Document:

ex10_4.htm

Exhibit 10.4

 

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT (AS THE SAME MAY BE AMENDED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF, THE “SUBORDINATION AGREEMENT”) DATED AS OF MARCH 31, 2011 AMONG PATRICK INDUSTRIES, INC., AN INDIANA CORPORATION (THE “COMPANY”), TONTINE CAPITAL OVERSEAS MASTER FUND II, L.P., A CAYMAN ISLANDS LIMITED PARTNERSHIP, NORTHCREEK MEZZANINE FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, ON ITS BEHALF AND IN ITS CAPACITY AS COLLATERAL AGENT, AND WELLS FARGO CAPITAL FINANCE, LLC (“WFCF”), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE CREDIT PARTIES (AS DEFINED IN THE SUBORDINATION AGREEMENT) PURSUANT TO THAT CERTAIN CREDIT AGREEMENT DATED AS OF MARCH 31, 2011 AMONG THE COMPANY, WFCF AND THE LENDERS FROM TIME TO TIME PARTY THERETO (THE “SENIOR CREDIT AGREEMENT”), AND THE OTHER SENIOR DEBT DOCUMENTS (AS DEFINED IN THE SUBORDINATION AGREEMENT), AS SUCH SENIOR CREDIT AGREEMENT, AND SUCH OTHER SENIOR DEBT DOCUMENTS HAVE BEEN AND HEREAFTER MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME AND TO INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER SUCH AGREEMENTS AS PERMITTED BY THE SUBORDINATION AGREEMENT; AND EACH HOLDER OF THE NOTES ISSUED HEREUNDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

SECURITY AGREEMENT

This SECURITY AGREEMENT (this "Agreement"), dated as of March 31, 2011, among the Persons listed on the signature pages hereof as "Grantors" and those additional entities that hereafter become parties hereto by executing the form of Joinder attached hereto as Annex 1 (each, a "Grantor" and collectively, the "Grantors"), and NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership ("Northcreek"), in its capacity as collateral agent for the Subordinated Lender Group (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Secured Senior Subordinated Note and Warrant Purchase Agreement of even date herewith (as amended, restated, supplemented, or otherwise modified from time to time, the "Note Purchase Agreement") by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the lenders party thereto as "Buyers" (such Buyers, together with their respective successors and assigns in such capacity, each, individually, a "Lender" and, collectively, the "Lenders"), and Collateral Agent, the Subordinated Lender Group has agreed to make certain financial accommodations available to the Borrower from time to time pursuant to the terms and conditions thereof; and

WHEREAS, Collateral Agent has agreed to act as collateral agent for the benefit of the Subordinated Lender Group in connection with the transactions contemplated by the Note Purchase Agreement and this Agreement; and

  

  

  

WHEREAS, in order to induce the Subordinated Lender Group to enter into the Note Purchase Agreement and the other Transaction Documents and to induce the Subordinated Lender Group to make financial accommodations to the Borrower as provided for in the Note Purchase Agreement and the other Transaction Documents, Grantors have agreed to grant a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of, among other things, the Secured Obligations.

NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1.              Defined Terms. All initially capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Note Purchase Agreement (including Schedule 1.1 thereto). Any terms (whether capitalized or lower case) used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Note Purchase Agreement; provided, however, that to the extent that the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

(a)            "Account" means an account (as that term is defined in Article 9 of the Code).

(b)            "Account Debtor" means an account debtor (as that term is defined in the Code).

(c)            "Agreement" has the meaning specified therefor in the preamble to this Agreement.

(d)            "Books" means books and records (including each Grantor's Records indicating, summarizing, or evidencing such Grantor's assets (including the Collateral) or liabilities, each Grantor's Records relating to such Grantor's business operations or financial condition, and each Grantor's goods or General Intangibles related to such information).

(e)            "Borrower" has the meaning specified therefor in the recitals to this Agreement.

(f)             "Cash Equivalents" has the meaning specified therefor in the Note Purchase Agreement.

(g)            "Chattel Paper" means chattel paper (as that term is defined in the Code), and includes tangible chattel paper and electronic chattel paper.

(h)            "Code" means the Illinois Uniform Commercial Code, as in effect from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Collateral Agent's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Illinois, the term "Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

(i)             "Collateral" has the meaning specified therefor in Section 2.

(j)             "Collateral Agent" has the meaning specified therefor in the preamble to this Agreement.

(k)            "Collateral Agent's Lien" has the meaning specified therefor in the Note Purchase Agreement.

  

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(l)             "Collections" has the meaning specified therefor in the Note Purchase Agreement.

(m)           "Commercial Tort Claims" means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims with a value in excess of $250,000 listed on Schedule 1.

(n)            "Controlled Account" has the meaning specified therefor in Section 6(k).

(o)            "Controlled Account Agreements" means those certain cash management agreements, in form and substance reasonably satisfactory to Collateral Agent, each of which is executed and delivered by a Grantor, Collateral Agent, and one of the Controlled Account Banks.

(p)            "Controlled Account Bank" has the meaning specified therefor in Section 6(k).

(q)            "Copyrights" means any and all rights in any works of authorship, including (i) copyrights and moral rights, (ii) copyright registrations and recordings thereof and all applications in connection therewith including those listed on Schedule 2, (iii) income, license fees, royalties, damages, and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (iv) the right to sue for past, present, and future infringements thereof, and (v) all of each Grantor's rights corresponding thereto throughout the world.

(r)             "Copyright Security Agreement" means each Copyright Security Agreement executed and delivered by Grantors, or any of them, and Collateral Agent, in substantially the form of Exhibit A.

(s)            "Deposit Account" means a deposit account (as that term is defined in the Code).

(t)             "Equipment" means equipment (as that term is defined in the Code).

(u)            "Event of Default" has the meaning specified therefor in the Note Purchase Agreement.

(v)            "Fixtures" means fixtures (as that term is defined in the Code).

(w)           "General Intangibles" means general intangibles (as that term is defined in the Code), and includes payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, Intellectual Property, Intellectual Property Licenses, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas, or other minerals before extraction.

(x)            "Grantor" and "Grantors" have the respective meanings specified therefor in the preamble to this Agreement.

(y)            "Insolvency Proceeding" has the meaning specified therefor in the Note Purchase Agreement.

(z)            "Intellectual Property" means any and all Patents, Copyrights, Trademarks, trade secrets, know-how, inventions (whether or not patentable), algorithms, software programs (including source code and object code), processes, product designs, industrial designs, blueprints, drawings, data, customer lists, 

  

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URLs and domain names, specifications, documentations, reports, catalogs, literature, and any other forms of technology or proprietary information of any kind, including all rights therein and all applications for registration or registrations thereof.

 

(aa)          "Intellectual Property Licenses" means, with respect to any Person (the "Specified Party"), (i) any licenses or other similar rights provided to the Specified Party in or with respect to Intellectual Property owned or controlled by any other Person, and (ii) any licenses or other similar rights provided to any other Person in or with respect to Intellectual Property owned or controlled by the Specified Party, in each case, including (A) any software license agreements (other than license agreements for commercially available off-the-shelf software that is generally available to the public which have been licensed to a Grantor pursuant to end-user licenses), (B) the license agreements listed on Schedule 3, and (C) the right to use any of the licenses or other similar rights described in this definition in connection with the enforcement of the Subordinated Lender Group's rights under the Transaction Documents.

(bb)         "Inventory" means inventory (as that term is defined in the Code).

(cc)          "Investment Related Property" means (i) any and all investment property (as that term is defined in the Code), and (ii) any and all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

(dd)         "Joinder" means each Joinder to this Agreement executed and delivered by Collateral Agent and each of the other parties listed on the signature pages thereto, in substantially the form of Annex 1.

(ee)          "Lender" and "Lenders" have the respective meanings specified therefor in the recitals to this Agreement.

(ff)           "Negotiable Collateral" means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts and documents (as each such term is defined in the Code).

(gg)         "Note Purchase Agreement" has the meaning specified therefor in the recitals to this Agreement.

(hh)         "Obligations" has the meaning specified therefor in the Note Purchase Agreement.

(ii)            "Patents" means patents and patent applications, including (i) the patents and patent applications listed on Schedule 4, (ii) all continuations, divisionals, continuations-in-part, re-examinations, reissues, and renewals thereof and improvements thereon, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (iv) the right to sue for past, present, and future infringements thereof, and (v) all of each Grantor's rights corresponding thereto throughout the world.

(jj)            "Patent Security Agreement" means each Patent Security Agreement executed and delivered by Grantors, or any of them, and Collateral Agent, in substantially the form of Exhibit B.

(kk)          "Permitted Liens" has the meaning specified therefor in the Note Purchase Agreement.

(ll)            "Person" has the meaning specified therefor in the Note Purchase Agreement.

(mm)        "Pledged Companies" means each Person listed on Schedule 6 as a "Pledged Company", together with each other Person, all or a portion of whose Stock is acquired or otherwise owned by a Grantor after the Closing Date.

  

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(nn)         "Pledged Interests" means, subject to the last paragraph of Section 2 hereof, all of each Grantor's right, title and interest in and to all of the Stock now owned or hereafter acquired by such Grantor, regardless of class or designation, including in each of the Pledged Companies, and all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof and the right to receive all dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and all cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

(oo)         "Pledged Interests Addendum" means a Pledged Interests Addendum substantially in the form of Exhibit C.

(pp)         "Pledged Notes" has the meaning specified therefor in Section 5(i).

(qq)         "Pledged Operating Agreements" means all of each Grantor's rights, powers, and remedies under the limited liability company operating agreements of each of the Pledged Companies that are limited liability companies.

(rr)           "Pledged Partnership Agreements" means all of each Grantor's rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.

(ss)          "Proceeds" has the meaning specified therefor in Section 2.

(tt)           "PTO" means the United States Patent and Trademark Office.

(uu)         "Real Property" means any estates or interests in real property now owned or hereafter acquired by any Grantor or any Subsidiary of any Grantor and the improvements thereto.

(vv)         "Records" means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

(ww)        "Secured Obligations" means each and all of the following: (a) all of the present and future obligations of each of the Grantors arising from, or owing under or pursuant to, this Agreement, the Note Purchase Agreement, or any of the other Transaction Documents, and (b) all other Obligations of the Borrower (including, in the case of each of clauses (a) and (b), reasonable attorneys fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding).

(xx)           "Securities Account" means a securities account (as that term is defined in the Code).

(yy)         "Security Interest" has the meaning specified therefor in Section 2.

(zz)           “Senior Agent” means Wells Fargo Capital Finance, LLC, as agent for all members of the Senior Lender Group.

(aaa)        "Stock" has the meaning specified therefor in the Note Purchase Agreement.

(bbb)       "Subordinated Lender Group" means each of the Lenders and Collateral Agent, or one or more of them.

  

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(ccc)        "Supporting Obligations" means supporting obligations (as such term is defined in the Code), and includes letters of credit and guaranties issued in support of Accounts, Chattel Paper, documents, General Intangibles, instruments or Investment Related Property.

(ddd)       "Trademarks" means any and all trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, including (i) the trade names, registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule 5, (ii) all renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iv) the right to sue for past, present and future infringements and dilutions thereof, (v) the goodwill of each Grantor's business symbolized by the foregoing or connected therewith, and (vi) all of each Grantor's rights corresponding thereto throughout the world.

 

(eee)        "Trademark Security Agreement" means each Trademark Security Agreement executed and delivered by Grantors, or any of them, and Collateral Agent, in substantially the form of Exhibit D.

(fff)          "Transaction Document" has the meaning specified therefor in the Note Purchase Agreement.

(ggg)       "URL" means "uniform resource locator," an internet web address.

(hhh)       "VIN" has the meaning specified therefor in Section 5(h).

2.              Grant of Security. Each Grantor hereby unconditionally grants, assigns, and pledges to Collateral Agent, for the benefit of each member of the Subordinated Lender Group, to secure the Secured Obligations, a continuing security interest (hereinafter referred to as the "Security Interest") in all of such Grantor's right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (the "Collateral"):

(a)            all of such Grantor's Accounts;

(b)            all of such Grantor's Books;

(c)            all of such Grantor's Chattel Paper;

(d)            all of such Grantor's Deposit Accounts;

(e)            all of such Grantor's Equipment and Fixtures;

(f)            all of such Grantor's General Intangibles;

(g)            all of such Grantor's Inventory;

(h)            all of such Grantor's Investment Related Property;

(i)             all of such Grantor's Negotiable Collateral;

(j)             all of such Grantor's Supporting Obligations;

(k)            all of such Grantor's Commercial Tort Claims;

  

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(l)             all of such Grantor's money, Cash Equivalents, or other assets of such Grantor that now or hereafter come into the possession, custody, or control of Collateral Agent (or its agent or designee) or any other member of the Subordinated Lender Group;

(m)           all of such Grantor's other personal property; and

(n)            all of the proceeds (as such term is defined in the Code) and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Fixtures, General Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the "Proceeds"). Without limiting the generality of the foregoing, the term "Proceeds" includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to any Grantor or Collateral Agent from time to time with respect to any of the Investment Related Property.

Notwithstanding anything contained in this Agreement to the contrary, the term "Collateral" shall not include: (i) voting Stock of any CFC, solely to the extent that (y) such Stock represents more than 65% of the outstanding voting Stock of such CFC, and (z) pledging or hypothecating more than 65% of the total outstanding voting Stock of such CFC would result in material adverse tax consequences; or (ii) any rights or interest in any contract, lease, permit, license, or license agreement covering real or personal property of any Grantor if under the terms of such contract, lease, permit, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such contract, lease, permit, license, or license agreement and such prohibition or restriction has not been waived or the consent of the other party to such contract, lease, permit, license, or license agreement has not been obtained (provided, that, (A) the foregoing exclusions of this clause (ii) shall in no way be construed (1) to apply to the extent that any described prohibition or restriction is unenforceable under Section 9-406, 9-407, 9-408, or 9-409 of the Code or other applicable law, or (2) to apply to the extent that any consent or waiver has been obtained that would permit Collateral Agent's security interest or lien notwithstanding the prohibition or restriction on the pledge of such contract, lease, permit, license, or license agreement and (B) the foregoing exclusions of clauses (i) and (ii) shall in no way be construed to limit, impair, or otherwise affect any of Collateral Agent's, any other member of the Subordinated Lender Group's continuing security interests in and liens upon any rights or interests of any Grantor in or to (1) monies due or to become due under or in connection with any described contract, lease, permit, license, license agreement, or Stock (including any Accounts or Stock), or (2) any proceeds from the sale, license, lease, or other dispositions of any such contract, lease, permit, license, license agreement, or Stock); (iii) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law, provided that upon submission and acceptance by the PTO of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall be considered Collateral, or (iv) Equipment or other assets or any proceeds thereof owned by any Grantor on the date hereof or hereafter acquired that is subject to a Permitted Lien which is a permitted purchase money Lien or the interest of a lessor under a Capital Lease if the contract or other agreement in which such Permitted Lien is granted (or the documentation providing for such Indebtedness in respect of purchase money financing) prohibits the creation of any other Lien on such Equipment, other assets or proceeds.

3.             Security for Secured Obligations. The Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the 

  

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generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Collateral Agent, the Subordinated Lender Group or any of them, but for the fact that they are unenforceable or not allowable (in whole or in part) as a claim in an Insolvency Proceeding involving any Grantor due to the existence of such Insolvency Proceeding.

4.             Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Collateral Agent or any other member of the Subordinated Lender Group of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) none of the members of the Subordinated Lender Group shall have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall any of the members of the Subordinated Lender Group be obligated to perform any of the obligations or duties of any Grantors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement, the Note Purchase Agreement, or any other Transaction Document, Grantors shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and of the Note Purchase Agreement and the other Transaction Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, dividend, and distribution rights, shall remain in the applicable Grantor until (i) the occurrence and continuance of an Event of Default and (ii) Collateral Agent has notified the applicable Grantor of Collateral Agent's election to exercise such rights with respect to Pledged Interests pursuant to Section 15.

5.             Representations and Warranties. Each Grantor hereby represents and warrants to Collateral Agent, for the benefit of the Subordinated Lender Group, which representations and warranties shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the Closing Date, and such representations and warranties shall survive the execution and delivery of this Agreement:

(a)            The exact legal name of each of the Grantors is set forth on the signature pages of this Agreement or a written notice provided to Collateral Agent pursuant to Section 6.5 of the Note Purchase Agreement.

(b)            Schedule 7 sets forth all Real Property owned by any of the Grantors as of the Closing Date.

(c)            As of the Closing Date: (i) Schedule 2 provides a complete and correct list of all registered Copyrights owned by any Grantor and all applications for registration of Copyrights owned by any Grantor,; (ii) Schedule 3 provides a complete and correct list of all Intellectual Property Licenses entered into by any Grantor pursuant to which (A) any Grantor has provided any license or other rights in Intellectual Property owned or controlled by such Grantor to any other Person or (B) any Person has granted to any Grantor any license or other rights in registered Intellectual Property owned or controlled by such Person that is material to the business of such Grantor, including any Intellectual Property that is incorporated in any Inventory, software, or other product marketed, sold, licensed, or distributed by such Grantor; (iii) Schedule 4 provides a complete and correct list of all registered Patents owned by any Grantor and all applications for Patents owned by any Grantor; and (iv) Schedule 5 provides a complete and correct list of all registered Trademarks owned by any Grantor and all applications for registration of Trademarks owned by any Grantor.

(d)            (i) (A) each Grantor owns exclusively or holds licenses in all Intellectual Property that is necessary to the conduct of its business, and (B) all employees and contractors of each Grantor who 

  

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were involved in the creation or development of any material Intellectual Property for such Grantor that is necessary to the business of such Grantor have signed agreements containing assignment of Intellectual Property rights to such Grantor and obligations of confidentiality;

(ii)        to each Grantor's knowledge, no Person has infringed or misappropriated or is currently infringing or misappropriating any Intellectual Property rights owned by such Grantor, in each case, that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Change;

(iii)       (A) to each Grantor's knowledge, (1) such Grantor has never infringed or misappropriated in the last five (5) years and is not currently infringing or misappropriating any Intellectual Property rights of any Person, and (2) no product manufactured, used, distributed, licensed, or sold by or service provided by such Grantor has ever infringed or misappropriated in the last five (5) years or is currently infringing or misappropriating any Intellectual Property rights of any Person, in each case, except where such infringement either individually or in the aggregate could not reasonably be expected to result in a Material Adverse Change, and (B) there are no pending, or to any Grantor's knowledge, threatened infringement or misappropriation claims or proceedings pending against any Grantor, and no Grantor has received any notice or other communication of any actual or alleged infringement or misappropriation of any Intellectual Property rights of any Person, in each case, except where such infringement either individually or in the aggregate could not reasonably be expected to result in a Material Adverse Change;

(iv)       to each Grantor's knowledge, all registered Copyrights, registered Trademarks, and issued Patents that are owned by such Grantor and necessary in to the conduct of its business are valid, subsisting and enforceable and in compliance with all legal requirements, filings, and payments and other actions that are required to maintain such Intellectual Property in full force and effect; and

(v)        each Grantor has taken commercially reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all trade secrets owned by such Grantor that are necessary in the business of such Grantor;

(e)            This Agreement creates a valid security interest in the Collateral of each Grantor, to the extent a security interest therein can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing of financing statements listing each applicable Grantor, as a debtor, and Collateral Agent, as secured party, in the jurisdictions listed next to such Grantor's name on Schedule 8. Upon the making of such filings, Collateral Agent shall have a perfected security interest in the Collateral of each Grantor to the extent such security interest can be perfected by the filing of a financing statement. Upon filing of the Copyright Security Agreement with the United States Copyright Office, filing of the Patent Security Agreement and the Trademark Security Agreement with the PTO, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 8, all action necessary or desirable to protect and perfect the Security Interest in and to on each Grantor's Patents, Trademarks, or Copyrights has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from any Grantor, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. All action by any Grantor necessary to protect and perfect such security interest on each item of Collateral (to the extent perfection is required hereby) has been duly taken or will be taken substantially contemporaneously with the Closing Date.

(f)            (i) Except for the Security Interest created hereby, each Grantor is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule 6 as being owned by such Grantor and, when acquired by such Grantor, any Pledged Interests acquired after the Closing Date; (ii) all of the Pledged Interests owned by such Grantor are duly authorized, validly issued, fully paid and nonassessable and the 

  

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Pledged Interests constitute or will constitute the percentage of the issued and outstanding Stock of the Pledged Companies of such Grantor identified on Schedule 6 as supplemented or modified by any Pledged Interests Addendum or any Joinder to this Agreement; (iii) such Grantor has the right and requisite authority to pledge, the Investment Related Property pledged by such Grantor to Collateral Agent as provided herein; (iv) all actions necessary to perfect and establish Collateral Agent's Liens in the Investment Related Property, and the proceeds thereof, have been duly taken, upon (A) the execution and delivery of this Agreement; (B) the taking of possession by Collateral Agent (or its agent or designee) of any certificates representing the Pledged Interests, together with undated powers (or other documents of transfer reasonably acceptable to Collateral Agent) endorsed in blank by the applicable Grantor; (C) the filing of financing statements in the applicable jurisdiction set forth on Schedule 8 for such Grantor with respect to the Pledged Interests of such Grantor that are not represented by certificates, and (D) with respect to any Securities Accounts, the delivery of Control Agreements with respect thereto; and (v) each Grantor has delivered to and deposited with Collateral Agent all certificates representing the Pledged Interests owned by such Grantor to the extent such Pledged Interests are represented by certificates, and undated powers (or other documents of transfer reasonably acceptable to Collateral Agent) endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by such Grantor has been issued or transferred in violation of any securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be subject.

(g)            No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Grantor, or (ii) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement with respect to the Investment Related Property or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally. No Intellectual Property License of any Grantor that is necessary to the conduct of such Grantor's business requires any consent of any other Person in order for such Grantor to grant the security interest granted hereunder in such Grantor's right, title or interest in or to such Intellectual Property License.

(h)            Schedule 9 sets forth all motor vehicles owned by Grantors as of the Closing Date, by model, model year and vehicle identification number ("VIN") having an aggregate value of $250,000 or more.

(i)             There is no default, breach, violation, or event of acceleration existing under any promissory note (as defined in the Code) constituting Collateral and pledged hereunder (each a "Pledged Note") and no event has occurred or circumstance exists which, with the passage of time or the giving of notice, or both, would constitute a default, breach, violation, or event of acceleration under any Pledged Note. No Grantor that is an obligee under a Pledged Note has waived any default, breach, violation, or event of acceleration under such Pledged Note.

(j)             As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby represents and warrants that the Pledged Interests issued pursuant to such agreement (A) are not dealt in or traded on securities exchanges or in securities markets, (B) do not constitute investment company securities, and (C) are not held by such Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

6.              Covenants. Each Grantor, jointly and severally, covenants and agrees with Collateral Agent that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with Section 22:

  

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(a)            Possession of Collateral. In the event that any Collateral, including Proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, in each case, having an aggregate value or face amount of $100,000 or more for all such Negotiable Collateral, Investment Related Property, or Chattel Paper, the Grantors shall promptly (and in any event within two (2) Business Days after receipt thereof (or such longer period as Collateral Agent in its Permitted Discretion may agree)), notify Collateral Agent thereof, and if and to the extent that perfection or priority of Collateral Agent's Security Interest is dependent on or enhanced by possession, the applicable Grantor, promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree)) after request by Collateral Agent, shall execute such other documents and instruments as shall be reasonably requested by Collateral Agent or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper to Collateral Agent, together with such undated powers (or other relevant document of transfer reasonably acceptable to Collateral Agent) endorsed in blank as shall be reasonably requested by Collateral Agent, and shall do such other acts or things deemed reasonably necessary by Collateral Agent to protect Collateral Agent's Security Interest therein;

(b)            Chattel Paper.

(i)             Promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree)) after request by Collateral Agent, each Grantor shall take all steps reasonably necessary to grant Collateral Agent control of all electronic Chattel Paper in accordance with the Code and all "transferable records" as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction, to the extent that the aggregate value or face amount of such electronic Chattel Paper equals or exceeds $100,000;

(ii)            If any Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby and by the Note Purchase Agreement), promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree)) upon the request of Collateral Agent, such Chattel Paper and instruments shall be marked with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the Security Interest of Northcreek Mezzanine Fund I, L.P., as Collateral Agent for the benefit of the Subordinated Lender Group";

(c)            Control Agreements.

(i)             Except to the extent otherwise excused by the Note Purchase Agreement, each Grantor shall obtain an authenticated Control Agreement (which may include a Controlled Account Agreement), from each bank maintaining a Deposit Account for such Grantor;

(ii)            Except to the extent otherwise excused by the Note Purchase Agreement, each Grantor shall obtain an authenticated Control Agreement from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for any Grantor;

(iii)           Except to the extent otherwise excused by the Note Purchase Agreement, each Grantor shall obtain an authenticated Control Agreement with respect to all of such Grantor's investment property;

(d)            Letter-of-Credit Rights. If the Grantors (or any of them) are or become the beneficiary of letters of credit having a face amount or value of $100,000 or more in the aggregate, then the applicable Grantor or Grantors shall promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree) after becoming a beneficiary), notify Collateral Agent thereof and, promptly (and in any event within two (2) Business Days) after request by Collateral Agent, enter into a tri-party agreement with Collateral Agent and the issuer or confirming bank with 

  

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respect to letter-of-credit rights assigning such letter-of-credit rights to Collateral Agent and directing all payments thereunder to Collateral Agent's Account, all in form and substance reasonably satisfactory to Collateral Agent;

(e)            Commercial Tort Claims. If the Grantors (or any of them) have an interest in or obtain Commercial Tort Claims having a value, or involving an asserted claim, in the amount of $250,000 or more in the aggregate for all Commercial Tort Claims, then the applicable Grantor or Grantors shall promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree) of obtaining such Commercial Tort Claim), notify Collateral Agent upon incurring or otherwise obtaining such Commercial Tort Claims and, promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree)) after request by Collateral Agent, amend Schedule 1 to describe such Commercial Tort Claims in a manner that reasonably identifies such Commercial Tort Claims and which is otherwise reasonably satisfactory to Collateral Agent, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things deemed necessary or desirable by Collateral Agent to give Collateral Agent a perfected security interest in any such Commercial Tort Claim;

(f)            Government Contracts. Other than Accounts and Chattel Paper the aggregate value of which does not at any one time exceed $50,000, if any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof, Grantors shall promptly (and in any event within two (2) Business Days of the creation thereof) notify Collateral Agent thereof and, promptly (and in any event within two (2) Business Days) after request by Collateral Agent, execute any instruments or take any steps reasonably required by Collateral Agent in order that all moneys due or to become due under such contract or contracts shall be assigned to Collateral Agent, for the benefit of the Subordinated Lender Group, and shall provide written notice thereof under the Assignment of Claims Act or other applicable law;

(g)            Intellectual Property.

(i)             Upon the request of Collateral Agent, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office, each Grantor shall execute and deliver to Collateral Agent one or more Copyright Security Agreements, Trademark Security Agreements, or Patent Security Agreements to further evidence Collateral Agent's Lien on such Grantor's Patents, Trademarks, or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby;

(ii)            Each Grantor shall have the duty, with respect to Intellectual Property that is necessary in the conduct of such Grantor's business, to protect and diligently enforce and defend at such Grantor's expense its Intellectual Property, including (A) to diligently enforce and defend, including promptly suing for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation, or dilution, and filing for opposition, interference, and cancellation against conflicting Intellectual Property rights of any Person, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor's Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including paying all maintenance fees and filing of applications for renewal, affidavits of use, and affidavits of noncontestability, and (E) to require all employees, consultants, and contractors of each Grantor who were involved in the creation or development of such Intellectual Property to sign agreements containing assignment of Intellectual Property rights and obligations of confidentiality. Each Grantor further agrees not to abandon any Intellectual Property or Intellectual Property License that is necessary in the conduct of such Grantor's business. Each Grantor hereby agrees to take the steps described in 

  

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this Section 6(g)(ii) with respect to all new or acquired Intellectual Property to which it or any of its Subsidiaries is now or later becomes entitled that is necessary in the conduct of such Grantor's business;

(iii)           Grantors acknowledge and agree that the Subordinated Lender Group shall have no duties with respect to any Intellectual Property or Intellectual Property Licenses of any Grantor. Without limiting the generality of this Section 6(g)(iii), Grantors acknowledge and agree that no member of the Subordinated Lender Group shall be under any obligation to take any steps necessary to preserve rights in the Collateral consisting of Intellectual Property or Intellectual Property Licenses against any other Person, but any member of the Subordinated Lender Group may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of the Borrower and shall be chargeable to the Loan Account;

(iv)           Each Grantor shall promptly file an application with the United States Copyright Office for any material Copyright that has not been registered with the United States Copyright Office if such Copyright is necessary in connection with the conduct of such Grantor's business. Any expenses incurred in connection with the foregoing shall be borne by the Grantors;

(v)            [Intentionally omitted];

(vi)           On each date on which a Compliance Certificate is delivered by the Borrower pursuant to Section 5.1 of the Note Purchase Agreement, each Grantor shall provide Collateral Agent with a written report of all new Patents or Trademarks that are registered or the subject of pending applications for registrations, and of all Intellectual Property Licenses that are material to the conduct of such Grantor's business, in each case, which were acquired, registered, or for which applications for registration were filed by any Grantor during the prior period and any statement of use or amendment to allege use with respect to intent-to-use trademark applications. In the case of such registrations or applications therefor, which were acquired by any Grantor, each such Grantor shall file the necessary documents with the appropriate Governmental Authority identifying the applicable Grantor as the owner (or as a co-owner thereof, if such is the case) of such Intellectual Property. In each of the foregoing cases, the applicable Grantor shall promptly cause to be prepared, executed, and delivered to Collateral Agent supplemental schedules to the applicable Transaction Documents to identify such Patent and Trademark registrations and applications therefor (with the exception of Trademark applications filed on an intent-to-use basis for which no statement of use or amendment to allege use has been filed) and Intellectual Property Licenses as being subject to the security interests created thereunder;

(vii)          Anything to the contrary in this Agreement notwithstanding, in no event shall any Grantor, either itself or through any agent, employee, licensee, or designee, file an application for the registration of any Copyright with the United States Copyright Office or any similar office or agency in another country without giving Collateral Agent written notice thereof at least three (3) Business Days prior to such filing and complying with Section 6(g)(i), and any such registration shall be on an "expedited basis". Upon receipt from the United States Copyright Office of notice of registration of any Copyright, each Grantor shall promptly (but in no event later than three (3) Business Days following such receipt) notify (but without duplication of any notice required by Section 6(g)(vi)) Collateral Agent of such registration by delivering, or causing to be delivered, to Collateral Agent, documentation sufficient for Collateral Agent to perfect Collateral Agent's Liens on such Copyright. If any Grantor acquires from any Person any Copyright registered with the United States Copyright Office or an application to register any Copyright with the United States Copyright Office, such Grantor shall promptly (but in no event later than three (3) Business Days following such acquisition) notify Collateral Agent of such acquisition and deliver, or cause to be delivered, to Collateral Agent, documentation sufficient for Collateral Agent to perfect Collateral Agent's Liens on such Copyright. In the case of such Copyright registrations or applications therefor which were acquired by any Grantor, each such Grantor shall promptly (but in no event later than three (3) Business Days following such acquisition) file the necessary documents with the appropriate Governmental Authority identifying the applicable Grantor as the owner (or as a co-owner thereof, if such is the case) of such Copyrights;

  

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(viii)         Each Grantor shall take commercially reasonable steps to maintain the confidentiality of, and otherwise protect and enforce its rights in, the Intellectual Property that is necessary in the conduct of such Grantor's business, including, as applicable: (A) protecting the secrecy and confidentiality of its confidential information and trade secrets by having and enforcing a policy requiring all current employees, consultants, licensees, vendors and contractors with access to such information to execute appropriate confidentiality agreements; (B) taking actions reasonably necessary to ensure that no trade secret falls into the public domain; and (C) protecting the secrecy and confidentiality of the source code of all software programs and applications of which it is the owner or licensee by having and enforcing a policy requiring any licensees (or sublicensees) of such source code to enter into license agreements with commercially reasonable use and non-disclosure restrictions;

(ix)           [Intentionally omitted]; and

(x)            No Grantor shall enter into any material Intellectual Property License to receive any license or rights in any Intellectual Property of any other Person unless such Grantor has used commercially reasonable efforts to permit the assignment of or grant of a security interest in such Intellectual Property License (and all rights of Grantor thereunder) to the (and any transferees of Collateral Agent).

(h)            Investment Related Property.

(i)             If any Grantor shall acquire, obtain, receive or become entitled to receive any Pledged Interests after the Closing Date, it shall promptly (and in any event within two (2) Business Days (or such longer period as Collateral Agent in its Permitted Discretion may agree) of acquiring or obtaining such Collateral) deliver to Collateral Agent a duly executed Pledged Interests Addendum identifying such Pledged Interests;

(ii)            Upon the occurrence and during the continuance of an Event of Default, following the request of Collateral Agent, all sums of money and property paid or distributed in respect of the Investment Related Property that are received by any Grantor shall be held by the Grantors in trust for the benefit of Collateral Agent segregated from such Grantor's other property, and such Grantor shall deliver it forthwith to Collateral Agent in the exact form received;

(iii)           Each Grantor shall promptly deliver to Collateral Agent a copy of each material notice or other material communication received by it in respect of any Pledged Interests;

(iv)           No Grantor shall make or consent to any amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests if the same is prohibited pursuant to the Transaction Documents;

(v)            Each Grantor agrees that it will cooperate with Collateral Agent in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law to effect the perfection of the Security Interest on the Investment Related Property or to effect any sale or transfer thereof;

(vi)           As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby covenants that the Pledged Interests issued pursuant to such agreement (A) are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

  

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(i)             Real Property; Fixtures. Each Grantor covenants and agrees that upon the acquisition of any fee interest in Real Property it will promptly (and in any event within two (2) Business Days of acquisition) notify Collateral Agent of the acquisition of such Real Property and will grant to Collateral Agent, for the benefit of the Subordinated Lender Group, a Mortgage on each fee interest in Real Property with a fair market value of at least $250,000 now or hereafter owned by such Grantor and shall deliver such other documentation and opinions, in form and substance satisfactory to Collateral Agent, in connection with the grant of such Mortgage as Collateral Agent shall reasonably request in its Permitted Discretion, including title insurance policies, financing statements, fixture filings and environmental audits and such Grantor shall pay all recording costs, intangible taxes and other fees and costs (including reasonable attorneys fees and expenses) incurred in connection therewith. Each Grantor acknowledges and agrees that, to the extent permitted by applicable law, all of the Collateral shall remain personal property regardless of the manner of its attachment or affixation to real property;

(j)             Transfers and Other Liens. Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except as expressly permitted by the Note Purchase Agreement, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral of any Grantor, except for Permitted Liens. The inclusion of Proceeds in the Collateral shall not be deemed to constitute Collateral Agent's consent to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Transaction Documents;

(k)            Controlled Accounts.

(i)             Each Grantor shall (A) establish and maintain cash management services of a type and on terms reasonably satisfactory to Collateral Agent at one or more of the banks set forth on Schedule 6(k) (each a "Controlled Account Bank"), and shall take reasonable steps to ensure that all of its and its Subsidiaries' Account Debtors forward payment of the amounts owed by them directly to such Controlled Account Bank, and (B) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all of their Collections (including those sent directly by their Account Debtors to a Grantor) into a bank account of such Grantor (each, a "Controlled Account") at one of the Controlled Account Banks.

(ii)            Each Grantor shall establish and maintain Controlled Account Agreements with Collateral Agent and the applicable Controlled Account Bank, in form and substance reasonably acceptable to Collateral Agent. Each such Controlled Account Agreement shall provide, among other things, that (A) the Controlled Account Bank will comply with any instructions originated by Collateral Agent directing the disposition of the funds in such Controlled Account without further consent by the applicable Grantor, (B) the Controlled Account Bank waives any rights of setoff or recoupment or any other claim against the applicable Controlled Account other than for payment of its service fees and other charges directly related to the administration of such Controlled Account and for returned checks or other items of payment, and (C) the Controlled Account Bank will forward, by daily sweep, all amounts in the applicable Controlled Account to the Collateral Agent's Account.

(iii)           So long as no Default or Event of Default has occurred and is continuing, the Borrower may amend Schedule 6(k) to add or replace a Controlled Account Bank or Controlled Account; provided, however, that (A) such prospective Controlled Account Bank shall be reasonably satisfactory to Collateral Agent, and (B) prior to the time of the opening of such Controlled Account, the applicable Grantor and such prospective Controlled Account Bank shall have executed and delivered to Collateral Agent a Controlled Account Agreement. Each Grantor shall close any of its Controlled Accounts (and establish replacement Controlled Account accounts in accordance with the foregoing sentence) as promptly as practicable and in any event within forty-five (45) days of notice from Collateral Agent that the operating performance, funds transfer, or availability procedures or performance of the Controlled Account Bank with respect to Controlled Account Accounts or Collateral Agent's liability under any Controlled Account Agreement with such Controlled Account Bank is no longer acceptable in Collateral Agent's reasonable judgment;

  

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(l)             Motor Vehicles. Promptly (and in any event within two (2) Business Days) after request by Collateral Agent, with respect to all motor vehicles owned by any Grantor having an aggregate value of $250,000 or more, Grantor shall deliver to Collateral Agent a certificate of title for all such motor vehicles and shall cause those title certificates to be filed (with the Collateral Agent's Lien noted thereon) in the appropriate state motor vehicle filing office; and

(m)           Pledged Notes. Grantors (i) without the prior written consent of Collateral Agent, will not (A) waive or release any obligation of any Person that is obligated under any of the Pledged Notes, (B) take or omit to take any action or knowingly suffer or permit any action to be omitted or taken, the taking or omission of which would result in any right of offset against sums payable under the Pledged Notes, or (C) other than Permitted Dispositions, assign or surrender their rights and interests under any of the Pledged Notes or terminate, cancel, modify, change, supplement or amend the Pledged Notes, and (ii) shall provide to Collateral Agent copies of all material written notices (including notices of default) given or received with respect to the Pledged Notes promptly after giving or receiving such notice.

(n)            Possession or Control by Senior Agent. Notwithstanding anything to the contrary in this Agreement, each Grantor hereby acknowledges that, to the extent that Senior Agent holds, or a third party holds on Senior Agent’s behalf, physical possession of or "control" (as defined in the Uniform Commercial Code) over any of the Collateral pursuant to the Senior Debt Documents, such possession or control is also for the benefit of Collateral Agent solely to the extent required to perfect its Security Interest in such Collateral, and shall constitute perfection of such Security Interest in Such Collateral.

7.              Relation to Other Security Documents. The provisions of this Agreement shall be read and construed with the other Transaction Documents referred to below in the manner so indicated.

(a)            Note Purchase Agreement. In the event of any conflict between any provision in this Agreement and a provision in the Note Purchase Agreement, such provision of the Note Purchase Agreement shall control.

(b)            Patent, Trademark, Copyright Security Agreements. The provisions of the Copyright Security Agreements, Trademark Security Agreements, and Patent Security Agreements are supplemental to the provisions of this Agreement, and nothing contained in the Copyright Security Agreements, Trademark Security Agreements, or the Patent Security Agreements shall limit any of the rights or remedies of Collateral Agent hereunder. In the event of any conflict between any provision in this Agreement and a provision in a Copyright Security Agreement, Trademark Security Agreement or Patent Security Agreement, such provision of this Agreement shall control.

(c)            Subordination Agreement. The Collateral Agent acknowledges and agrees to be bound by the Subordination Agreement. In the event of any conflict between any provision in this Agreement and a provision in the Subordination Agreement, such provision of the Subordination Agreement shall control. So long as Senior Agent is acting as bailee and as agent for perfection on behalf of Collateral Agent pursuant to the terms of the Subordination Agreement, any obligation of any Grantor in this Agreement that requires delivery of Collateral to, or the possession or control of Collateral with, Collateral Agent shall be deemed complied with and satisfied if such delivery of Collateral is made to, or such possession or control of Collateral is with, Senior Agent.

  

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8.              Further Assurances.

(a)            Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that Collateral Agent may reasonably request, in order to perfect and protect the Security Interest granted hereby, to create, perfect or protect the Security Interest purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.

(b)            Each Grantor authorizes the filing by Collateral Agent of financing or continuation statements, or amendments thereto, and such Grantor will execute and deliver to Collateral Agent such other instruments or notices, as Collateral Agent may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby.

(c)            Each Grantor authorizes Collateral Agent at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments (i) describing the Collateral as "all personal property of debtor" or "all assets of debtor" or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. Each Grantor also hereby ratifies any and all financing statements or amendments previously filed by Collateral Agent in any jurisdiction.

(d)            Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of Collateral Agent, subject to such Grantor's rights under Section 9-509(d)(2) of the Code.

9.             Collateral Agent's Right to Perform Contracts, Exercise Rights, etc. Upon the occurrence and during the continuance of an Event of Default, Collateral Agent (or its designee) (a) may proceed to perform any and all of the obligations of any Grantor contained in any contract, lease, or other agreement and exercise any and all rights of any Grantor therein contained as fully as such Grantor itself could, (b) shall have the right to use any Grantor's rights under Intellectual Property Licenses in connection with the enforcement of Collateral Agent's rights hereunder, including the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses, and (c) shall have the right to request that any Stock that is pledged hereunder be registered in the name of Collateral Agent or any of its nominees.

10.            Collateral Agent Appointed Attorney-in-Fact. Subject in all respects to the terms of the Subordination Agreement, each Grantor hereby irrevocably appoints Collateral Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, at such time as an Event of Default has occurred and is continuing under the Note Purchase Agreement, to take any action and to execute any instrument which Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including:

(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 connection with the Accounts or any other Collateral of such Grantor;

(b)            to receive and open all mail addressed to such Grantor and to notify postal authorities to change the address for the delivery of mail to such Grantor to that of Collateral Agent;

(c)            to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

  

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

(e)            to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to such Grantor in respect of any Account of such Grantor;

(f)             to use any Intellectual Property or Intellectual Property Licenses of such Grantor, including but not limited to any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, or advertising matter, in preparing for sale, advertising for sale, or selling Inventory or other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Grantor; and

(g)            Collateral Agent, on behalf of the Subordinated Lender Group, shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Intellectual Property and Intellectual Property Licenses and, if Collateral Agent shall commence any such suit, the appropriate Grantor shall, at the request of Collateral Agent, do any and all lawful acts and execute any and all proper documents reasonably required by Collateral Agent in aid of such enforcement.

To the extent permitted by law, each Grantor hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated.

11.            Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein, Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Collateral Agent incurred in connection therewith shall be payable, jointly and severally, by Grantors.

12.            Collateral Agent's Duties. The powers conferred on Collateral Agent hereunder are solely to protect Collateral Agent's interest in the Collateral, for the benefit of the Subordinated Lender Group, and shall not impose any duty upon Collateral Agent to exercise any such powers. Except for the safe custody of any Collateral in its actual possession and the accounting for moneys actually received by it hereunder, Collateral 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. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property.

13.            Collection of Accounts, General Intangibles and Negotiable Collateral. At any time upon the occurrence and during the continuance of an Event of Default, Collateral Agent or Collateral Agent's designee may (a) notify Account Debtors of any Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral of such Grantor have been assigned to Collateral Agent, for the benefit of the Subordinated Lender Group, or that Collateral Agent has a security interest therein, and (b) collect the Accounts, General Intangibles and Negotiable Collateral of any Grantor directly, and any collection costs and expenses shall constitute part of such Grantor's Secured Obligations under the Transaction Documents.

14.            Disposition of Pledged Interests by Collateral Agent. None of the Pledged Interests existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal or state securities laws of the United States and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of the lack of such registration. Each Grantor understands that in connection with such disposition, Collateral Agent may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal and state securities laws and sold on the open market. Each Grantor, therefore, agrees that: (a) if Collateral Agent shall, pursuant to the terms of 

  

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this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, Collateral Agent shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evidence that Collateral Agent has handled the disposition in a commercially reasonable manner.

15.            Voting and Other Rights in Respect of Pledged Interests. Subject in all respects to the terms of the Subordination Agreement:

(a)            Upon the occurrence and during the continuation of an Event of Default, (i) Collateral Agent may, at its option, and with two (2) Business Days prior written notice to any Grantor, and in addition to all rights and remedies available to Collateral Agent under any other agreement, at law, in equity, or otherwise, exercise all voting rights, or any other ownership or consensual rights (including any dividend or distribution rights) in respect of the Pledged Interests owned by such Grantor, but under no circumstances is Collateral Agent obligated by the terms of this Agreement to exercise such rights, and (ii) if Collateral Agent duly exercises its right to vote any of such Pledged Interests, each Grantor hereby appoints Collateral Agent, such Grantor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner Collateral Agent deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be. The power-of-attorney and proxy granted hereby is coupled with an interest and shall be irrevocable.

(b)            For so long as any Grantor shall have the right to vote the Pledged Interests owned by it, such Grantor covenants and agrees that it will not, without the prior written consent of Collateral Agent, vote or take any consensual action with respect to such Pledged Interests which would materially adversely affect the rights of Collateral Agent, the other members of the Subordinated Lender Group, or the value of the Pledged Interests.

16.            Remedies. Upon the occurrence and during the continuance of an Event of Default:

(a)            Collateral Agent may, and, at the instruction of the Subordinated Lender Group in accordance with the terms of the Note Purchase Agreement, shall exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, each Grantor expressly agrees that, in any such event, Collateral Agent without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Grantors to, and each Grantor hereby agrees that it will at its own expense and upon request of Collateral Agent forthwith, assemble all or part of the Collateral as directed by Collateral Agent and make it available to Collateral Agent at one or more locations where such Grantor regularly maintains Inventory, 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 Collateral Agent's offices or elsewhere, for cash, on credit, and upon such other terms as Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to the applicable 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 and specifically such notice shall constitute a reasonable "authenticated notification of disposition" within the meaning of Section 9-611 of the Code. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that the internet shall constitute a "place" for purposes of Section 9-610(b) of the Code. Each 

  

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Grantor agrees that any sale of Collateral to a licensor pursuant to the terms of a license agreement between such licensor and a Grantor is sufficient to constitute a commercially reasonable sale (including as to method, terms, manner, and time) within the meaning of Section 9-610 of the Code.

(b)            Collateral Agent is hereby granted a license or other right to use, without liability for royalties or any other charge, each Grantor's Intellectual Property, including but not limited to, any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, and advertising matter, whether owned by any Grantor or with respect to which any Grantor has rights under license, sublicense, or other agreements (including any Intellectual Property License), as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and each Grantor's rights under all licenses and all franchise agreements shall inure to the benefit of Collateral Agent.

(c)            Collateral Agent may, in addition to other rights and remedies provided for herein, in the other Transaction Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon any Grantor or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), (i) with respect to any Grantor's Deposit Accounts in which Collateral Agent's Liens are perfected by control under Section 9-104 of the Code, instruct the bank maintaining such Deposit Account for the applicable Grantor to pay the balance of such Deposit Account to or for the benefit of Collateral Agent, and (ii) with respect to any Grantor's Securities Accounts in which Collateral Agent's Liens are perfected by control under Section 9-106 of the Code, instruct the securities intermediary maintaining such Securities Account for the applicable Grantor to (A) transfer any cash in such Securities Account to or for the benefit of Collateral Agent, or (B) liquidate any financial assets in such Securities Account that are customarily sold on a recognized market and transfer the cash proceeds thereof to or for the benefit of Collateral Agent.

(d)            Any cash held by Collateral Agent as Collateral and all cash proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order set forth in the Note Purchase Agreement. In the event the proceeds of Collateral are insufficient to satisfy all of the Secured Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency.

(e)            Each Grantor hereby acknowledges that the Secured Obligations arise out of a commercial transaction, and agrees that if an Event of Default shall occur and be continuing Collateral Agent shall have the right to an immediate writ of possession without notice of a hearing. Collateral Agent shall have the right to the appointment of a receiver for the properties and assets of each Grantor, and each Grantor hereby consents to such rights and such appointment and hereby waives any objection such Grantor may have thereto or the right to have a bond or other security posted by Collateral Agent.

17.            Remedies Cumulative. Each right, power, and remedy of Collateral Agent or any other member of the Subordinated Lender Group as provided for in this Agreement, the other Transaction Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement, the other Transaction Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Collateral Agent or any other member of the Subordinated Lender Group of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by Collateral Agent or such other member of the Subordinated Lender Group of any or all such other rights, powers, or remedies.

18.            Marshaling. Collateral Agent shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating

  

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to the marshaling of collateral which might cause delay in or impede the enforcement of Collateral Agent's rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

19.            Indemnity and Expenses.

(a)            Each Grantor agrees to indemnify Collateral Agent and the other members of the Subordinated Lender Group from and against all claims, lawsuits and liabilities (including reasonable attorneys fees) growing out of or resulting from this Agreement (including enforcement of this Agreement) or any other Transaction Document to which such Grantor is a party to the same extent contemplated by Section 9(c) of the Note Purchase Agreement. This provision shall survive the termination of this Agreement and the Note Purchase Agreement and the repayment of the Secured Obligations.

(b)            Grantors, jointly and severally, shall, upon demand, pay to Collateral Agent (or Collateral Agent, may charge to the Loan Account) at the times contemplated by Section 11(g) of the Note Purchase Agreement all the Reimbursable Expenses which Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Transaction Documents, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder or (iv) the failure by any Grantor to perform or observe any of the provisions hereof.

20.            Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by Collateral Agent and each Grantor to which such amendment applies.

21.            Addresses for Notices. All notices and other communications provided for hereunder shall be given in the form and manner and delivered to Collateral Agent at its address specified in the Note Purchase Agreement, and to any of the Grantors at their respective addresses specified in the Note Purchase Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to the other party.

22.            Continuing Security Interest: Assignments under Note Purchase Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the Obligations have been paid in full in accordance with the provisions of the Note Purchase Agreement and the Commitments have expired or have been terminated, (b) be binding upon each Grantor, and their respective successors and assigns, and (c) inure to the benefit of, and be enforceable by, Collateral Agent, and its successors, permitted transferees and permitted assigns. Without limiting the generality of the foregoing clause (c), any Lender may, in accordance with the provisions of the Note Purchase Agreement, assign or otherwise transfer all or any portion of its rights and obligations under the Note Purchase Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise. Upon payment in full of the Secured Obligations in accordance with the provisions of the Note Purchase Agreement and the expiration or termination of the Commitments, the Security Interest granted hereby shall terminate, any Liens arising therefrom shall automatically terminate, and all rights to the Collateral shall revert to Grantors or any other Person entitled thereto. At such time, 

  

-21-

  

 

Collateral Agent will authorize the filing of appropriate termination statements to terminate such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement or of the Note Purchase Agreement, any other Transaction Document, or any other instrument or document executed and delivered by any Grantor to Collateral Agent nor any additional Advances or other loans made by any Lender to the Borrower, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantors, or any of them, by Collateral Agent, nor any other act of the Subordinated Lender Group, or any of them, shall release any Grantor from any obligation, except a release or discharge executed in writing by Collateral Agent in accordance with the provisions of the Note Purchase Agreement. Collateral Agent shall not by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by Collateral Agent and then only to the extent therein set forth. A waiver by Collateral Agent of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which Collateral Agent would otherwise have had on any other occasion.

23.            Governing Law.

(a)            THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

(b)            THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS, LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 23(b).

(c)            TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

24.            New Subsidiaries. Pursuant to Section 5(a)(x) of the Note Purchase Agreement, certain Subsidiaries (whether by acquisition or creation) of any Grantor are required to enter into this Agreement by executing and delivering in favor of Collateral Agent a Joinder to this Agreement in substantially the form of Annex 1. Upon the execution and delivery of Annex 1 by any such new Subsidiary, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any instrument adding an additional Grantor as a party to this Agreement shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor hereunder.

  

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25.            Collateral Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the "Collateral Agent" shall be a reference to Collateral Agent, for the benefit of each member of the Subordinated Lender Group.

26.            Miscellaneous.

(a)            This Agreement is a Transaction Document. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Transaction Document mutatis mutandis.

(b)            Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

(c)            Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

(d)            Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against any member of the Subordinated Lender Group or any Grantor, whether under any rule of construction or otherwise. This Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

(e)            The pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction of sentences shall conform thereto.

(f)            Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms "includes" and "including" are not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or". The words "hereof", "herein", "hereby", "hereunder", and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). The words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights. Any reference herein to the satisfaction, repayment, or payment in full of the Secured Obligations shall mean the repayment in full in cash or immediately available funds of all of the Secured Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein shall be satisfied by the transmission of a Record.

  

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(g)            All of the annexes, schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

[signature pages follow]

  

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IN WITNESS WHEREOF, the undersigned parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written.

	
GRANTORS:

	
PATRICK INDUSTRIES, INC.

	 
	  	  	  	  	 
	  	
By:

	  	
/s/ Andy L. Nemeth

	 
	  	  	
Name:

	
Andy L. Nemeth

	 
	  	  	
Title:

	
Executive Vice President of Finance,

	 
	  	  	  	
Chief Financial Officer, Secretary and

	 
	  	  	  	
Treasurer

	 

Signature Page To Security Agreement

  

 

  

	
COLLATERAL AGENT:

	
NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership

	 
	  	  	  	  	 
	  	
By:

	
NMF GP, LLC, its general partner

	 
	  	  	  	  	 
	  	  	
By:

	
Northcreek Management, Inc., its manager

	 
	  	  	  	  	 
	  	  	
By:

	
/s/ Barry Peterson

	 
	  	  	
Name:

	
Barry Peterson

	 
	  	  	
Title:

	
Vice President

	 

Signature Page To Security Agreement

  

 

  

SCHEDULE 1

 

COMMERCIAL TORT CLAIMS

None.

  

 

  

SCHEDULE 2

 

COPYRIGHTS

None.

  

 

  

SCHEDULE 3

 

INTELLECTUAL PROPERTY LICENSES

	
1.

	
Development and Trademark License Agreement by and between Rockford Corporation and Patrick Industries, Inc., as amended by Amendment 1 to Development and License Agreement and Amendment 2 to Development and License Agreement dated April 26, 2010.

	
2.

	
Asset Transfer Agreement by and between Estone Digital and Patrick Industries, Inc. dated December 7, 2009.

  

 

  

SCHEDULE 4

 

PATENTS

None.

  

 

  

SCHEDULE 5

 

TRADEMARKS

US Trademark Registrations

	
Registrant of Record

	
Trademark

	
Reg. No.

	
Reg. Date

	
Patrick Industries, Inc.

	
SUDDEN CHANGE

	
3868546

	
26 Oct. 2010

US Trademark Applications

	
Applicant of Record

	
Trademark

	
Serial No.

	
Status

	
Filing Date

	
Patrick Industries, Inc.

	
ARCADIA

	
85245746

	
Pending*

	
18 Feb. 2011

* Trademark application is intent-to-use.

Trade Names

Patrick Industries

Custom Vinyls

Adorn

Interior Components Plus

Gravure Ink

Patrick Distribution

Quest Audio Video

Sun Adhesives

Midwest Laminating

American Hardwoods

Nickell Enterprises

Patrick Metals

ILC Products

Patrick Moulding

Mobilcraft

Harlan Machinery

Patrick Door

Adorn of Indiana

Bristol Laminating

  

 

  

SCHEDULE 6

 

PLEDGED COMPANIES

	
Name of Grantor

	
Name of Pledged Company

	
Number of Shares/Units

	
Class of Interests

	
Percentage of Class Owned

	
Certificate Nos.

	
Patrick Industries, Inc.

	
Adorn Holdings, Inc.

	
29,043.956

	
Common A

	
100%

	
21

  

 

  

SCHEDULE 6(k)

 

CONTROLLED ACCOUNT BANKS

	
1.

	
JPMorgan Chase Bank, N.A.

	
2.

	
Wells Fargo Bank, N.A.

  

 

  

SCHEDULE 7

 

OWNED REAL PROPERTY

	
1.

	
1001 Beltline, Decatur, AL 35601

	
2.

	
107 W. Franklin St., Elkhart, IN 46516

	
3.

	
28163 CR 20, Elkhart, IN 46517

	
4.

	
201 Industrial Road, Halstead, KS 67056

	
5.

	
1930 West Lusher, Elkhart, IN 46517 (also known as 2044 West Lusher, Elkhart, IN 46517)

	
6.

	
20 Eby Chiques Rd., Mount Joy, PA 17552

	
7.

	
2225 Cypress St., Valdosta, GA 31601

	
8.

	
1500 Old Fort Graham Rd., Lacy Lakeview, TX 76705

	
9.

	
44017 US Highway 52 N, New London, NC 28127

  

 

  

SCHEDULE 8

 

LIST OF UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

	
Grantors

 

	
Jurisdictions

	
Patrick Industries, Inc.

 

	
Indiana

	
Patrick Industries, Inc.

 

	
Elkhart County, Indiana

	
Patrick Industries, Inc.

 

	
Morgan County, Alabama

	
Patrick Industries, Inc.

 

	
Lowndes County, Georgia

	
Patrick Industries, Inc.

 

	
Harvey County, Kansas

	
Patrick Industries, Inc.

 

	
Lancaster County, Pennsylvania

	
Patrick Industries, Inc.

 

	
McLennan County, Texas

	
Patrick Industries, Inc.

 

	
Stanly County, North Carolina

	
Patrick Industries, Inc.

 

	
San Bernardino County, California

	
Patrick Industries, Inc.

 

	
Maricopa County, Arizona

	
Patrick Industries, Inc.

 

	
Cook County, Illinois

  

 

  

SCHEDULE 9

 

 

MOTOR VEHICLES

None.

  

 

  

ANNEX 1 TO SECURITY AGREEMENT

FORM OF JOINDER

Joinder No. ____ (this "Joinder"), dated as of _______________, to the Security Agreement, dated as of March __, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the "Security Agreement"), by and among each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (collectively, jointly and severally, "Grantors" and each, individually, a "Grantor") and NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership ("Northcreek"), in its capacity as collateral agent for the Subordinated Lender Group (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Secured Senior Subordinated Note and Warrant Purchase Agreement dated as of March __, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the "Note Purchase Agreement"), by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the lenders party thereto as "Buyers" (such Buyers, together with their respective successors and assigns in such capacity, each, individually, a "Lender" and, collectively, the "Lenders"), and Collateral Agent, the Subordinated Lender Group has agreed to make certain financial accommodations available to the Borrower from time to time pursuant to the terms and conditions thereof; and

WHEREAS, initially capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement or, if not defined therein, in the Note Purchase Agreement; and

WHEREAS, Grantors have entered into the Security Agreement in order to induce the Subordinated Lender Group to make certain financial accommodations to the Borrower; and

WHEREAS, pursuant to Section 5(a)(x) of the Note Purchase Agreement and Section 24 of the Security Agreement, certain Subsidiaries of the Borrower must execute and deliver certain Transaction Documents, including the Security Agreement, and the joinder to the Security Agreement by the undersigned new Grantor or Grantors (collectively, the "New Grantors") may be accomplished by the execution of this Joinder in favor of Collateral Agent, for the benefit of the Subordinated Lender Group; and

WHEREAS, each New Grantor (a) is [an Affiliate][a Subsidiary] of the Borrower and, as such, will benefit by virtue of the financial accommodations extended to the Borrower by the Subordinated Lender Group and (b) by becoming a party will benefit from certain rights granted to the parties pursuant to the terms of the Transaction Documents;

NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each New Grantor hereby agrees as follows:

1.              In accordance with Section 24 of the Security Agreement, each New Grantor, by its signature below, becomes a "Grantor" under the Security Agreement with the same force and effect as if originally named therein as a "Grantor" and each New Grantor hereby (a) agrees to all of the terms and provisions of the Security Agreement applicable to it as a "Grantor" thereunder and (b) represents and warrants that the representations and warranties made by it as a "Grantor" thereunder are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that are already qualified or modified by materiality in the text thereof) on and as of the date hereof. In furtherance of the foregoing, each New Grantor does hereby unconditionally grant, assign, and pledge to Collateral Agent, for the benefit of the Subordinated Lender Group, to secure the Secured Obligations, a continuing security interest in and to all of such New Grantor's right, title and interest in and to the Collateral. Schedule 1, "Commercial 

Annex 1

  

Page 1

  

 

Tort Claims", Schedule 2, "Copyrights", Schedule 3, "Intellectual Property Licenses", Schedule 4, "Patents", Schedule 5, "Trademarks", Schedule 6, "Pledged Companies", Schedule 6(k), "Controlled Account Banks", Schedule 7, "Owned Real Property", Schedule 8, "List of Uniform Commercial Code Filing Jurisdictions", and Schedule 9, "Motor Vehicles" attached hereto supplement Schedule 1, Schedule 2, Schedule 3, Schedule 4, Schedule 5, Schedule 6, Schedule 6(k), Schedule 7, Schedule 8, and Schedule 9, respectively, to the Security Agreement and shall be deemed a part thereof for all purposes of the Security Agreement. Each reference to a "Grantor" in the Security Agreement shall be deemed to include each New Grantor. The Security Agreement is incorporated herein by reference. Each New Grantor authorizes Collateral Agent at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments thereto (i) describing the Collateral as "all personal property of debtor" or "all assets of debtor" or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. Each New Grantor also hereby ratifies any and all financing statements or amendments previously filed by Collateral Agent in any jurisdiction in connection with the Transaction Documents.

2.              Each New Grantor represents and warrants to Collateral Agent, the Subordinated Lender Group that this Joinder has been duly executed and delivered by such New Grantor and constitutes its legal, valid, and binding obligation, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium, or other similar laws affecting creditors' rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

3.             This Joinder is a Transaction Document. This Joinder may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Joinder. Delivery of an executed counterpart of this Joinder by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Joinder. Any party delivering an executed counterpart of this Joinder by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Joinder but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Joinder.

4.              The Security Agreement, as supplemented hereby, shall remain in full force and effect.

5.              THE VALIDITY OF THIS JOINDER, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

6.              THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS JOINDER SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH NEW GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 6.

Annex 1

  

Page 2

  

7.             TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH NEW GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS JOINDER OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH NEW GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS JOINDER MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Annex 1

  

Page 3

  

IN WITNESS WHEREOF, the parties hereto have caused this Joinder to the Security Agreement to be executed and delivered as of the day and year first above written.

	
NEW GRANTORS:

	
[NAME OF NEW GRANTOR]

	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	  	
[NAME OF NEW GRANTOR]

	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	
COLLATERAL AGENT:

	
NORTHCREEK MEZZANINE FUND I, L.P.,

	 
	  	
a Delaware limited partnership

	 
	  	  	  	  	 
	  	
By:

	
NMF GP, LLC, its general partner

	 
	  	  	  	  	 
	  	  	
By:

	
Northcreek Management, Inc., its manager

	 
	  	  	  	  	 
	  	  	
By:

	  	 
	  	  	
Name:

	
Barry Peterson

	 
	  	  	
Title:

	
Vice President

	 

 

[SIGNATURE PAGE TO JOINDER NO. ___ TO SECURITY AGREEMENT]

Annex 1

  

Page 4

  

EXHIBIT A

COPYRIGHT SECURITY AGREEMENT

This COPYRIGHT SECURITY AGREEMENT (this "Copyright Security Agreement") is made this ___ day of ___________, 20__, by and among Grantors listed on the signature pages hereof (collectively, jointly and severally, "Grantors" and each individually "Grantor"), and NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership ("Northcreek"), in its capacity as collateral agent for the Subordinated Lender Group (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Secured Senior Subordinated Note and Warrant Purchase Agreement dated as of March __, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the "Note Purchase Agreement") by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the lenders party thereto as "Buyers" (such Buyers, together with their respective successors and assigns in such capacity, each, individually, a "Lender" and, collectively, the "Lenders"), and Collateral Agent, the Subordinated Lender Group has agreed to make certain financial accommodations available to the Borrower from time to time pursuant to the terms and conditions thereof; and

WHEREAS, the members of the Subordinated Lender Group are willing to make the financial accommodations to the Borrower as provided for in the Note Purchase Agreement, but only upon the condition, among others, that Grantors shall have executed and delivered to Collateral Agent, for the benefit of the Subordinated Lender Group, that certain Security Agreement, dated as of March __, 2011 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Security Agreement"); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for the benefit of the Subordinated Lender Group, this Copyright Security Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

8.              DEFINED TERMS. All initially capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or, if not defined therein, in the Note Purchase Agreement.

9.              GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL. Each Grantor hereby unconditionally grants, assigns, and pledges to Collateral Agent, for the benefit each member of the Subordinated Lender Group, to secure the Secured Obligations, a continuing security interest (referred to in this Copyright Security Agreement as the "Security Interest") in all of such Grantor's right, title and interest in and to the following, whether now owned or hereafter acquired or arising (collectively, the "Copyright Collateral"):

(a)            all of such Grantor's Copyrights and Copyright Intellectual Property Licenses to which it is a party including those referred to on Schedule I;

(b)            all renewals or extensions of the foregoing; and

(c)            all products and proceeds of the foregoing, including any claim by such Grantor against third parties for past, present or future infringement of any Copyright or any Copyright exclusively 

Exhibit A

  

Page 1

  

 

licensed under any Intellectual Property License, including the right to receive damages, or the right to receive license fees, royalties, and other compensation under any Copyright Intellectual Property License.

10.            SECURITY FOR SECURED OBLIGATIONS. This Copyright Security Agreement and the Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Copyright Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Collateral Agent, the Subordinated Lender Group, or any of them, whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

11.            SECURITY AGREEMENT. The Security Interest granted pursuant to this Copyright Security Agreement is granted in conjunction with the security interests granted to Collateral Agent, for the benefit of the Subordinated Lender Group, pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the Security Interest in the Copyright Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. To the extent there is any inconsistency between this Copyright Security Agreement and the Security Agreement, the Security Agreement shall control.

12.            AUTHORIZATION TO SUPPLEMENT. Grantors shall give Collateral Agent prior written notice of no less than three (3) Business Days before filing any additional application for registration of any copyright and prompt notice in writing of any additional copyright registrations granted therefor after the date hereof. Without limiting Grantors' obligations under this Section, Grantors hereby authorize Collateral Agent unilaterally to modify this Copyright Security Agreement by amending Schedule I to include any future United States registered copyrights or applications therefor of each Grantor. Notwithstanding the foregoing, no failure to so modify this Copyright Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from Collateral Agent's continuing security interest in all Collateral, whether or not listed on Schedule I.

13.            COUNTERPARTS. This Copyright Security Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Copyright Security Agreement. Delivery of an executed counterpart of this Copyright Security Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Copyright Security Agreement. Any party delivering an executed counterpart of this Copyright Security Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Copyright Security Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Copyright Security Agreement.

14.            CONSTRUCTION. This Copyright Security Agreement is a Transaction Document. Unless the context of this Copyright Security Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms "includes" and "including" are not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or". The words "hereof", "herein", "hereby", "hereunder", and similar terms in this Copyright Security Agreement refer to this Copyright Security Agreement as a whole and not to any particular provision of this Copyright Security Agreement. Section, subsection, clause, schedule, and exhibit references herein are to this Copyright Security Agreement unless otherwise specified. Any reference in this Copyright Security Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). The words 

Exhibit A

  

Page 2

  

 

"asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights. Any reference herein to the satisfaction, repayment, or payment in full of the Secured Obligations shall mean the repayment in full in cash or immediately available funds of all of the Secured Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein to any Person shall be construed to include such Person's successors and permitted assigns. Any requirement of a writing contained herein shall be satisfied by the transmission of a Record.

15.            THE VALIDITY OF THIS COPYRIGHT SECURITY AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

16.            THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS COPYRIGHT SECURITY AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.

17.            TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS COPYRIGHT SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

[signature page follows]

Exhibit A

  

Page 3

  

IN WITNESS WHEREOF, the parties hereto have caused this Copyright Security Agreement to be executed and delivered as of the day and year first above written.

	
GRANTORS:

	  	  	  	 
	 	 	 	 	 
	 	 	 	 	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	  	
ACCEPTED AND ACKNOWLEDGED BY:

	 
	  	  	  	  	 
	
COLLATERAL AGENT:

	
NORTHCREEK MEZZANINE FUND I, L.P.,

	 
	  	
a Delaware limited partnership

	 
	  	  	  	  	 
	  	
By:

	
NMF GP, LLC, its general partner

	 
	  	  	  	  	 
	  	  	
By:

	
Northcreek Management, Inc.,

	 
	  	  	 	its manager	 
	  	  	  	  	 
	  	  	
By:

	  	 
	  	  	
Name:

	
Barry Peterson

	 
	  	  	
Title:

	
Vice President

	 

[SIGNATURE PAGE TO COPYRIGHT SECURITY AGREEMENT]

Exhibit A

  

Page 4

  

SCHEDULE I

to

COPYRIGHT SECURITY AGREEMENT

Copyright Registrations

	
Grantor

	
Country

	
Copyright

	
Registration No.

	
Registration Date

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

Copyright Licenses

COPYRIGHT SECURITY AGREEMENT

  

 

  

EXHIBIT B

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT (this "Patent Security Agreement") is made this ___ day of ___________, 20__, by and among the Grantors listed on the signature pages hereof (collectively, jointly and severally, "Grantors" and each individually "Grantor"), and NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership ("Northcreek"), in its capacity as collateral agent for the Subordinated Lender Group (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Secured Senior Subordinated Note and Warrant Purchase Agreement dated as of March __, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the "Note Purchase Agreement"), by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the lenders party thereto as "Buyers" (such Buyers, together with their respective successors and assigns in such capacity, each, individually, a "Lender" and, collectively, the "Lenders"), and Collateral Agent, the Subordinated Lender Group has agreed to make certain financial accommodations available to the Borrower from time to time pursuant to the terms and conditions thereof; and

WHEREAS, the members of Subordinated Lender Group are willing to make the financial accommodations to the Borrower as provided for in the Note Purchase Agreement, but only upon the condition, among others, that the Grantors shall have executed and delivered to Collateral Agent, for the benefit of the Subordinated Lender Group, that certain Security Agreement, dated as of March __, 2011 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Security Agreement"); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for the benefit of the Subordinated Lender Group, this Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereby agrees as follows:

18.            DEFINED TERMS. All initially capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or, if not defined therein, in the Note Purchase Agreement.

19.            GRANT OF SECURITY INTEREST IN PATENT COLLATERAL. Each Grantor hereby unconditionally grants, assigns, and pledges to Collateral Agent, for the benefit each member of the Subordinated Lender Group, to secure the Secured Obligations, a continuing security interest (referred to in this Patent Security Agreement as the "Security Interest") in all of such Grantor's right, title and interest in and to the following, whether now owned or hereafter acquired or arising (collectively, the "Patent Collateral"):

(a)            all of its Patents and Patent Intellectual Property Licenses to which it is a party including those referred to on Schedule I;

(b)            all divisionals, continuations, continuations-in-part, reissues, reexaminations, or extensions of the foregoing; and

Exhibit B

  

Page 1

  

(c)            all products and proceeds of the foregoing, including any claim by such Grantor against third parties for past, present or future infringement of any Patent or any Patent exclusively licensed under any Intellectual Property License, including the right to receive damages, or right to receive license fees, royalties, and other compensation under any Patent Intellectual Property License.

20.            SECURITY FOR SECURED OBLIGATIONS. This Patent Security Agreement and the Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Patent Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Collateral Agent, the Subordinated Lender Group, or any of them, whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

21.            SECURITY AGREEMENT. The Security Interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interests granted to Collateral Agent, for the benefit of the Subordinated Lender Group, pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the Security Interest in the Patent Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. To the extent there is any inconsistency between this Patent Security Agreement and the Security Agreement, the Security Agreement shall control.

22.            AUTHORIZATION TO SUPPLEMENT. If any Grantor shall obtain rights to any new patent application or issued patent or become entitled to the benefit of any patent application or patent for any divisional, continuation, continuation-in-part, reissue, or reexamination of any existing patent or patent application, the provisions of this Patent Security Agreement shall automatically apply thereto. Grantors shall give prompt notice in writing to Collateral Agent with respect to any such new patent rights. Without limiting Grantors' obligations under this Section, Grantors hereby authorize Collateral Agent unilaterally to modify this Patent Security Agreement by amending Schedule I to include any such new patent rights of each Grantor. Notwithstanding the foregoing, no failure to so modify this Patent Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from Collateral Agent's continuing security interest in all Collateral, whether or not listed on Schedule I.

23.            COUNTERPARTS. This Patent Security Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Patent Security Agreement. Delivery of an executed counterpart of this Patent Security Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Patent Security Agreement. Any party delivering an executed counterpart of this Patent Security Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Patent Security Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Patent Security Agreement.

24.            CONSTRUCTION. This Patent Security Agreement is a Transaction Document. Unless the context of this Patent Security Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms "includes" and "including" are not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or". The words "hereof", "herein", "hereby", "hereunder", and similar terms in this Patent Security Agreement refer to this Patent Security Agreement as a whole and not to any particular provision of this Patent Security Agreement. Section, subsection, clause, schedule, and exhibit references herein are to this Patent Security Agreement unless otherwise specified. Any reference in this Patent Security Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as 

Exhibit B

  

Page 2

  

 

applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). The words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights. Any reference herein to the satisfaction, repayment, or payment in full of the Secured Obligations shall mean the repayment in full in cash or immediately available funds of all of the Secured Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein to any Person shall be construed to include such Person's successors and permitted assigns. Any requirement of a writing contained herein shall be satisfied by the transmission of a Record.

25.            THE VALIDITY OF THIS PATENT SECURITY AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

26.            THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS PATENT SECURITY AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.

27.            TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS PATENT SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

[signature page follows]

Exhibit B

  

Page 3

  

IN WITNESS WHEREOF, the parties hereto have caused this Patent Security Agreement to be executed and delivered as of the day and year first above written.

	
GRANTORS:

	  	  	  	 
	 	 	 	 	 
	 	 	 	 	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	
COLLATERAL AGENT:

	
ACCEPTED AND ACKNOWLEDGED BY:

	 
	  	
NORTHCREEK MEZZANINE FUND I, L.P.,

	 
	  	
a Delaware limited partnership

	 
	  	  	  	  	 
	  	
By:

	
NMF GP, LLC, its general partner

	  	  	  	  	 
	  	  	
By:

	
Northcreek Management, Inc.,

	 
	  	  	  	
its manager

	 
	  	  	  	  	 
	  	  	
By:

	  	 
	  	  	
Name:

	
Barry Peterson

	 
	  	  	
Title:

	
Vice President

	 

[SIGNATURE PAGE TO PATENT SECURITY AGREEMENT]

Exhibit B

  

Page 4

  

SCHEDULE I

to

PATENT SECURITY AGREEMENT

Patents

	
Grantor

	
Country

	
Patent

	
Application/ Patent No.

	
Filing Date

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

Patent Licenses

  

 

  

EXHIBIT C

PLEDGED INTERESTS ADDENDUM

This Pledged Interests Addendum, dated as of _________ __, 20___ (this "Pledged Interests Addendum"), is delivered pursuant to Section 6 of the Security Agreement referred to below. The undersigned hereby agrees that this Pledged Interests Addendum may be attached to that certain Security Agreement, dated as of March __, 2011, (as amended, restated, supplemented, or otherwise modified from time to time, the "Security Agreement"), made by the undersigned, together with the other Grantors named therein, to NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership, as Collateral Agent. Initially capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Security Agreement or, if not defined therein, in the Note Purchase Agreement. The undersigned hereby agrees that the additional interests listed on Schedule I shall be and become part of the Pledged Interests pledged by the undersigned to Collateral Agent in the Security Agreement and any pledged company set forth on Schedule I shall be and become a "Pledged Company" under the Security Agreement, each with the same force and effect as if originally named therein.

This Pledged Interests Addendum is a Transaction Document. Delivery of an executed counterpart of this Pledged Interests Addendum by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Pledged Interests Addendum. If the undersigned delivers an executed counterpart of this Pledged Interests Addendum by telefacsimile or other electronic method of transmission, the undersigned shall also deliver an original executed counterpart of this Pledged Interests Addendum but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Pledged Interests Addendum.

The undersigned hereby certifies that the representations and warranties set forth in Section 5 of the Security Agreement of the undersigned are true and correct as to the Pledged Interests listed herein on and as of the date hereof.

THE VALIDITY OF THIS PLEDGED INTERESTS ADDENDUM, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS PLEDGED INTERESTS ADDENDUM SHALL BE TRIED AND LITIGATED ONLY IN THE STATE, AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS PARAGRAPH.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS PLEDGED INTERESTS ADDENDUM OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING 

Exhibit C

  

Page 1

  

 

CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS PLEDGED INTERESTS ADDENDUM MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

[signature page follows]

Exhibit C

  

Page 2

  

IN WITNESS WHEREOF, the undersigned has caused this Pledged Interests Addendum to be executed and delivered as of the day and year first above written.

	  	
[___________________]

	 
	  	  	  	 
	  	
By:

	  	 
	  	  	
Name:

	 
	  	  	
Title:

	 

Exhibit C

  

Page 3

  

SCHEDULE I

to

PLEDGED INTERESTS ADDENDUM

Pledged Interests

	
Name of Grantor

	
Name of Pledged Company

	
Number of Shares/Units

	
Class of Interests

	
Percentage of Class Owned

	
Certificate Nos.

	  	  	  	  	  	  
	  	  	  	  	  	  

Exhibit C

  

Page 4

  

EXHIBIT D

TRADEMARK SECURITY AGREEMENT

This TRADEMARK SECURITY AGREEMENT (this "Trademark Security Agreement") is made this ___ day of ___________, 20__, by and among Grantors listed on the signature pages hereof (collectively, jointly and severally, "Grantors" and each individually "Grantor"), and NORTHCREEK MEZZANINE FUND I, L.P., a Delaware limited partnership ("Northcreek"), in its capacity as collateral agent for the Subordinated Lender Group (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Secured Senior Subordinated Note and Warrant Purchase Agreement dated as of March __, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the "Note Purchase Agreement") by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the lenders party thereto as "Buyers" (such Buyers, together with their respective successors and assigns in such capacity, each, individually, a "Lender" and, collectively, the "Lenders"), and Collateral Agent, the Subordinated Lender Group has agreed to make certain financial accommodations available to the Borrower from time to time pursuant to the terms and conditions thereof; and

WHEREAS, the members of the Subordinated Lender Group are willing to make the financial accommodations to the Borrower as provided for in the Note Purchase Agreement, but only upon the condition, among others, that Grantors shall have executed and delivered to Collateral Agent, for the benefit of Subordinated Lender Group, that certain Security Agreement, dated as of March __, 2011 (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Security Agreement"); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to Collateral Agent, for the benefit of Subordinated Lender Group, this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereby agrees as follows:

28.            DEFINED TERMS. All initially capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or, if not defined therein, in the Note Purchase Agreement.

29.            GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL. Each Grantor hereby unconditionally grants, assigns, and pledges to Collateral Agent, for the benefit each member of the Subordinated Lender Group, to secure the Secured Obligations, a continuing security interest (referred to in this Trademark Security Agreement as the "Security Interest") in all of such Grantor's right, title and interest in and to the following, whether now owned or hereafter acquired or arising (collectively, the "Trademark Collateral"):

(a)            all of its Trademarks and Trademark Intellectual Property Licenses to which it is a party including those referred to on Schedule I;

(b)            all goodwill of the business connected with the use of, and symbolized by, each Trademark and each Trademark Intellectual Property License; and

Exhibit D

  

Page 1

  

(c)            all products and proceeds (as that term is defined in the Code) of the foregoing, including any claim by such Grantor against third parties for past, present or future (i) infringement or dilution of any Trademark or any Trademarks exclusively licensed under any Intellectual Property License, including right to receive any damages, (ii) injury to the goodwill associated with any Trademark, or (iii) right to receive license fees, royalties, and other compensation under any Trademark Intellectual Property License.

30.            SECURITY FOR SECURED OBLIGATIONS. This Trademark Security Agreement and the Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Trademark Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Collateral Agent, the Subordinated Lender Group, or any of them, whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

31.            SECURITY AGREEMENT. The Security Interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interests granted to Collateral Agent, for the benefit of the Subordinated Lender Group, pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms that the rights and remedies of Collateral Agent with respect to the Security Interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. To the extent there is any inconsistency between this Trademark Security Agreement and the Security Agreement, the Security Agreement shall control.

32.            AUTHORIZATION TO SUPPLEMENT. If any Grantor shall obtain rights to any new trademarks, the provisions of this Trademark Security Agreement shall automatically apply thereto. Grantors shall give prompt notice in writing to Collateral Agent with respect to any such new trademarks or renewal or extension of any trademark registration. Without limiting Grantors' obligations under this Section, Grantors hereby authorize Collateral Agent unilaterally to modify this Trademark Security Agreement by amending Schedule I to include any such new trademark rights of each Grantor. Notwithstanding the foregoing, no failure to so modify this Trademark Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from Collateral Agent's continuing security interest in all Collateral, whether or not listed on Schedule I.

33.            COUNTERPARTS. This Trademark Security Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Trademark Security Agreement. Delivery of an executed counterpart of this Trademark Security Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Trademark Security Agreement. Any party delivering an executed counterpart of this Trademark Security Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Trademark Security Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Trademark Security Agreement.

34.            CONSTRUCTION. This Trademark Security Agreement is a Transaction Document. Unless the context of this Trademark Security Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms "includes" and "including" are not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or". The words "hereof", "herein", "hereby", "hereunder", and similar terms in this Trademark Security Agreement refer to this Trademark Security Agreement as a whole and not to any particular provision of this Trademark Security Agreement. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Trademark Security Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, 

Exhibit D

  

Page 2

  

 

modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). The words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights. Any reference herein to the satisfaction, repayment, or payment in full of the Secured Obligations shall mean the repayment in full in cash or immediately available funds of all of the Secured Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein to any Person shall be construed to include such Person's successors and permitted assigns. Any requirement of a writing contained herein shall be satisfied by the transmission of a Record.

35.            THE VALIDITY OF THIS TRADEMARK SECURITY AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

36.            THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS TRADEMARK SECURITY AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COLLATERAL AGENT AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.

37.            TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, COLLATERAL AGENT AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COLLATERAL AGENT AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS TRADEMARK SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

[signature page follows]

Exhibit D

  

Page 3

  

IN WITNESS WHEREOF, the parties hereto have caused this Trademark Security Agreement to be executed and delivered as of the day and year first above written.

	
GRANTORS:

	  	  	  	 
	 	 	 	 	 
	 	 	 	 	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	  	
By:

	  	  	 
	  	  	
Name:

	  	 
	  	  	
Title:

	  	 
	  	  	  	  	 
	
COLLATERAL AGENT:

	
ACCEPTED AND ACKNOWLEDGED BY:

	  	
NORTHCREEK MEZZANINE FUND I, L.P.,

	  	
a Delaware limited partnership

	  	  	  	  	 
	  	
By:

	
NMF GP, LLC, its general partner

	  	  	  	  	 
	  	  	
By:

	
Northcreek Management, Inc.,

	 
	  	  	  	
its manager

	 
	  	  	  	  	 
	  	  	
By:

	  	 
	  	  	
Name:

	
Barry Peterson

	 
	  	  	
Title:

	
Vice President

	 

[SIGNATURE PAGE TO TRADEMARK SECURITY AGREEMENT]

Exhibit D

  

Page 4

  

SCHEDULE I

to

TRADEMARK SECURITY AGREEMENT

Trademark Registrations/Applications

 

	
Grantor

	
Country

	
Mark

	
Application/ Registration No.

	
App/Reg Date

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

Trade Names

Common Law Trademarks

Trademarks Not Currently In Use

Trademark Licensesex10_5.htm

Exhibit 10.5

 

SUBORDINATION AND INTERCREDITOR AGREEMENT

 

THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, this "Agreement") is entered into as of March 31, 2011, by and among Tontine Capital Overseas Master Fund II, L.P., a Cayman Islands limited partnership ("Tontine"), Northcreek Mezzanine Fund I, L.P., a Delaware limited partnership ("Northcreek"), on its behalf and in its capacity as collateral agent pursuant to the terms of the Note Purchase Agreement described below (in such capacity, "Collateral Agent"), Patrick Industries, Inc., an Indiana corporation (the "Company"), and Wells Fargo Capital Finance, LLC, a Delaware limited liability company, as Agent for all Senior Lenders party to the Senior Credit Agreement described below and all Bank Product Providers.

 

R E C I T A L S

 

A.            The Company, Agent and Senior Lenders have entered into a Credit Agreement of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Senior Credit Agreement") pursuant to which, among other things, Senior Lenders have agreed, subject to the terms and conditions set forth in the Senior Credit Agreement, to make certain loans and financial accommodations to the Company. All of the Company's obligations to Agent and Senior Lenders under the Senior Credit Agreement and the other Senior Debt Documents are secured by Liens on all of the Collateral.

 

B.             The Company may from time to time obtain Bank Products and become liable for the Bank Product Obligations secured by Liens on the Collateral.

 

C.             The Company, Collateral Agent and Subordinated Creditors have entered into a Secured Senior Subordinated Note and Warrant Purchase Agreement of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted hereunder, the "Note Purchase Agreement") pursuant to which (i) Subordinated Creditors are extending credit to the Company as evidenced by those certain Secured Senior Subordinated Notes of even date herewith, one issued to Tontine in the original principal amount of $2,500,000, and the other issued to Northcreek in the original principal amount of $2,500,000 (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted hereunder, the "Subordinated Notes") and (ii) the Company is issuing to Tontine and Northcreek those certain warrants of even date herewith (collectively, as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted hereunder, the "Warrants") to acquire common stock of the Company.

 

D.             All of the obligations of the Company under the Note Purchase Agreement, and the other Subordinated Debt Documents are secured by Liens on all of the Collateral.

  

  

  

E.             As an inducement to and as one of the conditions precedent to the agreement of Agent and Senior Lenders to consummate the transactions contemplated by the Senior Credit Agreement, Agent and Senior Lenders have required the execution and delivery of this Agreement by each Subordinated Party (as hereinafter defined) and the Company in order to set forth the relative rights and priorities of Agent, Senior Lenders, and Subordinated Parties under the Senior Debt Documents and the Subordinated Debt Documents and in respect of the Collateral.

 

NOW, THEREFORE, in order to induce Agent and Senior Lenders to consummate the transactions contemplated by the Senior Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

 

1.              Definitions. The following terms shall have the following meanings in this Agreement:

 

"Agent" shall mean Wells Fargo Capital Finance, LLC, a Delaware limited liability company, as Agent for the Senior Lenders and the Bank Product Providers, or any other Person appointed by the holders of the Senior Debt as Agent for purposes of the Senior Debt Documents and this Agreement; provided that, after the consummation of any Permitted Refinancing, the term "Agent" shall refer to any Person appointed by the holders of the Senior Debt at such time as agent for themselves for purposes of, among other things, this Agreement.

 

"Bank Product" shall mean any financial accommodation extended to Company or any of its subsidiaries by a Bank Product Provider including, without limitation: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) stored value cards, (e) purchase cards (including, without limitation, so-called "procurement cards" or "P-cards"), (f) cash management and related services, including, without limitation treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements, or (g) transactions under any "swap agreement" as that term is defined in Section 101(53B)(A) of the Bankruptcy Code.

 

"Bank Product Documents" shall mean those agreements entered into from time to time by Company or any of its subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

 

"Bank Product Obligations" shall mean (a) all obligations, liabilities, reimbursement obligations, fees, and expenses owing by Company or any of its 

  

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subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank Product Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and (b) all amounts Agent or any Senior Lender is obligated to pay to a Bank Product Provider as a result of Agent or such Senior Lender purchasing participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to Company or its subsidiaries.

 

"Bank Product Provider" shall mean Wells Fargo Bank, National Association or any of its affiliates (including, without limitation, Agent).

 

"Bankruptcy Code" shall mean the provisions of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

 

"Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to remain closed.

 

"Collateral" shall mean, collectively, the existing and hereafter acquired property, whether real, personal or mixed, of the Company and any and all additional property and interests in property that secures all or any portion of the Senior Debt, the Subordinated Debt or both.

 

"Credit Parties" shall mean, collectively, the Company, and any guarantor of all or any portion of the Senior Debt, the Subordinated Debt or both.

 

"Disposition" shall mean, with respect to any interest in property, the sale, lease, license or other disposition of such interest in such property.

 

"Distribution" shall mean, with respect to any indebtedness, obligation or security (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account of such indebtedness, obligation or security, or (b) any redemption, purchase or other acquisition of such indebtedness, obligation or security by any Person.

 

"Enforcement Action" shall mean (a) to take from or for the account of any of the Credit Parties or any other Person, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by any of the Credit Parties with respect to the Subordinated Debt, (b) to initiate or participate with others in any suit, action or proceeding against any of the Credit Parties or any other Person to (i) sue for or enforce payment of or to collect the whole or any part of the Subordinated Debt, (ii) commence or join 

 

  

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with other Persons to commence a Proceeding or (iii) commence judicial enforcement of any of the rights and remedies under the Subordinated Debt Documents or applicable law with respect to the Subordinated Debt, (c) to accelerate the Subordinated Debt, (d) to take any action to enforce any rights or remedies with respect to the Subordinated Debt, (e) to exercise any put option or to cause any of the Credit Parties to honor any redemption or mandatory prepayment obligation under any Subordinated Debt Document, (f) to exercise any rights or remedies of a secured party under the Subordinated Debt Documents or applicable law or take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of any Credit Party.

 

"Lien" shall mean, with respect to any asset, any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset.

 

"Paid in Full" or "Payment in Full" shall mean, as of any date of determination with respect to the Senior Debt, that (a) all such Senior Debt has been paid in full in cash (or with such other assets or consideration as agreed to by Agent and the Senior Lenders) (other than (i) contingent indemnification obligations not yet due and payable or with respect to which a claim has not been asserted, (ii) obligations not yet due and payable with respect to letters of credit issued pursuant to the Senior Debt Documents (it being understood that such obligations include interest, fees, charges, costs and expenses that accrue subsequent to such date of determination in respect of undrawn or drawn letters of credit) and (iii) Bank Product Obligations not yet due and payable), (b) no Person has any further right to obtain any loans, letters of credit or other extensions of credit under the Senior Debt Documents, (c) any and all letters of credit issued under the Senior Debt Documents have been cancelled and returned (or backed by standby letters of credit (issued by a bank, and in form and substance acceptable, to Agent) or cash collateralized, in each case in an amount equal to 105% of the face amount of such letters of credit in accordance with the terms of such documents), (d) any and all Bank Product Obligations have been cancelled (or backed by standby letters of credit (issued by a bank, and in form and substance, acceptable to Agent) or cash collateralized, in each case in an amount reasonably determined by Agent as sufficient to satisfy the estimated credit exposure with respect to the Bank Product Obligations), and (e) any costs, expenses and contingent indemnification obligations which are not yet due and payable but with respect to which a claim has been asserted by Agent or a Senior Lender, are backed by standby letters of credit (issued by a bank, and in form and substance, acceptable to Agent) or cash collateralized, in each case in an amount reasonably estimated by Agent to be the amount of costs, expenses and 

 

  

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contingent indemnification obligations that may become due and payable with respect to claims made.

 

"Permitted Refinancing" shall mean any refinancing or replacement of the Senior Debt under the WFCF Loan Documents (or any Permitted Refinancing Senior Debt Documents); provided, that the financing documentation entered into by the Credit Parties in connection with such Permitted Refinancing constitutes Permitted Refinancing Senior Debt Documents.

 

"Permitted Refinancing Senior Debt Documents" shall mean any financing documentation which replaces the WFCF Loan Documents and pursuant to which the Senior Debt under the WFCF Loan Documents is refinanced or replaced, as such financing documentation may be amended, restated, supplemented or otherwise modified from time to time in compliance with this Agreement, but specifically excluding any such financing documentation to the extent that it contains, either initially or by amendment or other modification, any material terms, conditions, covenants or defaults other than those that (a) then exist in the WFCF Loan Documents (or any Permitted Refinancing Senior Debt Documents) or (b) could be included in the WFCF Loan Documents (or any Permitted Refinancing Senior Debt Documents) by an amendment or other modification that would not be prohibited by the terms of this Agreement.

 

"Permitted Subordinated Debt Payments" shall mean (i) payments of Subordinated Debt Costs and Expenses, (ii) regularly scheduled payments of interest (including non-cash in-kind payments) on the Subordinated Debt due and payable on a non-accelerated basis as and when due and payable, (iii) the payment of principal of the Subordinated Debt at its regularly scheduled maturity date and (iv) payments constituting Permitted Subordinated Debt Redemptions (as such term is defined in the Senior Credit Agreement), in each case with respect to clauses (i), (ii) and (iii) above in accordance with the terms of the Subordinated Debt Documents as in effect on the date hereof or as modified in accordance with the terms of this Agreement.

 

"Person" shall mean any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

 

"Proceeding" shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

  

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"Senior Covenant Default" shall mean any "Event of Default" under the Senior Debt Documents (other than a Senior Payment Default), or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default (other than a Senior Payment Default) if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

 

"Senior Debt" shall mean (a) all obligations, liabilities and indebtedness of every nature of each Credit Party from time to time owed to Agent or any Senior Lender under the Senior Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest accruing thereon and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding, without regard to whether or not such interest, fees, costs and expenses are an allowed claim (provided, however, that in no event shall the principal amount of the Senior Debt exceed the sum of (i) the principal amount of the loans and any unfunded loan commitments under the Senior Credit Agreement as in effect on the date hereof reduced by the amount of any repayments and commitment reductions under the Senior Credit Agreement to the extent that such payments and reductions may not be reborrowed or increased, as applicable (specifically excluding, however, any such repayments and commitment reductions occurring in connection with any Permitted Refinancing), plus (ii) the aggregate amount of capitalized interest, fees and expenses in respect of the loans and other obligations under the Senior Credit Agreement plus (iii) $5,000,000) (the sum of items (i) and (iii) is the "Senior Debt Limit" but in no event shall such sum exceed $55,000,000) and (b) all Bank Product Obligations. Senior Debt shall be considered to be outstanding whenever any loan commitment under the Senior Debt Document is outstanding.

 

"Senior Debt Documents" shall mean the WFCF Loan Documents and, after the consummation of any Permitted Refinancing, the Permitted Refinancing Senior Debt Documents.

 

"Senior Default" shall mean any Senior Payment Default or Senior Covenant Default.

 

"Senior Default Notice" shall mean a written notice from Agent to Collateral Agent pursuant to which Collateral Agent is notified of the occurrence of a Senior Default, which notice incorporates a reasonably detailed description of such Senior Default and states that such notice is a "Senior Default Notice" for purposes of this Agreement.

  

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"Senior Lenders" shall mean the holders of the Senior Debt, and shall include, without limitation, the "Lenders", as such term is defined in the Senior Credit Agreement.

 

"Senior Payment Default" shall mean any "Event of Default" under the Senior Debt Documents resulting from the failure of any Credit Party to pay, on a timely basis, any principal, interest, fees or other obligations under the Senior Debt Documents including, without limitation, any default in payment of Senior Debt after acceleration thereof, or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

 

"Senior Secured Parties" shall mean Agent, Senior Lenders and Bank Product Providers.

 

"Subordinated Creditors" means Tontine and Northcreek, and their respective successors and assigns.

 

"Subordinated Debt" shall mean all of the obligations, liabilities and indebtedness of each Credit Party to each Subordinated Party evidenced by or incurred pursuant to the Subordinated Debt Documents; provided, however, that, "Subordinated Debt" shall not include the warrants issued to Subordinated Creditors pursuant to the Subordinated Debt Documents, any shares of stock of the Company issued to Subordinated Creditors upon the exercise of such warrants, or any proceeds received by Subordinated Creditors on account of such warrants or such shares.

 

"Subordinated Debt Costs and Expenses" shall mean reasonable out-of-pocket costs and expenses, including attorneys' fees and costs payable by the Credit Parties to Subordinated Parties pursuant to the terms of the Subordinated Debt Documents as in effect on the date of this Agreement or as modified in accordance with the terms of this Agreement.

 

"Subordinated Debt Default" shall mean a default in the payment of the Subordinated Debt or in the performance of any term, covenant or condition contained in the Subordinated Debt Documents or any other occurrence permitting Subordinated Parties (or any portion thereof) to accelerate the payment of, put or cause the redemption of, all or any portion of the Subordinated Debt or any Subordinated Debt Document.

 

"Subordinated Debt Default Notice" shall mean a written notice from one or more of the Subordinated Parties to Agent pursuant to which Agent is notified of the occurrence of a Subordinated Debt Default, which notice incorporates a reasonably detailed description of such Subordinated Debt 

 

  

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Default and states that such notice is a "Subordinated Debt Default Notice" for purposes of this Agreement.

 

"Subordinated Debt Documents" shall mean the Note Purchase Agreement, the Subordinated Note, any guaranty with respect to the Subordinated Debt, any security agreement or other collateral document securing the Subordinated Debt and all other documents, agreements and instruments now existing or hereinafter entered into evidencing or pertaining to all or any portion of the Subordinated Debt.

 

"Subordinated Parties" means, collectively, the Subordinated Creditors and Collateral Agent.

 

"WFCF Loan Documents" shall mean the Senior Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

2.              Subordination.

 

2.1.           Subordination of Subordinated Debt to Senior Debt. Each Credit Party covenants and agrees, and each Subordinated Party likewise covenants and agrees, notwithstanding anything to the contrary contained in any of the Subordinated Debt Documents, that the payment of any and all of the Subordinated Debt shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the Payment in Full of all Senior Debt. Each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.

 

2.2.           Liquidation, Dissolution, Bankruptcy. In the event of any Proceeding involving any Credit Party:

 

(a)            General Provisions.

 

(i)             Distributions. All Senior Debt shall first be Paid in Full before any Distribution from such Proceeding, whether in cash, securities or other property, shall be made to any Subordinated Party on account of Subordinated Debt. Any Distribution from such Proceeding, whether in cash, securities or other property, which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Debt shall be paid or delivered directly to Agent (to be held and/or applied by Agent in accordance with the terms of the Senior Debt Documents) until all Senior Debt is Paid in Full. Each Subordinated Party agrees to irrevocably authorize, empower and direct any debtor, debtor-in-possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to Agent for application to the Senior Debt until Payment in 

 

  

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Full of all Senior Debt. Each Subordinated Party also irrevocably authorizes and empowers Agent to demand, sue for, collect and receive any and all such Distributions.

 

(ii)            Proofs of Claim and Plans of Reorganization. Each Subordinated Party hereby irrevocably authorizes, empowers and appoints Agent its agent and attorney-in-fact to execute, verify, deliver and file proofs of claim in respect of the Subordinated Debt in any Proceeding upon the failure of any Subordinated Party to do so prior to fifteen (15) Business Days before the expiration of the time to file any such proof of claim; provided Agent shall have no obligation to execute, verify, and/or file any such proof of claim. Nothing in this Agreement shall restrict or impair the right of the Subordinated Parties to vote their respective claims in respect of the Subordinated Debt in any Proceeding; provided that, without the prior written consent of Agent, no Subordinated Party may vote in favor of a plan of reorganization in a Proceeding that contravenes the priority or subordination provisions of this Agreement.

 

(iii)           Avoidance, Etc. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Agent and Senior Lenders and the Subordinated Parties in respect of the Senior Debt and Subordinated Debt even if all or part of the Senior Debt or the Liens securing the Senior Debt are subordinated, set aside, avoided, invalidated or disallowed in connection with any such Proceeding, and this Agreement shall be reinstated (but without affecting any payment received by any Subordinated Party prior to such reinstatement) if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt or any representative of such holder.

 

(iv)           Effectiveness in a Proceeding. This Agreement, which the parties hereto expressly acknowledge is a "subordination agreement" under section 510(a) of the Bankruptcy Code, shall be effective before, during and after the commencement of any Proceeding. All references in this Agreement to any Credit Party shall include such Credit Party as a debtor-in-possession and any receiver or trustee for such Credit Party in any Proceeding.

 

(b)            Provisions Regarding Liens Securing the Subordinated Debt.

 

(i)             Filing of Motions; Voting. Except as specifically permitted in this Agreement and without limiting the rights of the Subordinated Parties to enforce this Agreement, until the Payment in Full of all the Senior Debt, each Subordinated Party agrees that it shall not, in or in connection with any Proceeding, file any adverse pleadings or motions, take any adverse position at any hearing or proceeding of any nature, or otherwise take any adverse action whatsoever, in each case in respect of the Collateral, including, without 

 

  

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limitation, with respect to the determination of Senior Debt or any Liens or claims held by Senior Secured Parties as security for the Senior Debt (including the validity, perfection, priority and enforceability thereof).

 

(ii)            Financing Matters. If any Credit Party becomes subject to any Proceeding, and if Agent desires to consent (or not object) to the sale, use or lease of cash or other collateral under the Bankruptcy Code or to provide financing to any Credit Party under the Bankruptcy Code or to consent (or not object) to the provision of such financing to any Credit Party by any third party ("DIP Financing"), then each Subordinated Party agrees, so long as the sum of the DIP Financing and the outstanding Senior Debt shall not exceed any of the applicable Senior Debt Limit, each Subordinated Party (A) will be deemed to have consented to, will raise no objection to, nor support any other Person objecting to, the sale, use or lease of such cash or other collateral or to such DIP Financing, (B) will not request or accept any form of adequate protection or any other relief in connection with the sale, use or lease of such cash or other collateral or such DIP Financing except as set forth in clause (iv) below, (C) will subordinate (and will be deemed hereunder to have subordinated) its Liens in the Collateral (x) to such DIP Financing on the same terms and conditions as the Subordinated Parties' other Liens are subordinated under this Agreement (and such subordination will not alter in any manner the terms of this Agreement), (y) to any adequate protection provided to Agent or any Senior Lender (subject to the other terms and provisions of this Agreement) and (z) to any "carve-out" for professional and United States Trustee fees agreed to by Agent, and (D) agrees that notice received five (5) Business Days prior to the entry of an order approving such usage of cash collateral or approving such financing shall be adequate notice. Each Subordinated Party agrees that such Subordinated Party will not, without the prior written consent of Agent, extend directly or indirectly all or any portion of any DIP Financing secured by Liens with priority over, or pari passu with, the Liens securing the Senior Debt.

 

(iii)           Relief From the Automatic Stay. Until the Payment in Full of the Senior Debt, each Subordinated Party agrees that it will not seek relief from, or modification of, the automatic stay or from any other stay in any Proceeding or take any action in derogation thereof, in each case in respect of the Subordinated Debt or any Collateral securing the Subordinated Debt, without the prior written consent of Agent, except and to the extent that Agent obtains relief from, or modification of, the automatic stay.

 

(iv)           Adequate Protection. Each Subordinated Party agrees that it shall not object to, contest, or support any other Person objecting to or contesting, (A) any request by Agent or any Senior Lender for adequate protection or (B) any objection by Agent or any Senior Lender to any motion, relief, action or proceeding based on a claim of a lack of adequate protection or 

 

  

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(C) the payment of interest, fees, expenses or other amounts to Agent or any Senior Lender under section 506(b) or 506(c) of the Bankruptcy Code or otherwise. Notwithstanding anything contained in this clause (b)(iv) and in clause (b)(ii) of this Section 2.2, in any Proceeding, (x) the Subordinated Parties may seek, support, accept and retain adequate protection solely in the form of (I) additional or replacement Liens on assets, subordinated to the Liens securing the Senior Debt and any DIP Financing provided in accordance with clause (ii) above on the same basis as the other Liens securing the Subordinated Debt are so subordinated to the Liens securing the Senior Debt under this Agreement and (II) superpriority claims junior in all respects to the superpriority claims granted to Agent, and (y) in the event the Subordinated Parties receive adequate protection, including in the form of additional or replacement collateral, then the Subordinated Parties agree that Agent shall have a senior Lien and claim on such adequate protection as security for the Senior Debt and that any Lien on any additional or replacement collateral securing the Subordinated Debt shall be subordinated to such Liens on such collateral securing the Senior Debt and any DIP Financing and any other Liens granted to Agent as adequate protection in respect of Senior Debt, with such subordination to be on the same terms, and to the extent, that the other Liens securing the Subordinated Debt are subordinated to the Liens securing the Senior Debt under this Agreement.

 

(v)            Section 363 Asset Dispositions. No Subordinated Party shall in a Proceeding oppose or object to any sale (or related sale procedures) or disposition of any assets conducted under Section 363 of the Bankruptcy Code of any Credit Party that is supported by Agent, and each Subordinated Party will be deemed to have consented under Section 363 of the Bankruptcy Code to any such sale or disposition consented to by Agent and to have released its Liens in such assets (but not the proceeds thereof) so long as Agent has done the same; provided that, the Collateral Agent retains the right to object to any use of proceeds thereof (other than proceeds that are used upon receipt thereof to permanently reduce the Senior Debt and thereby permanently reduce the applicable Senior Debt Limit). All proceeds of such sales and dispositions received by Agent shall be applied to permanently reduce the Senior Debt. Agent shall not object to any "credit bid" made by the Collateral Agent in respect of such sale or disposition so long as such bid is otherwise sufficient for the Senior Debt to be Paid in Full.

 

(vi)           Grants of Security and Separate Classification. Agent and each Subordinated Party acknowledges and agrees that (i) the grants of Liens pursuant to the Senior Debt Documents and Subordinated Debt Documents constitute two separate and distinct grants of Liens, and (ii) among other things, because the Subordinated Debt is subordinated to the Senior Debt (to the extent provided by this Agreement), and because of their differing rights in the Collateral, the Subordinated Debt is fundamentally different from the 

 

  

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Senior Debt and must be separately classified in any plan of reorganization proposed or adopted in a Proceeding. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of Agent and Senior Lenders and Subordinated Parties in respect of the Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then each Subordinated Party hereby acknowledges and agrees that all Distributions shall be made as if there were separate classes of senior and junior secured claims against the Credit Parties in respect of the Collateral (with the effect being that, to the extent that the aggregate Distributions are sufficient (for this purpose ignoring all claims held by the Subordinated Parties)), Agent shall be entitled to receive, in addition to amounts distributed to Agent in respect of Senior Debt constituting principal, pre-petition interest and other claims, all amounts owing in respect of and unpaid interest accruing thereon (including, without limitation, interest accruing after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim) on account of Senior Debt before any Distribution with respect to such Proceeding is made in respect of the claims held by the Subordinated Parties, with each Subordinated Party hereby acknowledging and agreeing to turn over to Agent amounts otherwise received or receivable by such Subordinated Party to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the claim or recovery of the Subordinated Parties.

 

(vii)          No Waivers of Rights of Agent. Nothing contained in this Section 2.2(b) shall prohibit or in any way limit Agent from objecting in any Proceeding or otherwise to any action taken by any Subordinated Party, including the seeking by any Subordinated Party of adequate protection or the asserting by any Subordinated Party of any of its rights and remedies under the Subordinated Debt Documents or otherwise, except with respect to such actions taken by the Subordinated Parties that are expressly permitted in this Agreement.

 

(viii)         Limitation of Waivers re Subordinated Parties' Rights as Unsecured Creditors. Notwithstanding any provisions in this Agreement to the contrary, the Subordinated Parties do not waive any rights to take any action or assert any position (whether or not such position would be adverse to Agent) with respect to the matters described in Section 2.2(b)(i), Section 2.2(b)(ii) or Section 2.2(b)(v) to the extent any holder of an unsecured claim would have the right to do so.

 

2.3.           Subordinated Debt Payment Restrictions.

 

(a)            Notwithstanding the terms of the Subordinated Debt Documents, each Credit Party hereby agrees that it may not make, and each Subordinated 

 

  

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Party hereby agrees that it will not accept, any Distribution with respect to the Subordinated Debt until the Senior Debt is Paid in Full, other than, subject to the terms of Section 2.2, Permitted Subordinated Debt Payments; provided, however, that each Credit Party and each Subordinated Party further agree that no Permitted Subordinated Debt Payment may be made by any Credit Party or accepted by any Subordinated Party if, either at the time of such payment or after giving effect thereto:

 

(i)             a Senior Payment Default exists and such Senior Payment Default shall not have been cured or waived; or

 

(ii)            subject to paragraph (d) of this Section 2.3, (A) the Company and Collateral Agent shall have received a Senior Default Notice from Agent stating that a Senior Covenant Default exists or would be created by the making of such payment, (B) each such Senior Covenant Default shall not have been cured or waived and (C) 180 days shall not have elapsed since the date such Senior Default Notice was received.

 

(b)            The Credit Parties may resume Permitted Subordinated Debt Payments (and may make any Permitted Subordinated Debt Payments missed due to the application of paragraph (a) of this Section 2.3) in respect of the Subordinated Debt or any judgment with respect thereto:

 

(i)             in the case of a Senior Payment Default referred to in clause (i) of paragraph (a) this Section 2.3, upon a cure or waiver thereof; or

 

(ii)            in the case of a Senior Covenant Default referred to in clause (ii) of paragraph (a) of this Section 2.3, upon the earlier to occur of (A) the cure or waiver of all such Senior Covenant Defaults for which a Senior Default Notice was provided by Agent to the Company and Collateral Agent or (B) the expiration of such period of 180 days.

 

(c)            No Senior Default shall be deemed to have been waived for purposes of this Section 2.3 unless and until the Credit Parties shall have received a written waiver from Agent.

 

(d)            Notwithstanding any provision of this Section 2.3 to the contrary:

 

(i)             the Credit Parties shall not be prohibited from making, and Subordinated Parties shall not be prohibited from receiving, Permitted Subordinated Debt Payments under clause (ii) of paragraph (a) of this Section 2.3 for more than an aggregate of 180 days within any period of 360 consecutive days;

  

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(ii)            no Senior Covenant Default existing on the date any Senior Default Notice is given pursuant to clause (ii) of paragraph (a) of this Section 2.3 shall, unless the same shall have ceased to exist for a period of at least 30 consecutive days, be used as a basis for any subsequent such notice (for purposes of this Section 2.3, breaches of the same financial covenant for different (including, without limitation, consecutive) periods shall constitute separate and distinct Senior Covenant Defaults); and

 

(iii)           the failure of any Credit Party to make any Distribution with respect to the Subordinated Debt by reason of the operation of this Section 2.3 shall not be construed as preventing the occurrence of a Subordinated Debt Default under the applicable Subordinated Debt Documents.

 

2.4.           Subordinated Debt Standstill Provisions.

 

(a)            Until the Senior Debt is Paid in Full, no Subordinated Party shall, without the prior written consent of Agent, take any Enforcement Action with respect to the Subordinated Debt or under any of the Subordinated Debt Documents; provided, that upon the earliest to occur of (i) acceleration of the Senior Debt, (ii) the commencement of a Proceeding involving a Credit Party, in which case the provisions of Section 2.2 shall apply, and (iii) the passage of 180 days from the delivery of a Subordinated Debt Default Notice to Agent if any Subordinated Debt Default described therein shall not have been cured or waived within such period, and in any event no earlier than 10 days after Agent's receipt of written notice of a Subordinated Party's intention to take any such action, such Subordinated Party may (A) sue for payment of the whole or any part of the Subordinated Debt, (B) accelerate the Subordinated Debt, or (C) exercise any other unsecured creditor remedy not otherwise prohibited by this Agreement (provided, that in no event may a Subordinated Party commence or join with other Persons to commence a Proceeding or exercise any rights or remedies with respect to the Collateral). Notwithstanding the foregoing but subject to the provisions of Section 2.2(a)(ii), Subordinated Parties may file proofs of claim against any Credit Party in any Proceeding involving such Credit Party. Any Distributions or other proceeds of any Enforcement Action obtained by any Subordinated Party shall in any event be held in trust by it for the benefit of Agent and Senior Lenders and promptly paid or delivered to Agent for the benefit of Senior Lenders in the form received until the Senior Debt is Paid in Full.

 

(b)            Notwithstanding anything contained herein to the contrary, if following the acceleration of the Senior Debt by Senior Lenders such acceleration is rescinded (whether or not any existing Senior Default has been cured or waived), then all Enforcement Actions taken by Subordinated Parties 

 

  

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shall likewise be rescinded if such Enforcement Action is based solely on clause (i) of paragraph (a) of this Section 2.4.

 

2.5.           Incorrect Payments. If any Distribution on account of the Subordinated Debt not permitted to be made by any Credit Party or accepted by any Subordinated Party under this Agreement is made and received by any Subordinated Party, such Distribution shall not be commingled with any of the assets of any Subordinated Party, shall be held in trust by such Subordinated Party for the benefit of Senior Secured Parties and shall be promptly paid over to Agent, with any necessary endorsement, for application (in accordance with the Senior Debt Documents) to the payment of the Senior Debt then remaining unpaid, until all of the Senior Debt is Paid in Full. Conversely, if any Distribution on account of the Senior Debt is made by any Credit Party or received by Agent or any Senior Lender after such time as the Senior Debt is Paid in Full, such Distribution shall not be commingled with any of the assets of Agent or any Senior Lender, shall be held in trust by Agent for the benefit of the Company and shall be promptly paid over to the Company, with any necessary endorsement.

 

2.6.           Subordination of Liens and Security Interests; Agreement Not to Contest; Agreement to Release Liens.

 

(a)            Until the Senior Debt has been Paid in Full, any Liens of any Subordinated Party in any Collateral shall be and hereby are subordinated for all purposes and in all respects to the Liens of Agent and Senior Lenders in such Collateral, regardless of the time, manner or order of perfection of any such Liens.

 

(b)            Each Subordinated Party agrees that it will not at any time, including without limitation in connection with any Proceeding, contest the validity, perfection, priority or enforceability of the Senior Debt, the Senior Debt Documents, or the Liens of Agent and Senior Lenders in the Collateral securing the Senior Debt. Conversely, Agent agrees that it will not at any time, including without limitation, in connection with any Proceeding, contest the validity, perfection, priority or enforceability of the Subordinated Debt, the Subordinated Debt Documents, or the Liens of the Subordinated Parties in the Collateral securing the Subordinated Debt.

 

(c)            In the event that the Company desires to sell, lease, license or otherwise dispose of any interest in any of the Collateral (including the equity interests of a Credit Party), Agent consents to such Disposition and the proceeds of such Disposition are applied in accordance with Section 2.8 hereof, each Subordinated Party shall be deemed to have consented to such Disposition and such Disposition shall be free and clear of any Liens of the Subordinated Parties in such Collateral (and if such Disposition involves the equity interests of a Credit Party, each Subordinated Party shall release such Credit Party from any guaranty or other obligation owing to such Subordinated 

 

  

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Party) and any purchaser of any Collateral may rely on this Agreement as evidence of each Subordinated Party's consent to such Disposition and that such Disposition is free and clear of any Liens of such Subordinated Party in such Collateral (and if such Disposition involves the equity interests of a Credit Party, that such Credit Party is released from any guaranty or other obligation owing to such Subordinated Party). Each Subordinated Party shall (or shall cause its agent) to promptly execute and deliver to Agent such termination statements and releases as Agent shall request to effect the release of the Liens of such Subordinated Party in such Collateral in accordance with this Section 2.6. In furtherance of the foregoing, each Subordinated Party hereby irrevocably appoints Agent its attorney-in-fact, with full authority in the place and stead of such Subordinated Party and in the name of such Subordinated Party or otherwise, to execute and deliver any document or instrument which such Subordinated Party may be required to deliver pursuant to this Section 2.6.

 

(d)            Proceeds of the Collateral include insurance proceeds, and therefore, anything contained in the Subordinated Debt Documents to the contrary notwithstanding, the priorities set forth in this Agreement govern the ultimate disposition of casualty insurance proceeds. Until the Senior Debt has been Paid in Full, Agent shall have the sole and exclusive right, as against the Subordinated Parties, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of such Collateral. All proceeds of such insurance shall inure to Agent and the Senior Lenders, to the extent of the Senior Debt, and each Subordinated Party shall cooperate (if necessary) in a reasonable manner in effecting the payment of insurance proceeds to the holders of Senior Debt (or any representative thereof). In the event the requisite holders of Senior Debt (or any representative thereof), in their or its sole discretion or pursuant to agreement with any Credit Party, permits such Credit Party to utilize the proceeds of insurance to replace Collateral, the consent of the holders of Senior Debt (or any representative thereof) shall be deemed to include the consent of each Subordinated Party.

 

2.7.           Sale, Transfer or other Disposition of Subordinated Debt.

 

(a)            No Subordinated Party shall sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Debt or any Subordinated Debt Document: (i) without giving prior written notice of such action to Agent, and (ii) unless, prior to the consummation of any such action, the transferee thereof shall execute and deliver to Agent an agreement joining such transferee as a party to this Agreement as a Subordinated Party or an agreement substantially identical to this Agreement, providing for the continued subordination of the Subordinated Debt to the Senior Debt as provided herein and for the continued effectiveness of all of the rights of Agent and Senior Lenders arising under this Agreement.

  

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(b)            Notwithstanding the failure of any transferee to execute or deliver an agreement substantially identical to this Agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Subordinated Debt, and the terms of this Agreement shall be binding upon the successors and assigns of each Subordinated Party, as provided in Section 11 hereof.

 

2.8.           Application of Proceeds from Sale or other Disposition of the Collateral. In the event of any sale, transfer or other disposition (including a casualty loss or taking through eminent domain or expropriation) of any Collateral, the proceeds resulting therefrom (including insurance proceeds) shall be applied in accordance with the terms of the Senior Debt Documents or as otherwise consented to by Agent and Senior Lenders until such time as the Senior Debt in Paid in Full.

 

2.9.           Legends. Until the termination of this Agreement in accordance with Section 17 hereof, each Subordinated Party will cause to be clearly, conspicuously and prominently inserted on the face of the Subordinated Note, and any other Subordinated Debt Document, as well as any renewals or replacements thereof, the following legend:

 

"This [agreement/instrument] and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain Subordination and Intercreditor Agreement (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof, the "Subordination Agreement") dated as of March 31, 2011 among Patrick Industries, Inc., an Indiana corporation (the "Company"), Tontine Capital Overseas Master Fund II, L.P., a Cayman Islands limited partnership, Northcreek Mezzanine Fund I, L.P., a Delaware limited partnership, on its behalf and as collateral agent, and Wells Fargo Capital Finance, LLC ("Agent"), to the indebtedness (including interest) owed by the Credit Parties pursuant to that certain Credit Agreement dated as of March 31, 2011 among the Company, Agent and the lenders from time to time party thereto, and the other Senior Debt Documents (as defined in the Subordination Agreement), as such Credit Agreement, and such other Senior Debt Documents have been and hereafter may be amended, restated, supplemented or otherwise modified from time to time and to indebtedness refinancing the indebtedness under such agreements as permitted by the Subordination Agreement; and each holder of this [agreement/instrument], by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement."

 

2.10.         Obligations Hereunder Not Affected. All rights and interest of Senior Secured Parties hereunder, and all agreements and obligations of the Subordinated Parties and Credit Parties hereunder, shall remain in full force and effect irrespective of:

 

(a)            any lack of validity or enforceability of any document evidencing any of the Senior Debt;

  

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(b)            any change in the time, manner or place of payment of, or any other term of, all or any of the Senior Debt, or any other permitted amendment or waiver of or any release or consent to departure from any of the Senior Debt Documents;

 

(c)            any exchange, release or non-perfection of any collateral for all or any of the Senior Debt;

 

(d)            any failure of any Senior Secured Party to assert any claim or to enforce any right or remedy against any other party hereto under the provisions of this Agreement or any Senior Debt Document other than this Agreement;

 

(e)            any reduction, limitation, impairment or termination of the Senior Debt for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Credit Parties and Subordinated Parties hereby waive any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of invalidity, illegality, nongenuiness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Senior Debt; and

 

(f)             any other circumstance which might otherwise constitute a defense available to, or a discharge of, Credit Parties in respect of the Senior Debt or the Subordinated Parties in respect of this Agreement.

 

Each Subordinated Party acknowledges and agrees that the Senior Secured Parties may, in accordance with the terms of the Senior Debt Documents, without notice or demand and without affecting or impairing any Subordinated Party's obligations hereunder, (i) modify the Senior Debt Documents to the extent permitted pursuant to Section 3.1; (ii) take or hold security for the payment of the Senior Debt and exchange, enforce, foreclose upon, waive and release any such security; (iii) apply such security and direct the order or manner of sale thereof as Agent and Senior Lenders in their sole discretion, may determine; (iv) release and substitute one or more endorsers, warrantors, borrowers or other obligors; and (v) exercise or refrain from exercising any rights against any Credit Party or any other Person. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Senior Secured Parties and the Subordinated Parties even if all or part of the Senior Debt or the security interests securing the Senior Debt are subordinated, set aside, avoided, invalidated or disallowed. For the avoidance of doubt, except as provided in Section 2.6(c), nothing in this Section 2.10 shall prevent the Subordinated Parties from taking possession or control of any Collateral waived or released by the Senior Secured Parties in order for the Subordinated Parties to perfect their continuing security interest in such Collateral.

 

2.11.         Notices to Collateral Agent. Promptly upon (or as soon as practicable following) (i) Payment in Full of the Senior Debt, (ii) commencement by Agent of any Enforcement Action with respect to any Collateral (including by way of a public or private sale of Collateral), (iii) the modification of any of the Senior Debt Documents, or (iv) the 

 

  

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transfer or assignment of any of the Senior Debt, Agent shall use commercially reasonable efforts to deliver written notice of such payment or action to the Collateral Agent; provided, however, that, the failure to give any such notice shall not result in any liability of Agent or any Senior Lender or in any modification, alteration, impairment or waiver of the rights of any party hereunder.

 

3.              Modifications.

 

3.1.           Modifications to Senior Debt Documents. Senior Lenders may at any time and from time to time without the consent of or notice to any Subordinated Party, without incurring liability to any Subordinated Party and without impairing or releasing the obligations of any Subordinated Party under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Debt, or amend or otherwise modify in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Senior Debt; provided that Senior Lenders shall not (a) increase the Senior Debt to an amount in excess of the Senior Debt Limit, (b) increase the margins applicable to the interest rates with respect to the Senior Debt by more than 200 basis points, except in connection with (i) the imposition of a default rate of interest in accordance with the terms of the Senior Debt Documents or (ii) the imposition of market interest rates in respect of any Permitted Refinancing of the Senior Debt, (c) extend the final maturity of the Senior Debt (as set forth in the WFCF Loan Documents in effect on the date hereof) by more than two years, other than in connection with a Permitted Refinancing or (d) shorten the amortization of any portion of the Senior Debt (as set forth in the WFCF Loan Documents in effect on the date hereof).

 

3.2.           Modifications to Subordinated Debt Documents. Until the Senior Debt has been Paid in Full, and notwithstanding anything to the contrary contained in the Subordinated Debt Documents, no Subordinated Party shall, without the prior written consent of Agent, (i) agree to any amendment, modification or supplement to the Subordinated Debt Documents the effect of which is to (a) increase the maximum principal amount of the Subordinated Debt or rate of interest on any of the Subordinated Debt (provided that, for the avoidance of doubt, the payment by the Company of non-cash in-kind interest, the increase in the interest rate on the second anniversary of the date hereof and the imposition of a default rate of interest, all in accordance with the terms of the Subordinated Debt Documents as in effect on the date hereof, shall not constitute an amendment, modification or supplement to the Subordinated Debt Documents), (b) change the dates upon which payments of principal or interest on the Subordinated Debt are due or terms upon which interest is required to be paid, (c) change or add any event of default or any covenant with respect to the Subordinated Debt, (d) change any redemption or prepayment provisions of the Subordinated Debt, (e) alter the subordination provisions with respect to the Subordinated Debt, including, without limitation, subordinating the Subordinated Debt to any other indebtedness, or (f) change or amend any other term of the Subordinated Debt Documents if such change or amendment would result in a Senior Default, increase the obligations of any Credit Party or confer additional material rights on any Subordinated Party or any other holder of the Subordinated Debt in a manner adverse to any Credit Party or 

 

  

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Senior Lenders, or (ii) take any Liens in any assets of any Credit Party other than such Liens provided for in the Subordinated Debt Documents as in existence on the date hereof unless the same shall have been granted to the Senior Secured Parties.

 

4.              Waiver of Certain Rights by Subordinated Parties.

 

4.1.           Acceptance. Except as specifically set forth in this Agreement, each Subordinated Party hereby waives notice of the acceptance by Agent and Senior Lenders of the subordination and other provisions of this Agreement, all other notices not expressly required pursuant to the terms of this Agreement and all waivable notices under the Uniform Commercial Code in connection with foreclosure on or sale of all or any portion of the Collateral by Agent and Senior Lenders, and each Subordinated Party expressly consents to reliance by Agent and Senior Lenders upon the subordination and other agreements as herein provided. Except as specifically set forth in this Agreement, Agent hereby waives notice of the acceptance by the Subordinated Parties of the subordination and other provisions of this Agreement, and Agent expressly consents to reliance by the Subordinated Parties upon the subordination and other agreements as herein provided.

 

4.2.           Marshaling. Each Subordinated Party hereby waives any rights it may have under applicable law to assert the doctrine of marshaling or to otherwise require Agent or any Senior Lender to marshal any property of any Credit Party for the benefit of such Subordinated Party.

 

4.3.           Rights Relating to Agent's Actions with respect to the Collateral. Except as expressly provided otherwise in this Agreement, each Subordinated Party hereby waives, to the extent permitted by applicable law, any rights which it may have (i) to enjoin or otherwise obtain a judicial or administrative order preventing Agent or any Senior Lender from taking, or refraining from taking, any action with respect to all or any part of the Collateral and (ii) to affect the method or challenge the appropriateness of any such action by Agent or such Senior Lender. Except as expressly provided otherwise in this Agreement, without limitation of the foregoing, each Subordinated Party hereby agrees (a) that it has no right to direct or object to the manner in which Agent or any Senior Lender applies the proceeds of the Collateral resulting from the exercise by Agent and Senior Lenders of rights and remedies under the Senior Debt Documents to the Senior Debt and (b) that Agent has not assumed any obligation to act as the agent for such Subordinated Party with respect to the Collateral except as provided in Section 7. Except as expressly provided otherwise in this Agreement, each Subordinated Party hereby (i) waives any and all rights of redemption with respect to the Collateral and (ii) agrees that the Agent and Senior Lenders may deal with the Collateral as if such Subordinated Party held no Lien on any Collateral in respect of the Subordinated Debt. Notwithstanding any provisions in this Section 4.3 to the contrary, no Subordinated Party waives any rights to take any action or assert any position (whether or not such position would be adverse to Agent and Senior Lenders) with respect to the matters described in this Section 4.3 to the extent any holder of an unsecured claim would have the right to do so.

  

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5.              Representations and Warranties.

 

5.1.           Representations and Warranties of Tontine. Tontine hereby represents and warrants to Agent and Senior Lenders that as of the date hereof: (a) Tontine is a limited partnership duly formed and validly existing under the laws of the Cayman Islands; (b) Tontine has the power and authority to enter into, execute, deliver and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (c) the execution of this Agreement by Tontine will not violate or conflict with the organizational documents of Tontine, any material agreement binding upon Tontine or any law, regulation or order or require any consent or approval which has not been obtained; (d) this Agreement is the legal, valid and binding obligation of Tontine, enforceable against Tontine in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles; and (e) Tontine is the sole owner of record, and, collectively with its general and limited partners, the sole owners beneficially, of a Subordinated Note in the original principal amount of $2,500,000.

 

5.2.           Representations and Warranties of Northcreek. Northcreek hereby represents and warrants to Agent and Senior Lenders that as of the date hereof: (a) Northcreek is a limited partnership duly formed and validly existing under the laws of the State of Delaware; (b) Northcreek has the power and authority to enter into, execute, deliver and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (c) the execution of this Agreement by Northcreek will not violate or conflict with the organizational documents of Northcreek, any material agreement binding upon Northcreek or any law, regulation or order or require any consent or approval which has not been obtained; (d) this Agreement is the legal, valid and binding obligation of Northcreek, enforceable against Northcreek in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles; and (e) Northcreek is the sole owner of record, and, collectively with its general and limited partners, the sole owners beneficially, of a Subordinated Note in the original principal amount of $2,500,000.

 

5.3.           Representations and Warranties of Agent. Agent hereby represents and warrants to each Subordinated Party that as of the date hereof: (a) Agent is a limited liability company duly formed and validly existing under the laws of the State of Delaware; (b) Agent has the power and authority to enter into, execute, deliver and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (c) the execution of this Agreement by Agent will not violate or conflict with the organizational documents of Agent, any material agreement binding upon Agent or any law, regulation or order or require any consent or approval which has not been obtained; and (d) this Agreement is the legal, valid and binding obligation of Agent, enforceable against Agent in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally or by equitable principles.

  

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6.             Subrogation; Recovery. Subject to the Payment in Full of the Senior Debt, each Subordinated Party shall be subrogated to the rights of Agent and Senior Lenders to receive Distributions until the Senior Debt is Paid in Full. If Agent or any Senior Lender is required to disgorge any proceeds of Collateral, payment or other amount received by such Person (whether because such proceeds, payment or other amount is invalidated, declared to be fraudulent or preferential or otherwise) or turn over or otherwise pay any amount (a "Recovery") to the estate or to any creditor or representative of the Company or any other Person, then the Senior Debt shall be reinstated (to the extent of such Recovery) as if such Senior Debt had never been paid and to the extent any Subordinated Party has received proceeds, payments or other amounts to such Subordinated Party would not have been entitled under this Agreement had such reinstatement occurred prior to receipt of such proceeds, payments or other amounts, such Subordinated Party shall turn over such proceeds, payments or other amounts to Agent for reapplication to the Senior Debt. A Distribution made pursuant to this Agreement to Agent or Senior Lenders which otherwise would have been made to any Subordinated Party is not, as between the Credit Parties and the Subordinated Parties, a payment by the Credit Parties to or on account of the Senior Debt.

 

7.             Possessory Collateral; Third Party Collateral Documents. Agent hereby acknowledges that, to the extent that it holds, or a third party holds on its behalf, physical possession of or "control" (as defined in the Uniform Commercial Code) over any of the Collateral pursuant to the Senior Debt Documents, such possession or control is also for the benefit of the Subordinated Parties solely to the extent required to perfect its Lien in such Collateral. Nothing in the preceding sentence shall be construed to impose any duty to the Subordinated Parties on Agent (or any third party acting on Agent's behalf) with respect to such Collateral or provide the Subordinated Parties with any rights with respect to such Collateral beyond those specified in this Agreement and the Subordinated Debt Documents, provided that upon the written request of the Collateral Agent, subsequent to the Payment in Full of all Senior Debt, Agent shall (i) deliver to the Collateral Agent, at the Credit Parties' sole cost and expense, all of the Collateral in the possession or control of Agent together with any necessary endorsements to the extent required by the Subordinated Debt Documents, except as a court of competent jurisdiction otherwise directs, and (ii) transfer to the Collateral Agent, at the Credit Parties' sole cost and expense, all of the rights and interests of Agent under any and all deposit account and securities account control agreements, landlord's agreements, warehouseman's agreements, collateral access agreements and/or any other third party collateral document with respect to the Senior Debt, and in each case take, at the Credit Parties' sole cost and expense, all steps reasonably requested with respect thereto by Collateral Agent. The provisions of this Section 7 shall not impose on Agent any obligations in respect of the disposition of any Collateral (or any proceeds thereof) that would conflict with any prior perfected Liens or any claims thereon in favor of any other Person.

 

8.             Modification. Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and each Subordinated Party, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any 

 

  

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party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

 

9.             Further Assurances. Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

 

10.            Notices. Unless otherwise specifically provided herein, any notice delivered under this Agreement shall be in writing addressed to the respective party as set forth below and may be personally served, sent by facsimile transmission or sent by overnight courier service or certified or registered United States mail and shall be deemed to have been given (a) if delivered in person, when delivered; (b) if delivered by facsimile transmission, on the date of transmission if transmitted on a business day before 4:00 p.m. (Chicago time) or, if not, on the next succeeding business day; (c) if delivered by overnight courier, one business day after delivery to such courier properly addressed; or (d) if by United States mail, four business days after deposit in the United States mail, postage prepaid and properly addressed.

 

Notices shall be addressed as follows:

 

If to Tontine:

 

Tontine Capital Overseas Master Fund II, L.P.

55 Railroad Avenue

Greenwich, Connecticut 06830

Attention: Mr. Jeffrey L. Gendell

Facsimile: (203) 769-2010

 

With a copy to:

 

Barack Ferrazzano Kirschbaum & Nagelberg LLP

200 West Madison Street, 39th Floor

Chicago, Illinois 60606

Attention: Sarah M. Bernstein, Esq.

Facsimile: (312) 984-3150

  

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If to Northcreek or Collateral Agent:

 

Northcreek Mezzanine Fund I, L.P.

255 East Fifth Street, Suite 3010

Cincinnati, Ohio 45202

Attention: Barry A. Peterson

Facsimile: (513) 985-6603

 

With a copy to:

 

McGuireWoods LLP

77 West Wacker Drive, Suite 4100

Chicago, Illinois 60601-1818

Attention: Mark A. Kromkowski, Esq.

Facsimile: (312) 698-4548

 

If to any Credit Party:

 

Patrick Industries, Inc.

107 West Franklin Street

Elkhart, Indiana 46515

Attention: Andy L. Nemeth

Facsimile: (574) 522-5213

 

With a copy to:

 

McDermott Will & Emery

227 West Monroe Street

Chicago, Illinois 60606

Attention: John Hammond, Esq.

Facsimile: (312) 984-7700

  

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If to Agent or Senior Lenders:

 

Wells Fargo Capital Finance, LLC

150 South Wacker Drive, Suite 2200

MAC N2814-220

Chicago, Illinois 60606-4204

Attention: Laura Dixon

Facsimile: (312) 332-0424

 

With a copy to:

 

Goldberg Kohn Ltd.

55 East Monroe Street, Suite 3300

Chicago, Illinois 60603

Attention: David L. Dranoff, Esq.

Facsimile: (312) 332-2196

 

or in any case, to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this Section 10. Notwithstanding anything to the contrary contained in this Agreement, for so long as only Tontine and Northcreek (or any of their Affiliates (as defined in the Senior Credit Agreement)) hold the Subordinated Debt, written notices that may or are required to be sent to Collateral Agent under this Agreement shall instead be sent to both Tontine and Northcreek.

 

11.            Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of Agent, Senior Lenders, the Subordinated Parties and the Credit Parties. To the extent permitted under the Senior Debt Documents, Senior Lenders may, from time to time, without notice to any Subordinated Party, assign or transfer any or all of the Senior Debt or any interest therein to any Person and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Debt shall, subject to the terms hereof, be and remain Senior Debt for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Debt or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Debt, be entitled to rely upon and be the third party beneficiary of the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto.

 

12.            Relative Rights. This Agreement shall define the relative rights of Agent, Senior Lenders and Subordinated Parties. Nothing in this Agreement shall (a) impair, as among the Credit Parties, Agent and Senior Lenders and as between the Credit Parties and the Subordinated Parties, the obligation of the Credit Parties with respect to the payment of the Senior Debt and the Subordinated Debt in accordance with their respective terms or 

 

  

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(b) affect the relative rights of Agent, Senior Lenders or Subordinated Parties with respect to any other creditors of the Credit Parties. The terms of this Agreement shall govern even if all or any part of the Senior Debt or the Liens in favor of Agent or Senior Lenders are avoided, disallowed, unperfected, set aside or otherwise invalidated in any judicial proceeding or otherwise.

 

13.            Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the Subordinated Debt Documents, the provisions of this Agreement shall control and govern.

 

14.            Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

 

15.            Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

16.            Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

 

17.            Continuation of Subordination; Termination of Agreement. This Agreement shall remain in full force and effect until Payment in Full of the Senior Debt, after which this Agreement shall terminate without further action on the part of the parties hereto.

 

18.            GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. EACH SUBORDINATED PARTY AND THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. EACH SUBORDINATED PARTY AND THE COMPANY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH SUBORDINATED PARTY AND THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO EACH SUBORDINATED PARTY AND THE COMPANY AT 

 

  

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THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

19.            WAIVER OF JURY TRIAL. EACH SUBORDINATED PARTY, THE COMPANY AND AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE SUBORDINATED DEBT DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH SUBORDINATED PARTY, THE COMPANY AND AGENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE SUBORDINATED DEBT DOCUMENTS AND THE SENIOR DEBT DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH SUBORDINATED PARTY, THE COMPANY AND AGENT WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

  

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IN WITNESS WHEREOF, Collateral Agent, the Subordinated Creditors, the Company and Agent have caused this Agreement to be executed as of the date first above written.

 

	  	
SUBORDINATED PARTIES:

	  	  	  
	  	
TONTINE:

	  	  	  
	  	
TONTINE CAPITAL OVERSEAS MASTER FUND II, L.P.,

	  	
a Cayman Islands limited partnership

	  	  	  
	  	
By: Tontine Asset Associates, L.L.C., a Delaware limited liability company, its general partner

	  	  	  
	  	
By:

	
/s/ Jeffrey L. Gendell

	  	
Name: Jeffrey L. Gendell, Managing Member

	  	  	  
	  	
NORTHCREEK:

	  	  	  
	  	
NORTHCREEK MEZZANINE FUND I, L.P.,

	  	
a Delaware limited partnership

	  	  	  
	  	
By: NMF GP, LLC, a Delaware limited liability company, its general partner

	  	  	  
	  	
By: Northcreek Management, Inc., a Delaware corporation, its manager

	  	  	  
	  	
By:

	
/s/ Barry Peterson

	  	
Name: Barry Peterson, Vice President

	  	  	  
	  	
COLLATERAL AGENT:

	  	  	  
	  	
NORTHCREEK MEZZANINE FUND I, L.P.,

	  	
a Delaware limited partnership

	  	  	  
	  	
By: NMF GP, LLC, a Delaware limited liability company, its general partner

	  	  	  
	  	
By: Northcreek Management, Inc., a Delaware corporation, its manager

	  	  	  
	  	
By:

	
/s/ Barry Peterson

	  	
Name: Barry Peterson, Vice President

 

Subordination and Intercreditor Agreement

  

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COMPANY:

	  	  	  
	  	
PATRICK INDUSTRIES, INC.,

	  	
an Indiana corporation

	  	  	  
	  	
By:

	
/s/ Andy L. Nemeth

	  	
Its:

	
Chief Financial Officer

	  	  	  
	  	
AGENT:

	  	  	  
	  	
WELLS FARGO CAPITAL FINANCE, LLC,

	  	
a Delaware limited liability company, as Agent

	  	  	  
	  	
By:

	
/s/ Ernest May

	  	
Its:

	
Director

 

 

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