CNS RESPONSE, INC.

 

SECOND AMENDED AND RESTATED SECURITY AGREEMENT

 

This SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as
of August ___, 2012, is entered into by and between CNS Response, Inc., a
Delaware corporation (the “Company”), and David B. Jones, as administrative
agent (in such capacity, the “Administrative Agent”) for the Secured Parties (as
defined below).

 

WHEREAS, the Company issued convertible promissory notes (including any
subsequent amendments, the “October 2010 Notes”) pursuant to a certain Note and
Warrant Purchase Agreement (including any subsequent amendments, the “October
2010 Purchase Agreement”), dated as of October 1, 2010, between the Company and
the investors signatory thereto (such investors, the “October 2010
Noteholders”);

 

WHEREAS, the Company issued convertible promissory notes (including any
subsequent amendments, the “January 2011 Notes”) pursuant to a certain Note and
Warrant Purchase Agreement (including any subsequent amendments, the “January
2011 Purchase Agreement”), dated as of January 20, 2011, between the Company and
the investors party thereto (such investors, the “January 2011 Noteholders”);

 

WHEREAS, the Company issued convertible promissory notes (including any
subsequent amendments, the “November 2011 Notes”) pursuant to a certain Amended
and Restated Note and Warrant Purchase Agreement (including any subsequent
amendments, the “November 2011 Purchase Agreement”), dated as of November 11,
2011, between the Company and the investors party thereto (such investors, the
“November 2011 Noteholders”);

 

WHEREAS, the Company entered into a Security Agreement, dated as of October 1,
2010, between the Company and John Pappajohn, as administrative agent, for the
October 2010 Noteholders, as amended and restated by that certain Amended and
Restated Security Agreement, dated as of September 30, 2011, between the Company
and Paul Buck, as administrative agent (together, the “Prior Security
Agreement”), which related to the October 2010 Notes, January 2011 Notes and
November 2011 Notes;

 

WHEREAS, the Company wishes to issue senior secured convertible promissory notes
(the “Senior Notes”) in the aggregate principal amount of $2 million to
investors (the “Senior Noteholders”), such amount subject to increase at the
discretion of the Company’s Board of Directors, pursuant to a new Note and
Warrant Purchase Agreement, dated on or about the date hereof (the “New Purchase
Agreement”);

 

WHEREAS, the October 2010 Noteholders, the January 2011 Noteholders, the
November 2011 Noteholders and the Senior Noteholders are collectively referred
to herein as the “Investors”, the October 2010 Purchase Agreement, January 2011
Purchase Agreement, November 2011 Purchase Agreement and the New Purchase
Agreement are collectively referred to herein as the “Purchase Agreements” and
the October 2010 Notes, the January 2011 Notes, the November 2011 Notes, and the
Senior Notes are collectively referred to herein as the “Notes”;

 

 

 

 

WHEREAS, the Company wishes to amend and restate the Prior Security Agreement to
provide for the grant of (i) a first position security interest in the
Collateral (as defined below) to the Senior Noteholders with respect to the
Senior Notes, (ii) a second position security interest in the Collateral to the
October 2010 Noteholders with respect to the October 2010 Notes, which security
interest will be subordinated to the security interest in the Collateral granted
to the Senior Noteholders, and (iii) a third position security interest in the
Collateral to the January 2011 Noteholders and the November 2011 Noteholders
with respect to the January 2011 Notes and the November 2011 Notes, as
applicable, which security interest will be subordinated to the security
interest in the Collateral granted to the Senior Noteholders and the October
2010 Noteholders.

 

WHEREAS, the obligations of each Investor to the Company under the Purchase
Agreements are conditioned upon, among other things, the execution and delivery
by the Company of an agreement in the form hereof to secure (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Notes, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (ii) all other monetary obligations, including fees (including
fees and disbursements of counsel), costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Company to the Investors under the
Purchase Agreements and the other Transaction Documents and (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Company under or pursuant to the Purchase Agreements and the other
Transaction Documents (all of the obligations described in the preceding clauses
(a) and (b) being referred to herein collectively as the “Obligations”).

 

NOW THEREFORE, in consideration of these premises and in order to induce the
Investors to enter into, or amend, the Purchase Agreements, as the case may be,
the Company and the Administrative Agent, for its benefit and for the ratable
benefit of the Secured Parties, hereby agree as follows:

 

AMENDMENT AND RESTATEMENT

 

The Company and the Administrative Agent, for the ratable benefit of the Senior
Noteholders, hereby agree and acknowledge that this Agreement amends and
restates the Prior Security Agreement and that the Company’s and the Senior
Noteholders’ rights and obligations under the Prior Security Agreement shall
hereby cease and that such agreement shall be of no further effect.

 

2

 

 

ARTICLE I

Definitions

 

SECTION 1.01.         Definition of Terms Used Herein. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to such
terms in the respective Purchase Agreement. All terms defined in the UCC (as
defined herein) and not defined in this Agreement shall have the meanings
specified therein; the term “instrument” shall have the meaning specified in
Article 9 of the UCC.

 

SECTION 1.02.         Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:

 

“Account Debtor” shall mean any person who is or who may become obligated to the
Company under, with respect to, or on account of, an Account.

 

“Collateral” shall mean all right, title or interest now owned or at anytime
hereafter acquired by the Company or in which the Company now has or at any time
in the future may acquire any right, title or interest in all (a) Accounts, (b) 
Chattel Paper, (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents,
(f) Electronic Chattel Paper, (g) Equipment, (h) General Intangibles,
(i) Instruments, (j) Inventory, (k) Investment Property, (l) Letter-of-Credit
Rights, (m) Supporting Obligations, (n) all books and records pertaining to the
foregoing and (o) to the extent not otherwise included, all Proceeds and
products of any of the foregoing and all collateral security and guarantees
given by any person with respect to any of the foregoing.

 

“Copyright License” shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by the Company or which the Company otherwise has the right to
license, or granting any right to the Company under any Copyright now or
hereafter owned by any third party, and all rights of the Company under any such
agreement.

 

“Copyrights” shall mean all of the following now owned or hereafter acquired by
the Company: (a) all copyright rights in any work subject to the copyright laws
of the United States or any other country, whether as author, assignee,
transferee or otherwise and (b) all registrations and applications for
registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office.

 

“Documents” shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.

 

“Event of Default” shall have the meaning ascribed to such term in the Notes.

 

“Existing Note Documents” shall mean (i) the October Purchase Agreement, (ii)
the October 2010 Notes, (iii) the January 2011 Purchase Agreement, (iv) the
January 2011 Notes, (v) the November 2011 Purchase Agreement, (vi) the November
2011 Notes, and (vii) the four Guaranties, dated November 3, 2010, by SAIL
Venture Partners, LP executed in favor of Deerwood Holdings, LLC and Deerwood
Partners, LLC, as holders of October 2010 Notes, as subsequently amended (the
“Existing Guaranties”).

 

3

 

 

“General Intangibles” shall mean all choses in action and causes of action and
all other assignable intangible personal property of the Company of every kind
and nature (other than Accounts) now owned or hereafter acquired by the Company,
including interests in any trust, corporate or other business records, contract
rights, indemnification claims, Intellectual Property, goodwill, registrations,
franchises, tax refund claims and any letter of credit, guarantee, claim,
security interest or other security held by or granted to the Company to secure
payment by an Account Debtor of any of the Accounts.

 

“Intellectual Property” shall mean all intellectual and similar property of the
Company of every kind and nature now owned or hereafter acquired by the Company,
including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade
secrets, confidential or proprietary technical and business information,
know-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.

 

“License” shall mean any Patent License, Trademark License, Copyright License or
other license or sublicense to which the Company is a party.

 

“Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.

 

“Transaction Documents” shall mean (a) this Agreement, (b) the Purchase
Agreements, (c) the Notes, (d) the Consent, Warrant Forfeiture and Note
Amendment Agreement, dated as of August _____, 2012, by and among the Company
and the other parties signatory thereto, and (e) the Existing Guaranties or any
replacements thereof.

 

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

 

“Patents” shall mean all of the following now owned or hereafter acquired by the
Company: (a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or any
similar offices in any other country, and (b) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.

 

4

 

 

“Perfection Certificate” shall mean a certificate substantially in the form of
Annex 1 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by an officer of the Company.

 

“Secured Parties” shall mean (a) the Investors, (b) the Administrative Agent and
(c) the successors and assigns of each of the foregoing.

 

“Trademark License” shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by the Company or which the Company otherwise has the right to
license, or granting to the Company any right to use any Trademark now or
hereafter owned by any third party, and all rights of the Company under any such
agreement.

 

“Trademarks” shall mean all of the following now owned or hereafter acquired by
the Company: (a) all trademarks, service marks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, trade
dress, logos, other source or business identifiers, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all registration and recording
applications filed in connection therewith, including registrations and
registration applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country or any
political subdivision thereof, and all extensions or renewals thereof, (b) all
goodwill associated therewith or symbolized thereby and (c) all other assets,
rights and interests that uniquely reflect or embody such goodwill.

 

“UCC” shall mean the Uniform Commercial Code as amended from time to time.

 

5

 

 

ARTICLE II

Security Interest

 

SECTION 2.01.         Security Interest. As security for the payment and
performance in full of the Obligations, the Company hereby grants, mortgages,
pledges, hypothecates and transfers to the Administrative Agent, its successors
and assigns, for the ratable benefit of the Secured Parties, and hereby grants
to the Administrative Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, a continuing security interest in all of the Company’s
right, title and interest now owned or at any time hereafter acquired by the
Company or in which the Company now has or any time in the future may acquire
any right, title or interest, in, to or under the Collateral (the “Security
Interest”). The Company hereby irrevocably authorizes the Administrative Agent
at any time and from time to time to file in any relevant jurisdiction any
initial financing statements (including fixture filings), and amendments thereto
that contain the information required by the Uniform Commercial Code of each
applicable jurisdiction for the filing of any financing statement or amendment
(without the signature of the Company), including (a) whether the Company is an
organization, the type of organization and any organizational identification
number issued to the Company and (b) in the case of a financing statement filed
as a fixture filing or covering Collateral constituting minerals or the like to
be extracted or timber to be cut, a sufficient description of the real property
to which such Collateral relates. The Company agrees to provide such information
to the Administrative Agent promptly upon request. The Company ratifies and
authorizes the filing by the Administrative Agent of any financing statement
filed prior to the date hereof. Any person (other than the Administrative Agent)
at any time and from time to time holding all or any portion of the Collateral
shall be deemed to, and shall, hold the Collateral as the agent of, and as
pledge holder for, the Administrative Agent. At any time and from time to time,
the Administrative Agent may give notice to any such person holding all or any
portion of the Collateral that such person is holding the Collateral as the
agent and bailee of, and as pledge holder for, the Administrative Agent, and
obtain such person’s written acknowledgment thereof. Without limiting the
generality of the foregoing, the Company will join with the Administrative Agent
in notifying any person who has possession of any Collateral of the
Administrative Agent’s security interest therein and obtaining an acknowledgment
from such person that it is holding the Collateral for the benefit of the
Administrative Agent.

 

The Administrative Agent is further authorized to file filings with the United
States Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) or other documents
for the purpose of perfecting, confirming, continuing, enforcing or protecting
the Security Interest granted by the Company, without the signature of the
Company, and naming the Company as debtor and the Administrative Agent as
secured party.

 

SECTION 2.02.         No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Administrative Agent or any
other Secured Party to, or in any way alter or modify, any obligation or
liability of the Company with respect to or arising out of the Collateral. In no
event shall the Administrative Agent or any other Secured Party be deemed a
trustee or become liable as a trustee as a result of the grant of the Security
Interest in any interest in any trust.

 

ARTICLE III

Representations and Warranties

 

The Company represents and warrants to the Administrative Agent and the other
Secured Parties that:

 

SECTION 3.01.         Title and Authority. The Company has good and valid rights
in, and title to, the Collateral with respect to which it has purported to grant
a Security Interest hereunder and has full power and authority to grant to the
Administrative Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval which has been obtained.

 

6

 

 

SECTION 3.02.         Filings. (a) A Perfection Certificate has been duly
prepared, completed and executed by the Company and the information set forth
therein, including the exact legal name of the Company, is correct and complete.
Fully executed Uniform Commercial Code financing statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations containing a description of the Collateral have been delivered, or
will be delivered promptly after execution hereof, to the Administrative Agent
for filing in each governmental, municipal or other office specified in the
Perfection Certificate, which are all the filings, recordings and registrations
that are necessary to publish notice of and protect the validity of and to
establish a legal, valid and perfected security interest in favor of the
Administrative Agent (for the ratable benefit of the Secured Parties) in respect
of all Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements or amendments.

 

(b)          The Company represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Administrative Agent for recording by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section
205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of the Administrative Agent (for the benefit of the Secured Parties) in
respect of all Collateral consisting of Patents, Trademarks and United States
registered Copyrights in which a security interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, or in any other necessary
jurisdiction, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than the
financing statements referred to above in Section 3.02(a) and such actions as
are necessary to perfect the Security Interest with respect to any Collateral
consisting of Patents, Trademarks and Copyrights (or registration or application
for registration thereof) acquired or developed after the date hereof).

 

SECTION 3.03.         Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) a perfected
security interest in all Collateral in which a security interest may be
perfected by filing, recording or registering a financing statement or analogous
document in the United States (or any political subdivision thereof) and its
territories and possessions pursuant to the Uniform Commercial Code or other
applicable law in such jurisdictions and (c) a security interest that shall be
perfected in all Collateral in which a security interest may be perfected upon
the receipt and recording of this Agreement with the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, within
the three month period (commencing as of the date hereof) pursuant to 35 U.S.C.
Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and otherwise as
may be required pursuant to the laws of any other necessary jurisdiction. The
Security Interest is and shall be prior to any other Lien on any of the
Collateral (now held or hereafter acquired).

 

7

 

 

SECTION 3.04.         Absence of Other Liens. The Collateral is owned by the
Company free and clear of any Lien other than those arising under the Existing
Note Documents. Other than as contemplated by the Existing Note Documents, the
Company has not filed or consented to the filing of (a) any financing statement
or analogous document under the Uniform Commercial Code or any other applicable
laws covering any Collateral, (b) any assignment in which the Company assigns
any Collateral or any security agreement or similar instrument covering any
Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which the Company assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement or
similar instrument is still in effect. The Company does not hold any Commercial
Tort Claim or Letter-of-Credit Right. Except with respect to any rights arising
under the Existing Note Documents, no person has control (as defined in the UCC)
over the Company’s Deposit Accounts, Electronic Chattel Paper, Investment
Property or Letter-of-Credit Rights.

 

ARTICLE IV

Covenants

 

SECTION 4.01.         Change of Name; Location of Collateral; Records; Place of
Business. (a) The Company agrees promptly to notify the Administrative Agent in
writing of any change (i) in its corporate name, (ii) in the location of its
chief executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the establishment
of any such new office or facility) other than with respect to Collateral (A)
consisting of goods in transit between facilities, whether in vehicles owned by
the Company or on common carriers and (B) located in temporary warehousing which
will remain in such warehousing for no longer than one month, (iii) in its
identity or type of organization or legal structure, (iv) in its Federal
Taxpayer Identification Number or organizational identification number, as
applicable or (v) in its jurisdiction of organization. The Company agrees
promptly to provide the Administrative Agent with certified organizational
documents reflecting any of the changes described in the preceding sentence. The
Company agrees not to effect or permit any change referred to in the preceding
sentences unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Administrative Agent to continue at
all times following such change to have a valid, legal and perfected first
priority security interest in all the Collateral. The Company agrees promptly to
notify the Administrative Agent if any material portion of the Collateral owned
or held by the Company is damaged or destroyed.

 

(b)          The Company agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which the Company is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to any part
of the Collateral, and, at such time or times as the Administrative Agent may
reasonably request, promptly to prepare and deliver to the Administrative Agent
a duly certified schedule or schedules in form and detail satisfactory to the
Administrative Agent showing the identity, amount and location of any and all
Collateral.

 

8

 

 

SECTION 4.02.         Changes to Perfection Certificate. The Company shall
notify the Administrative Agent promptly after any change to any of the
information set forth in the Perfection Certificate.

 

SECTION 4.03.         Protection of Security. The Company shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Administrative Agent in the Collateral and the priority thereof against any
Lien.

 

SECTION 4.04.         Further Assurances. The Company agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the
Administrative Agent may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be promptly pledged and delivered to the Administrative Agent,
duly endorsed in a manner satisfactory to the Administrative Agent. Without
limiting the generality of the foregoing, the Company hereby authorizes the
Administrative Agent, with prompt notice thereof to the Company, to supplement
this Agreement by adding additional schedules hereto to specifically identify
any asset or item that may constitute Copyrights, Patents or Trademarks;
provided, however, that the Company shall have the right, exercisable within 10
days after it has been notified by the Administrative Agent of the specific
identification of such Collateral, to advise the Administrative Agent in writing
of any inaccuracy of the representations and warranties made by the Company
hereunder with respect to such Collateral. The Company agrees that it will use
its reasonable best efforts to take such action as shall be necessary in order
that all representations and warranties hereunder shall be true and correct with
respect to such Collateral within 30 days after the date it has been notified by
the Administrative Agent of the specific identification of such Collateral. Upon
the request of the Administrative Agent, the Company will cooperate with the
Administrative Agent in obtaining control (as defined in the UCC) of Collateral
consisting of any Deposit Accounts, Electronic Chattel Paper, Investment
Property or Letter-of-Credit Rights. Upon the request of the Administrative
Agent, the Company will (a) immediately deliver to the Administrative Agent
appropriately endorsed or accompanied by appropriate instruments of transfer or
assignment, all Instruments, Documents, Chattel Paper and certificated
securities with respect to any Investment Property, all letters of credit, and
all other Accounts at any time evidenced by promissory notes, trade acceptances
or other instruments, (b) cause any securities intermediaries to show on their
books that the Administrative Agent is the entitlement holder with respect to
any Investment Property, and/or obtain agreements to establish control (as
defined in the UCC) in favor of the Administrative Agent from such securities
intermediaries, in form and substance satisfactory to the Administrative Agent
with respect to any Investment Property, as requested by the Administrative
Agent and (c) provide such notice, obtain such acknowledgements and take all
such other action, with respect to any Chattel Paper, Documents and
Letter-of-Credit Rights, as the Administrative Agent shall reasonably specify.

 

9

 

 

SECTION 4.05.         Inspection and Verification. The Administrative Agent and
such persons as the Administrative Agent may reasonably designate shall have the
right to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss the Company’s affairs with the officers of the
Company and their independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Collateral, including, in the case of
Accounts or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the purpose
of making such a verification. The Administrative Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any Secured Party.

 

SECTION 4.06.         Taxes; Encumbrances. At its option and after notice to the
Company, the Administrative Agent may discharge past due taxes, assessments,
charges, fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance and
preservation of the Collateral to the extent the Company fails to do so as
required by this Agreement, and the Company agrees to reimburse the
Administrative Agent on demand for any payment made or any expense incurred by
the Administrative Agent pursuant to the foregoing authorization; provided,
however, that nothing in this Section 4.06 shall be interpreted as excusing the
Company from the performance of, or imposing any obligation on the
Administrative Agent or any Secured Party to cure or perform, any covenants or
other promises of the Company with respect to taxes, assessments, charges, fees,
liens, security interests or other encumbrances and maintenance as set forth
herein or in the other Transaction Documents.

 

SECTION 4.07.         Assignment of Security Interest. If at any time the
Company shall take a security interest in any property of an Account Debtor or
any other person to secure payment and performance of an Account, the Company
shall promptly assign such security interest to the Administrative Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other person granting the security interest.

 

SECTION 4.08.         Continuing Obligations of the Company. The Company shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and the Company agrees to indemnify and hold harmless the
Administrative Agent and the Secured Parties from and against any and all
liability for such performance.

 

10

 

 

SECTION 4.09.         Use and Disposition of Collateral. The Company shall not
make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral. The
Company shall not make or permit to be made any transfer of the Collateral and
the Company shall remain at all times in possession of the Collateral owned by
it. Without limiting the generality of the foregoing, the Company agrees that it
shall not permit any Inventory to be in the possession or control of any
warehouseman, bailee, agent or processor at any time unless such warehouseman,
bailee, agent or processor shall have been notified of the Security Interest and
shall have agreed in writing to hold the Inventory subject to the Security
Interest and the instructions of the Administrative Agent and to waive and
release any Lien held by it with respect to such Inventory, whether arising by
operation of law or otherwise.

 

SECTION 4.10.         Limitation on Modification of Accounts. The Company shall
not, without the Administrative Agent’s prior written consent, grant any
extension of the time of payment of any of the Accounts included in the
Collateral, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partly, any person liable for the payment
thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which the Company is engaged.

 

SECTION 4.11.         Insurance. The Company, at its own expense, shall maintain
or cause to be maintained insurance covering physical loss or damage to the
Collateral. The Company irrevocably makes, constitutes and appoints the
Administrative Agent (and all officers, employees or agents designated by the
Administrative Agent) as the Company’s true and lawful agent (and
attorney-in-fact) for the purpose, during the continuance of an Event of
Default, of making, settling and adjusting claims in respect of Collateral under
policies of insurance, endorsing the name of the Company on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that the Company at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Administrative Agent may, without waiving
or releasing any obligation or liability of the Company hereunder or any Event
of Default, in its sole discretion, obtain and maintain such policies of
insurance and pay such premium and take any other actions with respect thereto
as the Administrative Agent deems advisable. All sums disbursed by the
Administrative Agent in connection with this Section 4.11, including reasonable
attorneys’ fees, court costs, expenses and other charges relating thereto, shall
be payable, upon demand, by the Company to the Administrative Agent and shall be
additional Obligations secured hereby.

 

SECTION 4.12.         Legend. The Company shall legend, in form and manner
satisfactory to the Administrative Agent, its Chattel Paper and its books,
records and documents evidencing or pertaining thereto with an appropriate
reference to the fact that such Chattel Paper have been assigned to the
Administrative Agent for the benefit of the Secured Parties and that the
Administrative Agent has a security interest therein.

 

SECTION 4.13.         Covenants Regarding Patent, Trademark and Copyright
Collateral.

 

(a)          The Company agrees that it will not, nor will it permit any of its
licensees to, do any act, or omit to do any act, whereby any Patent may become
invalidated or dedicated to the public, and agrees that it shall continue to
mark any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under
applicable laws.

 

11

 

 

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

 

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

 

(d)          The Company shall notify the Administrative Agent immediately if it
knows, or has reason to know, that any Patent, Trademark or Copyright may become
abandoned, lost or dedicated to the public, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
United States Copyright Office or any court or similar office of any country)
regarding the Company’s ownership of any Patent, Trademark or Copyright, its
right to register the same, or to keep and maintain the same.

 

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

 

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

 

12

 

 

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

 

(h)          Upon and during the continuance of an Event of Default, the Company
shall use its reasonable best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or Trademark
License to effect the assignment of all of the Company’s right, title and
interest thereunder to the Administrative Agent or its designee.

 

(i)          The Company shall ensure that fully executed security agreements in
the form hereof and containing a description of all Collateral consisting of
Intellectual Property shall have been received and recorded within three months
after the execution of this Agreement with respect to United States Patents,
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Administrative Agent for recording by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section
205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of the Administrative Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral consisting of Patents, Trademarks and
registered Copyrights in which a security interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, or in any other necessary
jurisdiction, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than such
actions as are necessary to perfect the Security Interest with respect to any
Collateral consisting of Patents, Trademarks and Copyrights (or registration or
application for registration thereof) acquired or developed after the date of
this amendment and restatement).

 

SECTION 4.14.         Other Actions. In order to further insure the attachment,
perfection and priority of, and the ability of the Administrative Agent to
enforce, the Administrative Agent’s security interest in the Collateral, the
Company agrees, in each case at the Company’s own expense, to take the following
actions with respect to the following Collateral:

 

(a)          Instruments and Tangible Chattel Paper. If the Company shall at any
time hold or acquire any Instruments or Tangible Chattel Paper, the Company
shall forthwith endorse, assign and deliver the same to the Administrative
Agent, accompanied by such instruments of transfer or assignment duly executed
in blank as the Administrative Agent may from time to time specify.

 

13

 

 

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

 

(c)          Electronic Chattel Paper and Transferable Records. If the Company
at any time holds or acquires an interest in any Electronic Chattel Paper or any
“transferable record,” as that term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, the Company shall promptly notify the Administrative Agent thereof
and, at the request of the Administrative Agent, shall take such action as the
Administrative Agent may reasonably request to vest in the Administrative Agent
control under the UCC of such Electronic Chattel Paper or control under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act or,
as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so
in effect in such jurisdiction, of such transferable record. The Administrative
Agent agrees with the Company that the Administrative Agent will arrange,
pursuant to procedures satisfactory to the Administrative Agent and so long as
such procedures will not result in the Administrative Agent’s loss of control,
for the Company to make alterations to the electronic chattel paper or
transferable record permitted under the UCC or, as the case may be, Section 201
of the Federal Electronic Signatures in Global and National Commerce Act or
Section 16 of the Uniform Electronic Transactions Act for a party in control to
allow without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by the Company
with respect to such Electronic Chattel Paper or transferable record.

 

14

 

 

(d)          Letter-of-Credit Rights. If the Company is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of the
Company, the Company shall promptly notify the Administrative Agent thereof and,
at the request and option of the Administrative Agent, the Company shall,
pursuant to an agreement in form and substance reasonably satisfactory to the
Administrative Agent, either (i) arrange for the issuer and any confirmed of
such letter of credit to consent to an assignment to the Administrative Agent of
the proceeds of any drawing under the letter of credit or (ii) arrange for the
Administrative Agent to become the transferee beneficiary of the letter of
credit.

 

(e)          Commercial Tort Claims. If the Company shall at any time hold or
acquire a Commercial Tort Claim, the Company shall promptly notify the
Administrative Agent in a writing signed by the Company of the brief details
thereof and grant to the Administrative 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 satisfactory to the
Administrative Agent.

 

ARTICLE V

Collections

 

SECTION 5.01.         Collections. Upon the occurrence of and during the
continuance of an Event of Default, the Administrative Agent shall have the
right, at any time and from time to time, (a) to notify the Account Debtors and
other third parties holding or otherwise concerned with the Collateral that the
Accounts have been assigned to the Administrative Agent and that the
Administrative Agent has a security interest therein; (b) to direct all such
persons to make payments to the Administrative Agent of all or any part of the
sums owing to the Company by such persons; (c) to enforce collection of any of
the Accounts by suit or otherwise; (d) to surrender, release or exchange all or
any part of such Accounts; or (e) to compromise, settle, extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby.

 

15

 

 

SECTION 5.02.         Power of Attorney. The Company irrevocably makes,
constitutes and appoints the Administrative Agent (and all officers, employees
or agents designated by the Administrative Agent) as the Company’s true and
lawful agent and attorney-in-fact, and in such capacity the Administrative Agent
shall have the right, with full power of substitution for the Company and in the
Company’s name or otherwise, for the use and benefit of the Administrative Agent
and the Secured Parties, upon the occurrence and during the continuance of an
Event of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to sign the name of the Company on any invoice or bill of
lading relating to any of the Collateral; (d) to send verifications of Accounts
included in the Collateral to any Account Debtor; (e) to commence and prosecute
any and all suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (f) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require the
Company to notify, Account Debtors to make payment directly to the
Administrative Agent; and (h) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Administrative Agent were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Administrative Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Administrative Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Administrative Agent
or any Secured Party with respect to the Collateral or any part thereof shall
give rise to any defense, counterclaim or offset in favor of the Company or to
any claim or action against the Administrative Agent or any Secured Party. It is
understood and agreed that the appointment of the Administrative Agent as the
agent and attorney-in-fact of the Company for the purposes set forth above is
coupled with an interest and is irrevocable. The provisions of this Section
shall in no event relieve the Company of any of its obligations hereunder or
under any other Transaction Document with respect to the Collateral or any part
thereof or impose any obligation on the Administrative Agent or any Secured
Party to proceed in any particular manner with respect to the Collateral or any
part thereof, or in any way limit the exercise by the Administrative Agent or
any Secured Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other Transaction
Document, by law or otherwise.

 

ARTICLE VI

Remedies

 

SECTION 6.01.         Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Company agrees to deliver each item of
Collateral to the Administrative Agent on demand, and it is agreed that the
Administrative Agent shall have the right to take any of, or all, the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the Company to the Administrative Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Administrative Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained) and (b) with or without legal process
and with or without prior notice or demand for performance, to take possession
of the Collateral and without liability for trespass to enter any premises where
the Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights afforded
to a secured party under the UCC or other applicable law. Without limiting the
generality of the foregoing, the Company agrees that the Administrative Agent
may sell or otherwise dispose of all or any part of the Collateral, at public or
private sale or at any broker’s board or on any securities exchange, for cash,
upon credit or for future delivery as the Administrative Agent shall deem
appropriate. The Administrative Agent shall be authorized at any such sale (if
it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Administrative Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of the Company, and the Company hereby waives all rights of
redemption, stay, valuation and appraisal which the Company now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.

 

16

 

 

The Administrative Agent shall give the Company 10 days’ written notice (which
the Company agrees is reasonable notice within the meaning of the UCC or its
equivalent in other jurisdictions) of the Administrative Agent’s intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker’s
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Administrative Agent may fix and state in the notice of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Administrative
Agent may (in its sole and absolute discretion) determine. The Administrative
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Administrative Agent may, without notice
or publication, 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. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Administrative Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Administrative Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free from any right of redemption, stay, valuation or appraisal
on the part of the Company (all said rights being also hereby waived and
released), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to such
Secured Party from the Company as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to the Company therefor.
For purposes hereof, a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof; the Administrative Agent
shall be free to carry out such sale pursuant to such agreement; and the Company
shall not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Administrative Agent
shall have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Administrative Agent may proceed by
a suit or suits at law or in equity to foreclose upon the Collateral and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this Section
6.01 shall be deemed to conform to the commercially reasonable standards as
provided in the UCC or its equivalent in other jurisdictions.

 

17

 

 

SECTION 6.02.         Application of Proceeds. The Administrative Agent shall
apply the proceeds of any collection or sale of Collateral, as well as any
Collateral consisting of cash, as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative
Agent (in its capacity as such hereunder or under any other Transaction
Document) in connection with such collection or sale or otherwise in connection
with this Agreement, any other Transaction Document or any of the Obligations,
including all court costs and the fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Administrative Agent
hereunder or under any other Transaction Document on behalf of the Company and
any other costs or expenses incurred by the Administrative Agent in connection
with the exercise of any right or remedy hereunder or under any other
Transaction Document;

 

SECOND, to the payment in full of the Obligations with respect to the Senior
Notes (the amounts so applied to be distributed among the Senior Noteholders pro
rata in accordance with the amounts of the Obligations owed to them on the date
of any such distribution);

 

THIRD, to the payment in full of the Obligations with respect to the October
2010 Notes (the amounts so applied to be distributed among the October 2010
Noteholders pro rata in accordance with the amounts of the Obligations owed to
them on the date of any such distribution);

 

FOURTH, to the payment in full of the Obligations with respect to the January
2011 Notes and the November 2011 Notes (the amounts so applied to be distributed
among the January 2011 Noteholders and the November 2011 Noteholders pro rata in
accordance with the amounts of the Obligations owed to them on the date of any
such distribution); and

 

FIFTH, to the Company, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

 

The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Administrative Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the purchase money by the Administrative Agent or of
the officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Administrative Agent or such officer or be answerable in any way for
the misapplication thereof.

 

18

 

 

SECTION 6.03.         Grant of License to Use Intellectual Property. For the
purpose of enabling the Administrative Agent to exercise rights and remedies
under this Article at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, the Company hereby grants to the
Administrative Agent an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Company) to use, license or
sub-license any of the Collateral consisting of Intellectual Property now owned
or hereafter acquired by the Company, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such license
by the Administrative Agent shall be exercised, at the option of the
Administrative Agent, upon the occurrence and during the continuation of an
Event of Default; provided that any license, sub-license or other transaction
entered into by the Administrative Agent in accordance herewith shall be binding
upon the Company notwithstanding any subsequent cure of an Event of Default.

 

ARTICLE VII

Miscellaneous

 

SECTION 7.01.         Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in the Purchase Agreements.

 

SECTION 7.02.         Security Interest Absolute. All rights of the
Administrative Agent hereunder, the Security Interest and all obligations of the
Company hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Purchase Agreements, any other
Transaction Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Purchase Agreements, any other Transaction Document or
any other agreement or instrument, (c) any exchange, release or non-perfection
of any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Company in respect of
the Obligations or in respect of this Agreement.

 

SECTION 7.03.         Survival of Agreement. All covenants, agreements,
representations and warranties made by the Company herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Transaction Document shall be considered
to have been relied upon by the Secured Parties and shall survive the Closing,
regardless of any investigation made by the Investors or on their behalf.

 

SECTION 7.04.         Binding Effect; Several Agreement. This Agreement shall
become effective as to the Company when a counterpart hereof executed on behalf
of the Company shall have been delivered to the Administrative Agent and a
counterpart hereof shall have been executed on behalf of the Administrative
Agent, and thereafter shall be binding upon the Company and the Administrative
Agent and their respective successors and assigns, and shall inure to the
benefit of the Company, the Administrative Agent and the other Secured Parties
and their respective successors and assigns, except that the Company shall not
have the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement and the other
Transaction Documents.

 

19

 

 

SECTION 7.05.         Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party; and all covenants, promises and
agreements by or on behalf of the Company that are contained in this Agreement
shall bind and inure to the benefit of its successors and permitted assigns.

 

SECTION 7.06.         Administrative Agent’s Fees and Expenses; Indemnification.
(a) The Company agrees to pay upon demand to the Administrative Agent the amount
of any and all reasonable expenses, including the reasonable fees, other charges
and disbursements of its counsel and of any experts or agents, which the
Administrative Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Administrative Agent
hereunder or (iv) the failure of the Company to perform or observe any of the
provisions hereof.

 

(b)          Without limitation of its indemnification obligations under the
other Transaction Documents, the Company agrees to indemnify the Administrative
Agent and the other Secured Parties against, and hold each Secured Party
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, other charges and disbursements,
incurred by or asserted against any Secured Party arising out of, in any way
connected with, or as a result of, the execution, delivery or performance of
this Agreement or any other Transaction Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations thereunder or the consummation of the transactions
contemplated hereby and thereby and the other transactions contemplated thereby
or any claim, litigation, investigation or proceeding relating to any of the
foregoing or to the Collateral, whether or not any Secured Party is a party
thereto.

 

(c)          Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Transaction Documents. The
provisions of this Section 7.06 shall remain operative and in full force and
effect regardless of the termination of this Agreement or any other Transaction
Document, the consummation of the transactions contemplated hereby, the
repayment of any of the Obligations, the invalidity or unenforceability of any
term or provision of this Agreement or any other Transaction Document, or any
investigation made by or on behalf of the Administrative Agent or any other
Secured Party. All amounts due under this Section 7.06 shall be payable on
written demand therefor.

 

SECTION 7.07.         GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

 

20

 

 

SECTION 7.08.         Waivers; Amendment. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent
hereunder and of the other Secured Parties under the other Transaction Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or any other
Transaction Document or consent to any departure by the Company therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.

 

(b)          Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Administrative Agent and the Company.

 

SECTION 7.09.         WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS.

 

SECTION 7.10.         Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction).

 

SECTION 7.11.         Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute a single contract and shall become
effective as provided in Section 7.04. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile or PDF transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.

 

SECTION 7.12.         Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.

 

21

 

 

SECTION 7.13.         Termination or Release. This Agreement and the Security
Interest shall terminate at the earliest of (i) the date when all of the
Obligations have been indefeasibly paid in full or (ii) (A) with respect to the
Senior Notes, the date that holders of a majority of the aggregate principal
amount of the Senior Notes issued have converted their Senior Notes in
accordance with the terms of such notes, (B) with respect to the October 2010
Notes, the date that holders of a majority of the aggregate principal amount of
the October 2010 Notes issued have converted their October 2010 Notes in
accordance with the terms of such notes and (C) with respect to the January 2011
Notes and the November 2011 Notes, the date that holders of a majority of the
aggregate principal amount issued of January 2011 Notes and November 2011 Notes
(on a combined basis) have converted such January 2011 Notes and November 2011
Notes, as the case may be, in accordance with the terms of such notes, at which
time the Administrative Agent shall execute and deliver to the Company, at the
Company’s expense, all Uniform Commercial Code termination statements and
similar documents which the Company shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.13 shall be without recourse to or warranty by the
Administrative Agent.

 

[Signatures on following page]

 

22

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date first written above.

  

  CNS RESPONSE, INC.       By:       Name:     Title:         ADMINISTRATIVE
AGENT           David B. Jones

 

[SIGNATURE PAGE TO SECURITY AGREEMENT] 

 

23