EX – 10.4

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Security Agreement”), dated as of
March 30, 2004, is made by DYNAMIC DETAILS, INCORPORATED, a California
corporation (“Details”), DYNAMIC DETAILS INCORPORATED, VIRGINIA, a Delaware
corporation (“Virginia”), DYNAMIC DETAILS INCORPORATED, SILICON VALLEY, a
Delaware corporation (“Valley”), LAMINATE TECHNOLOGY CORP., a Delaware
corporation (“Laminate”; Laminate, Details, Virginia and Valley are sometimes
collectively referred to herein as “Borrowers” and individually as a
“Borrower”), DYNAMIC DETAILS INCORPORATED, COLORADO SPRINGS, a Colorado
corporation (“Colorado”), DDI SALES CORP., a Delaware corporation (“Sales”),
DYNAMIC DETAILS TEXAS, LLC, a Delaware limited liability company (“Texas”),
DDI-TEXAS INTERMEDIATE PARTNERS II, L.L.C., a Delaware limited liability company
(“DTIP”), DDI-TEXAS INTERMEDIATE HOLDINGS II, L.L.C., a Delaware limited
liability company (“DTIH”), DYNAMIC DETAILS, L.P., a Delaware limited
partnership (“DDLP”; DDLP, Colorado, Sales, Texas, DTIP and DTIH are sometimes
collectively referred to herein as “Guarantors” and individually as a
“Guarantor”) (Borrowers and Guarantors are sometimes collectively referred to
herein as “Grantors” and individually as a “Grantor”), in favor of GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent (in such
capacity, “Agent”) for the lenders (“Lenders”) from time to time party to the
Credit Agreement (as defined below).

 

RECITALS

 

A. Pursuant to (1) that certain Credit Agreement of even date herewith by and
among Grantors, the other Credit Parties party thereto, Agent and Lenders
(including all annexes, exhibits and schedules thereto, as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), and (2) that certain Continuing Guaranty of even date
herewith made by Guarantors and the other guarantors party thereto in favor of
Agent, Lenders have agreed to extend certain financial accommodations to or for
the direct or indirect benefit of Grantors.

 

B. In order to induce Agent and Lenders to enter into the Credit Agreement and
the other Loan Documents and to induce Lenders to make the Loans and to incur
Letter of Credit Obligations as provided for in the Credit Agreement, Grantors
have agreed to grant a continuing Lien on the Collateral (as defined below) to
secure the Obligations. These recitals shall be construed as part of this
Security Agreement.

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AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors and Agent agree as
follows:

 

1. DEFINED TERMS.

 

(a) Unless otherwise defined herein, capitalized terms or matters of
construction defined or established in Annex A to the Credit Agreement shall be
applied herein as defined or established therein. All other undefined terms
contained in this Security Agreement, unless the context indicates otherwise,
shall have the meanings provided for by the Code to the extent the same are used
or defined therein.

 

(b) “Uniform Commercial Code jurisdiction” means any jurisdiction that has
adopted all or substantially all of Article 9 as contained in the 2000 Official
Text of the Uniform Commercial Code, as recommended by the National Conference
of Commissioners on Uniform State Laws and the American Law Institute, together
with any subsequent amendments or modifications to the Official Text.

 

2. GRANT OF LIEN.

 

(a) To secure the prompt and complete payment, performance and observance of all
of the Obligations (specifically including each Borrower’s Obligations arising
under the cross-guaranty provisions of Section 12 of the Credit Agreement and
each Guarantor’s obligations arising under the Guaranties), each Grantor hereby
grants, conveys, mortgages, pledges, hypothecates and transfers to Agent, for
the benefit of Agent and Lenders, a Lien upon all of its right, title and
interest in, to and under the following personal property of such Grantor,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of, such Grantor (including under any trade names, styles or derivations
thereof), and whether owned by or consigned by or to, or leased from or to, such
Grantor, and regardless of where located (all of which being hereinafter
collectively referred to as the “Collateral”):

 

(i) all Accounts;

 

(ii) all Chattel Paper;

 

(iii) all Contracts;

 

(iv) all Deposit Accounts, including all Blocked Accounts, Concentration
Accounts, Disbursement Accounts, and all other bank accounts and all funds on
deposit therein;

 

(v) all Documents;

 

(vi) all General Intangibles (including payment intangibles and Software);

 

(vii) all Goods (including Equipment, Fixtures and Inventory,);

 

(viii) all Instruments;

 

(ix) all Investment Property;

 

(x) all Letter-of-Credit Rights;

 

(xi) all money, cash or cash equivalents;

 

(xii) all Supporting Obligations; and

 

(xiii) to the extent not otherwise included in the foregoing, all Proceeds,
products, tort claims, insurance claims and other rights to payment and all
accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.

 

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Notwithstanding the generality of the foregoing, the “Collateral” shall not
include (1) any intent-to-use Trademark applications until a verified statement
of use is filed with the United States Patent and Trademark Office, or (2) any
Excluded Assets, but will include any Accounts arising thereunder.

 

(b) In addition, to secure the prompt and complete payment, performance and
observance of the Obligations and in order to induce Agent and Lenders as
aforesaid, each Grantor hereby grants to Agent, for the benefit of Agent and
Lenders, a right of setoff against the property of such Grantor held by Agent or
any Lender in accordance with the Credit Agreement, including all property
described above in Section 2(a) now or hereafter in the possession or custody
of, or in transit to, Agent or any Lender, for any purpose (including
safekeeping, collection or pledge), for the account of such Grantor, or as to
which such Grantor may have any right or power.

 

3. AGENT’S AND LENDERS’ RIGHTS; LIMITATIONS ON AGENT’S AND LENDERS’ OBLIGATIONS.

 

(a) It is expressly agreed by each Grantor that, anything herein to the contrary
notwithstanding, such Grantor shall remain liable under any and all Contracts
and Licenses to which it is a party to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. Neither Agent nor
any Lender shall have any obligation or liability under any such Contract or
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any such Contract or License pursuant hereto. Neither Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any of
the obligations of any Grantor under or pursuant to any such Contract or
License, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any such Contract or License, or to present or file any
claims, or to take any action to collect or enforce any performance or the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.

 

(b) Agent may, at any time after an Event of Default shall have occurred and be
continuing, without prior notice to any Grantor, notify Account Debtors
obligated under Accounts of any Grantor and other Persons obligated on
Collateral that Agent has a Lien thereon and that payments thereunder shall be
made directly to Agent, for the benefit of Agent and Lenders, while such Event
of Default is continuing. Furthermore, if Agent determines that Account Debtor’s
contra accounts or set off rights may cause Borrowing Availability to be less
than zero, Agent may notify Account Debtors that Agent has a Lien thereon, and
that payments shall be made directly to Agent, for the benefit of Agent and
Lenders. Upon the request of Agent after an Event of Default has occurred and is
continuing, each Grantor shall so notify any such Account Debtor or other
Persons obligated on the Collateral, and once any such notice has been given by
any Grantor, no Grantor shall give any contrary instructions to such Account
Debtor or other Person without Agent’s prior written consent.

 

(c) Agent may, at any time, in Agent’s own name, in the name of a nominee of
Agent, in the name of any Grantor or in the name of a nominee of any Grantor,

 

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communicate (by mail, telephone, facsimile or otherwise) with Account Debtors
obligated under Accounts of such Grantor and other Persons obligated on
Collateral to verify with such Persons, to Agent’s satisfaction, the existence,
amount and terms of, and any other matter relating to, any such Accounts or
other Collateral. If a Default or Event of Default shall have occurred and be
continuing, each Grantor, at its own expense, shall cause the independent
certified public accountants then engaged by such Grantor to prepare and deliver
to Agent and each Lender at any time and from time to time promptly upon Agent’s
request the following reports with respect to each Grantor: (i) a reconciliation
of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Each Grantor, at its
own expense, shall deliver to Agent upon request the results of each physical
verification, if any, which such Grantor may in its discretion have made, or
caused any other Person to have made on its behalf, of all or any portion of its
Inventory.

 

(d) If, notwithstanding the giving of any notice hereunder directing that
payments be made directly to Agent, any Account Debtor of such Grantor or any
other Person obligated on Collateral shall make payments to such Grantor, such
Grantor shall hold all such payments it receives in trust for Agent, for the
benefit of Agent and Lenders, without commingling the same with other funds or
property of, or held by, such Grantor and shall deliver the same to Agent in the
manner set forth in Annex C to the Credit Agreement, in the identical form
received, together with any necessary endorsements.

 

(e) Agent may, at any time after an Event of Default shall have occurred and be
continuing, without prior notice to any Grantor and without demand or other
process, and without payment of any rent or any other charge, (i) enter the
premises of any Grantor and, without breach of the peace, until Agent completes
the enforcement of its rights in the Collateral, take possession of such
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any Grantor’s Equipment for the purpose of
collecting any of the Collateral and (ii) exercise any and all of its rights
under any and all of the Collateral Documents.

 

4. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants that:

 

(a) Rights in the Collateral. Such Grantor has rights in and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder and such Collateral is free and clear of any and all Liens other than
Permitted Encumbrances.

 

(b) Filings. No effective security agreement, financing statement, equivalent
security or Lien instrument, continuation statement, or financing statement
amendment or assignment covering all or any part of the Collateral is on file or
of record in any public office, except such as may have been filed (i) by any
Grantor in favor of Agent pursuant to this Security Agreement or the other Loan
Documents, or (ii) in connection with any other Permitted Encumbrance.

 

(c) Liens. This Security Agreement is effective to create a valid and continuing
Lien upon the Collateral. Upon filing of appropriate financing statements in the
jurisdictions listed in Schedule I hereto, Agent, for the benefit of Agent and
Lenders, shall have a perfected Lien on the Collateral with respect to which a
Lien may be perfected by filing pursuant to the Code, which Lien (i) shall be
prior to all other Liens, except Permitted Encumbrances that would be prior to
Liens in favor of Agent, for the benefit of Agent and

 

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Lenders, as a matter of law, and (ii) is enforceable as such as against any and
all creditors of, and purchasers from, such Grantor (other than purchasers and
lessees of Inventory in the ordinary course of business). All action by such
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.

 

(d) Instruments, Letter-of-Credit Rights and Chattel Paper. Schedule II hereto
lists all Instruments, Letter-of-Credit Rights and Chattel Paper of each
Grantor. All action by such Grantor necessary or desirable to protect and
perfect the Lien in favor of Agent on each item of Collateral set forth in
Schedule II (including the delivery of all originals thereof to Agent and the
legending of all such Chattel Paper as required by Section 5(b) hereof) has been
duly taken. The Lien in favor of Agent, for the benefit of Agent and Lenders, on
the Collateral listed in Schedule II hereto is prior to all other Liens, except
Permitted Encumbrances that would be prior to the Liens in favor of Agent as a
matter of law, and is enforceable as such against any and all creditors of and
purchasers from such Grantor. Such Grantor shall, upon obtaining ownership of
any additional Instruments (other than checks received in the ordinary course of
business), letters of credit or Chattel Paper, promptly (and in any event within
five Business Days) deliver to Agent, for the benefit of Agent and Lenders, all
such additional Instruments or Chattel Paper duly endorsed and all letters of
credit.

 

(e) Grantor Information; Locations of Collateral and Records. Each Grantor’s
name as it appears in official filings in its jurisdiction of organization, the
type of entity of such Grantor (including corporation, partnership, limited
partnership or limited liability company), organizational identification number
issued by each Grantor’s jurisdiction of organization or a statement that no
such number has been issued, each Grantor’s jurisdiction of organization, the
location of each Grantor’s chief executive office, principal place of business,
corporate or other offices, all warehouses and premises where any item of
tangible Collateral is stored or located, and the locations of its books and
records concerning the Collateral are set forth in Schedule III hereto. Each
Grantor has only one jurisdiction of organization.

 

(f) Accounts. With respect to any Account of such Grantor, except as
specifically disclosed in the most recent Collateral Report delivered to Agent
and as of the date of such Collateral Report: (i) such Account represents a bona
fide sale of Inventory or rendering of services to the applicable Account Debtor
in the ordinary course of such Grantor’s business and is not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and such Grantor has made no
agreement with the applicable Account Debtor for any extension of time for the
payment thereof, any compromise or settlement for less than the full amount
thereof, any release of such Account Debtor from liability therefor, or any
deduction therefrom except a discount or allowance allowed by such Grantor in
the ordinary course of its business for prompt payment and disclosed to Agent;
(iii) to such Grantor’s knowledge, there are no facts, events or occurrences
that in any way impair the validity or enforceability thereof or could
reasonably be expected to reduce the amount payable thereunder as shown on such
Grantor’s books and records and any invoices, statements and Collateral Reports
delivered to Agent and Lenders with respect thereto; (iv) such Grantor has
received no notice of proceedings or actions that are threatened or pending
against the applicable Account Debtor that might result in any material adverse
change in such Account Debtor’s financial condition; and (v) such Grantor has no
knowledge that the applicable Account Debtor is unable generally to pay its
debts as they become due. In addition, with respect to any Account of any
Grantor: (A) the amounts reflected on all records, invoices, statements and

 

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Collateral Reports that may be delivered to Agent with respect thereto are
actually and absolutely owing to such Grantor as indicated thereon and are not,
unless otherwise indicated in a Collateral Report, in any way contingent; (B) no
payments have been or shall be made thereon except payments made in accordance
with the requirements of Annex C to the Credit Agreement; and (C) to such
Grantor’s knowledge, the applicable Account Debtor has the capacity to contract.

 

(g) Inventory. With respect to any Inventory of such Grantor scheduled or listed
in the most recent Collateral Report delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of such Grantor’s locations set forth in Schedule III hereto, (ii) such
Inventory is not now stored, nor shall at any time or times hereafter be stored,
at any other location without Agent’s prior written consent, and if Agent
provides such consent, each applicable Grantor will concurrently therewith
obtain, to the extent required by the Credit Agreement, bailee, landlord or
mortgagee agreements, as applicable, (iii) such Grantor has good and
merchantable title to such Inventory and such Inventory is not subject to any
Lien or document whatsoever except for the Lien granted to Agent hereunder, for
the benefit of Agent and Lenders, and except for Permitted Encumbrances, (iv)
such Inventory is not subject to any licensing, patent, royalty, trademark,
trade name or copyright agreements with any third parties that would require any
consent of any third party upon sale or disposition of such Inventory or the
payment of any monies to any third party upon such sale or other disposition,
and (v) the completion of manufacture, sale or other disposition of such
Inventory by Agent following an Event of Default shall not require the consent
of any Person and shall not constitute a breach or default under any Contract or
agreement to which such Grantor is a party or to which such Inventory is
subject.

 

(h) Intellectual Property Collateral. Such Grantor has no ownership interest in,
or title to, any Intellectual Property except as set forth in Schedule IV hereto
(“Intellectual Property Collateral”). This Security Agreement is effective to
create a valid and continuing Lien upon the Intellectual Property Collateral of
each Grantor. Upon the filing of the Intellectual Property Security Agreement
with each of the United States Copyright Office and the United States Patent and
Trademark Office, and the filing of appropriate financing statements in the
jurisdictions listed in Schedule I hereto: (i) Agent shall have perfected Liens
upon each Grantor’s Intellectual Property Collateral; (ii) such perfected Liens
shall be enforceable as such as against any and all creditors of and purchasers
from such Grantor; and (iii) all action necessary or desirable to protect and
perfect Agent’s Lien on such Grantor’s Intellectual Property Collateral shall
have been duly taken.

 

(i) Survival. The representations and warranties set forth in this Section 4
shall survive the execution and delivery of this Security Agreement, except
those that are specifically limited to the date hereof.

 

5. COVENANTS. Each Grantor covenants and agrees with Agent, for the benefit of
Agent and Lenders, that from and after the date of this Security Agreement and
until the Termination Date:

 

(a) Further Assurances; Pledge of Instruments; Chattel Paper.

 

(i) At any time and from time to time, upon the written request of Agent and at
the sole expense of such Grantors, such Grantor shall promptly and duly execute
and deliver any and all such further instruments and documents and take such
further actions as Agent may deem desirable to obtain the full benefits of this
Security Agreement and of the rights

 

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and powers herein granted, including (A) using its commercially reasonable
efforts to secure all consents and approvals necessary or appropriate for the
assignment to or for the benefit of Agent of any License or Contract held by
such Grantor and to enforce the Liens, granted hereunder and (B) filing any
financing or continuation statements under the Code with respect to the Liens
granted hereunder or under any other Loan Document as to those jurisdictions
relevant (in Agent’s sole judgment) to the attachment or perfection of Agent’s
Lien on the Collateral that are not Uniform Commercial Code jurisdictions.

 

(ii) Unless Agent shall otherwise consent in writing (which consent may be
revoked by Agent at any time in its sole discretion upon prior written notice),
each Grantor shall deliver to Agent all Collateral consisting of negotiable
Documents, certificated securities, Chattel Paper and Instruments (in each case,
accompanied by stock powers, allonges or other instruments of transfer executed
in blank) promptly after such Grantor receives the same.

 

(iii) Each Grantor shall, in accordance with the terms of the Credit Agreement,
obtain or use its commercially reasonable efforts to obtain waivers or
subordinations of Liens from landlords and mortgagees, and such Grantor shall in
all instances obtain signed acknowledgements of Agent’s Liens from bailees
having possession of such Grantor’s Goods that such bailees hold for the benefit
of Agent.

 

(iv) If required by the terms of the Credit Agreement and not waived by Agent in
writing (which waiver may be revoked by Agent at any time in its sole
discretion), each Grantor shall obtain authenticated Control Letters from each
issuer of uncertificated securities, securities intermediary, or commodities
intermediary issuing or holding any financial assets or commodities to or for
such Grantor.

 

(v) In accordance with Annex C to the Credit Agreement, each Grantor shall
obtain a blocked account, lockbox or similar agreement with each bank or
financial institution at which such Grantor has established a Deposit Account.

 

(vi) If any Grantor is or becomes the beneficiary of a letter of credit, then
such Grantor shall promptly, and in any event within five Business Days after
becoming such a beneficiary, notify Agent thereof and enter into a tri-party
agreement with Agent and the issuer or confirmation bank within a reasonable
time period after such Grantor provides such notice with respect all to
Letter-of-Credit Rights in connection with such letter of credit assigning such
Letter-of-Credit Rights to Agent and directing all payments thereunder to the
Collection Account or another bank account designated by Agent, which tri-party
agreement shall be in form and substance reasonably satisfactory to Agent.

 

(vii) Each Grantor shall take all commercially reasonable steps necessary to
grant Agent control of all electronic chattel paper in accordance with the Code
and all “transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.

 

(viii) Each Grantor hereby irrevocably authorizes Agent at any time and from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction any initial financing statement and any amendment thereto that (A)
describes the Collateral (I) as all assets of such Grantor or words of similar
effect, regardless of whether any particular asset included in the Collateral
falls within the scope of Article 9 of the Code in such

 

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jurisdiction, or (II) as being of an equal or lesser scope or with greater
detail, and (B) contains any other information required by part 5 of Article 9
of the Code for the sufficiency or filing office acceptance of any financing
statement or amendment, including (I) whether such Grantor is an organization,
the type of organization of such Grantor and any organization identification
number issued to such Grantor, and (II) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. Each Grantor agrees to furnish any such information to Agent
promptly upon Agent’s request therefor. Each Grantor also ratifies its
authorization for Agent to have filed in any Uniform Commercial Code
jurisdiction any initial statement or amendment thereto if filed prior to the
date hereof.

 

(ix) Each Grantor shall promptly, and in any event within five Business Days
after the same is acquired by it, notify Agent of any commercial tort claim (as
defined in the Code) acquired by it and unless otherwise consented to by Agent
in its permitted discretion, such Grantor shall enter into a supplement to this
Security Agreement, granting to Agent a Lien in such commercial tort claim.

 

(b) Maintenance of Books and Records. Such Grantor shall keep and maintain, at
its own cost and expense, satisfactory and complete records of each item of
Collateral to which it purports to grant a Lien hereunder, including a record of
any and all payments received and any and all credits granted with respect to
each such item of Collateral and all other dealings with respect to each such
item of Collateral. Such Grantor shall mark its books and records pertaining to
each such item of Collateral to evidence this Security Agreement and the Liens
granted hereby. If any Grantor retains possession of any Chattel Paper or
Instruments with Agent’s consent, such Chattel Paper or Instruments shall be
marked with the following legend: “This writing and the obligations evidenced or
secured hereby are subject to the security interest of General Electric Capital
Corporation, as Agent, for the benefit of Agent and certain Lenders.”

 

(c) Covenants Regarding Intellectual Property.

 

(i) Such Grantor shall notify Agent promptly if it knows or has reason to know
(A) that any application or registration relating to any of its Licenses,
Patents, Trademarks or Copyrights may become abandoned or dedicated, or (B) 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, the United States Copyright Office or any court) regarding
such Grantor’s ownership of any such License, Patent, Trademark or Copyright,
its right to register the same, or to keep and maintain the same.

 

(ii) In the event that such Grantor, either directly or through any agent,
employee, licensee or designee on behalf of it, files an application for the
registration of any Patent, Trademark or Copyright with the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency, such Grantor shall give Agent written notice within five Business
Days following such filing, and, upon request of Agent, such Grantor shall
execute and deliver any and all security documents as Agent may request,
including the Intellectual Property Security Agreement, to evidence Agent’s Lien
on such Patent, Trademark or Copyright, and the General Intangibles of such
Grantor relating thereto or represented thereby.

 

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(iii) Such Grantor shall take all actions deemed necessary by such Grantor or
requested by Agent to maintain and pursue each application, to obtain the
relevant registration and to maintain its registration of each of the Patents,
Trademarks and Copyrights (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings, unless such Grantor
shall determine that such Patent, Trademark or Copyright is not material to the
conduct of its business.

 

(iv) In the event that any Grantor’s Intellectual Property is infringed upon, or
misappropriated or diluted by a third party, such Grantor shall comply with
Section 5(a)(ix) of this Security Agreement. Such Grantor shall, unless such
Grantor shall reasonably determine that such Intellectual Property is not
material to the conduct of its business or operations, promptly sue for
infringement, misappropriation or dilution, and seek recovery of any and all
damages resulting from, such infringement, misappropriation or dilution, and
shall take such other actions as Agent shall deem appropriate under the
circumstances to protect such Intellectual Property.

 

(d) Indemnification. In any suit, proceeding or action brought by Agent or any
Lender relating to any Collateral for any sum owing with respect thereto or to
enforce any rights or claims with respect thereto, each Grantor shall save,
indemnify and hold Agent and Lenders harmless from and against all expense
(including reasonable attorneys’ fees and expenses), loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of any Person obligated on the Collateral, arising out of a
breach by such Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors by such Grantor, except in the case of Agent or any
Lender, to the extent such expense, loss, or damage is attributable solely to
the gross negligence or willful misconduct of Agent or any Lender as determined
by a court of competent jurisdiction. All such obligations of such Grantor shall
be and remain enforceable against and only against such Grantor and shall not be
enforceable against Agent or any Lender.

 

(e) Compliance with Terms of Accounts and Agreements. In all material respects,
such Grantor shall perform and comply with all obligations in respect of the
Collateral and all other agreements to which it is a party or by which it is
bound relating to the Collateral.

 

(f) Limitation on Liens on Collateral. Such Grantor shall not create, incur,
assume or permit to exist, and such Grantor shall defend the Collateral against,
and take such other action as is necessary to remove, any Lien upon the
Collateral except Permitted Encumbrances, and shall defend the right, title and
interest of Agent and Lenders in and to such Grantor’s rights under the
Collateral against the claims and demands of all Persons.

 

(g) Limitations on Disposition. Such Grantor shall not sell, lease, license,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as permitted by the Credit Agreement.

 

(h) Further Identification of Collateral. Such Grantor shall, if so requested by
Agent, furnish to Agent, as often as Agent requests, statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Agent may reasonably request, all in such
detail as Agent may specify.

 

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(i) Notices. Such Grantor shall advise Agent promptly, in reasonable detail, (i)
of any Lien (other than Permitted Encumbrances) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
that would have a Material Adverse Effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Loan Document.

 

(j) Good Standing Certificates. Not less frequently than once during each
calendar quarter, each Grantor shall, unless Agent shall otherwise consent,
provide to Agent a certificate of good standing from its jurisdiction of
organization.

 

(k) No Reorganization. Without limiting the prohibitions on mergers involving
Grantors contained in the Credit Agreement, no Grantor shall reincorporate or
reorganize itself under the laws of any jurisdiction other than the jurisdiction
in which it is organized as of the Closing Date without the prior written
consent of Agent.

 

(l) Terminations; Amendments Not Authorized. Each Grantor acknowledges that it
is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement without the prior written
consent of Agent and agrees that it will not do so without the prior written
consent of Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of
the Code.

 

(m) Authorized Terminations. Agent will promptly deliver to each Grantor for
filing or authorize each Grantor to prepare and file termination statements and
releases in accordance with Section 11.2(e) of the Credit Agreement.

 

6. AGENT’S APPOINTMENT AS ATTORNEY-IN-FACT.

 

On the Closing Date each Grantor shall execute and deliver to Agent a power of
attorney (the “Power of Attorney”) substantially in the form attached hereto as
Exhibit A. The power of attorney granted pursuant to each Power of Attorney is a
power coupled with an interest and shall be irrevocable until the Termination
Date. The powers conferred on Agent, for the benefit of Agent and Lenders, under
each Power of Attorney are solely to protect Agent’s Liens upon and interests in
the Collateral (for the benefit of Agent and Lenders) and shall not impose any
duty upon Agent or any Lender to exercise any such powers. Agent agrees that (a)
except for the powers granted in clause (i) of the Power of Attorney, it shall
not exercise any power or authority granted under the Power of Attorney unless
an Event of Default has occurred and is continuing, and (b) Agent shall account
for any moneys received by Agent in respect of any foreclosure on or disposition
of any of the Collateral pursuant to any Power of Attorney; provided, that,
except as set forth in Section 9, neither Agent nor any Lender shall have any
duty as to any Collateral, and Agent and Lenders shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers.
NONE OF AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY
ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN
RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR
ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

10

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7. REMEDIES; RIGHTS UPON DEFAULT.

 

(a) If any Event of Default shall have occurred and be continuing:

 

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

 

(ii) Each Grantor further agrees, at Agent’s request, to assemble the Collateral
and make it available to Agent at a place or places designated by Agent
reasonably convenient to Agent and such Grantor, whether at such Grantor’s
premises or elsewhere. Until Agent is able to effect a sale, lease, or other
disposition of Collateral, Agent shall have the right to hold or use the
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or its value or for any other purpose deemed
appropriate by Agent other than as set forth in Section 9 hereof or as otherwise
set forth in the Loan Documents. Agent shall have no obligation to any Grantor
to maintain or preserve the rights of such Grantor as against third parties with
respect to Collateral while Collateral is in the possession of Agent. Agent may,
if it so elects, seek the appointment of a receiver or keeper to take possession
of Collateral and to enforce any of Agent’s remedies (for the benefit of Agent
and Lenders), without prior notice or hearing as to such appointment. Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Obligations as provided in the Credit
Agreement, and only after so paying over such net proceeds, and after the
payment by Agent of any other amount required by any provision of law, need
Agent account for the surplus, if any, to any Grantor. Each Grantor waives, to
the maximum extent permitted by applicable law, all claims, damages, and demands
against Agent or any Lender arising out of the repossession, retention or sale
of the Collateral except such as

 

11

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arise solely out of the gross negligence or willful misconduct of Agent or such
Lender as determined by a court of competent jurisdiction. Each Grantor agrees
that ten days’ prior notice by Agent of the time and place of any public sale or
of the time after which a private sale may take place is reasonable notification
of such matters. Grantors shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient to pay all
Obligations, including any reasonable attorneys’ fees or other expenses incurred
by Agent or any Lender to collect such deficiency.

 

(b) Except as otherwise specifically provided herein, each Grantor hereby waives
(to the maximum extent permitted by applicable law) presentment, demand, protest
or any notice of any kind in connection with this Security Agreement or any
Collateral.

 

(c) To the extent that applicable law imposes duties on Agent to exercise
remedies in a commercially reasonable manner, each Grantor acknowledges and
agrees that it is not commercially unreasonable for Agent (i) to fail to incur
expenses reasonably deemed significant by Agent to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as such Grantor, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure Agent against risks
of loss, collection or disposition of Collateral or to provide to Agent a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist Agent in the
collection or disposition of any of the Collateral. Each Grantor acknowledges
that the purpose of this Section 7(c) is to provide non-exhaustive indications
of what actions or omissions by Agent would not be commercially unreasonable in
Agent’s exercise of remedies against the Collateral and that other actions or
omissions by Agent shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 7(c). Without limiting the
generality of the foregoing, nothing contained in this Section 7(c) shall be
construed to grant any rights to any Grantor or to impose any duties on Agent
that would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this Section 7(c).

 

(d) Neither Agent nor any Lender shall be required to make any demand upon, or
pursue or exhaust any of its respective rights or remedies against, any Grantor,

 

12

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

any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Obligations or to pursue or exhaust any of its respective rights
or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. Neither Agent nor any Lender shall be required to marshal the
Collateral or any guarantee of the Obligations or to resort to the Collateral or
any such guarantee in any particular order, and all of its respective rights
hereunder or under any other Loan Document shall be cumulative. To the extent it
may lawfully do so, each Grantor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
Agent or any Lender, any valuation, stay, appraisement, extension, redemption or
similar laws and any and all rights or defenses it may have as a surety now or
hereafter existing that, but for this provision, might be applicable to the sale
of any Collateral made pursuant to the judgment, order or decree of any court,
or privately pursuant to the power of sale conferred by this Security Agreement,
or otherwise.

 

8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. Solely for the
purpose of enabling Agent to exercise its rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time or times as
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to Agent, for the benefit of Agent and Lenders, to the
fullest extent not in violation of licenses that are permitted by the terms of
the Loan Documents to be granted by such Grantor to third parties or obtained by
such Grantor in the ordinary course of business, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to such
Grantor) to use, license or sublicense any Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

 

9. LIMITATION ON AGENT’S AND LENDERS’ DUTIES IN RESPECT OF COLLATERAL. Each of
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

 

10. REINSTATEMENT. This Security Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Grantor for liquidation or reorganization, should any Grantor become insolvent
or make an assignment for the benefit of any creditor or creditors, or should a
receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a “voidable preference,” “fraudulent transfer,” or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

13

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

11. NOTICES. Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other party any communication with respect to this Security Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given in the manner, and deemed received, as
provided for in the Credit Agreement.

 

12. SEVERABILITY. Whenever possible, each provision of this Security Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement. This Security Agreement is to be read, construed and applied
together with the Credit Agreement and the other Loan Documents which, taken
together, set forth the complete understanding and agreement of Agent, Lenders
and Grantors with respect to the matters referred to herein and therein.

 

13. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any Lender shall by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing and signed by
Agent, and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that Agent would otherwise have on any future occasion. No
failure by Agent or any Lender to exercise, nor any delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided hereunder are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and each Grantor.

 

14. LIMITATION BY LAW. All rights, remedies and powers provided in this Security
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this Security
Agreement are intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent necessary so that
they do not render this Security Agreement invalid, unenforceable, in whole or
in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.

 

15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10 hereof, this
Security Agreement shall terminate upon the Termination Date.

 

16. SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations of
Grantors hereunder shall be binding upon the successors and assigns of each
Grantor (including any debtor-in-possession on behalf of such Grantor) and
shall, together with the rights and remedies of Agent, for the benefit of Agent
and Lenders, hereunder, inure to the benefit of Agent and Lenders, all future
holders of any Instrument evidencing any of the Obligations and their respective
successors and assigns. No sales of participations, other sales,

 

14

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

assignments, transfers or other dispositions of any agreement governing or
Instrument evidencing any of the Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to Agent, for the benefit of
Agent and Lenders, hereunder. No Grantor may assign, sell, hypothecate or
otherwise transfer any interest in or obligation under this Security Agreement.

 

17. COUNTERPARTS. This Security Agreement may be authenticated in any number of
separate counterparts, each of which shall collectively and separately
constitute one and the same agreement. This Security Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by
Agent, electronic means, all of which shall be equally valid.

 

18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA (WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT
OF LAWS), AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN LOS
ANGELES COUNTY, CITY OF LOS ANGELES, STATE OF CALIFORNIA, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG GRANTORS, AGENT
AND LENDERS PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND GRANTORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF LOS ANGELES COUNTY; PROVIDED, FURTHER, THAT NOTHING IN THIS
SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH GRANTOR EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH GRANTOR HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS SET FORTH
ON ANNEX I TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH GRANTOR’S ACTUAL RECEIPT THEREOF OR THREE
DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.

 

15

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

19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES HERETO WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES HERETO DESIRE
THAT DISPUTES ARISING HEREUNDER OR RELATED HERETO BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS
AND GRANTORS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS SECURITY AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO.

 

20. SECTION TITLES. The Section titles contained in this Security Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.

 

21. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Security Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Security Agreement shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Security Agreement.

 

22. ADVICE OF COUNSEL. Each of the parties hereto represents to each other party
hereto that it has discussed this Security Agreement (and, specifically, the
provisions of Sections 18 and 19) with its counsel.

 

23. BENEFIT OF LENDERS. All Liens granted or contemplated hereby shall be for
the benefit of Agent, individually, and Lenders, and all proceeds or payments
realized from Collateral in accordance herewith shall be applied to the
Obligations in accordance with the terms of the Credit Agreement.

 

24. INCONSISTENCIES. To the extent of any inconsistencies between this Security
Agreement and the Pledge Agreement, the provisions of the Pledge Agreement shall
control as to all matters with respect to the Pledged Collateral (as defined
therein).

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

 

16

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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

“Grantors”     DYNAMIC DETAILS, INCORPORATED   DYNAMIC DETAILS, INCORPORATED,
VIRGINIA By:  

/S/ TIMOTHY DONNELLY

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

  By:  

/S/ TIMOTHY DONNELLY

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

Name:   Timothy Donnelly   Name:   Timothy Donnelly Title:   Vice President and
Secretary   Title:   Vice President and Secretary DYNAMIC DETAILS INCORPORATED,
SILICON VALLEY   LAMINATE TECHNOLOGY CORP. By:  

/S/ TIMOTHY DONNELLY

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

  By:  

/S/ TIMOTHY DONNELLY

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

Name:   Timothy Donnelly   Name:   Timothy Donnelly Title:   Vice President and
Secretary   Title:   Vice President and Secretary DDi SALES CORP.   DYNAMIC
DETAILS TEXAS, LLC By:  

/S/ TIMOTHY DONNELLY

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

  By:  

/S/ TIMOTHY DONNELLY

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

Name:   Timothy Donnelly   Name:   Timothy Donnelly Title:   Vice President and
Secretary   Title:   Vice President and Secretary DDi-TEXAS INTERMEDIATE
HOLDINGS II, L.L.C.   DDi-TEXAS INTERMEDIATE PARTNERS II, L.L.C. By:  

/S/ TIMOTHY DONNELLY

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

  By:  

/S/ TIMOTHY DONNELLY

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

Name:   Timothy Donnelly   Name:   Timothy Donnelly Title:   Vice President and
Secretary   Title:   Vice President and Secretary DYNAMIC DETAILS, L.P.  
DYNAMIC DETAILS INCORPORATED, COLORADO SPRINGS By:  

DDi-TEXAS INTERMEDIATE PARTNERS II, L.L.C.,

its General Partner

    By:  

/S/ TIMOTHY DONNELLY

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

  By:  

/S/ TIMOTHY DONNELLY

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

Name:   Timothy Donnelly   Name:   Timothy Donnelly Title:   Vice President and
Secretary   Title:   Vice President and Secretary

 

17

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

“Agent” GENERAL ELECTRIC CAPITAL CORPORATION By:  

/S/ E. J. HESS

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

    Duly Authorized Signatory

 

18

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

SCHEDULE I

 

to

 

SECURITY AGREEMENT

 

FILING JURISDICTIONS

 

Name of Entity

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

 

Filing Jurisdictions

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

DYNAMIC DETAILS, INCORPORATED   CALIFORNIA DYNAMIC DETAILS, INCORPORATED,
VIRGINIA   DELAWARE DYNAMIC DETAILS INCORPORATED, SILICON VALLEY   DELAWARE
LAMINATE TECHNOLOGY CORP.   DELAWARE DYNAMIC DETAILS INCORPORATED, COLORADO
SPRINGS   COLORADO DDI SALES CORP.   DELAWARE DYNAMIC DETAILS TEXAS, LLC  
DELAWARE DDI-TEXAS INTERMEDIATE PARTNERS II, L.L.C.   DELAWARE DDI-TEXAS
INTERMEDIATE HOLDINGS II, L.L.C.   DELAWARE DYNAMIC DETAILS, L.P.   DELAWARE

 

19

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

SCHEDULE II

 

to

 

SECURITY AGREEMENT

 

INSTRUMENTS

 

CHATTEL PAPER

 

AND

 

LETTER-OF-CREDIT-RIGHTS

 

Promissory Note in the principal amount of $150,000, dated June 26, 2002, issued
by Link World Technologies in favor of Dynamic Details, Incorporated.

 

Intercompany Note in the principal amount of CAD $12,903,801, dated as of
December 29, 2003, issued by DDi Canada Acquisition Corp., to the order of
Dynamic Details, Incorporated.

 

20

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

SCHEDULE III-A

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND

RECORDS CONCERNING DYNAMIC DETAILS, INCORPORATED’S COLLATERAL

 

I. Grantor’s official name: Dynamic Details, Incorporated

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: C2059971

 

IV. Jurisdiction or Organization of Dynamic Details, Incorporated: California

 

V. Chief Executive Office and principal place of business of Dynamic Details,
Incorporated: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details, Incorporated: 1220 Simon Circle,
Anaheim, California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located:

 

1230 Simon Circle, Anaheim, California

1240 Simon Circle, Anaheim, California

1220 Lance Lane, Anaheim, California

1240 Lance Lane, Anaheim, California

1260 Lance Lane, Anaheim, California

1290 Lance Lane, Anaheim, California

1295 Lance Lane, Anaheim, California

3021 E. Coronado, Anaheim, California

1211 Simon Circle, Anaheim, California

1221 Simon Circle, Anaheim, California

1231 Simon Circle, Anaheim, California

1241 Simon Circle, Anaheim California

1251 Simon Circle, Anaheim, California

1639 Commerce Street, Garland, Texas

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

21

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

SCHEDULE III-B

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS

CONCERNING DYNAMIC DETAILS, INCORPORATED, VIRGINIA’S COLLATERAL

 

I. Grantor’s official name: Dynamic Details, Incorporated, Virginia

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3235133

 

IV. Jurisdiction or Organization of Dynamic Details, Incorporated, Virginia:
Delaware

 

V. Chief Executive Office and principal place of business of Dynamic Details,
Incorporated, Virginia: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details, Incorporated, Virginia: 1200 Severn
Way, Sterling, Virginia 20166

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: 1200 Severn Way,
Sterling, Virginia

 

IX. Locations of Records Concerning Collateral: 1200 Severn Way, Sterling,
Virginia

 

22

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

SCHEDULE III-C

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS

CONCERNING DYNAMIC DETAILS INCORPORATED, SILICON VALLEY’S COLLATERAL

 

I. Grantor’s official name: Dynamic Details Incorporated, Silicon Valley

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 2641851

 

IV. Jurisdiction or Organization of Dynamic Details Incorporated, Silicon
Valley: Delaware

 

V. Chief Executive Office and principal place of business of Dynamic Details
Incorporated, Silicon Valley: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details Incorporated, Silicon Valley: 1220
Simon Circle, Anaheim, California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located:

 

1988 Tarob Court, Milpitas, California

2115-B Victor Place, Colorado Springs, Colorado

2150 Commerce Drive, San Jose, California

1831 Tarob Court, Milpitas, California

 

IX. Locations of Records Concerning Collateral:

 

1988 Tarob Court, Milpitas, California

2150 Commerce Drive, San Jose, California

1831 Tarob Court, Milpitas, California

 

23

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

SCHEDULE III-D

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL

AND RECORDS CONCERNING LAMINATE TECHNOLOGY CORP.’S COLLATERAL

 

I. Grantor’s official name: Laminate Technology Corp.

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3378162

 

IV. Jurisdiction or Organization of Laminate Technology Corp.: Delaware

 

V. Chief Executive Office and principal place of business of Laminate Technology
Corp.: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Laminate Technology Corp.: 1130 West Geneva Drive,
Tempe, Arizona

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located:

 

1117 Fairmont Drive, Tempe, Arizona

1104 West Geneva, Tempe, Arizona

1130 West Geneva Drive, Tempe, Arizona

1131 Fairmont Drive, Tempe, Arizona

 

IX. Locations of Records Concerning Collateral: 1130 West Geneva Drive, Tempe,
Arizona

 

24

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SCHEDULE III-E

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS

CONCERNING DYNAMIC DETAILS INCORPORATED, COLORADO SPRINGS’ COLLATERAL

 

I. Grantor’s official name: Dynamic Details Incorporated, Colorado Springs

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 19911021432

 

IV. Jurisdiction or Organization of Dynamic Details Incorporated, Colorado
Springs: Colorado

 

V. Chief Executive Office and principal place of business of Dynamic Details
Incorporated, Colorado Springs: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details Incorporated, Colorado Springs.: 2115-B
Victor Place, Colorado Springs, Colorado

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: 2115-B Victor
Place, Colorado Springs, Colorado

 

IX. Locations of Records Concerning Collateral:

 

2115-B Victor Place, Colorado Springs, Colorado

6031-6035 Galley, Colorado Springs, Colorado

 

25

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SCHEDULE III-F

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL

AND RECORDS CONCERNING DDI SALES CORP.’S COLLATERAL

 

I. Grantor’s official name: DDi Sales Corp.

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Corporation

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3314735

 

IV. Jurisdiction or Organization of DDi Sales Corp.: Delaware

 

V. Chief Executive Office and principal place of business of DDi Sales Corp.:
1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of DDi Sales Corp.: 1220 Simon Circle, Anaheim, California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: None

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

26

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

SCHEDULE III-G

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL

AND RECORDS CONCERNING DYNAMIC DETAILS TEXAS, LLC’S COLLATERAL

 

I. Grantor’s official name: Dynamic Details Texas, LLC

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Limited Liability Company

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 2136648

 

IV. Jurisdiction or Organization of Dynamic Details Texas, LLC: Delaware

 

V. Chief Executive Office and principal place of business of Dynamic Details
Texas, LLC: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details Texas, LLC: 1220 Simon Circle, Anaheim,
California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: None

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

27

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

SCHEDULE III-H

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING DDI-TEXAS
INTERMEDIATE PARTNERS II, L.L.C.’S COLLATERAL

 

I. Grantor’s official name: DDi-Texas Intermediate Partners II, L.L.C.

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Limited Liability Company

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3324558

 

IV. Jurisdiction or Organization of DDi-Texas Intermediate Partners II, L.L.C.:
Delaware

 

V. Chief Executive Office and principal place of business of DDi-Texas
Intermediate Partners II, L.L.C.: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of DDi-Texas Intermediate Partners II, L.L.C.: 1220 Simon
Circle, Anaheim, California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: None

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

28

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

SCHEDULE III-I

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING DDI-TEXAS
INTERMEDIATE HOLDINGS II, L.L.C.’S COLLATERAL

 

I. Grantor’s official name: DDi-Texas Intermediate Holdings II, L.L.C.

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Limited Liability Company

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3319555

 

IV. Jurisdiction or Organization of DDi-Texas Intermediate Holdings II, L.L.C.:
Delaware

 

V. Chief Executive Office and principal place of business of DDi-Texas
Intermediate Holdings II, L.L.C.: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of DDi-Texas Intermediate Holdings II, L.L.C.: 1220 Simon
Circle, Anaheim, California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: None

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

29

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

SCHEDULE III-J

 

to

 

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL

 

AND RECORDS CONCERNING DYNAMIC DETAILS, L.P.’S COLLATERAL

 

I. Grantor’s official name: Dynamic Details, L.P.

 

II. Type of entity (e.g., corporation, partnership, business trust, limited
partnership, limited liability company): Limited Partnership

 

III. Organizational identification number issued by Grantor’s jurisdiction of
organization or a statement that no such number has been issued: 3320987

 

IV. Jurisdiction or Organization of Dynamic Details, L.P.: Delaware

 

V. Chief Executive Office and principal place of business of Dynamic Details,
L.P.: 1220 Simon Circle, Anaheim, California 92806

 

VI. Corporate Offices of Dynamic Details, L.P.: 1220 Simon Circle, Anaheim,
California

 

VII. Warehouses: None

 

VIII. Other Premises at which Collateral is Stored or Located: 1639 Commerce,
Garland, Texas

 

IX. Locations of Records Concerning Collateral: 1220 Simon Circle, Anaheim,
California

 

30

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SCHEDULE IV

 

to

 

SECURITY AGREEMENT

 

PATENTS, TRADEMARKS AND COPYRIGHTS

 

I. DYNAMIC DETAILS, INCORPORATED

 

  A. Patents

 

1. DDi Corp. has granted to Dynamic Details, Incorporated certain rights to use
the following Patents owned by DDi Corp. (collectively, the “DDi Patents”):

 

  • United States Patent Application No. 10104262, “Inverted Microvias.”

 

  • Republic of China Patent Application No. 91113923, “Inverted Microvias”;
Patent Issued July 1, 2003.

 

  • Patent Cooperation Treaty Patent Application No. 2002-156949, “Inverted
Microvias.”

 

  • Japan Patent Application No. 2002-156949, “Inverted Microvias.”

 

  B. Trademarks

 

1. Service Mark “Dynamic Details” (Reg. No. 2,409,371 - USPTO).

 

2. Trademark “Dynamic Details” (Reg. No. 2,517,988 - USPTO).

 

3. Trademark “Dynamic Details” (Reg. No. 1219617 – European Community).

 

4. Trademark “DDi” (Reg. No. 2,370,315 – USPTO).

 

5. Trademark “DDi” (and Design) (Reg. No. 1219260 – European Community).

 

6. Service mark “DDi” (Reg. No. 2,409,942 – USPTO).

 

7. Application for “DDI” in Canada (App. No. 2370315).

 

8. Application for “Dynamic Details Canada” in Canada (App. No. 1119581, 1119582
CDN).

 

  C. Copyrights. None.

 

II. DYNAMIC DETAILS, INCORPORATED, VIRGINIA

 

A. Patents. DDi Corp. has granted to Dynamic Details, Incorporated, Virginia
certain rights to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

31

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

III. DYNAMIC DETAILS INCORPORATED, SILICON VALLEY

 

A. Patents. DDi Corp. has granted to Dynamic Details Incorporated, Silicon
Valley certain rights to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

IV. LAMINATE TECHNOLOGY CORP.

 

A. Patents. DDi Corp. has granted to Laminate Technology Corp. certain rights to
use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

V. DYNAMIC DETAILS INCORPORATED, COLORADO SPRINGS

 

A. Patents. DDi Corp. has granted to Dynamic Details Incorporated, Colorado
Springs certain rights to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

VI. DDI SALES CORP.

 

A. Patents. DDi Corp. has granted to DDi Sale Corp. certain rights to use the
DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

VII. DYNAMIC DETAILS TEXAS, LLC

 

A. Patents. DDi Corp. has granted to Dynamic Details Texas, LLC certain rights
to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

VIII. DDI-TEXAS INTERMEDIATE PARTNERS II, L.L.C.

 

A. Patents. DDi Corp. has granted to DDi-Texas Intermediate Partners II, L.L.C.
certain rights to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

IX. DDI-TEXAS INTERMEDIATE HOLDINGS II, L.L.C.

 

A. Patents. DDi Corp. has granted to DDi-Texas Intermediate Holdings II, L.L.C.
certain rights to use the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

32

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

X. DYNAMIC DETAILS, L.P.

 

A. Patents. DDi Corp. has granted to Dynamic Details, L.P. certain rights to use
the DDi Patents.

 

B. Trademarks. None.

 

C. Copyrights. None.

 

33

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

EXHIBIT A

 

POWER OF ATTORNEY

 

This Power of Attorney is executed and delivered by                         , a
                         (“Grantor”), to General Electric Capital Corporation, a
Delaware corporation (hereinafter referred to as “Attorney”), as Agent for the
benefit of Agent and Lenders, pursuant to that certain Credit Agreement dated as
of March 30, 2004 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), and the other
Loan Documents (as defined in the Credit Agreement). Unless otherwise defined
herein, capitalized terms or matters of construction defined or established in
Annex A to the Credit Agreement shall be applied herein as defined or
established therein. No Person to whom this Power of Attorney is presented, as
authority for Attorney to take any action or actions contemplated hereby, shall
be required to inquire into or seek confirmation from Grantor as to the
authority of Attorney to take any action described below, or as to the existence
of or fulfillment of any condition to this Power of Attorney, which is intended
to grant to Attorney unconditionally the authority to take and perform the
actions contemplated herein, and Grantor irrevocably waives any right to
commence any suit or action, in law or equity, against any Person that acts in
reliance upon or acknowledges the authority granted under this Power of
Attorney. The power of attorney granted hereby is coupled with an interest and
may not be revoked or cancelled by Grantor without Attorney’s written consent.

 

Subject to the terms of the Loan Documents, Grantor hereby irrevocably
constitutes and appoints Attorney (and all officers, employees or agent
designated by Attorney), with full power of substitution, as Grantor’s true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Grantor and in the name of Grantor or in its own name, from time to
time in Attorney’s discretion, to take any and all appropriate action and to
execute and deliver any and all documents and Instruments that may be necessary
or desirable to accomplish the purposes of the Loan Documents and, without
limiting the generality of the foregoing, Grantor hereby grants to Attorney the
power and right, on behalf of Grantor, without notice to or assent by Grantor,
and at any time, to do the following: (a) change the mailing address of Grantor,
open a post office box on behalf of Grantor, open mail for Grantor, and ask,
demand, collect, give acquittances and receipts for, take possession of, or
endorse and receive payment of, any checks, drafts, notes, acceptances, or other
Instruments for the payment of moneys due, and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in connection with any property
of Grantor; (b) effect any repairs to any asset of Grantor, or continue or
obtain any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of
insurance, and make all determinations and decisions with respect to such
policies; (c) pay or discharge any Taxes, Liens or other encumbrances levied or
placed on or threatened against Grantor or its property; (d) defend any suit,
action or proceeding brought against Grantor if Grantor does not defend such
suit, action or proceeding or if Attorney believes that Grantor is not pursuing
such defense in a manner that will maximize the recovery to Attorney, and
settle, compromise or adjust any suit, action, or proceeding described above
and, in connection therewith, give such discharges or releases as Attorney may
deem

 

34

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

appropriate; (e) file or prosecute any claim, litigation, suit or proceeding in
any court of competent jurisdiction or before any arbitrator, or take any other
action otherwise deemed appropriate by Attorney for the purpose of collecting
any and all such moneys due to Grantor whenever payable and to enforce any other
right in respect of Grantor’s property; (f) sell, transfer, pledge, make any
agreement with respect to, or otherwise deal with, any property of Grantor, and
execute, in connection with such sale or action, any endorsements, assignments
or other instruments of conveyance or transfer in connection therewith; (g)
cause the certified public accountants then engaged by Grantor to prepare and
deliver to Attorney at any time and from time to time, promptly upon Attorney’s
request, the following reports: (i) a reconciliation of all of its Accounts,
(ii) an aging of all such Accounts; (iii) trial balances; (iv) test
verifications of such Accounts as Attorney may request; and (v) the results of
each physical verification of its Inventory; (h) communicate in its own name
with any Account Debtors of Grantor, parties to any Contracts of Grantor or
other obligors of Grantor in respect of Instruments, Chattel Paper or General
Intangibles of Grantor with regard to the assignment of the right, title and
interest of such Grantor in, to and under such Accounts, Contracts, Instruments,
Chattel Paper, General Intangibles and other matters relating thereto; (i) file
such financing statements with respect to the Security Agreement, with or
without Grantor’s signature, or file a photocopy of the Security Agreement in
substitution for a financing statement, as Agent may deem appropriate and to
execute in Grantor’s name such financing statements and amendments thereto and
continuation statements that may require Grantor’s signature; (j) execute, in
connection with any sale provided for in any Loan Document, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral and to otherwise direct such sale or resale, all as though Attorney
were the absolute owner of the property of Grantor for all purposes; and (k) do,
at Attorney’s option and Grantor’s expense, at any time or from time to time,
all acts and other things that Attorney reasonably deems necessary to perfect,
preserve, or realize upon Grantor’s property or assets and Attorney’s Liens
thereon, all as fully and effectively as Grantor might do. Grantor hereby
ratifies, to the extent permitted by law, all that said Attorney shall lawfully
do or cause to be done by virtue hereof.

 

IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor, and Grantor
has caused its seal to be affixed pursuant to the authority of its board of
directors this              day of March, 2004.

 

[GRANTOR]

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

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

 

[Notarization in appropriate form for the state of execution is required]

 

35

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

ACKNOWLEDGMENT OF INSTRUMENTS

 

STATE OF

  

SS.

COUNTY OF

    

 

On                      before me, the undersigned notary public in and for said
state, personally appeared , personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument, the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

Signature

 

 

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

 

(Seal)

 

36