Exhibit 10.2

GUARANTEE AND SECURITY AGREEMENT

made by

HC INNOVATIONS, INC.

and its Subsidiaries

in favor of

BRAHMA FINANCE (BVI) LIMITED

as Secured Party

Dated as of October 19, 2009

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

 

 

 

 

ARTICLE 1 DEFINED TERMS

 

4

 

1.1

Definitions

 

4

 

1.2

Other Definitional Provisions

 

8

ARTICLE 2 GUARANTEE

 

8

 

2.1

Guarantee

 

8

 

2.2

Right of Contribution

 

9

 

2.3

No Subrogation

 

9

 

2.4

Amendments, Etc. With Respect to the Obligations

 

10

 

2.5

Guarantee Absolute and Unconditional

 

10

 

2.6

Reinstatement

 

11

 

2.7

Payments

 

11

ARTICLE 3 GRANT OF SECURITY INTEREST

 

11

 

3.1

Grant of Security Interest

 

11

 

3.2

Perfection: Authorization to File Financing Statements

 

12

ARTICLE 4 PLEDGE OF SECURITIES

 

12

 

4.1

Pledge

 

12

 

4.2

Delivery of the Pledged Collateral

 

13

 

4.3

Representations, Warranties and Covenants

 

14

 

4.4

Certification of Limited Liability Company and Limited Partnership Interests

 

15

 

4.5

Registration in Nominee Name; Denominations

 

15

 

4.6

Voting Rights; Dividends and Interest

 

15

ARTICLE 5 REPRESENTATIONS AND WARRANTIES

 

17

 

5.1

Representations in Senior Secured Note

 

17

 

5.2

Title; No Other Liens

 

17

 

5.3

Perfected First Priority Liens

 

18

 

5.4

Chief Executive Office; Inventory and Equipment

 

18

 

5.5

Farm Products

 

18

 

5.6

Accounts

 

19

ARTICLE 6 COVENANTS

 

19

 

6.1

Covenants in Senior Secured Note

 

19

 

6.2

Other Actions

 

19

 

6.3

Covenants Regarding Patent, Trademark and Copyright Collateral

 

21

 

6.4

Payment of Obligations

 

23

 

6.5

Maintenance of Perfected Security Interest; Further Documentation

 

23

 

6.6

Changes in Locations, Name, etc.

 

23

 

6.7

Notices

 

24

 

6.8

Accounts

 

24

 

6.9

Maintenance of Inventory and Equipment

 

24

 

6.10

Additional Shares

 

24

ARTICLE 7 REMEDIAL PROVISIONS

 

25

 

7.1

Certain Matters Relating to Accounts

 

25

 

7.2

Communications with Obligors; Grantors Remain Liable

 

25

 

7.3

Proceeds to be Turned Over To Secured Party

 

26

 

7.4

Application of Proceeds

 

26

 

7.5

New York UCC and Other Remedies

 

26

2

--------------------------------------------------------------------------------

 

 

 

 

 

 

7.6

Waiver; Deficiency

 

27

ARTICLE 8 SECURED PARTY POWERS ETC.

 

27

 

8.1

Secured Party’s Appointment by Grantors as Attorney-in-Fact, Etc.

 

27

 

8.2

Execution of Financing Statements

 

29

ARTICLE 9 MISCELLANEOUS

 

29

 

9.1

Amendments in Writing

 

29

 

9.2

Notices

 

29

 

9.3

No Waiver by Course of Conduct; Cumulative Remedies

 

29

 

9.4

Enforcement Expenses; Indemnification

 

30

 

9.5

Successors and Assigns

 

30

 

9.6

Set-Off

 

30

 

9.7

Counterparts

 

31

 

9.8

Severability

 

31

 

9.9

Section Headings

 

31

 

9.10

Integration

 

31

 

9.11

GOVERNING LAW

 

31

 

9.12

Submission To Jurisdiction; Waivers

 

31

 

9.13

Acknowledgements

 

32

 

9.14

WAIVER OF JURY TRIAL

 

32

 

9.15

Additional Guarantors; Additional Grantors

 

32

 

9.16

Releases

 

32

 

 

SCHEDULES AND ANNEXES

ANNEX 1

Grantor Assumption Agreement

SCHEDULE 1(i)

Copyrights

SCHEDULE 1(r)

License

SCHEDULE 1(w)

Patents

SCHEDULE 1(ff)

Trademarks

SCHEDULE 4.1

Pledged Securities

SCHEDULE 5.4

Chief Executive Office and Places of Business

SCHEDULE 6.2

Account Control Agreement

3

--------------------------------------------------------------------------------

GUARANTEE AND SECURITY AGREEMENT

          GUARANTEE AND SECURITY AGREEMENT, dated as of October 19, 2009, among
HC Innovations, Inc., a Delaware corporation (the “Company”), each of the
Subsidiaries of the Company identified herein (the Company, such Subsidiaries
and any other entity that may become a party hereto pursuant to Section 9.15,
together, the “Grantors”), and Brahma Finance (BVI) Limited, a company organized
under the laws of the British Virgin Islands (the “Secured Party”).

W I T N E S S E T H:

          WHEREAS, the Company has issued to the Secured Party a Senior Secured
Note (the “Senior Secured Note”) of even date herewith in the principal amount
of $2,400,000, the proceeds of which will be used by the Company for general
corporate purposes;

          WHEREAS, the Grantors are members of an affiliated group of companies
engaged in related businesses, and each Grantor will derive substantial direct
and indirect benefit from the transactions contemplated by the Senior Secured
Note; and

          WHEREAS, the Senior Secured Note contemplates that it shall be
entitled to the benefits of this Agreement.

          NOW, THEREFORE, in consideration of the premises and to induce the
Secured Party to consummate the transactions contemplated by the Senior Secured
Note, each Grantor hereby agrees, for the benefit of the Secured Party, as
follows:

ARTICLE 1

DEFINED TERMS

     1.1     Definitions

     The following terms shall have the following meanings:

          (a)          “Accounts” means, collectively, and in each instance
however and wherever arising all accounts receivable and other rights to payment
arising out of the sale or lease of goods and services, whether or not such
right is evidenced by an Instrument or Chattel Paper, and whether or not earned
by performance, including, without limitation, all “accounts” as such term is
defined in the New York UCC and all other obligations of any kind at any time
due or owing to Grantors

          (b)          “Agreement” means this Guarantee and Security Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.

          (c)          “Collateral” has the meaning set forth in Section 3.1
hereof.

          (d)          “Collateral Account” means any collateral account
established by the Secured Party as provided in Section 7.1.

4

--------------------------------------------------------------------------------

          (e)          “Collateral Party” means the pledgor, mortgagor or
grantor of a security interest for the benefit of the Secured Party under any
Security Document.

          (f)          “Company” has the meaning set forth in the preamble to
this Agreement.

          (g)         “Company Obligations” means, collectively, the unpaid
principal of and interest on the Senior Secured Note and all other obligations
and liabilities of the Company to the Secured Party, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the Senior
Secured Note, this Agreement, the other Transaction Documents, or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, premium, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Secured Party that are required to be
paid by the Company pursuant to the terms of any of the foregoing agreements).

          (h)         “Copyright License” means any written agreement, now or
hereafter in effect. granting any right to any third party under any copyright
now or hereafter owned by any Grantor or that such Grantor otherwise has the
right to license, or granting any right to any Grantor under any copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.

          (i)          “Copyrights” means all of the following, whether now
owned or hereafter acquired by any Grantor: (i) all copyright rights in any work
subject to the copyright laws of the United States or any other country, whether
as author, assignee, transferee or otherwise, and (ii) all registrations and
applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright Office,
including those listed on Schedule 1.1(i).

          (j)          “Documents” means, collectively, the Pledged Securities,
all chattel paper, all instruments, all investment property and all documents
and all payments thereunder and instruments and other property from time to time
delivered in respect thereof or in exchange therefor, and all bills of lading,
warehouse receipts and other documents of title and other documents, including,
without limitation, all “chattel paper”, “instruments”, “investment property”
and documents”, as such terms are defined in the New York UCC, in each instance
whether now owned or hereafter acquired by such Grantor.

          (k)         “Equipment” means all machinery and equipment, all
manufacturing, distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, tools, tooling, molds, dies, vehicles,
vessels, aircraft and all other goods of every type and description, in each
instance whether now owned or hereafter acquired by any Grantor and wherever
located, including without limitation all “equipment”, as such term is defined
in the New York UCC; provided that equipment shall not include “fixtures” as
defined in Section 9-313 of the New York UCC.

          (l)          “Financing Statement” means, as the context may require,
any and all UCC-1 financing statements naming the Grantors as the debtor and the
Secured Party as secured party.

5

--------------------------------------------------------------------------------

          (m)         “Fully Satisfied” means, with respect to the Obligations
as of any date, that, on or before such date, (i) the principal of and interest
accrued to such date on such Obligations shall have been paid in full in cash,
and (ii) all fees, expenses and other amounts then due and payable which
constituted Obligations shall have been paid in full in cash; provided, however,
that, on such date, the Secured Party shall not have made any claims in respect
of Obligations against the Company or any Guarantor under any provision of any
of the Transaction Documents that has not been cash collateralized by an amount
sufficient in the reasonable judgment of the Secured Party to secure such claim.

          (n)          “General Intangibles” means, collectively, and in each
instance however and wherever arising: (i) all rights, interests, choses in
action, causes of action, claims and all other intangible property of any
Grantor of every kind and nature, in each instance whether now owned or
hereafter acquired by any Grantor, including, without limitation, all corporate
and other business records; (ii) all loans, royalties, and other obligations
receivable; (iii) all Trademarks, inventions, designs, patents, patent
applications, (including any applications for the foregoing and whether or not
registered) and the goodwill of any Grantor’s business connected with and
symbolized by the same; (iv) trade secrets, computer programs, software,
printouts and other computer materials, goodwill, registrations, U.S. registered
copyrights, licenses relating to trademarks and U.S. registered copyrights,
franchises, customer lists, credit files, correspondence and advertising
materials; (v) all customer and supplier contracts, firm sale orders, rights
under license and franchise agreements, and other contracts and contract rights;
(vi) all interests in partnerships, joint ventures and other entities; (vii) all
tax refunds and tax refund claims; (viii) all right, title and interest under
leases, subleases, licenses and concessions and other agreements relating to
real or personal property; (ix) all payments due or made to any Grantor in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any property by any person or governmental authority; (x) all
deposit accounts (general or special) with any bank or other financial
institution; (xi) all credits with and other claims against carriers and
shippers; (xii) all rights to indemnification; (xiii) all reversionary interests
in pension and profit sharing plans and reversionary, beneficial and residual
interest in trusts; (xiv) all proceeds of insurance of which any Grantor is a
beneficiary; (xv) all letters of credit, guaranties, liens, security interests
and other security held by or granted to any Grantor; and (xvi) all other
intangible property, whether or not similar to the foregoing, including, without
limitation, all “general intangibles,” as such term is defined in the New York
UCC.

          (o)          “Grantors” has the meaning set forth in the preamble to
this Agreement.

          (p)          “Guarantor” means each of the Company’s Subsidiaries.

          (q)          “Guarantor Obligations” means, with respect to any
Guarantor, the collective reference to (i) the Company Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Transaction Document to which such
Guarantor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Secured Party that are required to be paid by such Guarantor pursuant to the
terms of this Agreement or any other Transaction Document).

          (r)          “Instrument” means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary obligation, is not
itself a security agreement or lease, and is of

6

--------------------------------------------------------------------------------

a type that in the ordinary course of business is transferred by delivery with
any necessary indorsement or assignment, including, without limitation, all
“instruments” as such term is defined in the New York UCC.

          (s)           “Inventory” means, collectively, and in each instance,
however and wherever arising, all inventory, finished goods, raw materials, work
in process and other goods, including, without limitation, all “inventory” as
such term is defined in the New York UCC.

          (t)           “License” means any Patent License, Trademark License,
Copyright License or other license or sublicense agreement to which any Grantor
is a party, including those listed on Schedule 1.1(r).

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

          (v)          “Obligations” mean (i) in the case of the Company, the
Company Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.

          (w)         “Other Property” means, collectively, all property or
interests in property now owned or hereafter acquired by any Grantor which now
may be owned or hereafter may come into the possession, custody or control of
the Secured Party or any agent or affiliate of the Secured Party in any way or
for any purpose (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise); and all rights and interests of any
Grantor, now existing or hereafter arising and however and wherever arising, in
respect of any and all (i) notes, drafts, letters of credit, bank accounts,
stocks, bonds, and debt and equity securities, whether or not certificated, and
warrants, options, puts and calls and other rights to acquire or otherwise
relating to the same; (ii) money; (iii) proceeds of loans; and (iv) insurance
proceeds and books and records relating to any of the Collateral.

          (x)          “Patent License” means any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a patent, now or hereafter owned by any Grantor or that
any Grantor otherwise has the right to license, is in existence, or granting to
any Grantor any right to make, use or sell any invention on which a patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.

          (y)          “Patents” means all of the following now owned or
hereafter acquired by any Grantor: (i) all letters patent of the United States
or the equivalent thereof in any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or the
equivalent thereof in any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or any
similar offices in any other country, including those listed on Schedule 1(w),
and (ii) all reissues, continuations, divisions, continuations-in-past, renewals
or extensions thereof. and the inventions disclosed or claimed therein,
including the right to make, use and/or sell the inventions disclosed or claimed
therein.

          (z)          “Pledged Collateral” has the meaning set forth in Section
4.1(f) hereof.

          (aa)        “Pledged Debt” has the meaning set forth in Section 4.1(b)
hereof.

7

--------------------------------------------------------------------------------

          (bb)        “Pledged Securities” has the meaning set forth in Section
4.1(a) hereof.

          (cc)         “Secured Party” has the meaning set forth in the preamble
to this Agreement.

          (dd)        “Securities Act”: means the Securities Act of 1933, as
amended.

          (ee)         “Senior Secured Note” has the meaning set forth in the
recitals to this Agreement.

          (ff)          “Trademark License” means any written agreement, now or
hereafter in effect, granting to any third party any right to use any trademark
now or hereafter owned by any Grantor or that any Grantor otherwise has the
right to license, or granting to any Grantor any right to use any trademark now
or hereafter owned by any third party, and all rights of any Grantor under any
such agreement.

          (gg)        “Trademarks” means all of the following, whether now owned
or existing or hereafter adopted or acquired by any Grantor: (i) all trademarks,
service marks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature, all
registrations and recordings thereof, and all registration and recording
applications filed in connections therewith, including without limitation
registrations and registration applications in the United States Patent and
Trademark Office or any similar offices in any state of the United States or any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including without limitation those listed in Schedule 1.1(ff),
(ii) all goodwill associated therewith or symbolized thereby and (iii) all other
assets, rights and interests that uniquely reflect or embody such goodwill.

     1.2     Other Definitional Provisions.

          (a)          Unless otherwise defined herein, terms defined in the
Senior Secured Note and used herein shall have the meanings given to them in the
Senior Secured Note, and the following terms which are defined in the New York
UCC in effect on the date hereof are used herein as so defined: Chattel Paper,
Equity Interests, Instruments and Proceeds.

          (b)          The words “hereof,” “herein”, “hereto” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section and Schedule references are to this Agreement unless otherwise
specified.

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

ARTICLE 2

GUARANTEE

     2.1     Guarantee

          (a)          Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Secured Party, for the
benefit of the Secured Party and its successors, indorsees, transferees and
assigns, the prompt and complete payment and

8

--------------------------------------------------------------------------------

performance by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Company Obligations.

          (b)          Each of the Guarantors further agrees that its guarantee
hereunder constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Secured Party to any
security held for the payment of the Obligations or to any balance of any
deposit account or credit on the books of the Secured Party in favor of the
Company or any other Person.

          (c)          Anything herein or in any other Transaction Document to
the contrary notwithstanding, the maximum liability of each Guarantor hereunder
and under the other Transaction Documents shall in no event exceed the amount
which can be guaranteed by such Guarantor under applicable federal and state
laws relating to the insolvency of debtors (after giving effect to the right of
contribution established in Section 2.2).

          (d)          Each Guarantor agrees that the Company Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this ARTICLE 2
or affecting the rights and remedies of the Secured Party hereunder.

          (e)          The guarantee contained in this ARTICLE 2 shall remain in
full force and effect until all the Guarantor Obligations shall have been Fully
Satisfied.

          (f)          No payment made by the Company, any of the Guarantors,
any other guarantor or any other Person or received or collected by the Secured
Party from the Company, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Company Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Company Obligations or any payment received or collected from such Guarantor in
respect of the Company Obligations), remain liable for the Company Obligations
up to the maximum liability of such Guarantor hereunder until the Company
Obligations are paid in full.

     2.2     Right of Contribution

     Each Guarantor hereby agrees that to the extent that a Guarantor shall have
paid more than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from and against
any other Guarantor hereunder which has not paid its proportionate share of such
payment. Each Guarantor’s right of contribution shall be subject to the terms
and conditions of Section 2.3. The provisions of this Section 2.2 shall in no
respect limit the obligations and liabilities of any Guarantor to the Secured
Party, and each Guarantor shall remain liable to the Secured Party for the full
amount guaranteed by such Guarantor hereunder.

     2.3     No Subrogation

     Notwithstanding any payment made by any Guarantor hereunder or any set-off
or application of funds of any Guarantor by the Secured Party, no Guarantor
shall be entitled to be subrogated to any of the rights of the Secured Party
against the Company or any other Guarantor or any

9

--------------------------------------------------------------------------------

collateral security or guarantee or right of offset held by the Secured Party
for the payment of the Company Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Company or any other
Guarantor in respect of payments made by such Guarantor hereunder, until all
amounts owing to the Secured Party on account of the Obligations are Fully
Satisfied. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
Fully Satisfied, such amount shall be held by such Guarantor in trust for the
Secured Party, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Secured Party in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Secured Party, if required), to be applied against the Obligations, whether
matured or unmatured, in such order as the Secured Party may determine.

     2.4          Amendments, Etc. With Respect to the Obligations

     Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Secured Party may be rescinded by the Secured Party and
any of the Obligations continued, and the Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, extended,
accelerated, compromised, waived, surrendered or released by the Secured Party,
and the Senior Secured Note and the other Transaction Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Secured Party
may deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Secured Party for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The Secured
Party shall not have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Obligations or for the guarantee
contained in this ARTICLE 2 or any property subject thereto.

     2.5          Guarantee Absolute and Unconditional

     Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Secured Party upon the guarantee contained in this ARTICLE 2 or
acceptance of the guarantee contained in this ARTICLE 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this ARTICLE 2; and all dealings between the Company and
any of the Guarantors, on the one hand, and the Secured Party, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this ARTICLE 2. Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Company or any of the Guarantors with respect to the
Obligations. Each Guarantor understands and agrees that the guarantee contained
in this ARTICLE 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Senior Secured Note or any other Transaction Document, any of the Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Secured Party, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be

10

--------------------------------------------------------------------------------

available to or be asserted by the Company or any other Person against the
Secured Party, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Company or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Company for the
Company Obligations, or of such Guarantor under the guarantee contained in this
ARTICLE 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Secured Party may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against the Company, any other Guarantor or any other Person or against any
collateral security or guarantee for the Obligations or any right of offset with
respect thereto, and any failure by the Secured Party to make any such demand,
to pursue such other rights or remedies or to collect any payments from the
Company, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Company, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Secured Party against any Guarantor. For the purposes
hereof “demand” shall include the commencement and continuance of any legal
proceedings.

     2.6          Reinstatement

     The guarantee contained in this ARTICLE 2 shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Company Obligations is rescinded or must otherwise be
restored or returned by the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.

     2.7          Payments

     Each Guarantor hereby guarantees that payments hereunder will be paid to
the Secured Party without set-off or counterclaim in United States Dollars at
such place as the Secured Party may from time to time designate in writing to
such Guarantor.

ARTICLE 3

GRANT OF SECURITY INTEREST

     3.1          Grant of Security Interest

     Each Grantor hereby assigns, transfers and grants to the Secured Party a
first priority security interest (the “Security Interest”) in all of the
following property now owned or at any time hereafter acquired by such Grantor,
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest, in each instance, with all accessions and additions
thereto, substitutions therefor, and replacements, proceeds and products thereof
(collectively, the “Collateral”), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor’s Obligations:

11

--------------------------------------------------------------------------------

 

 

 

 

(a)

all Accounts;

 

 

 

 

(b)

all Equipment;

 

 

 

 

(c)

all General Intangibles;

 

 

 

 

(d)

all Pledged Collateral;

 

 

 

 

(e)

all Inventory;

 

 

 

 

(f)

all Documents; and

 

 

 

 

(g)

all Other Property.

     3.2          Perfection: Authorization to File Financing Statements

     Each Grantor hereby irrevocably authorizes the Secured Party, 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/or “in lieu of” financing
statements and/or amendments of any financing statements filed at any time and
from time to time that (a) indicate the Collateral (i) as all assets of each
Grantor or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State or such jurisdiction, or (ii) as being of an equal
or lesser scope or with greater detail, and (b) provide any other information
required by Part 5 of Article 9 of the Uniform Commercial Code of the State or
such other jurisdiction for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether such Grantor is an
organization, the type of organization and any organizational identification
number issued to such Grantor and, (ii) 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. Each Grantor agrees to furnish any such information to the
Secured Party promptly upon request. Each Grantor also ratifies its
authorization for the Secured Party to file in any relevant jurisdiction any
initial financing statements or amendments thereto if filed prior to the date
hereof. The Secured Party is further authorized to file with the United States
Patent and Trademark Office or United States Copyright Office (or any successor
office or any similar office in any other country) such documents as may be
necessary or advisable for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by each Grantor, without
the signature of any Grantor, and naming any Grantor or the Grantors as debtors
and the Secured Party as secured party. The Security Interest is granted as
security only and shall not subject the Secured Party to or in any way alter or
modify, any obligation or liability of any Grantor with respect to or arising
out of the Collateral. Without limiting the foregoing, the Secured Party will
file the Financing Statements.

12

--------------------------------------------------------------------------------

ARTICLE 4

PLEDGE OF SECURITIES

     4.1          Pledge

     As security for the payment or performance, as the case may be, in full of
the Obligations, each Grantor hereby assigns, pledges and grants to the Secured
Party, its successors and assigns, a security interest in, all of such Grantor’s
right, title and interest in, to and under

          (a)          the shares of capital stock and other Equity Interests
owned by it and listed on Schedule 4.1 and any other Equity Interests obtained
in the future by such Grantor and the certificates representing all such Equity
Interests (the “Pledged Securities”); provided that the Pledged Securities shall
not include more than 65% of the issued and outstanding voting Equity Interests
of any Foreign Subsidiary,

          (b)          (i) the debt securities listed opposite the name of such
Grantor on Schedule 4.1, (ii) any debt securities in the future issued to such
Grantor and (iii) the promissory notes and any other instruments evidencing such
debt securities (the “Pledged Debt”),

          (c)          all other property that may be delivered to and held by
the Secured Party pursuant to the terms of this Section 4.1,

          (d)          subject to Section 4.6, all payments of principal or
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of, in exchange for or
upon the conversion of, and all other Proceeds received in respect of, the
securities referred to in clauses (a) and (b) above,

          (e)          subject to Section 4.6, all rights and privileges of such
Grantor with respect to the securities and other property referred to in clauses
(a), (b), (c) and (d) above, and

          (f)          all Proceeds of any of the foregoing (the items referred
to in clauses (a) through (f) above being collectively referred to as the
“Pledged Collateral”).

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

     4.2          Delivery of the Pledged Collateral

          (a)          Each Grantor agrees promptly to deliver or cause to be
delivered to the Secured Party any and all Pledged Collateral.

          (b)          Each Grantor will cause any Indebtedness for borrowed
money owed to such Grantor by any Person to be evidenced by a duly executed
promissory note that is pledged and delivered to the Secured Party pursuant to
the terms hereof.

          (c)          Upon delivery to the Secured Party, (i) any Pledged
Securities shall be accompanied by stock powers duly executed in blank or other
instruments of transfer satisfactory to the Secured Party and by such other
instruments and documents as the Secured Party may reasonably request and (ii)
all other property comprising part of the Pledged Collateral shall be
accompanied by proper instruments of assignment duly executed by the applicable
Grantor and such other instruments or documents as the Secured Party may
reasonably request. Each delivery

13

--------------------------------------------------------------------------------

of Pledged Collateral shall be accompanied by a schedule describing the
securities, which schedule shall be attached hereto as Schedule 4.1 and made a
part hereof; provided that failure to attach any such schedule hereto shall not
affect the validity of such pledge of such Pledged Collateral. Each schedule so
delivered shall supplement any prior schedules so delivered.

     4.3          Representations, Warranties and Covenants

     The Grantors jointly and severally represent, warrant and covenant to and
with the Secured Party, that:

          (a)          Schedule 4.1 correctly sets forth the percentage of the
issued and outstanding units of each class of the Equity Interests of the issuer
thereof represented by the Pledged Securities as of the date hereof and includes
all Equity Interests, debt securities and promissory notes legally or
beneficially owned by Grantor;

          (b)          the Pledged Securities and Pledged Debt have been duly
and validly authorized and issued by the issuers thereof and (i) in the case of
Pledged Securities, are fully paid and nonassessable and (ii) in the case of
Pledged Debt are legal, valid and binding obligations of the issuers thereof;

          (c)          except for the security interests granted hereunder, each
of the Grantors (i) is and will continue to be the direct owner, beneficially
and of record, of the Pledged Collateral indicated on Schedule 4.1 as owned by
such Grantor, (ii) holds the same free and clear of all Liens, other than Liens
created by this Agreement or Permitted Liens, (iii) will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any security
interest in or other Lien on, the Pledged Collateral, other than Liens created
by this Agreement or Permitted Liens and (iv) will defend its title or interest
thereto or therein against any and all Liens (other than the Lien created by
this Agreement and Permitted Liens), however, arising, of all Persons
whomsoever;

          (d)          except for restrictions and limitations imposed by the
Transaction Documents or securities laws generally, the Pledged Collateral is
and will continue to be freely transferable and assignable, and none of the
Pledged Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or bylaw provisions or contractual restriction
of any nature that might prohibit, impair, delay or otherwise affect the pledge
of such Pledged Collateral hereunder, the sale or disposition thereof pursuant
hereto or the exercise by the Secured Party of rights and remedies hereunder;

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

          (f)          no consent or approval of any Governmental Authority, any
securities exchange or any other Person was or is necessary to the validity of
the pledge effected hereby (other than such as have been obtained and are in
full force and effect);

14

--------------------------------------------------------------------------------

          (g)          by virtue of the execution and delivery by the Grantors
of this Agreement, when any Pledged Collateral is delivered to the Secured Party
in accordance with this Agreement, the Secured Party will obtain a legal, valid
and perfected lien upon and security interest in such Pledged Collateral as
security for the payment and performance of the Obligations; and

          (h)          the pledge effected hereby is effective to vest in the
Secured Party the rights of the Secured Party in the Pledged Collateral as set
forth herein.

     4.4          Certification of Limited Liability Company and Limited
Partnership Interests

     Each interest in any limited liability company or limited partnership
controlled by any Grantor and pledged hereunder shall be represented by a
certificate, shall be a “security” within the meaning of Article 8 of the New
York UCC and shall be governed by Article 8 of the New York UCC.

     4.5          Registration in Nominee Name; Denominations

     The Secured Party shall have the right (in its sole and absolute
discretion) to hold the Pledged Collateral in its own name as pledgee, the name
of its nominee (as pledgee or as sub-agent) or the name of the applicable
Grantor, indorsed or assigned in blank or in favor of the Secured Party. Each
Grantor will promptly give to the Secured Party copies of any notices or other
communications received by it with respect to Pledged Collateral registered in
the name of such Grantor. The Secured Party shall at all times have the right to
exchange the certificates representing Pledged Collateral for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.

     4.6          Voting Rights; Dividends and Interest

          (a)          Unless and until an Event of Default shall have occurred
and be continuing and the Secured Party shall have notified the Grantors that
their rights under this Section 4.6 are being suspended:

 

 

 

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

 

 

 

                (ii)          The Secured Party shall execute and deliver to
each Grantor, or cause to be executed and delivered to such Grantor, all such
proxies, powers of attorney and other instruments as such Grantor may reasonably
request for the purpose of enabling such

15

--------------------------------------------------------------------------------

 

 

 

Grantor to exercise the voting and/or consensual rights and powers it is
entitled to exercise pursuant to subparagraph (i) above.

 

 

 

                (iii)           Each Grantor shall be entitled to receive and
retain any and all dividends, interest, principal and other distributions paid
on or distributed in respect of the Pledged Collateral to the extent and only to
the extent that such dividends, interest, principal and other distributions are
permitted by, and otherwise paid or distributed in accordance with, the terms
and conditions of the Senior Secured Note, the other Transaction Documents and
applicable laws; provided that any noncash dividends, interest, principal or
other distributions that would constitute Pledged Securities or Pledged Debt,
whether resulting from a subdivision, combination or reclassification of the
outstanding Equity Interests of the issuer of any Pledged Collateral or received
in exchange for Pledged Collateral or any part thereof, or in redemption
thereof, or as a result of any merger, consolidation, acquisition or other
exchange of assets to which such issuer may be a party or otherwise, shall be
and become part of the Pledged Collateral, and, if received by any Grantor,
shall not be commingled by such Grantor with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Secured Party and shall be forthwith delivered to the Secured
Party in the same form as so received (with any necessary indorsement).

          (b)          Upon the occurrence and during the continuance of an
Event of Default, after the Secured Party shall have notified the Grantors of
the suspension of their rights under paragraph (a)(iii) of this Section 4.6,
then all rights of any Grantor to dividends, interest, principal or other
distributions that such Grantor is authorized to receive pursuant to paragraph
(a)(iii) of this Section 4.6 shall cease, and all such rights shall thereupon
become vested in the Secured Party, which shall have the sole and exclusive
right and authority to receive and retain such dividends, interest, principal or
other distributions. All dividends, interest, principal or other distributions
received by any Grantor contrary to the provisions of this Section 4.6 shall be
held in trust for the benefit of the Secured Party, shall be segregated from
other property or funds of such Grantor and shall be forthwith delivered to the
Secured Party upon demand in the same form as so received (with any necessary
indorsement). Any and all money and other property paid over to or received by
the Secured Party pursuant to the provisions of this paragraph (b) shall be
retained by the Secured Party in an account to be established by the Secured
Party upon receipt of such money or other property and shall be applied in
accordance with the provisions of Section 7.4. After all Events of Default have
been cured or waived and the Company has delivered to the Secured Party a
certificate to that effect, the Secured Party shall promptly repay to each
Grantor (without interest) all dividends, interest, principal or other
distributions that such Grantor would otherwise be permitted to retain pursuant
to the terms of paragraph (a)(iii) of this Section 4.6 and that remain in such
account.

          (c)          Upon the occurrence and during the continuance of an
Event of Default, after the Secured Party shall have notified the Grantors of
the suspension of their rights under paragraph (a)(i) of this Section 4.6, then
all rights of any Grantor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section
4.6, and the obligations of the Secured Party under paragraph (a)(ii) of this
Section 4.6. shall cease, and all such rights shall thereupon become vested in
the Secured Party, which shall have the sole and

16

--------------------------------------------------------------------------------

exclusive right and authority to exercise such voting and consensual rights and
powers; provided, however, that the Secured Party shall have the right from time
to time following and during the continuance of an Event of Default to permit
the Grantors to exercise such rights.

          (d)          Any notice given by the Secured Party to the Grantors
suspending their rights under paragraph (a) of this Section 4.6 (i) may be given
to one or more of the Grantors at the same or different times and (ii) may
suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii)
in part without suspending all such rights (as specified by the Secured Party in
its sole and absolute discretion) and without waiving or otherwise affecting the
Secured Party ‘s rights to give additional notices from time to time suspending
other rights so long as an Event of Default has occurred and is continuing.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

          To induce the Secured Party to purchase the Senior Secured Note from
the Company, the Company and each Guarantor hereby represents and warrants to
the Secured Party that:

     5.1     Representations in Senior Secured Note

     In the case of each Guarantor, the representations and warranties of the
Company set forth in the Senior Secured Note as they relate to such Guarantor or
to the Transaction Documents to which such Guarantor is a party, each of which
is hereby incorporated herein by reference, are true and correct, and the
Secured Party shall be entitled to rely on each of them as if they were fully
set forth herein, provided that each reference in each such representation and
warranty to the Company’s knowledge shall, for the purposes of this Section 5.1,
be deemed to be a reference to such Guarantor’s knowledge.

     5.2     Title; No Other Liens

          (a)          No financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as are permitted by the Senior Secured Note.

          (b)          Each Grantor is the legal and beneficial owner of the
Collateral free and clear of all liens, security interests or other
encumbrances, except as expressly permitted by the Senior Secured Note.

          (c)          For the past five years, each Grantor has conducted
business only under its own corporate name and not under any trade name or other
name.

          (d)          Each Grantor has exclusive possession and control of the
Inventory (other than raw materials and work in process) and Equipment, except
for (i) Inventory and Equipment in the possession and control of such Grantor’s
lessees and licensees under written lease and license agreements entered into in
the ordinary course of business and consistent with past practice and (ii)
Inventory and Equipment in transit with common or other carriers.

          (e)          The Pledged Securities have been duly authorized and
validly issued and are fully paid and non-assessable. The Pledged Debt of each
Grantor’s Subsidiaries (if any), and, to the

17

--------------------------------------------------------------------------------

best of each Grantor’s knowledge, all other Pledged Debt, has been duly
authorized, issued and delivered, and is the legal, valid, binding and
enforceable obligation of the issuers thereof.

          (f)          The Pledged Securities indicated on Schedule 4.1 hereto
constitute all of the shares held by each Grantor of the respective issuers
thereof and constitute 100% of all of the shares of stock of the respective
issuers who are Subsidiaries of such Grantor.

          (g)          Other than filings with the United States Patent and
Trademark Office, filings and registrations with the United States Copyright
Office and filings under the Uniform Commercial Code in effect in each relevant
jurisdiction no authorization, approval or other action by, and no notice to or
filing with, any federal, state or local governmental authority in the United
States that have not already been taken or made and which are in full force and
effect, is required (i) for the pledge by each Grantor of the Pledged Collateral
or for the grant by each Grantor of the security interest in the Collateral
granted hereby or for the execution, delivery or performance of this Agreement
by such Grantor, (ii) for the exercise by the Secured Party of the voting or
other rights provided in this Agreement with respect to the Pledged Collateral
or the remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with the disposition thereof by laws
affecting the offering and sale of securities generally), or (iii) for the
exercise by the Secured Party of any of its other rights or remedies hereunder.

     5.3     Perfected First Priority Liens

     In the case of each Grantor, the security interests granted pursuant to
this Agreement (a) upon completion of the filings and other actions specified in
Section 6.2 (which, in the case of all filings and other documents referred to
in Section 6.2, have been delivered to the Secured Party in completed and duly
executed form) will constitute valid perfected security interests in all of the
Collateral in favor of the Secured Party as collateral security for such
Grantor’s Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor (except as to the ability of the Secured Party to
have the U.S. federal government make payments directly to the Secured Party in
respect of Accounts arising under contracts with the U.S. federal government as
to which no filing has been or will be made under the Federal Assignment of
Claims Act) and (b) are prior to all other Liens on the Collateral in existence
on the date hereof.

     5.4     Chief Executive Office; Inventory and Equipment

     On the date hereof, each Grantor’s jurisdiction of organization, the
location of such Grantor’s chief executive office and principal place of
business are specified on Schedule 5.4. As of the date of this Agreement, the
locations listed on Schedule 5.4 to this Agreement constitute all locations at
which its Inventory (other than raw materials and work in process) or Equipment
is located, except for (a) Inventory or Equipment temporarily in transit from
one location listed on Schedule 5.4 to another location listed on Schedule 5.4
or (b) Inventory or Equipment in transit with common or other carriers to a
location listed on Schedule 5.4.

     5.5     Farm Products

     None of the Collateral constitutes, or is the Proceeds of, Farm Products.

18

--------------------------------------------------------------------------------

     5.6     Accounts

          (a)          In the case of each Grantor, no amount payable to such
Grantor under or in connection with any Account is evidenced by any Instrument
or Chattel Paper which has not been delivered to the Secured Party.

          (b)          In the case of each Grantor, the amounts represented by
such Grantor to the Secured Party from time to time as owing to such Grantor in
respect of the Accounts will at such times be accurate.

ARTICLE 6

COVENANTS

          Each Grantor covenants and agrees with the Secured Party that, from
and after the date of this Agreement until the Obligations shall have been Fully
Satisfied:

     6.1     Covenants in Senior Secured Note

     Each Grantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or not taken, as the case may be, so
that no Event of Default is caused by the failure to take such action or to
refrain from taking such action by such Grantor or any of its Subsidiaries.

     6.2     Other Actions

     In order to further insure the attachment, perfection and priority of, and
the ability of the Secured Party to enforce, the Security Interest, each Grantor
agrees, in each case at such Grantor’s own expense, to take the following
actions with respect to the following Collateral:

          (a)          Instruments. If any Grantor shall at any time hold or
acquire any Instruments, such Grantor shall forthwith indorse, assign and
deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time reasonably request.

          (b)          Deposit Accounts. For each deposit account that any
Grantor at any time opens or maintains, such Grantor and the Secured Party shall
either (i) cause the depositary bank to agree to comply with instructions from
the Secured Party to such depositary bank directing the disposition of funds
from time to time credited to such deposit account, without further consent of
such Grantor or any other Person, pursuant to a duly executed and completed
Account Control Agreement substantially in the form of Schedule 6.2 or in such
other form proposed by such depository bank as shall be acceptable to the
Secured Party, it being understood that the Secured Party shall issue such
instructions to such depositary banks only in connection with the exercise of
remedies following the occurrence of an Event of Default, or (ii) arrange for
the Secured Party to become the customer of the depositary bank with respect to
the deposit account, with the Grantor being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw funds from such deposit
account. The provisions of this paragraph shall not apply to (A) any deposit
account for which any Grantor, the depositary bank and the Secured Party have
entered into a cash collateral agreement specially negotiated among such
Grantor, the depositary

19

--------------------------------------------------------------------------------

bank and the Secured Party for the specific purpose set forth therein and (B)
deposit accounts for which the Secured Party is the depositary.

          (c)          Investment Property. Except to the extent otherwise
provided in ARTICLE 4, if any Grantor shall at any time hold or acquire any
certificated securities, such Grantor shall forthwith indorse, assign and
deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time specify. If any securities now or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the
issuer thereof, such Grantor shall immediately notify the Secured Party thereof
and, at the Secured Party’s request and option, pursuant to an agreement in form
and substance reasonably satisfactory to the Secured Party, either (i) cause the
issuer to agree to comply with instructions from the Secured Party as to such
securities, without further consent of any Grantor or such nominee, or (ii)
arrange for the Secured Party to become the registered owner of the securities.
If any securities, whether certificated or uncertificated, or other investment
property now or hereafter acquired by any Grantor are held by such Grantor or
its nominee through a securities intermediary or commodity intermediary, such
Grantor shall immediately notify the Secured Party thereof and, at the Secured
Party’s request and option, pursuant to an agreement in form and substance
reasonably satisfactory to the Secured Party, either (i) cause such securities
intermediary or (as the case may be) commodity intermediary to agree to comply
with entitlement orders or other instructions from the Secured Party to such
securities intermediary as to such security entitlements, or (as the case may
be) to apply any value distributed on account of any commodity contract as
directed by the Secured Party to such commodity intermediary, in each case
without further consent of any Grantor or such nominee, or (ii) in the case of
financial assets or other investment property held through a securities
intermediary, arrange for the Secured Party to become the entitlement holder
with respect to such investment property, with the Grantor being permitted, only
with the consent of the Secured Party, to exercise rights to withdraw or
otherwise deal with such investment property. The Secured Party agrees with each
of the Grantors that the Secured Party shall not give any such entitlement
orders or instructions or directions to any such issuer, securities intermediary
or commodity intermediary, and shall not withhold its consent to the exercise of
any withdrawal or dealing rights by any Grantor, unless an Event of Default has
occurred and is continuing, or, after giving effect to any such investment and
withdrawal rights would occur. The provisions of this paragraph shall not apply
to any financial assets credited to a securities account for which the Secured
Party is the securities intermediary.

          (d)          Electronic Chattel Paper and Transferable Records. If any
Grantor at any time holds or acquires an interest in any electronic chattel
paper or any “transferable record,” as that term is defined in Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, such Grantor shall promptly notify the Secured Party
thereof and, at the request of the Secured Party, shall take such action as the
Secured Party may reasonably request to vest in the Secured Party control under
New York UCC Section 9-105 of such electronic chattel paper or control under
Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as so in effect in such jurisdiction, of such transferable record. The
Secured Party agrees with such Grantor that the Secured Party will arrange.
pursuant to procedures reasonably satisfactory to the Secured Party and so long
as such procedures will not result in the

20

--------------------------------------------------------------------------------

Secured Party’s loss of control. for the Grantor to make alterations to the
electronic chattel paper or transferable record permitted under UCC Section
9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to allow without loss of control, unless
an Event of Default has occurred and is continuing or would occur after taking
into account any action by such Grantor with respect to such electronic chattel
paper or transferable record.

          (e)          Letter-of-Credit Rights. If any Grantor is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of such
Grantor, such Grantor shall promptly notify the Secured Party thereof and, at
the request and option of the Secured Party, such Grantor shall, pursuant to an
agreement in form and substance reasonably satisfactory to the Secured Party,
either (i) arrange for the issuer and any confirmer of such letter of credit to
consent to an assignment to the Secured Party of the proceeds of any drawing
under the letter of credit or (ii) arrange for the Secured Party to become the
transferee beneficiary of the letter of credit, with the Secured Party agreeing,
in each case, that the proceeds of any drawing under the letter of credit are to
be paid to the applicable Grantor unless an Event of Default has occurred or is
continuing.

          (f)          Commercial Tort Claims. If any Grantor shall at any time
hold or acquire a commercial tort claim in an amount reasonably estimated to
exceed $100,000, such Grantor shall promptly notify the Secured Party thereof in
a writing signed by such Grantor including a summary description of such claim
and grant to the Secured Party in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such writing
to be in form and substance reasonably satisfactory to the Secured Party.

          (g)          Leasehold Deposits. If any Grantor shall at any time hold
or acquire any leasehold deposits, such Grantor shall promptly notify the
Secured Party thereof, and shall authorize the Secured Party to file a UCC-9
financing statement in the county where the leasehold is located and in the
state of organization of such Grantor.

     6.3     Covenants Regarding Patent, Trademark and Copyright Collateral.

          (a)          Each Grantor agrees that it will not do any act or omit
to do any act (and will exercise commercially reasonable efforts to prevent its
licensees from doing any act or omitting to do any act) whereby any Patent that
is material to the conduct of such Grantor’s business may become invalidated or
dedicated to the public, and agrees that it shall continue to mark any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.

          (b)          Each Grantor (either itself or through its licensees or
its sublicensees) will, for each Trademark material to the conduct of such
Grantor’s business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such Trademark
with notice of Federal or foreign registration to the extent necessary and
sufficient to establish and preserve its maximum rights under applicable law and
(iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights.

21

--------------------------------------------------------------------------------

          (c)          Each Grantor (either itself or through its licensees or
sublicensees) will, for each work covered by a material Copyright, continue to
publish, reproduce, display, adopt and distribute the work with appropriate
copyright notice as necessary and sufficient to establish and preserve its
maximum rights under applicable copyright laws.

          (d)          Each Grantor shall notify the Secured Party promptly if
it knows or has reason to know that any Patent, Trademark or Copyright material
to the conduct of its business may become abandoned, lost or dedicated to the
public, or of any materially adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office or
any court or similar office of any country) regarding such Grantor’s ownership
of any Patent, Trademark or Copyright, its right to register the same, or its
right to keep and maintain the same.

          (e)          In no event shall any Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, unless it promptly
informs the Secured Party, and, upon request of the Secured Party, executes and
delivers any and all agreements, instruments, documents and papers as the
Secured Party may reasonably request to evidence the Secured Party’s security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Secured Party as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.

          (f)          Each Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor’s business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.

          (g)          In the event that any Grantor has reason to believe that
any Collateral consisting of a Patent. Trademark or Copyright material to the
conduct of any Grantor’s business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Secured Party and shall, if consistent with good business judgment. promptly
sue for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to protect such Collateral.

          (h)          Upon and during the continuance of an Event of Default,
each Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright

22

--------------------------------------------------------------------------------

License, Patent License or Trademark License to effect the assignment of all
such Grantor’s right, title and interest thereunder to the Secured Party or its
designee.

     6.4     Payment of Obligations

     Each Grantor will pay and discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of income or profits therefrom as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge need be
paid if the amount or validity thereof is currently being contested in good
faith by appropriate proceedings, reserves in conformity with GAAP with respect
thereto have been provided on the books of such Grantor and such proceedings
could not reasonably be expected to result in the sale, forfeiture or loss of
any material portion of the Collateral or any interest therein.

     6.5     Maintenance of Perfected Security Interest; Further Documentation

          (a)          Each Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having first priority
pursuant to Section 5.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.

          (b)          Each Grantor will furnish to the Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party may reasonably request, all in reasonable detail.

          (c)          At any time and from time to time, upon the written
request of the Secured Party, and at the sole expense of each Grantor, such
Grantor, will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the Secured
Party may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.

     6.6     Changes in Locations, Name, etc.

          No Grantor will, except upon 15 days prior written notice to the
Secured Party and delivery to the Secured Party of all additional executed
financing statements and other documents reasonably requested by the Secured
Party to maintain the validity, perfection and priority of the security
interests provided for herein:

          (a)          change its jurisdiction of organization, the location of
its chief executive office, or the location of its sole place of business from
that referred to in Schedule 5.4 above; or

          (b)          change its name, identity or corporate structure to such
an extent that any financing statement filed by the Secured Party in connection
with this Agreement would become misleading; or

23

--------------------------------------------------------------------------------

          (c)          make any other change(s) which might affect the
perfection or priority of the Secured Parties’ Lien in the Collateral.

     6.7     Notices

     In the case of each Grantor, such Grantor will advise the Secured Party
promptly, in reasonable detail, of:

          (a)          any Lien (other than security interests created hereby or
Liens permitted under the Senior Secured Note) on any of the Collateral which
would adversely affect the ability of the Secured Party to exercise any of its
remedies hereunder; and

          (b)          of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interests created hereby.

     6.8     Accounts

          (a)          Each Grantor, other than in the ordinary course of
business consistent with its past practice, will not (i) grant any extension of
the time of payment of any Account, (ii) compromise or settle any Account for
less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any Account or (v) amend, supplement or modify any Account in any
manner that could adversely affect the value thereof.

     6.9     Maintenance of Inventory and Equipment

          (a)          Each Grantor hereby covenants that is shall keep the
Inventory and Equipment (other than raw materials and work in process and
Inventory sold in the ordinary course of business) at the places specified on
Schedule 5.4 hereof and deliver written notice to the Secured Party at least 30
days prior to establishing any other location at which it reasonably expects to
maintain Inventory (other than raw materials and work in process) or Equipment,
in which jurisdiction all action required by paragraph (b) hereof shall have
been taken with respect to all such Inventory or Equipment, as the case may be,
in order to perfect the security interest granted therein under this Agreement.

          (b)          Maintain or cause to be maintained in good repair,
working order and condition, excepting ordinary wear and tear and damage due to
casualty, all of the Inventory or Equipment, and make or cause to be made all
appropriate repairs, renewals and replacements thereof, to the extent not
obsolete and consistent with past practice of the each Grantor, as quickly as
practicable after the occurrence of any loss or damage thereto which are
necessary or desirable to such end. Each Grantor shall promptly furnish to the
Secured Party a statement respecting any material loss or damage as a result of
a single occurrence to any of its Inventory or Equipment which has an aggregate
fair market value exceeding $25,000.

     6.10     Additional Shares

     Each Grantor agrees that it will (a) cause each issuer of the Pledged
Securities subject to its control not to issue any stock or other securities in
addition to or in substitution for the Pledged Securities issued by such issuer,
except to such Grantor, and (b) pledge, hereunder, immediately

24

--------------------------------------------------------------------------------

upon its acquisition (directly or indirectly) thereof, any and all additional
shares of stock or other securities of each issuer of the Pledged Securities.
Each Grantor hereby authorizes the Secured Party to modify this Agreement by
amending Schedule 4.1 to include such additional shares or other securities.

ARTICLE 7

REMEDIAL PROVISIONS

     7.1          Certain Matters Relating to Accounts

          (a)          The Secured Party shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Secured Party may require in connection with
such test verifications. At any time and from time to time, upon the Secured
Party’s request and at the expense of the relevant Grantor, such Grantor shall
cause independent public accountants or others satisfactory to the Secured Party
to furnish to the Secured Party reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.

          (b)          The Secured Party hereby authorizes each Grantor to
collect such Grantor’s Accounts, subject to the Secured Party’s direction and
control, and the Secured Party may curtail or terminate said authority at any
time after the occurrence and during the continuance of an Event of Default. If
required by the Secured Party at any time after the occurrence and during the
continuance of an Event of Default, any payments of Accounts, when collected by
any Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Secured Party if required, in a Collateral Account
maintained under the sole dominion and control of the Secured Party, subject to
withdrawal by the Secured Party for the account of the Secured Parties only as
provided in Section 7.4, and (ii) until so turned over, shall be held by such
Grantor in trust for the Secured Party, segregated from other funds of such
Grantor. Each such deposit of Proceeds of Accounts shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.

          (c)          At the Secured Party’s request, each Grantor shall
deliver to the Secured Party all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.

     7.2          Communications with Obligors; Grantors Remain Liable

          (a)          The Secured Party in its own name or in the name of
others may at any time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts to verify with
them to the Secured Party’s satisfaction the existence, amount and terms of any
Accounts.

          (b)          Upon the request of the Secured Party at any time after
the occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on the Accounts that the Accounts have been assigned to
the Secured Party and that payments in respect thereof shall be made directly to
the Secured Party.

25

--------------------------------------------------------------------------------

          (c)          Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. The Secured Party shall not have any obligation or liability under any
Account (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating
thereto, nor shall the Secured Party be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.

     7.3          Proceeds to be Turned Over To Secured Party

     In addition to the rights of the Secured Party specified in Section 7.1
with respect to payments of Accounts, if an Event of Default shall occur and be
continuing, all Proceeds received by any Grantor consisting of cash, checks and
other near-cash items shall be held by such Grantor in trust for the Secured
Party, segregated from other funds of such Grantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Secured Party in the exact form
received by such Guarantor (duly indorsed by such Grantor to the Secured Party,
if required). All Proceeds received by the Secured Party hereunder shall be held
by the Secured Party in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Secured Party in a Collateral
Account (or by such Grantor in trust for the Secured Party) shall continue to be
held as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 7.4.

     7.4          Application of Proceeds

     If an Event of Default shall have occurred and be continuing, at any time
at the Secured Party’s election, the Secured Party may apply all or any part of
Proceeds held in any Collateral Account in payment of the Obligations in such
order as the Secured Party may elect, and any part of such funds which the
Secured Party elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the Secured
Party to the Company or to whomsoever may be lawfully entitled to receive the
same. Any balance of such Proceeds remaining after the Obligations shall have
been Fully Satisfied shall be paid over to the Company or to whomsoever may be
lawfully entitled to receive the same.

     7.5          New York UCC and Other Remedies

     If an Event of Default shall occur and be continuing, the Secured Party, on
behalf of the Secured Parties, may exercise, in addition to all other rights and
remedies granted to them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable law.
Without limiting the generality of the foregoing, the Secured Party, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the

26

--------------------------------------------------------------------------------

Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The Secured
Party 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 the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released.
Each Grantor further agrees, at the Secured Party’s request, to assemble the
Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at such Grantor’s premises or
elsewhere. The Secured Party shall apply the net proceeds of any action taken by
it pursuant to this Section 7.5, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Secured Party hereunder, including, without
limitation, reasonable attorneys’ fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as the Secured Party may
elect, and only after such application and after the payment by the Secured
Party of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the New York UCC, need the Secured Party
account for the surplus, if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Secured Party arising out of the exercise by them of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.

     7.6          Waiver; Deficiency

     Each Grantor waives and agrees not to assert any rights or privileges which
it may acquire under Section 9-112 of the New York UCC. Each Grantor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay its Obligations and the
fees and disbursements of any attorneys employed by the Secured Party to collect
such deficiency.

ARTICLE 8

SECURED PARTY POWERS ETC.

     8.1          Secured Party’s Appointment by Grantors as Attorney-in-Fact,
Etc.

          (a)          Each Grantor hereby irrevocably constitutes and appoints
the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Secured Party the power and right, on
behalf of such Grantor, without notice to or assent by such Grantor, to do any
or all of the following:

27

--------------------------------------------------------------------------------

 

 

 

          (i)     in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any Account
or with respect to any other Collateral and file any claim or take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any Account or with respect to any other Collateral whenever
payable;

 

 

 

          (ii)     upon such Grantor’s failure to do so, pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, effect any
repairs or any insurance called for by the terms of this Agreement and pay all
or any part of the premiums therefor and the costs thereof;

 

 

 

          (iii)     execute, in connection with any sale provided for in Section
7.5, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and

 

 

 

          (iv)     (A) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; (B) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (D) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (E) defend any suit, action or proceeding brought
against such Guarantor with respect to any Collateral; (F) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Secured Party may deem appropriate; and (G)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes, and do, at the
Secured Party’s option and such Grantor’s expense, at any time, or from time to
time, all acts and things which the Secured Party deems necessary to protect,
preserve or realize upon the Collateral and the Secured Party’s security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do. Anything in this Section 8.1(a) to the
contrary notwithstanding, the Secured Party agrees that it will not exercise any
rights under the power of attorney provided for in this Section 8.1(a) unless an
Event of Default shall have occurred and be continuing.

          (b)          If any Grantor fails to perform or comply with any of its
agreements contained herein, the Secured Party, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement. The Secured Party shall use its best efforts to
notify each Grantor if the Secured Party shall itself perform or comply, or
otherwise, cause performance or compliance, with any of such Grantor’s
agreements hereunder, but failure of the Secured Party to so notify such Grantor
should not affect the obligations of such Grantor.

28

--------------------------------------------------------------------------------

          (c)          The expenses of the Secured Party incurred in connection
with actions undertaken as provided in this Section 8.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be accruing on the Senior Secured Note from the date of payment by the
Secured Party up to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Secured Party on demand.

          (d)          Each Grantor hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.

     8.2          Execution of Financing Statements

     Pursuant to Section 9-402 of the New York UCC and any other applicable law,
each Grantor authorizes the Secured Party to file or record financing statements
and other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Secured Party reasonably determines appropriate to perfect the
security interests of the Secured Party under this Agreement. A photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.

ARTICLE 9

MISCELLANEOUS

     9.1          Amendments in Writing

     None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except in accordance with the Senior Secured
Note.

     9.2          Notices

     All notices, requests and demands to or upon the Secured Party or the
Company or any Guarantor hereunder shall be effected in the manner provided for
in the Senior Secured Note; provided that any such notice, request or demand to
or upon any Guarantor shall be addressed to such Guarantor at its notice address
set forth on Schedule 5.4.

     9.3          No Waiver by Course of Conduct; Cumulative Remedies

     The Secured Party shall not by any act (except by a written instrument
pursuant to Section 9.1), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Event of
Default. No failure to exercise, nor any delay in exercising, on the part of the
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

29

--------------------------------------------------------------------------------

     9.4          Enforcement Expenses; Indemnification

          (a)          Each Guarantor agrees to pay or reimburse the Secured
Party for all its reasonable costs and expenses incurred in collecting against
such Guarantor under the guarantee contained in ARTICLE 2 or otherwise enforcing
or preserving any rights under this Agreement and the other Transaction
Documents to which such Guarantor is a party, including, without limitation, the
reasonable fees and disbursements of counsel to the Secured Party.

          (b)          The Company and each Guarantor agrees to pay, and to save
the Secured Party harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.

          (c)          The Company and each Guarantor agrees to pay, and to save
the Secured Party harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Company would be required to do so pursuant to the Senior Secured Note.

          (d)          The agreements in this Section 9.4 shall survive
repayment of the Obligations and all other amounts payable under the Senior
Secured Note and the other Transaction Documents.

     9.5          Successors and Assigns

     This Agreement shall be binding upon the successors and assigns of the
Company and each Guarantor and shall inure to the benefit of the Secured Party
and their successors and assigns; provided, that neither the Company nor any
Guarantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Secured Party.

     9.6          Set-Off

     The Company and each Guarantor hereby irrevocably authorizes the Secured
Party at any time and from time to time following the occurrence of and during
the continuation of an Event of Default, without notice to the Company or such
Guarantor or any other Guarantor, any such notice being expressly waived by the
Company and each Guarantor, to set-off and appropriate and apply any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Secured Party to or for the credit
or the account of such Person, or any part thereof in such amounts as the
Secured Party may elect, against and on account of the obligations and
liabilities of such Person to the Secured Party hereunder and claims of every
nature and description of the Secured Party against such Person, in any
currency, whether arising hereunder, under the Senior Secured Note, any other
Transaction Document or otherwise, as the Secured Party may elect, whether or
not the Secured Party has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The Secured
Party shall notify such Person promptly of any such set-off and the application
made by the Secured Party of the proceeds thereof, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Secured Party under this Section 9.6 are in

30

--------------------------------------------------------------------------------

addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Secured Party may have.

     9.7          Counterparts

     This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by facsimile), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.

     9.8          Severability

     Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     9.9          Section Headings

     The Section headings used in this Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

     9.10          Integration

     This Agreement and the other Transaction Documents represent the agreement
of the Company, the Guarantors and the Secured Party with respect to the subject
matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Secured Party relative to subject matter
hereof and thereof not expressly set forth or referred to herein or in the other
Transaction Documents.

     9.11          GOVERNING LAW

     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS RULES THEREOF.

     9.12          Submission To Jurisdiction; Waivers

     The Company and each Guarantor hereby irrevocably and unconditionally:

          (a)          submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Transaction Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of the
State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;

          (b)          consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

31

--------------------------------------------------------------------------------

          (c)          agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Company or such Guarantor, as the case may be, at its address referred to in
Schedule 5.4 or at such other address of which the Secured Party shall have been
notified pursuant thereto;

          (d)          agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and

          (e)          waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential damages.

     9.13          Acknowledgements

     The Company and each Guarantor hereby acknowledges that:

          (a)          it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Transaction Documents to
which it is a party;

          (b)          the Secured Party has no fiduciary relationship with or
duty to the Company or any Guarantor arising out of or in connection with this
Agreement or any of the other Transaction Documents, and the relationship
between the Company and the Guarantors, on the one hand, and the Secured Party,
on the other hand, in connection herewith or therewith is solely that of debtor
and creditor; and

          (c)          no joint venture is created hereby or by the other
Transaction Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Company or the Guarantors and the Secured Party.

     9.14          WAIVER OF JURY TRIAL

     THE COMPANY AND EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF,
THE SECURED PARTY, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

     9.15          Additional Guarantors; Additional Grantors

          Each Subsidiary of the Company not a party hereto as of the date
hereof shall become a Grantor for all purposes of this Agreement upon execution
and delivery by such Subsidiary of a Grantor Assumption Agreement in the form of
Annex 1 hereto.

     9.16          Releases

          (a)          At such time as Obligations have been Fully Satisfied,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Secured Party, the Company and each Guarantor hereunder
shall terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the Grantors.
At the request

32

--------------------------------------------------------------------------------

and sole expense of any Grantor following any such termination, the Secured
Party shall deliver to such Grantor any Collateral held by the Secured Party
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.

          (b)          If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor, then the Secured Party, at the request and
sole expense of such Grantor, shall execute and deliver to such Grantor all
releases or other documents reasonably necessary or desirable for the release of
the Liens created hereby on such Collateral.

[signature pages follow]

33

--------------------------------------------------------------------------------

          IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Security Agreement to be duly executed and delivered as of the date first
above written.

 

 

 

 

 

COMPANY

 

 

 

 

 

 

 

 

HC Innovations, Inc.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name: John Randazzo

 

 

 

Title: Interim Chief Executive Officer

 

 

 

 

 

 

 

 

SUBSIDIARIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

ENHANCED CARE INITIATIVES, INC.

 

ENHANCED CARE INITIATIVES OF

 

 

 

ALABAMA, INC.

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

 

 

 

 

 

 

 

 

 

 

NP CARE, LLC,

 

NP CARE, LLC,

a Connecticut limited liability company

 

a Florida limited liability company

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

 

 

 

 

 

TEXAS ENHANCED CARE

 

ENHANCED CARE INITIATIVES OF

INITIATIVES, INC.

 

MASSACHUSETTS, INC.

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

--------------------------------------------------------------------------------

 

 

 

 

 

NP CARE OF NEW JERSEY, LLC

 

ENHANCED CARE INITIATIVES OF

 

 

 

NEW YORK, INC.

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

 

 

 

 

 

RESIDENT CARE MEDICINE OF NEW

 

NP CARE OF OHIO, LLC

YORK, PLLC

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

 

 

 

 

 

ENHANCED CARE INITIATIVES OF

 

NP CARE OF TENNESSEE, LLC

TENNESSEE, INC.

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name: John Randazzo

 

Name: John Randazzo

Title:

 

Title:

 

 

 

 

 

NP CARE OF MASSACHUSETTS, LLC

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name: John Randazzo

 

 

 

Title:

 

 

 

--------------------------------------------------------------------------------

 

 

 

SECURED PARTY:

 

 

 

 

BRAHMA FINANCE (BVI) LIMITED

 

 

 

 

By:

 

 

 

 

 

Name: John M. Clapp

 

Title: Attorney-In-Fact

 

[Signature page to Guarantee and Amended and Restated Security Agreement]

--------------------------------------------------------------------------------

ANNEX 1

GRANTOR ASSUMPTION AGREEMENT

          GRANTOR ASSUMPTION AGREEMENT, dated as of ________________, 20__, made
by ______________________________, a ______________ corporation (the “Additional
Grantor”), in favor of [___________], as secured party (in such capacity, the
“Secured Party”) and those individuals and entities who may become holders of
the Senior Secured Note from time to time (collectively, the “Secured Parties”).
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Senior Secured Note.

W I T N E S S E T H :

          WHEREAS, in connection with the Senior Secured Note, the Company and
certain of its Subsidiaries (other than the Additional Grantor) have entered
into the Guarantee and Security Agreement, dated as of ___________, 2009 (as
amended, supplemented or otherwise modified from time to time, the “Guarantee
and Security Agreement”) in favor of the Secured Party;

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Security
Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1.          Guarantee and Security Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 9.15 of the Guarantee and Security Agreement, hereby becomes a party to
the Guarantee and Security Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Exhibit A
hereto is hereby added to the information set forth in Schedules ____________ to
the Guarantee and Security Agreement. The Additional Grantor hereby represents
and warrants that each of the representations and warranties contained in
ARTICLE 5 of the Guarantee and Security Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.

          2.          GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

[ADDITIONAL GRANTOR]

 

 

 

By:

 

 

 

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

Schedule 1(i): List of Copyrights

There are no existing Copyrights or pending Copyrights

--------------------------------------------------------------------------------

SCHEDULE 1 (r) List of Licenses

There are no existing or pending Licenses

--------------------------------------------------------------------------------

 

Schedule 1(w): List of Patents*

(1)     

Method of generating a healthcare plan or wellness plan for a member of a group.

  (2)     

Method and criterion for selecting patients for treatment.

  (3)     

Care management method for managing the treatment of high risk patients.

  (4)     

Care management method for managing the treatments of high risk mentally
unstable patients.

 

*All Patents were filed under Enhanced Care Initiatives, Inc. of Connecticut. On
August 18, 2009, Enhanced Care Initiatives, Inc. of Connecticut was informed
that the United States Patent and Trademark Office has rejected all pending
claims. The Company is currently assessing what actions to take, if any,
relative to such rejected applications.

--------------------------------------------------------------------------------

Schedule 1(ff): List of Trademarks

(1)     

MARK—SAMehr:

    a.     

It is intended that the above identified Trademark shall be used for medical
software, namely, – MEDICAL MANAGEMENT SOFTWARE FOR MONITORING AND INTEGRATING
DIFFERENT ASPECTS OF THE PATIENT’S CARE AND TREATMENT – in International Class 9
(Electrical & Scientific Apparatus).

  (2)     

MARK—Enhanced Care Initiatives Innovative/Targeted Health Solutions

    a.     

Medical coordination and assessment services to provided to patients by state
licensed medical managers

  (3)     

MARK—Easy Care (Stylized)

    a.     

The Mark is used on advertising materials, advertising banners, billing
statements, brochures, business cards, company e-mail accounts, company
proprietary software, electronic and biometric devices furnished to patients,
electronic medical records of patients, electronic presentations published for
medical personnel, envelopes, exercise protocols for patients, giveaway
promotional items, namely, T-shirts, pens and mugs, letterhead stationary,
medical records for patients, notebooks, papers for medical records,
prescription pads and treatment protocols for patients.

  (4)     

Enhanced Care Initiatives, Inc., acquired all right, title, interest and
goodwill in and to US Application for Registration – EASY CARE – Serial Number
76612724.

  (5)     

Enhanced Care Initiatives, Inc., acquired all right, title, interest and
goodwill in and to US Trademark Registration No. 3,075,366 – MINDFUL PATHS –
Serial Number 76631406.

 

--------------------------------------------------------------------------------

Schedule 4.1: Pledged Securities

There are no existing Pledged Securities

--------------------------------------------------------------------------------

Schedule 5.4: Chief Executive Office and Place of Business

Alabama:        o Enhanced Care Initiatives of Alabama, Inc.     Connecticut:  
 o Enhance Care Initiatives, Inc.    o NP Care, LLC     Delaware:        o HC
Innovations, Inc. (PARENT COMPANY)     Florida:        o NP Care, LLC    
Massachusetts:    o Enhanced Care Initiatives of MA, Inc.    o NP Care of
Massachusetts, LLC     New Jersey:        o NP Care of New Jersey, LLC     New
York:        o Enhanced Care Initiative of New York, Inc.    o Resident Care
Medicine of New York, PLLC     Ohio:        o NP Care of Ohio, LLC    
Tennessee:        o Enhanced Care Initiatives of Tennessee, Inc.    o NP care of
Tennessee, LLC     Texas:        o Texas Enhanced Care Initiatives, Inc.

--------------------------------------------------------------------------------

SCHEDULE 6.2

ACCOUNT CONTROL AGREEMENT

ACCOUNT CONTROL AGREEMENT, dated as of _________, 20__, made by
_________________, as “Secured Party,”____________________, as
“Grantor,”___________ as “Bank” in regards to Account Number
______________________.

WITNESSETH:

          WHEREAS, in connection with the Senior Secured Note dated ______,
2009, Grantor has granted Secured Party a security interest in the financial
assets in the securities account identified above (the “Account”), maintained by
Bank for Grantor.

          WHEREAS, the parties are entering into this Agreement to provide for
the control of the Account as a means to perfect the security interest of
Secured Party.

          WHEREAS, Bank has no responsibility to Secured Party in respect to the
validity or perfection of such security interest otherwise than to act in
accordance with the terms and conditions of this Agreement.

          NOW, therefore, it is agreed:

          1. The Account. Bank represents and warrants to Secured Party that
Bank maintains the Account. Bank represents and warrants that except for the
claim and interest of Grantor and Secured Party, Bank does not know of any claim
to or interest in the Account or any financial assets credited thereto.

          2. Control by Secured Party. Bank will comply with all written
notifications it receives directing it to transfer or redeem any financial
assets in the Account (an “Entitlement Order”) (as set forth in Exhibit A
attached hereto) originated by an authorized person of the Secured Party (an
“Authorized Person of Secured Party,” as set forth in Exhibit B attached hereto)
without further consent by Grantor.

          3. Grantor’s Rights in Account. Until Bank receives an Entitlement
Order from an Authorized Person of Secured Party, Bank may accept and comply
with any Entitlement Order signed by an authorized person of the Grantor (an
“Authorized Person of Grantor,” as set forth in Exhibit C attached hereto). If
an Authorized Person of Secured Party gives Bank an entitlement order notifying
Bank that Secured Party will exercise exclusive control over the Account, Bank
will cease complying with entitlement orders or other directions concerning the
Account originated by an Authorized Person of Grantor. All instructions required
under this Agreement will be delivered to Bank in writing, in either original or
facsimile form, executed by an Authorized Person. In its capacity as Bank, Bank
will accept all instructions and documents complying with the above under the
indemnities provided in this Agreement, and reserves the right to refuse to
accept any instructions or documents which fail, or appear to fail, to comply.

--------------------------------------------------------------------------------

Further to this procedure, Bank reserves the right to telephone an Authorized
Person to confirm the details of such instructions or documents if they are not
already on file with Bank as standing instructions. The parties agree that the
above constitutes a commercially reasonable security procedure. Entitlement
orders received after 12:00 p.m. E.S.T. will be treated as if received on the
next succeeding business day in New York.

          4. Investments: Assets in the Account may be invested only in
investments specifically directed to the Bank in writing. Neither Bank nor any
of its affiliates assume any duty or liability for monitoring the investment
rating on any investments hereunder.

          5. Priority of Secured Party’s Security Interest. Bank subordinates in
favor of Secured Party any interest lien or right of setoff it may have, now or
in the future, against the Account or financial assets in the Account (except
that Bank may set off all amounts due to it in respect of customary fees and
expenses for the routine maintenance and operation of the Account).

          6. Statements, Confirmations and Notices of Adverse Claims. Bank will
send copies of all statements and confirmations for the Account simultaneously
to Grantor and Secured Party. Bank will use reasonable efforts promptly to
notify Secured Party and Grantor if any other person claims that it has a
property interest in the Account or any financial asset in the Account.

          7. Bank’s Responsibility.

          (a)          Bank will not be liable to Secured Party for complying
with entitlement orders from an Authorized Person of Grantor that are received
by Bank before Bank receives and has a reasonable opportunity to act on an
entitlement order from an Authorized Person of Secured Party.

          (b)          If at any time Bank is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects the Account (including but not
limited to orders of attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of the Account or any financial
asset in the Account), Bank is authorized to comply therewith in any manner it
or legal counsel of its own choosing deems appropriate; and if Bank complies
with any such judicial or administrative order, judgment, decree, writ or other
form of judicial or administrative process, Bank will not be liable to any of
the parties hereto or to any other person or entity even though such order,
judgment, decree, writ or process may be subsequently modified or vacated or
otherwise determined to have been without legal force or effect.

          (c)          Bank will be entitled to conclusively rely upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. Bank may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
receipt or advice to make any

--------------------------------------------------------------------------------

statement or execute any document in connection with the provisions hereof has
been duly authorized to do so.

          (d)          Bank will not be responsible in any respect for the form,
execution, validity, value or genuineness of documents or securities deposited
hereunder, or for any description therein, or for the identity, authority or
rights of persons executing or delivering or purporting to execute or deliver
any such document, security or endorsement. Bank will not be called upon to
advise any party as to the wisdom in selling or retaining or taking or
refraining from any action with respect to any securities or other property
deposited hereunder.

          (e)          This Agreement does not create any obligation of Bank
except for those expressly set forth in this Agreement. In particular, Bank need
not investigate whether Secured Party is entitled under Secured Party’s
agreement with Grantor to give an entitlement order.

          (f)          Bank will maintain the Account and financial assets in
the same manner as it maintains accounts and assets for its custodial customers.
During the term of this Agreement, Bank will remain a securities intermediary
within the meaning of such term in Section 8- 102(a)(14) of Article 8 of the
Uniform Commercial Code of the State of New York as in effect from time to time
(the “UCC”) and 31 C.F.R. 357.2.

          8. Indemnity

          (a)          The duties, responsibilities and obligations of Bank will
be limited to those expressly set forth herein and no duties, responsibilities
or obligations will be inferred or implied. Bank will not be subject to, nor
required to comply with, any other agreement to which Grantor or Secured Party
is a party, even though reference thereto may be made herein, or to comply with
any direction or instruction (other than those contained herein or delivered in
accordance with this Agreement) from Grantor or an entity acting on its behalf.

          (b)          Grantor will be liable for and will reimburse and
indemnify and hold Bank harmless from and against any and all claims, losses,
actions, liabilities, costs, damages or expenses (including reasonable
attorneys’ fees and expenses) (collectively “Losses”) arising from or in
connection with its administration of this Agreement, provided, however, that
nothing contained herein will require Bank to be indemnified for Losses caused
by its own gross negligence or own willful misconduct.

          (c)          Bank may consult with legal counsel of its own choosing
at the expense of the Grantor and Secured Party as to any matter relating to
this Agreement, and Bank will not incur any liability in acting in good faith in
accordance with any advice from such counsel.

          (d)          Bank will not incur any liability for not performing any
act or fulfilling any duty, obligation or responsibility hereunder by reason of
any occurrence beyond the control of Bank including, but not limited to any act
or provision of any present or future law or regulation or governmental
authority, any act of God or war or terrorism, or the unavailability of the
Federal Reserve Bank wire or facsimile or other wire or communication facility.

--------------------------------------------------------------------------------

          9. Termination; Survival. Secured Party may terminate this Agreement
by notice to Bank and Grantor. Upon receipt of a notice of termination, Bank
will cease accepting any entitlement order from Grantor, and any previous
entitlement order delivered by Grantor will be deemed to be of no further force
and effect. If Secured Party notifies Bank that its security interest in the
Account or all of the financial assets therein has terminated, this Agreement
will immediately terminate. Section 5, “Compensation”, Section 6, “Bank’s
Responsibility” and Section 7, “Indemnity,” will survive termination of this
Agreement.

          10. Governing Law. Regardless of any provision in any other agreement,
for purposes of the UCC, New York shall be deemed to be the “securities
intermediary’s jurisdiction”, and this Agreement and the Account (including all
interests, duties and obligations with respect thereto, as well as the
entitlement orders related thereto) will be governed by the laws of the State of
New York. Bank and Grantor may not change the law governing the Account without
Secured Party’s express written agreement. Each of the Grantor and Secured Party
hereby submits to the personal jurisdiction of, and each agrees that all
proceedings relating hereto will be brought in, courts located within the City
and State of New York.

          11. Entire Agreement. This Agreement is the entire agreement and
supersedes any prior agreements and contemporaneous oral agreements, of the
parties concerning its subject matter.

          12. Amendments. No amendment of, or waiver of a right under, this
Agreement will be binding unless it is in writing and signed by each of the
parties hereto.

          13. Severability. To the extent a provision of this Agreement is
unenforceable, this Agreement will be construed as if the unenforceable
provision were omitted.

          14. Financial Assets. The Account and all property (including cash)
credited to the Account will be treated as financial assets under the Article 8
of the UCC.

          15. Successors and Assigns. A successor to or assignee of Secured
Party’s rights and obligations under the agreement between Secured Party and
Grantor will succeed to Secured Party’s rights and obligations under this
Agreement.

          16. Notices A notice or other communication to a party under this
Agreement will be in writing (except that entitlement orders will be given in
accordance with procedures as Bank may reasonably specify), will be sent to the
party’s address set forth below or to such other address as the party may notify
the other parties and will be effective on receipt.

          17. Miscellaneous.

          (a)          IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW
ACCOUNT: To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each person who opens an
account. When an account is opened, Bank will ask for information that will
allow it to identify relevant parties.

--------------------------------------------------------------------------------

          (b)          Each of Grantor and Secured Party hereby represents and
warrants (a) that this Agreement has been duly authorized, executed and
delivered on its behalf and constitutes its legal, valid and binding obligation
and (b) that the execution, delivery and performance of this Agreement by it
does not and will not violate any applicable law or regulation.

          18. Counterparts. This Agreement may be executed in any number of
counterparts, all of which will constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.

--------------------------------------------------------------------------------

SIGNATURES

[SECURED PARTY]

 

 

BY:  

 

 

Name:

 

Title:

 

Address:

[GRANTOR]

 

 

BY:  

 

 

Name:

 

Title:

 

Address:

[BANK]

 

 

BY:  

 

 

Name:

 

Title:

 

Address:

--------------------------------------------------------------------------------

FORM OF ENTITLEMENT ORDER

VIA FACSIMILE: 212-657-2762

[Depositary Bank]

Pursuant to the Account Control Agreement dated [ ], among [specify parties],
and Citibank, N.A., we hereby instruct you of the following:

 

 

 

 

RECEIVE/DELIVER

 

 

 

 

ACCOUNT NUMBER:

 

 

 

 

 

USD:

 

 

 

 

 

VALUE DATE:

 

 

 

 

 

WIRE TO:

 

 

 

 

[                         ]

 

as [Secured Party][Grantor]

 

By: 

 

 

 

 

 

   Name:

 

   Title:

--------------------------------------------------------------------------------

EXHIBIT B

 

 

Authorized Person of Secured Party

Authorized Person of Grantor

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------