3COM CORP
EX 10.16
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>6
<FILENAME>a2067560zex-10_16.htm
<DESCRIPTION>EX 10.16
<TEXT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="ma1033_exhibit_10.16"> </A>
<A NAME="toc_ma1033_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit&nbsp;10.16    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ma1033_security_agreement"> </A>
<A NAME="toc_ma1033_2"> </A>
<BR></FONT><FONT SIZE=2><B>SECURITY AGREEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECURITY AGREEMENT, dated as of November&nbsp;28, 2001, between 3COM CORPORATION, a Delaware corporation ("Grantor"), and BANK OF AMERICA, N.A., in its
capacity as Agent for Lenders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ma1033_w_i_t_n_e_s_s_e_t_h_"> </A>
<A NAME="toc_ma1033_3"> </A>
<BR></FONT><FONT SIZE=2><B>W I T N E S S E T H:    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof by and among Grantor, Agent and Lenders (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders have agreed to make the Loans and issue Letters of Credit on behalf of
Grantor; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
in order to induce Agent and Lenders to enter into the Credit Agreement and the other Loan Documents and to induce Lenders to make the Loans and issue Letters of Credit as
provided for in the Credit Agreement, Grantor has agreed to grant a continuing Lien on the Collateral (as hereinafter defined) to secure the Obligations; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>DEFINED TERMS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The following terms shall have the following respective
meanings: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Accounts</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned or hereafter acquired or arising accounts, as defined in the UCC, including any rights
to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Affiliate</I></FONT><FONT SIZE=2>" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person or which owns, directly or indirectly, five percent (5%) or more of the outstanding equity interest of such Person. A Person shall be deemed to control another Person
if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Cash Management Investments</I></FONT><FONT SIZE=2>" means, for any Person, such Person's (a)&nbsp;cash and Cash Equivalents, (b)&nbsp;deposit accounts,
(c)&nbsp;Investment Property, and (d)&nbsp;Short Term Investments. For purposes of this Agreement, Cash Management Investments shall not include: (i)&nbsp;Proceeds of any Collateral, unless and
until such Proceeds have been disbursed from a Payment Account to Grantor pursuant to </FONT><FONT SIZE=2><I>Section&nbsp;11(a)</I></FONT><FONT SIZE=2>; and (ii)&nbsp;Investment Property
consisting of Grantor's Capital Stock in its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Chattel Paper</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned or hereafter acquired chattel paper, as defined in the UCC, including electronic
chattel paper. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Collateral </I></FONT><FONT SIZE=2>has the meaning set forth in </FONT><FONT SIZE=2><I>Section&nbsp;2(a)</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Deposit Accounts</I></FONT><FONT SIZE=2>" means all "deposit accounts" as such term is defined in the UCC, now or hereafter held in the name of Grantor. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Documents</I></FONT><FONT SIZE=2>" means all documents as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of
title, now owned or hereafter acquired by the Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Equipment</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including embedded software, motor vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs, molds and
office equipment, as well as all of such types of property leased by the Grantor and all of the Grantor's rights and interests with respect thereto under such leases (including, </FONT></P>

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<P><FONT SIZE=2>
without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in
connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Excluded Cash Management Investments</I></FONT><FONT SIZE=2>" means Cash Management Investments that are not Included Cash Management Investments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>General Intangibles</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned or hereafter acquired general intangibles, choses in action and causes of
action and all other intangible personal property of the Grantor of every kind and nature (other than Accounts and Proprietary Rights), including, without limitation, all contract rights, payment
intangibles, corporate or other business records, customer lists, registrations, tax refund claims, any funds which may become due to the Grantor in connection with the termination of any employee
benefit plan or any rights thereto and any other amounts payable to the Grantor from any employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which the
Grantor is beneficiary, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged equity interests or Investment Property and any letter
of credit, guarantee, claim, security interest or other security held by or granted to the Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Goods</I></FONT><FONT SIZE=2>" means all "goods" as defined in the UCC, now owned or hereafter acquired by Grantor, wherever located, including embedded
software to the extent included in "goods" as defined in the UCC, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Included Cash Management Investments</I></FONT><FONT SIZE=2>" means Cash Management Investments consisting of: (a)&nbsp;the Qualified Custodial Accounts;
(b)&nbsp;any Investment Property maintained in the Qualified Custodial Accounts; (c)&nbsp;any Deposit Accounts now or in the future maintained with Bank of America; and (d)&nbsp;the Payment
Accounts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Instruments</I></FONT><FONT SIZE=2>" means all instruments as such term is defined in the UCC, now owned or hereafter acquired by the Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Inventory</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned and hereafter acquired inventory, goods and merchandise, wherever located, to be
furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded software), other
materials and supplies of any kind, nature or description which are used or consumed in the Grantor's business or used in connection with the packing, shipping, advertising, selling or finishing of
such goods, merchandise, and all documents of title or other Documents representing them. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Investment Property</I></FONT><FONT SIZE=2>" means all of the Grantor's right title and interest in and to any and all: (a)&nbsp;securities whether
certificated or uncertificated; (b)&nbsp;securities entitlements; (c)&nbsp;securities accounts; (d)&nbsp;commodity contracts; or (e)&nbsp;commodity accounts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Letter-of-Credit Rights</I></FONT><FONT SIZE=2>" means "letter-of-credit rights" as such term is defined in
the UCC, now owned or hereafter acquired by Grantor, including rights to payment or performance under a letter of credit, whether or not Grantor, as beneficiary, has demanded or is entitled to demand
payment or performance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Liquidity Trigger Event</I></FONT><FONT SIZE=2>" means the first to occur of (1)&nbsp;an Event of Default (y)&nbsp;arising out of a breach of </FONT> <FONT SIZE=2><I>Section&nbsp;7.25 </I></FONT><FONT SIZE=2>of the Credit Agreement or
(z)&nbsp;under </FONT><FONT SIZE=2><I>Section&nbsp;9.1(a) </I></FONT><FONT SIZE=2>of the Credit
Agreement, or (2)&nbsp;acceleration of the Loans pursuant to </FONT><FONT SIZE=2><I>Section&nbsp;9.2(a)(B) </I></FONT><FONT SIZE=2>of the Credit Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Payment Account</I></FONT><FONT SIZE=2>" means each bank account established pursuant to this Security Agreement, to which the proceeds of Accounts and other
Collateral are deposited or credited, and which is </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>
maintained in the name of the Agent or the Grantor, as the Agent may determine, on terms acceptable to the Agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Payment Account Trigger Event</I></FONT><FONT SIZE=2>" means any Event of Default. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Proceeds</I></FONT><FONT SIZE=2>" has the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Proprietary Rights</I></FONT><FONT SIZE=2>" means all of the Grantor's now owned and hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, trade secrets, patent, trademark and service mark applications, and
all licenses and rights and goodwill related to any of the foregoing, and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Qualified Custodial Accounts</I></FONT><FONT SIZE=2>" means account no. CMVF 1000002 maintained at Mellon Bank, N.A., any future securities or custodial
accounts that are Qualified Custodial Accounts as defined in the Credit Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Short-term Investments</I></FONT><FONT SIZE=2>" means investments with maturities exceeding three months but less than three years. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Software</I></FONT><FONT SIZE=2>" means all "software" as such term is defined in the UCC, now owned or hereafter acquired by the Grantor, other than software
embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Supporting Obligations</I></FONT><FONT SIZE=2>" means all supporting obligations as such term is defined in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>UCC</I></FONT><FONT SIZE=2>" means the Uniform Commercial Code, as in effect from time to time, of the State of California or of any other state the laws of
which are required as a result thereof to be applied in connection with the issue of perfection, continuation and enforcement of security interests. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All
other capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in </FONT><FONT SIZE=2><I>Annex A  </I></FONT><FONT SIZE=2>thereto. All other undefined terms contained in this Security
Agreement, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the
same are used or defined therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>GRANT OF LIEN.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)
As security for all its Obligations, the Grantor hereby grants to the Agent, for the benefit of the Agent and the Lenders, a continuing security interest in, lien on, assignment
of and right of set-off against, all of the following property and assets of the Grantor, whether now owned or existing or hereafter acquired or arising, regardless of where located: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;all
Accounts; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;all
Inventory; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;all
contract rights; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;all
Chattel Paper; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;all
Documents; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;all
Instruments; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;all
Supporting Obligations and Letter-of-Credit Rights; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(viii)&nbsp;all
General Intangibles (including payment intangibles and Software); </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;all Goods; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;all
Equipment; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xi)&nbsp;Investment
Property; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xii)&nbsp;all
of the Grantor's Deposit Accounts, credits, and balances with and other claims against the Agent, and any Payment Accounts; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xiii)&nbsp;all
books, records and other property related to or referring to any of the foregoing, including books, records, account ledgers, data processing
records, computer software and other property and General Intangibles at any time evidencing or relating to any of the foregoing; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xiv)&nbsp;the
following commercial tort claims in which the Grantor is a plaintiff: </FONT></P>
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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="76%"><FONT SIZE=2>3Com v. Electronic Recovery Specialists,<BR>
Davis Gilbert and Leonard Caldwell<BR>
Docket No.&nbsp;99 C 698<BR>
United States District Court for the Northern District<BR>
of Illinois, Eastern Division<BR>
Filed: January&nbsp;27, 2000;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
(2)</FONT></TD>
<TD WIDTH="76%"><FONT SIZE=2><BR>
3Com vs. Wave Technologies,&nbsp;Inc.<BR>
CV797525<BR>
Superior Court of California, County of Santa Clara<BR>
Filed: April&nbsp;13, 2001;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
(3)</FONT></TD>
<TD WIDTH="76%"><FONT SIZE=2><BR>
3Com Corporation vs. Total Upgrade Solutions,&nbsp;Inc.<BR>
CA No.&nbsp;01-1629-A<BR>
United States District Court, Eastern District of Virginia;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
(4)</FONT></TD>
<TD WIDTH="76%"><FONT SIZE=2><BR>
3Com Corporation and 3Com Canada,&nbsp;Inc. vs<BR>
Intelligent Decisions,&nbsp;Inc.<BR>
Ontario Superior Court of Justice<BR>
Court file no.&nbsp;00-CV-188089; and</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
(5)</FONT></TD>
<TD WIDTH="76%"><FONT SIZE=2><BR>
3Com Corporation and 3Com Canada,&nbsp;Inc. vs.<BR>
Zorin International Corporation, et al<BR>
Ontario Superior Court of Justice<BR>
Court file no.&nbsp;00-CV-198957;</FONT></TD>
</TR>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xv)&nbsp;all
accessions to, substitutions for and replacements, products and proceeds of any of the foregoing, including, but not limited to, proceeds of any insurance
policies, claims against third parties, and condemnation or requisition payments with respect to all or any of the foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(xvi)&nbsp;Notwithstanding
anything herein to the contrary, in no event shall the Collateral include, and Grantor shall not be deemed to have granted a security interest in: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;any
of Grantor's rights and interests in any license, contract or agreement to which Grantor is a party or any of its rights thereunder to the extent, but only to
the extent, that (A)&nbsp;such a grant is
prohibited by law, </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, that immediately upon such legal prohibition terminating, the Collateral shall include, and Grantor shall be deemed to have
granted a security interest in, all such rights and provisions as if such prohibition had never been in effect, or (B)&nbsp;such a grant would, under the terms of any such license, contract, or
agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract, or agreement to which Grantor is a party (other than to the extent that any such term
would be rendered ineffective pursuant to the UCC of any relevant jurisdiction or any </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>
other applicable law (including the Bankruptcy Code) or principles of equity); </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, that immediately upon the ineffectiveness, lapse, or
termination of any such provision, the Collateral shall include, and Grantor shall be deemed to have granted a security interest in, all such rights and provisions as if such provision had never been
in effect; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;any
Equipment subject to a Capital Lease or purchase money financing (in each case as permitted by the Credit Agreement) that by its terms would not allow the
security interest created hereunder; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;any
Proprietary Rights; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;35%
of Grantor's shares of each of its foreign Restricted Subsidiaries and all of Grantor's shares of each of its foreign Unrestricted Subsidiaries; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;any
Excluded Cash Management Investments. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>All
of the foregoing, together with the Real Estate covered by the Mortgage(s), all equity interests in Subsidiaries pledged to the Agent and all other property of the Grantor in which the Agent or
any Lender may at any time be granted a Lien as collateral for the Obligations, is herein collectively referred to as the "Collateral." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All
of the Obligations shall be secured by all of the Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Notwithstanding
anything herein to the contrary: (i)&nbsp;Agent's Lien on any Payment Account shall be deemed to automatically attach without further action upon,
but in no event before, the occurrence of a Payment Account Trigger Event; and (ii)&nbsp;Agent's Lien on any Included Cash Management Investments shall be deemed to automatically attach without
further action upon, but in no event before, the
occurrence of a Liquidity Trigger Event. Until such attachment, Included Cash Management Investments shall not be deemed Collateral for purposes of the terms of this Security Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>PERFECTION AND PROTECTION OF SECURITY INTEREST.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Grantor shall, at its expense, perform all steps requested by the Agent at any time to perfect, maintain, protect, and enforce the Agent's Liens granted under
this Security Agreement or any other Loan Document, including: (i)&nbsp;executing, delivering and/or filing and recording of the Mortgages and executing and filing financing or continuation
statements, and amendments thereof, in form and substance reasonably satisfactory to the Agent; (ii)&nbsp;delivering to the Agent the originals of all Instruments, Documents, and tangible Chattel
Paper, and all other Collateral in Grantor's possession of which the Agent determines it should have physical possession in order to perfect and protect the Agent's security interest therein, duly
pledged, endorsed, or assigned to the Agent without restriction; (iii)&nbsp;delivering to the Agent warehouse receipts covering any portion of the Collateral located in warehouses and for which
warehouse receipts are issued and certificates of title covering any portion of the collateral for which certificates of title have been issued; (iv)&nbsp;when an Event of Default has occurred and
is continuing, transferring Inventory to warehouses or other locations designated by the Agent; (v)&nbsp;placing notations on the Grantor's books of account to disclose the Agent's security
interest; (vi)&nbsp;assigning and, upon the Agent's request during the continuance of an Event of Default, delivering to the Agent all Supporting Obligations, including letters of credit on which
such Grantor is named beneficiary with the written consent of the issuer thereof; and (vii)&nbsp;taking such other steps as are deemed necessary or desirable by the Agent to maintain and protect the
Agent's Liens. The Grantor agrees that a carbon, photographic, photostatic, or other reproduction of this Security Agreement or of a financing statement is sufficient as a financing statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Unless
Agent shall otherwise consent in writing (which consent may be revoked), Grantor shall deliver to Agent all Collateral consisting of negotiable Documents,
certificated securities </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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(accompanied by stock papers executed in blank), Chattel Paper and Instruments promptly after Grantor receives the same. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Grantor
shall, in accordance with the terms of the Credit Agreement, obtain or use its best efforts to obtain waivers or subordinations of Liens from landlords and
mortgagees, and Grantor shall in all instances obtain signed acknowledgements of Agent's Liens from bailees having possession of any Collateral that they hold for the benefit of Agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If
required by the terms of the Credit Agreement and not waived by Agent in writing (which waiver may be revoked), Grantor shall obtain authenticated control
agreements from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any
financial assets or commodities to or for Grantor. Notwithstanding anything to the contrary herein or in the Loan Documents, Agent will not deliver to any Person any notice of exclusive control, any
entitlement order, or other directions or instructions pursuant to any account control agreement with respect to (i)&nbsp;the Qualified Custodial Accounts or the Deposit Accounts (other than Payment
Accounts), except in connection with the exercise of remedies hereunder following the occurrence of a Liquidity Trigger Event or (ii)&nbsp;the Payment Accounts, except in connection with the
exercise of remedies hereunder following the occurrence of a Payment Account Trigger Event. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;If
Grantor is or becomes the beneficiary of a letter of credit Grantor shall promptly notify Agent thereof and, if an Event of Default exists, upon the Agent's
request, enter into a tri-party agreement with Agent and the issuer and/or confirmation bank with respect to Letter-of-Credit Rights assigning such
Letter-of-Credit Rights to Agent and directing all payments thereunder to the Payment Account, all in form and substance reasonably satisfactory to Agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;Grantor
shall take all steps necessary to grant the Agent control of all electronic chattel paper in accordance with the Code and all "transferable records" as
defined in the Uniform Electronic Transactions Act. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Grantor
hereby irrevocably authorizes the Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a)&nbsp;indicate the Collateral (i)&nbsp;as all assets of Grantor as to which Grantor has granted a security interest hereunder, or words
of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Division 9 of the UCC of the State of California or such jurisdiction, or
(ii)&nbsp;as being of an equal or lesser scope or with greater detail, and (b)&nbsp;contain any other information required by part&nbsp;5 of Division 9 of the UCC of the State of California for
the sufficiency or filing office acceptance of any financing statement or amendment, including (i)&nbsp;whether Grantor is an organization, the type of organization and any organization
identification number issued to Grantor, and (ii)&nbsp;in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be
cut, a sufficient description of real property to which the Collateral relates. Grantor agrees to furnish any such information to the Agent promptly upon request. Grantor also ratifies its
authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Grantor
shall promptly notify Agent of any commercial tort claim (as defined in the UCC) acquired by it and unless otherwise consented by Agent, Grantor shall enter
into a supplement to this Security Agreement, granting to Agent a Lien in such commercial tort claim. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;From
time to time, the Grantor shall, upon the Agent's request, execute and deliver confirmatory written instruments pledging to the Agent, for the ratable benefit
of the Agent and the Lenders, the Collateral, but the Grantor's failure to do so shall not affect or limit any security interest or any other rights of the Agent or any Lender in and to the Collateral
with respect to the Grantor. So long as the Credit Agreement is in effect and until all Obligations have been fully satisfied, the Agent's </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>
Liens shall continue in full force and effect in all Collateral (whether or not deemed eligible for the purpose of calculating the Availability or as the basis for any advance, loan, extension of
credit, or other financial accommodation). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;[Intentionally
Deleted]. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;Without
limiting the prohibitions on mergers involving Grantor contained in the Credit Agreement, Grantor shall not reincorporate or reorganize itself under the
laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof or change its type of entity as identified on Schedule&nbsp;II without giving
thirty (30)&nbsp;days' prior written notice to Agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;Grantor
acknowledges that it is not authorized to file any financing statement regarding Agent's Liens on the Collateral or amendment or termination statement with
respect to any financing statement regarding Agent's Liens on the Collateral without the prior written consent of Agent and agrees that it will not do so without the prior written consent of Agent,
subject to Grantor's rights under Section&nbsp;9509(d)(2) of the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>LOCATION OF COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;(a)&nbsp;The Grantor represents and warrants to
the Agent and the Lenders that: (A) </FONT><FONT SIZE=2><I>Schedule&nbsp;I </I></FONT><FONT SIZE=2>is a correct and complete list of the location of Grantor's location of its books and records, the
locations of the Collateral, and the locations of all of its places of business; </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that Collateral at undisclosed locations shall not
constitute a breach of this provision to the extent that it does not exceed $2,000,000 in value at any one undisclosed location and $10,000,000 in value at all undisclosed locations; and (B) </FONT> <FONT SIZE=2><I>Schedule&nbsp;I </I></FONT><FONT
SIZE=2>correctly identifies any of such facilities and locations that are not owned by the Grantor and sets forth the names of the owners and
lessors or sublessors of such facilities and locations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The
Grantor covenants and agrees that it will not: (A)&nbsp;maintain any Collateral, at any location other than those locations listed for the Grantor on </FONT> <FONT SIZE=2><I>Schedule&nbsp;I; provided, however</I></FONT><FONT SIZE=2>, that Collateral
at undisclosed locations shall not constitute a breach of this provision to the extent that it
does not exceed $2,000,000 in value at any one undisclosed location and $10,000,000 in value at all undisclosed locations; or (B)&nbsp;otherwise change or add to any of such locations, unless it
gives the Agent at least thirty (30)&nbsp;days' prior written notice thereof and executes any and all financing statements and other documents that the Agent reasonably requests in connection
therewith; such notice shall be deemed to amend </FONT><FONT SIZE=2><I>Schedule&nbsp;I </I></FONT><FONT SIZE=2>to include each new location described in the notice. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without
limiting the foregoing, the Grantor represents that all of its Inventory (other than Inventory in transit) is, and covenants that all of its Inventory
(other than Inventory in Transit) will be, located either: (A)&nbsp;on premises owned by the Grantor; (B)&nbsp;on premises leased by the Grantor, provided that the
Grantor has complied with its best efforts obligations with respect to each of the leased premises in accordance with </FONT><FONT SIZE=2><I>Section&nbsp;3(c)</I></FONT><FONT SIZE=2>; (C)&nbsp;in
a warehouse or with a bailee, provided that the Agent has received an executed warehouseman or bailee letter from the applicable Person in form and substance satisfactory to the Agent; (D)&nbsp;on
consignment, provided that the Borrower has taken all actions necessary to protect its interests in such Collateral against such consignees and their creditors (including the filing of precautionary
financing statements against such consignees and has provided to Agent an assignment of such financing statements); or (E)&nbsp;in transit to one of the foregoing locations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>JURISDICTION OF ORGANIZATION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Schedule&nbsp;II  </I></FONT><FONT SIZE=2>hereto identifies Grantor's name as of the Closing Date as it appears
in official filings in the state of its incorporation or other organization, the type of entity of Grantor
(including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by Grantor's state of incorporation or organization or a statement
that no such number has been issued and the jurisdiction in which the Grantor is incorporated or organized. Grantor has only one state of incorporation or organization. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Grantor represents
and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>
(a)&nbsp;Grantor has and will continue to have rights in and the power to transfer all of the Collateral free and clear of all Liens whatsoever, except for Permitted Liens; (b)&nbsp;the Agent's
Liens in the Collateral will not be subject to any prior Lien except for those Liens identified in </FONT><FONT SIZE=2><I>clauses (c), (d), (e), (h), (l), (m) </I></FONT><FONT SIZE=2>and </FONT> <FONT SIZE=2><I>(o) </I></FONT><FONT SIZE=2>of the
definition of Permitted Liens; and (c)&nbsp;the Grantor will use, store, and maintain the Collateral with all reasonable care and will use
such Collateral for lawful purposes only. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>APPRAISALS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Grantor shall, at its sole expense and upon the Agent's request,
provide the Agent with appraisals or updates thereof of any or all of the Collateral in which it has an interest from an appraiser, and prepared on a basis, satisfactory to the Agent, such appraisals
and updates to include, without limitation, information required by applicable laws and regulations and by the internal policies of the Lenders, or required to calculate the Borrowing Base; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>,
that unless a Default or Event of Default has occurred and is continuing, no Grantor shall be required to pay for an appraisal or update
pursuant to this sentence more frequently than (i)&nbsp;twice prior to the Stated Maturity Date with respect to Real Estate, or (ii)&nbsp;once per quarter with respect to Inventory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>ACCESS AND EXAMINATION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Agent may at all reasonable times on a quarterly
basis and during regular business hours (and at any time and frequency when a Default or Event of Default exists and is continuing) have access to, examine, audit, make extracts from or copies of and
inspect any or all of the Grantor's records, files, and books of account and the Collateral, and discuss the Grantor's affairs with the Grantor's officers and management. The foregoing may be
accomplished by Agent's own employees or its agents or independent contractors, accompanied by any Lender which so elects, and shall, to the extent expenses are reasonable, be at the sole expense of
Grantor. The Grantor will deliver to the Agent any instrument necessary for the Agent to obtain records from any service
bureau maintaining financial records for the Grantor. The Agent may, and at the direction of the Required Lenders shall, at any time when a Default or Event of Default exists, and at the Grantor's
expense, make copies of all of the Grantor's books and records, or require the Grantor to deliver such copies to the Agent. The Agent may, during the continuance of an Event of Default, and at the
sole expense of the Grantor, use such of the Grantor's respective personnel, supplies, and Real Estate as may be reasonably necessary for maintaining or enforcing the Agent's Liens. The Agent shall
have the right to contact Account Debtors, warehousemen, bailees and similar third Persons, at any time, in the name of a nominee of the Agent (and when an Event of Default exists and is continuing,
in Agent's name), to verify the validity, amount or any other matter relating to the Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>COLLATERAL REPORTING.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Grantor shall provide the Agent with the following
documents at the following times in form satisfactory to the Agent: (a)&nbsp;at the times specified in </FONT><FONT SIZE=2><I>Section&nbsp;5.2(k) </I></FONT><FONT SIZE=2>of the Credit Agreement,
or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time, a schedule of the Grantor's Accounts created, credits given, cash collected and other adjustments
to Accounts since the last such schedule and a Borrowing Base Certificate; (b)&nbsp;on a monthly basis, by the 15th day of the following month, a reconciliation to the corresponding Borrowing Base
and to the Grantor's general ledger; (c)&nbsp;on a monthly basis by the 15th day of the following month, or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at
such time, an aging of the Grantor's Accounts, and an aging of the Grantor's accounts payable; (d)&nbsp;on a monthly basis by the 15th day of the following month (or more frequently if requested by
the Agent and if Liquidity is less than $650,000,000 at such time), a detailed calculation of Eligible Accounts and Eligible Inventory; (e)&nbsp;on a monthly basis by the 15th day of the following
month (or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time), Inventory reports by category, product line, and location, together with a reconciliation
to the corresponding Borrowing Base and to the Grantor's general ledger; (f)&nbsp;upon request, copies of invoices in connection with the Grantor's Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery documents in connection with the Grantor's Accounts and for Inventory and Equipment acquired by the Grantor, purchase orders and
invoices; (g)&nbsp;upon request, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>
a statement of the balance of each of the Intercompany Accounts; (h)&nbsp;such other reports as to the Collateral of the Grantor as the Agent shall reasonably request from time to time; and
(i)&nbsp;with the delivery of each of the foregoing, a certificate of the Grantor executed by an officer thereof certifying as to the accuracy and completeness of the foregoing. If any of the
Grantor's records or reports of the Collateral are prepared by an accounting service or other agent, the Grantor hereby authorizes such service or agent to deliver such records, reports, and related
documents to the Agent, for distribution to the Lenders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>ACCOUNTS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Grantor hereby represents and warrants to the Agent and the Lenders, with respect to the Grantor's Accounts, that: (i)&nbsp;each existing Account represents,
and each future Account will represent, a </FONT><FONT SIZE=2><I>bona fide </I></FONT><FONT SIZE=2>sale or lease and delivery of goods by the Grantor, or rendition of services by the Grantor, in
the ordinary course of the Grantor's business; (ii)&nbsp;each existing Account is, and each future Account will be, for a liquidated amount payable by the Account Debtor thereon on the terms set
forth in the invoice therefor or in the schedule thereof delivered to the Agent, without any offset, deduction, defense, or counterclaim known to the Grantor except as disclosed to the Agent and the
Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement; (iii)&nbsp;no payment will be received with respect to any Account, and no credit, discount, or
extension, or agreement therefor will be granted on any Account, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement;
(iv)&nbsp;each copy of an invoice delivered to the Agent by the Grantor will be a genuine copy of the original invoice sent to the Account Debtor named therein; (v)&nbsp;all goods described in any
invoice representing a sale of goods will have been delivered to the Account Debtor and all services of the Grantor described in each invoice will have been performed, except as reported to the Agent
and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement; and (vi)&nbsp;none of such Accounts derives 20% or more of its value from copyrights employed in
the inventory sold to generate such Accounts except to the extent of Accounts not in excess of 10% of the amount of Grantor's Accounts in the aggregate outstanding at any one time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)
The Grantor shall not re-date any invoice or sale or make sales on extended dating beyond that customary in the Grantor's business or extend or modify any Account,
except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement. If the Grantor becomes aware of any matter adversely affecting the
collectibility of any Account or the Account Debtor therefor, while Revolving Loans are outstanding, involving an amount greater than $1,000,000, including information regarding the Account Debtor's
creditworthiness, the Grantor will promptly so advise the Agent and exclude such amounts from Eligible Accounts. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The
Grantor shall not accept any note or other instrument (except a check or other instrument for the immediate payment of money) with respect to any Account unless
it notifies Agent and promptly delivers such instrument to the Agent, endorsed by the Grantor to the Agent in a manner satisfactory in form and substance to the Agent. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If
Revolving Loans are outstanding, the Grantor shall notify the Agent promptly of all disputes and claims in excess of $1,000,000 with any Account Debtor, and
agrees to settle, contest, or adjust such dispute or claim at no expense to the Agent or any Lender. No discount, credit or allowance shall be granted to any such Account Debtor without the Agent's
prior written consent, except for discounts, credits and allowances made or given when no Event of Default exists hereunder. If Revolving Loans are outstanding, the Grantor shall send the Agent a copy
of each credit memorandum in excess of $1,000,000 as soon as issued, and the Grantor shall promptly report that credit on Borrowing Base Certificates submitted by it. The Agent may at all times when
an Event of Default exists hereunder, settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which the Agent or the Required Lenders, as applicable, shall
consider advisable and, in all cases, the Agent will credit the Grantor's Loan Account with the net amounts received by the Agent in payment of any Accounts. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;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. If Revolving Loans are outstanding the Grantor shall immediately report to the Agent any return which exceeds
$1,000,000 in amount, or which, together with all other returns at such time that have not been reflected in the previous Borrowing Base Certificate, exceeds $5,000,000. Each such report shall
indicate the reasons for the returns and the locations and condition of the returned Inventory. In the event any Account Debtor returns Inventory to the Grantor when an Event of Default exists, the
Grantor, upon the request of the Agent, shall: (i)&nbsp;hold the returned Inventory in trust for the Agent; (ii)&nbsp;segregate all returned Inventory from all of its other property;
(iii)&nbsp;dispose of the returned Inventory solely according to the Agent's written instructions; and (iv)&nbsp;not issue any credits or allowances with respect thereto without the Agent's prior
written consent. All returned Inventory shall be subject to the Agent's Liens thereon. Whenever any Inventory is returned, the related Account shall be deemed ineligible to the extent of the amount
owing by the Account Debtor with respect to such returned Inventory and such returned Inventory shall not be Eligible Inventory. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>COLLECTION OF ACCOUNTS; PAYMENTS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Until
the Agent notifies the Grantor to the contrary, the Grantor shall make collection of all Accounts and other Collateral (including any rents for leased Real
Estate) for the Agent, shall receive all payments as the Agent's trustee, and shall immediately deliver all payments in their original form duly endorsed in blank into a Payment Account established
for the account of the Grantor at a Clearing Bank acceptable to the Agent, subject to a Blocked Account Agreement. On or prior to the date hereof, the Grantor shall establish a lock-box
service for collections of Accounts at a Clearing Bank acceptable to the Agent and subject to documentation acceptable to the Agent. The Grantor shall instruct all Account Debtors to make all payments
directly to the address established for such service. If, notwithstanding such instructions, the Grantor receives any proceeds of Accounts or other Collateral (including any rents for leased Real
Estate), it shall receive such payments as the Agent's trustee, and shall immediately deliver such payments to the Agent in their original form duly endorsed in blank or deposit them into a Payment
Account, as the Agent may direct. All collections of Accounts and other Collateral received in any lock-box or Payment Account or directly by the Grantor or the Agent, and all funds in any
Payment Account or other account to which such collections are deposited shall be subject to the Agent's sole control and withdrawals by the Grantor shall not be permitted; </FONT> <FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that each
Blocked Account Agreement shall provide that until Agent notifies the Clearing Bank to the contrary, (which notice the
Agent will not send until the occurrence of a Payment Account Trigger Event), Grantor may cause monies in the Payment Account to be sent to Grantor or otherwise pursuant to Grantor's direction. The
Agent or the Agent's designee may, at any time after the occurrence of an Event of Default, notify Account Debtors that the Accounts have been assigned to the Agent and of the Agent's security
interest therein, and may collect them directly and charge the collection costs and expenses to the Loan Account as a Revolving Loan. So long as an Event of Default has occurred and is continuing, the
Grantor, at the Agent's request, shall execute and deliver to the Agent such documents as the Agent shall require to grant the Agent access to any post office box in which collections of Accounts are
received. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;If
sales of Inventory are made or services are rendered for cash, the Grantor shall immediately deposit into a Payment Account the cash which the Grantor receives,
or if a Payment Account Trigger Events has occurred, deliver such cash to the Agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If
a Payment Account Trigger Event has occurred, all payments including immediately available funds received by the Agent at a bank account designated by it, will
be the Agent's sole </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>
property for its benefit and the benefit of the Lenders and will be credited to the Loan Account (conditional upon final collection) on the date of receipt. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;In
the event the Grantor repays all of the Obligations upon the termination of the Credit Agreement or upon acceleration of the Obligations, other than through the
Agent's receipt of payments on account of the Accounts or proceeds of the other Collateral, such payment will be credited (conditioned upon final collection) to the Grantor's Loan Account upon the
Agent's receipt of immediately available funds. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;12.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>INVENTORY; PERPETUAL INVENTORY.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Grantor represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that all of the Inventory owned by the Grantor is and
will be held for sale or lease, or to be furnished in connection with the rendition of services, in the ordinary course of the Grantor's business. The Grantor will keep its Inventory in good and
marketable condition, except for damaged or defective goods arising in the ordinary course of the Grantor's business. Grantor will not, without prior written notice to the Agent, acquire or accept any
Inventory on consignment or approval. The Grantor agrees that all Inventory produced by the Grantor in the United States of America will be produced in accordance with the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations, and orders thereunder. The Grantor will conduct a physical count of the Inventory at least once per Fiscal Year, and after and during the
continuation of an Event of Default, at such other times as the Agent requests; </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that so long as an Event of Default does not exist,
in lieu of an annual physical inventory, the Borrower may conduct cycle counts that are in compliance with Borrower's internal audit procedures as approved by Borrower's independent certified public
accountants. The Grantor will maintain a perpetual inventory reporting system at all times. If Revolving Loans are outstanding, the Grantor will not, without prior written notice to the Agent, sell
any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis except in conformity with Borrower's
business practices as of the Closing Date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;In
connection with all Inventory financed by Letters of Credit, the Grantor will, at the Agent's request, instruct all suppliers, carriers, forwarders, customs
brokers, warehouses or others receiving or holding cash, checks, Inventory, Documents or Instruments in which the Agent holds a security interest to deliver them to the Agent and/or subject to the
Agent's order, and if they shall come into the Grantor's possession, to deliver them, upon request, to the Agent in their original form. The Grantor shall also, at the Agent's request, designate the
Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;13.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>EQUIPMENT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Grantor represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that all of the Equipment owned by the Grantor is and
will be used or held for use in the Grantor's business. The Grantor shall keep and maintain its Equipment in good operating condition and repair (ordinary wear and tear excepted) and shall make all
necessary replacements thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The
Grantor shall promptly inform the Agent of any material additions to or deletions from the Equipment. The Grantor will not, without the Agent's prior written
consent, alter or remove any identifying symbol or number on any of the Grantor's Equipment constituting Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;14.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2>[Intentionally Deleted].&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;15.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Grantor represents and
warrants to the Agent and the Lenders that (a)&nbsp;all Documents, Instruments, and Chattel Paper </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>
describing, evidencing, or constituting Collateral, and all signatures and endorsements thereon, are and will be complete, valid, and genuine, and (b)&nbsp;all goods evidenced by such Documents,
Instruments, and Chattel Paper are and will be owned by the Grantor, free and clear of all Liens other than Permitted Liens. If Grantor retains possession of any Chattel Paper or Instruments with
Agent's consent, such Chattel Paper and Instruments shall be marked with the following legend: "This writing and the obligations evidenced or served hereby are subject to the security interest of Bank
of America, N.A., as Agent, for the benefit of Agent and certain Lenders." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;16.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>RIGHT TO CURE.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Agent may, in its discretion, and shall, at the
direction of the Required Lenders, pay any amount or do any act required of the Grantor hereunder or under any other Loan Document in order to preserve, protect, maintain or enforce the Obligations,
the Collateral or the Agent's Liens therein, and which the Grantor fails to pay or do, including payment of any judgment against the Grantor, any insurance premium, any warehouse charge, any finishing
or processing charge,
any landlord's or bailee's claim, and any other Lien upon or with respect to the Collateral. All payments that the Agent makes under this Section&nbsp;16 and all
out-of-pocket costs and expenses that the Agent pays or incurs in connection with any action taken by it hereunder shall be charged to the Grantor's Loan Account as a Revolving
Loan. Any payment made or other action taken by the Agent under this </FONT><FONT SIZE=2><I>Section&nbsp;16 </I></FONT><FONT SIZE=2>shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed thereafter as herein provided. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;17.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>POWER OF ATTORNEY.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Grantor hereby appoints the Agent and the Agent's
designee as the Grantor's attorney, with power: (a)&nbsp;to endorse the Grantor's name on any checks, notes, acceptances, money orders, or other forms of payment or security that come into the
Agent's or any Lender's possession; (b)&nbsp;to sign the Grantor's name on any invoice, bill of lading, warehouse receipt or other negotiable or non-negotiable Document constituting
Collateral, on drafts against customers, on assignments of Accounts, on notices of assignment, financing statements and other public records and to file any such financing statements by electronic
means with or without a signature as authorized or required by applicable law or filing procedure; (c)&nbsp;so long as any Event of Default has occurred and is continuing, to notify the post office
authorities to change the address for delivery of the Grantor's mail to an address designated by the Agent and to receive, open and dispose of all mail addressed to the Grantor; </FONT> <FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that
the Agent and the Agent's designee, as appropriate, upon completion of its review of such mail and handling of any Collateral
contained therein, shall promptly forward it to Grantor; (d)&nbsp;to send requests (which do not disclose the Agent's or any Lender's name, if sent when no Event of Default exists) for verification
of Accounts to customers or Account Debtors; (e)&nbsp;to complete in the Grantor's name or the Agent's name, any order, sale or transaction, obtain the necessary Documents in connection therewith,
and collect the proceeds thereof; (f)&nbsp;to clear Inventory through customs in the Grantor's name, the Agent's name or the name of the Agent's designee, and to sign and deliver to customs
officials powers of attorney in the Grantor's name for such purpose; (g)&nbsp;to the extent that Grantor's authorization given in </FONT><FONT SIZE=2><I>Section&nbsp;3(g)  </I></FONT><FONT SIZE=2>of this Security Agreement is not sufficient, to file
such financing statements with respect to this Security Agreement, with or without Grantor's signature, or to
file&nbsp;a photocopy of this Security Agreement in substitution for a financing statement, as the Agent may deem appropriate and to execute in Grantor's name such financing statements and
amendments thereto and continuation statements which may require the Grantor's signature; and (h)&nbsp;to do all things necessary to carry out the Credit Agreement and this Security Agreement. The
Grantor ratifies and approves all acts of such attorney. None of the Lenders or the Agent nor their attorneys will be liable for any acts or omissions or for any error of judgment or mistake of fact
or law except for their willful misconduct and gross negligence. This power, being coupled with an interest, is irrevocable until the Credit Agreement has been terminated and the Obligations have been
fully satisfied. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;18.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The
Grantor assumes all responsibility and liability arising from or relating to the use, sale, license or other disposition of the Collateral. The Obligations
shall not be affected by any failure of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<P><FONT SIZE=2>
Agent or any Lender to take any steps to perfect the Agent's Liens or to collect or realize upon the Collateral, nor shall loss of or damage to the Collateral release the Grantor from any of the
Obligations. Following the occurrence and during the continuation of an Event of Default, the Agent may (but shall not be required to), and at the direction of the Required Lenders shall, without
notice to or consent from the Grantor, sue upon or otherwise collect, extend the time for payment of, modify or amend the terms of, compromise or settle for cash, credit, or otherwise upon any terms,
grant other indulgences, extensions, renewals, compositions, or releases, and take or omit to take any other action with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or indirectly in connection with any of the foregoing, without discharging or otherwise affecting the liability of the Grantor
for the Obligations or under the Credit Agreement or any other agreement now or hereafter existing between the Agent and/or any Lender and the Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;It
is expressly agreed by Grantor that, anything herein to the contrary notwithstanding, Grantor shall remain liable under each of its contracts and each of its
licenses to observe and perform all the conditions and obligations to be observed and performed by it thereunder. Neither Agent nor any Lender shall have any obligation or liability under any contract
or license by reason of or arising out of this Security Agreement or the granting herein of a Lien thereon or the receipt by Agent or any Lender of any payment relating to any contract or license
pursuant hereto. Neither Agent nor any Lender shall be required or obligated in any manner to perform or fulfill any of the obligations of Grantor under or pursuant to any contract or license, or to
make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any contract or license, or to
present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or
times. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Agent
may at any time after an Event of Default has occurred and is continuing, without prior notice to Grantor, notify Account Debtors, and other Persons obligated
on the Collateral that Agent has a security interest therein, and that payments shall be made directly to Agent, for itself and the benefit of Lenders. Upon the request of Agent, after an Event of
Default has occurred and is continuing, Grantor shall so notify Account Debtors and other Persons obligated on Collateral. Once any such notice has been given to any Account Debtor or other Person
obligated on the Collateral, the Grantor shall not give any contrary instructions to such Account Debtor or other Person without Agent's prior written consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If
an Event of Default shall have occurred and be continuing, Grantor, at its own expense, shall cause the independent certified public accountants then engaged by
Grantor to prepare and deliver to Agent and each Lender at any time and from time to time promptly upon Agent's request the following reports with respect to Grantor: (i)&nbsp;a reconciliation of
all Accounts; (ii)&nbsp;an aging of all Accounts; (iii)&nbsp;trial balances; and (iv)&nbsp;a test verification of such Accounts as Agent may request. Grantor, at its own expense, shall deliver
to Agent the results of each physical verification, if any, which Grantor may in its discretion have made, or caused any other Person to have made on its behalf, of all or any portion of its
Inventory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;19.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2>[Intentionally Deleted].&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;20.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>INDEMNIFICATION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;In any suit, proceeding or action brought by Agent or any
Lender relating to any Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect thereto, Grantor will save, indemnify and keep Agent and Lenders harmless from
and against all expense (including reasonable attorneys' fees and expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of
the Account Debtor or other Person obligated on the Collateral, arising out of a breach by Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any
time owing </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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to, or in favor of, such obligor or its successors from Grantor, except in the case of Agent or any Lender, to the extent such expense, loss, or damage is attributable solely to the gross negligence
or willful misconduct of Agent or such Lender as finally determined by a court of competent jurisdiction. All such obligations of Grantor shall be and remain enforceable against and only against
Grantor and shall not be enforceable against Agent or any Lender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;21.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>LIMITATION ON LIENS ON COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Grantor will not create, permit or
suffer to exist, and will defend the Collateral against, and take such other action as is necessary to remove, any Lien on the Collateral except Permitted Liens, and will defend the right, title and
interest of Agent and Lenders in and to any of Grantor's rights under the Collateral against the claims and demands of all Persons whomsoever. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;22.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>NOTICE REGARDING COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Grantor will advise Agent promptly, in
reasonable detail, (i)&nbsp;of any Lien (other than Permitted Liens) or claim made or asserted against any of the Collateral, and (ii)&nbsp;of the occurrence of any other event which could
reasonably be expected to have a Material Adverse Effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;23.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>REMEDIES; RIGHTS UPON DEFAULT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;In
addition to all other rights and remedies granted to it under this Security Agreement, the Credit Agreement, the other Loan Documents and under any other
instrument or agreement securing, evidencing or relating to any of the Obligations, if any Event of Default shall have occurred and be continuing, Agent may exercise all rights and remedies of a
secured party under the UCC. Without limiting the generality of the foregoing, Grantor expressly agrees that in any such event Agent, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Grantor or any other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may forthwith enter upon the premises of Grantor where any Collateral is located through
self-help, without judicial process, without first obtaining a final judgment or giving Grantor or any other Person notice and opportunity for a hearing on Agent's claim or action and may
collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, license, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to do so), or
any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem acceptable, for cash or on credit or for future delivery without assumption
of any credit risk. Agent or any Lender shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of
Agent and Lenders, the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption Grantor hereby releases. Such sales may be adjourned and
continued from time to time with or without notice. Agent shall have the right to conduct such sales on Grantor's premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Grantor
further agrees, at Agent's request, to assemble the Collateral and make it available to Agent at a place or places designated by Agent which are reasonably
convenient to Agent and Grantor, whether at Grantor's premises or elsewhere. Until Agent is able to effect a sale, lease, or other disposition of Collateral, Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by Agent. Agent shall have no
obligation to Grantor to maintain or preserve the rights of Grantor as against third parties with respect to Collateral while Collateral is in the possession of Agent. Agent may, if it so elects, seek
the appointment of a receiver or keeper to take possession of Collateral and to enforce any of Agent's remedies (for the benefit of Agent and Lenders), with respect to such appointment without prior
notice or hearing as to such appointment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2>
Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the Obligations as provided in the Credit Agreement, and only after so paying over
such net proceeds, and after the payment by Agent of any other amount required by any provision of law, need Agent account for the surplus, if any, to Grantor. To the maximum extent permitted by
applicable law, Grantor waives all claims, damages, and demands against Agent or any Lender arising out of the repossession, retention or sale of the Collateral except such as arise solely out of the
gross negligence or willful misconduct of Agent or such Lender as finally determined by a court of competent jurisdiction. Grantor agrees that ten (10)&nbsp;Business Days prior notice by Agent of
the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Grantor shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any attorneys' fees or other expenses incurred by Agent or any Lender to collect such
deficiency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Except
as otherwise specifically provided herein, Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement or any Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;To
the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, Grantor acknowledges and agrees that it is
not commercially unreasonable for the Agent (a)&nbsp;to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material
or work in process into finished goods or other finished products for disposition, (b)&nbsp;to fail to obtain third party consents for
access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be
collected or disposed of, (c)&nbsp;to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (d)&nbsp;to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection
specialists, (e)&nbsp;to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f)&nbsp;to contact
other Persons, whether or not in the same business as the Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (g)&nbsp;to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h)&nbsp;to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (i)&nbsp;to dispose of assets in wholesale
rather than retail markets, (j)&nbsp;to disclaim disposition warranties, such as title, possession or quiet enjoyment, (k)&nbsp;to purchase insurance or credit enhancements to insure the Agent
against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (l)&nbsp;to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the
Collateral. Grantor acknowledges that the purpose of this </FONT><FONT SIZE=2><I>Section&nbsp;23(d) </I></FONT><FONT SIZE=2>is to provide non-exhaustive indications of what actions or
omissions by the Agent would not be commercially unreasonable in the Agent's exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this </FONT><FONT SIZE=2><I>Section&nbsp;23(d)</I></FONT><FONT SIZE=2>. Without limitation upon the foregoing, nothing
contained in this </FONT><FONT SIZE=2><I>Section&nbsp;23(d) </I></FONT><FONT SIZE=2>shall be construed to grant any rights to Grantor or to impose any duties on Agent that would not have been
granted or imposed by this Security Agreement or by applicable law in the absence of this </FONT><FONT SIZE=2><I>Section&nbsp;23(d)</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;24.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>GRANT OF LICENSE TO USE PROPRIETARY RIGHTS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;For the purpose of enabling
Agent to exercise rights and remedies under </FONT><FONT SIZE=2><I>Section&nbsp;23 </I></FONT><FONT SIZE=2>(including, without limiting the terms of </FONT> <FONT SIZE=2><I>Section&nbsp;23</I></FONT><FONT SIZE=2>, in order to take possession of, hold,
 preserve, process, assemble, prepare for sale, market </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<P><FONT SIZE=2>
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall be lawfully entitled to exercise such rights and remedies, Grantor hereby grants to Agent, for the benefit of Agent and
Lenders, such sufficient rights to any Propriety Rights now owned or hereafter acquired by Grantor (including, as necessary, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any such Proprietary Rights) to the extent necessary to enable Agent to exercise rights and remedies under </FONT> <FONT SIZE=2><I>Section&nbsp;23</I></FONT><FONT SIZE=2>, and
wherever the same may be located, and including in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the compilation or printout thereof. Notwithstanding the foregoing provisions of this </FONT><FONT SIZE=2><I>Section&nbsp;24  </I></FONT><FONT SIZE=2>to the contrary, with respect
to Grantor's Proprietary Rights licensed to it by others, the sublicense granted to Agent under the </FONT><FONT SIZE=2><I>Section&nbsp;24  </I></FONT><FONT SIZE=2>shall be limited to a sublicense solely for purposes of enabling Agent to exercise its
rights under </FONT><FONT SIZE=2><I>Section&nbsp;23 </I></FONT><FONT SIZE=2>to take
possession of, hold, preserve, assemble, prepare for sale, market for sale, sell or otherwise dispose of the Collateral, and not for the purposes of processing, completing or otherwise manufacturing
the Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;25.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Agent and
each Lender shall use reasonable care with respect to the Collateral in its possession or under its control. Neither Agent nor any Lender shall have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of Agent or such Lender, or any income thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;26.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>MISCELLANEOUS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Reinstatement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against Grantor for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for all or any significant part of Grantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Notices.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the
parties desires to give and serve upon any other party any communication with respect to this Security Agreement, each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be given in the manner, and deemed received, as provided for in the Credit Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Severability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Whenever possible, each provision of this Security Agreement
shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. This
Security Agreement is to be read, construed and applied together with the Credit Agreement and the other Loan Documents which, taken together, set forth the complete understanding and agreement of
Agent, Lenders and Grantor with respect to the matters referred to herein and therein. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>No Waiver; Cumulative Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Neither Agent nor any Lender shall by any
act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Agent and then only to the extent therein
set forth. A waiver by Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Agent would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Agent or any Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law. None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed by Agent and Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Limitation by Law.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Security Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Termination of this Security Agreement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Subject to </FONT> <FONT SIZE=2><I>Section&nbsp;26 (a) </I></FONT><FONT SIZE=2>hereof, this Security Agreement shall terminate
only upon: the termination of all commitments, the posting of satisfactory
collateral for all outstanding Letters of Credit and any contingent obligations owed by Grantor under the Guaranty in accordance with the Credit Agreement, and the payment in full of all other
Obligations (other than indemnification Obligations as to which no claim has been asserted). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Successors and Assigns.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;This Security Agreement and all obligations of
Grantor hereunder shall be binding upon the successors and assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and shall, together with the rights and
remedies of Agent, for the benefit of Agent and Lenders, hereunder, inure to the benefit of Agent and Lenders, all future holders of any instrument evidencing any of the Obligations and their
respective successors and assigns. No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any
portion thereof or interest therein shall in any manner affect the Lien granted to Agent, for the benefit of Agent and Lenders, hereunder. Grantor may not assign, sell, hypothecate or otherwise
transfer any interest in or obligation under this Security Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Counterparts.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;This Security Agreement may be authenticated in any number of
separate counterparts, each of which shall collectively and separately constitute one and the same agreement.
This Security Agreement may be authenticated by manual signature, facsimile or, if approved in writing by Agent, electronic means, all of which shall be equally valid. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;THIS
SECURITY AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT ISSUES WITH RESPECT TO CREATION, PERFECTION, AND ENFORCEMENT OF LIENS UNDER DIVISION 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW
RULES SET FORTH IN DIVISION 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, EACH OF THE GRANTOR AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GRANTOR AND THE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF </FONT><FONT SIZE=2><I>FORUM NON CONVENIENS</I></FONT><FONT SIZE=2>, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS SECURITY AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1)&nbsp;THE AGENT SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST GRANTOR OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION THE AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2)&nbsp;EACH OF THE PARTIES HERETO
ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;GRANTOR
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY OVERNIGHT MAIL, COURIER
SERVICE, OR REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO FLEETWOOD AT ITS ADDRESS SET FORTH IN THE CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5)&nbsp;DAYS
AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS
POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;NOTWITHSTANDING
ANY OTHER PROVISION OF THIS SECURITY AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT OF OR RELATING
TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY BINDING ARBITRATION.
The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Security Agreement, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is
arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any
other party contests such action for judicial relief. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;Notwithstanding
the provisions of (iv)&nbsp;above, no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of
the proposed submission, such controversy or claim arises from or related to an obligation to the Agent or any Lender which is secured by real estate property collateral (exclusive of real estate
space lease assignments). If all </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2>
the parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in </FONT><FONT SIZE=2><I>Section&nbsp;26
(i)(vi)</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;At
the request of either party a controversy or claim which is not submitted to arbitration as provided and limited in </FONT><FONT SIZE=2><I>Sections 26 (i),
(iv) and (v) </I></FONT><FONT SIZE=2>shall be determined by judicial reference. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active
attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;No
provision of Sections (iv)&nbsp;through (vi)&nbsp;shall limit the right of the Agent or the Lenders to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(j)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Waiver of Jury Trial.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;SUBJECT TO THE PROVISIONS OF </FONT> <FONT SIZE=2><I>SECTION 26 (i)(iv)</I></FONT><FONT SIZE=2>, GRANTOR AND THE AGENT EACH IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT
BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GRANTOR AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS SECURITY AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(k)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Limitation of Liability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;NO CLAIM MAY BE MADE BY GRANTOR AGAINST THE AGENT
OR THE LENDERS, OR THE AFFILIATES, DIRECTORS, OFFICERS, OFFICERS, EMPLOYEES, OR AGENTS OF THE AGENT OR THE LENDERS FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, AND GRANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN
ITS FAVOR. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(l)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Section Titles.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The Section titles contained in this Security Agreement are
and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;(m)</FONT><FONT SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>No Strict Construction.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;The parties hereto have participated jointly in the
negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly by the
parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Security Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(n)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Advice of Counsel.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;Each of the parties represents to each other party
hereto that it has discussed this Security Agreement and, specifically, the provisions of </FONT><FONT SIZE=2><I>Section&nbsp;26 (i) </I></FONT><FONT SIZE=2>and </FONT> <FONT SIZE=2><I>Section&nbsp;26 (j)</I></FONT><FONT SIZE=2>, with its counsel.
</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(o)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Benefit of Lenders.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;All Liens granted or contemplated hereby shall be for
the benefit of Agent and Lenders, and all proceeds or payments realized from Collateral in accordance herewith shall be applied to the Obligations in accordance with the terms of the Credit Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B><I>[Signatures on following pages]</I></B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above. </FONT></P>

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<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><B>3COM CORPORATION,<BR> </B></FONT><FONT SIZE=2>a Delaware corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="41%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B>BANK OF AMERICA, N.A.,<BR> </B></FONT><FONT SIZE=2>as Agent</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="41%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="me1033_schedule_i_to_security___me102285"> </A>
<A NAME="toc_me1033_1"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE I<BR>  to<BR>  SECURITY AGREEMENT<BR>  <BR>    LOCATION OF COLLATERAL    <BR>  </B></FONT></P>


<P><FONT SIZE=2>A.&nbsp;&nbsp;Location
of Chief Executive Office </FONT></P>

<P><FONT SIZE=2>B.&nbsp;&nbsp;Location
of Books and Records </FONT></P>

<P><FONT SIZE=2>C.&nbsp;&nbsp;Location
of Collateral </FONT></P>

<P><FONT SIZE=2>D.&nbsp;&nbsp;Location
of all other places of business </FONT></P>

<P><FONT SIZE=2>E.&nbsp;&nbsp;Location
of leased facilities and name of lessor/sublessor </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="me1033_schedule_ii_to_security_agreem__sch02574"> </A>
<A NAME="toc_me1033_2"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE II<BR>  to<BR>  SECURITY AGREEMENT<BR>  <BR>    JURISDICTION OF ORGANIZATION    <BR>  </B></FONT></P>

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<TD WIDTH="5%"><FONT SIZE=2>A.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2>Grantor's official name:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
B.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2><BR>
Type of entity (i.e. corporation, partnership, limited partnership, limited liability company)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
C.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2><BR>
Organizational identification number issued by Grantor's state of incorporation or organization or a statement that no such number has been issued.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
D.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2><BR>
State of Incorporation or Organization.</FONT></TD>
</TR>
</TABLE>
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<BR>
<P><br><A NAME="02PAL1033_5">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_ma1033_1">Exhibit 10.16</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_ma1033_2">SECURITY AGREEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ma1033_3">W I T N E S S E T H</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_me1033_1">SCHEDULE I to SECURITY AGREEMENT LOCATION OF COLLATERAL</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_me1033_2">SCHEDULE II to SECURITY AGREEMENT JURISDICTION OF ORGANIZATION</A></FONT><BR>
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</TEXT>
</DOCUMENT>
