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Exhibit 10.2
 
Execution Copy

AMENDED AND RESTATED SECURITY AGREEMENT

THIS AMENDED AND RESTATED SECURITY AGREEMENT (the “Agreement”) dated as of
November 10, 2010, is entered into by and among the Borrowers (as defined
below), such other entities which from time to time become parties hereto
(collectively, including the Borrowers, the “Debtors” and each individually a
“Debtor”) and Comerica Bank, a Texas banking association (“Comerica”), as
Administrative Agent for and on behalf of the Lenders (as defined below) (in
such capacity, the “Agent”).  The addresses for the Debtors and the Agent, as of
the date hereof, are set forth on the signature pages attached hereto.

R E C I T A L S:

A.            National Technical Systems, Inc. (“NTSI”) together with certain of
its Subsidiaries party thereto (collectively, the “Borrowers”) entered into that
certain Revolving Credit Agreement dated as of November 21, 2001 (as amended,
restated, or otherwise modified, the “Prior Credit Agreement”), which Prior
Credit Agreement has been amended and restated as of the date hereof by that
certain Amended and Restated Credit Agreement dated as of November 10, 2010 (as
amended, supplemented, amended and restated or otherwise modified from time to
time the “Credit Agreement”) with each of the financial institutions party
thereto (collectively, including their respective successors and assigns, the
“Lenders”) and the Agent pursuant to which the Lenders have agreed, subject to
the satisfaction of certain terms and conditions, to amend, restate and to
continue to extend financial accommodations to the Borrowers, as provided
therein.

B.             In connection with the Prior Credit Agreement, certain of the
Borrowers have previously entered into (a) that certain Security Agreement dated
as of November 21, 2001 by and among NTSI, NTS Technical Systems, XXCAL, Inc.,
Approved Engineering Test Laboratories, Inc., ETCR, Inc., Acton Environmental
Testing Corporation, the Agent, and the other Persons party thereto from time to
time (as amended, restated or otherwise modified from time to time, the “Prior
Security Agreement”), (b) that certain Limited Liability Company Membership
Interest Pledge Agreement dated as of June 6, 2008 by and between NTSI and
Comerica (as amended, restated or otherwise modified, the “Prior NTSI Pledge
Agreement”), (c) that certain Limited Liability Company Membership Interest
Pledge Agreement dated as of December 5, 2007 by and between NTS Technical
Systems and Comerica (as amended, restated or otherwise modified, the “Prior NTS
Pledge Agreement”), (d) that certain Security Agreement – Stock Pledge dated as
of November 21, 2001 by and between NTS Technical Systems and Comerica (as
amended, restated or otherwise modified, the “Prior NTS Stock Pledge Agreement
#1”), (e) that certain Security Agreement – Stock Pledge dated as of July 1,
2005 by and between NTS Technical Systems and Comerica (as amended, restated or
otherwise modified, the “Prior NTS Stock Pledge Agreement #2” and collectively,
together with the Prior Security Agreement, the Prior NTSI Pledge Agreement, the
Prior NTS Pledge Agreement and the Prior NTS Stock Pledge Agreement #1, the
“Prior Collateral Documents”).

C.             Pursuant to the Credit Agreement, the Lenders have required that
each of the Debtors amend and restate the liens granted under the Prior
Collateral Documents and/or, as applicable, grant (or cause to be granted)
certain Liens to the Agent, for the benefit of the Lenders, all to secure the
obligations of the Borrowers or any Debtor under the Credit Agreement or any
related Loan Document (including any Guaranty).

 
 

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D.             The Debtors have directly and indirectly benefited and will
directly and indirectly benefit from the transactions evidenced by and
contemplated in the Credit Agreement and the other Loan Documents.

 
E.              The Agent is acting as Agent for the Lenders pursuant to the
terms and conditions of Section 13.1 of the Credit Agreement.

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1
Definitions

Section 1.1             Definitions.  As used in this Agreement, capitalized
terms not otherwise defined herein have the meanings provided for such terms in
the Credit Agreement.  References to “Sections,” “subsections,” “Exhibits” and
“Schedules” shall be to Sections, subsections, Exhibits and Schedules,
respectively, of this Agreement unless otherwise specifically provided.  All
references to statutes and regulations shall include any amendments of the same
and any successor statutes and regulations.  References to particular sections
of the UCC should be read to refer also to parallel sections of the Uniform
Commercial Code as enacted in each state or other jurisdiction which may be
applicable to the grant and perfection of the Liens held by the Agent for the
benefit of the Lenders pursuant to this Agreement.

The following terms have the meanings indicated below, all such definitions to
be equally applicable to the singular and plural forms of the terms defined:

“Account” means any “account,” as such term is defined in Article or Chapter 9
of the UCC, now owned or hereafter acquired by a Debtor, and, in any event,
shall include, without limitation, each of the following, whether now owned or
hereafter acquired by such Debtor: (a) all rights of such Debtor to payment for
goods sold or leased or services rendered, whether or not earned by performance,
(b) all accounts receivable of such Debtor, (c) all rights of such Debtor to
receive any payment of money or other form of consideration, (d) all security
pledged, assigned or granted to or held by such Debtor to secure any of the
foregoing, (e) all guaranties of, or indemnifications with respect to, any of
the foregoing, and (f) all rights of such Debtor as an unpaid seller of goods or
services, including, but not limited to, all rights of stoppage in transit,
replevin, reclamation and resale.

“Chattel Paper” means any “chattel paper,” as such term is defined in Article or
Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor, and shall
include both electronic Chattel Paper and tangible Chattel Paper.

“Collateral” has the meaning specified in Section 2.1 of this Agreement.

 
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“Collateral Compliance Report” shall mean a report in the form attached hereto
as Exhibit C.

“Computer Records” means any computer records now owned or hereafter acquired by
any Debtor.

“Copyright Collateral” shall mean all Copyrights and Copyright Licenses of the
Debtors.

“Copyright Licenses” shall mean all license agreements with any other Person in
connection with any of the Copyrights or such other Person’s copyrights, whether
a Debtor is a licensor or a licensee under any such license agreement,
including, without limitation, the license agreements listed on Schedule 1.1
hereto and made a part hereof, subject, in each case, to the terms of such
license agreements and the right to prepare for sale, sell and advertise for
sale, all inventory now or hereafter covered by such licenses.

“Copyrights” shall mean all copyrights and mask works, whether or not
registered, and all applications for registration of all copyrights and mask
works, including, but not limited to all copyrights and mask works, and all
applications for registration of all copyrights and mask works identified on
Schedule 1.1 attached hereto and made a part hereof, and including without
limitation (a) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations thereof; (b) all income,
royalties, damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all Copyright
Licenses entered into in connection therewith, and damages and payments for past
or future infringements thereof); and (c) all rights corresponding thereto and
all modifications, adaptations, translations, enhancements and derivative works,
renewals thereof, and all other rights of any kind whatsoever of a Debtor
accruing thereunder or pertaining thereto.

“Deposit Account” shall mean a demand, time, savings, passbook, or similar
account maintained with a bank.  The term does not include investment property,
investment accounts or accounts evidenced by an instrument.

“Document” means any “document,” as such term is defined in Article or Chapter 9
of the UCC, now owned or hereafter acquired by any Debtor, including, without
limitation, all documents of title and all receipts covering, evidencing or
representing goods now owned or hereafter acquired by a Debtor.

“Equipment” means any “equipment,” as such term is defined in Article or Chapter
9 of the UCC, now owned or hereafter acquired by a Debtor and, in any event,
shall include, without limitation, all machinery, equipment, furniture, trade
fixtures, tractors, trailers, rolling stock, vessels, aircraft and Vehicles now
owned or hereafter acquired by such Debtor and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.

“General Intangibles” means any “general intangibles,” as such term is defined
in Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor
and, in any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by such Debtor: (a) all of such Debtor’s
Intellectual Property Collateral; (b) all of such Debtor’s books, records, data,
plans, manuals, computer software, computer tapes, computer disks, computer
programs, source codes, object codes and all rights of such Debtor to retrieve
data and other information from third parties; (c) all of such Debtor’s contract
rights, commercial tort claims, partnership interests, membership interests,
joint venture interests, securities, deposit accounts, investment accounts and
certificates of deposit; (d) all rights of such Debtor to payment under chattel
paper, documents, instruments and similar agreements; (e) letters of credit,
letters of credit rights supporting obligations and rights to payment for money
or funds advanced or sold of such Debtor; (f) all tax refunds and tax refund
claims of such Debtor; (g) all choses in action and causes of action of such
Debtor (whether arising in contract, tort or otherwise and whether or not
currently in litigation) and all judgments in favor of such Debtor; (h) all
rights and claims of such Debtor under warranties and indemnities, (i) all
health care receivables; and (j) all rights of such Debtor under any insurance,
surety or similar contract or arrangement.

 
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“Governmental Authority” shall mean any nation or government, any state,
province or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

“Instrument” shall mean any “instrument,” as such term is defined in Article or
Chapter 9 of the UCC, now owned or hereafter acquired by any Debtor, and, in any
event, shall include all promissory notes (including without limitation, any
Intercompany Notes held by such Debtor), drafts, bills of exchange and trade
acceptances, whether now owned or hereafter acquired.

“Insurance Proceeds” shall have the meaning set forth in Section 4.4 of this
Agreement.

“Intellectual Property Collateral” shall mean Patents, Patent Licenses,
Copyrights, Copyright Licenses, Trademarks, Trademark Licenses, trade secrets,
registrations, goodwill, franchises, permits, proprietary information, customer
lists, designs, inventions and all other intellectual property and proprietary
rights, including without limitation those described on Schedule 1.1 attached
hereto and incorporated herein by reference.

“Inventory” means any “inventory,” as such term is defined in Article or Chapter
9 of the UCC, now owned or hereafter acquired by a Debtor, and, in any event,
shall include, without limitation, each of the following, whether now owned or
hereafter acquired by such Debtor: (a) all goods and other personal property of
such Debtor that are held for sale or lease or to be furnished under any
contract of service; (b) all raw materials, work-in-process, finished goods,
supplies and materials of such Debtor; (c) all wrapping, packaging, advertising
and shipping materials of such Debtor; (d) all goods that have been returned to,
repossessed by or stopped in transit by such Debtor; and (e) all Documents
evidencing any of the foregoing.

“Investment Property” means any “investment property” as such term is defined in
Article or Chapter 9 of the UCC, now owned or hereafter acquired by a Debtor,
and in any event, shall include without limitation all shares of stock and other
equity, partnership or membership interests constituting securities, of the
Domestic Subsidiaries of such Debtor from time to time owned or acquired by such
Debtor in any manner (including, without limitation, the Pledged Shares), and
the certificates and all dividends, cash, instruments, rights and other property
from time to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of such shares, but excluding any
shares of stock or other equity, partnership or membership interests in any
Foreign Subsidiaries of such Debtor.

 
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“Patent Collateral” shall mean all Patents and Patent Licenses of the Debtors.

“Patent Licenses” shall mean all license agreements with any other Person in
connection with any of the Patents or such other Person’s patents, whether a
Debtor is a licensor or a licensee under any such license agreement, including,
without limitation, the license agreements listed on Schedule 1.1 hereto and
made a part hereof, subject, in each case, to the terms of such license
agreements and the right to prepare for sale, sell and advertise for sale, all
inventory now or hereafter covered by such licenses.

“Patents” shall mean all letters patent, patent applications and patentable
inventions, including, without limitation, all patents and patent applications
identified on Schedule 1.1 attached hereto and made a part hereof, and including
without limitation, (a) all inventions and improvements described and claimed
therein, and patentable inventions, (b) the right to sue or otherwise recover
for any and all past, present and future infringements and misappropriations
thereof, (c) all income, royalties, damages and other payments now and hereafter
due and/or payable with respect thereto (including, without limitation, payments
under all Patent Licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (d) all rights
corresponding thereto and all reissues, divisions, continuations,
continuations-in-part, substitutes, renewals, and extensions thereof, all
improvements thereon, and all other rights of any kind whatsoever of a Debtor
accruing thereunder or pertaining thereto.

“Pledged Shares” means the shares of capital stock or other equity, partnership
or membership interests described on Schedule 1.2 attached hereto and
incorporated herein by reference, and all other shares of capital stock or other
equity, partnership or membership interests (other than in an entity which is a
Foreign Subsidiary) acquired by any Debtor after the date hereof.

“Proceeds” means any “proceeds,” as such term is defined in Article or Chapter 9
of the UCC and, in any event, shall include, but not be limited to, (a) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to a
Debtor from time to time with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable to a Debtor from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting, or purporting to act, for or on behalf of any
Governmental Authority), and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.

“Records” are defined in Section 3.2 of this Agreement.

 
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“Software” means all (i) computer programs and supporting information provided
in connection with a transaction relating to the program, and (ii) computer
programs embedded in goods and any supporting information provided in connection
with a transaction relating to the program whether or not the program is
associated with the goods in such a manner that it customarily is considered
part of the goods, and whether or not, by becoming the owner of the goods, a
Person acquires a right to use the program in connection with the goods, and
whether or not the program is embedded in goods that consist solely of the
medium in which the program is embedded.

“Trademark Collateral” shall mean all Trademarks and Trademark Licenses of the
Debtors.

“Trademark Licenses” shall mean all license agreements with any other Person in
connection with any of the Trademarks or such other Person’s names or
trademarks, whether a Debtor is a licensor or a licensee under any such license
agreement, including, without limitation, the license agreements listed on
Schedule 1.1 hereto and made a part hereof, subject, in each case, to the terms
of such license agreements, and the right to prepare for sale, and to sell and
advertise for sale, all inventory now or hereafter covered by such licenses.

“Trademarks” shall mean all trademarks, service marks, trade names, trade dress
or other indicia of trade origin, trademark and service mark registrations, and
applications for trademark or service mark registrations, and any renewals
thereof, including, without limitation, each registration and application
identified on Schedule 1.1 attached hereto and made a part hereof, and including
without limitation (a) the right to sue or otherwise recover for any and all
past, present and future infringements and misappropriations thereof, (b) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments under all
Trademark Licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof) and (c) all rights
corresponding thereto and all other rights of any kind whatsoever of a Debtor
accruing thereunder or pertaining thereto, together in each case with the
goodwill of the business connected with the use of, and symbolized by, each such
trademark, service mark, trade name, trade dress or other indicia of trade
origin.

“UCC” means the Uniform Commercial Code as in effect in the State of California;
provided, that if, by applicable law, the perfection or effect of perfection or
non-perfection of the security interest created hereunder in any Collateral is
governed by the Uniform Commercial Code as in effect on or after the date hereof
in any other jurisdiction, “UCC” means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such perfection or the effect of perfection or non-perfection.

“Vehicles” means all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.

 
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ARTICLE 2
Security Interest

Section 2.1            Grant of Security Interest.  As collateral security for
the prompt payment and performance in full when due of the Indebtedness (whether
at stated maturity, by acceleration or otherwise), each Debtor hereby pledges,
assigns, transfers and conveys to the Agent as collateral, and grants the Agent
a continuing Lien on and security interest in, all of such Debtor’s right, title
and interest in and to the following, whether now owned or hereafter arising or
acquired and wherever located (collectively, the “Collateral”):

 
(a)
all Accounts;

 
(b)
all Chattel Paper;

 
(c)
all General Intangibles;

 
(d)
all Equipment;

 
(e)
all Inventory;

 
(f)
all Documents;

 
(g)
all Instruments;

 
(h)
all Deposit Accounts and any other cash collateral, deposit or investment
accounts, including all cash collateral, deposit or investment accounts
established or maintained pursuant to the terms of this Agreement or the other
Loan Documents;

 
(i)
all Computer Records and Software, whether relating to the foregoing Collateral
or otherwise, but in the case of such Software, subject to the rights of any
non-affiliated licensee of software;

 
(j)
all Investment Property; and

 
(k)
the Proceeds, in cash or otherwise, of any of the property described in the
foregoing clauses (a) through (j) and all Liens, security, rights, remedies and
claims of such Debtor with respect thereto (provided that the grant of a
security interest in Proceeds set forth is in this subsection (k) shall not be
deemed to give the applicable Debtor any right to dispose of any of the
Collateral, except as may otherwise be permitted pursuant to the terms of the
Credit Agreement);

provided, however, that “Collateral” shall not include rights under or with
respect to any General Intangible, license, permit or authorization to the
extent any such General Intangible, license, permit or authorization, by its
terms or by law, prohibits the assignment of, or the granting of a Lien over the
rights of a grantor thereunder or which would be invalid or unenforceable upon
any such assignment or grant (the “Restricted Assets”), provided that (A) the
Proceeds of any Restricted Asset shall continue to be deemed to be “Collateral”,
and (B) this provision shall not limit the grant of any Lien on or assignment of
any Restricted Asset to the extent that the UCC or any other applicable law
provides that such grant of Lien or assignment is effective irrespective of any
prohibitions to such grant provided in any Restricted Asset (or the underlying
documents related thereto); provided, further, however, that “Collateral” shall
not include any “intent-to-use” application for registration of a Trademark
filed pursuant to applicable law, prior to the filing of a “Statement of Use”
pursuant to applicable law or an “Amendment to Allege Use” pursuant to
applicable law with respect thereto, solely to the extent, if any, that, and
solely during the period, if any, in which, the grant of a security interest
therein would impair the validity or enforceability of, or render void or result
in the cancellation of, any registration issued as a result of such
intent-to-use application under applicable law.  Concurrently with any such
Restricted Asset being entered into or arising after the date hereof, the
applicable Debtor shall be obligated to obtain any waiver or consent (in form
and substance acceptable to the Agent) necessary to allow such Restricted Asset
to constitute Collateral hereunder if the failure of such Debtor to have such
Restricted Asset would have a Material Adverse Effect.

 
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Section 2.2            Debtors Remain Liable.  Notwithstanding anything to the
contrary contained herein, (a) the Debtors shall remain liable under the
contracts, agreements, documents and instruments included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Agent or any Lender of any of their respective rights or
remedies hereunder shall not release the Debtors from any of their duties or
obligations under the contracts, agreements, documents and instruments included
in the Collateral, and (c) neither the Agent nor any of the Lenders shall have
any indebtedness, liability or obligation (by assumption or otherwise) under any
of the contracts, agreements, documents and instruments included in the
Collateral by reason of this Agreement, and none of them shall be obligated to
perform any of the obligations or duties of the Debtors thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.

ARTICLE 3
Representations and Warranties

To induce the Agent to enter into this Agreement and the Agent and the Lenders
to enter into the Credit Agreement, each Debtor represents and warrants to the
Agent and to each Lender as follows, each such representation and warranty being
a continuing representation and warranty, surviving until termination of this
Agreement in accordance with the provisions of Section 7.12 of this Agreement:

Section 3.1            Title.  Such Debtor is, and with respect to Collateral
acquired after the date hereof such Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien or other encumbrance, except
for the Permitted Liens, provided that, other than the Lien established under
this Agreement, no Lien on any Pledged Shares shall constitute a Permitted Lien.

Section 3.2            Change in Form or Jurisdiction; Successor by Merger;
Location of Books and Records.  As of the date hereof, each Debtor (a) is duly
organized and validly existing as a corporation (or other business organization)
under the laws of its jurisdiction of organization; (b) is formed in the
jurisdiction of organization and has the registration number and tax
identification number set forth on Schedule 3.2 attached hereto; (c) has not
changed its respective corporate form or its jurisdiction of organization at any
time during the five years immediately prior to the date hereof, except as set
forth on such Schedule 3.2; (d) except as set forth on such Schedule 3.2
attached hereto, no Debtor has, at any time during the five years immediately
prior to the date hereof, become the successor by merger, consolidation,
acquisition, change in form, nature or jurisdiction of organization or otherwise
of any other Person, and (e) keeps true and accurate books and records regarding
the Collateral (the “Records”) in the office indicated on such Schedule 3.2.

 
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Section 3.3            Representations and Warranties Regarding Certain Types of
Collateral.

 
(a)
Location of Inventory and Equipment.  As of the date hereof, (i) all Inventory
(except Inventory in transit) and Equipment (except trailers, rolling stock,
vessels, aircraft and Vehicles) of each Debtor are located at the places
specified on Schedule 3.3(a) attached hereto, (ii) the name and address of the
landlord leasing any location to any Debtor is identified on such Schedule
3.3(a), and (iii) the name of and address of each bailee or warehouseman which
holds any Collateral and the location of such Collateral is identified on such
Schedule 3.3(a).

 
(b)
Account Information.  As of the date hereof, all Deposit Accounts, cash
collateral account or investment accounts of each Debtor (except for those
Deposit Accounts located with the Agent) are located at the banks specified on
Schedule 3.3(b) attached hereto which Schedule sets forth the true and correct
name of each bank where such accounts are located, such bank’s address, the type
of account and the account number.

 
(c)
Documents.  As of the date hereof, except as set forth on Schedule 3.3(c), none
of the Inventory or Equipment of such Debtor (other than trailers, rolling
stock, vessels, aircraft and Vehicles) is evidenced by a Document (including,
without limitation, a negotiable document of title).

 
(d)
Intellectual Property.  Set forth on Schedule 1.1 (the same may be amended from
time to time) is a true and correct list of the registered Patents, Patent
Licenses, registered Trademarks, Trademark Licenses, registered Copyrights and
Copyright Licenses owned by the Debtors (including, in the case of the Patents,
Trademarks and Copyrights, the applicable name, date of registration (or of
application if registration not completed) and application or registration
number).

Section 3.4            Pledged Shares.

 
(a)
Duly Authorized and Validly Issued.  The Pledged Shares that are shares of a
corporation have been duly authorized and validly issued and are fully paid and
nonassessable, and the Pledged Shares that are membership interests or
partnership units (if any) have been validly granted, under the laws of the
jurisdiction of organization of the issuers thereof, and, to the extent
applicable, are fully paid and nonassessable. No such membership or partnership
interests constitute “securities” within the meaning of Article 8 of the UCC,
and each Debtor covenants and agrees not to allow any such membership or
partnership interest to become “securities” for purposes of Article 8 of the
UCC.

 
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(b)
Valid Title; No Liens; No Restrictions.  Each Debtor is the legal and beneficial
owner of the Pledged Shares, free and clear of any Lien (other than the Liens
created by this Agreement), and such Debtor has not sold, granted any option
with respect to, assigned, transferred or otherwise disposed of any of its
rights or interest in or to the Pledged Shares.  None of the Pledged Shares are
subject to any contractual or other restrictions upon the pledge or other
transfer of such Pledged Shares, other than those imposed by securities laws
generally.  No issuer of Pledged Shares is party to any agreement granting
“control” (as defined in Section 8-106 of the UCC) of such Debtor’s Pledged
Shares to any third party.  All such Pledged Shares are held by each Debtor
directly and not through any securities intermediary.

 
(c)
Description of Pledged Shares; Ownership.  The Pledged Shares constitute the
percentage of the issued and outstanding shares of stock, partnership units or
membership interests of the issuers thereof indicated on Schedule 1.2 (as the
same may be amended from time to time) and such Schedule contains a description
of all shares of capital stock, membership interests and other equity interests
of or in any Subsidiaries owned by such Debtor.

Section 3.5            Intellectual Property.

 
(a)
Filings and Recordation.  Each Debtor has made all necessary filings and
recordations to protect and maintain its interest in the Trademarks, Patents and
Copyrights set forth on Schedule 1.1 (as the same may be amended from time to
time), including, without limitation, all necessary filings and recordings, and
payments of all maintenance fees, in the United States Patent and Trademark
Office and United States Copyright Office to the extent such Trademarks, Patents
and Copyrights are material to such Debtor’s business. Also set forth on
Schedule 1.1 (as the same may be amended from time to time) is a complete and
accurate list of all of the material Trademark Licenses, Patent Licenses and
Copyright Licenses owned by the Debtors as of the date hereof.

 
(b)
Trademarks and Trademark Licenses Valid.  (i) Each Trademark of the Debtors set
forth on Schedule 1.1 (as the same may be amended from time to time) is
subsisting and has not been adjudged invalid, unregisterable or unenforceable,
in whole or in part, and, to the Debtors’ knowledge, is valid, registrable and
enforceable, (ii) each of the Trademark Licenses set forth on Schedule 1.1 (as
the same may be amended from time to time) is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and, to the
Debtors’ knowledge, is valid and enforceable, and (iii) the Debtors have
notified the Agent in writing of all uses of any material item of Trademark
Collateral of which any Debtor is aware which could reasonably be expected to
lead to such item becoming invalid or unenforceable, including unauthorized uses
by third parties and uses which were not supported by the goodwill of the
business connected with such Collateral.

 
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(c)
Patents and Patent Licenses Valid.  (i) Each Patent of the Debtors set forth on
Schedule 1.1 (as the same may be amended from time to time) is subsisting and
has not been adjudged invalid, unpatentable or unenforceable, in whole or in
part, and, to the Debtors’ knowledge, is valid, patentable and enforceable
except as otherwise set forth on Schedule 1.1 (as the same may be amended from
time to time), (ii) each of the Patent Licenses set forth on Schedule 1.1 (as
the same may be amended from time to time) is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and, to the
Debtors’ knowledge, is valid and enforceable, and (iii) the Debtors have
notified the Agent in writing of all uses of any item of Patent Collateral
material to any Debtor’s business of which any Debtor is aware which could
reasonably be expected to lead to such item becoming invalid or unenforceable.

 
(d)
Copyright and Copyright Licenses Valid.  (i) Each Copyright of the Debtors set
forth on Schedule 1.1 (as the same may be amended from time to time) is
subsisting and has not been adjudged invalid, uncopyrightable or unenforceable,
in whole or in part, and, to the Debtors’ knowledge, is valid, copyrightable and
enforceable, (ii) each of the Copyright Licenses set forth on Schedule 1.1 (as
the same may be amended from time to time) is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and, to the
Debtors’ knowledge, is valid and enforceable, and (iii) the Debtors have
notified the Agent in writing of all uses of any item of Copyright Collateral
material to any Debtor’s business of which any Debtor is aware which could
reasonably be expected to lead to such item becoming invalid or unenforceable.

 
(e)
No Assignment.  The Debtors have not made a previous assignment, sale, transfer
or agreement constituting a present or future assignment, sale, transfer or
encumbrance of any of the Intellectual Property Collateral, except with respect
to non-exclusive licenses granted in the ordinary course of business or as
permitted by this Agreement or the Loan Documents.  No Debtor has granted any
license, shop right, release, covenant not to sue, or non-assertion assurance to
any Person with respect to any part of the Intellectual Property Collateral,
except as set forth on Schedule 1.1 or as otherwise disclosed to the Agent in
writing.

 
(f)
Products Marked.  Each Debtor has marked its products with the trademark
registration symbol, copyright notices, the numbers of all appropriate patents,
the common law trademark symbol or the designation “patent pending,” as the case
may be, to the extent that Debtor, in good faith, believes is reasonably and
commercially practicable.

 
(g)
Other Rights.  Except for the Trademark Licenses, Patent Licenses and Copyright
Licenses listed on Schedule 1.1 hereto under which a Debtor is a licensee, no
Debtor has knowledge of the existence of any right or any claim (other than as
provided by this Agreement) that is likely to be made under or against any item
of Intellectual Property Collateral contained on Schedule 1.1 to the extent such
claim could reasonably be expected to have a Material Adverse Effect.

 
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(h)
No Claims.  Except as set forth on Schedule 1.1 or as otherwise disclosed to the
Agent in writing, no claim has been made and is continuing or, to any Debtor’s
knowledge, threatened that the use by any Debtor of any item of Intellectual
Property Collateral is invalid or unenforceable or that the use by any Debtor of
any Intellectual Property Collateral does or may violate the rights of any
Person. To the Debtors’ knowledge, there is no infringement or unauthorized use
of any item of Intellectual Property Collateral contained on Schedule 1.1 or as
otherwise disclosed to the Agent in writing.

 
(i)
No Consent.  No consent of any party (other than such Debtor) to any Patent
License, Copyright License or Trademark License constituting Intellectual
Property Collateral is required, or purports to be required, to be obtained by
or on behalf of such Debtor in connection with the execution, delivery and
performance of this Agreement that has not been obtained. Each Patent License,
Copyright License and Trademark License constituting Intellectual Property
Collateral is in full force and effect and constitutes a valid and legally
enforceable obligation of the applicable Debtor and (to the knowledge of the
Debtors) each other party thereto except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditor’s rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law). No consent
or authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the execution, delivery,
performance, validity or enforceability of any of the Patent Licenses, Copyright
Licenses or Trademark Licenses by any party thereto other than those which have
been duly obtained, made or performed and are in full force and effect. Neither
the Debtors nor (to the knowledge of any Debtor) any other party to any Patent
License, Copyright License or Trademark License constituting Collateral is in
default in the performance or observance of any of the terms thereof, except for
such defaults as would not reasonably be expected, in the aggregate, to have a
material adverse effect on the value of the Intellectual Property Collateral. To
the knowledge of such Debtor, the right, title and interest of the applicable
Debtor in, to and under each Patent License, Copyright License and Trademark
License constituting Intellectual Property Collateral is not subject to any
defense, offset, counterclaim or claim.

Section 3.6            Priority.  No financing statement, security agreement or
other Lien instrument covering all or any part of the Collateral is on file in
any public office with respect to any outstanding obligation of such Debtor
except (i) as may have been filed in favor of the Agent pursuant to this
Agreement and the other Loan Documents and (ii) financing statements filed to
perfect Permitted Liens (which shall not, in any event, grant a Lien over the
Pledged Shares).

 
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Section 3.7            Perfection.  Upon (a) the filing of Uniform Commercial
Code financing statements in the jurisdictions listed on Schedule 3.7 attached
hereto, and (b) the recording of this Agreement in the United States Patent and
Trademark Office and the United States Copyright Office, the security interest
in favor of the Agent created herein will constitute a valid and perfected Lien
upon and security interest in the Collateral which may be created and perfected
either under the UCC by filing financing statements or by a filing with the
United States Patent and Trademark Office and the United States Copyright
Office.

ARTICLE 4
Covenants

Each Debtor covenants and agrees with the Agent, until termination of this
Agreement in accordance with the provisions of Section 7.12 hereof, as follows:

Section 4.1            Covenants Regarding Certain Kinds of Collateral.

(a)            Promissory Notes and Tangible Chattel Paper.  If Debtors, now or
at any time hereafter, collectively hold or acquire any promissory notes or
tangible Chattel Paper for which the principal amount thereof or the obligations
evidenced thereunder are, in the aggregate, in excess of $100,000, the
applicable Debtors shall promptly notify the Agent in writing thereof and
forthwith endorse, assign and deliver the same to the Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as the Agent may
from time to time reasonably specify, and cause all such Chattel Paper to bear a
legend reasonably acceptable to the Agent indicating that the Agent has a
security interest in such Chattel Paper.

(b)            Electronic Chattel Paper and Transferable Records.  If Debtors,
now or at any time hereafter, collectively hold or acquire an interest in any
electronic Chattel Paper or any “transferable record,” as that term is defined
in the federal Electronic Signatures in Global and National Commerce Act, or in
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, worth, in the aggregate, in excess of $100,000, the applicable
Debtors shall promptly notify the Agent thereof and, at the request and option
of the Agent, shall take such action as the Agent may reasonably request to vest
in the Agent control, under Section 9-105 of the UCC, of such electronic chattel
paper or control under the federal Electronic Signatures in Global and National
Commerce Act, or the Uniform Electronic Transactions Act, as so in effect in
such jurisdiction, of such transferable record.

(c)            Letter-of-Credit Rights.  If Debtors, now or at any time
hereafter, collectively are or become beneficiaries under letters of credit,
with an aggregate face amount in excess of $100,000, the applicable Debtors
shall promptly notify the Agent thereof and, at the request of the Agent, the
applicable Debtors shall, pursuant to an agreement in form and substance
reasonably satisfactory to the Agent either arrange (i) for the issuer and any
confirmer of such letters of credit to consent to an assignment to the Agent of
the proceeds of the letters of credit or (ii) for the Agent to become the
transferee beneficiary of the letters of credit, together with, in each case,
any such other actions as reasonably requested by the Agent to perfect its first
priority Lien in such letter of credit rights.  The applicable Debtor shall
retain the proceeds of the applicable letters of credit until an Event of
Default has occurred and is continuing whereupon the proceeds are to be
delivered to the Agent and applied as set forth in the Credit Agreement.

 
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(d)            Commercial Tort Claims.  If Debtors, now or at any time
hereafter, collectively hold or acquire any commercial tort claims, which, the
reasonably estimated value of which are in aggregate excess of $100,000, the
applicable Debtors shall immediately notify the Agent in a writing signed by
such Debtors of the particulars thereof and grant to the Agent 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 Agent.

(e)            Pledged Shares.  All certificates or instruments representing or
evidencing the Pledged Shares or any Debtor’s rights therein shall be delivered
to the Agent promptly upon Debtor gaining any rights therein, in suitable form
for transfer by delivery or accompanied by duly executed stock powers or
instruments of transfer or assignments in blank, all in form and substance
reasonably acceptable to the Agent.

(f)            Equipment and Inventory.

 
(i)
Location.  Each Debtor shall keep the Equipment (other than Vehicles) and
Inventory (other than Inventory in transit) which is in such Debtor’s possession
or in the possession of any bailee or warehouseman at any of the locations
specified on Schedule 3.3(a) attached hereto or as otherwise disclosed in
writing to the Agent from time to time, subject to compliance with the other
provisions of this Agreement, including subsection (ii) below.

 
(ii)
Landlord Consents and Bailee’s Waivers.  Each Debtor shall provide, as
applicable, a bailee’s waiver or landlord consent, as required pursuant to the
terms and conditions of the Credit Agreement.

 
(iii)
Maintenance.  Each Debtor shall maintain the Equipment and Inventory in such
condition as may be specified by the terms of the Credit Agreement.

(g)            Intellectual Property.

 
(i)
Trademarks.  Each Debtor agrees to take all necessary steps, including, without
limitation, in the United States Patent and Trademark Office or in any court, to
(x) defend, enforce, preserve the validity and ownership of, and maintain each
Trademark registration and each Trademark License identified on Schedule 1.1
hereto, and (y) pursue each trademark application now or hereafter identified on
Schedule 1.1 hereto, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office, the
filing of applications for renewal, the filing of affidavits under Sections 8
and 15 of the United States Trademark Act, and the participation in opposition,
cancellation, infringement and misappropriation proceedings, except, in each
case in which the Debtors have determined, using their commercially reasonable
judgment, that any of the foregoing is not of material economic value to them.
Each Debtor agrees to take corresponding steps with respect to each new or
acquired Trademark registration, Trademark application or any rights obtained
under any Trademark License, in each case, which it is now or later becomes
entitled, except in each case in which such Debtor has determined, using its
commercially reasonable judgment, that any of the foregoing is not of material
economic value to it. Any expenses incurred in connection with such activities
shall be borne by the Debtors.

 
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(ii)
Patents.  Each Debtor agrees to take all necessary steps, including, without
limitation, in the United States Patent and Trademark Office or in any court, to
(x) defend, enforce, preserve the validity and ownership of, and maintain each
Patent and each Patent License identified on Schedule 1.1 hereto, and (y) pursue
each patent application, now or hereafter identified on Schedule 1.1 hereto,
including, without limitation, the filing of divisional, continuation,
continuation-in-part and substitute applications, the filing of applications for
reissue, renewal or extensions, the payment of maintenance fees, and the
participation in interference, reexamination, opposition, infringement and
misappropriation proceedings, except in each case in which the Debtors have
determined, using their commercially reasonable judgment, that any of the
foregoing is not of material economic value to them. Each Debtor agrees to take
corresponding steps with respect to each new or acquired Patent, patent
application, or any rights obtained under any Patent License, in each case,
which it is now or later becomes entitled, except in each case in which the
Debtors have determined, using their commercially reasonable judgment, that any
of the foregoing is not of material economic value to them. Any expenses
incurred in connection with such activities shall be borne by the Debtors.

 
(iii)
Copyrights.  Each Debtor agrees to take all necessary steps, including, without
limitation, in the United States Copyright Office or in any court, to (x)
defend, enforce, and preserve the validity and ownership of each Copyright and
each Copyright License identified on Schedule 1.1 hereto, and (y) pursue each
Copyright and mask work application, now or hereafter identified on Schedule 1.1
hereto, including, without limitation, the payment of applicable fees, and the
participation in infringement and misappropriation proceedings, except in each
case in which the Debtors have determined, using their commercially reasonable
judgment, that any of the foregoing is not of material economic value to them.
Each Debtor agrees to take corresponding steps with respect to each new or
acquired Copyright, Copyright and mask work application, or any rights obtained
under any Copyright License, in each case, which it is now or later becomes
entitled, except in each case in which the Debtors have determined, using their
commercially reasonable judgment, that any of the foregoing is not of material
economic value to them. Any expenses incurred in connection with such activities
shall be borne by the Debtors.

 
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(iv)
No Abandonment.  The Debtors shall not abandon any Trademark, Patent, Copyright
or any pending Trademark, Copyright, mask work or Patent application, without
the written consent of the Agent, unless the Debtors shall have previously
determined, using their commercially reasonable judgment, that such use or the
pursuit or maintenance of such Trademark registration, Patent, Copyright
registration or pending Trademark, Copyright, mask work or Patent application is
not of material economic value to it, in which case, the Debtors shall give
notice of any such abandonment to the Agent promptly in writing after the
determination to abandon such Intellectual Property Collateral  is made.

 
(v)
No Infringement.  In the event that a Debtor becomes aware that any item of the
Intellectual Property Collateral which such Debtor has determined, using its
commercially reasonable judgment, to be material to its business is infringed or
misappropriated by a third party, such Debtor shall notify the Agent promptly
and in writing, in reasonable detail, and shall take such actions as such Debtor
or the Agent deems reasonably appropriate under the circumstances to protect
such Intellectual Property Collateral, including, without limitation, suing for
infringement or misappropriation and for an injunction against such infringement
or misappropriation. Any expense incurred in connection with such activities
shall be borne by the Debtors. Each Debtor will advise the Agent promptly and in
writing, in reasonable detail, of any adverse determination or the institution
of any proceeding (including, without limitation, the institution of any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) regarding any material item of the Intellectual
Property Collateral.

 
(h)
Accounts and Contracts.  Each Debtor shall, in accordance with its usual
business practices in effect from time to time, endeavor to collect or cause to
be collected from each account debtor under its Accounts, as and when due, any
and all amounts owing under such Accounts.  So long as no Event of Default has
occurred and is continuing and except as otherwise provided in Section 6.3, each
Debtor shall have the right to collect and receive payments on its Accounts, and
to use and expend the same in its operations in each case in compliance with the
terms of the Credit Agreement.

 
(i)
Vehicles; Aircraft and Vessels.  Notwithstanding any other provision of this
Agreement, no Debtor shall be required to make any filings as may be necessary
to perfect the Agent’s Lien on its Vehicles, aircraft and vessels, unless (i) an
Event of Default has occurred and is continuing, whereupon the Agent may require
such filings be made or (ii) such Debtor, either singly, or together with the
other Debtors, owns Vehicles, aircraft and vessels (other than Vehicles provided
for use by such Debtor’s executive employees) which have a fair market value of
at least $100,000, in aggregate amount, whereupon the applicable Debtors shall
provide prompt notice to the Agent, and the Agent, at its option, may require
the applicable Debtors to execute such agreements and make such filings as may
be necessary to perfect the Agent’s Lien for the benefit of the Lenders and
ensure the priority thereof on the applicable Vehicles, aircraft and vessels.

 
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(j)
Life Insurance Policies.  If any Debtor, now or any time hereafter, is the
beneficiary of a “key man life insurance policy”, it shall promptly notify the
Agent thereof, provide the Agent with a true and correct list of the Persons
insured, the name and address of the insurance company providing the coverage,
the amount of such insurance and the policy number, and, unless otherwise waived
by the Agent in writing, take such actions as Agent may deem necessary or the
Agent shall deem reasonably desirable to collaterally assign policy to the Agent
for the benefit of the Lenders.

 
(k)
Deposit Accounts.  Each Debtor agrees to comply with the terms and conditions
set forth in Section 8.14 of the Credit Agreement with respect to the Deposit
Accounts of such Debtor.

Section 4.2            Encumbrances.  Each Debtor shall not create, permit or
suffer to exist, and shall defend the Collateral against any Lien (other than
the Permitted Liens, provided that no Lien, other than the Lien created
hereunder, shall exist over the Pledged Shares) or any restriction upon the
pledge or other transfer thereof (other than as specifically permitted in the
Credit Agreement), and shall defend such Debtor’s title to and other rights in
the Collateral and the Agent’s pledge and collateral assignment of and security
interest in the Collateral against the claims and demands of all
Persons.  Except to the extent permitted by the Credit Agreement or in
connection with any release of Collateral under Section 7.13 hereof (but only to
the extent of any Collateral so released), such Debtor shall do nothing to
impair the rights of the Agent in the Collateral.

Section 4.3            Disposition of Collateral. Except as otherwise permitted
under the Credit Agreement, no Debtor shall enter into or consummate any
transfer or other disposition of Collateral.

Section 4.4            Insurance.  The Collateral pledged by such Debtor or the
Debtors will be insured (to the extent such Collateral is insurable) with
insurance coverage in such amounts and of such types as are required by the
terms of the Credit Agreement.

Section 4.5            Corporate Changes; Books and Records; Inspection
Rights.  (a) Each Debtor shall not change its respective name, identity,
corporate structure or jurisdiction of organization, or identification number in
any manner that might make any financing statement filed in connection with this
Agreement seriously misleading within the meaning of Section 9-506 of the UCC
unless such Debtor shall have given the Agent twenty (20) days prior written
notice with respect to any change in such Debtor’s corporate structure,
jurisdiction of organization, name or identity and shall have taken all action
deemed reasonably necessary by the Agent under the circumstances to protect its
Liens and the perfection and priority thereof, (b) each Debtor shall keep the
Records at the location specified on Schedule 3.2 as the location of such books
and records or as otherwise specified in writing to the Agent and (c) the
Debtors shall permit the Agent, the Lenders, and their respective agents and
representatives to conduct inspections, discussion and audits of the Collateral
in accordance with the terms of the Credit Agreement.
___________________________
 
1
Determine if this conflicts with or is already handled by the terms of the
Credit Agreement, including mandatory prepayment sections of the Credit
Agreement.

 
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Section 4.6            Notification of Lien; Continuing Disclosure.  (a)  Each
Debtor shall promptly notify the Agent in writing of any Lien, encumbrance or
claim (other than a Permitted Lien) that has attached to or been made or
asserted against any of the Collateral upon becoming aware of the existence of
such Lien, encumbrance or claim; and (b) concurrently with delivery of the
Covenant Compliance Report for each fiscal year, Debtors shall execute and
deliver to the Agent a Collateral Compliance Report in the form attached hereto
as Exhibit C.

Section 4.7            Covenants Regarding Pledged Shares

(a)            Voting Rights and Distributions.

 
(i)
So long as no Event of Default shall have occurred and be continuing (both
before and after giving effect to any of the actions or other matters described
in clauses (A) or (B) of this subparagraph):

 
(A)
Each Debtor shall be entitled to exercise any and all voting and other
consensual rights (including, without limitation, the right to give consents,
waivers and ratifications) pertaining to any of the Pledged Shares or any part
thereof; provided, however, that no vote shall be cast or consent, waiver or
ratification given or action taken without the prior written consent of the
Agent which would violate any provision of this Agreement or the Credit
Agreement; and

 
(B)
Except as otherwise provided by the Credit Agreement, such Debtor shall be
entitled to receive and retain any and all dividends, distributions and interest
paid in respect to any of the Pledged Shares.

 
(ii)
Upon the occurrence and during the continuance of an Event of Default:

 
(A)
The Agent may, without notice to such Debtor, transfer or register in the name
of the Agent or any of its nominees, for the equal and ratable benefit of the
Lenders, any or all of the Pledged Shares and the Proceeds thereof (in cash or
otherwise) held by the Agent hereunder, and the Agent or its nominee may
thereafter, after delivery of notice to such Debtor, exercise all voting and
corporate rights at any meeting of any corporation issuing any of the Pledged
Shares and any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any of the Pledged Shares as if the
Agent were the absolute owner thereof, including, without limitation, the right
to exchange, at its discretion, any and all of the Pledged Shares upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
any corporation issuing any of such Pledged Shares or upon the exercise by any
such issuer or the Agent of any right, privilege or option pertaining to any of
the Pledged Shares, and in connection therewith, to deposit and deliver any and
all of the Pledged Shares with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the Agent
may determine, all without liability except to account for property actually
received by it, but the Agent shall have no duty to exercise any of the
aforesaid rights, privileges or options, and the Agent shall not be responsible
for any failure to do so or delay in so doing.

 
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(B)
All rights of such Debtor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section
4.7(a)(i)(A) and to receive the dividends, interest and other distributions
which it would otherwise be authorized to receive and retain pursuant to Section
4.7(a)(i)(B) shall be suspended until such Event of Default shall no longer
exist, and all such rights shall, until such Event of Default shall no longer
exist, thereupon become vested in the Agent which shall thereupon have the sole
right to exercise such voting and other consensual rights and to receive, hold
and dispose of as Pledged Shares such dividends, interest and other
distributions.

 
(C)
All dividends, interest and other distributions which are received by such
Debtor contrary to the provisions of this Section 4.7(a)(ii) shall be received
in trust for the benefit of the Agent, shall be segregated from other funds of
such Debtor and shall be forthwith paid over to the Agent as Collateral in the
same form as so received (with any necessary endorsement).

 
(D)
Each Debtor shall execute and deliver (or cause to be executed and delivered) to
the Agent all such proxies and other instruments as the Agent may reasonably
request for the purpose of enabling the Agent to exercise the voting and other
rights which it is entitled to exercise pursuant to this Section 4.7(a)(ii) and
to receive the dividends, interest and other distributions which it is entitled
to receive and retain pursuant to this Section 4.7(a)(ii). The foregoing shall
not in any way limit the Agent’s power and authority granted pursuant to the
other provisions of this Agreement.

 
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(b)            Possession; Reasonable Care.  Regardless of whether a Default or
an Event of Default has occurred or is continuing, the Agent shall have the
right to hold in its possession all Pledged Shares pledged, assigned or
transferred hereunder and from time to time constituting a portion of the
Collateral.  The Agent may appoint one or more agents (which in no case shall be
a Debtor or an affiliate of a Debtor) to hold physical custody, for the account
of the Agent, of any or all of the Collateral.  The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Agent accords its own property, it being understood that the
Agent shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Agent has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any Collateral, except, subject to
the terms hereof, upon the written instructions of the Lenders.  Following the
occurrence and continuance of an Event of Default, the Agent shall be entitled
to take ownership of the Collateral in accordance with the UCC.

Section 4.8            New Subsidiaries; Additional Collateral

 
(a)
With respect to each Person which becomes a Subsidiary of a Debtor subsequent to
the date hereof, execute and deliver such joinders or security agreements or
other pledge documents as are required by the Credit Agreement, within the time
periods set forth therein.

 
(b)
Each Debtor agrees that, (i) except with the written consent of the Agent, it
will not permit any Domestic Subsidiary (whether now existing or formed after
the date hereof) to issue to such Debtor or any of such Debtor’s other
Subsidiaries any shares of stock, membership interests, partnership units, notes
or other securities or instruments (including without limitation the Pledged
Shares) in addition to or in substitution for any of the Collateral, unless,
concurrently with each issuance thereof, any and all such shares of stock,
membership interests, partnership units, notes or instruments are encumbered in
favor of the Agent under this Agreement or otherwise (it being understood and
agreed that all such shares of stock, membership interests, partnership units,
notes or instruments issued to such Debtor shall, without further action by such
Debtor or the Agent, be automatically encumbered by this Agreement as Pledged
Shares) and (ii) it will promptly following the issuance thereof deliver to the
Agent (A) an amendment, duly executed by such Debtor, in substantially the form
of Exhibit A hereto in respect of such shares of stock, membership interests,
partnership units, notes or instruments issued to Debtor or (B) if reasonably
required by the Lenders, a new stock pledge, duly executed by the applicable
Debtor, in substantially the form of this Agreement (a “New Pledge”), in respect
of such shares of stock, membership interests, partnership units, notes or
instruments issued to any Debtor granting to the Agent, for the benefit of the
Lenders, a first priority security interest, pledge and Lien thereon, together
in each case with all certificates, notes or other instruments representing or
evidencing the same, together with such other documentation as the Agent may
reasonably request. Such Debtor hereby (x) authorizes the Agent to attach each
such amendment to this Agreement, (y) agrees that all such shares of stock,
membership interests, partnership units, notes or instruments listed in any such
amendment delivered to the Agent shall for all purposes hereunder constitute
Pledged Shares, and (z) is deemed to have made, upon the delivery of each such
amendment, the representations and warranties contained in Section 3.4 of this
Agreement with respect to the Collateral covered thereby.

 
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(c)
With respect to any Intellectual Property Collateral owned, licensed or
otherwise acquired by any Debtor after the date hereof, and with respect to any
Patent, Trademark or Copyright which is not registered or filed with the U.S.
Patent and Trademark Office and/or the U.S. Copyright Office at the time such
Collateral is pledged by a Debtor to the Agent pursuant to this Security
Agreement, and which is subsequently registered or filed by such Debtor in the
appropriate office, such Debtor shall promptly after the acquisition or
registration thereof execute or cause to be executed and delivered to the Agent,
(i) an amendment, duly executed by such Debtor, in substantially the form of
Exhibit A hereto, in respect of such additional or newly registered collateral
or (ii) at the Agent’s option, a new security agreement, duly executed by the
applicable Debtor, in substantially the form of this Agreement, in respect of
such additional or newly registered collateral, granting to the Agent, for the
benefit of the Lenders, a first priority security interest, pledge and Lien
thereon (subject only to the Permitted Liens), together in each case with all
certificates, notes or other instruments representing or evidencing the same,
and shall, upon the Agent’s request, execute or cause to be executed any
financing statement or other document (including without limitation, filings
required by the U.S. Patent and Trademark Office and/or the U.S. Copyright
Office in connection with any such additional or newly registered collateral)
granting or otherwise evidencing a Lien over such new Intellectual Property
Collateral.  Each Debtor hereby (x) authorizes the Agent to attach each
amendment to this Agreement, (y) agrees that all such additional collateral
listed in any amendment delivered to the Agent shall for all purposes hereunder
constitute Collateral, and (z) is deemed to have made, upon the delivery of each
such Amendment, the representations and warranties contained in Section 3.3(d)
and Section 3.5 of this Agreement with respect to the Collateral covered
thereby.

Section 4.9            Further Assurances  (a)  At any time and from time to
time, upon the request of the Agent, and at the sole expense of the Debtors,
each Debtor shall promptly execute and deliver all such further agreements,
documents and instruments and take such further action as the Agent may
reasonably deem necessary or appropriate to (i) preserve, ensure the priority,
effectiveness and validity of and perfect the Agent’s security interest in and
pledge and collateral assignment of the Collateral (including causing the
Agent’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition of the Agent’s ability to enforce
its security interest in such Collateral), unless such actions are specifically
waived under the terms of this Agreement and the other Loan Documents, (ii)
carry out the provisions and purposes of this Agreement and (iii) to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any of the Collateral.  Except as otherwise expressly permitted by the terms of
the Credit Agreement relating to disposition of assets and except for Permitted
Liens (except for Pledged Shares, over which the only Lien shall be that Lien
established under this Agreement), each Debtor agrees to maintain and preserve
the Agent’s security interest in and pledge and collateral assignment of the
Collateral hereunder and the priority thereof.

 
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(b)           Each Debtor hereby irrevocably authorizes the Agent at any time
and from time to time to file in any filing office in any jurisdiction any
initial financing statements and amendments thereto that (i) indicate any or all
of the Collateral upon which the Debtors have granted a Lien, and (ii) provide
any other information required by Part 5 of Article 9 of the UCC, including
organizational information and in the case of a fixture filing or a filing for
Collateral consisting of as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  Each
Debtor agrees to furnish any such information required by the preceding
paragraph to the Agent promptly upon request.

ARTICLE 5
Rights of the Agent

Section 5.1            Power of Attorney.  Each Debtor hereby irrevocably
constitutes and appoints the Agent 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 name of such Debtor or in its own name,
to take, after the occurrence and during the continuance of an Event of Default,
any and all actions, and to execute any and all documents and instruments which
the Agent at any time and from time to time reasonably deems necessary, to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, such Debtor hereby gives the Agent the power and right on
behalf of such Debtor and in its own name to do any of the following after the
occurrence and during the continuance of an Event of Default, without notice to
or the consent of such Debtor:

 
(a)
to demand, sue for, collect or receive, in the name of such Debtor or in its own
name, any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral and, in connection therewith, endorse
checks, notes, drafts, acceptances, money orders, documents of title or any
other instruments for the payment of money under the Collateral or any policy of
insurance;

 
(b)
to pay or discharge taxes, Liens (other than Permitted Liens) or other
encumbrances levied or placed on or threatened against the Collateral;

 
(c)
(i) to direct account debtors and any other parties liable for any payment under
any of the Collateral to make payment of any and all monies due and to become
due thereunder directly to the Agent or as the Agent shall direct; (ii) to
receive payment of and receipt for any and all monies, claims and other amounts
due and to become due at any time in respect of or arising out of any
Collateral; (iii) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, proxies, stock powers, verifications and notices in connection with
accounts and other documents relating to the Collateral; (iv) to commence and
prosecute any suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral; (v) to defend any suit,
action or proceeding brought against such Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or releases as the
Agent may deem appropriate; (vii) to exchange any of the Collateral for other
property upon any merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof and, in connection therewith, deposit
any of the Collateral with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms as the Agent may determine; (viii) to
add or release any guarantor, indorser, surety or other party to any of the
Collateral; (ix) to renew, extend or otherwise change the terms and conditions
of any of the Collateral; (x) to make, settle, compromise or adjust any claim
under or pertaining to any of the Collateral (including claims under any policy
of insurance); (xi) subject to any pre-existing rights or licenses, to assign
any Patent, Copyright or Trademark constituting Intellectual Property Collateral
(along with the goodwill of the business to which any such Patent, Copyright or
Trademark pertains), for such term or terms, on such conditions and in such
manner, as the Agent shall in its sole discretion determine, and (xii) to sell,
transfer, pledge, convey, make any agreement with respect to, or otherwise deal
with, any of the Collateral as fully and completely as though the Agent were the
absolute owner thereof for all purposes, and to do, at the Agent’s option and
such Debtor’s expense, at any time, or from time to time, all acts and things
which the Agent deems necessary to protect, preserve, maintain, or realize upon
the Collateral and the Agent’s security interest therein.

 
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This power of attorney is a power coupled with an interest and shall be
irrevocable.  The Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Agreement, and shall not be liable for
any failure to do so or any delay in doing so.  This power of attorney is
conferred on the Agent solely to protect, preserve, maintain and realize upon
its security interest in the Collateral.  The Agent shall not be responsible for
any decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve or
maintain any Lien given to secure the Collateral.

Section 5.2            Setoff.  In addition to and not in limitation of any
rights of any Lenders under applicable law, the Agent and each Lender shall,
upon the occurrence and continuance of an Event of Default, without notice or
demand of any kind, have the right to appropriate and apply to the payment of
the Indebtedness owing to it (whether or not then due) any and all balances,
credits, deposits, accounts or moneys of Debtors then or thereafter on deposit
with such Lenders; provided, however, that any such amount so applied by any
Lender on any of the Indebtedness owing to it shall be subject to the provisions
of the Credit Agreement.

Section 5.3            Assignment by the Agent.  The Agent may at any time
assign or otherwise transfer all or any portion of its rights and obligations as
Agent under this Agreement and the other Loan Documents (including, without
limitation, the Indebtedness) to any other Person, to the extent permitted by,
and upon the conditions contained in, the Credit Agreement and such Person shall
thereupon become vested with all the benefits and obligations thereof granted to
the Agent herein or otherwise.

 
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Section 5.4            Performance by the Agent. If any Debtor shall fail to
perform any covenant or agreement contained in this Agreement, the Agent may
(but shall not be obligated to) perform or attempt to perform such covenant or
agreement on behalf of the Debtors, in which case Agent shall exercise good
faith and make diligent efforts to give Debtors prompt prior written notice of
such performance or attempted performance.  In such event, the Debtors shall, at
the request of the Agent, promptly pay any reasonable amount expended by the
Agent in connection with such performance or attempted performance to the Agent,
together with interest thereon at the interest rate set forth in the Credit
Agreement, from and including the date of such expenditure to but excluding the
date such expenditure is paid in full.  Notwithstanding the foregoing, it is
expressly agreed that the Agent shall not have any liability or responsibility
for the performance (or non-performance) of any obligation of the Debtors under
this Agreement.

Section 5.5            Certain Costs and Expenses.  The Debtors shall pay or
reimburse the Agent within five (5) Business Days after demand for all
reasonable costs and expenses (including reasonable attorney’s and paralegal
fees) in accordance with the payment and reimbursement requirements of Borrowers
under Section 14.5 of the Credit Agreement.

Section 5.6            Indemnification.  The Debtors shall indemnify, defend and
hold the Agent, and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
“Indemnified Person”) harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including reasonable attorneys’ and
paralegals’ fees) of any kind or nature whatsoever in accordance with the
indemnification requirements of Borrowers under Section 14.5 of the Credit
Agreement.

ARTICLE 6

Default

Section 6.1            Rights and Remedies.  If an Event of Default shall have
occurred and be continuing, the Agent shall have the following rights and
remedies subject to the direction and/or consent of the Lenders as required
under the Credit Agreement:

 
(a)
The Agent may exercise any of the rights and remedies set forth in this
Agreement (including, without limitation, Article 5 hereof), in the Credit
Agreement, or in any other Loan Document, or by applicable law.

 
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(b)
In addition to all other rights and remedies granted to the Agent in this
Agreement, the Credit Agreement or by applicable law, the Agent shall have all
of the rights and remedies of a secured party under the UCC (whether or not the
UCC applies to the affected Collateral) and the Agent may also, without previous
demand or notice except as specified below or in the Credit Agreement, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker’s board or at any of the Agent’s offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Agent may, in its reasonable discretion, deem commercially reasonable or
otherwise as may be permitted by law.  Without limiting the generality of the
foregoing, the Agent may (i) without demand or notice to the Debtors (except as
required under the Credit Agreement or applicable law), collect, receive or take
possession of the Collateral or any part thereof, and for that purpose the Agent
(and/or its Agents, servicers or other independent contractors) may enter upon
any premises on which the Collateral is located and remove the Collateral
therefrom or render it inoperable, and/or (ii) sell, lease or otherwise dispose
of the Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Agent’s offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Agent may, in its
reasonable discretion, deem commercially reasonable or otherwise as may be
permitted by law.  The Agent and, subject to the terms of the Credit Agreement,
each of the Lenders shall have the right at any public sale or sales, and, to
the extent permitted by applicable law, at any private sale or sales, to bid
(which bid may be, in whole or in part, in the form of cancellation of
indebtedness) and become a purchaser of the Collateral or any part thereof free
of any right of redemption on the part of the Debtors, which right of redemption
is hereby expressly waived and released by the Debtors to the extent permitted
by applicable law.  The Agent may require the Debtors to assemble the Collateral
and make it available to the Agent at any place designated by the Agent to allow
the Agent to take possession or dispose of such Collateral.  The Debtors agree
that the Agent shall not be obligated to give more than five (5) days prior
written notice of the time and place of any public sale or of the time after
which any private sale may take place and that such notice shall constitute
reasonable notice of such matters.  The foregoing shall not require notice if
none is required by applicable law.  The Agent shall not be obligated to make
any sale of Collateral if, in the exercise of its reasonable discretion, it
shall determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given.  The Agent may, without notice or publication
(except as required by applicable law), adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned.  The Debtors shall be liable
for all reasonable expenses of retaking, holding, preparing for sale or the
like, and all reasonable attorneys’ fees, legal expenses and other costs and
expenses incurred by the Agent in connection with the collection of the
Indebtedness and the enforcement of the Agent’s rights under this Agreement and
the Credit Agreement.  The Debtors shall, to the extent permitted by applicable
law, remain liable for any deficiency if the proceeds of any such sale or other
disposition of the Collateral (conducted in conformity with this clause (ii) and
applicable law) applied to the Indebtedness are insufficient to pay the
Indebtedness in full.  The Agent shall apply the proceeds from the sale of the
Collateral hereunder against the Indebtedness in such order and manner as
provided in the Credit Agreement.

 
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(c)
The Agent may cause any or all of the Collateral held by it to be transferred
into the name of the Agent or the name or names of the Agent’s nominee or
nominees.

 
(d)
The Agent may exercise any and all rights and remedies of the Debtors under or
in respect of the Collateral, including, without limitation, any and all rights
of the Debtors to demand or otherwise require payment of any amount under, or
performance of any provision of any of the Collateral and any and all voting
rights and corporate powers in respect of the Collateral.

 
(e)
On any sale of the Collateral, the Agent is hereby authorized to comply with any
limitation or restriction with which compliance is necessary (based on a
reasoned opinion of the Agent’s counsel) in order to avoid any violation of
applicable law or in order to obtain any required approval of the purchaser or
purchasers by any applicable Governmental Authority.

 
(f)
The Agent may direct account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all monies due
and to become due thereunder directly to the Agent or as the Agent shall direct.

 
(g)
In the event of any sale, assignment or other disposition of the Intellectual
Property Collateral, the goodwill of the business connected with and symbolized
by any Collateral subject to such disposition shall be included, and the Debtors
shall supply to the Agent or its designee the Debtors’ know-how and expertise
related to the Intellectual Property Collateral subject to such disposition, and
the Debtors’ notebooks, studies, reports, records, documents and things
embodying the same or relating to the inventions, processes or ideas covered by
and to the manufacture of any products under or in connection with the
Intellectual Property Collateral subject to such disposition.

 
(h)
For purposes of enabling the Agent to exercise its rights and remedies under
this Section 6.1 and enabling the Agent and its successors and assigns to enjoy
the full benefits of the Collateral, the Debtors hereby grant to the Agent an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to the Debtors) to use, assign, license or sublicense any of
the Intellectual Property Collateral, Computer Records or Software (including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and all computer programs used for the completion or
printout thereof), exercisable upon the occurrence and during the continuance of
an Event of Default (and thereafter if Agent succeeds to any of the Collateral
pursuant to an enforcement proceeding or voluntary arrangement with Debtor),
except as may be prohibited by any licensing agreement relating to such Computer
Records or Software.  This license shall also inure to the benefit of all
successors, assigns, transferees of and purchasers from the Agent.

 
 
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Section 6.2            Private Sales.

 
 
(a)
In view of the fact that applicable securities laws may impose certain
restrictions on the method by which a sale of the Pledged Shares may be effected
after an Event of Default, Debtors agree that upon the occurrence and during the
continuance of an Event of Default, the Agent may from time to time attempt to
sell all or any part of the Pledged Shares by a private sale in the nature of a
private placement, restricting the bidders and prospective purchasers to those
who will represent and agree that they are “accredited investors” within the
meaning of Regulation D promulgated pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), and are purchasing for investment only and not
for distribution. In so doing, the Agent may solicit offers for the Pledged
Shares, or any part thereof, from a limited number of investors who might be
interested in purchasing the Pledged Shares. Without limiting the methods or
manner of disposition which could be determined to be commercially reasonable,
if the Agent hires a firm of regional or national reputation that is engaged in
the business of rendering investment banking and brokerage services to solicit
such offers and facilitate the sale of the Pledged Shares, then the Agent’s
acceptance of the highest offer (including its own offer, or the offer of any of
the Lenders at any such sale) obtained through such efforts of such firm shall
be deemed to be a commercially reasonable method of disposition of such Pledged
Shares.  The Agent shall not be under any obligation to delay a sale of any of
the Pledged Shares for the period of time necessary to permit the issuer of such
securities to register such securities under the laws of any jurisdiction
outside the United States, under the Securities Act or under any applicable
state securities laws, even if such issuer would agree to do so.

 
(b)
The Debtors further agree to do or cause to be done, to the extent that the
Debtors may do so under applicable law, all such other reasonable acts and
things as may be necessary to make such sales or resales of any portion or all
of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the Debtors’
expense.

Section 6.3            Establishment of Cash Collateral Account; and Lock Box.

 
(a)
Notwithstanding anything to the contrary in this Agreement, in the case of any
Event of Default under Section 10.1(i) of the Credit Agreement, immediately
following the occurrence thereof, and in the case of any other Event of Default,
(w) upon the termination of any commitments to extend credit under the Credit
Agreement, (x) upon the acceleration of any Indebtedness arising under the
Credit Agreement, (y) at the option of Agent or (z) upon the request of the
Majority Lenders after the commencement of any remedies hereunder, there shall
be established by each Debtor with the Agent, for the benefit of the Lenders in
the name of the Agent, a segregated non-interest bearing cash collateral account
(the “Cash Collateral Account”) bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Agent and the
Lenders; provided, however, that the Cash Collateral Account may be an
interest-bearing account with a commercial bank (including Comerica or any other
Lender which is a commercial bank) if determined by the Agent, in its reasonable
discretion, to be practicable, invested by the Agent in its sole discretion, but
without any liability for losses or the failure to achieve any particular rate
of return.  Furthermore, in connection with the establishment of a Cash
Collateral Account under the first sentence of this Section 6.3 (and on the
terms and within the time periods provided thereunder), (i) each Debtor agrees
to establish and maintain (and the Agent, acting at the request of the Lenders,
may establish and maintain) at Debtor’s sole expense a United States Post Office
lock box (the “Lock Box”), to which the Agent shall have exclusive access and
control.  Each Debtor expressly authorizes the Agent, from time to time, to
remove the contents from the Lock Box for disposition in accordance with this
Agreement; and (ii) each Debtor shall notify all account debtors that all
payments made to Debtor (a) other than by electronic funds transfer, shall be
remitted, for the credit of Debtor, to the Lock Box, and Debtor shall include a
like statement on all invoices, and (b) by electronic funds transfer, shall be
remitted to the Cash Collateral Account, and Debtor shall include a like
statement on all invoices. Each Debtor agrees to execute all documents and
authorizations as reasonably required by the Agent to establish and maintain the
Lock Box and the Cash Collateral Account.  It is acknowledged by the parties
hereto that any lockbox presently maintained or subsequently established by a
Debtor with the Agent may be used, subject to the terms hereof, to satisfy the
requirements set forth in the first sentence of this Section 6.3.

 
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(b)
Notwithstanding anything to the contrary in this Agreement, in the case of any
Event of Default under Section 10.1(i) of the Credit Agreement, immediately
following the occurrence thereof, and in the case of any other Event of Default,
(w) upon the termination of any commitments to extend credit under the Credit
Agreement, (x) upon the acceleration of any Indebtedness arising under the
Credit Agreement, (y) at the option of Agent or (z) upon the request of the
Majority Lenders after the commencement of any remedies hereunder, any and all
cash (including amounts received by electronic funds transfer), checks, drafts
and other instruments for the payment of money received by each Debtor at any
time, in full or partial payment of any of the Collateral consisting of Accounts
or Inventory, shall forthwith upon receipt be transmitted and delivered to the
Agent, properly endorsed, where required, so that such items may be collected by
the Agent. Any such amounts and other items received by a Debtor shall not be
commingled with any other of such Debtor’s funds or property, but will be held
separate and apart from such Debtor’s own funds or property, and upon express
trust for the benefit of the Agent until delivery is made to the Agent.  All
items or amounts which are remitted to a Lock Box or otherwise delivered by or
for the benefit of a Debtor to the Agent on account of partial or full payment
of, or any other amount payable with respect to, any of the Collateral shall, at
the Agent’s option, be applied to any of the Indebtedness, whether then due or
not, in the order and manner set forth in the Credit Agreement. No Debtor shall
have any right whatsoever to withdraw any funds so deposited. Each Debtor
further grants to the Agent a first security interest in and Lien on all funds
on deposit in such account. Each Debtor hereby irrevocably authorizes and
directs the Agent to endorse all items received for deposit to the Cash
Collateral Account, notwithstanding the inclusion on any such item of a
restrictive notation, e.g., “paid in full”, “balance of account”, or other
restriction.

 
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Section 6.4            Default Under Credit Agreement.  Subject to any
applicable notice and cure provisions contained in the Credit Agreement, the
occurrence of any Event of Default (as defined in the Credit Agreement),
including without limit a breach of any of the provisions of this Agreement,
shall be deemed to be an Event of Default under this Agreement.  This Section
6.4 shall not limit the Events of Default set forth in the Credit Agreement.

ARTICLE 7
Miscellaneous

Section 7.1            No Waiver; Cumulative Remedies.  No failure on the part
of the Agent to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.  The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.

Section 7.2            Successors and Assigns.  Subject to the terms and
conditions of the Credit Agreement, this Agreement shall be binding upon and
inure to the benefit of the Debtors and the Agent and their respective heirs,
successors and assigns, except that the Debtors may not assign any of their
rights or obligations under this Agreement without the prior written consent of
the Agent.

Section 7.3            AMENDMENT; ENTIRE AGREEMENT.  THIS AGREEMENT AND THE
CREDIT AGREEMENT REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO.  The provisions of this Agreement may be amended or waived only by an
instrument in writing signed by the parties hereto.

Section 7.4            Notices.  All notices, requests, consents, approvals,
waivers and other communications hereunder shall be in writing (including, by
facsimile transmission) and mailed, faxed or delivered to the address or
facsimile number specified for notices on signature pages hereto; or, as
directed to the Debtors or the Agent, to such other address or number as shall
be designated by such party in a written notice to the other. All such notices,
requests and communications shall, when sent by overnight delivery, or faxed, be
effective when delivered for overnight (next business day) delivery, or
transmitted in legible form by facsimile machine (with electronic confirmation
of receipt), respectively, or if mailed, upon the third Business Day after the
date deposited into the U.S. mail, or if otherwise delivered, upon delivery;
except that notices to the Agent shall not be effective until actually received
by the Agent.

 
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Section 7.5            GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS.

(a)            THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD FOR
PRINCIPLES OF CONFLICTS OF LAWS.

(b)            THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND.  DEBTORS AND AGENT WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 7.5.

Section 7.6            Headings.  The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.

Section 7.7            Survival of Representations and Warranties.  All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Agent shall affect the representations
and warranties or the right of the Agent or the Lenders to rely upon them.

Section 7.8            Counterparts.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

Section 7.9            Waiver of Bond.  In the event the Agent seeks to take
possession of any or all of the Collateral by judicial process, the Debtors
hereby irrevocably waive any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.

Section 7.10          Severability.  Any provision of this Agreement which is
determined by a court of competent jurisdiction to be 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 of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 
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Section 7.11          Construction.  Each Debtor and the Agent acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Debtors and the
Agent.

Section 7.12          Termination.  If all of the Indebtedness (other than
contingent liabilities pursuant to any indemnity, including without limitation
Section 5.5 and Section 5.6 hereof, for claims which have not been asserted, or
which have not yet accrued) shall have been paid and performed in full (in cash)
and all commitments to extend credit or other credit accommodations under the
Credit Agreement have been terminated, the Agent shall, upon the written request
of the Debtors, execute and deliver to the Debtors a proper instrument or
instruments acknowledging the release and termination of the security interests
created by this Agreement, and shall duly assign and deliver to the Debtors
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Agent and has not previously been
sold or otherwise applied pursuant to this Agreement; provided, however, that,
the effectiveness of this Agreement shall continue or be reinstated, as the case
may be, in the event that any payment received or credit given by the Agent or
the Lenders, or any of them, is returned, disgorged, rescinded or required to be
recontributed to any party as an avoidable preference, impermissible setoff,
fraudulent conveyance, restoration of capital or otherwise under any applicable
state, federal, or local law of any jurisdiction, including laws pertaining to
bankruptcy or insolvency, and this Agreement shall thereafter be enforceable
against the Debtors as if such returned, disgorged, recontributed or rescinded
payment or credit has not been received or given by the Agent or the Lenders,
and whether or not the Agent or any Lender relied upon such payment or credit or
changed its position as a consequence thereof.

Section 7.13         Release of Collateral. The Agent shall, upon the written
request of the Debtors, execute and deliver to the Debtors a proper instrument
or instruments acknowledging the release of the security interest and Liens
established hereby on any Collateral (other than the Pledged Shares): (a) if the
sale or other disposition of such Collateral is permitted under the terms of the
Credit Agreement, (b) if the sale or other disposition of such Collateral is not
permitted under the terms of the Credit Agreement, provided that the requisite
Lenders under the Credit Agreement shall have consented to such sale or
disposition in accordance with the terms thereof, or (c) if such release has
been approved by the requisite Lenders in accordance with the Credit Agreement.

Section 7.14          WAIVER OF JURY TRIAL.  TO THE EXTENT PERMITTED BY LAW,
DEBTORS AND AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS.  DEBTORS AND AGENT REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 
31

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

 

(A)           Judicial Reference.

(i)             The parties prefer that any dispute between them be resolved in
litigation subject to a Jury Trial Waiver as set forth in this Agreement (“Jury
Trial Waiver”), but the Jury Trial Waiver may not be enforceable under certain
circumstances.  In the event the Jury Trial Waiver is not enforceable, the
parties elect to proceed under this Reference Provision.

(ii)            Other than (i) nonjudicial foreclosure of security interests in
real or personal property and self-help remedies, (ii) the appointment of a
receiver or (iii) the exercise of other provisional remedies (any of which may
be initiated pursuant to applicable law), any controversy, dispute or claim
(each, a “Claim”) between the parties arising out of or relating to this
Agreement, will be resolved by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure (“CCP”), or their successor sections, which shall constitute the
exclusive remedy for the resolution of any Claim, including whether the Claim is
subject to the reference proceeding.  Except as otherwise provided in this
Agreement, the Notes or the other Loan Documents, venue for the reference
proceeding will be in the Superior Court or Federal District Court in the County
or District where venue is otherwise appropriate under applicable law (the
“Court”).

(iii)           The referee shall be a retired Judge or Justice selected by
mutual written agreement of the parties.  If the parties do not agree, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative).  A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted.  The referee shall be appointed to sit
with all the powers provided by law.  Each party shall have one peremptory
challenge pursuant to CCP §170.6.  Pending appointment of the referee, the Court
has power to issue temporary or provisional remedies.

(iv)           The parties agree that time is of the essence in conducting the
reference proceedings.  Accordingly, the referee shall be requested to (a) set
the matter for a status and trial-setting conference within fifteen (15) days
after the date of selection of the referee, (b) if practicable, try all issues
of law or fact within ninety (90) days after the date of the conference and (c)
report a statement of decision within twenty (20) days after the matter has been
submitted for decision.  Any decision rendered by the referee will be final,
binding and conclusive, and judgment shall be entered pursuant to CCP §644.

(v)            The referee will have power to expand or limit the amount and
duration of discovery.  The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party’s failure to provide requested
discovery for any reason whatsoever.  Unless otherwise ordered, no party shall
be entitled to “priority” in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service.  All disputes relating
to discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.

 
32

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

 

(vii)          Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the reference
proceeding.  All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee, and the referee will be provided a courtesy copy of the
transcript.  The party making such a request shall have the obligation to
arrange for and pay the court reporter.  Subject to the referee’s power to award
costs to the prevailing party, the parties will equally share the cost of the
referee and the court reporter at trial.

(viii)         The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California.  The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding.  The referee shall
be empowered to enter equitable as well as legal relief, provide all temporary
or provisional remedies, enter equitable orders that will be binding on the
parties and rule on any motion which would be authorized in a trial, including
without limitation motions for summary judgment or summary adjudication .  The
referee shall issue a decision at the close of the reference proceeding which
disposes of all claims of the parties that are the subject of the
reference.  The referee’s decision shall be entered by the Court as a judgment
or an order in the same manner as if the action had been tried by the
Court.  The parties reserve the right to appeal from the final judgment or order
or from any appealable decision or order entered by the referee.  The parties
reserve the right to findings of fact, conclusions of laws, a written statement
of decision, and the right to move for a new trial or a different judgment,
which new trial, if granted, is also to be a reference proceeding under this
provision.

(ix)           If the enabling legislation which provides for appointment of a
referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by reference procedure will be
resolved and determined by arbitration.  The arbitration will be conducted by a
retired judge or Justice, in accordance with the California Arbitration Act
§1280 through §1294.2 of the CCP as amended from time to time.  The limitations
with respect to discovery set forth above shall apply to any such arbitration
proceeding.

 
33

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

 

(x)            THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER
THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY, AND
THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS
REFERENCE PROVISION.  AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY
AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO
ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT,
THE NOTES OR THE OTHER LOAN DOCUMENTS.

Section 7.15          Consistent Application.  The rights and duties created by
this Agreement shall, in all cases, be interpreted consistently with, and shall
be in addition to (and not in lieu of), the rights and duties created by the
Credit Agreement or the other Loan Documents.  In the event that any provision
of this Agreement shall be inconsistent with any provision of the Credit
Agreement, such provision of the Credit Agreement shall govern.

Section 7.16          Amendment and Restatement; Continuing Lien.  This
Agreement amends, restates and continues the liens granted under and pursuant to
the Prior Collateral Documents.  The security interest granted under this
Security Agreement shall be a continuing security interest in every respect
(whether or not the outstanding balance of the Indebtedness is from time to time
temporarily reduced to zero) and the Agent’s security interest in the Collateral
as granted herein shall continue in full force and effect for the entire
duration that the Credit Agreement remains in effect and until all of the
Indebtedness are repaid and discharged in full, and no commitment (whether
optional or obligatory) to extend any credit under the Credit Agreement remain
outstanding.

 
34

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

 
 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.

 
DEBTORS:
       
NATIONAL TECHNICAL SYSTEMS, INC.
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian
             
NTS TECHNICAL SYSTEMS
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian
             
APPROVED ENGINEERING TEST LABORATORIES. INC.
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian

Signature Page to Security Agreement
(1038405)

 
 

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

 
 

 
NTS ENGINEERING SERVICES, INC. (f/k/a XXCAL, Inc.)
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian
             
ETCR, INC.
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian
             
PHASE SEVEN LABORATORIES, INC.
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591 -0776
 
Attention: Raffy Lorentzian

Signature Page to Security Agreement
(1038405)

 
 

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

 
 

 
ELLIOTT LABORATORIES, LLC
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian
             
ACTON ENVIRONMENTAL TESTING CORPORATION
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Rally Lorentzian
             
UNITED STATES TEST LABORATORY, L.L.C.
             
By:
/s/ Raffy Lorentzian
 
Name: Raffy Lorentzian
 
Title: Chief Financial Officer
 
Address for Notices:
 
24007 Ventura Boulevard, Suite 200
 
Calabasas, California 91302
 
Fax No.: (818) 591-0899
 
Telephone No.: (818) 591-0776
 
Attention: Raffy Lorentzian

Signature Page to Security Agreement
(1038405)

 
 

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

 
 

 
AGENT:
             
COMERICA BANK, as Agent
             
By:
/s/ Vahe Medzoyan
 
Name: Vahe Medzoyan
 
Title: Vice President
 
Address for Notices:
 
500 Woodward Avenue
 
Detroit, Michigan 48226
 
Fax No.: (313) 222-9434
 
Telephone No.: (313) 2224280
 
Attention: Corporate Finance
             
Copy to:
 
15303 Ventura Boulevard, Suite 100
 
Sherman Oaks, California 91403
 
Fax No.: (818) 379-2902
 
Telephone No.: (818) 379-2937
 
Attention: Vahe Medzoyan

Signature Page to Security Agreement
(1038405)

 
 

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

 

EXHIBIT A
TO
SECURITY AGREEMENT

FORM OF AMENDMENT

This Amendment, dated________________, 20__, is delivered pursuant to Section
4.8[(b)/(c)] of the Security Agreement referred to below.  The undersigned
hereby agrees that this Amendment may be attached to the Amended and Restated
Security Agreement dated as of November 10, 2010, between the undersigned and
Comerica Bank, as the Agent for the benefit of the Lenders referred to therein
(the “Security Agreement”), and (a) [that the intellectual property listed on
Schedule A]/[that the shares of stock, membership interests, partnership units,
notes or other instruments listed on Schedule A] annexed hereto shall be and
become part of the Collateral referred to in the Security Agreement and shall
secure payment and performance of all Indebtedness as provided in the Security
Agreement and (b) that Schedule A shall be deemed to amend [Schedule
1.2/Schedule 1.1] by supplementing the information provided on such Schedule
with the information set forth on Schedule A.

Capitalized terms used herein but not defined herein shall have the meanings
therefor provided in the Security Agreement.

                     
By:
   
Name:
   
Title
               
COMERICA BANK, as Agent
             
By:
   
Name:
   
Title
 

 
36

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

 

EXHIBIT B

JOINDER AGREEMENT
(Security Agreement)

THIS JOINDER AGREEMENT (the “Joinder Agreement”) is dated as of ______________,
____ by ______________, a _________ (“New Debtor”).

WHEREAS, pursuant to Section 8.13 of that certain Amended and Restated Credit
Agreement dated as of November 10, 2010 (as amended or otherwise modified from
time to time, the “Credit Agreement”) by and among National Technical Systems,
Inc. and its Subsidiaries party thereto (collectively, the “Borrowers”), the
financial institutions signatory thereto from time to time (the “Lenders”) and
Comerica Bank, as Agent for the Lenders (in such capacity, “Agent”), the New
Debtor is required to execute and deliver a joinder agreement to the Security
Agreement.

WHEREAS, in order to comply with the Credit Agreement, New Debtor executes and
delivers this Joinder Agreement in accordance therewith.

NOW THEREFORE, as a further inducement to Lenders to continue to provide credit
accommodations to the Borrowers, New Debtor hereby covenants and agrees as
follows:

A.            All capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement unless expressly defined to the contrary.

B.             New Debtor hereby enters into this Joinder Agreement in order to
comply with Section 8.13 of the Credit Agreement and does so in consideration of
the Advances made or to be made from time to time under the Credit Agreement and
the other Loan Documents.

C.             Schedule [insert appropriate Schedule] attached to this Joinder
Agreement is intended to supplement Schedule [insert appropriate Schedule] of
the Security Agreement with the respective information applicable to New Debtor.

D.             New Debtor shall be considered, and deemed to be, for all
purposes of the Credit Agreement, the Security Agreement and the other Loan
Documents, a Debtor under the Security Agreement as fully as though New Debtor
had executed and delivered the Security Agreement at the time originally
executed and delivered under the Credit Agreement and hereby ratifies and
confirms its obligations under the Security Agreement, all in accordance with
the terms thereof and shall be deemed to have made each representation and
warranty set forth in the Security Agreement.

E.              No Default or Event of Default (each such term being defined in
the Credit Agreement) has occurred and is continuing under the Credit Agreement.

F.              This Joinder Agreement shall be governed by the laws of the
State of California without giving effect to its principles of conflicts of laws
and shall be binding upon New Debtor and its successors and assigns.

 
37

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

 

IN WITNESS WHEREOF, the undersigned New Debtor has executed and delivered this
Joinder Agreement as of __________________, _____.

     
[NEW DEBTOR]
                               
By:
                     
Its:
               
Accepted:
                   
COMERICA BANK, as Agent
                               
By:
                     
Its:
         

 
38

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

 

EXHIBIT C

FORM OF COLLATERAL COMPLIANCE CERTIFICATE

To:           Comerica Bank as Agent (the “Agent”) and the Lenders

Re:           Amended and Restated Security Agreement dated as of November 10,
2010 by and among National Technical Systems, Inc. and its Subsidiaries party
thereto (each a “Debtor” and collectively, the “Debtors”) and Agent, (as the
same may be amended, restated or otherwise modified from time to time, the
“Security Agreement”; capitalized terms not otherwise defined herein shall have
the meanings set forth in the Security Agreement).

 Reference is made to Section 4.6 of the Security Agreement.  The undersigned
hereby represents and warrants to Agent and the Lenders, in consideration of the
loans extended to Borrowers, as follows:

1.             Locations.  No Debtor has any leased or owned location, or any
Collateral located with a warehousemen or bailee, which has not been previously
disclosed in writing to Agent, or is not set forth on Schedule 1 attached
hereto, which sets forth the information required by Section 3.3(a)(ii) and
Section 3.3(a)(iii) of the Security Agreement, as applicable, for all previously
undisclosed locations.

2.             Deposit Accounts.  No Debtor has any Deposit Accounts, cash
collateral accounts or investment accounts (other than with Agent) which have
not been previously disclosed in writing to Agent, or are not set forth on
Schedule 2 attached hereto, which sets forth the information required by Section
3.3(b) of the Security Agreement as to each previously undisclosed account.

3.             Intellectual Property.  No Debtor has any registered Patents,
Patent Licenses, registered Trademarks, Trademark Licenses, registered
Copyrights and Copyright Licenses which have not been previously disclosed in
writing to Agent, or are not set forth on Schedule 3 attached hereto, which sets
forth the information required by Section 3.3(d) of the Security Agreement for
such previously undisclosed Intellectual Property Collateral.

4.             Pledged Shares.  None of the Debtors, singly or collectively,
hold any Pledged Shares which have not been previously disclosed to Agent in
writing except as set forth on Schedule 4 attached hereto, which sets forth the
information required by Section 3.4(c) of the Security Agreement for such
previously undisclosed Pledged Shares.

5.             Promissory Notes; Tangible Chattel Paper.  None of the Debtors,
singly or collectively, have promissory notes or tangible Chattel Paper for
which the principal amount or obligations evidenced thereunder are, in
aggregate, in excess of $100,000 which promissory notes and/or Chattel Paper
have not been previously disclosed to Agent in writing, assigned and delivered
to Agent in accordance with Section 4.1(a) of the Security Agreement, except as
set forth on Schedule 5 attached hereto.

 
39

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

 

6.             Electronic Chattel Paper.  None of the Debtors, singly or
collectively, have electronic Chattel Paper or any “transferable record”
evidencing obligations, in the aggregate, in excess of $100,000, which have not
previously been disclosed to Agent in writing, and over which Agent has not been
granted control in accordance with Section 4.1(b) of the Security Agreement,
except as set forth on Schedule 6 attached hereto.

7.             Letters of Credit.  None of the Debtors, singly or collectively,
are beneficiaries under letters of credit, with an aggregate face amount in
excess of $100,000, which have not previously been disclosed to Agent in
writing, and over which Agent has not been granted a Lien in compliance with the
terms of Section 4.1(c) of the Security Agreement, except as set forth on
Schedule 7 attached hereto.

8.             Commercial Tort Claims.  None of the Debtors, singly or
collectively, have any commercial tort claims which, in the aggregate, are
reasonably estimated to have a value in excess of $100,000, which claims have
not previously been disclosed to Agent in writing and over which Agent has not
been granted a Lien in compliance with Section 4.1(d) of the Security Agreement,
except as set forth on Schedule 8 attached hereto.

9.             Vehicles, Aircraft and Vessels.  None of the Debtors, singly or
collectively, own Vehicles (other than Vehicles used by executive employees),
aircraft or vessels with a fair market value in excess of $100,000, which have
not been previously disclosed in writing to Agent, except as set forth on
Schedule 9 attached hereto.

10.           Life Insurance.  None of the Debtors are beneficiaries of any key
man life insurance policies which have not been previously disclosed in writing
to Agent, except as set forth on Schedule 10 attached hereto.

IN WITNESS WHEREOF, the undersigned have executed this Collateral Compliance
Report, as of this ____ day of ________, __________.

 
[DEBTORS]
                   
By:
             
Its:
   

 
 
40

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

 

Schedule 1.1
Intellectual Property

Patents
Debtor
Title of Patent
Patent Number / (Application Number)
Issue Date / (Filing Date)
 
None
   

Patent Licenses
Debtor
Description of Patent License
Patent Number of Underlying Patent
Name of Licensor / Licensee
 
None
   

 
Trademarks
       
Debtor
Trademark
Serial Number
Filing Date
Registration Number
Registration Date
National Technical Systems, Inc.
SMART SOLUTIONS TO TOUGH CHALLENGES
77-919869
1/25/2010
   
Elliott Laboratories, LLC
SIMPLIFYING THE WORLD OF COMPLIANCE
78-454970
7/22/2004
3265746
7/17/2007
Elliott Laboratories, LLC
ELLIOTT
76-500884
3/24/2003
2824724
3/23/2004
Elliott Laboratories, LLC
E (stylized letters)
76-500850
3/21/2003
2833984
4/20/2004
National Technical Systems, Inc.
NTS (stylized letters)
76-446472
9/3/2002
2729044
6/24/2003
National Technical Systems, Inc.
NTS (words and design)
76-445945
9/3/2002
2771233
10/7/2003
National Technical Systems, Inc.
NEBS NTS CERTIFIED
76-142040
10/6/2000
2714124
5/6/2003
National Technical Systems, Inc.
NTS -XXCAL
75-706533
5/14/1999
2374902
8/8/2000
National Technical Systems, Inc.
NTS (words and design)
75-462550
4/6/1998
2530147
1/15/2002
National Technical Systems, Inc.
NTS (stylized letters)
73-314162
6/10/1981
1199986
6/29/1982
National Technical Systems, Inc.
SMART SOLUTIONS FOR TOUGH CHALLENGES
77-902301
12/29/2009
   

Trademark Licenses
       
Debtor
Description of Trademark License
Registration Number of Underlying Trademark
Name of Licensor / Licensee
None

 
 

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

 
 
Copyrights
Debtor
Title of Work
Registration Number (if any)
Registration Date (if any)
Acton Environmental Testing Corporation
AEVIBES
TXu000104268
5/12/1982
Elliott Laboratories, LLC
Billing rates
TX0004685122
12/8/1997
NTS Engineering Services, Inc.
"E-services" test lab white paper
TX0006107592
3/15/2005
NTS Engineering Services, Inc.
Firewall hardware/software test lab compatibility & functionality test outline
TX0006145322
3/11/2005
NTS Engineering Services, Inc.
IEEE-1394/firewire peripheral test lab compatibility & functionality test
outline
TX0006145320
3/11/2005
NTS Engineering Services, Inc.
Music sequencer application test lab compatibility & functionality test outline
TX0006145318
3/11/2005
National Technical Systems, Inc.
National Technical Systems look & feel test outline
TX0006121378
2/9/2005
NTS Engineering Services, Inc.
Network switch peripheral test lab compatibility & functionality test outline
TX0006145771
3/11/2005
NTS Engineering Services, Inc.
NTS testing labs: Enterprise web server test lab : benchmark test outline,
revision 1.0
TX0006140372
3/11/2005
NTS Engineering Services, Inc.
NTS testing labs: Home phoneline networking alliance (HPNA) peripheral test lab
compatibility & functionality test outline, revision 1.0
TX0006140373
3/11/2005
NTS Engineering Services, Inc.
NTS testing labs: Internet appliance test lab compatibility & functionality test
outline, revision 1.0
TX0006140374
3/11/2005
NTS Engineering Services, Inc.
NTS testing labs music notation application test lab compatibility &
functionality test outline
TX0006142134
3/11/2005

 
 

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

 

NTS Engineering Services, Inc.
NTS testing labs video streaming test lab compatibility & functionality test
outline
TX0006142135
3/11/2005
NTS Engineering Services, Inc.
Univeral serial bus (USB) test lab compatibility & functionality test outline
TX0006145319
3/11/2005
NTS Engineering Services, Inc.
Voice over IP (VoIP) product test lab compatibility & functionality test outline
TX0006145313
3/11/2005
NTS Engineering Services, Inc.
Wireless/802.1lb. Peripheral test lab compatibility & functionality test outline
TX0006107593
3/15/2005
NTS Engineering Services, Inc.
Teleconferencing product test lab compatibility & functionality test outline
TX0006145321
3/11/2005

Copyright Licenses
Debtor
Description of Copyright License
Registration Number (if any) of Underlying Copyright
Name of Licensor / Licensee
None

 
 

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

 

Schedule 1.2
Pledged Shares

Legal Name
Number of shares issued and outstanding
Holder of shares
NTS Technical Systems
5,985,000
National Technical Systems, Inc.
Acton Environmental Testing Corporation
200
NTS Technical Systems
Approved Engineering Test Laboratories, Inc.
1,000
NTS Technical Systems
ETCR, Inc.
213
NTS Technical Systems
NTS Engineering Services, Inc.
967,280
National Technical Systems, Inc.
Phase Seven Laboratories, Inc.
1,264
NTS Technical Systems
United States Test Laboratory, L.L.C.
n/a
NTS Technical Systems
Elliott Laboratories, LLC
n/a
NTS Technical Systems
AETL Testing Inc.
65
National Technical Systems, Inc.

 
 

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

 

Schedule 3.2
Debtor Information

Legal Name
 
Jurisdiction of Organization
 
Organization identification number
 
Tax identification number
 
Location of books and records
 
Type of Organization
 
Changes to Company's corporate form or jurisdiction of organization in last 5
years
National Technical Systems, Inc.
 
CA
 
C1784693
 
95-4134955
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
NTS Technical Systems
 
CA
 
C0539689
 
95-2780647
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
Acton Environmental Testing Corporation
 
MA
 
042398305
 
04-2398305
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
Approved Engineering Test Laboratories, Inc.
 
CA
 
C0791092
 
95-3248992
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
ETCR, Inc.
 
CA
 
C0638590
 
95-2746869
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
NTS Engineering Services, Inc.
 
CA
 
C0793749
 
95-3112285
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
Phase Seven Laboratories, Inc.
 
CA
 
C2411491
 
33-1001352
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
C-Corp
   
United States Test Laboratory, L.L.C.
 
KS
 
2564805
 
48-1196290
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
LLC
   
Elliott Laboratories, LLC
 
CA
 
200812110117
 
26-2744194
 
24007 Ventura Blvd., Ste
200 Calabasas, CA 91302
 
LLC
 
Acquired company in June 2008. Prior to acquisition, company was a Corporation.

 
 

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Schedule 3.3 (a)
Inventory and Equipment

Legal Name
Locations of inventory and equipment
City and State
Landlord Name
Landlord Address
Landlord City, State and Zipcode
 
NTS Technical Systems
24007 Ventura Blvd., Suite 200
Calabasas, CA
 
Northpark Associates
23945 Calabasas Road
Calabasas, CA 91302
NTS Technical Systems
5320 West 104th Street
Los Angeles, CA
 
AMB US Logistics Fund LP
PO Box 6156
Hicksville, NY 11802
NTS Technical Systems
501 Sally Place
Fullerton, CA
 
Alliance Properties, LLC
27875 Elk Mountain Dr.
Yorba Linda, CA 92887
NTS Technical Systems
535 Sally Place
Fullerton , CA
 
Minh Son
Thunderbolt Manufacturing, 1185 N. Van Horne Way
Anaheim, CA 92806
NTS Technical Systems
1534 E. Valencia Drive
Fullerton, CA
 
JCC Califonia Properties, LLC
File 50755
Los Angeles, CA 90074
NTS Technical Systems
1155 W. 23rd Street
Tempe, AZ
 
Zimmerman Properites, Inc.
2150 E. Highland Suite 207
Phoenix, AZ 85016
NTS Technical Systems
1701 East Plano Parkway, Suite 150
Plano, TX
 
Northwestern Mutual c/o Bradford Companies
9400 N. Central Expy #500
Dallas, TX 75231
NTS Technical Systems
12601 Southfield Road
Detroit, MI
 
Hagar Pacific Properties
PO BOX 31-0737
Detroit, MI 48231
NTS Technical Systems
Highway 274, Building K5
Camden, AR
 
Highland Industrial Park
PO Box 3108
East Camden, AR 71711
NTS Technical Systems
126 Washington
Camden, AR
 
Jordan Agency
PO Box 962
Camden, AR 71711
NTS Technical Systems
700 N. Fairfax Street
Alexandria, VA
 
Simpson Properties
PO Box 430
Alexandria, VA 22313
NTS Technical Systems
34052 La Plaza, Suite 205
Dana Point, CA
 
Bettye Trowbridge Vaughen 2000 Revocable Trust
26302 La Paz Ste 215
Mission Viejo, CA 92691
Acton Environmental Testing Corporation
36 Gilbert Street South
Tinton Falls, NJ
 
36 Gilbert St. South, LLC C/O Katrin A Heidelmeier, Brooks Von Arx
777 River Rd PO Box 271
Fair Haven, NJ 07704
Acton Environmental Testing Corporation
1120 Realty Trust
Boxborough, MA
 
1120 Mass Ave Realty Trust
1120 Mass Ave
Boxborough, MA 01719
Acton Environmental Testing Corporation
1146 Massachusetts Ave.
Boxborough, MA
 
ETCR, Inc.
1146 Massachusetts Ave.
Boxborough, MA
NTS Technical Systems
3915 Sunnymeade Road
Rustburg, VA
 
Wanda Bunnell
6080 Campbell Highway
Lynchburg, VA 24501
NTS Technical Systems
7447 W. 33rd Street North
Wichita, KS
 
TCK, LLC
8221 Meadow Pass Ct.
Wichita, KS 67205
NTS Technical Systems
5200A Pasadena Ave. NE, Suite A
Albuquerque, NM
 
Mechenbier Construction
8500 Washington St., NE Suite A-6
Albuquerque, NM 87113
Elliott Laboratories, LLC.
40999 Boyce Road
Fremont, CA
 
Catellus
PO Box 60000, File # 1918
San Francisco, CA 94161
Elliott Laboratories, LLC.
38995 Cherry Street, Bldg #3
Newark, CA
 
Prologis
47775 Fremont Blvd.
Fremont, CA 94538
NTS Technical Systems
5730 Buckingham Parkway
Culver City, CA
 
Buckingham Heights Business Park
5730 W. Slauson Ave., Ste 222
Culver City, CA 90230
NTS Technical Systems
7961 Shaffer Parkway
Littleton, Colorado
 
Dallas Tourney Inc.
7961 Shaffer Parkway Ste 6
Littelton, CO 80127
NTS Technical Systems
5701 Fortune Circle South
Indianapolis, IN
 
Park Fletcher Management Co
Park Fletcher Building 30 4211 Solutions Center Lockbox 774211
Chicago, IL 60677
ETCR, Inc.
1536 East Valencia Drive
Fullerton, CA
 
Property owned by ETCR
   
ETCR, Inc.
20970 Centre Pointe Parkway
Santa Clarita, CA
 
Property owned by ETCR
   
ETCR, Inc.
1146 Massachusetts Ave.
Boxborough, MA
 
Property owned by ETCR
   
ETCR, Inc.
1717 Capital Ave.
Plano, TX
 
Property owned by ETCR
   
Acton Environmental Testing Corporation
533 Main Street
Acton, MA
 
Property owned by Acton Environmental Testing Corporation
   

 
 

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Schedule 3.3 (b)
Deposit Accounts

Bank Name
Bank Address
Bank City, State and Zipcode
Type of Account
Account Holder
Account Number
   
BancorpSouth
123 Washington St.
Camden, AR 71701
Commercial Checking
National Technical Systems
6400084817
 
Camden
Bank of America
PO Box 25118
Tampa, FL 33622
Commercial Checking
National Technical Systems
71212926
 
Acton Payroll
Bank of America
PO Box 25118
Tampa, FL 33622
Full Analysis Business Checking
National Technical Systems
71225870
 
Acton
Bank of America
333 S Hope St.
Los Angeles, CA 90071
Commercial Checking
National Technical Systems
1465050314
 
401k Profit sharing plan
Bank of America
333 S Hope St.
Los Angeles, CA 90071
Non-analyzed Investment
National Technical Systems
1465252010
 
BofA money market
Bank of America
333 S Hope St.
Los Angeles, CA 90071
Full Analysis Business Checking
National Technical Systems
1465350308
 
Corporate - BofA master account
Bank of America
333 S Hope St.
Los Angeles, CA 90071
Commercial Checking
National Technical Systems
1465850315
 
ESOP - not used - has a balance
Commerce Bank
386 Main Street
Worcester, MA 01608
Commercial Checking
Acton Environmental Testing Corporation
7189499
 
Acton
Commerce Bank
386 Main Street
Worcester, MA 01608
Commercial Checking
Acton Environmental Testing Corporation
7163074
 
Acton
Commerce Bank
386 Main Street
Worcester, MA 01608
Commercial Checking
Acton Environmental Testing Corporation
7189480
   
US Bank
PO Box 1800
Saint Paul, MI 55101
Commercial Money Market Savings
National Technical Systems
153495476779
 
Money market account - new
Wachovia Bank
819 Village Highway
Rustburg, VA 24588
Commercial Checking
National Technical Systems
2000020476751
   
First Community Bank
PO Box 3686
Albuquerque, NM 87190
Commercial Checking
National Technical Systems
2763885
   

 
 

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Schedule 3.3 (c)
Documents of Title
None

 
 

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Schedule 3.7
Perfection of Security Interest

Legal Name
Jurisdiction
National Technical Systems, Inc.
CA
NTS Technical Systems
CA
Acton Environmental Testing Corporation
MA
Approved Engineering Test Laboratories, Inc.
CA
ETCR, Inc.
CA
NTS Engineering Services, Inc.
CA
Phase Seven Laboratories, Inc.
CA
United States Test Laboratory, L.L.C.
KS
Elliott Laboratories, LLC
CA

 
 

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