Document:

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                                                                   Exhibit 10.35

                           SUBSIDIARY PLEDGE AGREEMENT
                           ---------------------------

         THIS PLEDGE AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time, this "Pledge Agreement"), dated as of November 21,
2000, made by ATLANTIC GUEST, INC., a Delaware corporation, KCLLC HOLDINGS,
INC., a Delaware corporation, and ACME ELECTRIC CORPORATION, a New York
Corporation (each, a "Pledgor", and collectively, the "Pledgors"), in favor of
FIRST UNION NATIONAL BANK, as agent (together with any successor(s) thereto in
such capacity, the "Administrative Agent") for each of the Lender Parties (such
capitalized terms and all other capitalized terms not otherwise defined herein
shall have the meanings provided for in Article I).

                              W I T N E S S E T H:
                              -------------------

         WHEREAS, pursuant to the Credit and Guaranty Agreement, dated as of
September 29, 2000 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "Credit Agreement"), among Key Components, LLC
(the "Borrower"), certain of its Subsidiaries and its equity holders, as
Guarantors, the various financial institutions and other Persons as are or may
become parties thereto, as lenders (the "Lenders"), the Administrative Agent,
Societe Generale, as Syndication Agent for the Lenders, and First Union
Securities, Inc. and SG Cowen Securities Corporation, as Co-Arrangers, the
Lenders have extended Commitments to make Credit Extensions to the Borrower;

         WHEREAS, as a condition precedent to the making of the initial Credit
Extension under the Credit Agreement and to the execution and delivery of any
Rate Protection Agreement, each Pledgor is required to execute and deliver this
Pledge Agreement;

         WHEREAS, each Pledgor is a Subsidiary of the Borrower;

         WHEREAS, each Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and

         WHEREAS, it is in the best interests of each Pledgor to execute this
Pledge Agreement inasmuch as each Pledgor will derive substantial direct and
indirect benefits from the Credit Extensions made from time to time to the
Borrower by the Lenders pursuant to the Credit Agreement and pursuant to Rate
Protection Agreements;
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         NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders to make Credit
Extensions (including the initial Credit Extension) to the Borrower pursuant to
the Credit Agreement, and to enter into Rate Protection Agreements with the
Borrower, each Pledgor agrees with the Administrative Agent, for the benefit of
each Lender Party, as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION I.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):

         "Administrative Agent" is defined in the preamble.

         "Collateral" is defined in Section 2.1.

         "Control Agreement" means an agreement in form and substance
satisfactory to the Administrative Agent which provides for the Administrative
Agent to have "control" (as defined in Section 8-106 of the UCC, as such term
relates to Investment property (other than certificated securities or
commodities contracts), or as used in Section 9-115(e) of the UCC, as such term
relates to commodity contracts).

         "Credit Agreement" is defined in the first recital.

         "Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers and
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Interests or other shares of
capital stock constituting Collateral, but shall not include Dividends.

         "Dividends" means cash dividends and cash distributions with respect to
any Pledged Interests or other Pledged Property made in the ordinary course of
business or otherwise permitted under the Credit Agreement.

         "Investment property" is defined in Section 9-115 of the UCC.

         "Lender" and "Lenders" are defined in the first recital.

         "Lender Party" means, as the context may require, any Lender and/or the
Administrative Agent and/or each party to a Rate Protection Agreement (other
than the Borrower) and each of their respective successors and permitted
transferees and assigns.
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         "Pledge Agreement" is defined in the preamble.

         "Pledged Interest Issuers" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Interests identified opposite the name of
such Person and each Person whose ownership, equity or other similar interests,
including shares of capital stock, limited liability company interests and
general and limited partnership interests, are required to be pledged hereunder
and under the Credit Agreement from time to time.

         "Pledged Interests" means all ownership, equity or other similar
interests, including shares of capital stock, limited liability company
interests and general and limited partnership interests, of any Pledged Interest
Issuer which are required to be delivered by any Pledgor to the Administrative
Agent as Pledged Property hereunder.

         "Pledged Property" means all Pledged Interests, all intercompany notes
in which any of the Pledgors has an interest (including the right to receive
payment of principal and accrued interest on such notes and all other rights of
a payee under such notes), and all other instruments and securities, in each
case which are now being delivered or required to be delivered by any Pledgor to
the Administrative Agent or may from time to time hereafter be delivered or be
required to be delivered by any Pledgor to the Administrative Agent for the
purpose of pledge under this Pledge Agreement or any other Loan Document, and
all proceeds of any of the foregoing.

         "Pledgor" and "Pledgors" are defined in the preamble.

         "Secured Obligations" is defined in Section 2.2.

         "Stock Collateral" is defined in clause (a) of Section 2.1.

         "UCC" means the Uniform Commercial Code as in effect in the State of
New York.

         SECTION I.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

         SECTION I.3. UCC Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the UCC are
used in this Pledge Agreement, including its preamble and recitals, with such
meanings.
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                                   ARTICLE II

                                     PLEDGE

         SECTION II.1. Grant of Security Interest. Each Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Administrative Agent, for its benefit and the ratable benefit of each of the
Lender Parties, and hereby grants to the Administrative Agent, for its benefit
and the ratable benefit of the Lender Parties, a continuing security interest
in, all of such Pledgor's right, title and interest in, to and under the
following property, whether now or hereafter existing or acquired by such
Pledgor (the "Collateral"):

                  (a) all Investment property in which such Pledgor has an
         interest, including all Pledged Interests of each Pledged Interest
         Issuer identified in Attachment 1 hereto, issued from time to time (the
         "Stock Collateral");

                  (b) all other Pledged Property, whether now or hereafter
         delivered to the Administrative Agent in connection with this
         Agreement;

                  (c) all right, title and interest of such Pledgor, whether now
         existing or hereafter arising or acquired, in, to and under any
         partnership, joint venture, limited liability company operating and/or
         similar agreement which governs the rights and obligations of the
         holders of ownership, equity or similar interests in a Pledged Interest
         Issuer;

                  (d) all Dividends, Distributions, interest, and other payments
         and rights with respect to any Pledged Property; and

                  (e) all proceeds of and from any of the foregoing.

         SECTION II.2. Security for Obligations. This Pledge Agreement secures
the payment in full of all amounts payable by the Borrower, each Pledgor and
each other Obligor under or in connection with the Credit Agreement, the Notes,
each Rate Protection Agreement and each other Loan Document (including this
Pledge Agreement), whether for principal, interest (including interest accruing
during, or which would have accrued but for, the pendency of any bankruptcy or
similar proceeding), costs, fees, expenses, indemnities or otherwise and whether
now or hereafter existing (all of such obligations being the "Secured
Obligations").

         SECTION II.3. Delivery and Transfer of Pledged Property. All
certificates or instruments representing or evidencing any Collateral, including
all Pledged Interests, shall be delivered to and held by or on behalf of the
Administrative Agent pursuant hereto, shall be in suitable form for delivery,
and shall be accompanied by all necessary undated instruments of transfer or
assignment, duly executed in blank or, if any securities pledged pursuant to
this Agreement are uncertificated securities, confirmation and evidence
satisfactory to the Administrative Agent that the security interests in such
uncertificated securities have been transferred to and perfected by the
Administrative Agent for the benefit of the Lenders in accordance with the UCC.

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         SECTION II.4. Dividends on Pledged Interests. In the event that any
Dividend is to be paid to any Pledgor on any Pledged Interests, such Dividend
may be paid directly to such Pledgor. If any Default of the nature set forth in
Section 8.1.9 of the Credit Agreement or Event of Default has occurred and is
continuing, then any such Dividend shall be paid directly to the Administrative
Agent other than as permitted by clause (a)(i)(A) of Section 7.2.6 of the Credit
Agreement.

         SECTION II.5. Continuing Security Interest; Transfer of Note. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall

                  (a) remain in full force and effect until payment in full in
         cash of all Secured Obligations and the expiration or termination of
         all Commitments,

                  (b) be binding upon each Pledgor and its successors,
         transferees and assigns, provided that none of the Pledgors shall
         assign any of its rights or obligations under this Agreement without
         the consent of all the Lenders, and

                  (c) inure, together with the rights and remedies of the
         Administrative Agent hereunder, to the benefit of the Administrative
         Agent and each other Lender Party.

Without limiting the foregoing clause (c), any Lender may, to the extent
permitted under the Credit Agreement, assign or otherwise transfer (in whole or
in part) any Note or Credit Extension held by it, to any other Person or entity,
and such other Person or entity shall thereupon become vested with all the
rights and benefits in respect thereof granted to such Lender under any Loan
Document (including this Pledge Agreement) or otherwise, subject, however, to
any contrary provisions in such assignment or transfer, and to the provisions of
Section 11.11 and Article X of the Credit Agreement. Upon the payment in full in
cash of all Secured Obligations and the expiration or termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Pledgors. Upon any such termination or
release, the Administrative Agent will, at the Pledgors' joint and several
expense, deliver to such Pledgor, without any representations, warranties or
recourse of any kind whatsoever, (i) in the case of such termination, all
certificates and instruments representing or evidencing all Pledged Interests,
together with all other Collateral held by the Administrative Agent hereunder,
and (ii) in the case of any such release, all Collateral held by the
Administrative Agent for which the security interest granted hereunder is so
released, and in each case, execute and deliver to such Pledgor such documents
as such Pledgor shall reasonably request to evidence such termination or
release.

         SECTION II.6. Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of each Pledgor hereunder, shall, to the
fullest extent permitted by applicable law, be absolute and unconditional,
irrespective of

                  (a) any lack of validity or enforceability of the Credit
         Agreement, any Note, any Rate Protection Agreement or any other Loan
         Document,

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                  (b) the failure of any Lender Party or any holder of any Note

                           (i) to assert any claim or demand or to enforce any
                  right or remedy against the Borrower, any Pledgor or any other
                  Obligor or any other Person under the provisions of the Credit
                  Agreement, any Note, any Rate Protection Agreement, any other
                  Loan Document or otherwise, or

                           (ii) to exercise any right or remedy against any
                  other guarantor of, or collateral securing, any Secured
                  Obligation of the Borrower, any Pledgor or any other Obligor,

                  (c) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the Secured Obligations or any
         other extension, compromise or renewal of any Obligation of the
         Borrower, any Pledgor or any other Obligor,

                  (d) any reduction, limitation, impairment or termination of
         any Secured Obligation of the Borrower, any Pledgor or any other
         Obligor for any reason (other than the repayment in full of all Secured
         Obligations), including any claim of waiver, release, surrender,
         alteration or compromise, and shall not be subject to (and the Pledgor
         hereby waives any right to or claim of) any defense or setoff,
         counterclaim, recoupment or termination whatsoever by reason of the
         invalidity, illegality, nongenuineness, irregularity, compromise,
         unenforceability of, or any other event or occurrence affecting, any
         Secured Obligation of the Borrower, any Pledgor or any other Obligor or
         otherwise,

                  (e) any amendment to, rescission, waiver, or other
         modification of, or any consent to departure from, any of the terms of
         the Credit Agreement, any Note, any Rate Protection Agreement or any
         other Loan Document,

                  (f) any addition, exchange, release, surrender or
         non-perfection of any collateral (including the Collateral), or any
         amendment to or waiver or release of or addition to or consent to
         departure from any guaranty, for any of the Secured Obligations, or

                  (g) any other circumstances which might otherwise constitute a
         defense available to, or a legal or equitable discharge of, the
         Borrower, any Pledgor, any other Obligor, any surety or any guarantor.

         SECTION II.7. Postponement of Subrogation, etc. None of the Pledgors
will exercise any rights which it may acquire by way of rights of subrogation
under this Pledge Agreement or otherwise, until the prior payment, in full and
in cash, of all Secured Obligations. Any amount paid to any Pledgor on account
of any such subrogation rights prior to the payment in full of all Secured
Obligations shall be held in trust for the benefit of the Lender Parties and
each holder of a Note and shall immediately be paid to the Administrative Agent
and credited and applied against the Secured Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if

<PAGE>

                  (a) any Pledgor has made payment to the Lender Parties and
         each holder of a Note of all or any part of the Secured Obligations,
         and

                  (b) all Secured Obligations have been paid in full and all
         Commitments have been permanently terminated,

each Lender Party and each holder of a Note agrees that, at such Pledgor's
request, the Administrative Agent, on behalf of the Lender Parties and the
holders of the Notes, will execute and deliver to such Pledgor appropriate
documents (without recourse and without representation or warranty) necessary to
evidence the transfer by subrogation to such Pledgor of an interest in the
Secured Obligations resulting from such payment by such Pledgor. In furtherance
of the foregoing, for so long as any Secured Obligations or Commitments remain
outstanding, each Pledgor shall refrain from taking any action or commencing any
proceeding against the Borrower or the other Guarantors (or their respective
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of proceeds of any Collateral
received by any Lender Party or any holder of a Note.

         SECTION II.8. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding

                  (a) each Pledgor will remain liable under the contracts and
         agreements included in the Collateral to the extent set forth therein,
         and will perform all of its duties and obligations under such contracts
         and agreements to the same extent as if this Pledge Agreement had not
         been executed;

                  (b) the exercise by the Administrative Agent of any of its
         rights hereunder will not release any Pledgor from any of its duties or
         obligations under any such contracts or agreements included in the
         Collateral; and

                  (c) neither the Administrative Agent nor any other Lender
         Party will have any obligation or liability under any contracts or
         agreements included in the Collateral by reason of this Pledge
         Agreement, nor will the Administrative Agent or any other Lender Party
         be obligated to perform any of the obligations or duties of any Pledgor
         thereunder or to take any action to collect or enforce any claim for
         payment assigned hereunder.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         SECTION III.1. Warranties, etc. Each Pledgor represents and warrants
unto each Lender Party, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Interests) by such Pledgor to the
Administrative Agent of any Collateral, as set forth in this Article.
<PAGE>

         SECTION 3.1.1. Incorporation of Credit Agreement Representations and
Warranties. The representations and warranties contained in Article VI of the
Credit Agreement are hereby confirmed and restated, insofar as the
representations and warranties contained therein by their terms are applicable
to any Pledgor or its properties or assets, each such representation and
warranty (insofar as applicable as aforesaid), together with all related
definitions and ancillary provisions, being hereby incorporated into this Pledge
Agreement by reference as though specifically set forth in this Section.

         SECTION 3.1.2. Ownership, No Liens, etc. Each Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all Liens,
except any lien or security interest granted pursuant hereto in favor of the
Administrative Agent and any other Liens permitted under the Credit Agreement.
No effective financing statement or other filing similar in effect covering any
Collateral is on file in any recording office, except those filed in favor of
the Administrative Agent relating to this Pledge Agreement.

         SECTION 3.1.3. Valid Security Interest. This Pledge Agreement creates a
valid security interest in the Collateral securing the payment of the Secured
Obligations. Each Pledgor has filed or caused to be filed all statements in the
appropriate offices therefor (or has executed and delivered to the
Administrative Agent originals thereof suitable for filing in such offices) and
has taken all of the actions necessary to create perfected and first-priority
security interests in the applicable Collateral, including (a) in the case of
Stock Collateral, delivery of such Collateral to the Administrative Agent, duly
endorsed in blank; and (b) in the case of Collateral comprised of uncertificated
securities and other Investment property (other than certificated securities),
causing the Administrative Agent to have "control" as such term relates to
Investment property (other than certificated securities of such Collateral).

         SECTION 3.1.4. As to Pledged Interests. With respect to any Pledged
Interest Issuer that is

                  (a) a corporation, business trust, joint stock company or
         similar Person, all Pledged Interests issued by such Issuer are duly
         authorized and validly issued, fully paid and non-assessable, and
         represented by a certificate (other than securities which are
         uncertificated and for which a legal, valid and binding Control
         Agreement has been delivered pursuant to Section 4.5); and

                  (b) a partnership or limited liability company, all Capital
         Securities issued by such Issuer provide that such Capital Securities
         are a security governed by Article 8 of the UCC.

The percentage of the issued and outstanding Capital Securities of each Pledged
Interest Issuer pledged by any Pledgor hereunder are as set forth on Schedule I
attached hereto. Each Pledgor has no direct Subsidiaries other than the Pledged
Interest Issuers.

<PAGE>

         SECTION 3.1.5. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required (other than UCC
filings) either

                  (a) for the pledge by each Pledgor of any Collateral pursuant
         to this Pledge Agreement or for the execution, delivery, and
         performance of this Pledge Agreement by such Pledgor, or

                  (b) for the perfection or exercise by the Administrative Agent
         of the voting or other rights provided for in this Pledge Agreement,
         or, except with respect to the Pledged Interests, as may be required in
         connection with a disposition of such Pledged Interests by laws
         affecting the offering and sale of securities generally, the remedies
         in respect of the Collateral pursuant to this Pledge Agreement.

         SECTION 3.1.6. Compliance with Contracts, Laws, etc. Each Pledgor is in
compliance with the requirements of all applicable laws (including, without
limitation, the provisions of the Fair Labor Standards Act), contracts to which
it is a party, rules, regulations and orders of every governmental authority,
the non-compliance with which might reasonably be expected to materially
adversely affect the condition (financial or otherwise), operations, business,
assets or liabilities of such Pledgor and its Subsidiaries (taken as a whole) or
the value of the Collateral or the worth of the Collateral as collateral
security.

         SECTION 3.1.7. As to Intercompany Notes. All intercompany notes have
been duly authorized, executed, endorsed, issued and delivered, and are the
legal, valid and binding obligation of the issuers thereof, and no payee
thereunder is in default. No maker has any defense or counterclaim to payment in
connection with any of said intercompany notes.

         SECTION 3.1.8. Location, Records, etc. The place(s) of business and the
office(s) where each Pledgor keeps its records concerning Capital Securities
that are not securities are set forth on Item B of Schedule I hereto. None of
the Pledgors has been known by any legal name different from the one set forth
on the signature page hereto.

                                   ARTICLE IV

                                    COVENANTS

         SECTION IV.1. Protect Collateral; Further Assurances, etc. None of the
Pledgors will sell, assign, transfer, pledge, or encumber in any other manner
the Collateral (except in favor of the Administrative Agent hereunder), except
for a Permitted Disposition thereof complying with the terms and conditions of
Section 7.2.11 of the Credit Agreement. In the event of a Permitted Disposition
of Collateral hereunder which is effected by any Pledgor in compliance with the

<PAGE>

terms of the Credit Agreement, the Administrative Agent shall release its lien
and security interest in respect of the Collateral so disposed of upon request
therefor made by such Pledgor. Each Pledgor will warrant and defend the right
and title herein granted unto the Administrative Agent in and to the Collateral
(and all right, title, and interest represented by the Collateral) against the
claims and demands of all Persons whomsoever. Each Pledgor agrees that at any
time, and from time to time, at the expense of such Pledgor, such Pledgor will
promptly execute and deliver all further instruments, and take all further
action, that may be necessary or desirable, or that the Administrative Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Administrative Agent
to exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Pledgor will
(a) from time to time upon the request of the Administrative Agent, promptly
deliver to the Administrative Agent such stock powers, instruments and similar
documents, satisfactory in form and substance to the Administrative Agent, with
respect to such Collateral as the Administrative Agent may reasonably request
and will, from time to time upon the request of the Administrative Agent after
the occurrence and during the continuance of any Event of Default, promptly
transfer any securities constituting Collateral into the name of any nominee
designated by the Administrative Agent, all in form and substance satisfactory
to the Administrative Agent; (b) execute and file (or cause to be filed) such
financing statements or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or that the Administrative
Agent may request in order to perfect and preserve the security interests and
other rights granted or purported to be granted to the Administrative Agent
hereby; (c) not enter into any agreement amending, supplementing, or waiving any
provision of any intercompany note (including any underlying instrument pursuant
to which such intercompany note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; (d) not
take or omit to take any action the taking or the omission of which would result
in any impairment or alteration of any obligation of the maker of any
intercompany note or other instrument constituting Collateral; and (e) furnish
to the Administrative Agent, from time to time at the request of the
Administrative Agent, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail. With respect to the foregoing and the grant of the security interest
hereunder, each Pledgor hereby authorizes the Administrative Agent to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of such Pledgor where
permitted by law. None of the Pledgors will permit any Pledged Interest Issuer
to issue any capital stock or other ownership interests unless the same is
immediately delivered in pledge to the Administrative Agent hereunder.

         SECTION IV.2. Stock Powers, etc. Each Pledgor agrees that all Pledged
Interests (and all other shares of capital stock, partnership interests and
other ownership interests constituting Collateral) delivered by such Pledgor
pursuant to this Pledge Agreement will be accompanied by duly executed undated
blank stock powers, or other equivalent instruments of transfer acceptable to
the Administrative Agent. Each Pledgor will, from time to time upon the request
of the Administrative Agent, promptly deliver to the Administrative Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Administrative Agent, with respect to the Collateral as the
Administrative Agent may reasonably request and will, from time to time upon the

<PAGE>

request of the Administrative Agent after the occurrence and during the
continuation of any Event of Default, promptly transfer any Pledged Interests or
other shares of common stock or other ownership interests constituting
Collateral into the name of any nominee designated by the Administrative Agent.

         SECTION IV.3. Continuous Pledge. Subject to Section 2.4, each Pledgor
will, at all times, keep pledged to the Administrative Agent pursuant hereto all
Pledged Interests and all other shares of capital stock constituting Collateral,
all Dividends (other than Dividends actually paid in cash in accordance with the
terms of the Credit Agreement) and Distributions with respect thereto, and all
other Collateral and other securities, instruments, proceeds, and rights from
time to time received by or distributable to such Pledgor in respect of any
Collateral.

         SECTION IV.4.  Voting Rights; Dividends, etc.  Each Pledgor agrees:

                  (a) after any Default of the nature set forth in Section 8.1.9
         of the Credit Agreement or Event of Default shall have occurred and be
         continuing, promptly upon receipt thereof by such Pledgor and without
         any request therefor by the Administrative Agent, to deliver (properly
         endorsed where required hereby or requested by the Administrative
         Agent) to the Administrative Agent all Dividends, all Distributions,
         all interest, all principal, all other cash payments, and all proceeds
         of the Collateral (in each case other than as permitted by clauses (a)
         and (b) of Section 7.2.6 of the Credit Agreement), all of which shall
         be held by the Administrative Agent as additional Collateral for use in
         accordance with Sections 6.3 and 6.4; and

                  (b) after any Event of Default shall have occurred and be
         continuing and the Administrative Agent has notified such Pledgor of
         the Administrative Agent's intention to exercise its voting power under
         this Section 4.4(b)

                           (i) the Administrative Agent may exercise (to the
                  exclusion of such Pledgor) the voting power and all other
                  incidental rights of ownership with respect to any Pledged
                  Interests or other shares of capital stock or other ownership
                  interests constituting Collateral and such Pledgor hereby
                  grants the Administrative Agent an irrevocable proxy,
                  exercisable under such circumstances, to vote the Pledged
                  Interests and such other Collateral; and

                           (ii) promptly to deliver to the Administrative Agent
                  such additional proxies and other documents as may be
                  reasonably necessary to allow the Administrative Agent to
                  exercise such voting power.

All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by each Pledgor but which
such Pledgor is then obligated to deliver to the Administrative Agent, shall,
until delivery to the Administrative Agent, be held by such Pledgor separate and
apart from its other property in trust for the Administrative Agent for the
benefit of the Lenders. The Administrative Agent agrees that unless an Event of
Default shall have occurred and be continuing and the Administrative Agent shall

<PAGE>

have given the notice referred to in Section 4.4(b), each Pledgor shall have the
exclusive voting power with respect to any shares of capital stock or other
ownership interests (including any of the Pledged Interests) constituting
Collateral and the Administrative Agent shall, upon the written request of such
Pledgor, promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by such Pledgor which are necessary to allow such Pledgor
to exercise voting power with respect to any such share of capital stock or
other ownership interests (including any of the Pledged Interests) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by such Pledgor that would materially
impair any Collateral or be materially inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).

         SECTION IV.5. Capital Securities of Subsidiaries. Each Pledgor will
cause each Pledged Interest Issuer:

                  (a) to provide in its Organic Documents that all securities
         issued by such Issuer will be represented by a certificate; and

                  (b) that is a partnership or limited liability company, to
         provide in its Organic Documents that all Capital Securities issued by
         such Subsidiary will expressly provide that such Capital Securities are
         securities governed by Article 8 of the UCC.

         SECTION IV.6. Investment Property (other than Certificated Securities).
With respect to any Investment property (other than certificated securities)
owned by each Pledgor, such Pledgor will cause a Control Agreement relating to
such Investment property to be executed and delivered by such Pledgor and the
applicable financial intermediary in favor of the Administrative Agent or, if
any securities pledged by such Pledgor pursuant to this Pledge Agreement are
uncertificated securities, confirmation and evidence satisfactory to the
Administrative Agent that such Pledgor has taken all actions reasonably
requested by the Administrative Agent to provide for the transfer to, and
perfection by, the Administrative Agent of the security interests in such
uncertificated securities for the benefit of the Lender Parties in accordance
with the UCC.

                                    ARTICLE V

                                    THE AGENT

         SECTION V.1. Administrative Agent Appointed Attorney-in-Fact. Each
Pledgor hereby irrevocably appoints the Administrative Agent such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time in the
Administrative Agent's discretion, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including without limitation:

<PAGE>

                  (a) to ask, demand, collect, sue for, recover, compromise,
         receive and give acquittance and receipts for moneys due and to become
         due under or in respect of any of the Collateral;

                  (b) to receive, endorse, and collect any drafts or other
         instruments, documents and chattel paper, in connection with clause (a)
         above; and

                  (c) to file any claims or take any action or institute any
         proceedings which the Administrative Agent may deem necessary or
         desirable for the collection of any of the Collateral or otherwise to
         enforce the rights of the Administrative Agent with respect to any of
         the Collateral, and to perform the affirmative obligations of such
         Pledgor hereunder (including Section 4.1).

Each Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

         SECTION V.2. Administrative Agent May Perform. If any of the Pledgors
fails to perform any agreement contained herein, the Administrative Agent may
itself perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Pledgor pursuant to Section 6.4.

         SECTION V.3. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on behalf
of the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for

                  (a) ascertaining or taking action with respect to calls,
         conversions, exchanges, maturities, tenders or other matters relative
         to any Pledged Property, whether or not the Administrative Agent has or
         is deemed to have knowledge of such matters, or

                  (b) taking any necessary steps to preserve rights against
         prior parties or any other rights pertaining to any Collateral.

         SECTION V.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral if it takes such action for that purpose as any of the
Pledgors reasonably requests in writing at times other than upon the occurrence
and during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.

<PAGE>

                                   ARTICLE VI

                                    REMEDIES

         SECTION VI.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:

                  (a) The Administrative Agent may exercise in respect of the
         Collateral, in addition to other rights and remedies provided for
         herein or otherwise available to it, all the rights and remedies of a
         secured party on default under the UCC (whether or not the UCC applies
         to the affected Collateral) and also may, without notice except as
         specified below, sell the Collateral or any part thereof in one or more
         parcels at public or private sale, at any of the Administrative Agent's
         offices or elsewhere, for cash, on credit or for future delivery
         (without assumption of any credit risk), and upon such other terms as
         the Administrative Agent may deem commercially reasonable in accordance
         with applicable laws. Each Pledgor agrees that, to the extent notice of
         sale shall be required by law, at least ten days' prior notice to such
         Pledgor 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 Administrative Agent shall not be obligated to make
         any sale of Collateral regardless of notice of sale having been given.
         The Administrative 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.

                  (b)  The Administrative Agent may

                           (i) transfer all or any part of the Collateral into
                  the name of the Administrative Agent or its nominee, with or
                  without disclosing that such Collateral is subject to the lien
                  and security interest hereunder,

                           (ii) notify the parties obligated on any of the
                  Collateral to make payment to the Administrative Agent of any
                  amount due or to become due thereunder,

                           (iii) enforce collection of any of the Collateral by
                  suit or otherwise, and surrender, release or exchange all or
                  any part thereof, or compromise or extend or renew for any
                  period (whether or not longer than the original period) any
                  obligations of any nature of any party with respect thereto,

                           (iv) endorse any checks, drafts, or other writings in
                  the appropriate Pledgor's name to allow collection of the
                  Collateral,

                           (v) take control of any proceeds of the Collateral,
                  and
<PAGE>

                           (vi) execute (in the name, place and stead of any
                  Pledgor) endorsements, assignments, stock powers and other
                  instruments of conveyance or transfer with respect to all or
                  any of the Collateral.

         SECTION VI.2. Compliance with Restrictions (including Securities Laws).
Each Pledgor agrees that in any sale of any of the Collateral whenever an Event
of Default shall have occurred and be continuing, the Administrative Agent is
hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including compliance with such procedures as
may restrict the number of prospective bidders and purchasers, require that such
prospective bidders and purchaser have certain qualifications, and restrict such
prospective bidders and purchasers to persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any governmental regulatory
authority or official, and such Pledgor further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Administrative Agent or any
other Lender Party be liable or accountable to such Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in compliance with
any such limitation or restriction.

         SECTION VI.3. Application of Proceeds. All cash proceeds received by
the Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held, to the extent permitted under applicable law,
by the Administrative Agent as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Administrative Agent pursuant to Sections 11.3 and 11.4 of the Credit Agreement
and Section 6.4 below) in whole or in part by the Administrative Agent against,
all or any part of the Secured Obligations in the following order:

                  (a) first, to payment of the expenses of such sale or other
         realization including reasonable compensation to the Administrative
         Agent and its agents and counsel, and all expenses, liabilities and
         advances incurred or made by the Administrative Agent in connection
         therewith, and any other unreimbursed expenses for which the
         Administrative Agent is to be reimbursed pursuant to Sections 11.3 and
         11.4 of the Credit Agreement or Section 6.4 hereof and unpaid fees
         owing to the Administrative Agent under the Credit Agreement;

                  (b) second, to the ratable payment of accrued but unpaid
         interest on the Loans;

                  (c) third, to the ratable (i) payment of unpaid principal of
         the Loans under the Credit Agreement, (ii) reduction of "credit
         exposure" under Rate Protection Agreements ("credit exposure" being
         determined at such time in accordance with the customary methods of
         calculating credit exposure under similar arrangements by the
         counterparty to such arrangements), and (iii) cash collateralization of
         Letter of Credit Outstandings;

<PAGE>

                  (d) fourth, to the ratable payment of all other amounts
         payable by the Obligors under the Credit Agreement; and

                  (e) fifth, to the ratable payment of all other Secured
         Obligations owing under any Loan Document, and then to be held as
         additional collateral security until the Termination Date, until all
         Secured Obligations shall have been paid in full.

The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. Any surplus of such cash or cash
proceeds held by the Administrative Agent and remaining after payment in full of
all the Secured Obligations, and the termination of all Commitments, shall be
paid over to a Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.

         SECTION VI.4. Indemnity and Expenses. The Pledgors hereby jointly and
severally indemnify and hold harmless the Administrative Agent and the other
Lender Parties from and against any and all claims, losses, and liabilities
arising out of or resulting from this Pledge Agreement (including enforcement of
this Pledge Agreement), except claims, losses, or liabilities resulting from the
Administrative Agent's gross negligence or wilful misconduct. Upon demand, the
Pledgors will pay to the Administrative Agent the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Administrative Agent or, in the
case of clause (c) below, any other Lender Party may incur in connection with:

                  (a) the administration of this Pledge Agreement, the Credit
         Agreement and each other Loan Document;

                  (b) the custody, preservation, use, or operation of, or the
         sale of, collection from, or other realization upon, any of the
         Collateral;

                  (c) the exercise or enforcement of any of the rights of the
         Administrative Agent hereunder; or

                  (d) the failure by any of the Pledgors to perform or observe
         any of the provisions hereof.

                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

         SECTION VII.1. Loan Document; Counterparts. This Pledge Agreement is a
Loan Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof. This Pledge Agreement may be
executed by the parties hereto in several counterparts.

<PAGE>

         SECTION VII.2. Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by any of the
Pledgors herefrom shall in any event be effective unless the same shall be in
writing and signed by the Administrative Agent (acting with the requisite
consent of the Lenders as provided in the Credit Agreement), and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it is given.

         SECTION VII.3. Protection of Collateral. The Administrative Agent may
from time to time, at its option and at the expense of each Pledgor, perform any
act which such Pledgor agrees hereunder to perform and which such Pledgor shall
fail to perform after being requested in writing so to perform (it being
understood that no such request need be given after the occurrence and during
the continuance of any Event of Default) and the Administrative Agent may from
time to time take any other action which the Administrative Agent reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein for the benefit of the Lender
Parties.

         SECTION VII.4. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing or by facsimile
transmission and, if to any of the Pledgors, at the address of such Pledgor
provided for in the Credit Agreement and, if to the Administrative Agent, at its
address set forth in the Credit Agreement, or as to either party at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. All such notices
and other communications, if mailed and properly addressed with postage prepaid,
shall be deemed given three Business Days after posting; any notice sent by
prepaid overnight express mail shall be deemed delivered on the next following
Business Day; and any notice transmitted by facsimile shall be deemed given upon
receipt of electronic confirmation of transmission by the sender thereof.

         SECTION VII.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.

         SECTION VII.6. Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.

         SECTION VII.7. Governing Law, Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.
<PAGE>

         SECTION VII.8. Forum Selection and Consent to Jurisdiction. TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY LENDER PARTY MAY BE BROUGHT AND MAINTAINED IN ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURTS SITTING IN THE CITY OF NEW YORK; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PLEDGOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
ANY UNITED STATES FEDERAL OR NEW YORK STATE COURTS SITTING IN THE CITY OF NEW
YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY OF THE PLEDGOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, SUCH PLEDGOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
PLEDGE AGREEMENT.

         SECTION VII.9. Waiver of Jury Trial, etc. EACH LENDER PARTY AND EACH
PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AGREEMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE PLEDGOR. EACH PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS PLEDGE
AGREEMENT. IN NO EVENT SHALL ANY LENDER PARTY BE LIABLE FOR ANY CONSEQUENTIAL
DAMAGES WHICH MAY BE ALLEGED IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective authorized
officers thereunto duly authorized as of the day and year first above written.

                                        ATLANTIC GUEST, INC.

                                        By:/s/ Alan L. Rivera
                                           -------------------------------------
                                           Title:

                                        KCLLC HOLDINGS, INC.

                                        By:/s/ Alan L. Rivera
                                           -------------------------------------
                                           Title:

                                        ACME ELECTRIC CORPORATION

                                        By:/s/ Alan L. Rivera
                                           -------------------------------------
                                           Title:

                                        FIRST UNION NATIONAL BANK,
                                          as Administrative Agent

                                        By:/s/ Robert Brown
                                           -------------------------------------
                                           Title:

<PAGE>

                                                                    ATTACHMENT 1

Item A.  Pledged Interests:
-------  ------------------
<TABLE>
<CAPTION>

                                                                            Common Stock
                                            -----------------------------------------------------------------------------
                Pledged                           Authorized                Outstanding                % of Shares
            Interest Issuer                         Shares                     Shares                    Pledged
----------------------------------------    -----------------------------------------------------------------------------
<S>                                              <C>                         <C>                       <C>
VFC Acquisition Company, Inc.                        3,000                      1,000                       100%
----------------------------------------    -----------------------------------------------------------------------------
Acme-URDC, Inc.                                     50,000                        100                       100%
----------------------------------------    -----------------------------------------------------------------------------
Acme Electric Mexico Holdings I, Inc.                1,000                        100                       100%
----------------------------------------    -----------------------------------------------------------------------------
Acme Electric Mexico Holdings II, Inc.               1,000                        100                       100%
----------------------------------------    -----------------------------------------------------------------------------

                                                                        Membership Interests
                                            -----------------------------------------------------------------------------
                Pledged                                          % of Membership Interests Pledged
            Interest Issuer
----------------------------------------    -----------------------------------------------------------------------------
Guest Building, LLC                                                             100%
---------------------------------------- -- -----------------------------------------------------------------------------
</TABLE>

Item B. Location of Records Concerning Capital Securities that Are Not
        Securities:
----------------------------------------------------------------------

None.<PAGE>

Exhibit 10.36

                           BORROWER SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (as amended, supplemented, restated or
otherwise modified from time to time, the "Security Agreement"), dated as of
November 21, 2000, made by Key Components, LLC, a Delaware limited liability
company (the "Grantor"), in favor of First Union National Bank, as
administrative agent for the Lenders (together with any successor(s) thereto in
such capacity, the "Administrative Agent") for each of the Lender Parties (as
defined below).

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, pursuant to the Credit and Guaranty Agreement, dated as of
September 29, 2000 (together with all amendments, supplements, restatements and
other modifications, if any, from time to time thereafter made thereto, the
"Credit Agreement"), among the Grantor, as Borrower, certain of its Subsidiaries
and its equity holders, as Guarantors, the various financial institutions and
other Persons as are or may become parties thereto, as lenders (the "Lenders"),
the Administrative Agent, Societe Generale, as Syndication Agent for the
Lenders, and First Union Securities, Inc. and SG Cowen Securities Corporation,
as Co-Arrangers, the Lenders have extended Commitments to make Credit Extensions
to the Grantor;

         WHEREAS, as a condition precedent to the making of the initial Credit
Extensions under the Credit Agreement, the Grantor is required to execute and
deliver this Security Agreement;

         WHEREAS, the Grantor also intends to enter into Rate Protection
Agreements; and

         WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make Credit Extensions (including the initial Credit Extensions) to the
Grantor pursuant to the Credit Agreement, the Grantor agrees, for the benefit of
each Lender Party, as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION I.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):

         "Administrative Agent" is defined in the preamble.

<PAGE>

         "Collateral" is defined in Section 2.1.

         "Collateral Account" is defined in Section 4.1.2(c).

         "Computer Hardware and Software Collateral" means:

                  (a) all computer and other electronic data processing
         hardware, integrated computer systems, central processing units, memory
         units, display terminals, printers, features, computer elements, card
         readers, tape drives, hard and soft disk drives, cables, electrical
         supply hardware, generators, power equalizers, accessories, all
         peripheral devices and other related computer hardware now owned or
         hereafter acquired by the Grantor;

                  (b) all software programs (including both source code, object
         code and all related applications and data files), whether now owned,
         licensed or leased or hereafter acquired by the Grantor, designed for
         use on the computers and electronic data processing hardware described
         in clause (a) above;

                  (c) all firmware associated therewith now owned or hereafter
         acquired by the Grantor;

                  (d) all documentation (including flow charts, logic diagrams,
         manuals, guides and specifications) with respect to such hardware,
         software and firmware described in the preceding clauses (a) through
         (c) above; and

                  (e) all rights of the Grantor with respect to all of the
         foregoing, including, without limitation, any and all copyrights,
         licenses, options, warranties, service contracts, program services,
         test rights, maintenance rights, support rights, improvement rights,
         renewal rights and indemnifications and any substitutions,
         replacements, additions or model conversions of any of the foregoing.

         "Copyright Collateral" means all copyrights and all semi-conductor chip
product mask works of the Grantor, whether statutory or common law, registered
or unregistered, now or hereafter in force throughout the world including,
without limitation, all of the Grantor's right, title and interest in and to all
copyrights and mask works registered in the United States Copyright Office or
anywhere else in the world and also including, without limitation, the
copyrights and mask works referred to in Item A of Schedule IV attached hereto,
and all applications for registration thereof, whether pending or in
preparation, all copyright and mask work licenses, including each copyright and
mask work license referred to in Item B of Schedule IV attached hereto, the
right to sue for past, present and future infringements of any thereof, all
rights corresponding thereto throughout the world, all extensions and renewals
of any thereof and all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages and proceeds of suit.

         "Credit Agreement" is defined in the first recital.

         "Equipment" is defined in clause (a) of Section 2.1.

         "Grantor" is defined in the preamble.

         "Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.

<PAGE>

         "Inventory" is defined in clause (b) of Section 2.1.

         "Lenders" is defined in the first recital.

         "Lender Party" means, as the context may require, any Lender, each
party to a Rate Protection Agreement (other than the Borrower) and/or the
Administrative Agent and each of their respective successors, transferees and
assigns.

         "Patent Collateral" means:

                  (a) all letters patent and applications for letters patent
         throughout the world of the Grantor, including all patent applications
         of the Grantor in preparation for filing anywhere in the world and
         including each patent and patent application referred to in Item A of
         Schedule II attached hereto;

                  (b) all patent licenses in favor of the Grantor, including
         each patent license in favor of the Grantor referred to in Item B of
         Schedule II attached hereto;

                  (c) all reissues, divisions, continuations,
         continuations-in-part, extensions, renewals and reexaminations of any
         of the items described in clauses (a) and (b) above; and

                  (d) all proceeds of, and rights associated with, the foregoing
         (including license royalties and proceeds of infringement suits), the
         right of the Grantor to sue third parties for past, present or future
         infringements of any patent or patent application, including any patent
         or patent application referred to in Item A of Schedule II attached
         hereto, and for breach or enforcement of any patent license, including
         any patent license referred to in Item B of Schedule II attached
         hereto, and all rights corresponding thereto throughout the world.

         "Receivables" is defined in clause (c) of Section 2.1.

         "Related Contracts" is defined in clause (c) of Section 2.1.

         "Rolling Stock" means all railcars, barges and other water carrier
equipment, and all accessions, appurtenances and parts installed on and
additions thereto and replacements thereof hereafter acquired by the Grantor.

         "Secured Obligations" is defined in Section 2.2.

         "Security Agreement" is defined in the preamble.

         "Trademark Collateral" means:

                  (a) all trademarks, trade names, corporate names, company
         names, business names, fictitious business names, trade styles, service
         marks, certification marks, collective marks, logos, other source of
         business identifiers, prints and labels on which any of the foregoing
         have appeared or appear, designs and general intangibles of a like
         nature of the Grantor (all of the foregoing items in this clause (a)
         being collectively called a "Trademark"), now existing anywhere in the
         world or hereafter adopted or acquired, whether currently in use or
         not, all registrations and recordings thereof and all applications in
         connection therewith, whether pending or in preparation for filing,

<PAGE>
         including registrations, recordings and applications of the Grantor in
         the United States Patent and Trademark Office or in any office or
         agency of the United States of America or any state thereof or any
         foreign country, including those referred to in Item A of Schedule III
         attached hereto;

                  (b) all Trademark licenses in favor of the Grantor, including
         each Trademark license referred to in Item B of Schedule III attached
         hereto;

                  (c) all reissues, extensions or renewals of any of the items
         described in clauses (a) and (b) above;

                  (d) all of the goodwill of the business of the Grantor
         connected with the use of, and symbolized by the items described in,
         clauses (a) and (b) above; and

                  (e) all proceeds of, and rights associated with, the
         foregoing, including any claim by the Grantor against third parties for
         past, present or future infringement or dilution of any Trademark,
         Trademark registration or Trademark license of the Grantor, including
         any Trademark, Trademark registration or Trademark license referred to
         in Item A or Item B of Schedule III attached hereto, or for any injury
         to the goodwill associated with the use of any such Trademark or for
         breach or enforcement of any Trademark license.

         "Trade Secrets Collateral" means common law and statutory trade secrets
and all other confidential or proprietary or useful information of the Grantor
and all know-how obtained by the Grantor or used by the Grantor in the business
of the Grantor (all of the foregoing being collectively called a "Trade
Secret"), 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, all Trade Secret licenses,
including each Trade Secret license referred to in Schedule V attached hereto,
and including the right of the Grantor to sue for and to enjoin and to collect
damages for the actual or threatened misappropriation of any Trade Secret and
for the breach or enforcement of any such Trade Secret license.

         "U.C.C." means the Uniform Commercial Code, as in effect in the State
of New York.

         SECTION I.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

         SECTION I.3. U.C.C. Definitions. Unless otherwise defined herein or in
the Credit Agreement or unless the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Security Agreement,
including its preamble and recitals, with such meanings.

                                   ARTICLE II

                                SECURITY INTEREST

         SECTION II.1. Grant of Security. The Grantor hereby assigns and pledges
to the Administrative Agent for its benefit and the ratable benefit of each of
the Lender Parties, and hereby grants to the Administrative Agent for its
benefit and the ratable benefit of each of the Lender Parties a security
interest in, all of the Grantor's right, title and interest in, to and under the
following property, whether now or hereafter existing or acquired (the
"Collateral"):

<PAGE>
                  (a) all equipment in all of its forms of the Grantor, wherever
         located, including Rolling Stock (but excluding motor vehicles, trucks
         and trailers), and all parts thereof and all accessions, additions,
         attachments, improvements, substitutions and replacements thereto and
         therefor (any and all of the foregoing being the "Equipment");

                  (b)  all inventory in all of its forms of the Grantor,
         wherever located, including

                           (i) all merchandise, goods and other personal
                  property which are held for sale or lease, all raw materials
                  and work in process therefor (including, without limitation,
                  tobacco and tobacco related products), finished goods thereof,
                  and materials used or consumed in the manufacture or
                  production thereof,

                           (ii) all goods in which the Grantor has an interest
                  in mass or a joint or other interest or right of any kind
                  (including goods in which the Grantor has an interest or right
                  as consignee), and

                           (iii)  all goods which are returned to or
                  repossessed by the Grantor,

         and all accessions thereto, products thereof and documents therefor
         (any and all such inventory, materials, goods, accessions, products and
         documents being the "Inventory");

                  (c) all accounts, contracts, contract rights, chattel paper,
         documents, instruments, and general intangibles (including tax refunds)
         of the Grantor, including ownership rights of the inventory owned by
         the Grantor, whether or not arising out of or in connection with the
         sale or lease of goods or the rendering of services, and all rights of
         the Grantor now or hereafter existing in and to all security
         agreements, guaranties, leases and other contracts securing or
         otherwise relating to any such accounts, contracts, contract rights,
         chattel paper, documents, instruments, and general intangibles (any and
         all such accounts, contracts, contract rights, chattel paper,
         documents, instruments, and general intangibles being the
         "Receivables", and any and all such security agreements, guaranties,
         leases and other contracts being the "Related Contracts");

                  (d)  all Intellectual Property Collateral of the Grantor;

                  (e) all books, records, writings, data bases, information and
         other property of the Grantor relating to, used or useful in connection
         with, evidencing, embodying, incorporating or referring to any of the
         foregoing in this Section 2.1;

                  (f) all of the Grantor's other property and rights of every
         kind and description and interests therein; and

                  (g) all products, offspring, rents, issues, profits, returns,
         income and proceeds of and from any and all of the foregoing Collateral
         (including proceeds which constitute property of the types described in
         clauses (a), (b), (c), (d), (e) and (f) above, proceeds deposited from
         time to time in the Collateral Account and in any lock boxes of the
         Grantor, and, to the extent not otherwise included, all payments under
         insurance (whether or not the Administrative Agent is the loss payee
         thereof), or any indemnity, warranty or guaranty, payable by reason of
         loss or damage to or otherwise with respect to any of the foregoing
         Collateral).

<PAGE>

         SECTION II.2. Security for Secured Obligations. This Security Agreement
secures the prompt payment in full of all amounts payable by the Grantor and
each other Obligor under or in connection with the Credit Agreement, the Notes,
each Rate Protection Agreement, the Acme Guaranty and each other Loan Document,
whether for principal, interest, costs, fees, expenses, indemnities or otherwise
and whether now or hereafter existing (all of such obligations being the
"Secured Obligations").

         SECTION II.3. Continuing Security Interest; Transfer of Notes. This
Security Agreement shall create a continuing security interest in the Collateral
and shall

                  (a) remain in full force and effect until the indefeasible
         payment in full in cash of all Secured Obligations and the expiration
         or termination of all Commitments,

                  (b)  be binding upon the Grantor, its successors, transferees
         and assigns, and

                  (c) inure, together with the rights and remedies of the
         Administrative Agent hereunder, to the benefit of the Administrative
         Agent and each other Lender Party.

Without limiting the generality of the foregoing clause (c), any Lender may, to
the extent permitted pursuant to Section 11.11.1 of the Credit Agreement, assign
or otherwise transfer (in whole or in part) any Note or Loan held by it to any
other Person or entity, and such other Person or entity shall thereupon become
vested with all the rights and benefits in respect thereof granted to such
Lender under any Loan Document (including this Security Agreement) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Section 11.11 and Article X of the Credit Agreement.

         SECTION II.4.  Release and Termination.

         (a) Upon any sale, lease, transfer or other disposition of any item of
Collateral permitted under the terms of the Loan Documents (other than sales of
Inventory in the ordinary course of business), the Administrative Agent will, at
the Grantor's expense, execute and deliver such documents and instruments as the
Grantor shall reasonably request to evidence the release of such Collateral from
the security interest granted hereunder and shall deliver such Collateral held
by the Administrative Agent to the Grantor; provided, however, that the proceeds
of any such sale, lease transfer or other disposition are applied in accordance
with Section 3.1.2 of the Credit Agreement, to the extent applicable. Upon any
such release, the security interest granted herein shall terminate as to such
Collateral, and all rights to such Collateral shall revert to the Grantor.

         (b) Upon the indefeasible payment in cash in full of all Secured
Obligations and the expiration or termination of all Commitments, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Grantor. Upon any such termination, the Administrative Agent will,
at the Grantor's sole expense, deliver to the Grantor, without any
representations, warranties or recourse of any kind whatsoever, such documents
as the Grantor shall reasonably request to evidence such termination.

         SECTION II.5. Grantor Remains Liable. Anything herein to the contrary
notwithstanding

                  (a) the Grantor shall remain liable under the contracts and
         agreements included in the Collateral to the extent set forth therein,
         and shall perform all of its duties and obligations under such
         contracts and agreements to the same extent as if this Security
         Agreement had not been executed,

<PAGE>
                  (b) the exercise by the Administrative Agent of any of its
         rights hereunder shall not release the Grantor from any of its duties
         or obligations under any such contracts or agreements included in the
         Collateral, and

                  (c) neither the Administrative Agent nor any other Lender
         Party shall have any obligation or liability under any such contracts
         or agreements included in the Collateral by reason of this Security
         Agreement, nor shall the Administrative Agent or any other Lender Party
         be obligated to perform any of the obligations or duties of the Grantor
         thereunder or to take any action to collect or enforce any claim for
         payment assigned hereunder.

         SECTION II.6. Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of the Grantor hereunder, shall be absolute
and unconditional, irrespective of

                  (a) any lack of validity or enforceability of the Credit
         Agreement, any Note, any Rate Protection Agreement with a Lender or any
         other Loan Document;

                  (b)  the failure of any Lender Party or any holder of any
         Note;

                           (i) to assert any claim or demand or to enforce any
                  right or remedy against the Grantor, any Obligor or any other
                  Person under the provisions of the Credit Agreement, any Note,
                  any Rate Protection Agreement with a Lender, any other Loan
                  Document or otherwise, or

                           (ii) to exercise any right or remedy against any
                  other guarantor of, or collateral securing, any Secured
                  Obligation;

                  (c) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the Secured Obligations or any
         other extension, compromise or renewal of any Secured Obligation;

                  (d) any reduction, limitation, impairment or termination of
         any Secured Obligation for any reason (other than repayment in full of
         the Secured Obligations), including any claim of waiver, release,
         surrender, alteration or compromise, and shall not be subject to (and
         the Grantor hereby waives any right to or claim of) any defense or
         setoff, counterclaim, recoupment or termination whatsoever by reason of
         the invalidity, illegality, nongenuineness, irregularity, compromise or
         unenforceability of, or any other event or occurrence affecting, any
         Secured Obligation or otherwise;

                  (e) any amendment to, rescission, waiver, or other
         modification of, or any consent to departure from, any of the terms of
         the Credit Agreement, any Note, any Rate Protection Agreement with a
         Lender or any other Loan Document;

                  (f) any addition, exchange, release, surrender, impairment or
         non-perfection of any collateral (including the Collateral), or any
         amendment to or waiver or release of or addition to or consent to
         departure from any guaranty, for any of the Secured Obligations; or

                  (g) any other circumstances which might otherwise constitute a
         defense available to, or a legal or equitable discharge of, the
         Grantor, any other Obligor or otherwise.

<PAGE>

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         SECTION III.1. Representations and Warranties. The Grantor represents
and warrants unto each Lender Party as set forth in this Article.

         SECTION III.1.1. Location of Collateral, etc. All of the Equipment,
Inventory and lock boxes of the Grantor are located at the places specified in
Item A, Item B and Item C, respectively, of Schedule I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified in
Item A and Item B, respectively, of Schedule I hereto. The principal place of
business and chief executive office of the Grantor is set forth on the signature
page hereto. The Grantor keeps its records concerning the Receivables, and all
originals of all chattel paper which evidence Receivables, at the addresses as
set forth on the signature page hereto. The Grantor does not have any trade
names. The Grantor has not been known by any legal name different from those set
forth on the signature page hereto, nor has the Grantor been the subject of any
merger or other corporate reorganization. If the Collateral includes any
Inventory located in the State of California, the Grantor is not a "retail
merchant" within the meaning of Section 9102 of the Uniform Commercial Code -
Secured Transactions of the State of California. None of the Receivables is
evidenced by a promissory note or other instrument.

         SECTION III.1.2. Ownership, No Liens, etc. The Grantor owns the
Collateral free and clear of any Lien, security interest, charge or encumbrance
except for the security interest created by this Security Agreement and except
as permitted by the Credit Agreement. No effective financing statement or other
similar instrument in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of the
Administrative Agent relating to this Security Agreement.

         SECTION III.1.3. Possession and Control. The Grantor has exclusive
possession and control of the Equipment and Inventory.

         SECTION III.1.4. Negotiable Documents, Instruments and Chattel Paper.
The Grantor has, contemporaneously herewith, delivered to the Administrative
Agent possession of all originals of all negotiable documents, instruments and
chattel paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Administrative Agent).

         SECTION III.1.5. Validity, etc. The Liens intended to be created by
this Security Agreement constitute valid first priority security interests in
the Collateral securing the payment of the Secured Obligations, and all filings
and other actions necessary or desirable to perfect and protect such security
interest have been duly taken.

         SECTION III.1.6. Authorization, Approval, etc. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than U.C.C. filings) is required either

                  (a) for the grant by the Grantor of the security interest
         granted hereby or for the execution, delivery and performance of this
         Security Agreement by the Grantor, or

<PAGE>
                  (b) for the perfection of or the exercise by the
         Administrative Agent of its rights and remedies hereunder.

         SECTION III.1.7. Compliance with Laws. The Grantor is in compliance
with the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which would reasonably be
expected to materially adversely affect the condition (financial or otherwise),
operations, business, assets or liabilities of the Grantor.

         SECTION III.1.8. Due Execution, Validity, Etc. The execution, delivery
and performance by the Grantor of this Security Agreement does not contravene or
result in a default under the Grantor's Organic Documents or contravene or
result in a default under any material contractual restriction, Lien or
governmental regulation or court decree or order binding on the Grantor. This
Security Agreement has been duly executed and delivered on behalf of the Grantor
and constitutes the legal, valid and binding obligation of the Grantor
enforceable in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditor's right generally, and subject to the effect of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law). In addition, each representation and warranty of the Grantor
contained in each Loan Document to which it is a party is true and correct in
all material respects.

                                   ARTICLE IV

                                    COVENANTS

         SECTION IV.1. Certain Covenants. The Grantor covenants and agrees that,
so long as any portion of the Secured Obligations shall remain unpaid or any
Lender shall have any outstanding Commitment, the Grantor will, unless the
Required Lenders shall otherwise consent in writing, perform the obligations set
forth in this Section.

         SECTION IV.1.1. As to Equipment and Inventory. The Grantor hereby
agrees that it shall

                  (a) keep all material Equipment and Inventory (other than
         Inventory sold in the ordinary course of business) at the places
         therefor specified in Section 3.1.1 or, upon 30 days' prior written
         notice to the Administrative Agent, at such other places in a
         jurisdiction where all representations and warranties set forth in
         Article III shall be true and correct in all material respects, and all
         action required pursuant to the first sentence of Section 4.1.7 shall
         have been taken with respect to the material Equipment and Inventory;

                  (b) cause all material Equipment to be maintained and
         preserved in good condition, repair and working order, ordinary wear
         and tear excepted; and make or cause to be made all material repairs,
         replacements, and other improvements in connection therewith which are
         reasonably necessary or desirable to such end; and promptly furnish to
         the Administrative Agent a statement respecting any loss or damage to
         any of the material Equipment; and

                  (c) pay, before the same shall become delinquent, promptly
         when due all property and other taxes, assessments and governmental
         charges or levies imposed upon, and all material claims (including
         claims for labor, materials and supplies) against, the Equipment and
         Inventory, except to the extent the validity thereof is being contested
         in good faith by appropriate proceedings and for which adequate
         reserves in accordance with GAAP have been set aside.

<PAGE>
         SECTION IV.1.2.  As to Receivables.

                  (a) The Grantor shall keep its place(s) of business and chief
         executive office at the offices set forth on Schedule III of the Credit
         Agreement and shall keep the offices where it keeps its records
         concerning the Receivables, and all originals of all chattel paper
         which evidence Receivables, located at the addresses set forth on
         Schedule III of the Credit Agreement or, upon 30 days' prior written
         notice to the Administrative Agent, at such other locations in a
         jurisdiction where all representations and warranties set forth in
         Article III shall be true and correct, and all actions required by the
         first sentence of Section 4.1.7 shall have been taken with respect to
         the Receivables; not change its name except upon 30 days' prior written
         notice to the Administrative Agent; hold and preserve such records and
         chattel paper; and permit representatives of the Administrative Agent
         at any time upon reasonable advance notice and during normal business
         hours to inspect and make abstracts from such records and chattel
         paper.

                  (b) The Grantor will direct all obligors under any Receivables
         to make all payments to one or more bank accounts. Each such bank
         account will be maintained only if the relevant bank has agreed (by no
         later than 30 days after the Effective Date) in writing to remit the
         balance from time to time in the account to the Administrative Agent
         upon notice from the Administrative Agent that any Default is
         continuing. No funds, other than proceeds of Collateral, will be paid
         to any such bank account. The Grantor will not open any new bank
         accounts, or terminate any existing bank accounts, except upon 10 days'
         prior written notice to the Administrative Agent.

                  (c) All proceeds of Collateral received by the Grantor shall,
         upon the request of the Administrative Agent during the continuance of
         an Event of Default, be delivered in kind to the Administrative Agent
         for deposit to a deposit account (the "Collateral Account") of the
         Grantor maintained with the Administrative Agent, and the Grantor shall
         not commingle any such proceeds, and shall hold separate and apart from
         all other property, all such proceeds in express trust for the benefit
         of the Administrative Agent and the other Lender Parties until delivery
         thereof is made to the Administrative Agent. No funds, other than
         proceeds of Collateral, will be deposited in the Collateral Account.

                  (d) The Administrative Agent shall have the right to apply any
         amount in the Collateral Account to the payment of any Secured
         Obligations which are due and payable or payable upon demand, or to the
         payment of any Secured Obligations at any time that an Event of Default
         shall exist. Subject to the rights of the Administrative Agent, the
         Grantor shall have the right, with respect to and to the extent of
         collected funds in the Collateral Account, (i) as long as there shall
         be no Default, to require the Administrative Agent to transfer to the
         Grantor's general demand deposit account at the Administrative Agent
         any or all of such collected funds and (ii) as long as there shall be a
         Default and after giving effect to any exercise by the Administrative
         Agent of its rights, (A) to require the Administrative Agent to
         transfer to the Grantor's general demand deposit account at the
         Administrative Agent amounts required to cover checks drawn against
         that account which shall have been presented for payment at the
         Administrative Agent as of the preceding business day and all wire
         transfers which the Grantor has directed to be made on the current
         business day, to the extent such checks and wire transfers are for any
         purpose which does not violate any provision of any Loan Document and
         (B) to require the Administrative Agent to purchase any Cash Equivalent
         Investment, provided that, in the case of certificated securities, the
         Administrative Agent will retain possession thereof as Collateral and,
         in the case of uncertificated securities, the Administrative Agent will
         take such actions, including registration of such securities in its
         name, as it shall determine is necessary to perfect its security
         interest therein. The Administrative Agent may at any time transfer to
         the Grantor's general demand deposit account at

<PAGE>

         the Administrative Agent any or all of the collected funds in the
         Collateral Account; provided, however, that any such transfer shall not
         be deemed to be a waiver or modification of any of the Administrative
         Agent's rights under this Section 4.1.2(d).

         SECTION IV.1.3.  As to Collateral.

                  (a) Until such time (during the continuance of an Event of
         Default) as the Administrative Agent shall notify the Grantor of the
         revocation of the power and authority granted by this Section 4.1.3(a),
         the Grantor (i) may in the ordinary course of its business, at its own
         expense, sell, lease or furnish under the contracts of service any of
         the Inventory normally held by the Grantor for such purpose, and use
         and consume, in the ordinary course of its business, any raw materials,
         work in process or materials normally held by the Grantor for such
         purpose, (ii) will, at its own expense, endeavor to collect, as and
         when due, all amounts due with respect to any of the Collateral,
         including the taking of such action with respect to such collection as
         the Administrative Agent may reasonably request or, in the absence of
         such request, as the Grantor may deem advisable, and (iii) may grant,
         in the ordinary course of business, to any party obligated on any of
         the Collateral, any rebate, refund or allowance to which such party may
         be lawfully entitled, and may accept, in connection therewith, the
         return of goods, the sale or lease of which shall have given rise to
         such Collateral. The Administrative Agent, however, may (subject to
         Section 7.2.6 of the Credit Agreement), at any time during the
         continuance of an Event of Default, whether before or after any
         revocation of such power and authority or the maturity of any of the
         Secured Obligations, notify any parties obligated on any of the
         Collateral to make payment to the Administrative Agent of any amounts
         due or to become due thereunder and enforce collection of any of the
         Collateral by suit or otherwise and surrender, release, or exchange all
         or any part thereof, or compromise or extend or renew for any period
         (whether or not longer than the original period) any indebtedness
         thereunder or evidenced thereby. Upon request of the Administrative
         Agent, the Grantor will (subject to Section 7.2.6 of the Credit
         Agreement), at its own expense, notify any parties obligated on any of
         the Collateral to make payment to the Administrative Agent of any
         amounts due or to become due thereunder.

                  (b) The Administrative Agent is authorized, during the
         continuation of an Event of Default, to endorse, in the name of the
         Grantor, any item, howsoever received by the Administrative Agent,
         representing any payment on or other proceeds of any of the Collateral.

                  (c) The Grantor will not change its Federal Employer
         Identification Number unless the Grantor notifies the Administrative
         Agent of any change in writing at least 30 days prior to the date of
         such change and executes such additional security agreements and
         financing statements as may be reasonably requested by the
         Administrative Agent.

         SECTION IV.1.4.  As to Intellectual Property Collateral.

                  (a) The Grantor shall not, unless the Grantor shall reasonably
         and in good faith determine (and notice of such determination shall
         have been delivered to the Administrative Agent) that any of the Patent
         Collateral is not of material economic value to the Grantor, do any
         act, or omit to do any act, whereby any of the Patent Collateral may
         lapse or become abandoned or dedicated to the public or unenforceable.

                  (b) The Grantor shall not, and shall not permit any of its
         licensees to, unless the Grantor shall reasonably and in good faith
         determine (and notice of such determination shall have been

<PAGE>

         delivered to the Administrative Agent) that any of the Trademark
         Collateral is not of material economic value to the Grantor,

                           (i) fail to continue to use any of the Trademark
                  Collateral in order to maintain all of the material Trademark
                  Collateral in full force free from any claim of abandonment
                  for non-use,

                           (ii) fail to maintain as in the past, in all material
                  respects, the quality of products and services offered under
                  all of the Trademark Collateral,

                           (iii) fail to employ all of the material Trademark
                  Collateral registered with any Federal or state or foreign
                  authority with an appropriate notice of such registration,

                           (iv) adopt or use any other Trademark which is
                  confusingly similar or a colorable imitation of any of the
                  material Trademark Collateral,

                           (v) use any of the material Trademark Collateral
                  registered with any Federal or state or foreign authority
                  except for the uses for which registration or application for
                  registration of all of the Trademark Collateral has been made,
                  and

                           (vi) do or permit any act or knowingly omit to do any
                  act whereby any of the material Trademark Collateral would
                  reasonably be expected to lapse or become invalid or
                  unenforceable.

                  (c) The Grantor shall not, unless the Grantor shall reasonably
         and in good faith determine (and notice of such determination shall
         have been delivered to the Administrative Agent) that any of the
         Copyright Collateral or any of the Trade Secrets Collateral is not of
         material economic value to the Grantor, do or permit any act or
         knowingly omit to do any act whereby any of the Copyright Collateral or
         any of the Trade Secrets Collateral would reasonably be expected to
         lapse or become invalid or unenforceable or placed in the public domain
         except upon expiration of the end of an unrenewable term of a
         registration thereof.

                  (d) The Grantor shall notify the Administrative Agent
         immediately if it knows, or has reason to know, that any application or
         registration relating to any material item of the Intellectual Property
         Collateral would reasonably be expected to become abandoned or
         dedicated to the public or placed in the public domain or invalid or
         unenforceable, or of any material adverse determination or development
         (including the institution of, or any such determination or development
         in, any proceeding in the United States Patent and Trademark Office,
         the United States Copyright Office or any foreign counterpart thereof
         or any court) regarding the Grantor's ownership of any of the material
         Intellectual Property Collateral, its right to register the same or to
         keep and maintain and enforce the same.

                  (e) In no event shall the Grantor or any of its agents,
         employees, designees or licensees file an application for the
         registration of any Intellectual Property Collateral with the United
         States Patent and Trademark Office, the United States Copyright Office
         or any similar office or agency in any other country or any political
         subdivision thereof, unless it promptly informs the Administrative
         Agent, and upon request of the Administrative Agent, executes and
         delivers any and all agreements, instruments, documents and papers as
         the Administrative Agent may reasonably request to evidence the
         Administrative Agent's security interest for the benefit of the

<PAGE>
         Lender Parties in such Intellectual Property Collateral and the
         goodwill and general intangibles of the Grantor relating thereto or
         represented thereby.

                  (f) The Grantor shall take all commercially reasonable steps,
         including in any proceeding before the United States Patent and
         Trademark Office, the United States Copyright Office or any similar
         office or agency in any other country or any political subdivision
         thereof, to maintain and pursue any application (and to obtain the
         relevant registration) filed with respect to, and to maintain any
         registration of, any material Intellectual Property Collateral,
         including the filing of applications for renewal, affidavits of use,
         affidavits of incontestability and opposition, interference and
         cancellation proceedings and the payment of fees and taxes (except to
         the extent that dedication, abandonment or invalidation is permitted
         under the foregoing clauses (a), (b) and (c)).

                  SECTION IV.1.5. Insurance. The Grantor will maintain or cause
         to be maintained with responsible and reputable insurance carriers
         licensed to write insurance, insurance with respect to the Equipment
         and Inventory against such casualties and contingencies and of such
         types and in such amounts as is customary in the case of similar
         businesses and will, upon the request of the Administrative Agent,
         furnish a certificate of a reputable insurance broker setting forth the
         nature and extent of all insurance maintained by the Grantor in
         accordance with this Section. Without limiting the foregoing, the
         Grantor further agrees as follows:

                  (a) Each policy for property insurance shall show the
         Administrative Agent as loss payee.

                  (b) Each policy for liability insurance shall show the
         Administrative Agent as an additional insured.

                  (c) With respect to each life insurance policy, the Grantor
         shall execute and deliver to the Administrative Agent a collateral
         assignment, notice of which has been acknowledged in writing by the
         insurer.

                  (d) Each insurance policy shall provide that at least 30 days'
         prior written notice of cancellation or of lapse shall be given to the
         Administrative Agent by the insured.

                  (e) The Grantor shall, if so requested by the Administrative
         Agent, deliver to the Administrative Agent a copy of each insurance
         policy.

                  (f) All payments in respect of property insurance and life
         insurance shall be paid to the Grantor.

         SECTION IV.1.6.  Transfers and Other Liens.  The Grantor shall not:

                  (a) sell, assign (by operation of law or otherwise) or
         otherwise dispose of any of the Collateral, except Inventory in the
         ordinary course of business or as permitted by the Credit Agreement; or

                  (b) create or suffer to exist any Lien or other charge or
         encumbrance upon or with respect to any of the Collateral to secure
         Indebtedness of any Person or entity, except for the security interest
         created by this Security Agreement and except as permitted by the
         Credit Agreement.

         SECTION IV.1.7. Further Assurances, etc. The Grantor agrees that, from
time to time at its own expense, the Grantor will promptly execute and deliver
all further instruments and documents, and take all

<PAGE>
further action, that may be necessary or desirable, or that the Administrative
Agent may request, in order to perfect, preserve and protect any security
interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, the Grantor will

                  (a) mark conspicuously each document included in the
         Inventory, each chattel paper included in the Receivables and each
         Related Contract and, at the request of the Administrative Agent, each
         of its records pertaining to the Collateral with a legend, in form and
         substance satisfactory to the Administrative Agent, indicating that
         such document, chattel paper, Related Contract or Collateral is subject
         to the security interest granted hereby;

                  (b) if any Receivable shall be evidenced by a promissory note
         or other instrument, negotiable document or chattel paper, deliver and
         pledge to the Administrative Agent hereunder such promissory note,
         instrument, negotiable document or chattel paper duly endorsed and
         accompanied by duly executed instruments of transfer or assignment, all
         in form and substance satisfactory to the Administrative Agent;

                  (c) execute and file such financing or continuation
         statements, or amendments thereto, and such other instruments or
         notices (including, without limitation, any assignment of claim form
         under or pursuant to the federal assignment of claims statute, 31
         U.S.C. ss. 3726, any successor or amended version thereof or any
         regulation promulgated under or pursuant to any version thereof), as
         may be necessary or desirable, or as the Administrative Agent may
         request, in order to perfect and preserve the security interests and
         other rights granted or purported to be granted to the Administrative
         Agent hereby; and

                  (d) furnish to the Administrative Agent, from time to time at
         the Administrative Agent's request, statements and schedules further
         identifying and describing the Collateral and such other reports in
         connection with the Collateral as the Administrative Agent may
         reasonably request, all in reasonable detail.

With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A carbon, photographic or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

<PAGE>

                                    ARTICLE V

                            THE ADMINISTRATIVE AGENT

         SECTION V.1. Administrative Agent Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Administrative Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Administrative
Agent's discretion, to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Security Agreement, including, without limitation:

                  (a) to ask, demand, collect, sue for, recover, compromise,
         receive and give acquittance and receipts for moneys due and to become
         due under or in respect of any of the Collateral;

                  (b) to receive, endorse, and collect any drafts or other
         instruments, documents and chattel paper, in connection with clause (a)
         above;

                  (c) to file any claims or take any action or institute any
         proceedings which the Administrative Agent may deem necessary or
         desirable for the collection of any of the Collateral or otherwise to
         enforce the rights of the Administrative Agent with respect to any of
         the Collateral; and

                  (d) to perform the affirmative obligations of the Grantor
         hereunder (including all obligations of the Grantor pursuant to Section
         4.1.7).

The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

         SECTION V.2. Administrative Agent May Perform. If the Grantor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 6.2.

         SECTION V.3. Administrative Agent Has No Duty. In addition to, and not
in limitation of, Section 2.5, the powers conferred on the Administrative Agent
hereunder are solely to protect its interest (on behalf of the Lender Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.

         SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, that the Administrative Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as the Grantor reasonably requests in writing at times other than upon the
occurrence and during the continuance of any Event of Default, but failure of
the

<PAGE>

Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.

                                   ARTICLE VI

                                    REMEDIES

         SECTION VI.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:

                  (a) The Administrative Agent may exercise in respect of the
         Collateral, in addition to other rights and remedies provided for
         herein or otherwise available to it, all the rights and remedies of a
         secured party on default under the U.C.C. (whether or not the U.C.C.
         applies to the affected Collateral) and also may

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

                           (ii) without notice except as specified below, sell
                  the Collateral or any part thereof in one or more parcels at
                  public or private sale, at any of the Administrative Agent's
                  offices or elsewhere, for cash, on credit or for future
                  delivery (without assumption of any credit risk), and upon
                  such other terms as the Administrative Agent may deem
                  commercially reasonable. The Grantor agrees that, to the
                  extent notice of sale shall be required by law, at least ten
                  days' prior notice to the 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
                  Administrative Agent shall not be obligated to make any sale
                  of Collateral regardless of notice of sale having been given.
                  The Administrative 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.

                  (b) All cash proceeds received by the Administrative Agent in
         respect of any sale of, collection from, or other realization upon all
         or any part of the Collateral may, in the discretion of the
         Administrative Agent, be held by the Administrative Agent as collateral
         for, and/or then or at any time thereafter applied (after payment of
         any amounts payable to the Administrative Agent pursuant to Section
         6.2) in whole or in part by the Administrative Agent for the ratable
         benefit of the Lender Parties against, all or any part of the Secured
         Obligations in the following order:

                           (i) first, to payment of the expenses of such sale or
                  other realization including reasonable compensation to the
                  Administrative Agent and its agents and counsel, and all
                  expenses, liabilities and advances incurred or made by the
                  Administrative Agent in connection therewith, and any other
                  unreimbursed expenses for which the Administrative Agent is to
                  be reimbursed pursuant to Sections 11.3 and 11.4 of the Credit
                  Agreement or Section 6.2 hereof and unpaid fees owing to the
                  Administrative Agent under the Credit Agreement;

<PAGE>

                           (ii) second, to the ratable payment of accrued but
                  unpaid interest on the Loans under the Credit Agreement;

                           (iii) third, to the ratable (i) payment of unpaid
                  principal of the Loans under the Credit Agreement, (ii)
                  redemption of "credit exposure" under Rate Protection
                  Agreements ("credit exposure" being determined at such time in
                  accordance with the customary methods of calculating credit
                  exposure under similar arrangements by the counterparty to
                  such arrangements), and (iii) cash collateralization of Letter
                  of Credit Outstandings;

                           (iv) fourth, to the ratable payment of all other
                  amounts payable by the Obligors under the Credit Agreement;
                  and

                           (v) fifth, to the ratable payment of all other
                  Secured Obligations, and then to be held as additional
                  collateral security until the Termination Date, until all
                  Secured Obligations shall have been paid in full.

The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. Any surplus of such cash or cash
proceeds held by the Administrative Agent and remaining after payment in full of
all the Secured Obligations shall be paid over to the Grantor or to whomsoever
may be lawfully entitled to receive such surplus.

         SECTION VI.2.  Indemnity and Expenses.

                  (a) The Grantor agrees to indemnify the Administrative Agent
         and the other Lender Parties from and against any and all claims,
         losses and liabilities arising out of or resulting from this Security
         Agreement (including, without limitation, enforcement of this Security
         Agreement), except claims, losses or liabilities resulting from the
         Administrative Agent's gross negligence or wilful misconduct.

                  (b) The Grantor will upon demand pay to the Administrative
         Agent the amount of any and all reasonable expenses, including the
         reasonable fees and disbursements of its counsel and of any experts and
         agents, which the Administrative Agent may incur in connection with

                           (i) the administration of this Security Agreement,

                           (ii) the custody, preservation, use or operation of,
                  or the sale of, collection from, or other realization upon,
                  any of the Collateral,

                           (iii) the exercise or enforcement of any of the
                  rights of the Administrative Agent or the other Lender Parties
                  hereunder, or

                           (iv) the failure by the Grantor to perform or observe
                  any of the provisions hereof.

<PAGE>
                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

         SECTION VII.1. Loan Document; Counterparts. This Security Agreement is
a Loan Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, and may be executed in
separate counterparts.

         SECTION VII.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (acting with the requisite consent of the
Lenders as provided in the Credit Agreement) and the Grantor, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

         SECTION VII.3. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier
communication) and, if to the Grantor, mailed, telecopied or delivered to it,
addressed to it at the address as set forth on Schedule III of the Credit
Agreement, if to the Administrative Agent, mailed, telecopied or delivered to
it, addressed to it at the address of the Administrative Agent as specified in
the Credit Agreement, or as to either party at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms of this Section. Any notice, if mailed and properly
addressed and sent return receipt requested with postage prepaid, shall be
deemed given three Business Days after posting; any notice, if sent by prepaid
overnight express shall be deemed delivered on the next Business Day; any
notice, if transmitted by telecopier, shall be deemed given when sent, with
confirmation of receipt; and any notice, if transmitted by hand, shall be deemed
received when delivered.

         SECTION VII.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.

         SECTION VII.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.

         SECTION VII.6. Governing Law, Entire Agreement, etc. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.

         SECTION VII.7. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
SECURITY AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES OR THE GRANTOR MAY BE
BROUGHT AND MAINTAINED IN ANY UNITED STATES FEDERAL OR NEW YORK STATE COURTS
SITTING IN THE CITY OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL

<PAGE>

OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE GRANTOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURTS SITTING IN THE CITY OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
GRANTOR FURTHER IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.
THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GRANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE GRANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
SECURITY AGREEMENT.

         SECTION VII.8. Waiver of Jury Trial. THE LENDER PARTIES AND THE GRANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS SECURITY AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER
PARTIES OR THE GRANTOR. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT. IN NO EVENT SHALL ANY LENDER PARTY BE LIABLE FOR ANY
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

<PAGE>

         IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                        KEY COMPONENTS, LLC

                                        By:/s/ Alan L. Rivera
                                           -------------------
                                        Title:

                                        Address:   200 White Plains Rd.
                                                   4th Floor
                                                   Tarrytown, N.Y. 10581

                                        FIRST UNION NATIONAL BANK,
                                          as Administrative Agent

                                        By:/s/ Robert Brown
                                           ------------------
                                        Title:

                                        Address:   301 South College Street
                                                   Charlotte, N.C. 28288

                                        Attention:
                                        Telecopier No.:

<PAGE>

                                                                      SCHEDULE I
                                                                              to
                                                              Security Agreement

Item A.  Location of Equipment

None

Item B.  Location of Inventory

None

Item C.  Location of Bank Account

                                                                    Contact
   Bank Name and Address                Account Number              Person
   ---------------------                --------------              ------
First Union National Bank               2000005969827            Joseph Markey
50 Main Street
White Plains, N.Y. 10605

<PAGE>

                                                                     SCHEDULE II
                                                                              to
                                                              Security Agreement

Item A.  Patents
         -------
                                         Issued Patents
                                         --------------
<TABLE>
<CAPTION>
Country                      Patent No.                Patent Date               Inventor(s)              Title
-------                      ----------                -----------               -----------              -----
<S>                              <C>                        <C>                       <C>                   <C>
None

</TABLE>

                                  Pending Patent Applications
                                  ---------------------------
<TABLE>
<CAPTION>
Country                      Serial No.                Filing Date               Inventor(s)              Title
-------                      ----------                -----------               -----------              -----
<S>                             <C>                         <C>                       <C>                   <C>
None
</TABLE>

                               Patent Applications in Preparation
                               ----------------------------------
<TABLE>
<CAPTION>
                                                        Expected
Country                      Docket No.                Filing Date               Inventor(s)              Title
-------                      ----------                -----------               -----------              -----
<S>                              <C>                        <C>                       <C>                   <C>
None
</TABLE>

Item B.  Patent Licenses
         ---------------
<TABLE>
<CAPTION>
 Country or                                                          Effective            Expiration             Subject
 Territory                   Licensor           Licensee                Date                 Date                 Matter
 ----------                  --------           --------             ---------            ----------             --------
<S>                             <C>                <C>                    <C>                  <C>                   <C>
None
</TABLE>

<PAGE>
                                                                    SCHEDULE III
                                                                              to
                                                              Security Agreement

Item A.  Trademarks
         ----------
None

Item B.  Trademark Licenses
         ------------------
None

<PAGE>

                                                                     SCHEDULE IV
                                                                              to
                                                              Security Agreement

Item A.  Copyrights/Mask Works
         ---------------------
None

Item B.  Copyright/Mask Work Licenses
         ----------------------------
None

<PAGE>

                                                                      SCHEDULE V
                                                                              to
                                                              Security Agreement

                        Trade Secret or Know-How Licenses
                        ---------------------------------
<TABLE>
<CAPTION>
         Country or
           Subject                                                     Effective            Expiration
          Territory            Licensor           Licensee                Date                 Date                Matter
          ----------           --------           --------             ---------            ----------             ------
<S>                              <C>                  <C>                  <C>                   <C>                  <C>
None

</TABLE>

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