AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

Exhibit 4.5

THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT is subject to the terms and provisions of the Intercreditor Agreement, dated as of July 2, 2009 (as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”), among JPMorgan Chase Bank, N.A., as collateral agent for the ABL Secured Parties referred to therein, U.S. Bank National Association, as collateral agent for the Term Debt Secured Parties referred to therein, Smithfield Foods, Inc. and the other Grantors (as defined below).

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time to time, this “ Security Agreement ”) is entered into as of July 2, 2009 by and between Smithfield Foods, Inc., a Virginia corporation (the “ Company ”), and the other Persons listed on the signature pages hereof (each, including the Company, a “ Grantor ”, and collectively, the “ Grantors ”), and JPMorgan Chase Bank, N.A., in its capacity as administrative agent (the “ Administrative Agent ”) for the Secured Parties and amends and restates in full the Security Agreement, dated as of August 19, 2005, among the Company, the subsidiary grantors from time to time party thereto and JPMorgan Chase Bank, N.A., as collateral agent for the Secured Parties, as defined therein.

PRELIMINARY STATEMENT

The Company, the Administrative Agent, certain of the Lenders and others are party to the Revolving Credit Agreement, dated as of August 19, 2005 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “ Existing Credit Agreement ”). Each Grantor is entering into this Security Agreement in order to induce the Lenders to enter into an Amended and Restated Credit Agreement, among the Company, the other Grantors, the Administrative Agent, the Lenders and the others party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) and extend credit to the Company under the Credit Agreement and to secure the Secured Obligations (including with respect to any guarantee pursuant to Article X of the Credit Agreement).

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

ARTICLE I

DEFINITIONS

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

1.2. Terms Defined in UCC . Terms defined in the UCC which are not otherwise defined in this Security Agreement are used herein as defined in the UCC.

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

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

“ Additional Grantor ” has the meaning set forth in Section 8.16.

“ Aircraft Collateral ” means that certain Galaxy G200 with FAA registration number N321SF, and that certain Astra with FAA registration number N383SF.

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

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

“ Collateral ” has the meaning set forth in Article II.

“ Collateral Deposit Account ” has the meaning set forth in Section 7.1(a).

“ Collateral Report ” means any certificate (including any Borrowing Base Certificate), report or other document delivered by any Grantor to the Administrative Agent or any Lender with respect to the Collateral pursuant to any Loan Document.

“ Collection Account ” has the meaning set forth in Section 7.1(b).

“ Commercial Tort Claims ” shall have the meaning set forth in Article 9 of the UCC.

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

“ Controlled Deposit Account ” means a Deposit Account that is subject to a Deposit Account Control Agreement.

“ Copyrights ” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following: (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, and copyright applications; (b) all renewals of any of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements for any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

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

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

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

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

“ Excluded Accounts ” means (i) deposit accounts, the funds in which are used, in the ordinary course of business, solely for the payment of salaries and wages, workers’ compensation, pension benefits and similar expenses or taxes related thereto, (ii) each deposit account used, in the ordinary course of business, solely for daily accounts payable and that has an ending daily balance of zero, (iii) each account, all the cash and Permitted Investments contained in which are subject to a Lien permitted under Section 6.02(h) of the Credit Agreement, (iv) each account, all the cash and Permitted Investments contained in which are subject to a Lien pursuant to Section 6.02(t) of the Credit Agreement to cash collateralize obligations under letters of credit or in respect of Banking Services Obligations; (v) each account, all the cash and Permitted Investments contained in which consist of proceeds of the issuance of any debt securities pursuant to Section 6.01(b), 6.01(r) or 6.01(g) (solely to the extent such debt securities constitute an extension, refinancing or renewal of Indebtedness permitted pursuant to Section 6.01(b) or 6.01(r) of the Credit Agreement) and/or proceeds from the sale, transfer

 

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or other disposition of Term Debt Priority Collateral, in each case, to the extent depositing such cash or Permitted Investments in such account is required pursuant to the Senior Secured Notes Documents and (iv) accounts of the Grantors holding cash or Permitted Investments in an aggregate amount not to exceed $10,000,000 at any one time.

“ Excluded Collateral ” has the meaning set forth in Article II.

“ Excluded Payments ” has the meaning set forth in Section 4.6(d)(iii).

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

“ Farm Products ” has the meaning set forth in Article 9 of the UCC.

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

“ Foreign Subsidiary Voting Stock ” means the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of any Foreign Subsidiary.

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

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

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

“ Intellectual Property ” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Patents, the Trademarks and the Licenses, and all rights to sue at law or in equity for any Infringement thereof, including the right to receive all proceeds and damages therefrom.

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

“ Investment Property ” means the collective reference to (i) all “investment property” as such term is defined in Section 9-102(a)(49) of the UCC (other than any Foreign Subsidiary Voting Stock excluded from the definition of “Pledged Stock”) and (ii) whether or not constituting “investment property” as so defined, all Pledged Notes and all Pledged Stock.

“ Issuer ” means any issuer of any Investment Property.

“ Joinder ” has the meaning set forth in Section 8.16.

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

“ Licenses ” means, with respect to any Person, all of such Person’s right, title, and interest in and to (a) any and all licensing agreements or similar arrangements in and to its Patents, Copyrights, or Trademarks, (b) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future breaches thereof, and (c) all rights to sue for past, present, and future breaches thereof.

“ Lock Boxes ” has the meaning set forth in Section 7.1(a).

“ Lock Box Agreements ” has the meaning set forth in Section 7.1(a).

 

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“ Margin Stock ” has the meaning assigned to such term in Regulation U.

“ Material Intellectual Property ” means the Intellectual Property listed on Exhibit G attached hereto.

“ Patents ” means, with respect to any Person, all of such Person’s right, title, and interest in and to: (a) any and all patents and patent applications; (b) all inventions and improvements described and claimed therein; (c) all reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof; (d) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements thereof; and (f) all rights corresponding to any of the foregoing throughout the world.

“ Permitted Liens ” means a Lien permitted by Section 6.02 of the Credit Agreement.

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

“ Pledged Notes ” means all promissory notes listed on Exhibit C and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business).

“ Pledged Stock ” means the Equity Interests listed on Exhibit C , together with any other shares, stock certificates, options, interests or rights of any nature whatsoever in respect of the Equity Interests of any Person that may be issued or granted to, or held by, any Grantor while this Security Agreement is in effect, in each case, to the extent not constituting Excluded Collateral.

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

“ Regulation U ” means Regulation U of the Board (12 CFR Part 221) as from time to time in effect and any successor or other regulation or official interpretation of the Board relating to the extension of credit by banks for the purpose of purchasing or carrying Margin Stock applicable to member banks of the Federal Reserve System.

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

“ Secured Parties ” means the Administrative Agent, the Joint Collateral Agents, the Lead Arrangers, the Lenders, any Affiliate of any Lender to which Secured Obligations are owed, the Issuing Banks and any other holder of Secured Obligations.

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

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

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

“ Term Debt Representative ” has the meaning set forth in the Intercreditor Agreement.

 

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“ Trademarks ” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following: (a) all trademarks (including service marks), trade names, trade dress, trade styles, brand names, corporate names, business names, domain names, logos and other source or business identifiers and the registrations and applications for registration thereof, all common-law rights related thereto, and the goodwill of the business symbolized by the foregoing; (b) all renewals of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including, without limitation, damages, claims, and payments for past and future infringements thereof; (d) all rights to sue for past, present, and future infringements of the foregoing, including the right to settle suits involving claims and demands for royalties owing; and (e) all rights corresponding to any of the foregoing throughout the world.

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

“ Vehicles ” means all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state.

1.4 Other Definitional Provisions . The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement, and Section and Exhibit references are to this Security Agreement unless otherwise specified.

The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.

1.5 Exhibit Updates . The Grantors may update the Exhibits hereto from time to time to reflect changes to the information contained therein by notifying the Administrative Agent in writing and delivering such updated Exhibits to the Administrative Agent within 15 days of any such change.

ARTICLE II

GRANT OF SECURITY INTEREST

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

 

(i)

all Accounts;

 

(ii)

all Chattel Paper;

 

(iii)

all Copyrights, Patents, Trademarks and Licenses;

 

(iv)

all Documents;

 

(v)

all Equipment;

 

(vi)

all Fixtures;

 

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(vii)

all General Intangibles;

 

(viii)

all Goods;

 

(ix)

all Instruments;

 

(x)

all Inventory;

 

(xi)

all Investment Property;

 

(xii)

all cash or cash equivalents;

 

(xiii)

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

 

(xiv)

all Deposit Accounts with any bank or other financial institution (including all cash and other items deposited therein or credited thereto);

 

(xv)

all Commercial Tort Claims listed on Exhibit H ;

 

(xvi)

all Farm Products;

 

(xvii)

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

to secure the prompt and complete payment and performance of the Secured Obligations; provided , however , that notwithstanding any of the other provisions set forth in this Article II, this Security Agreement shall not constitute a grant of a security interest in any of the following assets, now owned or hereafter acquired or arising (the following assets being hereinafter collectively referred to as the “ Excluded Collateral ”): (a) any treasury stock of the Company; (b) any Equity Interest or group of Equity Interests issued by a Foreign Subsidiary representing more than 65% of the total outstanding Foreign Subsidiary Voting Stock of such Foreign Subsidiary; (c) any lease, license, contract, or agreement to which any Grantor is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract or agreement (other than to the extent that any such Lien or other obligation would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, or 9-409 of the UCC (or any successor provision or provisions)), (d) any asset owned by any Grantor that is subject to a Permitted Lien or other contractual obligation that prohibits or requires the consent of any Person (other than the Company) not obtained as a condition to the creation of any lien on such asset (other than to the extent that any such Lien or other obligation would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, or 9-409 of the UCC (or any successor provision or provisions)), (e) any “intent to use” Trademark applications for which a statement of use has not been filed (but only until such statement is filed, at which point such application shall constitute Collateral hereunder), (f) any property to the extent that such grant of such security interest is prohibited by any Requirement of Law of a Governmental Authority or requires a consent not obtained of any Governmental Authority pursuant to such Requirement of Law is ineffective under applicable law, (g) any Vehicle, (h) all Aircraft Collateral and (i) Margin Stock owned by any Grantor on the Effective Date and Margin Stock purchased by the Grantors subsequent to the Effective Date in an aggregate fair market value not to exceed $2,000,000; provided that no Margin Stock shall constitute Excluded Collateral upon the Company delivering a Form FR U-1 in accordance with Section 5.6.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Grantor represents and warrants to the Administrative Agent and the other Secured Parties that:

3.1. Title, Perfection and Priority . Such Grantor has good and valid rights in or the power to transfer the Collateral and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1(e), and has full power and authority to grant to the Administrative Agent the security interest in such Collateral pursuant hereto. When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit D , the Administrative Agent will have a fully perfected first priority security interest (or, at any time when the Intercreditor Agreement is in effect, a perfected security interest with the priority required pursuant thereto) in that Collateral of the Grantor in which a security interest may be perfected by filing, subject only to Liens permitted under Section 4.1(e).

 

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

3.3. Principal Location . (a) In the case of a Grantor that is not a registered organization, such Grantor’s mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), are disclosed in Exhibit A , and (b) in the case of other Grantors, as of the Effective Date, or, with respect to any Additional Grantor, such other date such Grantor became a party hereto, such Grantor’s mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), are disclosed in Exhibit A .

3.4. [Intentionally omitted]

3.5. Deposit Accounts . All of such Grantor’s Deposit Accounts (other than deposit accounts with total aggregate balances of less than $1,000,000 that are Excluded Accounts) are listed on Exhibit B .

3.6. Exact Names . As of the Effective Date, or, with respect to any Additional Grantor, such other date such Grantor becomes a party hereto, such Grantor’s name in which it has executed this Security Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization. As of the Effective Date, such Grantor has not, (a) during the past five years (i) other than as set forth in Part A of Exhibit A , been known by or used any other corporate or fictitious name, (ii) except as described on Exhibit E , been a party to any merger or consolidation or (iii) except as described in Exhibit E , acquired all of the Equity Interests or all or substantially all of the assets, or a business unit, division, product line or line of business of a Person or (b) during the past four months, except as described in Exhibit E , been a party to any acquisition other than those described in clause (a)(iii) of this Section 3.6.

3.7. Letter-of-Credit Rights and Chattel Paper . As of the Effective Date, Exhibit F lists all Letter-of-Credit Rights that are not Supporting Obligations and Chattel Paper of such Grantor involving amounts, individually or in the aggregate, in excess of $10,000,000. As of the date of the most recent delivery of quarterly and annual financial statements in accordance with the Credit Agreement, Exhibit F lists all Chattel Paper of such Grantor involving amounts, individually, in excess of $10,000,000. All actions requested by the Administrative Agent to be taken by such Grantor to protect and perfect the Administrative Agent’s Lien on the Chattel Paper listed on Exhibit F (including the delivery of all originals and the placement of a legend on all Chattel Paper as required hereunder) have been duly taken. The Administrative Agent will have a fully perfected security interest in the Chattel Paper listed on Exhibit F prior to any other Liens other than Permitted Prior Liens. Such Grantor has not pledged, assigned or delivered any letter of credit or Chattel Paper to any third party other than the Administrative Agent or the Term Debt Representative (to the extent required by the Intercreditor Agreement).

 

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3.8. Accounts and Chattel Paper .

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

(b) With respect to its Accounts, as of the date of the most recently delivered Borrowing Base Certificate, (i) all Accounts specified as Eligible Accounts in such Borrowing Base Certificate are Eligible Accounts; (ii) except as specifically disclosed on the most recent Borrowing Base Certificate, to such Grantor’s knowledge, there are no facts, events or occurrences which in any way impair the validity or enforceability of any Eligible Account or could reasonably be expected to reduce the amount payable thereunder as shown on such Grantor’s books and records and any invoices, statements and Collateral Reports with respect thereto; and (iii) such Grantor has no knowledge that any Account Debtor in respect of any Eligible Account is unable generally to pay its debts as they become due.

(c) In addition, with respect to all of its Accounts indicated in any Borrowing Base Certificate to be an Eligible Account, (i) the amounts shown on all invoices, statements and Collateral Reports with respect thereto are actually and absolutely owing to such Grantor as indicated thereon and are not in any way contingent; (ii) the obligations set forth in Section 7.1 have been satisfied; and (iii) to such Grantor’s knowledge, all Account Debtors have the capacity to contract.

3.9. Inventory . (a) With respect to any of its Inventory scheduled or listed on the most recent Borrowing Base Certificate, Exhibit A sets forth the information required thereby for all of such Grantor’s Inventory (other than Inventory in transit) located at a location (i) owned by such Grantor and (ii) which is leased by such Grantor as lessee (x) where the aggregate value of the Inventory of such Grantor at such location is in excess of $5,000,000 and (y) where at least 80% of the Inventory of the Grantors at all leased real properties is located, as designated in Part B of Exhibit A and (b)(i) as of the Effective Date, Part C of Exhibit A sets forth the information required thereby for all of such Grantor’s Inventory located at a location at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment where the aggregate value of the Inventory of such Grantor at such location is in excess of $1,000,000 and (ii) with respect to any of its Inventory scheduled or listed on the most recent Borrowing Base Certificate delivered subsequent to the Effective Date, Part C of Exhibit A sets forth the information required thereby for all of such Grantor’s Inventory located at a location at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment (x) where the aggregate value of the Inventory of such Grantor at such location is in excess of $5,000,000 and (y) where at least 80% of the Inventory located at locations at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment. In addition (a) such Inventory specified therein as Eligible Inventory satisfies the requirements applicable thereto, (b) such Inventory has been produced in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder and (c) the completion of manufacture, sale or other disposition of such Inventory (other than Inventory of the type described in clause (n) of the definition of Eligible Inventory) by the Administrative Agent following an Event of Default shall not require the consent of any Person and shall not constitute a breach or default under any contract or agreement to which such Grantor is a party or to which such property is subject.

3.10. Intellectual Property .

(a) [Intentionally Omitted].

(b) Except for dispositions permitted under the Credit Agreement, such Grantor owns or has the right to use all Material Intellectual Property free and clear of all Liens other than Permitted Liens.

 

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(c) On the date hereof, all Material Intellectual Property is valid, subsisting, unexpired and enforceable, has not been abandoned and to such Grantor’s knowledge, does not infringe, impair, misappropriate, dilute or otherwise violate (“ Infringe ”) the intellectual property rights of any other Person and is not being Infringed by any other Person.

(d) Except as set forth in Exhibit G , on the date hereof, none of the Material Intellectual Property is the subject of any licensing or franchising agreement pursuant to which such Grantor is the licensor.

(e) No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or challenge the validity, enforceability, ownership or use of, or such Grantor’s rights in, any Intellectual Property in any respect, and such Grantor knows of no valid basis for same, in each case, in any respect that could reasonably be expected to have a Material Adverse Effect.

(f) No action or proceeding is pending, or, to the knowledge of such Grantor, threatened or imminent, on the date hereof (i) seeking to limit, cancel or challenge the validity, enforceability, ownership or use of any Intellectual Property or such Grantor’s interest therein, or (ii) which, if adversely determined, would materially affect the value of any Intellectual Property to such Grantor, in each case, in any respect that could reasonably be expected to have a Material Adverse Effect.

(g) This Security Agreement is effective to create a valid and continuing Lien and, upon filing of appropriate financing statements in the offices listed on Exhibit D and a short form of this Security Agreement with the United States Patent and Trademark Office, fully perfected first priority security interests (or, at any time when the Intercreditor Agreement is in effect, a perfected security interest with the priority required pursuant thereto) in favor of the Administrative Agent on such Grantor’s Material Intellectual Property, such perfected security interests are enforceable as such as against any and all creditors of and purchasers from such Grantor; and all action necessary or desirable to protect and perfect the Administrative Agent’s Lien on such Grantor’s Material Intellectual Property has been duly taken.

3.11. Filing Requirements . As of the Effective Date, none of such Grantor’s Equipment is covered by any certificate of title, except for Vehicles and Aircraft Collateral. As of the Effective Date, none of the Collateral owned by such Grantor is of a type for which security interests or liens may be perfected by filing under any federal statute except for (a) Vehicles; (b) Patents, Trademarks and Copyrights held by such Grantor; and (c) other Collateral in an aggregate amount not in excess of $5,000,000.

3.12. No Financing Statements, Security Agreements . No effective financing statement or security agreement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed or is of record in any relevant jurisdiction except (a) for financing statements or security agreements naming the Administrative Agent on behalf of the Secured Parties as the secured party or (b) as permitted by Section 4.1(e).

3.13. Pledged Collateral .

(a) As of the Effective Date, or, with respect to any Additional Grantor, such other date such Grantor became a party hereto, Exhibit C sets forth a complete and accurate list of all Pledged Collateral held by such Grantor; provided that (i) with respect to Equity Interests issued by a Subsidiary that constitute Pledged Collateral, Exhibit C sets forth all such Equity Interests; (ii) with respect to Equity Interests issued by a non-Subsidiary, Exhibit C sets forth all such Equity Interests with an individual value in excess of $5,000,000; provided that the aggregate value of all such Equity Interests not listed on Exhibit C shall not exceed $15,000,000, (iii) with respect to Instruments issued by a non-Subsidiary, Exhibit C sets forth all such Instruments with an individual value in excess of $5,000,000; provided that the aggregate value of all such Instruments not listed on Exhibit C shall not exceed $15,000,000; and (iv) with respect to Securities issued by a non-Subsidiary held in a securities account, Exhibit C sets forth all such Securities with an individual value in excess of $5,000,000; provided that the aggregate value of all such Securities not listed on Exhibit C shall not

 

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exceed $15,000,000. As of the Effective Date, such Grantor is the direct, sole beneficial owner and sole holder of record of the Pledged Collateral listed on Exhibit C as being owned by it, free and clear of any Liens, except for the security interest granted to the Administrative Agent for the benefit of the Secured Parties hereunder, the Permitted Equity Liens and, with respect to Pledged Collateral other than Equity Interests, Liens permitted by Section 4.1(e). Such Grantor further represents and warrants that (i) all Pledged Stock has been (to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized and validly issued and are fully paid and non-assessable and (ii) all Pledged Collateral which represents Indebtedness owed to such Grantor by any other Grantor or Subsidiary thereof has been duly authorized, authenticated or issued and delivered by the issuer of such Indebtedness and is the legal, valid and binding obligation of such issuer and such issuer is not in default thereunder.

(b) In addition, (i) none of the Pledged Collateral owned by it has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject that could reasonably be expected to materially and adversely affect the value of such Collateral or the rights or remedies of the Administrative Agent in respect thereof, (ii) other than in connection with a disposition permitted pursuant Section 6.05 of the Credit Agreement, there are existing no options, warrants, calls or commitments of any character whatsoever relating to such Pledged Stock or which obligate any issuer of any Pledged Stock that is a Subsidiary of the Company to issue additional Equity Interests, and (iii) with respect to any Pledged Stock issued by a Subsidiary of the Company, no consent, approval, authorization, or other action by, and no giving of notice to or filing with, any Governmental Authority or any other Person is required for the pledge by such Grantor of such Pledged Stock pursuant to this Security Agreement or for the execution, delivery and performance of this Security Agreement by such Grantor, or for the exercise by the Administrative Agent of the voting or other rights provided for in this Security Agreement or for the remedies in respect of the Pledged Stock pursuant to this Security Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally.

(c) As of the Effective Date, or, with respect to any Additional Grantor, such other date such Grantor became a party hereto, except as set forth in Exhibit C , such Grantor owns 100% of the issued and outstanding Equity Interests of each issuer of Pledged Stock owned by it and none of the Pledged Collateral which represents Indebtedness owed to such Grantor is subordinated in right of payment to other Indebtedness (other than any such Indebtedness that is subordinated to the Secured Obligations) or subject to the terms of an indenture.

ARTICLE IV

COVENANTS

From the date of this Security Agreement, and thereafter until this Security Agreement is terminated, each Grantor agrees that:

4.1. General .

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

(b) Authorization to File Financing Statements; Ratification . Such Grantor hereby authorizes the Administrative Agent to file, and if requested will deliver to the Administrative Agent, all financing statements and other documents and take such other actions as may from time to time be requested by the Administrative Agent in order to maintain a first priority perfected security interest (or, at any time when the Intercreditor Agreement is in effect, a perfected security interest with the priority required pursuant thereto) in and, if applicable, Control of, the Collateral owned by such Grantor. Any financing statement filed by the

 

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Administrative Agent may be filed in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s Collateral (1) as all assets of the Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (2) by any other description which reasonably approximates the description contained in this Security Agreement, and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organization identification number issued to such Grantor, and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. Such Grantor also agrees to furnish any such information to the Administrative Agent promptly upon request. Such Grantor also ratifies its authorization for the Administrative Agent to have filed in any UCC jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

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

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

(e) Liens . Such Grantor will not create, incur, or suffer to exist any Lien on the Collateral owned by it except (i) the security interest created by this Security Agreement, and (ii) other Permitted Liens.

(f) Other Financing Statements . Such Grantor will not authorize the filing of any financing statement naming it as debtor covering all or any portion of the Collateral owned by it, except, in the case of Equity Interests, in respect of Permitted Equity Liens, and in the case of any other Collateral, in respect of Liens permitted by Section 4.1(e) . Such Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Administrative Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.

(g) Locations . Such Grantor will not maintain any Collateral owned by it at any location other than those locations listed on Exhibit A , unless it shall have notified the Administrative Agent in writing, by amending, supplementing or restating Exhibit A hereto to add any such other location, within 15 days of the end of any calendar month in which any Collateral is located at any such other location and shall have obtained a Collateral Access Agreement for each such location to the extent required by Section 4.13 ( provided that such requirement shall not apply with respect to locations leased or subleased by the Grantors where the aggregate value of the Inventory of the Grantors at such property is equal to or less than $5,000,000, so long as at least 80% of the Inventory of the Grantors at all leased or subleased locations is listed on Exhibit A ).

(h) Compliance with Terms . Such Grantor will perform and comply with all obligations in respect of the Collateral owned by it and all agreements to which it is a party or by which it is bound relating to such Collateral except to the extent any failure to comply could not reasonably be expected to result in a Material Adverse Effect.

4.2. Receivables .

(a) Certain Agreements on Receivables . Such Grantor will not make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that, so long as no Event of Default shall have occurred and be continuing, such Grantor may reduce the amount of any Receivable in accordance with its present policies and in the ordinary course of business or otherwise as appropriate in its commercially reasonable business judgment.

 

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(b) Collection of Receivables . Except as otherwise provided in this Security Agreement, such Grantor will use commercially reasonable efforts to collect and enforce, at such Grantor’s sole expense and as appropriate in its commercially reasonable business judgment, all amounts due or hereafter due to such Grantor under the Receivables owned by it.

(c) Delivery of Invoices . At the request of the Administrative Agent, such Grantor will promptly deliver to the Administrative Agent duplicate invoices with respect to each Account requested by the Administrative Agent and owned by such Grantor bearing such language of assignment as the Administrative Agent shall specify.

(d) Disclosure of Counterclaims on Receivables . If (i) any discount, credit or agreement to make a rebate or to otherwise reduce the amount owing on any Eligible Account in excess of $500,000 owned by such Grantor exists or (ii) if, to the knowledge of such Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to any such Eligible Account in excess of $500,000, such Grantor will disclose such fact to the Administrative Agent in writing together with the delivery of each Borrowing Base Certificate.

(e) Electronic Chattel Paper . Such Grantor shall take all steps requested by the Administrative Agent to grant the Administrative Agent Control of all electronic chattel paper involving amounts in excess of $5,000,000, in accordance with the UCC and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

4.3. Inventory and Equipment .

(a) Maintenance of Goods . Such Grantor will do all things necessary to maintain, preserve, protect and keep its Inventory and the Equipment material to the conduct of its business in good repair and working and saleable condition, except for (i) damaged or defective goods arising in the ordinary course of such Grantor’s business, (ii) ordinary wear and tear in respect of the Equipment, (iii) casualty events (to the extent such casualty, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect) and (iv) dispositions permitted pursuant to the Credit Agreement.

(b) Returned Inventory . Such Grantor shall, at such time as any Financial Officer of such Grantor knows or should have known, promptly report to the Administrative Agent any return of Inventory involving an amount in excess of $20,000,000. Each such report shall indicate the reasons for the returns and the locations and condition of the returned Inventory. In the event any Account Debtor returns Inventory to such Grantor when an Event of Default exists, such Grantor, upon the request of the Administrative Agent, shall: (i) hold the returned Inventory in trust for the Administrative Agent; (ii) segregate all returned Inventory from all of its other property; (iii) dispose of the returned Inventory solely according to the Administrative Agent’s written instructions; and (iv) not issue any credits or allowances with respect thereto without the Administrative Agent’s prior written consent. All returned Inventory shall be subject to the Administrative Agent’s Liens thereon. Whenever any Inventory is returned, the related Account shall be deemed ineligible to the extent of the amount owing by the Account Debtor with respect to such returned Inventory and such returned Inventory shall not be Eligible Inventory.

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

 

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4.4. Delivery of Instruments, Securities, Chattel Paper and Documents . Subject to the Intercreditor Agreement, such Grantor will (a) deliver to the Administrative Agent, immediately upon execution of this Security Agreement any Chattel Paper, Certificated Securities (other than Certificated Securities that represent Equity Interests in Subsidiaries) and Instruments constituting Collateral owned by it whose value exceeds $5,000,000, and within 30 days of the execution of this Security Agreement, the originals of all Certificated Securities that represent Equity Interests in Subsidiaries, (b) hold in trust for the Administrative Agent upon receipt and (i) promptly thereafter deliver to the Administrative Agent, all Certificated Securities that represent Equity Interests in Subsidiaries and (ii) contemporaneously with the delivery of quarterly and annual financial statements in accordance with the Credit Agreement, deliver to the Administrative Agent any such Chattel Paper, Certificated Securities and Instruments constituting Collateral whose value exceeds $5,000,000; provided that with respect to a new issuance of Certificated Securities that represent Equity Interests of an issuer whose Equity Interests have previously been pledged to the Administrative Agent, such newly issued Certificated Securities shall be delivered within 30 days of such issuance, (c)(i) cause any Indebtedness of a Subsidiary owed to any Grantor in excess of $5,000,000 and (ii) use its commercially reasonable best efforts to cause any Indebtedness of a non-Subsidiary owed to any Grantor in excess of $5,000,000 to be evidenced by a duly executed promissory note (or subject to a global note) that, in either case, is pledged and delivered to the Administrative Agent, for the benefit of the Secured Parties, with such notes being accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as th