Exhibit 10.3

GUARANTY AND SECURITY AGREEMENT,

Dated as of February 28, 2012

by

TITANIUM METALS CORPORATION

as Borrower

and

EACH OTHER GRANTOR

FROM TIME TO TIME PARTY HERETO

in favor of

U.S. BANK NATIONAL ASSOCIATION,

as Agent

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TABLE OF CONTENTS

 

     Page  

ARTICLE I. DEFINED TERMS

     1   

Section 1.1. Definitions

     1   

Section 1.2. Certain Other Terms

     3   

ARTICLE II. GUARANTY

     4   

Section 2.1. Guaranty

     4   

Section 2.2. Limitation of Guaranty

     4   

Section 2.3. Contribution

     5   

Section 2.4. Authorization; Other Agreements

     5   

Section 2.5. Guaranty Absolute and Unconditional

     5   

Section 2.6. Waivers

     6   

Section 2.7. Reliance

     7   

ARTICLE III. GRANT OF SECURITY INTEREST

     7   

Section 3.1. Collateral

     7   

Section 3.2. Grant of Security Interest in Collateral

     8   

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

     8   

Section 4.1. Title; No Other Liens

     8   

Section 4.2. Perfection and Priority

     8   

Section 4.3. Grantor Information

     9   

Section 4.4. Accounts; Instruments and Tangible Chattel Paper Formerly Accounts

     9   

Section 4.5. [Intentionally Omitted]

     9   

Section 4.6. Specific Collateral

     9   

Section 4.7. Enforcement

     9   

Section 4.8. Identified Patents

     9   

Section 4.9. Excluded Property

     10   

Section 4.10. Representations and Warranties of the Financing Agreement

     10   

ARTICLE V. COVENANTS

     10   

Section 5.1. Maintenance of Perfected Security Interest; Further Documentation
and Consents

     10   

Section 5.2. Accounts

     12   

Section 5.3. Delivery of Instruments and Tangible Chattel Paper and Control of
Securities Accounts,

                     Letter-of-Credit Rights and Electronic Chattel Paper

     12   

Section 5.4. Locations; Identity; Corporate Structure

     13   

Section 5.5. Notices

     13   

Section 5.6. [Intentionally Omitted]

     13   

Section 5.7. Controlled Securities Account

     13   

Section 5.8. Identified Patents

     13   

 

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ARTICLE VI. REMEDIAL PROVISIONS

   14

Section 6.1. Code and Other Remedies

   14

Section 6.2. Accounts and Payments in Respect of General Intangibles
Constituting Collateral

   17

Section 6.3. Proceeds to be Turned over to and Held by Agent

   18

Section 6.4. Deficiency

   18

ARTICLE VII. AGENT

   18

Section 7.1. Agent's Appointment as Attorney-in-Fact

   18

Section 7.2. Authorization to File Financing Statements

   19

Section 7.3. Authority of Agent

   20

Section 7.4. Duty; Obligations and Liabilities

   20

ARTICLE VIII. MISCELLANEOUS

   21

Section 8.1. Reinstatement

   21

Section 8.2. Release of Collateral.

   21

Section 8.3. Independent Obligations

   22

Section 8.4. No Waiver by Course of Conduct

   22

Section 8.5. Amendments in Writing

   22

Section 8.6. Additional Grantors; Joinder Agreements

   22

Section 8.7. Marshaling

   22

Section 8.8. Notices

   23

Section 8.9. Successors and Assigns

   23

Section 8.10. Counterparts

   23

Section 8.11. Severability

   23

Section 8.12. Governing Law

   23

Section 8.13. Waiver of Jury Trial

   23

 

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ANNEXES AND SCHEDULES

 

Annex 1

   Form of Joinder Agreement

Schedule 1

Schedule 2

Schedule 3

  

Filings

Identified Patents

Grantor Information

 

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GUARANTY AND SECURITY AGREEMENT, dated as of February 28, 2012, by TITANIUM
METALS CORPORATION, a Delaware corporation (“Timet”), and each of the other
entities listed on the signature pages hereof or that becomes a party hereto
pursuant to Section 8.6 (together with Timet, the “Grantors”), in favor of U.S.
BANK NATIONAL ASSOCIATION (“U.S. Bank”), as agent (in such capacity, together
with its successors and permitted assigns, “Agent”) for the Lenders, the LC
Issuers and each other Secured Party (each as defined in the Financing Agreement
referred to below).

W I T N E S S E T H:

WHEREAS, pursuant to the Financing Agreement dated as of February 28, 2012 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the “Financing Agreement”) by and among Timet, the other Borrowers
party thereto, the other Credit Parties party thereto, the Lenders, the LC
Issuers from time to time party thereto and U.S. Bank, as Agent, the Lenders and
the LC Issuers have severally agreed to make extensions of credit to Borrowers
upon the terms and subject to the conditions set forth therein;

WHEREAS, each Grantor has agreed to guaranty the Secured Obligations (as defined
in the Financing Agreement) of each Borrower and each other Grantor;

WHEREAS, each Grantor will derive substantial direct and indirect benefits from
the making of the extensions of credit under the Financing Agreement; and

WHEREAS, it is a condition precedent to the obligation of the Lenders and the LC
Issuers to make their respective extensions of credit to Borrower under the
Financing Agreement that the Grantors shall have executed and delivered this
Agreement to Agent.

NOW, THEREFORE, in consideration of the premises and to induce the Lenders, the
LC Issuers and Agent to enter into the Financing Agreement and to induce the
Lenders and the LC Issuers to make their respective extensions of credit to
Borrowers thereunder, each Grantor hereby agrees with Agent as follows:

ARTICLE I.

DEFINED TERMS

Section 1.1. Definitions.

(a) Capital terms used herein without definition are used as defined in the
Financing Agreement.

(b) The following terms have the meanings given to them in the UCC and terms
used herein without definition that are defined in the UCC have the meanings
given to them in the UCC (such meanings to be equally applicable to both the
singular and plural

 

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forms of the terms defined): “account”, “account debtor”, “certificated
security”, “chattel paper”, “deposit account”, “electronic chattel paper”,
“equipment”, “farm products”, “general intangible”, “goods”,
“health-care-insurance receivable”, “instruments”, “inventory”, “investment
property”, “letter-of-credit right”, “proceeds”, “record”, “securities account”,
“security”, “supporting obligation” and “tangible chattel paper”.

(c) The following terms shall have the following meanings:

“Agreement” means this Guaranty and Security Agreement.

“Collateral” has the meaning specified in Section 3.1.

“Contractual Obligations” means, as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its Property is bound.

“Controlled Deposit Account” means each deposit account (including all cash on
deposit therein) that is the subject of an effective Control Agreement.

“Controlled Securities Account” means each securities account (including all
financial assets held therein and all certificates and instruments, if any,
representing or evidencing such financial assets) that is the subject of an
effective Control Agreement.

“Excluded Deposit and Securities Accounts” means the deposit accounts and
securities accounts that are not required to be subject to an effective Control
Agreement pursuant to Section 5.11.1 of the Credit Agreement.

“Excluded Property” means, collectively, (a) any permit or license or any
Contractual Obligation entered into by any Grantor (i) that prohibits or
requires the consent of any Person other than Borrowers and their Affiliates
which has not been obtained as a condition to the creation by such Grantor of a
Lien on any right, title or interest in such permit, license or Contractual
Obligation or (ii) to the extent that any Requirement of Law applicable thereto
prohibits the creation of a Lien thereon, but only, with respect to the
prohibition in (i) and (ii), to the extent, and for as long as, such prohibition
is not terminated or rendered unenforceable or otherwise deemed ineffective by
the UCC or any other Requirement of Law and (b) Excluded Deposit and Securities
Accounts; provided, however, “Excluded Property” shall not include any proceeds,
products, substitutions or replacements of Excluded Property (unless such
proceeds, products, substitutions or replacements would otherwise constitute
Excluded Property).

“Guaranteed Obligations” has the meaning set forth in Section 2.1.

“Guarantor” means each Grantor, including each Borrower with respect to the
obligations of each other Grantor.

 

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“Guaranty” means the guaranty of the Guaranteed Obligations made by the
Guarantors as set forth in this Agreement.

“Identified Patents” means all letters patent and applications for letters
patent identified on Schedule 2, all rights to obtain any reissues and
extensions thereof, all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds and
damages therefrom.

“UCC” means the Uniform Commercial Code as from time to time in effect in the
State of New York; provided, however, that, in the event that, by reason of
mandatory provisions of any applicable Requirement of Law, any of the
attachment, perfection or priority of Agent’s or any other Secured Party’s
security interest in any Collateral is governed by the Uniform Commercial Code
of a jurisdiction other than the State of New York, “UCC” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of the definitions related to or otherwise used in such provisions.

Section 1.2. Certain Other Terms.

(a) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms. The terms “herein”, “hereof”
and similar terms refer to this Agreement as a whole and not to any particular
Article, Section or clause in this Agreement. References herein to an Annex,
Schedule, Article, Section or clause refer to the appropriate Annex or Schedule
to, or Article, Section or clause in this Agreement. Where the context requires,
provisions relating to any Collateral when used in relation to a Grantor shall
refer to such Grantor’s Collateral or any relevant part thereof.

(b) Other Interpretive Provisions.

(i) Defined Terms. Unless otherwise specified herein or therein, all terms
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto.

(ii) The Agreement. The words “hereof”, “herein”, “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.

(iii) Certain Common Terms. The term “including” is not limiting and means
“including without limitation.”

(iv) Performance; Time. Whenever any performance obligation hereunder (other
than a payment obligation) shall be stated to be due or required to be satisfied
on a day other than a Business Day, such performance shall be made or satisfied
on the next succeeding Business Day. In the computation of periods of time from
a specified date to a later specified date, the word “from” means “from and
including”; the words “to” and “until” each mean “to but excluding”, and the
word

 

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“through” means “to and including.” If any provision of this Agreement refers to
any action taken or to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be interpreted to encompass any and
all means, direct or indirect, of taking, or not taking, such action.

(v) Contracts. Unless otherwise expressly provided herein, references to
agreements and other contractual instruments, including this Agreement and the
other Loan Documents, shall be deemed to include all subsequent amendments,
thereto, restatements and substitutions thereof and other modifications and
supplements thereto which are in effect from time to time, but only to the
extent such amendments and other modifications are not prohibited by the terms
of any Loan Document.

(vi) Laws. References to any statute or regulation are to be construed as
including all statutory and regulatory provisions related thereto or
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.

ARTICLE II.

GUARANTY

Section 2.1. Guaranty. To induce the Lenders to make the Loans and the LC
Issuers to issue Letters of Credit and each other Secured Party to make credit
available to or for the benefit of one or more Grantors, each Guarantor hereby,
jointly and severally, absolutely, unconditionally and irrevocably guarantees,
as primary obligor and not merely as surety, the full and punctual payment when
due, whether at stated maturity or earlier, by reason of acceleration, mandatory
prepayment or otherwise in accordance with any Loan Document, of all the Secured
Obligations of each Borrower and each other Guarantor whether existing on the
date hereof or hereinafter incurred or created (the “Guaranteed Obligations”).
This Guaranty by each Guarantor hereunder constitutes a guaranty of payment and
not of collection.

Section 2.2. Limitation of Guaranty. Any term or provision of this Guaranty or
any other Loan Document to the contrary notwithstanding, the maximum aggregate
amount for which any Guarantor shall be liable hereunder shall not exceed the
maximum amount for which such Guarantor can be liable without rendering this
Guaranty or any other Loan Document, as it relates to such Guarantor, subject to
avoidance under applicable Requirements of Law relating to fraudulent conveyance
or fraudulent transfer (including the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act and Section 548 of title 11 of the United States
Code or any applicable provisions of comparable Requirements of Law)
(collectively, “Fraudulent Transfer Laws”). Any analysis of the provisions of
this Guaranty for purposes of Fraudulent Transfer Laws shall take into account
the right of contribution established in Section 2.3 and, for purposes of such
analysis, give effect to any discharge of intercompany debt as a result of any
payment made under the Guaranty.

 

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Section 2.3. Contribution. To the extent that any Guarantor shall be required
hereunder to pay any portion of any Guaranteed Obligation exceeding the greater
of (a) the amount of the value actually received by such Guarantor and its
Subsidiaries from the Loans and other Obligations and (b) the amount such
Guarantor would otherwise have paid if such Guarantor had paid the aggregate
amount of the Guaranteed Obligations (excluding the amount thereof repaid by
Borrower) in the same proportion as such Guarantor’s net worth on the date
enforcement is sought hereunder bears to the aggregate net worth of all the
Guarantors on such date, then such Guarantor shall be reimbursed by such other
Guarantors for the amount of such excess, pro rata, based on the respective net
worth of such other Guarantors on such date.

Section 2.4. Authorization; Other Agreements. The Secured Parties are hereby
authorized, without notice to or demand upon any Guarantor and without
discharging or otherwise affecting the obligations of any Guarantor hereunder
and without incurring any liability hereunder, from time to time, to do each of
the following:

(a) (i) subject to compliance, if applicable, with Section 10.2 of the Financing
Agreement, modify, amend, supplement or otherwise change, (ii) accelerate or
otherwise change the time of payment or (iii) waive or otherwise consent to
noncompliance with, any Guaranteed Obligation or any Loan Document;

(b) apply to the Guaranteed Obligations any sums by whomever paid or however
realized to any Guaranteed Obligation in such order as provided in the Loan
Documents;

(c) refund at any time any payment received by any Secured Party in respect of
any Guaranteed Obligation;

(d) (i) sell, exchange, enforce, waive, substitute, liquidate, terminate,
release, abandon, fail to perfect, subordinate, accept, substitute, surrender,
exchange, affect, impair or otherwise alter or release any Collateral for any
Guaranteed Obligation or any other guaranty therefor in any manner,
(ii) receive, take and hold additional Collateral to secure any Guaranteed
Obligation, (iii) add, release or substitute any one or more other Guarantors,
makers or endorsers of any Guaranteed Obligation or any part thereof and
(iv) otherwise deal in any manner with Borrowers or any other Guarantor, maker
or endorser of any Guaranteed Obligation or any part thereof; and

(e) settle, release, compromise, collect or otherwise liquidate the Guaranteed
Obligations.

Section 2.5. Guaranty Absolute and Unconditional. Each Guarantor hereby waives
and agrees not to assert any defense, whether arising in connection with or in
respect of any of the following or otherwise, and hereby agrees that its
obligations under this Guaranty are irrevocable, absolute and unconditional and
shall not be discharged as a result of or otherwise affected by any of the
following (which may not be pleaded and evidence of which may not be introduced
in any proceeding with respect to this Guaranty, in each case except as
otherwise agreed in writing by Agent):

 

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(a) the invalidity or unenforceability of any obligation of any Borrower or any
other Guarantor under any Loan Document or any other agreement or instrument
relating thereto (including any amendment, consent or waiver thereto), or any
security for, or other guaranty of, any Guaranteed Obligation or any part
thereof, or the lack of perfection or continuing perfection or failure of
priority of any security for the Guaranteed Obligations or any part thereof;

(b) the absence of (i) any attempt to collect any Guaranteed Obligation or any
part thereof from any Borrower or any other Guarantor or other action to enforce
the same or (ii) any action to enforce any Loan Document or any Lien thereunder;

(c) the failure by any Person to take any steps to perfect and maintain any Lien
on, or to preserve any rights with respect to, any Collateral;

(d) any workout, insolvency, bankruptcy proceeding, reorganization, arrangement,
liquidation or dissolution by or against any Borrower, any other Guarantor or
any of any Borrower’s other Subsidiaries or any procedure, agreement, order,
stipulation, election, action or omission thereunder, including any discharge or
disallowance of, or bar or stay against collecting, any Guaranteed Obligation
(or any interest thereon) in or as a result of any such proceeding;

(e) any foreclosure, whether or not through judicial sale, and any other sale or
other disposition of any Collateral or any election following the occurrence of
an Event of Default by any Secured Party to proceed separately against any
Collateral in accordance with such Secured Party’s rights under any applicable
Requirement of Law; or

(f) any other defense, setoff, counterclaim or any other circumstance that might
otherwise constitute a legal or equitable discharge of any Borrower, any other
Guarantor or any other Subsidiary of any Borrower, in each case other than the
payment in full of the Guaranteed Obligations.

Section 2.6. Waivers. Each Guarantor hereby unconditionally and irrevocably
waives and agrees not to assert any claim, defense, setoff or counterclaim based
on diligence, promptness, presentment, requirements for any demand or notice
hereunder including any of the following: (a) any demand for payment or
performance and protest and notice of protest; (b) any notice of acceptance;
(c) any presentment, demand, protest or further notice or other requirements of
any kind with respect to any Guaranteed Obligation (including any accrued but
unpaid interest thereon) becoming immediately due and payable; and (d) any other
notice in respect of any Guaranteed Obligation or any part thereof, and any
defense arising by reason of any disability or other defense of any Borrower or
any other Guarantor. Except as otherwise provided in Section 2.3, each Guarantor
further unconditionally and irrevocably agrees not to (x) enforce or otherwise
exercise any right of subrogation or any right of reimbursement or contribution
or similar right against any

 

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Borrower or any other Guarantor by reason of any Loan Document or any payment
made thereunder or (y) assert any claim, defense, setoff or counterclaim it may
have against any other Credit Party or set off any of its obligations to such
other Credit Party against obligations of such Credit Party to such Guarantor.
No obligation of any Guarantor hereunder shall be discharged other than by
complete performance.

Section 2.7. Reliance. Each Guarantor hereby assumes responsibility for keeping
itself informed of the financial condition of each Borrower, each other
Guarantor and any other guarantor, maker or endorser of any Guaranteed
Obligation or any part thereof, and of all other circumstances bearing upon the
risk of nonpayment of any Guaranteed Obligation or any part thereof that
diligent inquiry would reveal, and each Guarantor hereby agrees that no Secured
Party shall have any duty to advise any Guarantor of information known to it
regarding such condition or any such circumstances. In the event any Secured
Party, in its sole discretion, undertakes at any time or from time to time to
provide any such information to any Guarantor, such Secured Party shall be under
no obligation to (a) undertake any investigation not a part of its regular
business routine, (b) disclose any information that such Secured Party, pursuant
to accepted or reasonable commercial finance or banking practices, wishes to
maintain confidential or (c) make any future disclosures of such information or
any other information to any Guarantor.

ARTICLE III.

GRANT OF SECURITY INTEREST

Section 3.1. Collateral. For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by a Grantor or
in which a Grantor now has or at any time in the future may acquire any right,
title or interests is collectively referred to as the “Collateral”:

(a) all accounts;

(b) all inventory;

(c) all deposit accounts and securities accounts (other than Excluded Deposit
and Securities Accounts), including all cash, marketable securities, securities
entitlements, financial assets and other funds held in or on deposit in any of
the foregoing;

(d) all Identified Patents;

(e) all chattel paper, documents (as defined in the UCC), general intangibles,
instruments, investment property and letter of credit rights, in each case to
the extent relating or pertaining primarily to any or all of the foregoing;

(f) all books and records and supporting obligations to the extent relating or
pertaining primarily to any or all of the foregoing; and

(g) to the extent not otherwise included, all proceeds of the foregoing.

 

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Section 3.2. Grant of Security Interest in Collateral. Each Grantor, as
collateral security for the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations of such Grantor, hereby mortgages, pledges and hypothecates to Agent
for the benefit of the Secured Parties, and grants to Agent for the benefit of
the Secured Parties a Lien on and security interest in, all of its right, title
and interest in, to and under the Collateral of such Grantor; provided, however,
notwithstanding the foregoing, no Lien or security interest is hereby granted on
any Excluded Property and such Excluded Property shall not be considered
Collateral for purposes of this Agreement; provided, further, that if and when
any property shall cease to be Excluded Property, a Lien on and security in such
property shall be deemed granted therein and such property shall be considered
Collateral for purposes of this Agreement. Each Grantor hereby represents and
warrants that the Excluded Property (other than Excluded Deposit and Securities
Accounts), when taken as a whole, is not material to the business operations or
financial condition of the Grantors, taken as a whole.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

To induce the Lenders, the LC Issuers and Agent to enter into the Loan
Documents, each Grantor hereby represents and warrants each of the following to
Agent, the Lenders, the LC Issuers and the other Secured Parties:

Section 4.1. Title; No Other Liens. Except for the Liens granted to Agent
pursuant to this Agreement and other Permitted Liens (except for those Permitted
Liens not permitted to exist on any Collateral), such Grantor owns each item of
the Collateral free and clear of any and all Liens or claims of others. Such
Grantor (a) is the record and beneficial owner of the Collateral pledged by it
hereunder constituting instruments and (b) has rights in or the power to
transfer each other item of Collateral in which a Lien is granted by it
hereunder, free and clear of any other Lien.

Section 4.2. Perfection and Priority. The security interest granted pursuant to
this Agreement constitutes a valid and continuing perfected security interest in
favor of Agent in all Collateral subject, for the following Collateral, to the
occurrence of the following: (i) in the case of all Collateral in which a
security interest may be perfected by filing a financing statement under the
UCC, the completion of the filings and other actions specified on Schedule 1
(which, in the case of all filings and other documents referred to on such
schedule, have been delivered to Agent in completed and duly authorized form),
(ii) with respect to any deposit account or securities account, the execution of
Control Agreements, (iii) in the case of letter of credit rights that are not
supporting obligations of Collateral, the execution of a Contractual Obligation
granting control to Agent over such letter of credit rights, (iv) in the case of
electronic chattel paper, the completion of all steps necessary to grant control
to Agent over such electronic chattel paper and (v) in the case of all
certificated securities, instruments and tangible chattel paper, the delivery
thereof to Agent of such certificated securities, instruments and tangible
chattel paper. Except as set forth in this Section 4.2, all actions by such
Grantor necessary or desirable to protect and perfect the Lien granted hereunder
on its Collateral have been duly taken.

 

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Section 4.3. Grantor Information. On the date hereof, Schedule 3 sets forth
(a) each Grantor’s jurisdiction of organization, (b) the location of each
Grantor’s chief executive office, (c) each Grantor’s exact legal name as it
appears in its organizational documents, (d) each Grantor’s federal employer
identification number, and (e) each Grantor’s organizational identification
number.

Section 4.4. Accounts; Instruments and Tangible Chattel Paper Formerly Accounts.

(a) No amount payable to such Grantor under or in connection with any account is
evidenced by any instrument or tangible chattel paper that has not been
delivered to Agent, properly endorsed for transfer, to the extent delivery is
required by subsection 5.3(a).

(b) The amounts represented by such Grantor to Lenders or Agent from time to
time as owing to such Grantor in respect of any accounts are and will at all
times be accurate.

Section 4.5. [Intentionally Omitted].

Section 4.6. Specific Collateral. None of the Collateral is or is proceeds or
products of farm products, as-extracted collateral, health-care-insurance
receivables or timber to be cut.

Section 4.7. Enforcement. No Permit, notice to or filing with any Governmental
Authority or any other Person or any consent from any Person is required for the
exercise by Agent of its rights provided for in this Agreement or the
enforcement of remedies in respect of the Collateral pursuant to this Agreement,
including the transfer of any Collateral, except for any approvals that may be
required to be obtained from any bailees, processors or landlords to collect the
Collateral and compliance with any applicable assignment of claims laws.

Section 4.8. Identified Patents

(a) On the date hereof, all issued Identified Patents owned by such Grantor is
valid, subsisting, unexpired and enforceable, has not been abandoned and, to
such Grantor’s knowledge, does not infringe the intellectual property rights of
any other Person.

(b) No holding, decision or judgment has been rendered by any governmental
authority which would limit, cancel or question the validity of, or such
Grantor’s rights in, any issued Identified Patents owned by such Grantor in any
material respect.

 

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(c) No action or proceeding is pending, or, to the knowledge of such Grantor,
threatened, on the date hereof (i) seeking to limit, cancel or question the
validity of any issued Identified Patent or such Grantor’s ownership interest
therein, or (ii) which, if adversely determined, would adversely affect the
value of any Identified Patent.

Section 4.9. Excluded Property. No Grantor owns, and will not own, assets which
constitute Excluded Property (other than Excluded Deposit and Securities
Accounts) and which, when aggregated, are material to the business of such
Grantor.

Section 4.10. Representations and Warranties of the Financing Agreement. The
representations and warranties as to such Grantor made in Section 4
(Representations and Warranties) of the Financing Agreement are true and correct
on each date as required by Section 3.2 of the Financing Agreement.

ARTICLE V.

COVENANTS

Each Grantor agrees with Agent to the following, from the date of this Agreement
and thereafter until this Agreement is terminated:

Section 5.1. Maintenance of Perfected Security Interest; Further Documentation
and Consents.

(a) Generally. Except as permitted by the Financing Agreement, such Grantor
shall (i) not use or permit any Collateral to be used unlawfully or in violation
of any provision of any Loan Document, any Requirement of Law or any policy of
insurance covering the Collateral and (ii) not enter into any Contractual
Obligation or undertaking restricting the right or ability of such Grantor or
Agent to sell, assign, convey or transfer any Collateral.

(b) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.2 and shall defend such security interest and such priority against
the claims and demands of all Persons.

(c) Such Grantor shall furnish to Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
documents in connection with the Collateral as Agent may reasonably request, all
in reasonable detail and in form and substance reasonably satisfactory to Agent.

(d) At any time and from time to time, upon the written request of Agent, such
Grantor shall, for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, (i) promptly and
duly execute and deliver, and have recorded, such further documents, including
an authorization to file (or, as applicable, the filing of) any financing
statement or amendment under the UCC (or other filings under similar
Requirements of Law) in effect in any jurisdiction with respect to the security
interest created hereby and (ii) take such further action as Agent may
reasonably request, including executing and delivering any Control Agreements
with respect to deposit accounts and securities accounts required pursuant to
Section 5.11.1 of the Credit Agreement.

 

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(e) Such Grantor authorizes Agent to, at any time and from time to time, file
financing statements, continuation statements, and amendments thereto that
describe the Collateral, and which contain any other information required
pursuant to the UCC for the sufficiency of filing office acceptance of any
financing statement, continuation statement, or amendment. Any such financing
statement, continuation statement, or amendment may be signed (to the extent
signature of a Grantor is required under applicable law) by Agent on behalf of
any Grantor and may be filed at any time in any jurisdiction.

(f) Such Grantor shall, at any time and from time to time, take such steps as
Agent may reasonably request for Agent (i) to obtain “control” of any
letter-of-credit rights, or electronic chattel paper (as such terms are defined
by the UCC with corresponding provisions thereof defining what constitutes
“control” for such items of Collateral) constituting Collateral, with any
agreements establishing control to be in form and substance reasonably
satisfactory to Agent, and (ii) otherwise to insure the continued perfection and
priority of Agent’s security interest in any of the Collateral and of the
preservation of its rights therein.

(g) Without limiting the generality of the foregoing, if such 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 §16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction
constituting Collateral, such Grantor shall promptly notify Agent thereof and,
at the request of Agent, shall take such action as Agent may reasonably request
to vest in Agent “control” under Section 9-105 of the UCC 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, §16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record. Agent agrees with the Grantors that Agent will arrange,
pursuant to procedures satisfactory to Agent and so long as such procedures will
not result in Agent’s loss of control, for the Grantors to make alterations to
the electronic chattel paper or transferable record constituting Collateral
permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of
the federal Electronic Signatures in Global and National Commerce Act or §16 of
the Uniform Electronic Transactions Act for a party in control to make without
loss of control, unless an Event of Default has occurred and is continuing or
would occur after taking into account any action by any Grantor with respect to
such electronic chattel paper or transferable record.

 

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Section 5.2. Accounts.

(a) Such Grantor shall not, other than in the Ordinary Course of Business,
(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 on any account or (v) amend, supplement or
modify any account in any manner that could adversely affect the value thereof.

(b) Agent shall have the right to make test verifications of the Accounts in any
manner and through any medium that it reasonably considers advisable, and such
Grantor shall furnish all such assistance and information as Agent may
reasonably require in connection therewith.

Section 5.3. Delivery of Instruments and Tangible Chattel Paper and Control of
Securities Accounts, Letter-of-Credit Rights and Electronic Chattel Paper.

(a) If any amount in excess of $1,000,000 payable under or in connection with
any Account owned by such Grantor shall be or become evidenced by an instrument
or tangible chattel paper during a Cash Dominion Period, such Grantor shall mark
all such instruments and tangible chattel paper with the following legend: “This
writing and the obligations evidenced or secured hereby are subject to the
security interest of U.S. BANK NATIONAL ASSOCIATION, as Agent” and, at the
request of Agent, shall immediately deliver such instrument or tangible chattel
paper to Agent, duly indorsed in a manner satisfactory to Agent.

(b) Such Grantor shall not grant “control” (within the meaning of such term
under Article 9-106 of the UCC) over any securities accounts (including any
securities entitlements carried therein) to any Person other than Agent.

(c) If such Grantor is or becomes the beneficiary of a letter of credit
constituting Collateral that is in excess of $1,000,000 during a Cash Dominion
Period, such Grantor shall promptly, and in any event within 2 Business Days
after becoming a beneficiary, notify Agent thereof and as promptly as
practicable thereafter enter into a Contractual Obligation with Agent, the
issuer of such letter of credit or any nominated person with respect to the
letter-of-credit rights under such letter of credit. Such Contractual Obligation
shall assign such letter-of-credit rights to Agent and such assignment shall be
sufficient to grant control for the purposes of Section 9-107 of the UCC (or any
similar section under any equivalent UCC). Such Contractual Obligation shall
also direct all payments thereunder to a Controlled Deposit Account. The
provisions of the Contractual Obligation shall be in form and substance
reasonably satisfactory to Agent.

(d) If any amount in excess of $1,000,000 payable under or in connection with
any Collateral owned by such Grantor shall be or become evidenced by electronic
chattel paper during a Cash Dominion Period, such Grantor shall take all steps
necessary to grant Agent control of all such electronic chattel paper for the
purposes of Section 9-105 of the UCC (or any similar section under any
equivalent UCC) and all “transferable records” as defined in each of the Uniform
Electronic Transactions Act and the Electronic Signatures in Global and National
Commerce Act.

 

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Section 5.4. Locations; Identity; Corporate Structure.

(a) Such Grantor shall not maintain any Inventory (other than Inventory in
transit) at any location other than (x) owned and leased locations listed on
Schedule 4.20 to the Financing Agreement and (y) storage, bailee, converter and
processor locations (1) subject to a reasonably satisfactory, acknowledged
bailee or processor waiver, as applicable, (2) as to which Reserves reasonably
satisfactory to Agent have been established, or (3) at which only Inventory that
is not included in the Borrowing Base is located. Subject to the following
sentence, such Grantor shall not change their respective principal places of
business or chief executive offices from the location identified on Schedule
4.20 to the Financing Agreement. Such Grantor will give Agent prompt written
notice of any new principal place of business or chief executive officer or any
new location for any Inventory to be included in the Borrowing Base.

(b) Such Grantor shall give Agent prior written notice of any change of its
name, identity, corporate structure or jurisdiction of incorporation.

Section 5.5. Notices. Such Grantor shall promptly notify Agent in writing of

(a) its acquisition of any interest hereafter in Collateral that is of a type
where a security interest or lien must be or may be registered, recorded or
filed under, or notice thereof given under, any federal statute or regulation;

(b) any Lien (other than Permitted Liens, except for those Permitted Liens not
permitted to exist on any Collateral) on any of the Collateral which would
adversely affect the ability of Agent to exercise any of its remedies hereunder;

(c) the occurrence of any other event which could reasonably be expected to have
a Material Adverse Effect on the aggregate value of the Collateral of the Liens
created hereby.

Section 5.6. [Intentionally Omitted].

Section 5.7. Controlled Securities Account. Each Grantor shall deposit all of
its Cash Equivalents in securities accounts that are Controlled Securities
Accounts except as permitted pursuant to Section 5.11.1 of the Credit Agreement.

Section 5.8. Identified Patents. Upon the reasonable request of Agent, each
Grantor will notify Agent if it knows, or has reason to know, that (a) any
registration relating to any issued Identified Patent may become forfeited,
abandoned or dedicated to the public, or of any 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)
regarding such Grantor’s ownership of, or the validity of, any Identified Patent
or such Grantor’s right to register the same or to own and maintain the same or
(b) any issued Identified Patent has been infringed upon or misappropriated or
diluted by a third party.

 

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ARTICLE VI.

REMEDIAL PROVISIONS

Section 6.1. Code and Other Remedies.

(a) UCC Remedies. During the continuance of an Event of Default, Agent may
exercise, in addition to all other rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to any Secured Obligation, all rights and remedies of a secured party
under the UCC or any other applicable law.

(b) Disposition of Collateral. Without limiting the generality of the foregoing,
Agent may, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below or pursuant Section 8.1(d) of the Credit Agreement) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), during the continuance of any
Event of Default (personally or through its agents or attorneys), (i) enter upon
the premises where any Collateral is located, without any obligation to pay
rent, through self-help, without judicial process, without first obtaining a
final judgment or giving any Grantor or any other Person notice or opportunity
for a hearing on Agent’s claim or action, (ii) collect, receive, appropriate and
realize upon any Collateral, and (iii) sell, assign, convey, transfer, grant
option or options to purchase and deliver any Collateral (enter into Contractual
Obligations 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 any 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. Agent shall have the right, upon any such
public sale or sales and, to the extent permitted by the UCC and other
applicable Requirements of Law, upon any such private sale, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption of any Grantor, which right or equity is hereby waived and released.

(c) Management of the Collateral. Each Grantor further agrees, that, during the
continuance of any Event of Default, (i) at Agent’s request, it shall assemble
the Collateral and make it available to Agent at places that Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere, (ii) without
limiting the foregoing, Agent also has the right to require that each Grantor
store and keep any Collateral pending further action by Agent and, while any
such Collateral is so stored or kept, provide such guards and maintenance
services as shall be necessary to protect the same and to preserve and maintain
such Collateral in good condition, (iii) until Agent is able to sell, assign,
convey or transfer any Collateral, Agent shall have the right to hold or use
such Collateral to the extent that it deems appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by Agent and (iv) Agent may, if it so elects, seek the appointment
of a receiver or keeper to take possession of any Collateral and to enforce any
of Agent’s remedies (for the benefit of the Secured Parties). Agent shall not
have any obligation to any Grantor to maintain or preserve the rights of any
Grantor as against third parties with respect to any Collateral while such
Collateral is in the possession of Agent.

 

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(d) Application of Proceeds. Agent shall apply the cash proceeds of any action
taken by it pursuant to this Section 6.1, after deducting all reasonable costs
and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any Collateral or in any way relating to the Collateral
or the rights of Agent and any other Secured Party hereunder, including
reasonable attorneys’ fees and disbursements, to the payment in whole or in part
of the Secured Obligations, as set forth in the Financing Agreement, and only
after such application and after the payment by Agent of any other amount
required by any Requirement of Law, need Agent account for the surplus, if any,
to any Grantor.

(e) Direct Obligation. Neither Agent nor any other Secured Party shall be
required to make any demand upon, or pursue or exhaust any right or remedy
against, any Grantor, any other Credit Party or any other Person with respect to
the payment of the Obligations or to pursue or exhaust any right or remedy with
respect to any Collateral therefor or any direct or indirect guaranty thereof.
All of the rights and remedies of Agent and any other Secured Party under any
Loan Document shall be cumulative, may be exercised individually or concurrently
and not exclusive of any other rights or remedies provided by any Requirement of
Law. To the extent it may lawfully do so, each Grantor absolutely and
irrevocably waives and relinquishes the benefit and advantage of, and covenants
not to assert against Agent or any other Secured Party, any valuation, stay,
appraisement, extension, redemption or similar laws and any and all rights or
defenses it may have as a surety, now or hereafter existing, arising out of the
exercise by them of any rights hereunder. If any notice of a proposed sale or
other disposition of any 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.

(f) Commercially Reasonable. To the extent that applicable Requirements of Law
impose duties on Agent to exercise remedies in a commercially reasonable manner,
each Grantor acknowledges and agrees that it is not commercially unreasonable
for Agent to do any of the following:

(i) fail to incur significant costs, expenses or other Liabilities reasonably
deemed as such by Agent to prepare any Collateral for disposition or otherwise
to complete raw material or work in process into finished goods or other
finished products for disposition;

(ii) fail to obtain Permits, or other consents, for access to any Collateral to
sell or for the collection or sale of any Collateral, or, if not required by
other Requirements of Law, fail to obtain Permits or other consents for the
collection or disposition of any Collateral;

 

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(iii) fail to exercise remedies against account debtors or other Persons
obligated on any Collateral or to remove Liens on any Collateral or to remove
any adverse claims against any Collateral;

(iv) advertise dispositions of any Collateral through publications or media of
general circulation, whether or not such Collateral is of a specialized nature,
or to contact other Persons, whether or not in the same business as any Grantor,
for expressions of interest in acquiring any such Collateral;

(v) exercise collection remedies against account debtors and other Persons
obligated on any Collateral, directly or through the use of collection agencies
or other collection specialists, hire one or more professional auctioneers to
assist in the disposition of any Collateral, whether or not such Collateral is
of a specialized nature, or, to the extent deemed appropriate by Agent, obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any
Collateral, or utilize internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets to dispose of any
Collateral;

(vi) dispose of assets in wholesale rather than retail markets;

(vii) disclaim disposition warranties, such as title, possession or quiet
enjoyment; or

(viii) purchase insurance or credit enhancements to insure Agent against risks
of loss, collection or disposition of any Collateral or to provide to Agent a
guaranteed return from the collection or disposition of any Collateral.

Each Grantor acknowledges that the purpose of this Section 6.1 is to provide a
non-exhaustive list of actions or omissions that are commercially reasonable
when exercising remedies against any Collateral and that other actions or
omissions by the Secured Parties shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 6.1. Without limitation
upon the foregoing, nothing contained in this Section 6.1 shall be construed to
grant any rights to any Grantor or to impose any duties on Agent that would not
have been granted or imposed by this Agreement or by applicable Requirements of
Law in the absence of this Section 6.1.

(g) Licenses. For the purpose of enabling Agent to exercise rights and remedies
under this Section 6.1 (including in order to take possession of, collect,
receive, assemble, process, appropriate, remove, realize upon, sell, assign,
convey, transfer or grant options to purchase any Collateral) at such time as
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to Agent, for the benefit of the Secured Parties, (i) an
irrevocable, nonexclusive, worldwide license (exercisable without payment of
royalty or other compensation to such Grantor), including in such license the
right to sublicense, use and practice any intellectual property now owned or
hereafter

 

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acquired by such Grantor and access to all media in which any of the licensed
items may be recorded or stored and to all software and programs used for the
compilation or printout thereof and (ii) an irrevocable license (without payment
of rent or other compensation to such Grantor) to use, operate and occupy all
real Property owned, operated, leased, subleased or otherwise occupied by such
Grantor.

Section 6.2. Accounts and Payments in Respect of General Intangibles
Constituting Collateral.

(a) At any time during the continuance of an Event of Default:

(i) each Grantor shall, upon Agent’s request, deliver to Agent all original and
other documents evidencing, and relating to, the Contractual Obligations and
transactions that gave rise to any account or any payment in respect of general
intangibles constituting Collateral, including all original orders, invoices and
shipping receipts and notify account debtors that the accounts or general
intangibles constituting Collateral have been collaterally assigned to Agent and
that payments in respect thereof shall be made directly to Agent; and

(ii) Agent may, without notice, at any time during the continuance of an Event
of Default, limit or terminate the authority of a Grantor to collect its
accounts or amounts due under general intangibles constituting Collateral or any
thereof and, in its own name or in the name of others, communicate with account
debtors to verify with them to Agent’s satisfaction the existence, amount and
terms of any account or amounts due under any general intangible constituting
Collateral. In addition, Agent may at any time enforce such Grantor’s rights
against such account debtors and obligors of general intangibles constituting
Collateral.

(b) Anything herein to the contrary notwithstanding, each Grantor shall remain
liable under each account and each payment in respect of general intangibles
constituting Collateral 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. No Secured Party shall have
any obligation or liability under any agreement giving rise to an account or a
payment in respect of a general intangible constituting Collateral by reason of
or arising out of any Loan Document or the receipt by any Secured Party of any
payment relating thereto, nor shall any Secured Party be obligated in any manner
to perform any obligation of any Grantor under or pursuant to any agreement
giving rise to an account or a payment in respect of a general intangible
constituting Collateral, 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 that may have been assigned to it or to which it may be entitled at any
time or times.

 

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Section 6.3. Proceeds to be Turned over to and Held by Agent. To the extent
required by Section 2.11.3 of the Credit Agreement, all proceeds of any
Collateral received by any Grantor hereunder in cash or Cash Equivalents shall
be held by such Grantor in trust for Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, promptly upon receipt by
any Grantor, be turned over to Agent in the exact form received (with any
necessary endorsement). All such proceeds of Collateral and any other proceeds
of any Collateral received by Agent in cash or Cash Equivalents shall be applied
as provided in the Financing Agreement.

Section 6.4. Deficiency. Each Grantor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of any Collateral are insufficient
to pay the Secured Obligations and the fees and disbursements of any attorney
employed by Agent or any other Secured Party to collect such deficiency.

ARTICLE VII.

AGENT

Section 7.1. Agent’s Appointment as Attorney-in-Fact.

(a) Each Grantor hereby irrevocably constitutes and appoints Agent and any
Related Party thereof, with full power of substitution, as its true and lawful
attorney-in-fact, exercisable when an Event of Default shall be continuing 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 the Loan Documents, to take any appropriate action and to execute
any document or instrument that may be necessary or desirable to accomplish the
purposes of the Loan Documents, and, without limiting the generality of the
foregoing, each Grantor hereby gives Agent and its Related Parties the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any of the following when an Event of Default shall be continuing:

(i) in the name of such Grantor, in its own name or otherwise, take possession
of and indorse and collect any check, draft, note, acceptance or other
instrument 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 Agent for the
purpose of collecting any such moneys due under any account or with respect to
any other Collateral whenever payable;

(ii) pay or discharge taxes and Liens levied or placed on or threatened against
any Collateral, effect any repair or pay any insurance called for by the terms
of the Financing Agreement (including all or any part of the premiums therefor
and the costs thereof);

(iii) execute, in connection with any sale provided for in Section 6.1, any
document to effect or otherwise necessary or appropriate in relation to evidence
the sale of any Collateral; or

 

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(iv) (A) direct any party liable for any payment under any Collateral to make
payment of any moneys due or to become due thereunder directly to Agent or as
Agent shall direct, (B) ask or demand for, and collect and receive payment of
and receipt for, any 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 invoice, freight or express bill, bill of lading, storage or warehouse
receipt, draft against debtors, assignment, verification, notice and other
document in connection with any Collateral, (D) commence and prosecute any suit,
action or proceeding at law or in equity in any court of competent jurisdiction
to collect any Collateral and to enforce any other right in respect of any
Collateral, (E) defend any actions, suits, proceedings, audits, claims, demands,
orders or disputes brought against such Grantor with respect to any Collateral,
(F) settle, compromise or adjust any such actions, suits, proceedings, audits,
claims, demands, orders or disputes and, in connection therewith, give such
discharges or releases as Agent may deem appropriate, (G) exercise voting rights
with respect to any of the Collateral, and (H) generally, sell, assign, convey,
transfer or grant a Lien on, make any Contractual Obligation with respect to and
otherwise deal with, any Collateral as fully and completely as though Agent were
the absolute owner thereof for all purposes and do, at Agent’s option, at any
time or from time to time, all acts and things that Agent deems necessary to
protect, preserve or realize upon any Collateral and the Secured Parties’
security interests therein and to effect the intent of the Loan Documents, all
as fully and effectively as such Grantor might do.

(v) If any Grantor fails to perform or comply with any Contractual Obligation
contained herein, Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
Contractual Obligation.

(b) The expenses of Agent incurred in connection with actions undertaken as
provided in this Section 7.1, together with interest thereon at a rate set forth
in Section 2.13.4 of the Financing Agreement, from the date of payment by Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to Agent on demand.

(c) Each Grantor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue of this Section 7.1. 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.

Section 7.2. Authorization to File Financing Statements. Each Grantor authorizes
Agent and its Related Parties, at any time and from time to time, to file or
record financing statements, amendments thereto, and other filing or recording
documents or instruments with respect to any Collateral in such form and in such
offices as Agent reasonably determines appropriate to perfect the security
interests of Agent 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.
Such Grantor also hereby ratifies its authorization for Agent to have filed any
initial financing statement or amendment thereto under the UCC (or other similar
laws) in effect in any jurisdiction if filed prior to the date hereof.

 

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Section 7.3. Authority of Agent. Each Grantor acknowledges that the rights and
responsibilities of Agent under this Agreement with respect to any action taken
by Agent or the exercise or non-exercise by Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between Agent and the other Secured
Parties, be governed by the Financing Agreement and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
Agent and the Grantors, Agent shall be conclusively presumed to be acting as
agent for the Secured Parties with full and valid authority so to act or refrain
from

acting, and no Grantor shall be under any obligation or entitlement to make any
inquiry respecting such authority.

Section 7.4. Duty; Obligations and Liabilities.

(a) Duty of Agent. Agent’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession shall be to deal
with it in the same manner as Agent deals with similar property for its own
account. The powers conferred on Agent hereunder are solely to protect Agent’s
interest in the Collateral and shall not impose any duty upon Agent to exercise
any such powers. Agent shall be accountable only for amounts that it receives as
a result of the exercise of such powers, and neither it nor any of its Related
Parties shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. In addition, Agent
shall not be liable or responsible for any loss or damage to any Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehousemen, carrier, forwarding agency, consignee or other bailee if such
Person has been selected by Agent in good faith.

(b) Obligations and Liabilities With Respect to Collateral. No Secured Party and
no Related Party thereof shall be liable for failure to demand, collect or
realize upon any Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to any Collateral. The powers conferred on Agent hereunder shall not
impose any duty upon any other Secured Party to exercise any such powers. The
other Secured Parties shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their respective officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.

 

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ARTICLE VIII.

MISCELLANEOUS

Section 8.1. Reinstatement. Each Grantor agrees that, if any payment made by any
Credit Party or other Person and applied to the Secured Obligations is at any
time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by any Secured Party
to such Credit Party, its estate, trustee, receiver or any other party,
including any Grantor, under any bankruptcy law, state or federal law, common
law or equitable cause, then, to the extent of such payment or repayment, any
Lien or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made. If, prior to
any of the foregoing, (a) any Lien or other Collateral securing such Grantor’s
liability hereunder shall have been released or terminated by virtue of the
foregoing or (b) any provision of the Guaranty hereunder shall have been
terminated, cancelled or surrendered, such Lien, other Collateral or provision
shall be reinstated in full force and effect and such prior release,
termination, cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of any such Grantor in respect of any
Lien or other Collateral securing such obligation or the amount of such payment.

Section 8.2. Release of Collateral.

(a) At the time provided in clause (i) of Section 9.7 of the Financing
Agreement, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of Agent and each Grantor 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. Each Grantor is
hereby authorized to file UCC amendments at such time evidencing the termination
of the Liens so released. At the request of any Grantor following any such
termination, Agent shall deliver to such Grantor any Collateral of such Grantor
held by Agent hereunder and execute and deliver to such Grantor such documents
as Borrower shall reasonably request to evidence such termination.

(b) If Agent shall be directed or permitted pursuant to Section 9.7 of the
Financing Agreement to release any Lien or any Collateral, such Collateral shall
be released from the Lien created hereby to the extent provided under, and
subject to the terms and conditions set forth in, Section 9.7. In connection
therewith, Agent, at the request of any Grantor, shall execute and deliver to
such Grantor such documents as Borrower shall reasonably request to evidence
such release.

(c) At the request of Borrower, a Grantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Grantor shall be sold
to any Person that is not an Affiliate of Borrowers or any Subsidiary of a
Borrower in a transaction permitted by the Loan Documents.

 

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Section 8.3. Independent Obligations. The obligations of each Grantor hereunder
are independent of and separate from the Secured Obligations and the Guaranteed
Obligations. If any Secured Obligation or Guaranteed Obligation is not paid when
due, or upon any Event of Default, Agent may, at its sole election, proceed
directly and at once, without notice, against any Grantor and any Collateral to
collect and recover the full amount of any Secured Obligation or Guaranteed
Obligation then due, without first proceeding against any other Grantor, any
other Credit Party or any other Collateral and without first joining any other
Grantor or any other Credit Party in any proceeding.

Section 8.4. No Waiver by Course of Conduct. No Secured Party shall by any act
(except by a written instrument pursuant to Section 8.5), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of any 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 any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that such
Secured Party would otherwise have on any future occasion.

Section 8.5. Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.2 of the Financing Agreement; provided, however, that
annexes to this Agreement may be supplemented (but no existing provisions may be
modified and no Collateral may be released) through Joinder Agreements, in
substantially the form of Annex 1, duly executed by Agent and each Grantor
directly affected thereby.

Section 8.6. Additional Grantors; Joinder Agreements. If required pursuant to
Section 5.13 of the Financing Agreement, Borrower shall cause any Subsidiary
that is not a Grantor and/or Guarantor to become a Grantor and/or Guarantor
hereunder, such Subsidiary shall execute and deliver to Agent a Joinder
Agreement substantially in the form of Annex 1 and shall thereafter for all
purposes be a party hereto and have the same rights, benefits and obligations as
a Grantor party hereto on the Closing Date.

Section 8.7. Marshaling. Agent shall not be required to marshal any present or
future collateral security (including but not limited to the Collateral) for, or
other assurances of payment of, the Secured Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of its rights and remedies hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights and remedies, however existing or arising. To
the extent that it lawfully may, each Grantor hereby agrees that it will not
invoke any law relating to the marshaling of collateral which might cause delay
in or impede the enforcement of Agent’s rights and remedies under this Agreement
or under any other instrument creating or evidencing any of the Secured
Obligations or under which any of the Secured Obligations is outstanding or by
which any of the Secured Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.

 

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Section 8.8. Notices. All notices, requests and demands to or upon Agent or any
Grantor hereunder shall be effected in the manner provided for in Section 10.1
of the Financing Agreement; provided, however, that any such notice, request or
demand to or upon any Grantor shall be addressed to Borrower’s notice address
set forth in Section 10.1.

Section 8.9. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of each
Secured Party and their successors and assigns; provided, however, that no
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of Agent.

Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.

Section 8.11. Severability. Any provision of this Agreement being held illegal,
invalid or unenforceable in any jurisdiction shall not affect any part of such
provision not held illegal, invalid or unenforceable, any other provision of
this Agreement or any part of such provision in any other jurisdiction.

Section 8.12. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.

Section 8.13. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREIN OR RELATED THERETO (WHETHER FOUNDED IN
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
OTHER PARTY AND NO RELATED PERSON OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.

 

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EACH GRANTOR AGREES TO BE BOUND BY THE PROVISIONS OF SECTIONS 10.9.2, 10.9.3 AND
10.9.4 OF THE FINANCING AGREEMENT.

[SIGNATURE PAGES FOLLOW]

 

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

 

TITANIUM METALS CORPORATION, as a

Grantor

TIMET POWDERED METALS, LLC, as a Grantor

TI•PRO, LLC, as a Grantor and as a Guarantor

TMCA INTERNATIONAL, INC., as a Grantor and

as a Guarantor

TIMET REAL ESTATE CORPORATION, as a

Grantor and as a Guarantor

TIMET ASIA, INC., as a Grantor and as a Guarantor

 

Each By: /s/ JOHN ST. WRBA

Name: John St. Wrba

Title: Vice President and Treasurer

 

TIMET FINANCE MANAGEMENT COMPANY,

as a Grantor and as a Guarantor

 

By: /s/ JOAN L. YORI

Name: Joan L. Yori

Title: President

Signature Page to Guaranty and Security Agreement

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ACCEPTED AND AGREED

as of the date first above written:

 

U.S. BANK NATIONAL ASSOCIATION, as Agent

 

By: /s/ KELLI STABENOW

Name: Kelli Stabenow

Title: Assistant Vice President

Signature Page to Guaranty and Security Agreement