PLEDGE AND SECURITY AGREEMENT

Exhibit 10.2

PLEDGE AND SECURITY AGREEMENT

          THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time to time, this “ Security Agreement ”) is entered into as of April 30, 2009, by and between Escalade, Incorporated, an Indiana corporation (the “ Grantor ”), and JPMorgan Chase Bank, N.A., in its capacity as administrative agent (the “ Administrative Agent ”) for the Lenders party to the Credit Agreement referred to below.

PRELIMINARY STATEMENT

          The Grantor, the Administrative Agent, the other Loan Parties and the Lenders are entering into a Credit Agreement dated as of even date herewith, (as it may be amended or modified from time to time, the “ Credit Agreement ”). The Grantor is entering into this Security Agreement in order to induce the Lenders to enter into and extend credit to the Grantor under the Credit Agreement.

          ACCORDINGLY, the Grantor and the Administrative Agent, on behalf of the Lenders, hereby agree as follows:

ARTICLE I
DEFINITIONS

          1.1. Terms Defined in Credit Agreement . Terms used in this Agreement which are defined in the Credit agreement and are not otherwise defined in this Security Agreement shall have the same meanings in this Security Agreement as are ascribed 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 Preliminary Statement, the following terms shall have the following meanings:

          “ Accounts ” shall have the meaning set forth in Chapter 9.1 of the UCC.

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

          “ Assigned Contracts ” means, collectively, all of the Grantor’s rights and remedies under, and all moneys and claims for money due or to become due to the Grantor under those contracts set forth on Exhibit I hereto, and any other material contracts, and any and all amendments, supplements, extensions, and renewals thereof including all rights and claims of the Grantor now or hereafter existing: (a) under any insurance, indemnities, warranties, and guarantees provided for or arising out of or in connection with any of the foregoing agreements; (b) for any damages arising out of or for breach or default under or in connection with any of the foregoing contracts; (c) to all other amounts from time to time paid or payable under or in connection with any of the foregoing agreements; or (d) to exercise or enforce any and all covenants, remedies, powers and privileges thereunder.

          “ Chattel Paper ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Closing Date ” means the date of the Credit Agreement.

          “ Collateral ” shall have the meaning set forth in Article II.

          “ Collateral Access Agreement ” means any landlord waiver or other agreement, in form and substance satisfactory to the Administrative Agent, between the Administrative Agent and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of any Loan Party for any real property where any Collateral is located, as such landlord waiver or other agreement may be amended, restated, or otherwise modified from time to time.

          “ Collateral Deposit Account ” means each Deposit Account maintained by the Grantor into which all cash, checks or other similar payments relating to or constituting payments made in respect of Receivables will be deposited, which Collateral Deposit Accounts are identified as such on Exhibit B .

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

          “ Commercial Tort Claims ” shall have the meaning set forth in Section 9.1-102 of Chapter 9.1 of the UCC.

          “ Control ” shall have the meaning set forth in Chapter 8.1 or, if applicable, in Chapter 9.1 of the UCC.

          “ 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.

          “ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

          “ Deposit Account Control Agreement ” means an agreement, in form and substance 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 ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Documents ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Equipment ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Event of Default ” means an event described in Section 5.1.

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

          “ Excluded Deposit Account ” means (a) a Deposit Account that is not held with a Lender and that never has a balance in excess of $25,000 at the end of any day, (b) a Deposit Account that is a trust, fiduciary or payroll account, that is not used for any other purpose, and with respect to any payroll account, that never has a balance in excess of the payroll due within 5 days, and (c) the Deposit Accounts listed on Exhibit K hereto.

          “ Excluded Location ” shall have the meaning set forth in Section 4.13(a).

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          “ Excluded Investments ” means (i) all treasury stock of the Grantor, and (ii) 35% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each foreign Subsidiary directly owned by the Grantor.

          “ Fixtures ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ General Intangibles ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Goods ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Instruments ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Inventory ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Investment Property ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ Lenders ” means the lenders party to the Credit Agreement and their successors and assigns.

          “ Letter-of-Credit Rights ” shall have the meaning set forth in Chapter 9.1 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.

          “ 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.

          “ Patents Application Schedule ” shall have the meaning set forth in Section 3.10.

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

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

          “ 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.

          “ Required Secured Parties ” means (a) prior to an acceleration of the Obligations under the Credit Agreement, the Required Lenders, (b) after an acceleration of the Obligations under the Credit Agreement but prior to the date upon which the Credit Agreement has terminated by its terms and all of the obligations thereunder have been paid in full, Lenders holding in the aggregate at least 50% of the total of the Credit Exposure of all Lenders, and (c) after the Credit Agreement has terminated by its terms and all of the Obligations thereunder have been paid in full (whether or not the Obligations under the Credit Agreement were ever accelerated), Lenders holding in the aggregate at least 50% of the aggregate net early termination payments and all other amounts then due and unpaid from the Grantor to the Lenders under Swap Agreements, as determined by the Administrative Agent in its reasonable discretion.

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

          “ Security ” has the meaning set forth in Chapter 8.1 of the UCC.

          “ Stock Rights ” means all dividends, instruments or other distributions and any other right or property which the Grantor 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 Grantor now has or hereafter acquires any right, issued by an issuer of such Equity Interest.

          “ Supporting Obligations ” shall have the meaning set forth in Chapter 9.1 of the UCC.

          “ 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, and trade styles and the registrations and applications for registration thereof and the goodwill of the business symbolized by the foregoing; (b) all licenses of the foregoing, whether as licensee or licensor; (c) all renewals of the foregoing; (d) 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; (e) 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 (f) 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 Indiana, Ind. Code § 26-1 et. seq ., 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 Lender’s Lien on any Collateral. Excluding the definitions in Article I of this Security Agreement, if the Uniform Commercial Code of any state other than Indiana is applicable, then the references in this Security Agreement to any Chapter or Section of Ind. Code § 26-1, et seq . shall be deemed to be references to the equivalent Chapter or Section of such other state’s Uniform Commercial Code however numbered or denominated.

          The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

ARTICLE II
GRANT OF SECURITY INTEREST

          The Grantor hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders, a security interest in all of its rights, title and interests 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 the Grantor (including under any trade name or derivations thereof), and whether owned or consigned by or to, or leased from or to, the Grantor, and regardless of where located (all of which will be collectively referred to as the “ Collateral ”), including:

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to secure the prompt and complete payment and performance of the Secured Obligations.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

          The Grantor represents and warrants to the Administrative Agent and the Lenders that:

          3.1. Title, Perfection and Priority . The 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 the Grantor in the locations listed on Exhibit G , the Administrative Agent will have a fully perfected first priority security interest in that Collateral in which a security interest may be perfected by filing, subject only to Liens permitted under Section 4.1(e).

          3.2. Type and Jurisdiction of Organization, Organizational and Identification Numbers . The type of entity of the 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 . The 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), is disclosed in Exhibit A ; the Grantor has no other places of business except those set forth in Exhibit A .

          3.4. Collateral Locations . All of the Grantor’s locations where Collateral is located are listed on Exhibit A . All of said locations are owned by the Grantor except for locations (i) which are leased by the Grantor as lessee and designated in Part VII(b) of Exhibit A and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in Part VII(c) of Exhibit A.

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          3.5. Deposit Accounts . All of the Grantor’s Deposit Accounts are listed on Exhibit B .

          3.6. Exact Names . The Grantor’s name in which it has executed this Security Agreement is the exact name as it appears in the Grantor’s organizational documents, as amended, as filed with the Grantor’s jurisdiction of organization. The Grantor has not, during the past five years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or been a party to any acquisition.

          3.7. Letter-of-Credit Rights and Chattel Paper . Exhibit C lists all Letter-of-Credit Rights and Chattel Paper of the Grantor. All action by the Grantor necessary or desirable to protect and perfect the Administrative Agent’s Lien on each item listed on Exhibit C (including the delivery of all originals and the placement of a legend on all Chattel Paper as required hereunder) has been duly taken. The Administrative Agent will have a fully perfected first priority security interest in the Collateral listed on Exhibit C , subject only to Liens permitted under Section 4.1(e).

          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 records of the Grantor relating thereto and in all invoices with respect thereto furnished to the Administrative Agent by the Grantor from time to time. As of the time when each Account or each item of Chattel Paper arises, the 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 respects what they purport to be.

                    (b) With respect to its Accounts, (i) all Accounts represent bona fide sales of Inventory or rendering of services to Account Debtors in the ordinary course of the Grantor’s business and are not evidenced by a judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes existing or asserted with respect thereto in a material aggregate amount and the Grantor has not made any agreement with any Account Debtor for any extension of time for the payment thereof, any compromise or settlement for less than the full amount thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except such extension, discount or allowance allowed by Grantor in the ordinary course of its business; (iii) to Grantor’s knowledge, there are no facts, events or occurrences which in any way materially and adversely impair the validity or enforceability thereof or could reasonably be expected to reduce the amount payable thereunder as shown on the Grantor’s books and records and any invoices and statements with respect thereto; (iv) the Grantor has not received any notice of proceedings or actions which are threatened or pending against any Account Debtor which might result in any adverse change in such Account Debtor’s financial condition; and (v) the Grantor has no knowledge that any Account Debtor is unable generally to pay its debts as they become due.

                    (c) In addition, with respect to all of its Accounts, (i) the amounts shown on all invoices and statements with respect thereto are actually and absolutely owing to the Grantor as indicated thereon and are not in any way contingent; (ii) no payments have been or shall be made thereon except payments immediately delivered to a Collateral Deposit Account as required pursuant to Section 7.1 ; and (iii) to the Grantor’s knowledge, all Account Debtors have the capacity to contract.

          3.9. Inventory . With respect to any of its Inventory, (a) such Inventory (other than Inventory in transit) is located at one of the Grantor’s locations set forth on Exhibit A , (b) no Inventory (other than Inventory in transit) is now, or shall at any time or times hereafter be stored at any other location except as permitted by Section 4.1(g), (c) the Grantor has good, indefeasible and merchantable title to such Inventory and such Inventory is not subject to any Lien or security interest or document whatsoever except for the Lien granted to the Administrative Agent, for the benefit of the Administrative Agent and Lenders, and except for Permitted Liens, (d) such Inventory is Inventory of good and merchantable quality, (e) such Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to any third party upon such sale or other disposition, (f) 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 (g) the completion of manufacture, sale or other disposition of such 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 the Grantor is a party or to which such property is subject.

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          3.10. Intellectual Property . The Grantor does not have any interest in, or title to, any Patent or Trademark except as set forth in Exhibit D (other than Patent applications which have been separately disclosed to the Administrative Agent in writing (the “ Patent Application Schedule ”). 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 G and this Security Agreement with the United States Copyright Office and the United States Patent and Trademark Office, fully perfected first priority security interests in favor of the Administrative Agent on the Grantor’s Patents (other than Patent applications not disclosed in this Security Agreement) and Trademarks, such perfected security interests are enforceable as such as against any and all creditors of and purchasers from the Grantor; and all action necessary or desirable to protect and perfect the Administrative Agent’s Lien on the Grantor’s Patents (other than Patent applications not disclosed in this Security Agreement) or Trademarks shall have been duly taken.

          3.11. Filing Requirements . None of the Collateral is of a type for which security interests or liens may be perfected by filing under any federal statute except for (a) the vehicles and (b) Patents and Trademarks held by the Grantor. The legal description, county and street address of each property on which any Fixtures are located is set forth in Exhibit E together with the name and address of the record owner of each such property.

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

          3.13. Pledged Collateral .

                    (a) Exhibit F sets forth a complete and accurate list of all of the Pledged Collateral. The Grantor is the direct, sole beneficial owner and sole holder of record of the Pledged Collateral listed on Exhibit F 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 Lenders hereunder. The Grantor further represents and warrants that (i) all Pledged Collateral constituting an Equity Interest has been (to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized, validly issued, are fully paid and non-assessable, (ii) with respect to any certificates delivered to the Administrative Agent representing an Equity Interest, either such certificates are Securities as defined in Chapter 8.1 of the UCC as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, the Grantor has so informed the Administrative Agent so that the Administrative Agent may take steps to perfect its security interest therein as a General Intangible, (iii) all Pledged Collateral held by a securities intermediary is covered by a control agreement among the Grantor, the securities intermediary and the Administrative Agent pursuant to which the Administrative Agent has Control and (iv) all Pledged Collateral which represents Indebtedness owed to the Grantor has been duly authorized, authenticated or issued and delivered by the issuer of such Indebtedness, 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 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, (ii) there are existing no options, warrants, calls or commitments of any character whatsoever relating to the Pledged Collateral or which obligate the issuer of any Equity Interest included in the Pledged Collateral to issue additional Equity Interests, and (iii) no consent, approval, authorization, or other action by, and no giving of notice, filing with, any governmental authority or any other Person is required for the pledge by the Grantor of the Pledged Collateral pursuant to this Security Agreement or for the execution, delivery and performance of this Security Agreement by the 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 Collateral 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.

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                    (c) Except as set forth in Exhibit F , the Grantor owns 100% of the issued and outstanding Equity Interests which constitute Pledged Collateral and none of the Pledged Collateral which represents Indebtedness owed to the Grantor is subordinated in right of payment to other Indebtedness 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, the Grantor agrees that:

          4.1. General .

                    (a) Collateral Records . The Grantor will maintain complete and accurate books and records with respect to the Collateral, and furnish to the Administrative Agent, such reports relating to the Collateral as the Administrative Agent shall from time to time request.

                    (b) Authorization to File Financing Statements; Ratification . The 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 perfected security interest in and, if applicable, Control of, the Collateral. Any financing statement filed by the Administrative Agent may be filed in any filing office in any UCC jurisdiction and may (i) indicate the 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 Chapter 9.1 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 Chapter 9.1 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether the Grantor is an organization, the type of organization and any organization identification number issued to the Grantor, and (B) in the case of a financing statement filed as a fixture filing or indicating the Grantor’s Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. The Grantor also agrees to furnish any such information to the Administrative Agent promptly upon request. The 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 . The Grantor will, if so requested by the Administrative Agent, furnish to the Administrative Agent, as often as the Administrative Agent reasonably requests, statements and schedules further identifying and describing the Collateral and such other reports and information in connection with the Collateral as the Administrative Agent may reasonably request, all in such detail as the Administrative Agent may specify. The 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 the Collateral and the priority thereof against any Lien not expressly permitted hereunder.

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

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

                    (f) Other Financing Statements . The Grantor will not authorize the filing of any financing statement naming it as debtor covering all or any portion of the Collateral, except as permitted by Section 4.1(e) . The 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 the Grantor’s rights under Section 9.1-509(d)(2) of the UCC.

                    (g) Locations . The Grantor will not (i) maintain any Collateral at any location other than those locations listed on Exhibit A , (ii) otherwise change, or add to, such locations without the Administrative Agent’s prior written consent (such consent not to be unreasonably withheld or delayed) as required by the Credit Agreement (and if the Administrative Agent gives such consent, the Grantor will concurrently therewith obtain a Collateral Access Agreement for each such location to the extent required by the Credit Agreement), or (iii) change its principal place of business or chief executive office from the location identified on Exhibit A , other than as permitted by the Credit Agreement.

                    (h) Compliance with Terms . The Grantor will perform and comply with all obligations in respect of the Collateral and all agreements to which it is a party or by which it is bound relating to the Collateral.

          4.2. Receivables .

                    (a) Certain Agreements on Receivables. The 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, prior to the occurrence of an Event of Default, the Grantor may discount, credit, rebate or otherwise reduce the amount of Accounts arising from the sale of Inventory in accordance with its present policies and in the ordinary course of business.

                    (b) Collection of Receivables . Except as otherwise provided in this Security Agreement, the Grantor will collect and enforce, at the Grantor’s sole expense, all amounts due or hereafter due to the Grantor under the Receivables, except that, prior to the occurrence of an Event of Default, the Grantor may choose not to enforces Receivables that have been written off in accordance with its present policies and in the ordinary course of business.

                    (c) Delivery of Invoices . The Grantor shall deliver to the Administrative Agent as soon as practical upon the Administrative Agent’s written request duplicate invoices with respect to each Account owned by it 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 a Receivable exists or (ii) if, to the knowledge of the Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to a Receivable, the Grantor shall disclose such fact to the Administrative Agent in writing at least as often as once in each three Fiscal Months. At least as often as once in each three Fiscal Months, the Grantor shall send the Administrative Agent a copy of each credit memorandum in excess of $50,000 and the Grantor shall simultaneously report each other credit memo and each of the facts required to be disclosed to the Administrative Agent in accordance with this Section 4.2(d) .

                    (e) Electronic Chattel Paper . The Grantor shall take all steps necessary to grant the Administrative Agent Control of all electronic chattel paper 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.

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          4.3. Inventory and Equipment.

                    (a) Maintenance of Goods . The Grantor will do all things necessary to maintain, preserve, protect and keep the Inventory and the Equipment in good repair and working and saleable condition, except for damaged or defective or obsolete goods arising in the ordinary course of the Grantor’s business and except for ordinary wear and tear in respect of the Equipment.

                    (b) Returned Inventory . If an Account Debtor returns any Inventory to the Grantor when no Event of Default exists, then the Grantor shall promptly determine the reason for such return and shall issue a credit memorandum to the Account Debtor in the appropriate amount. The Grantor shall promptly report to the Administrative Agent any return involving an amount in excess of $200,000. 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 the Grantor when an Event of Default exists, the Grantor, upon the written 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.

                    (c) Inventory Count . The Grantor will conduct a physical count of its Inventory at least once per Fiscal Year (at one time or by cycle counting in each case in accordance with GAAP), and after and during the continuation of an Event of Default, at such other times as the Administrative Agent requests. Upon the request of the Administrative Agent, the Grantor, at Grantor’s own expense, shall deliver to the Administrative Agent the results of each physical verification, which the Grantor has made, or has caused any other Person to make on its behalf, of all or any portion of its Inventory.

                    (d) Equipment . Upon the written request of the Administrative Agent, the Grantor shall inform the Administrative Agent of any additions to or deletions from the Equipment which individually exceed $100,000 book value on depreciation schedules, or if an Event of Default has occurred and is continuing the Grantor shall inform the Administrative Agent promptly upon each such addition or deletion. The Grantor shall not permit any Equipment to become a fixture with respect to real property or to become an accession with respect to other personal property with respect to which real or personal property the Administrative Agent does not have a Lien. The Grantor will not, without the Administrative Agent’s prior written consent, alter or remove any identifying symbol or number on any of the Grantor’s Equipment constituting Collateral.

                    (e) Titled Vehicles . Upon the Administrative Agent’s request after an Event of Default, promptly deliver to the Administrative Agent the original of any vehicle title certificate and provide and/or file all other documents or instruments necessary to have the Lien of the Administrative Agent noted on any such certificate or with the appropriate state office. The Grantor will give the Administrative Agent notice of its acquisition of any vehicle covered by a certificate of title; provided that, no such notice shall be required so long as the net book value of all vehicles owned by the Loan Parties is less than $100,000.

          4.4. Delivery of Instruments, Securities, Chattel Paper and Documents . The Grantor will (a) deliver to the Administrative Agent promptly upon execution of this Security Agreement the originals of all Chattel Paper, Securities and Instruments constituting Collateral (if any then exist), (b) hold in trust for the Administrative Agent upon receipt and immediately thereafter deliver to the Administrative Agent any Chattel Paper, Securities and Instruments constituting Collateral, (c) upon the Administrative Agent’s request, deliver to the Administrative Agent (and thereafter hold in trust for the Administrative Agent upon receipt and immediately deliver to the Administrative Agent) any Document evidencing or constituting Collateral and (d) upon the Administrative Agent’s request, deliver to the Administrative Agent a duly executed amendment to this Security Agreement, in the form of Exhibit H hereto (the “ Amendment ”), pursuant to which the Grantor will pledge such additional Collateral. The Grantor hereby authorizes the Administrative Agent to attach each Amendment to this Security Agreement and agrees that all additional Collateral set forth in such Amendments shall be considered to be part of the Collateral.

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          4.5. Uncertificated Pledged Collateral . The Grantor will permit the Administrative Agent from time to time to cause the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Pledged Collateral not represented by certificates to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Pledged Collateral not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Administrative Agent granted pursuant to this Security Agreement. The Grantor will take any actions necessary to cause (a) the issuers of uncertificated securities which are Pledged Collateral and (b) any securities intermediary which is the holder of any Pledged Collateral, to cause the Administrative Agent to have and retain Control over such Pledged Collateral. Without limiting the foregoing, the Grantor will, with respect to Pledged Collateral held with a securities intermediary, cause such securities intermediary to enter into a control agreement with the Administrative Agent, in form and substance satisfactory to the Administrative Agent, giving the Administrative Agent Control.

          4.6. Pledged Collateral .

                    (a) Changes in Capital Structure of Issuers. Except as otherwise provided in the Credit Agreement, the Grantor will not (i) permit or suffer any issuer of an Equity Interest constituting Pledged Collateral to dissolve, merge, liquidate, retire any of its Equity Interests or other Instruments or Securities evidencing ownership, reduce its capital, sell or encumber all or substantially all of its assets (except for Permitted Liens and sales of assets permitted pursuant to Section 4.1(d) ) or merge or consolidate with any other entity, or (ii) vote any Pledged Collateral in favor of any of the foregoing.

                    (b) Issuance of Additional Securities . The Grantor will not permit or suffer the issuer of an Equity Interest constituting Pledged Collateral owned by it to issue additional Equity Interests, any right to receive the same or any right to receive earnings, except to the Grantor.

                    (c) Registration of Pledged Collateral . The Grantor will permit any registerable Pledged Collateral to be registered in the name of the Administrative Agent or its nominee at any time at the option of the Required Secured Parties.

                    (d) Exercise of Rights in Pledged Collateral .