on any of the foregoing;




          (iii) upon the occurrence and during the continuance of an Event of Default, and upon
request by the Collateral Agent, assemble the Collateral and allow inspection of the
Collateral by the Collateral Agent, or persons designated by the Collateral Agent; and




          (iv) at the Collateral Agent’s request, appear in and defend any action or proceeding
that could reasonably be expected to have a Material Adverse Effect with respect to such
Grantor’s title to or the Collateral Agent’s security interest in all or any part of the
Collateral.



          (b) Each Grantor hereby authorizes the Collateral Agent to file a Record or Records,
including, without limitation, financing or continuation statements, and amendments thereto, in any
jurisdictions and with any filing offices as the Collateral Agent may determine, in



30









 







its sole
discretion, are necessary or advisable to perfect the security interest granted to the Collateral
Agent herein. Such financing statements may describe the Collateral in the same manner as
described herein or may contain an indication or description of collateral that describes such
property in any other manner as the Collateral Agent may determine, in its sole discretion, is
necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral
granted to the Collateral Agent herein, including, without limitation, describing such property as
“all assets” or “all personal property, whether now owned or hereafter acquired.” Each Grantor
shall furnish to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection with the Collateral
as the Collateral Agent may reasonably request, all in reasonable detail.




          (c) Each Grantor hereby authorizes the Collateral Agent to modify this Agreement after
obtaining such Grantor’s written approval of or signature to such modification by amending Schedule
4.7 (as such schedule may be amended or supplemented from time to time) to include reference to any
right, title or interest in any existing Intellectual Property or any Intellectual Property
acquired or developed by any Grantor after the execution hereof or to delete any reference to any
right, title or interest in any Intellectual Property in which any Grantor no longer has or claims
any right, title or interest.




     5.3 Additional Grantors. From time to time subsequent to the date hereof, additional Persons
may become parties hereto as additional Grantors (each, an “Additional Grantor”), by executing a
Counterpart Agreement. Upon delivery of any such counterpart agreement to the Collateral Agent,
notice of which is hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall
be as fully a party hereto as if Additional Grantor were an original signatory hereto. Each
Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished
by the addition or release of any other Grantor hereunder, nor by any election of Collateral Agent
not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto regardless of
whether any other Person becomes or fails to become or ceases to be a Grantor hereunder.



SECTION 6. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.




     6.1 Power of Attorney. Subject to Section 6.1 of the First Lien Pledge and Security Agreement
and the Intercreditor Agreement, each Grantor hereby irrevocably appoints the Collateral Agent
(such appointment being coupled with an interest) as such Grantor’s attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor, the Collateral
Agent or otherwise, from time to time in the Collateral Agent’s discretion to take any action and
to execute any instrument that the Collateral Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, the following:



          (a) upon the occurrence and during the continuance of any Event of Default, to obtain and
adjust insurance required to be maintained by such Grantor or paid to the Collateral Agent pursuant
to the Credit Agreement;




          (b) upon the occurrence and during the continuance of any Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral;





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          (c) upon the occurrence and during the continuance of any Event of Default, to receive,
endorse and collect any drafts or other instruments, documents and chattel paper in connection with
clause (b) above;




          (d) upon the occurrence and during the continuance of any Event of Default, to file any claims
or take any action or institute any proceedings that the Collateral Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce the rights of the
Collateral Agent with respect to any of the Collateral;




          (e) to prepare and file any UCC financing statements against such Grantor as debtor;




          (f) to prepare, sign, and file for recordation in any intellectual property registry,
appropriate evidence of the lien and security interest granted herein in the Intellectual Property
in the name of such Grantor as debtor;




          (g) upon the occurrence and during the continuance of an Event of Default, to take or cause to
be taken all actions necessary to perform or comply or cause performance or compliance with the
terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens
(other than Permitted Liens) levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to be determined by
the Collateral Agent in its sole discretion, any such payments made by the Collateral Agent to
become obligations of such Grantor to the Collateral Agent, due and payable immediately without
demand; and




          (h) upon the occurrence and during the continuance of an Event of Default, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent’s option and such Grantor’s
expense, at any time or from time to time, all acts and things that the Collateral Agent deems
reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Agent’s
security interest therein in order to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.




     6.2 No Duty on the Part of Collateral Agent or Secured Parties. The powers conferred on the
Collateral Agent hereunder are solely to protect the interests of the Secured Parties in the
Collateral and shall not impose any duty upon the Collateral Agent or any Secured Party to exercise
any such powers. The Collateral Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers, and neither they nor
any of their officers, directors, employees or agents shall be responsible to any Grantor for any
act or failure to act hereunder, except for their own gross negligence or willful misconduct.



SECTION 7. REMEDIES.




     7.1 Generally.



          (a) If any Event of Default shall have occurred and be continuing, the Collateral Agent may,
subject to the terms of and in the manner contemplated by the Intercreditor



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Agreement, exercise in
respect of the Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it at law or in equity, all the rights and remedies of the Collateral Agent
on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect,
enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and
also may pursue any of the following separately, successively or simultaneously:





          (i) require any Grantor to, and each Grantor hereby agrees that it shall at its
expense and promptly upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent (subject to the Intercreditor
Agreement) and make it available to the Collateral Agent at a place to be designated by the
Collateral Agent that is reasonably convenient to both parties;




          (ii) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process;




          (iii) prior to the disposition of the Collateral, store, process, repair or
recondition the Collateral or otherwise prepare the Collateral for disposition in any
manner to the extent the Collateral Agent deems appropriate; and




          (iv) without notice except as specified below or under the UCC, sell, assign, lease,
license (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral or
any part thereof in one or more parcels at public or private sale, at any of the Collateral
Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or
times and at such price or prices and upon such other terms as the Collateral Agent may
deem commercially reasonable.



          (b) The Collateral Agent or any Secured Party may be the purchaser of any or all of the
Collateral at any public or private (to the extent to the portion of the Collateral being privately
sold is of a kind that is customarily sold on a recognized market or the subject of widely
distributed standard price quotations) sale in accordance with the UCC and the Collateral Agent, as
collateral agent for and representative of the Secured Parties, shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such sale made in accordance with the UCC, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Collateral payable by the
Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which
it now has or may at any time in the future have under any rule of law or statute now existing or
hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor agrees that it would not be
commercially unreasonable for the Collateral Agent to dispose of the Collateral or any portion
thereof by using Internet sites that provide for the auction of assets of the types included in the
Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of
assets. Each Grantor hereby waives any claims against the Collateral Agent arising by reason of
the fact that the price at which any Collateral may have been sold at such a private



33









 







sale was less
than the price which might have been obtained at a public sale, even if the Collateral Agent
accepts the first offer received and does not offer such Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the
Secured Obligations, Grantors shall be liable for the deficiency and the fees of any attorneys
employed by the Collateral Agent to collect such deficiency. Each Grantor further agrees that a
breach of any of the covenants contained in this Section will cause irreparable injury to the
Collateral Agent, that the Collateral Agent has no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for a defense that no
default has occurred giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral
Agent hereunder.



          (c) The Collateral Agent may sell the Collateral without giving any warranties as to the
Collateral. The Collateral Agent may specifically disclaim or modify any warranties of title or
the like. This procedure will not be considered to adversely affect the commercial reasonableness
of any sale of the Collateral.



          (d) The Collateral Agent shall have no obligation to marshal any of the Collateral.



     7.2 Application of Proceeds. Except as expressly provided elsewhere in this Agreement, the
Credit Agreement or the Intercreditor Agreement, all proceeds received by the Collateral Agent in
respect of any sale, any collection from, or other realization upon all or any part of the
Collateral shall be applied in full
or in part by the Collateral Agent against, the Secured Obligations in the following order of
priority: first, to the payment of all costs and expenses of such sale, collection or other
realization, including reasonable compensation to the Collateral Agent and its agents and counsel,
and all other expenses, liabilities and advances made or incurred by the Collateral Agent in
connection therewith, and all amounts for which the Collateral Agent is entitled to indemnification
hereunder (in its capacity as the Collateral Agent and not as a Lender) and all advances made by
the Collateral Agent hereunder for the account of the applicable Grantor, and to the payment of all
costs and expenses paid or incurred by the Collateral Agent in connection with the exercise of any
right or remedy hereunder or under the Credit Agreement, all in accordance with the terms hereof or
thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured
Obligations for the ratable benefit of the Secured Parties; and third, to the extent of any excess
of such proceeds, to the payment to or upon the order of such Grantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction may direct.



     7.3 Sales on Credit. If Collateral Agent sells any of the Collateral upon credit, Grantor
will be credited only with payments actually made by purchaser and received by Collateral Agent and
applied to indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, Collateral Agent may resell the Collateral and Grantor shall be credited with proceeds
of the sale.



     7.4 Deposit Accounts.



     If any Event of Default shall have occurred and be continuing, the Collateral Agent may,
subject to the Intercreditor Agreement, apply the balance from any Deposit Account (other than
Foreign Deposit Accounts) or instruct the bank at which any Deposit Account (other than Foreign



34









 







Deposit Accounts) is maintained to pay the balance of any Deposit Account (other than Foreign
Deposit Accounts) to or for the benefit of the Collateral Agent.



     7.5 Investment Related Property.



     Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities
Act and applicable state securities laws, the Collateral Agent may be compelled, with respect to
any sale of all or any part of the Investment Related Property conducted without prior registration
or qualification of such Investment Related Property under the Securities Act and/or such state
securities laws, to limit purchasers to those who will agree, among other things, to acquire the
Investment Related Property for their own account, for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges that any such private sale may be at
prices and on terms less favorable than those obtainable through a public sale without such
restrictions (including a public offering made pursuant to a registration statement under the
Securities Act) and, notwithstanding such circumstances, each Grantor agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral
Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any
Investment Related Property for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to so register it.
If the Collateral Agent determines to exercise its right to sell any or all of the Investment
Related Property (subject to the terms of the Intercreditor Agreement), upon written request, each
Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each
partnership and each limited liability company from time to time to furnish to the Collateral Agent
all such
information as the Collateral Agent may request in order to determine the number and nature of
interest, shares or other instruments included in the Investment Related Property which may be sold
by the Collateral Agent in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same are from time to time
in effect.



     7.6 Intellectual Property.



          (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during
the continuation of an Event of Default and subject to the Intercreditor Agreement:





          (i) the Collateral Agent shall have the right (but not the obligation) to bring suit
or otherwise commence any action or proceeding in the name of any Grantor, the Collateral
Agent or otherwise, in the Collateral Agent’s sole discretion, to enforce any Intellectual
Property, in which event such Grantor shall, at the request of the Collateral Agent, do any
and all lawful acts and execute any and all documents required by the Collateral Agent in
aid of such enforcement and such Grantor shall promptly, upon written demand, reimburse and
indemnify the Collateral Agent as provided in Section 10 hereof in connection with the
exercise of its rights under this Section, and, to the extent that the Collateral Agent
shall elect not to bring suit to enforce any Intellectual Property as provided in this
Section, each Grantor agrees to use commercially reasonable measures, whether by action,
suit, proceeding or otherwise, to prevent the infringement or other violation of any of
such Grantor’s rights in the Intellectual Property by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so infringing as
shall be necessary to prevent such infringement or violation;



35









 






          (ii) upon written demand from the Collateral Agent, each Grantor shall grant, assign,
convey or otherwise transfer to the Collateral Agent or such Collateral Agent’s designee
all of such Grantor’s right, title and interest in and to the Intellectual Property and
shall execute and deliver to the Collateral Agent such documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement;




          (iii) each Grantor agrees that such an assignment and/or recording shall be applied to
reduce the Secured Obligations outstanding only to the extent that the Collateral Agent (or
any Secured Party) receives cash proceeds in respect of the sale of, or other realization
upon, the Intellectual Property;




          (iv) subject to the terms of the Intercreditor Agreement, within five (5) Business
Days after written notice from the Collateral Agent, each Grantor shall make available to
the Collateral Agent, to the extent within such Grantor’s power and authority, such
personnel in such Grantor’s employ on the date of such Event of Default as the Collateral
Agent may reasonably designate, by name, title or job responsibility, to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell the products
and services sold or delivered by such Grantor under or in connection with the Trademarks,
Trademark Licenses, such persons to be available to perform their prior functions on the
Collateral Agent’s behalf and to be compensated by the Collateral Agent at such Grantor’s
expense on a per diem, pro-rata basis consistent with the salary and benefit structure
applicable to each as of the date of such Event of Default; and




          (v) the Collateral Agent shall have the right to notify, or require each Grantor to
notify, any obligors with respect to amounts due or to become due to such Grantor in
respect of the Intellectual Property, of the existence of the security interest created
herein, to direct such obligors to make payment of all such amounts directly to the
Collateral Agent, and, upon such notification and at the expense of such Grantor, to
enforce collection of any such amounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such Grantor might have done;




	 	(1)	 	all amounts and proceeds (including checks and other instruments) received by
Grantor in respect of amounts due to such Grantor in respect of the Collateral or any
portion thereof shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of such Grantor and shall be forthwith
paid over or delivered to the Collateral Agent in the same form as so received (with
any necessary endorsement) to be held as cash Collateral and applied as provided by
Section 7.7 hereof; and
	 
	 	(2)	 	Grantor shall not adjust, settle or compromise the amount or payment of any
such amount or release wholly or partly any obligor with respect thereto or allow any
credit or discount thereon.





          (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver,
modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall
have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Agent of
any rights, title and interests in and to the Intellectual Property shall have been previously made
and shall have become absolute and effective, and (iv) the Secured Obligations shall not have
become immediately due and payable, upon the written request of any

36









 








Grantor, the Collateral Agent
shall promptly execute and deliver to such Grantor, at such Grantor’s sole cost and expense, such
assignments or other transfer as may be necessary to reassign to such Grantor any such rights,
title and interests as may have been assigned to the Collateral Agent as aforesaid, subject to any
disposition thereof that may have been made by the Collateral Agent; provided, after giving effect
to such reassignment, the Collateral Agent’s security interest granted pursuant hereto, as well as
all other rights and remedies of the Collateral Agent granted hereunder, shall continue to be in
full force and effect; and provided further, the rights, title and interests so reassigned shall be
free and clear of any other Liens granted by or on behalf of the Collateral Agent and the Secured
Parties.




          (c) Solely for the purpose of enabling the Collateral Agent to exercise rights and remedies
under this Section 7 and at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent, to the
extent it has the right to do so, an irrevocable (except by reason of cure of an Event of Default),
nonexclusive license (exercisable without payment of royalty or other compensation to such
Grantor), subject, in the case of Trademarks, to sufficient rights to quality control and
inspection in favor of such Grantor to avoid the risk of invalidation of said Trademarks, to use,
operate under, license, or sublicense any Intellectual Property now owned or hereafter acquired by
such Grantor, and wherever the same may be located.




     7.7 Cash Proceeds. In addition to the rights of the Collateral Agent specified in Section 4.3
with respect to payments of Receivables (and subject to the terms of the Intercreditor Agreement),
upon the
occurrence and during the continuance of an Event of Default all proceeds of any Collateral
received by any Grantor consisting of cash, checks and other non-cash items (collectively, “Cash
Proceeds”) shall be held by such Grantor in trust for the Collateral Agent, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, unless otherwise provided
pursuant to Section 4.4.1(a)(ii), be turned over to the Collateral Agent in the exact form received
by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required) and held by
the Collateral Agent in the Collateral Account. Upon the occurrence and during the continuance of
an Event of Default any Cash Proceeds received by the Collateral Agent (whether from a Grantor or
otherwise) may, in the sole discretion of the Collateral Agent, (A) be held by the Collateral Agent
for the ratable benefit of the Secured Parties, as collateral security for the Secured Obligations
(whether matured or unmatured) and/or (B) then or at any time thereafter may be applied by the
Collateral Agent against the Secured Obligations then due and owing.



SECTION 8. COLLATERAL AGENT.




     The Collateral Agent has been appointed to act as Collateral Agent hereunder by Lenders and,
by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Agent shall
be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in accordance with this
Agreement and the Second Lien Credit Documents. In furtherance of the foregoing provisions of this
Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no
right individually to realize upon any of the Collateral hereunder, it being understood and agreed
by such Secured Party that all rights and remedies hereunder may be exercised solely by the
Collateral Agent for the benefit of Secured Parties in accordance with the terms of this Section.
Collateral Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to
Lenders and the Grantors, and Collateral Agent may be removed at any time with or without cause by
an instrument or concurrent instruments in writing delivered to the



37









 







Grantors and Collateral Agent
signed by the Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders shall have the right, upon five (5) Business Days’ notice to the Administrative
Agent, to appoint a successor Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges and duties of the
retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral
Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums,
Securities and other items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the duties of the
successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor
Collateral Agent or otherwise authorize the filing of such amendments to financing statements, and
take such other actions, as may be necessary or appropriate in connection with the assignment to
such successor Collateral Agent of the security interests created hereunder, whereupon such
retiring or removed Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent’s resignation or removal hereunder as
the Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was the Collateral Agent
hereunder.



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




     This Agreement shall create a continuing security interest in the Collateral and shall remain
in full force and effect until the payment in full of all Secured Obligations and the expiration or
termination of all Hedge Agreements, be binding upon each Grantor, its successors and assigns, and
inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of
the Collateral Agent and its successors, transferees and assigns. Without limiting the generality
of the foregoing, but subject to the terms of the Credit Agreement, any Lender may assign or
otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations and the expiration or termination of all Hedge
Agreements, the security interest granted hereby shall automatically terminate hereunder and of
record and all rights to the Collateral shall revert to Grantors. Upon any such termination the
Collateral Agent shall, at Grantors’ expense, execute and deliver to Grantors or otherwise
authorize the filing of such documents as Grantors shall reasonably request, including financing
statement amendments to evidence such termination. Upon any disposition of property permitted by
the Second Lien Credit Documents or as provided in the Intercreditor Agreement, the Liens granted
herein shall be deemed to be automatically released and such property shall automatically revert to
the applicable Grantor with no further action on the part of any Person. The Collateral Agent
shall, at Grantor’s expense, execute and deliver or otherwise authorize the filing of such
documents as Grantors shall reasonably request, in form and substance reasonably satisfactory to
the Collateral Agent, including financing statement amendments to evidence such release.



SECTION 10. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.




     The powers conferred on the Collateral Agent hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Collateral in its possession and the accounting
for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against prior




38









 







parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its
own property. Neither the Collateral Agent nor any of its directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Grantor or otherwise. If any Grantor fails to perform any
agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be
payable by each Grantor under Section 10.2 of the Credit Agreement.



SECTION 11. MISCELLANEOUS.




     Any notice required or permitted to be given under this Agreement shall be given in accordance
with Section 10.1 of the Credit Agreement. No failure or delay on the part of the Collateral Agent
in the exercise of any power, right or privilege hereunder or under any other Second Lien Credit
Document shall impair such power, right or privilege or be construed to be a waiver of any default
or acquiescence therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement and the other Second Lien Credit Documents
are cumulative to, and not exclusive of, any rights or remedies otherwise available. In case any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby. All covenants hereunder shall be given independent
effect so that if a particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within the limitations
of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit
of the Collateral Agent and Grantors and their respective successors and assigns. Except as
permitted under the Second Lien Credit Documents, no Grantor shall, without the prior written
consent of the Collateral Agent given in accordance with the Credit Agreement, assign any right,
duty or obligation hereunder. This Agreement and the other Second Lien Credit Documents embody the
entire agreement and understanding between Grantors and the Collateral Agent and supersede all
prior agreements and understandings between such parties relating to the subject matter hereof and
thereof. Accordingly, the Second Lien Credit Documents may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties. This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to the same document.



SECTION 12. CONFLICTS WITH FIRST LIEN LOAN DOCUMENTS.




     In the event of any conflict between the provisions of this Agreement and the provisions of
the First Lien Loan Documents, the provisions of the Intercreditor Agreement shall govern and
control.



39









 





     THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS CONFLICTS OF LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER
STATE.



[Remainder of this page intentionally left blank]




40









 





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




	 	 	 	 	 	 	 
	 	 	DAY INTERNATIONAL, INC.
	 	 	as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 
	 
	 	 	 	 	 	 
	 	 	DAY INTERNATIONAL GROUP, INC.
	 	 	as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 
	 
	 	 	 	 	 	 
	 	 	VARN INTERNATIONAL, INC.
	 	 	as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 
	 
	 	 	 	 	 	 
	 	 	DAY INTERNATIONAL FINANCE, INC.
	 	 	as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 
	 
	 	 	 	 	 	 
	 	 	NETWORK DISTRIBUTION INTERNATIONAL
	 	 	as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 






[SECOND LIEN PLEDGE AND SECURITY AGREEMENT]




 









 








	 	 	 	 	 	 	 
	 	 	NETWORK DISTRIBUTION INTERNATIONAL, INC.

as Grantor
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Thomas J. Koenig
 

Name: Thomas J. Koenig
	 	 
	 

	 	 	 	Title: Vice President and CFO	 	 






[SECOND LIEN PLEDGE AND SECURITY AGREEMENT]




 









 








	 	 	 	 	 	 	 
	 	 	THE BANK OF NEW YORK
	 	 	as the Collateral Agent
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Stephen C. Jerard
 

	 	 
	 	 	Name: Stephen C. Jerard
	 	 	Title: Vice President






[SECOND LIEN PLEDGE AND SECURITY AGREEMENT]