COLLATERAL AGREEMENT

EXHIBIT 4.2

EXECUTION VERSION

 

 

COLLATERAL AGREEMENT

dated and effective as of

June 15, 2009

among

 

MOMENTIVE PERFORMANCE MATERIALS INC.,
as Issuer

each Subsidiary Guarantor
party hereto

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Collateral Trustee

 

 

 

The lien and security interest created by this Collateral Agreement on the property described herein is junior and subordinate, in accordance with the provisions of the Intercreditor Agreement dated as of June 15, 2009, among JPMorgan Chase Bank, N.A., as First Priority Representative, The Bank of New York Mellon Trust Company, N.A., as Second Priority Representative, Momentive Performance Materials Inc., Momentive Performance Materials USA Inc. and the other Loan Parties referred to therein, as amended from time to time, to the lien and security interest on such property created by any similar instrument now or hereafter granted to JPMorgan Chase Bank, N.A., as administrative agent, and its successors and assigns, in such property.

TABLE OF CONTENTS

Page

ARTICLE I
Definitions
SECTION 1.01. Indenture		1
SECTION 1.02. Other Defined Terms		1
ARTICLE II
Pledge of Securities
SECTION 2.01. Pledge		7
SECTION 2.02. Delivery of the Pledged Collateral		8
SECTION 2.03. Representations, Warranties and Covenants		9
SECTION 2.04. Registration in Nominee Name; Denominations		11
SECTION 2.05. Voting Rights; Dividends and Interest, Etc		11
SECTION 2.06. Unlimited Liability Corporations		14
ARTICLE III
Security Interests in Other Personal Property
SECTION 3.01. Security Interest		15
SECTION 3.02. Representations and Warranties		17
SECTION 3.03. Covenants		20
SECTION 3.04. Other Actions		22
SECTION 3.05. Covenants Regarding Patent, Trademark and Copyright Collateral		23
ARTICLE IV
Remedies
SECTION 4.01. Remedies Upon Default		24
SECTION 4.02. Application of Proceeds		26
SECTION 4.03. Securities Act, Etc		27
ARTICLE V
Other Second-Lien Obligations

 

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SECTION 5.01. Other Second-Lien Obligations		28
ARTICLE VI
Miscellaneous
SECTION 6.01. Notices		28
SECTION 6.02. Security Interest Absolute		28
SECTION 6.03. Limitation By Law		29
SECTION 6.04. Binding Effect; Several Agreement		29
SECTION 6.05. Successors and Assigns		29
SECTION 6.06. Collateral Trustee’s Fees and Expenses; Indemnification		29
SECTION 6.07. Collateral Trustee Appointed Attorney-in-Fact		30
SECTION 6.08. Governing Law		31
SECTION 6.09. Waivers; Amendment		31
SECTION 6.10. WAIVER OF JURY TRIAL		32
SECTION 6.11. Severability		32
SECTION 6.12. Counterparts		32
SECTION 6.13. Headings		32
SECTION 6.14. Jurisdiction; Consent to Service of Process		33
SECTION 6.15. Termination or Release		33
SECTION 6.16. Additional Subsidiaries		33
SECTION 6.17. Intercreditor Agreement		33

 

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Schedules
Schedule I		Subsidiary Guarantors
Schedule II		Pledged Stock; Debt Securities
Schedule III		Intellectual Property
Schedule IV		Filing Offices
Exhibits
Exhibit I		Form of Supplement to the Collateral Agreement
Exhibit II		Form of Additional Secured Party Consent

 

        COLLATERAL AGREEMENT dated and effective as of June 15, 2009, (this “ Agreement ”), among MOMENTIVE PERFORMANCE MATERIALS INC., (the “ Issuer ”), each Subsidiary of the Issuer party hereto and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (“ BONY ”), as collateral trustee (in such capacity, the “ Collateral Trustee ”) for the Secured Parties (as defined below).

 

PRELIMINARY STATEMENT

                  Reference is made to (i) the Indenture dated as of June 15, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), among the Issuer, certain Subsidiaries of the Issuer party thereto and BONY, as trustee and collateral trustee and (ii) the Intercreditor Agreement dated as of June 15, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”), among JPMorgan Chase Bank, N.A., as First Priority Representative, BONY, as Second Priority Representative, the Issuer, Momentive Performance Materials USA Inc. and the other Loan Parties referred to therein.

                  Pursuant to the terms of the Indenture, the Issuer will issue 12½% Second-Lien Senior Secured Notes due 2014 (the “ Securities ”) and the Issuer’s obligations under the Indenture and Securities will be guaranteed by the Subsidiary Guarantors. The Issuer and the Subsidiary Guarantors will derive substantial benefits from the transactions contemplated by the Indenture. Pursuant to the Indenture, the Pledgors have agreed to grant a security interest in the Collateral for the benefit of the Holders to secure the payment and performance of the Obligations, subject to the terms of the Intercreditor Agreement, including with respect to the relative rights and priorities in respect of the Collateral. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

                  SECTION 1.01. Indenture . (a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Indenture. All terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein. The term “instrument” shall have the meaning specified in Article 9 of the New York UCC.

                  (b) The rules of construction specified in Section 1.04 of the Indenture also apply to this Agreement.

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

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                  “ Account Debtor ” means any person who is or who may become obligated to any Pledgor under, with respect to or on account of an Account, Chattel Paper, General Intangibles, Instruments or Investment Property.

                  “ Additional Secured Debt Documents ” means any document or instrument executed and delivered with respect to any Other Second Priority Obligation.

                  “ Additional Secured Party Consent ” means a completed additional secured party consent substantially in the form of Exhibit II hereto.

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

                  “ Authorized Representative ” means, with respect to any holder of Other Second Priority Obligations, the agent or trustee under the agreement pursuant to which such Other Second Priority Obligations are issued or incurred.

                  “ Collateral ” means Article 9 Collateral and Pledged Collateral.

                  “ Copyright License ” means any written agreement, now or hereafter in effect, granting any right to any Pledgor under any Copyright now or hereafter owned by any third party, and all rights of any Pledgor under any such agreement (including, without limitation, any such rights that such Pledgor has the right to license).

                  “ Copyrights ” means all of the following now owned or hereafter acquired by any Pledgor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise; (b) all registrations and applications for registration of any such Copyright in the United States or any other country, including registrations, supplemental registrations and pending applications for registration in the United States Copyright Office and the right to obtain all renewals thereof, including those listed on Schedule III ; (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing; and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

                  “ Designated Securities ” means any securities, the granting of a security interest in which would require separate financial statements of a Subsidiary of the Issuer to be filed with the SEC (or any other government agency), pursuant to Rule 3-16 of Regulation S-X under the Securities Act and the Exchange Act (or any successor regulation or any other law, rule or regulation), other than any securities of a Subsidiary for which the Issuer is required to file separate financial statements with the SEC as a result of any First Priority Obligations being secured by a security interest in such securities.

                  “ Equity Interests ” of any person shall mean any and all shares, interests, rights to purchase or otherwise acquire, warrants, options, participations or other equivalents of or interests in (however designated) equity or ownership of such person,

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including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, and any securities or other rights or interests convertible into or exchangeable for any of the foregoing.

                  “ Federal Securities Laws ” has the meaning assigned to such term in Section 4.03.

                  “ First Priority Agreement ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ First Priority Documents ” has the meaning assigned to such term in the Intercreditor Agreement.

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

                  “ First Priority Obligations ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ First Priority Obligations Payment Date ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ First Priority Representative ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ First Priority Security Documents ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ Foreign Subsidiary ” means any Subsidiary that is incorporated or organized, constituted or amalgamated under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia and any direct or indirect Subsidiary of any such Subsidiary.

                  “ General Intangibles ” means all “General Intangibles” as defined in the New York UCC, including all choses in action and causes of action and all other intangible personal property of any Pledgor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Pledgor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Swap Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any guarantee, claim, security interest or other security held by or granted to any Pledgor to secure payment by an Account Debtor of any of the Accounts.

                  “ Governmental Authority ” means any federal, state, provincial, territorial, municipal, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.

                  “ Indemnitee ” has the meaning assigned to such term in Section 6.06.

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                  “ Indenture ” has the meaning assigned to such term in the preliminary statements of this Agreement.

                  “ Insolvency Proceeding ” has the meaning assigned to such term in the Intercreditor Agreement.

                  “ Intellectual Property ” means all intellectual property of every kind and nature now owned or hereafter acquired by any Pledgor, including, inventions, designs, Patents, Copyrights, Trademarks, Patent Licenses, Copyright Licenses, Trademark Licenses, trade secrets, domain names, confidential or proprietary technical and business information, knowhow, show-how or other data or information and all related documentation.

                  “ Intellectual Property Security Agreement ” means a security agreement in the form hereof or a short form hereof, in each case, which form shall be reasonably acceptable to the Collateral Trustee.

                  “ Intercreditor Agreement ” has the meaning assigned to such term in the preliminary statements of this Agreement.

                  “ IP Agreements ” means all material Copyright Licenses, Patent Licenses, Trademark Licenses, and all other agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of any material Intellectual Property to which a Pledgor, now or hereafter, is a party or a beneficiary, including, without limitation, the agreements set forth on Schedule III hereto.

                  “ Material Adverse Effect ” means a material adverse effect on the business, property, operations or condition of the Issuer and its Subsidiaries, taken as a whole, or the validity or enforceability of any of the material Note Documents or the rights and remedies of the Collateral Trustee and the Holders thereunder.

                  “ New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.

                  “ Note Obligations ” means the due and punctual payment of (a) all principal of and interest (including any post-petition interest) and premium (if any) on all indebtedness under the Indenture, and (b) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including post-petition interest), of the Pledgors or any of their Subsidiaries to the Secured Parties under the Note Documents, and other amounts payable from time to time pursuant to the Note Documents, in each case whether or not allowed or allowable in an Insolvency Proceeding.

                  “ Obligations ” means (a) the Note Obligations and (b) if any Other Second Priority Obligations are incurred and designated by the Issuer as Obligations pursuant to Section 5.01, the due and punctual payment of (i) the unpaid principal of and interest (including interest accruing during the pendency of any Insolvency Proceeding) owing to any holder of Other Second Priority Obligations under any Additional Secured Debt

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Document, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations of the Issuer to any holder of Other Second Priority Obligations under the Additional Secured Debt Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise, in each case whether or not allowed or allowable in an Insolvency Proceeding.

                  “ Patent License ” means any written agreement, now or hereafter in effect, granting to any Pledgor any right to make, use or sell any invention covered by a Patent, now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

                  “ Patents ” means all of the following now owned or hereafter acquired by any Pledgor: (a) all letters patent of the United States or the equivalent thereof in any other country or jurisdiction, including those listed on Schedule III , and all applications for letters patent of the United States or the equivalent thereof in any other country or jurisdiction, including those listed on Schedule III , (b) all provisionals, reissues, extensions, continuations, divisions, continuations-in-part, reexaminations or revisions thereof, and the inventions disclosed or claimed therein, including the right to make, use, import and/or sell the inventions disclosed or claimed therein, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

                  “ Perfection Certificate ” means the Perfection Certificate with respect to the Issuer and the other Pledgors in a form reasonably satisfactory to the Collateral Trustee.

                  “ Permitted Liens ” means any Lien permitted by Section 4.12 of the Indenture.

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

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

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

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

                  “ Pledgor ” means the Issuer and each Subsidiary Guarantor.

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                  “ Priority Representative ” means (a) prior to the First Priority Obligations Payment Date, the First Priority Representative and (b) at all other times, the Collateral Trustee.

                  “ Qualified CFC Holding Company ” has the meaning assigned to such term in the Existing First Priority Agreement (as defined in the Intercreditor Agreement).

                  “ Responsible Officer ” of any person means any chief executive officer, Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of the Indenture.

                  “ Secured Parties ” means (a) the Trustee, the Collateral Trustee and each Holder and (b) subject to compliance with Section 5.01, each holder of Other Second Priority Obligations and its Authorized Representative.

                  “ Securities ” has the meaning assigned to such term in the preliminary statements of this Agreement.

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

                  “ Subsidiary Guarantor ” means any subsidiary set forth on Schedule I and any Subsidiary that becomes a party hereto pursuant to Section 6.16.

                  “ Swap Agreement ” has the meaning assigned to such term in the Existing First Priority Agreement (as defined in the Intercreditor Agreement).

                  “ Trademark License ” means any written agreement, now or hereafter in effect, granting to any Pledgor any right to use any Trademark now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

                  “ Trademarks ” means all of the following now owned or hereafter acquired by any Pledgor: (a) all trademarks, service marks, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations thereof (if any), and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof (except for “intent-to-use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of Lanham Act has been filed, to extent, if any, that any assignment of an “intent-to-use” application prior to such filing would violate the Lanham Act), and all renewals thereof, including those listed on Schedule III , (b) all goodwill associated therewith or symbolized thereby, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or

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hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

ARTICLE II

Pledge of Securities

                  SECTION 2.01. Pledge . Subject to the last paragraph of Section 3.01(a), as security for the payment or performance, as the case may be, in full of the Obligations, each Pledgor hereby assigns and pledges to the Collateral Trustee, its successors and permitted assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Trustee, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest in all of such Pledgor’s right, title and interest in, to and under (a) the Equity Interests directly owned by it (including those listed on Schedule II ) and any other Equity Interests obtained in the future by such Pledgor and any certificates representing all such Equity Interests (the “ Pledged Stock ”); provided that the Pledged Stock shall not include (i) (A) more than 65% of the issued and outstanding voting Equity Interests of any “first tier” Foreign Subsidiary directly owned by such Pledgor, (B) more than 65% of the issued and outstanding voting Equity Interests of any “first tier” Qualified CFC Holding Company directly owned by such Pledgor, (C) any issued and outstanding Equity Interest of any Foreign Subsidiary that is not a “first tier” Foreign Subsidiary, or (D) any issued and outstanding Equity Interests of any Qualified CFC Holding Company that is not a “first tier” Qualified CFC Holding Company, (ii) to the extent applicable law requires that a subsidiary of such Pledgor issue directors’ qualifying shares, such shares or nominee or other similar shares, (iii) any Equity Interests that are not subject to a First Priority Lien, including, any Equity Interests in a person acquired after the Issue Date (other than Equity Interests in a person that is a Subsidiary acquired after such person became a Subsidiary) in accordance with the Indenture if, and to the extent that, and for so long as (A) such Equity Interests constitute less than 100% of all applicable Equity Interests of such person and the persons holding the remainder of such Equity Interests are not Affiliates, (B) granting a security interest in such Equity Interests would violate applicable law or a contractual obligation binding on such Equity Interests and (C) with respect to contractual obligations, such obligation existed at the time of acquisition thereof and was not created or made binding on such Equity Interests in contemplation of or in connection with the acquisition of such Subsidiary ( provided , that if at any time such Equity Interests (for the avoidance of doubt, other than any Designated Securities) shall become subject to a First Priority Lien, the Collateral shall immediately include such Equity Interests and such Pledgor shall be deemed to have granted a security interest hereunder in such Equity Interests), (iv) any Equity Interests of a person that is not directly or indirectly a Subsidiary or (v) any Designated Securities; (b) (i) the debt obligations listed opposite the name of such Pledgor on Schedule II , (ii) any debt obligations in the future issued to such Pledgor having, in the case of each instance of debt securities, an aggregate principal amount in excess of $5.0 million, and (iii) the certificates, promissory notes and any other instruments, if any, evidencing such debt obligations (the “ Pledged Debt Securities ” and, together with the property described in clauses (b)(i) and (ii) above, the " Pledged Debt ");

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provided that the Pledged Debt shall exclude (1) the Japan Notes, (2) any debt obligations or instruments that are not subject to a First Priority Lien ( provided , that if at any time such property described in this clause (2) and not otherwise excluded from the Pledged Debt shall become subject to a First Priority Lien, the Collateral shall immediately include such property, and such Pledgor shall be deemed to have granted a security interest hereunder in such property) and (3) any Designated Securities; (c) subject to Section 2.05 hereof, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of the Pledged Stock and the Pledged Debt; (d) subject to Section 2.05 hereof, all rights and privileges of such Pledgor with respect to the Pledged Stock, Pledged Debt and other property referred to in clause (c) above; and (e) all proceeds of any of the foregoing (the Pledged Stock, Pledged Debt and other property referred to in clauses (c) through (e) above being collectively referred to as the “ Pledged Collateral ”).

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

                  SECTION 2.02. Delivery of the Pledged Collateral . (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Priority Representative, for the ratable benefit of the Secured Parties, any and all Pledged Securities to the extent such Pledged Securities are either (i) Equity Interests in Subsidiaries or (ii) in the case of promissory notes or other instruments evidencing Indebtedness, are required to be delivered pursuant to paragraph (b) of this Section 2.02. If any Pledged Stock that is uncertificated on the date hereof shall hereinafter become certificated, the applicable Pledgor shall promptly cause the certificate or certificates representing such Pledged Stock to be delivered to the Priority Representative together with accompanying stock powers or other documentation required by Section 2.02(c) . None of the Pledgors shall permit any other party to “control” (for purposes of Section 8-106 of the New York UCC (or any analogous provision of the Uniform Commercial Code in effect in the jurisdiction whose law applies)) any uncertificated securities that constitute Pledged Collateral other than the Priority Representative or the Collateral Trustee.

                  (b) To the extent any Indebtedness for borrowed money constitutes Pledged Collateral (other than (i) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Issuer and its Subsidiaries and (ii) to the extent that a pledge of such promissory note or instrument would violate applicable law) owed to any Pledgor by the Issuer or any Subsidiary is evidenced by a promissory note, such Pledgor shall cause such promissory note to be pledged and delivered to the Priority Representative, for the ratable benefit of the Secured Parties, pursuant to the terms hereof. To the extent any such promissory note is a demand note, each Pledgor party thereto agrees, if requested by the Priority Representative, to immediately demand payment thereunder upon an Event of Default specified under

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Section 6.01(a), (b), (e), (f) or (g) of the Indenture unless such demand would not be commercially reasonable or would otherwise expose Pledgor to liability to the maker.

                  (c) Upon delivery to the Priority Representative, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) of this Section 2.02 shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or other instruments of transfer reasonably satisfactory to the Priority Representative and by such other instruments and documents as the Priority Representative may reasonably request and (ii) all other property comprising part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Priority Representative may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II (or a supplement to Schedule II , as applicable) and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

                  SECTION 2.03. Representations, Warranties and Covenants. The Pledgors, jointly and severally, represent, warrant and covenant to and with the Collateral Trustee, for the ratable benefit of the Secured Parties, that:

       (a) Subject to any applicable exclusion of Designated Securities, Schedule II correctly sets forth the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock and includes (i) all Equity Interests pledged hereunder and (ii) all debt securities and promissory notes or instruments evidencing Indebtedness, in each case pledged hereunder and in an aggregate principal amount in excess of $5.0 million;

       (b) the Pledged Stock and Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a subsidiary of the Issuer or an Affiliate of any such subsidiary, to the best of each Pledgor’s knowledge) have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable (subject to the assessability of the shares of a ULC) and (ii) in the case of Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a subsidiary of the Issuer or an Affiliate of any such subsidiary, to the best of each Pledgor’s knowledge) are legal, valid and binding obligations of the issuers thereof, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding at law or in equity) and an implied covenant of good faith and fair dealing;

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       (c) except for the security interests granted hereunder, each Pledgor (i) is and, subject to any transfers made in compliance with the Indenture, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Pledgor, (ii) holds the same free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than pursuant to a transaction permitted by the Indenture and other than Permitted Liens and (iv) subject to the rights of such Pledgor under the Note Documents to dispose of Pledged Collateral, will use commercially reasonable efforts to defend its title or interest hereto or therein against any and all Liens (other than Permitted Liens), however arising, of all persons;

       (d) other than as set forth in the Intercreditor Agreement or the First Priority Documents, and except for restrictions and limitations imposed by the First Priority Documents, the Note Documents or securities laws generally, or, in the case of shares of a ULC, any requirement that transfers of such shares be approved by the directors of the ULC, or otherwise permitted to exist pursuant to the terms of the Indenture, the Pledged Stock (other than partnership interests) is and will continue to be freely transferable and assignable, and none of the Pledged Stock is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Stock hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Trustee of rights and remedies hereunder;

       (e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

       (f) other than as set forth in the Indenture or the First Priority Documents, no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (or the transfer of the Pledged Securities upon a foreclosure thereof (other than compliance with any securities law applicable to the transfer of securities, or, in the case of shares of a ULC, any requirement that transfers of such shares be approved by the directors of the ULC), in each case other than such as have been obtained and are in full force and effect;

       (g) by virtue of the execution and delivery by the Pledgors of this Agreement and the Intercreditor Agreement, when any Pledged Securities (including Pledged Stock of any Domestic Subsidiary or any Qualified CFC Holding Company) are delivered to the Priority Representative in accordance with this Agreement and the Intercreditor Agreement and a financing statement naming the Collateral Trustee as the secured party and covering such Pledged Securities is filed in the appropriate filing office, the Collateral Trustee will obtain, for the ratable benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Securities under the New York UCC, subject

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only to Permitted Liens, as security for the payment and performance of the Obligations;

       (h) each Pledgor that is an issuer of the Pledged Collateral confirms that it has received notice of the security interest granted hereunder and consents to such security interest and, subject to the terms of the Intercreditor Agreement, agrees to transfer record ownership of the securities issued by it in connection with any request by the Collateral Trustee;

       (i) the Issuer will promptly notify the Collateral Trustee if it shall at any time become aware that the SEC or any other government agency shall have ruled that any securities held by any Pledgor constitute Designated Securities; and

       (j) on or prior to the date that is 90 days after the Issue Date, the Pledgors will (i) cause the Pledged Stock consisting of Equity Interests in Japan Acquisition Co. to be pledged to the Collateral Trustee pursuant to a pledge agreement governed by Japanese law and (ii) to take any other actions reasonably requested by the Collateral Trustee that are necessary to perfect such pledge under Japanese law.

                  SECTION 2.04. Registration in Nominee Name; Denominations .  Subject to the terms of the Intercreditor Agreement, the Priority Representative, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities (other than Pledged Securities that are ULC Interests) in the name of the applicable Pledgor, endorsed or assigned in blank or in favor of the Priority Representative or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor will promptly give to the Collateral Trustee copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. Subject to the terms of the Intercreditor Agreement, if an Event of Default shall have occurred and be continuing, the Collateral Trustee shall have the right to exchange the certificates representing Pledged Securities (other than Pledged Securities that are ULC Interests) for certificates of smaller or larger denominations for any purpose consistent with this Agreement. With respect to Pledged Securities that are ULC Interests, subject to the terms of the Intercreditor Agreement, at any time at which an Event of Default has occurred and is continuing, the Collateral Trustee shall have the right to require the Pledgors to cause the ULC Interests to be transferred and registered as the Collateral Trustee may direct and each applicable Pledgor covenants that, at the time of any such transfer, it will provide all required consents and approvals. Each Pledgor shall use its commercially reasonable efforts to cause any Loan Party (as defined in the Intercreditor Agreement) that is not a party to this Agreement to comply with a request by the Collateral Trustee, pursuant to this Section 2.04, to exchange certificates representing Pledged Securities of such Loan Party (as defined in the Intercreditor Agreement) for certificates of smaller or larger denominations.

                  SECTION 2.05. Voting Rights; Dividends and Interest, Etc. (a) Subject to the terms of the Intercreditor Agreement, unless and until an Event of Default shall

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have occurred and be continuing and the Collateral Trustee shall have given notice to the relevant Pledgors of the Collateral Trustee’s intention to exercise its rights hereunder:

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

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

       (iii) Each Pledgor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Indenture, the other Note Documents, the Intercreditor Agreement and applicable laws; provided , that (A) any noncash dividends, interest, principal or other distributions, payments or other consideration in respect thereof, including any rights to receive the same to the extent not so distributed or paid, that would constitute Pledged Securities to the extent such Pledgor has the rights to receive such Pledged Securities if they were declared, distributed and paid on the date of this Agreement, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities, received in exchange for Pledged Securities or any part thereof, or in redemption thereof, as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise or (B) any non-cash dividends and other distributions paid or payable in respect of any Pledged Securities that would constitute Pledged Securities to the extent such Pledgor has the rights to receive such Pledged Securities if they were declared, distributed and paid on the date of this Agreement, in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Trustee, for the ratable

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benefit of the Secured Parties, and shall be forthwith delivered to the Priority Representative, for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Priority Representative).

                    (b) Subject to the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default and after notice by the Collateral Trustee to the Issuer of the Collateral Trustee’s intention to exercise its rights hereunder, all rights of any Pledgor to receive dividends, interest, principal or other distributions with respect to Pledged Securities that are not ULC Interests that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.05 shall cease, and all such rights shall thereupon become vested, for the ratable benefit of the Secured Parties, in the Collateral Trustee which, subject to the terms of the Intercreditor Agreement, shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Pledgor contrary to the provisions of this Section 2.05 shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Priority Representative, and shall be forthwith delivered to the Priority Representative, in the same form as so received (endorsed in a manner reasonably satisfactory to the Priority Representative). Subject to the terms of the Intercreditor Agreement, any and all money and other property paid over to or received by the Collateral Trustee pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Trustee in an account to be established by the Collateral Trustee upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 4.02 hereof. After all Events of Default have been cured or waived and a Responsible Officer has delivered to the Collateral Trustee a certificate to that effect, the Collateral Trustee shall promptly repay to each Pledgor (without interest) all dividends, interest, principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.05 and that remain in such account. With respect to Pledged Securities that are ULC Interests, all rights of any Pledgor to receive dividends, interest, principal or other distributions that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.05 shall continue and not become vested or held in trust for or on behalf of the Collateral Trustee or the First Priority Representative.

                    (c) Subject to the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default and after notice by the Collateral Trustee to the Issuer of the Collateral Trustee’s intention to exercise its rights hereunder, all rights of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.05 with respect to Pledged Securities that are not ULC Interests, and the obligations of the Collateral Trustee under paragraph (a)(ii) of this Section 2.05, shall cease, and all such rights shall thereupon become vested in the Collateral Trustee, for the ratable benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, subject to the terms of the Intercreditor Agreement and the Indenture, unless otherwise directed by the Holders of at least a majority in principal amount of the Securities then outstanding voting as a single

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class, the Collateral Trustee shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived and a Responsible Officer has delivered to the Collateral Trustee a certificate to that effect, each Pledgor shall have the right to exercise the voting and/or consensual rights and powers that such Pledgor would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above and the obligations of the Collateral Trustee under paragraph (a)(ii) shall be in effect. With respect to Pledged Securities that are ULC Interests, all rights of any Pledgor to exercise the voting and/or other consensual rights and powers that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.05 shall continue and all such rights shall not become vested in the Collateral Trustee or the First Priority Representative.

                  SECTION 2.06. Unlimited Liability Corporations . Notwithstanding the grant of security interest made by a Pledgor in favour of the Collateral Trustee, its successor and assigns, for the rateable benefit of the Secured Parties, of all of its Pledged Securities, any Pledgor that controls any interest (for the purposes of this Article II, “ ULC Interests ”) in any unlimited liability corporation (for the purposes of this Article II, a “ ULC ”) pledged hereunder shall remain registered as the sole registered and beneficial owner of such ULC Interests and will remain as registered and beneficial owner until such time as such ULC Interests are effectively transferred into the name of the Collateral Trustee or any other person on the books and records of such ULC. Nothing in this Agreement is intended to or shall constitute the Collateral Trustee or any person as a shareholder of any ULC until such time as notice is given to such ULC and further steps are taken thereunder so as to register the Collateral Trustee or any other person as the holder of the ULC Interests of such ULC. To the extent any provision hereof would have the effect of constituting the Collateral Trustee or any other person as a shareholder of a ULC prior to such time, such provision shall be severed therefrom and ineffective with respect to the ULC Interests of such ULC without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Pledged Stock which are not ULC Interests. Except upon the exercise of rights to sell or otherwise dispose of ULC Interests following the occurrence and during the continuance of an Event of Default hereunder, no Pledgor shall cause or permit, or enable any ULC in which it holds ULC Interests to cause or permit, the Collateral Trustee to: (a) be registered as shareholders of such ULC; (b) have any notation entered in its favour in the share register of such ULC; (c) be held out as a shareholder of such ULC; (d) receive, directly or indirectly, any dividends, property or other distributions from such ULC by reason of the Collateral Trustee holding a security interest in such ULC; or (e) act as a shareholder of such ULC, or exercise any rights of a shareholder of such ULC including the right to attend a meeting of, or to vote the shares of, such ULC.

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ARTICLE III

Security Interests in Other Personal Property

                  SECTION 3.01. Security Interest . (a) As security for the payment or performance when due (whether at the stated maturity, by acceleration or otherwise), as the case may be, in full of the Obligations, each Pledgor hereby assigns and pledges to the Collateral Trustee, its successors and permitted assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Trustee, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest (the “ Security Interest ”) in all right, title and interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the “ Article 9 Collateral ”):

      (i) all Accounts;

      (ii) all Chattel Paper;

      (iii) [Reserved];

      (iv) all Documents;

      (v) all Equipment;

      (vi) all General Intangibles;

      (vii) all Instruments;

      (viii) all Inventory and all other Goods not otherwise described above;

      (ix) all Investment Property; (x) all Letter of Credit Rights;

      (xi) all Commercial Tort Claims;

      (xii) all other personal property not otherwise described above (except for property specifically excluded from any defined term used in any of the foregoing clauses);

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

      (xiv) to the extent not otherwise included, all proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

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Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in (a) any vehicle covered by a certificate of title or ownership, whether now owned or hereafter acquired, (b) any cash, deposit account or securities account, (c) any assets acquired after the Issue Date, to the extent that, and for long as, granting a security interest in such assets would violate an enforceable contractual obligation binding on such assets that existed at the time of the acquisition thereof and was not created or made binding on such assets in contemplation of or in connection with the acquisition of such assets; provided , that, upon the reasonable request of the Priority Representative, the Issuer shall, and shall cause any applicable Subsidiary to, use commercially reasonable efforts to have waived or eliminated any such contractual obligation, (d) any property excluded from the definition of Pledged Collateral pursuant to Section 2.01 hereof, including without limitation any Designated Securities, (e) any Letter of Credit Rights to the extent any Pledgor, is required by applicable law to apply the proceeds of a drawing of such Letter of Credit for a specified purpose, (f) any Pledgor’s right, title or interest in any license, contract or agreement to which such Pledgor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that such a grant w