Exhibit 10.24

 

[Execution Copy]

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”), dated as of March 31, 2006, is made
between AKSYS, LTD., a Delaware corporation (“Debtor”), and DURUS LIFE SCIENCES
MASTER FUND LTD., a Cayman Islands Exempted Company (the “Secured Party”).

 

Debtor and Secured Party hereby agree as follows:

 

Section 1.   Definitions; Interpretation.

 

(A)           ALL CAPITALIZED TERMS USED IN THIS AGREEMENT AND NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE LOAN AGREEMENT.

 

(B)           AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS:

 

“Collateral” has the meaning set forth in Section 2.

 

“Event of Default” has the meaning set forth in Section 8.

 

“Loan Agreement” means the Bridge Loan Agreement, dated as the date hereof,
between Debtor and Secured Party, as amended, amended and restated, modified,
renewed, extended or replaced from time to time.

 

“Obligations” means the indebtedness, liabilities and other obligations of
Debtor and any Guarantor to Secured Party under or in connection with the Loan
Agreement, the Note and the other Loan Documents, including, the Loan, all
interest accrued thereon, all fees due under the Loan Agreement and all other
amounts payable by Debtor to Secured Party thereunder or in connection
therewith, whether now or hereafter existing or arising, and whether due or to
become due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and including interest that accrues after the commencement by or
against Debtor or any Guarantor of any Insolvency Proceeding naming such Person
as the debtor in such proceeding.

 

“Partnership and LLC Collateral” has the meaning set forth in Section 5(r).

 

“Pledged Collateral” means Debtor’s (i) investment property and (ii) Partnership
and LLC Collateral, including any ownership interests in any Subsidiaries of
Debtor.

 

“Pledged Collateral Agreements” means any shareholders agreement, operating
agreement, partnership agreement, voting trust, proxy agreement or other
agreement or understanding with respect to any Pledged Collateral.

 

“Specified Default” means any Event of Default except that an Event of Default
(as defined in the Loan Agreement) under Section 6.01(c) thereof shall be deemed
an Event of

 

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Default for purposes of this definition only if such Event of Default occurs as
a result of the Company’s failure to perform or observe (i) any term, covenant
or agreement contained in Section 5.01 or clauses (a), (e), (g), (l), (m), (q)
or (r) of Section 5.02 of the Loan Agreement, or (ii) any material term,
covenant or agreement contained in Section 5.03 of the Loan Agreement or any
such term, covenant or agreement involving an amount in excess of $25,000.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York.

 

(C)           WHERE APPLICABLE AND EXCEPT AS OTHERWISE DEFINED HEREIN, TERMS
USED IN THIS AGREEMENT SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE UCC.

 

(D)           THE RULES OF INTERPRETATION SET FORTH IN SECTION 1.02 OF THE LOAN
AGREEMENT SHALL BE APPLICABLE TO THIS AGREEMENT AND ARE INCORPORATED HEREIN BY
THIS REFERENCE.

 

Section 2.   Security Interest.

 

(A)           AS SECURITY FOR THE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS,
DEBTOR HEREBY GRANTS TO SECURED PARTY A SECURITY INTEREST IN ALL OF DEBTOR’S
RIGHT, TITLE AND INTEREST IN, TO AND UNDER THE FOLLOWING ASSETS, WHEREVER
LOCATED AND WHETHER NOW EXISTING OR OWNED OR HEREAFTER ACQUIRED OR ARISING: ALL
GOODS, ACCOUNTS, CHATTEL PAPER (WHETHER TANGIBLE OR ELECTRONIC), SOFTWARE,
COMMERCIAL TORT CLAIMS, DEPOSIT ACCOUNTS, DOCUMENTS, EQUIPMENT (INCLUDING ALL
FIXTURES), GENERAL INTANGIBLES (INCLUDING INTELLECTUAL PROPERTY), PAYMENT
INTANGIBLES, INSTRUMENTS, INVENTORY, INVESTMENT PROPERTY, LETTER-OF-CREDIT
RIGHTS, MONEY, RECORDS, AND ALL OTHER PERSONAL PROPERTY AND ALL PRODUCTS,
PROCEEDS AND SUPPORTING OBLIGATIONS OF ANY AND ALL OF THE FOREGOING
(COLLECTIVELY, THE “COLLATERAL”). NOTWITHSTANDING THE FOREGOING, “COLLATERAL”
SHALL NOT INCLUDE ANY RIGHTS OR INTERESTS IN ANY LEASE, LICENSE, CONTRACT, OR
AGREEMENT, AS SUCH, IF UNDER THE TERMS OF SUCH LEASE, LICENSE, CONTRACT, OR
AGREEMENT, OR APPLICABLE LAW WITH RESPECT THERETO, THE VALID GRANT OF A SECURITY
INTEREST OR LIEN THEREIN TO SECURED PARTY IS PROHIBITED AND SUCH PROHIBITION HAS
NOT BEEN OR IS NOT WAIVED OR THE CONSENT OF THE OTHER PARTY TO SUCH LEASE,
LICENSE, CONTRACT, OR AGREEMENT HAS NOT BEEN OR IS NOT OTHERWISE OBTAINED OR
UNDER APPLICABLE LAW SUCH PROHIBITION CANNOT BE WAIVED; PROVIDED, THAT THE
FOREGOING EXCLUSION SHALL IN NO WAY BE (I) CONSTRUED TO APPLY IF ANY SUCH
PROHIBITION WOULD BE RENDERED INEFFECTIVE UNDER THE UCC OR OTHER APPLICABLE LAW
(INCLUDING THE BANKRUPTCY CODE) OR PRINCIPLES OF EQUITY, (II) CONSTRUED SO AS TO
LIMIT, IMPAIR OR OTHERWISE AFFECT SECURED PARTY’S UNCONDITIONAL CONTINUING
SECURITY INTERESTS IN AND LIENS UPON ANY RIGHTS OR INTERESTS OF DEBTOR IN OR TO
THE PROCEEDS THEREOF, INCLUDING MONIES DUE OR TO BECOME DUE UNDER ANY SUCH
LEASE, LICENSE, CONTRACT, OR AGREEMENT (INCLUDING ANY ACCOUNTS), OR (III)
CONSTRUED TO APPLY AT SUCH TIME AS THE CONDITION CAUSING SUCH PROHIBITION SHALL
BE REMEDIED AND, TO THE EXTENT SEVERABLE, “COLLATERAL” SHALL INCLUDE ANY PORTION
OF SUCH LEASE, LICENSE, CONTRACT, OR AGREEMENT THAT DOES NOT RESULT IN SUCH
PROHIBITION; AND PROVIDED, FURTHER, THAT DEBTOR SHALL OBTAIN THE CONSENTS WITH
RESPECT TO LEASES, LICENSES, CONTRACTS AND AGREEMENTS AS SET FORTH IN THE LOAN
AGREEMENT.

 

(B)           ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, (I) DEBTOR SHALL
REMAIN LIABLE UNDER ANY PLEDGED COLLATERAL AGREEMENTS AND ANY OTHER CONTRACTS,
AGREEMENTS AND OTHER DOCUMENTS INCLUDED IN THE COLLATERAL, TO THE EXTENT SET
FORTH THEREIN, TO PERFORM ALL OF ITS DUTIES AND OBLIGATIONS THEREUNDER TO THE
SAME EXTENT AS IF THIS AGREEMENT HAD NOT BEEN EXECUTED, (II) THE

 

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EXERCISE BY SECURED PARTY OF ANY OF THE RIGHTS HEREUNDER SHALL NOT RELEASE
DEBTOR FROM ANY OF ITS DUTIES OR OBLIGATIONS UNDER ANY PLEDGED COLLATERAL
AGREEMENTS OR OTHER SUCH CONTRACTS, AGREEMENTS AND OTHER DOCUMENTS, AND
(III) SECURED PARTY SHALL NOT HAVE ANY OBLIGATION OR LIABILITY UNDER ANY PLEDGED
COLLATERAL AGREEMENTS OR OTHER SUCH CONTRACTS, AGREEMENTS AND OTHER DOCUMENTS BY
REASON OF THIS AGREEMENT, NOR SHALL SECURED PARTY BE OBLIGATED TO PERFORM ANY OF
THE OBLIGATIONS OR DUTIES OF DEBTOR THEREUNDER OR TO TAKE ANY ACTION TO COLLECT
OR ENFORCE ANY PLEDGED COLLATERAL AGREEMENTS OR OTHER SUCH CONTRACT, AGREEMENT
OR OTHER DOCUMENT.

 

(C)           THIS AGREEMENT SHALL CREATE A CONTINUING SECURITY INTEREST IN THE
COLLATERAL WHICH SHALL REMAIN IN EFFECT UNTIL TERMINATED IN ACCORDANCE WITH
SECTION 18 HEREOF.

 

(D)           ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, IN NO EVENT SHALL
THE COLLATERAL INCLUDE, AND DEBTOR SHALL NOT BE DEEMED TO HAVE GRANTED A
SECURITY INTEREST IN, ANY OF DEBTOR’S RIGHT, TITLE OR INTEREST IN ANY OF THE
OUTSTANDING VOTING CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS OF A CONTROLLED
FOREIGN CORPORATION (AS DEFINED BELOW) IN EXCESS OF 65% OF THE VOTING POWER OF
ALL CLASSES OF CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS OF SUCH CONTROLLED
FOREIGN CORPORATION ENTITLED TO VOTE; PROVIDED THAT (I) IMMEDIATELY UPON THE
AMENDMENT OF THE INTERNAL REVENUE CODE TO ALLOW THE PLEDGE OF A GREATER
PERCENTAGE OF THE VOTING POWER OF CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS IN
A CONTROLLED FOREIGN CORPORATION WITHOUT ADVERSE TAX CONSEQUENCES, THE
COLLATERAL SHALL INCLUDE, AND DEBTOR SHALL BE DEEMED TO HAVE GRANTED A SECURITY
INTEREST IN, SUCH GREATER PERCENTAGE OF CAPITAL STOCK OR OTHER OWNERSHIP
INTERESTS OF EACH CONTROLLED FOREIGN CORPORATION; AND (II) IF NO ADVERSE TAX
CONSEQUENCES TO DEBTOR SHALL ARISE OR EXIST IN CONNECTION WITH THE PLEDGE OF ANY
CONTROLLED FOREIGN CORPORATION, THE COLLATERAL SHALL INCLUDE, AND DEBTOR SHALL
BE DEEMED TO HAVE GRANTED A SECURITY INTEREST IN, SUCH CONTROLLED FOREIGN
CORPORATION. AS USED HEREIN, “CONTROLLED FOREIGN CORPORATION” SHALL MEAN A
“CONTROLLED FOREIGN CORPORATION” AS DEFINED IN THE INTERNAL REVENUE CODE.

 

(E)           SECURED PARTY AGREES THAT, NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, THE SECURITY INTEREST GRANTED HEREIN TO SECURED PARTY IN AND TO
RESTRICTED ACCOUNT NO. 1610630624 HELD AT JPMORGAN CHASE BANK, NA AND THE CASH
AND CASH EQUIVALENTS HELD THEREIN (COLLECTIVELY, THE “RESTRICTED ACCOUNT”) SHALL
BE SUBJECT, SUBORDINATE AND JUNIOR IN ALL RESPECTS TO THE LIENS AND SECURITY
INTERESTS GRANTED TO JPMORGAN CHASE BANK, NA IN THE RESTRICTED ACCOUNT TO SECURE
DEBTOR’S REIMBURSEMENT OBLIGATION AS OF THE DATE HEREOF WITH RESPECT TO A LETTER
OF CREDIT ISSUED BY JPMORGAN CHASE BANK, NA, FOR THE BENEFIT OF TWO LINCOLNSHIRE
OFFICE VENTURE, LLC IN CONNECTION WITH THE COMPANY’S LEASE OF THE PREMISES AT
TWO MARRIOTT DRIVE, LINCOLNSHIRE, ILLINOIS.. THE SUBORDINATIONS AND PRIORITIES
SPECIFIED HEREINABOVE WITH RESPECT TO ANY SUCH COLLATERAL ARE EXPRESSLY
CONDITIONED UPON THE NONAVOIDABILITY AND PERFECTION OF THE LIEN OR SECURITY
INTEREST OF JPMORGAN CHASE BANK, NA AND, IF SUCH LIEN OR SECURITY INTEREST IS
NOT PERFECTED OR IS AVOIDABLE, FOR ANY REASON, THEN THE SUBORDINATIONS AND
RELATIVE PRIORITY AGREEMENTS PROVIDED FOR HEREIN SHALL NOT BE EFFECTIVE AS TO
THE RESTRICTED ACCOUNT. DEBTOR AGREES THAT IMMEDIATELY UPON ANY EVENT OR
CIRCUMSTANCE RESULTING IN THE RELEASE OF THE RESTRICTED ACCOUNT BY JPMORGAN
CHASE BANK, NA. (A) TO CAUSE SUCH PERSON TO TAKE ALL ACTION NECESSARY TO
EVIDENCE SUCH RELEASE IMMEDIATELY UPON THE OCCURRENCE OF SUCH EVENT OR
CIRCUMSTANCE, (B) TO FURNISH TO SECURED PARTY AT LEAST TEN (10) DAYS PRIOR
WRITTEN NOTICE OF ANY ANTICIPATED EVENT OR CIRCUMSTANCE THAT WOULD RESULT IN THE
RELEASE OF THE RESTRICTED ACCOUNT, AND (III) TO COOPERATE WITH SECURED PARTY IN
OBTAINING CONTROL (AS DEFINED IN THE UCC) OF THE RESTRICTED ACCOUNT.

 

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Section 3.   Financing Statements and Other Action.

 

(A)           DEBTOR HEREBY AUTHORIZES SECURED PARTY TO FILE AT ANY TIME AND
FROM TIME TO TIME ANY FINANCING STATEMENTS DESCRIBING THE COLLATERAL, AND DEBTOR
SHALL EXECUTE AND DELIVER TO SECURED PARTY, AND DEBTOR HEREBY AUTHORIZES SECURED
PARTY TO FILE (WITH OR WITHOUT DEBTOR’S SIGNATURE), AT ANY TIME AND FROM TIME TO
TIME, ALL AMENDMENTS TO FINANCING STATEMENTS, ASSIGNMENTS, CONTINUATION
FINANCING STATEMENTS, TERMINATION STATEMENTS, SECURITY AGREEMENTS RELATING TO
INTELLECTUAL PROPERTY COLLATERAL, ACCOUNT CONTROL AGREEMENTS, COLLATERAL ACCESS
AGREEMENTS, LANDLORD WAIVERS AND OTHER DOCUMENTS AND INSTRUMENTS, IN FORM
REASONABLY SATISFACTORY TO SECURED PARTY, AND TO TAKE SUCH OTHER ACTION, IN EACH
CASE AS SECURED PARTY MAY REASONABLY REQUEST, TO PERFECT AND CONTINUE PERFECTION
OF, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF THE SECURITY INTEREST OF
SECURED PARTY IN THE COLLATERAL AND TO ACCOMPLISH THE PURPOSES OF THIS
AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, DEBTOR RATIFIES AND
AUTHORIZES THE FILING BY SECURED PARTY OF (I) ANY FINANCING STATEMENTS FILED
PRIOR TO THE DATE HEREOF, AND (II) ANY FINANCING STATEMENTS DESCRIBING THE
COLLATERAL AS “ALL ASSETS” OR “ALL PERSONAL PROPERTY.”

 

(B)           DEBTOR WILL COOPERATE WITH SECURED PARTY IN OBTAINING CONTROL (AS
DEFINED IN THE UCC) OF COLLATERAL CONSISTING OF DEPOSIT ACCOUNTS, INVESTMENT
PROPERTY, LETTER OF CREDIT RIGHTS AND ELECTRONIC CHATTER PAPER.

 

(C)           UPON REQUEST OF THE SECURED PARTY, DEBTOR WILL JOIN WITH SECURED
PARTY IN NOTIFYING ANY THIRD PARTY WHO HAS POSSESSION OF ANY COLLATERAL OF
SECURED PARTY’S SECURITY INTEREST THEREIN AND OBTAINING AN ACKNOWLEDGMENT FROM
THE THIRD PARTY THAT IT IS HOLDING THE COLLATERAL FOR THE BENEFIT OF SECURED
PARTY; PROVIDED, HOWEVER, THIS SECTION 3(C) SHALL NOT APPLY WITH RESPECT TO
COLLATERAL CONSISTING OF MACHINES USED BY INDIVIDUALS FOR THE PURPOSE OF HOME
HEALTHCARE TREATMENTS.

 

(D)           UPON REQUEST OF SECURED PARTY, DEBTOR (I) SHALL CAUSE CERTIFICATES
TO BE ISSUED IN RESPECT OF ANY UNCERTIFICATED PLEDGED COLLATERAL, (II) SHALL
EXCHANGE CERTIFICATED PLEDGED COLLATERAL FOR CERTIFICATES OF LARGER OR SMALLER
DENOMINATIONS, AND (III) SHALL CAUSE ANY SECURITIES INTERMEDIARIES TO SHOW ON
THEIR BOOKS THAT SECURED PARTY IS THE ENTITLEMENT HOLDER WITH RESPECT TO ANY
PLEDGED COLLATERAL.

 

(E)           UPON REQUEST OF THE SECURED PARTY, DEBTOR WILL NOT CREATE ANY
CHATTEL PAPER WITHOUT PLACING A LEGEND ON THE CHATTEL PAPER ACCEPTABLE TO
SECURED PARTY INDICATING THAT SECURED PARTY HAS A SECURITY INTEREST IN THE
CHATTEL PAPER.

 

Section 4.   Representations and Warranties. Debtor represents and warrants to
Secured Party that:

 

(A)           THIS AGREEMENT CREATES A SECURITY INTEREST WHICH IS ENFORCEABLE
AGAINST THE COLLATERAL IN WHICH DEBTOR NOW HAS RIGHTS, AND WILL CREATE A
SECURITY INTEREST WHICH IS ENFORCEABLE AGAINST THE COLLATERAL IN WHICH DEBTOR
HEREAFTER ACQUIRES RIGHTS AT THE TIME DEBTOR ACQUIRES ANY SUCH RIGHTS; AND
(II) SECURED PARTY HAS A PERFECTED AND FIRST PRIORITY SECURITY INTEREST IN THE
COLLATERAL, IN WHICH DEBTOR NOW HAS RIGHTS, AND WILL HAVE A PERFECTED AND FIRST
PRIORITY SECURITY

 

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INTEREST IN THE COLLATERAL IN WHICH DEBTOR HEREAFTER ACQUIRES RIGHTS AT THE TIME
DEBTOR ACQUIRES ANY SUCH RIGHTS, IN EACH CASE SECURING THE PAYMENT AND
PERFORMANCE OF THE OBLIGATIONS.

 

(B)           DEBTOR’S CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS
(AS OF THE DATE OF THIS AGREEMENT) IS LOCATED AT THE ADDRESS SET FORTH IN
SCHEDULE 1; DEBTOR’S JURISDICTION OF ORGANIZATION AND ORGANIZATIONAL ID NUMBER
IS SET FORTH IN SCHEDULE 1; DEBTOR’S EXACT LEGAL NAME IS AS SET FORTH IN THE
FIRST PARAGRAPH OF THIS AGREEMENT; AND ALL OTHER LOCATIONS WHERE DEBTOR CONDUCTS
BUSINESS OR COLLATERAL IS KEPT (AS OF THE DATE OF THIS AGREEMENT) ARE SET FORTH
IN SCHEDULE 1. ALL TRADE NAMES AND TRADE STYLES UNDER WHICH DEBTOR CONDUCTS ITS
BUSINESS OPERATIONS AS OF THE DATE HEREOF ARE SET FORTH IN SCHEDULE 2, AND,
EXCEPT AS SET FORTH IN SCHEDULE 2, DEBTOR HAS NOT, AT ANY TIME IN THE PAST: 
(I) BEEN KNOWN AS OR USED ANY OTHER CORPORATE, TRADE OR FICTITIOUS NAME;
(II) CHANGED ITS NAME; (III) BEEN THE SURVIVING OR RESULTING CORPORATION IN A
MERGER OR CONSOLIDATION; OR (IV) ACQUIRED THROUGH ASSET PURCHASE OR OTHERWISE
ANY BUSINESS OF ANY PERSON.

 

(C)           DEBTOR HAS RIGHTS IN OR THE POWER TO TRANSFER THE COLLATERAL, AND
DEBTOR IS THE SOLE AND COMPLETE OWNER OF THE COLLATERAL OR HAS THE RIGHT TO USE
THE COLLATERAL PURSUANT TO A VALID AND ENFORCEABLE LICENSE, FREE FROM ANY LIEN
OTHER THAN PERMITTED LIENS.

 

(D)           ALL OF DEBTOR’S UNITED STATES AND FOREIGN PATENTS AND PATENT
APPLICATIONS, COPYRIGHTS (REGISTERED AND MATERIAL UNREGISTERED), APPLICATIONS
FOR COPYRIGHT REGISTRATIONS, TRADEMARKS, SERVICE MARKS AND TRADE NAMES
(REGISTERED AND MATERIAL UNREGISTERED), AND APPLICATIONS FOR REGISTRATION OF
SUCH TRADEMARKS, SERVICE MARKS AND TRADE NAMES, ARE SET FORTH IN SCHEDULE 2.

 

(E)           NO CONTROL AGREEMENTS EXIST WITH RESPECT TO ANY COLLATERAL OTHER
THAN CONTROL AGREEMENTS IN FAVOR OF SECURED PARTY.

 

(F)            DEBTOR DOES NOT HAVE OR HOLD ANY CHATTEL PAPER, LETTER-OF-CREDIT
RIGHTS OR COMMERCIAL TORT CLAIMS EXCEPT AS DISCLOSED IN WRITING TO SECURED
PARTY.

 

(G)           THE NAMES AND ADDRESSES OF ALL FINANCIAL INSTITUTIONS AND OTHER
PERSONS AT WHICH DEBTOR MAINTAINS ITS DEPOSIT AND SECURITIES ACCOUNTS, AND THE
ACCOUNT NUMBERS AND ACCOUNT NAMES OF SUCH ACCOUNTS, ARE SET FORTH IN SCHEDULE 1.

 

(H)           SCHEDULE 3 LISTS DEBTOR’S OWNERSHIP INTERESTS IN EACH OF ITS
SUBSIDIARIES AS OF THE DATE HEREOF.

 

(I)            DEBTOR IS AND WILL BE THE LEGAL RECORD AND BENEFICIAL OWNER OF
ALL PLEDGED COLLATERAL, AND HAS AND WILL HAVE GOOD AND MARKETABLE TITLE THERETO.

 

(J)            EXCEPT AS DISCLOSED IN WRITING TO SECURED PARTY, THERE ARE NO
PLEDGED COLLATERAL AGREEMENTS WHICH AFFECT OR RELATE TO THE VOTING OR GIVING OF
WRITTEN CONSENTS WITH RESPECT TO ANY OF THE PLEDGED COLLATERAL. EACH PLEDGED
COLLATERAL AGREEMENT CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES THERETO
WITH RESPECT TO THE SUBJECT MATTER THEREOF, HAS NOT BEEN AMENDED OR MODIFIED,
AND IS IN FULL FORCE AND EFFECT IN ACCORDANCE WITH ITS TERMS. TO THE BEST
KNOWLEDGE OF DEBTOR, THERE EXISTS NO VIOLATION OR DEFAULT UNDER ANY PLEDGED
COLLATERAL AGREEMENT BY DEBTOR OR THE OTHER PARTIES THERETO. DEBTOR HAS NOT
KNOWINGLY WAIVED OR RELEASED

 

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ANY OF ITS RIGHTS UNDER OR OTHERWISE CONSENTED TO A DEPARTURE FROM THE TERMS AND
PROVISIONS OF ANY PLEDGED COLLATERAL AGREEMENT.

 

(K)           DEBTOR IS NOT AND WILL NOT BECOME A LESSEE UNDER ANY REAL PROPERTY
LEASE OR PARTY TO ANY OTHER AGREEMENT GOVERNING THE LOCATION OF COLLATERAL AT
THE PREMISES OF ANOTHER PERSON PURSUANT TO WHICH THE LESSOR OR SUCH OTHER PERSON
MAY OBTAIN ANY RIGHTS IN ANY OF THE COLLATERAL EXCEPT AS DISCLOSED IN WRITING TO
SECURED PARTY, AND NO SUCH LEASE OR OTHER SUCH AGREEMENT NOW PROHIBITS,
RESTRAINS, IMPAIRS OR WILL PROHIBIT, RESTRAIN OR IMPAIR DEBTOR’S RIGHT TO REMOVE
ANY COLLATERAL FROM THE PREMISES AT WHICH SUCH COLLATERAL IS SITUATED, EXCEPT
FOR THE USUAL AND CUSTOMARY RESTRICTIONS CONTAINED IN SUCH LEASES OF REAL
PROPERTY, AND SUCH OTHER AGREEMENTS.

 

Section 5.   Covenants. So long as any of the Obligations remain unsatisfied,
Debtor agrees that:

 

(A)           DEBTOR SHALL APPEAR IN AND DEFEND ANY ACTION, SUIT OR PROCEEDING
WHICH MAY AFFECT ITS TITLE TO, OR RIGHT OR INTEREST IN, SECURED PARTY’S RIGHT OR
INTEREST IN, THE COLLATERAL, AND SHALL DO AND PERFORM ALL REASONABLE ACTS THAT
MAY BE NECESSARY AND APPROPRIATE TO MAINTAIN, PRESERVE AND PROTECT THE
COLLATERAL.

 

(B)           DEBTOR SHALL COMPLY WITH ALL LAWS, REGULATIONS AND ORDINANCES, AND
ALL POLICIES OF INSURANCE, RELATING TO THE POSSESSION, OPERATION, MAINTENANCE
AND CONTROL OF THE COLLATERAL.

 

(C)           DEBTOR SHALL GIVE PROMPT WRITTEN NOTICE TO SECURED PARTY (AND IN
ANY EVENT NOT LATER THAN TEN (10) DAYS PRIOR TO ANY CHANGE DESCRIBED BELOW IN
THIS SUBSECTION) OF:  (I) ANY CHANGE IN THE LOCATION OF DEBTOR’S CHIEF EXECUTIVE
OFFICE OR PRINCIPAL PLACE OF BUSINESS; (II) ANY CHANGE IN THE LOCATIONS SET
FORTH IN SCHEDULE 1; (III) ANY CHANGE IN ITS NAME; (IV) ANY CHANGES IN ITS
IDENTITY OR STRUCTURE IN ANY MANNER WHICH MIGHT MAKE ANY FINANCING STATEMENT
FILED HEREUNDER INCORRECT OR MISLEADING; AND (V) ANY CHANGE IN ITS JURISDICTION
OF ORGANIZATION; PROVIDED THAT DEBTOR SHALL NOT LOCATE ANY COLLATERAL OUTSIDE OF
THE UNITED STATES NOR SHALL DEBTOR CHANGE ITS JURISDICTION OF ORGANIZATION TO A
JURISDICTION OUTSIDE OF THE UNITED STATES.

 

(D)           DEBTOR SHALL CARRY AND MAINTAIN IN FULL FORCE AND EFFECT, AT ITS
OWN EXPENSE AND WITH FINANCIALLY SOUND AND REPUTABLE INSURANCE COMPANIES (NOT
AFFILIATES OF DEBTOR), INSURANCE WITH RESPECT TO THE COLLATERAL IN SUCH AMOUNTS,
WITH SUCH DEDUCTIBLES AND COVERING SUCH RISKS AS IS CUSTOMARILY CARRIED IN
ACCORDANCE WITH SOUND BUSINESS PRACTICE BY COMPANIES ENGAGED IN THE SAME OR
SIMILAR BUSINESSES AND OWNING SIMILAR PROPERTIES IN THE LOCALITIES WHERE DEBTOR
OPERATES, AND IN ANY EVENT IN AMOUNT, ADEQUACY AND SCOPE SATISFACTORY TO THE
BOARD OF DIRECTORS OF DEBTOR. INSURANCE ON THE COLLATERAL SHALL NAME THE SECURED
PARTY AS ADDITIONAL INSURED AND AS LOSS PAYEE. UPON THE REQUEST OF SECURED
PARTY, DEBTOR SHALL FURNISH SECURED PARTY FROM TIME TO TIME WITH FULL
INFORMATION AS TO THE INSURANCE CARRIED BY IT AND, IF SO REQUESTED, COPIES OF
ALL SUCH INSURANCE POLICIES. DEBTOR SHALL ALSO FURNISH TO SECURED PARTY FROM
TIME TO TIME UPON THE REQUEST OF SECURED PARTY A CERTIFICATE OF DEBTOR’S
INSURANCE BROKER OR OTHER INSURANCE SPECIALIST STATING THAT ALL PREMIUMS THEN
DUE ON THE POLICIES RELATING TO INSURANCE ON THE COLLATERAL HAVE BEEN PAID AND
THAT SUCH POLICIES ARE IN FULL FORCE AND EFFECT. ALL INSURANCE POLICIES REQUIRED
UNDER THIS SUBSECTION (D) SHALL PROVIDE THAT THEY SHALL NOT BE TERMINATED OR
CANCELLED NOR SHALL ANY SUCH POLICY BE MATERIALLY CHANGED WITHOUT AT LEAST 30
DAYS’ PRIOR WRITTEN

 

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NOTICE (OR 10 DAYS’ PRIOR WRITTEN NOTICE IN THE EVENT OF CANCELLATION FOR
NON-PAYMENT OF PREMIUM) TO DEBTOR AND SECURED PARTY. RECEIPT OF NOTICE OF
TERMINATION OR CANCELLATION OF ANY SUCH INSURANCE POLICIES OR REDUCTION OF
COVERAGES OR AMOUNTS THEREUNDER SHALL ENTITLE SECURED PARTY TO RENEW ANY SUCH
POLICIES, CAUSE THE COVERAGES AND AMOUNTS THEREOF TO BE MAINTAINED AT LEVELS
REQUIRED PURSUANT TO THE FIRST SENTENCE OF THIS SUBSECTION (D) OR OTHERWISE TO
OBTAIN SIMILAR INSURANCE IN PLACE OF SUCH POLICIES, IN EACH CASE AT THE EXPENSE
OF DEBTOR. IF THE COLLATERAL SHALL BE MATERIALLY DAMAGED OR DESTROYED, IN WHOLE
OR IN PART, BY FIRE OR OTHER CASUALTY, DEBTOR SHALL GIVE PROMPT NOTICE THEREOF
TO SECURED PARTY. ADDITIONALLY, DEBTOR SHALL IN ANY EVENT PROMPTLY GIVE SECURED
PARTY NOTICE OF ALL REPORTS MADE TO INSURANCE COMPANIES IN RESPECT OF ANY CLAIM
IN EXCESS OF $100,000. NO SETTLEMENT ON ACCOUNT OF ANY LOSS COVERED BY INSURANCE
SHALL BE MADE FOR LESS THAN INSURED VALUE WITHOUT THE CONSENT OF SECURED PARTY.

 

(E)           DEBTOR SHALL KEEP ACCURATE AND COMPLETE BOOKS AND RECORDS WITH
RESPECT TO THE COLLATERAL, DISCLOSING SECURED PARTY’S SECURITY INTEREST
HEREUNDER.

 

(F)            DEBTOR SHALL NOT SURRENDER OR LOSE POSSESSION OF (OTHER THAN TO
SECURED PARTY), SELL, LEASE, OR OTHERWISE DISPOSE OF OR TRANSFER ANY OF THE
COLLATERAL OR ANY RIGHT OR INTEREST THEREIN, EXCEPT AS EXPRESSLY PERMITTED BY
THE LOAN DOCUMENTS.

 

(G)           DEBTOR SHALL KEEP THE COLLATERAL FREE OF ALL LIENS EXCEPT
PERMITTED LIENS.

 

(H)           DEBTOR SHALL PAY AND DISCHARGE ALL TAXES, FEES, ASSESSMENTS AND
GOVERNMENTAL CHARGES OR LEVIES IMPOSED UPON IT WITH RESPECT TO THE COLLATERAL
PRIOR TO THE DATE ON WHICH PENALTIES ATTACH THERETO, EXCEPT TO THE EXTENT SUCH
TAXES, FEES, ASSESSMENTS OR GOVERNMENTAL CHARGES OR LEVIES ARE BEING CONTESTED
IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND ARE ADEQUATELY RESERVED AGAINST IN
ACCORDANCE WITH GAAP.

 

(I)            DEBTOR SHALL MAINTAIN AND PRESERVE ITS LEGAL EXISTENCE, ITS
RIGHTS TO TRANSACT BUSINESS AND ALL OTHER RIGHTS, FRANCHISES AND PRIVILEGES
NECESSARY OR DESIRABLE IN THE NORMAL COURSE OF ITS BUSINESS AND OPERATIONS AND
THE OWNERSHIP OF THE COLLATERAL, EXCEPT IN CONNECTION WITH ANY TRANSACTIONS
EXPRESSLY PERMITTED BY THE LOAN AGREEMENT.

 

(J)            UPON THE REQUEST OF SECURED PARTY, DEBTOR SHALL (I) IMMEDIATELY
DELIVER TO SECURED PARTY, OR ITS DESIGNATED AGENT, APPROPRIATELY ENDORSED OR
ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER OR ASSIGNMENT, ALL DOCUMENTS
AND INSTRUMENTS, ALL CERTIFICATED SECURITIES WITH RESPECT TO ANY PLEDGED
COLLATERAL, ALL LETTERS OF CREDIT AND ALL ACCOUNTS AND OTHER RIGHTS TO PAYMENT
AT ANY TIME EVIDENCED BY PROMISSORY NOTES, TRADE ACCEPTANCES OR OTHER
INSTRUMENTS, AND (II) CAUSE CERTIFICATES TO BE ISSUED IN RESPECT OF ANY
UNCERTIFICATED PLEDGED COLLATERAL, (III) PROVIDE SUCH NOTICE, OBTAIN SUCH
ACKNOWLEDGMENTS AND TAKE ALL SUCH OTHER ACTION, WITH RESPECT TO ANY INVESTMENT
PROPERTY, CHATTEL PAPER, DOCUMENTS AND LETTER-OF CREDIT RIGHTS, AS SECURED PARTY
SHALL REASONABLY SPECIFY.

 

(K)           DEBTOR SHALL:  (I)  WITH SUCH FREQUENCY AS SECURED PARTY MAY
REQUIRE, FURNISH TO SECURED PARTY SUCH LISTS OF CUSTOMERS AND OTHER INFORMATION
RELATING TO THE ACCOUNTS AND OTHER RIGHTS TO PAYMENT AS SECURED PARTY SHALL
REASONABLY REQUEST; (II) GIVE ONLY NORMAL DISCOUNTS, ALLOWANCES AND CREDITS AS
TO ACCOUNTS AND OTHER RIGHTS TO PAYMENT, IN THE ORDINARY COURSE OF BUSINESS,
ACCORDING TO NORMAL TRADE PRACTICES UTILIZED BY DEBTOR, AND ENFORCE ALL

 

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ACCOUNTS AND OTHER RIGHTS TO PAYMENT STRICTLY IN ACCORDANCE WITH THEIR TERMS,
EXCEPT THAT DEBTOR MAY GRANT ANY EXTENSION OF THE TIME FOR PAYMENT OR ENTER INTO
ANY AGREEMENT TO MAKE A REBATE OR OTHERWISE TO REDUCE THE AMOUNT OWING ON OR
WITH RESPECT TO, OR COMPROMISE OR SETTLE FOR LESS THAN THE FULL AMOUNT THEREOF,
ANY ACCOUNT OR OTHER RIGHT TO PAYMENT, IN THE ORDINARY COURSE OF BUSINESS,
ACCORDING TO NORMAL AND PRUDENT TRADE PRACTICES UTILIZED BY DEBTOR; AND
(III) DEBTOR SHALL UPON THE REQUEST OF SECURED PARTY (A) AT ANY TIME, NOTIFY ALL
OR ANY DESIGNATED PORTION OF THE ACCOUNT DEBTORS AND OTHER OBLIGORS ON THE
ACCOUNTS AND OTHER RIGHTS TO PAYMENT OF THE SECURITY INTEREST HEREUNDER, AND
(B) UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
NOTIFY THE ACCOUNT DEBTORS AND OTHER OBLIGORS ON THE ACCOUNTS AND OTHER RIGHTS
TO PAYMENT OR ANY DESIGNATED PORTION THEREOF THAT PAYMENT SHALL BE MADE DIRECTLY
TO SECURED PARTY OR TO SUCH OTHER PERSONS OR LOCATIONS AS SECURED PARTY SHALL
SPECIFY.

 

(L)            DEBTOR SHALL, AT SUCH TIMES AS SECURED PARTY SHALL REASONABLY
REQUEST, PREPARE AND DELIVER TO SECURED PARTY A REPORT OF ALL INVENTORY, IN FORM
AND SUBSTANCE SATISFACTORY TO SECURED PARTY.

 

(M)          DEBTOR SHALL (I) NOTIFY SECURED PARTY OF ANY MATERIAL CLAIM MADE OR
ASSERTED AGAINST THE COLLATERAL BY ANY PERSON AND OF ANY CHANGE IN THE
COMPOSITION OF THE COLLATERAL OR OTHER EVENT WHICH COULD MATERIALLY ADVERSELY
AFFECT THE VALUE OF THE COLLATERAL OR SECURED PARTY’S LIEN THEREON; (II) FURNISH
TO SECURED PARTY SUCH STATEMENTS AND SCHEDULES FURTHER IDENTIFYING AND
DESCRIBING THE COLLATERAL AND SUCH OTHER REPORTS AND OTHER INFORMATION IN
CONNECTION WITH THE COLLATERAL AS SECURED PARTY MAY REASONABLY REQUEST, ALL IN
REASONABLE DETAIL; AND (III) UPON REASONABLE REQUEST OF SECURED PARTY MAKE SUCH
DEMANDS AND REQUESTS FOR INFORMATION AND REPORTS AS DEBTOR IS ENTITLED TO MAKE
IN RESPECT OF THE COLLATERAL.

 

(N)           IF AND WHEN DEBTOR SHALL OBTAIN RIGHTS TO ANY NEW PATENTS,
TRADEMARKS, SERVICE MARKS, TRADE NAMES OR REGISTERED OR MATERIAL UNREGISTERED
COPYRIGHTS, OR OTHERWISE ACQUIRE OR BECOME ENTITLED TO THE BENEFIT OF, OR APPLY
FOR REGISTRATION OF, ANY OF THE FOREGOING, DEBTOR (I) SHALL PROMPTLY NOTIFY
SECURED PARTY, AS THE CASE MAY BE, THEREOF AND (II) HEREBY AUTHORIZES SECURED
PARTY, AS THE CASE MAY BE, TO MODIFY, AMEND, OR SUPPLEMENT SCHEDULE 2 AND FROM
TIME TO TIME TO INCLUDE ANY OF THE FOREGOING AND MAKE ALL NECESSARY OR
APPROPRIATE FILINGS WITH RESPECT THERETO. DEBTOR SHALL PROMPTLY EXECUTE AND
DELIVER APPROPRIATE DOCUMENTS (IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
SECURED PARTY) WITH RESPECT TO ANY SUCH CURRENT OR FUTURE REGISTERED COPYRIGHTS
FOR RECORDING IN THE U.S. COPYRIGHT OFFICE.

 

(O)           WITHOUT LIMITING THE GENERALITY OF SUBSECTION (N), DEBTOR SHALL
NOT REGISTER WITH THE U.S. COPYRIGHT OFFICE ANY UNREGISTERED COPYRIGHTS (WHETHER
IN EXISTENCE ON THE DATE HEREOF OR THEREAFTER ACQUIRED, ARISING, OR DEVELOPED)
UNLESS DEBTOR PROVIDES SECURED PARTY, AS THE CASE MAY BE, WITH WRITTEN NOTICE OF
ITS INTENT TO REGISTER SUCH COPYRIGHTS NOT LESS THAN 30 DAYS PRIOR TO THE DATE
OF THE PROPOSED REGISTRATION.

 

(P)           AT THE REQUEST OF SECURED PARTY, DEBTOR WILL OBTAIN FROM EACH
PERSON FROM WHOM DEBTOR LEASES ANY PREMISES AT WHICH ANY COLLATERAL IS AT ANY
TIME PRESENT SUCH COLLATERAL ACCESS, SUBORDINATION, WAIVER, CONSENT AND ESTOPPEL
AGREEMENTS, AS SECURED PARTY MAY REQUIRE, IN FORM AND SUBSTANCE SATISFACTORY TO
SECURED PARTY.

 

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(Q)           DEBTOR SHALL GIVE SECURED PARTY IMMEDIATE NOTICE OF THE
ACQUISITION OF ANY INSTRUMENTS OR SECURITIES, OR THE ESTABLISHMENT OF ANY NEW
DEPOSIT ACCOUNT OR ANY NEW SECURITIES ACCOUNT WITH RESPECT TO ANY PLEDGED
COLLATERAL.

 

(R)            (I) DEBTOR SHALL COMPLY WITH ALL OF ITS OBLIGATIONS UNDER ANY
PLEDGED COLLATERAL AGREEMENTS TO WHICH IT IS A PARTY AND SHALL ENFORCE ALL OF
ITS RIGHTS THEREUNDER. (II) DEBTOR WILL TAKE ALL ACTIONS NECESSARY TO CAUSE EACH
PLEDGED COLLATERAL AGREEMENT RELATING TO COLLATERAL CONSISTING OF ANY AND ALL
LIMITED LIABILITY AND GENERAL PARTNERSHIP INTERESTS AND LIMITED LIABILITY
COMPANY INTERESTS OF ANY TYPE OR NATURE (“PARTNERSHIP AND LLC COLLATERAL”) TO
PROVIDE SPECIFICALLY AT ALL TIMES THAT: (A) NO PARTNERSHIP AND LLC COLLATERAL
SHALL BE A SECURITY GOVERNED BY ARTICLE 8 OF THE APPLICABLE UNIFORM COMMERCIAL
CODE; AND (B) NO CONSENT OF ANY MEMBER, MANAGER, PARTNER OR OTHER PERSON SHALL
BE A CONDITION TO THE ADMISSION AS A MEMBER OR PARTNER OF ANY TRANSFEREE THAT
ACQUIRES OWNERSHIP OF THE PARTNERSHIP AND LLC COLLATERAL AS A RESULT OF THE
EXERCISE BY SECURED PARTY OF ANY REMEDY HEREUNDER OR UNDER APPLICABLE LAW.
ADDITIONALLY, DEBTOR AGREES THAT NO PARTNERSHIP AND LLC COLLATERAL (A) SHALL BE
DEALT IN OR TRADED ON ANY SECURITIES EXCHANGE OR IN ANY SECURITIES MARKET, (B)
SHALL CONSTITUTE AN INVESTMENT COMPANY SECURITY, OR (C) SHALL BE HELD BY DEBTOR
IN A SECURITIES ACCOUNT. (III) DEBTOR SHALL NOT VOTE TO ENABLE OR TAKE ANY OTHER
ACTION TO:  (A) AMEND OR TERMINATE, OR WAIVE COMPLIANCE WITH ANY OF THE TERMS
OF, ANY PLEDGED COLLATERAL AGREEMENT, CERTIFICATE OR ARTICLES OF INCORPORATION,
BYLAWS OR OTHER ORGANIZATIONAL DOCUMENTS IN ANY WAY THAT CHANGES THE RIGHTS OF
DEBTOR WITH RESPECT TO ANY PARTNERSHIP AND LLC COLLATERAL OR OTHER COLLATERAL
CONSTITUTING INVESTMENT PROPERTY IN A MANNER ADVERSE TO THE SECURED PARTY OR
THAT ADVERSELY AFFECTS THE VALIDITY, PERFECTION OR PRIORITY OF SECURED PARTY’S
SECURITY INTEREST THEREIN.

 

(S)           DEBTOR SHALL IMMEDIATELY NOTIFY SECURED PARTY IF DEBTOR HOLDS OR
ACQUIRES (I) ANY COMMERCIAL TORT CLAIMS, (II) ANY CHATTEL PAPER, INCLUDING ANY
INTEREST IN ANY ELECTRONIC CHATTEL PAPER, OTHER THAN CHATTEL PAPER ARISING IN
THE ORDINARY COURSE OF DEBTOR’S BUSINESS IN CONNECTION WITH LEASES BY DEBTOR TO
ITS CUSTOMERS OF INVENTORY, OR (III) ANY LETTER-OF-CREDIT RIGHTS.

 

(T)            IN THE EVENT THAT DEBTOR ACQUIRES RIGHTS IN ANY SUBSIDIARY AFTER
THE DATE HEREOF, IT SHALL DELIVER TO SECURED PARTY A COMPLETED SUPPLEMENT TO
SCHEDULE 3, REFLECTING SUCH NEW SUBSIDIARY AND DEBTOR SHALL COMPLY WITH THE
SECTION 5.02(M) OF THE LOAN AGREEMENT. NOTWITHSTANDING THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT THE SECURITY INTEREST OF SECURED PARTY SHALL ATTACH
TO ANY SUCH SUBSIDIARY IMMEDIATELY UPON DEBTOR’S ACQUISITION OF RIGHTS THEREIN
AND SHALL NOT BE AFFECTED BY THE FAILURE OF DEBTOR TO DELIVER ANY SUCH
SUPPLEMENT TO SCHEDULE 3 OR TO COMPLY WITH SECTION 5.02(M) OF THE LOAN
AGREEMENT.

 

Section 6.   Rights of Secured Party.

 

(A)           UNTIL SECURED PARTY EXERCISES ITS RIGHTS HEREUNDER TO COLLECT THE
ACCOUNTS AND OTHER RIGHTS TO PAYMENT, DEBTOR SHALL ENDEAVOR IN THE FIRST
INSTANCE DILIGENTLY TO COLLECT ALL AMOUNTS DUE OR TO BECOME DUE ON OR WITH
RESPECT TO THE ACCOUNTS AND OTHER RIGHTS TO PAYMENT. AT THE REQUEST OF SECURED
PARTY, UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT,
ALL REMITTANCES RECEIVED BY DEBTOR SHALL BE HELD IN TRUST FOR SECURED PARTY AND,
IN ACCORDANCE WITH SECURED PARTY’S INSTRUCTIONS, REMITTED TO SECURED PARTY OR
DEPOSITED TO AN ACCOUNT OF SECURED PARTY IN THE FORM RECEIVED (WITH ANY
NECESSARY ENDORSEMENTS OR INSTRUMENTS OF ASSIGNMENT OR TRANSFER).

 

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(B)           AT THE REQUEST OF SECURED PARTY, UPON THE OCCURRENCE AND DURING
THE CONTINUANCE OF ANY EVENT OF DEFAULT, SECURED PARTY SHALL BE ENTITLED TO
RECEIVE ALL DISTRIBUTIONS AND PAYMENTS OF ANY NATURE WITH RESPECT TO ANY PLEDGED
COLLATERAL OR INSTRUMENT COLLATERAL, AND ALL SUCH DISTRIBUTIONS OR PAYMENTS
RECEIVED BY THE DEBTOR SHALL BE HELD IN TRUST FOR SECURED PARTY AND, IN
ACCORDANCE WITH SECURED PARTY’S INSTRUCTIONS, REMITTED TO SECURED PARTY OR
DEPOSITED TO AN ACCOUNT DESIGNATED BY SECURED PARTY IN THE FORM RECEIVED (WITH
ANY NECESSARY ENDORSEMENTS OR INSTRUMENTS OF ASSIGNMENT OR TRANSFER). FURTHER,
UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT ANY SUCH
DISTRIBUTIONS AND PAYMENTS WITH RESPECT TO ANY PLEDGED COLLATERAL HELD IN ANY
SECURITIES ACCOUNT SHALL BE HELD AND RETAINED IN SUCH SECURITIES ACCOUNT, IN
EACH CASE AS PART OF THE COLLATERAL HEREUNDER, AND SECURED PARTY SHALL HAVE THE
RIGHT, FOLLOWING PRIOR WRITTEN NOTICE TO THE DEBTOR, TO VOTE AND TO GIVE
CONSENTS, RATIFICATIONS AND WAIVERS WITH RESPECT TO ANY PLEDGED COLLATERAL AND
INSTRUMENTS, AND TO EXERCISE ALL RIGHTS OF CONVERSION, EXCHANGE, SUBSCRIPTION OR
ANY OTHER RIGHTS, PRIVILEGES OR OPTIONS PERTAINING THERETO, AS IF SECURED PARTY
WERE THE ABSOLUTE OWNER THEREOF; PROVIDED THAT SECURED PARTY SHALL HAVE NO DUTY
TO EXERCISE ANY OF THE FOREGOING RIGHTS AFFORDED TO IT OR THEM AND SHALL NOT BE
RESPONSIBLE TO THE DEBTOR OR ANY OTHER PERSON FOR ANY FAILURE TO DO SO OR DELAY
IN DOING SO.

 

Section 7.   Authorization; Secured Party Appointed Attorney-in-Fact. Secured
Party shall have the right to, in the name of Debtor, or in the name of Secured
Party or otherwise, upon notice to but without the requirement of assent by
Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of
Secured Party’s officers, employees or agents designated by Secured Party) as
Debtor’s true and lawful attorney-in-fact, with full power and authority to:
(i) sign and file any of the financing statements and other documents and
instruments which must be executed or filed to perfect or continue perfected,
maintain the priority of or provide notice of Secured Party’s security interest
in the Collateral (including any notices to or agreements with any securities
intermediary); (ii) assert, adjust, sue for, compromise or release any claims
under any policies of insurance; (iii) give notices of control, default or
exclusivity (or similar notices) under any account control agreement or similar
agreement with respect to exercising control over deposit accounts or securities
accounts; and (iv) execute any and all such other documents and instruments, and
do any and all acts and things for and on behalf of Debtor, which Secured Party
may deem reasonably necessary or advisable to maintain, protect, realize upon
and preserve the Collateral and Secured Party’s security interest therein and to
accomplish the purposes of this Agreement. The foregoing power of attorney is
coupled with an interest and irrevocable so long as the Obligations have not
been paid and performed in full. Secured Party agrees that, except upon and
during the continuance of an Event of Default, the power of attorney, or any
rights granted to Secured Party, pursuant to clauses (ii), (iii) and (iv), shall
not be exercised. Debtor hereby ratifies, to the extent permitted by law, all
that Secured Party shall lawfully and in good faith do or cause to be done by
virtue of and in compliance with this Section 7.

 

Section 8.   Events of Default. Any of the following events which shall occur
and be continuing shall constitute an “Event of Default”:

 

(A)           ANY “EVENT OF DEFAULT” AS DEFINED IN THE LOAN AGREEMENT OR IN ANY
OTHER LOAN DOCUMENT SHALL HAVE OCCURRED AND BE CONTINUING;

 

(B)           ANY MATERIAL IMPAIRMENT IN THE VALUE OF THE COLLATERAL OR ANY
IMPAIRMENT OF THE PRIORITY OF SECURED PARTY’S LIEN HEREUNDER.

 

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(C)           ANY LEVY UPON, SEIZURE OR ATTACHMENT OF ANY OF THE COLLATERAL, THE
AGGREGATE VALUE OF WHICH EXCEEDS $100,000, WHICH SHALL NOT HAVE BEEN RESCINDED
OR WITHDRAWN.

 

(D)           ANY LOSS, THEFT OR SUBSTANTIAL DAMAGE TO, OR DESTRUCTION OF, ANY
MATERIAL PORTION OF THE COLLATERAL (UNLESS WITHIN 10 DAYS AFTER THE OCCURRENCE
OF ANY SUCH EVENT, DEBTOR FURNISHES TO SECURED PARTY EVIDENCE SATISFACTORY TO
SECURED PARTY THAT THE AMOUNT OF ANY SUCH LOSS, THEFT, DAMAGE TO OR DESTRUCTION
OF THE COLLATERAL IS FULLY INSURED UNDER POLICIES NAMING SECURED PARTY AS AN
ADDITIONAL NAMED INSURED OR LOSS PAYEE).

 

Section 9.   Remedies.

 

(A)           UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF
DEFAULT (OR WITH RESPECT TO CLAUSE (VI) BELOW, ANY SPECIFIED DEFAULT), SECURED
PARTY SHALL HAVE, IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES GRANTED TO IT IN
THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT, ALL
RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE UCC AND OTHER APPLICABLE LAWS.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, (I) SECURED PARTY MAY
PEACEABLY AND WITHOUT NOTICE ENTER ANY PREMISES OF DEBTOR, TAKE POSSESSION OF
ANY THE COLLATERAL, REMOVE OR DISPOSE OF ALL OR PART OF THE COLLATERAL ON ANY
PREMISES OF DEBTOR OR ELSEWHERE, OR, IN THE CASE OF EQUIPMENT, RENDER IT
NONFUNCTIONAL, AND OTHERWISE COLLECT, RECEIVE, APPROPRIATE AND REALIZE UPON ALL
OR ANY PART OF THE COLLATERAL, AND DEMAND, GIVE RECEIPT FOR, SETTLE, RENEW,
EXTEND, EXCHANGE, COMPROMISE, ADJUST, OR SUE FOR ALL OR ANY PART OF THE
COLLATERAL, AS SECURED PARTY MAY DETERMINE; (II) SECURED PARTY MAY REQUIRE
DEBTOR TO ASSEMBLE ALL OR ANY PART OF THE COLLATERAL AND MAKE IT AVAILABLE TO
SECURED PARTY AT ANY PLACE AND TIME DESIGNATED BY SECURED PARTY; (III) SECURED
PARTY MAY USE OR TRANSFER ANY OF DEBTOR’S RIGHTS AND INTERESTS IN ANY
INTELLECTUAL PROPERTY COLLATERAL, BY LICENSE, BY SUBLICENSE (TO THE EXTENT
PERMITTED BY AN APPLICABLE LICENSE) OR OTHERWISE, ON SUCH CONDITIONS AND IN SUCH
MANNER AS SECURED PARTY MAY DETERMINE (IV) SECURED PARTY MAY SECURE THE
APPOINTMENT OF A RECEIVER OF THE COLLATERAL OR ANY PART THEREOF (TO THE EXTENT
AND IN THE MANNER PROVIDED BY APPLICABLE LAW); (V) SECURED PARTY MAY SELL,
RESELL, LEASE, USE, ASSIGN, LICENSE, SUBLICENSE, TRANSFER OR OTHERWISE DISPOSE
OF ANY OR ALL OF THE COLLATERAL IN ITS THEN CONDITION OR FOLLOWING ANY
COMMERCIALLY REASONABLE PREPARATION OR PROCESSING (UTILIZING IN CONNECTION
THEREWITH ANY OF DEBTOR’S ASSETS, WITHOUT CHARGE OR LIABILITY TO SECURED PARTY
THEREFOR) AT PUBLIC OR PRIVATE SALE, BY ONE OR MORE CONTRACTS, IN ONE OR MORE
PARCELS, AT THE SAME OR DIFFERENT TIMES, FOR CASH OR CREDIT, OR FOR FUTURE
DELIVERY WITHOUT ASSUMPTION OF ANY CREDIT RISK, ALL AS SECURED PARTY DEEMS
ADVISABLE, AND (VI) SECURED PARTY MAY DELIVER A NOTICE TO ANY DEPOSITORY BANK OR
SECURITIES INTERMEDIARY TO CAUSE A SHIFT OF CONTROL TO SECURED PARTY OF ANY OR
ALL OF DEBTOR’S DEPOSIT ACCOUNTS OR SECURITIES ACCOUNTS AT SUCH BANK OR
SECURITIES INTERMEDIARY AND SUBJECT TO A CONTROL AGREEMENT IN SECURED PARTY’S
FAVOR AND MAY WITHDRAW (OR CAUSE TO BE WITHDRAWN) ANY AND ALL FUNDS AND OTHER
COLLATERAL FROM SUCH DEPOSIT ACCOUNTS OR SECURITIES ACCOUNTS; PROVIDED, HOWEVER,
THAT DEBTOR SHALL BE CREDITED WITH THE NET PROCEEDS OF SALE ONLY WHEN SUCH
PROCEEDS ARE FINALLY COLLECTED BY SECURED PARTY. DEBTOR RECOGNIZES THAT SECURED
PARTY MAY BE UNABLE TO MAKE A PUBLIC SALE OF ANY OR ALL OF THE PLEDGED
COLLATERAL, BY REASON OF PROHIBITIONS CONTAINED IN APPLICABLE SECURITIES LAWS OR
OTHERWISE, AND EXPRESSLY AGREES THAT A PRIVATE SALE TO A RESTRICTED GROUP OF
PURCHASERS FOR INVESTMENT AND NOT WITH A VIEW TO ANY DISTRIBUTION THEREOF SHALL
BE CONSIDERED A COMMERCIALLY REASONABLE SALE. SECURED PARTY SHALL HAVE THE RIGHT
UPON ANY SUCH PUBLIC SALE, AND, TO THE EXTENT PERMITTED BY LAW, UPON ANY SUCH
PRIVATE SALE, TO PURCHASE THE WHOLE OR ANY PART OF THE COLLATERAL SO SOLD, FREE
OF ANY RIGHT OR EQUITY OF REDEMPTION, WHICH RIGHT OR EQUITY OF REDEMPTION DEBTOR
HEREBY RELEASES, TO THE EXTENT PERMITTED

 

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BY LAW. SECURED PARTY SHALL GIVE DEBTOR SUCH NOTICE OF ANY PRIVATE OR PUBLIC
SALES AS MAY BE REQUIRED BY THE UCC OR OTHER APPLICABLE LAW.

 

(B)           FOR THE PURPOSE OF ENABLING SECURED PARTY TO EXERCISE ITS RIGHTS
AND REMEDIES UNDER THIS SECTION 9 OR OTHERWISE IN CONNECTION WITH THIS
AGREEMENT, EFFECTIVE UPON THE OCCURRENCE AND CONTINUANCE OF AN EVENT OF DEFAULT,
DEBTOR HEREBY GRANTS TO SECURED PARTY AN IRREVOCABLE, NON-EXCLUSIVE AND
ASSIGNABLE LICENSE (EXERCISABLE WITHOUT PAYMENT OR ROYALTY OR OTHER COMPENSATION
TO DEBTOR) TO USE, LICENSE OR SUBLICENSE ANY INTELLECTUAL PROPERTY COLLATERAL TO
THE EXTENT SUCH GRANT IS NOT PROHIBITED WITH RESPECT TO SUCH INTELLECTUAL
PROPERTY COLLATERAL.

 

(C)           SECURED PARTY SHALL NOT HAVE ANY OBLIGATION TO CLEAN UP OR
OTHERWISE PREPARE THE COLLATERAL FOR SALE. SECURED PARTY SHALL NOT HAVE ANY
OBLIGATION TO ATTEMPT TO SATISFY THE OBLIGATIONS BY COLLECTING THEM FROM ANY
OTHER PERSON LIABLE FOR THEM, AND SECURED PARTY MAY RELEASE, MODIFY OR WAIVE ANY
COLLATERAL PROVIDED BY ANY OTHER PERSON TO SECURE ANY OF THE OBLIGATIONS, ALL
WITHOUT AFFECTING SECURED PARTY’S RIGHTS AGAINST DEBTOR. DEBTOR WAIVES ANY RIGHT
IT MAY HAVE TO REQUIRE SECURED PARTY TO PURSUE ANY THIRD PERSON FOR ANY OF THE
OBLIGATIONS. SECURED PARTY MAY COMPLY WITH ANY APPLICABLE STATE OR FEDERAL LAW
REQUIREMENTS IN CONNECTION WITH A DISPOSITION OF THE COLLATERAL AND COMPLIANCE
WILL NOT BE CONSIDERED ADVERSELY TO AFFECT THE COMMERCIAL REASONABLENESS OF ANY
SALE OF THE COLLATERAL. SECURED PARTY MAY SELL THE COLLATERAL WITHOUT GIVING ANY
WARRANTIES AS TO THE COLLATERAL. SECURED PARTY MAY SPECIFICALLY DISCLAIM ANY
WARRANTIES OF TITLE OR THE LIKE. THIS PROCEDURE WILL NOT BE CONSIDERED ADVERSELY
TO AFFECT THE COMMERCIAL REASONABLENESS OF ANY SALE OF THE COLLATERAL. IF
SECURED PARTY SELLS ANY OF THE COLLATERAL UPON CREDIT, DEBTOR WILL BE CREDITED
ONLY WITH PAYMENTS ACTUALLY MADE BY THE PURCHASER, RECEIVED BY SECURED PARTY AND
APPLIED TO THE INDEBTEDNESS OF THE PURCHASER. IN THE EVENT THE PURCHASER FAILS
TO PAY FOR THE COLLATERAL, SECURED PARTY MAY RESELL THE COLLATERAL, AND DEBTOR
SHALL BE CREDITED WITH THE PROCEEDS OF THE SALE.

 

(D)           TO THE EXTENT DEBTOR USES THE PROCEEDS OF ANY OF THE OBLIGATIONS
TO PURCHASE COLLATERAL, DEBTOR’S REPAYMENT OF THE OBLIGATIONS SHALL APPLY ON A
“FIRST-IN, FIRST-OUT” BASIS SO THAT THE PORTION OF THE OBLIGATIONS USED TO
PURCHASE A PARTICULAR ITEM OF COLLATERAL SHALL BE PAID IN THE CHRONOLOGICAL
ORDER THE DEBTOR PURCHASED THE COLLATERAL.

 

(E)           THE CASH PROCEEDS ACTUALLY RECEIVED FROM THE SALE OR OTHER
DISPOSITION OR COLLECTION OF COLLATERAL, AND ANY OTHER AMOUNTS RECEIVED IN
RESPECT OF THE COLLATERAL THE APPLICATION OF WHICH IS NOT OTHERWISE PROVIDED FOR
HEREIN, SHALL BE APPLIED FIRST, TO THE PAYMENT OF THE FEES, COSTS AND EXPENSES
OF SECURED PARTY IN EXERCISING OR ENFORCING ITS RIGHTS HEREUNDER AND IN
COLLECTING OR ATTEMPTING TO COLLECT ANY OF THE COLLATERAL, AND TO THE PAYMENT OF
ALL OTHER AMOUNTS PAYABLE TO SECURED PARTY WITH RESPECT TO THE LOAN DOCUMENTS
(OTHER THAN PRINCIPAL AND INTEREST); AND SECOND, TO THE PAYMENT OF THE
OBLIGATIONS. ANY SURPLUS THEREOF WHICH EXISTS AFTER PAYMENT AND PERFORMANCE IN
FULL OF THE OBLIGATIONS SHALL BE PROMPTLY PAID OVER TO DEBTOR OR OTHERWISE
DISPOSED OF IN ACCORDANCE WITH THE UCC OR OTHER APPLICABLE LAW. DEBTOR SHALL
REMAIN LIABLE TO SECURED PARTY FOR ANY DEFICIENCY WHICH EXISTS AFTER ANY SALE OR
OTHER DISPOSITION OR COLLECTION OF COLLATERAL.

 

Section 10.   Certain Waivers. Debtor waives, to the fullest extent permitted by
law, (i) any right of redemption with respect to the Collateral, whether before
or after sale hereunder, and all rights, if any, of marshalling of the
Collateral or other collateral or security for

 

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the Obligations; (ii) any right to require Secured Party (A) to proceed against
any Person, (B) to exhaust any other collateral or security for any of the
Obligations, (C) to pursue any remedy in Secured Party’s power, or (D) to make
or give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any of
the Collateral; and (iii) all claims, damages, and demands against Secured Party
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral.

 

Section 11.   Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified; (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day; (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) two (2) days after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the parties hereto at their
respective addresses or facsimile numbers set forth below their names on the
signature pages hereof, or, in all cases, as notified by such party from time to
time at least ten (10) days prior to the effectiveness of such notice.

 

Section 12.   No Waiver; Cumulative Remedies. No failure on the part of Secured
Party to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Secured Party.

 

Section 13.   Binding Effect. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by Debtor, Secured Party and their respective
successors and assigns. Debtor may not assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder without
the prior express written consent of Secured Party. Any such purported
assignment, transfer, hypothecation or other conveyance by Debtor without the
prior express written consent of Secured Party shall be void. Debtor
acknowledges and agrees that in connection with an assignment of, or grant of a
participation in, the Obligations, Secured Party may assign, or grant
participations in, all or a portion of its rights and obligations hereunder.
Upon any assignment of Secured Party’s rights hereunder, such assignee or
assignees shall have, to the extent of such assignment, all rights of Secured
Party hereunder. Debtor agrees that, upon any such assignment, such assignee may
enforce directly, without joinder of Secured Party, the rights of Secured Party
set forth in this Agreement. Any such assignee shall be entitled to enforce
Secured Party’s rights and remedies under this Agreement to the same extent as
if it were an original secured party named herein.

 

Section 14.   Governing Law; Waiver of Jury Trial; Submission to Jurisdiction.

 

(a)           This Agreement shall be construed in accordance with and governed
by the internal laws of the State of New York (as permitted by Section 5-1401 of
the New York General Obligations Law (or any similar successor provision))
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the

 

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INTERNAL LAWS OF THE STATE OF NEW YORK TO THE RIGHTS AND DUTIES OF THE PARTIES,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY
OR PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
NEW YORK.

 

(B)           THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, THIS WAIVER BEING A MATERIAL INDUCEMENT FOR EACH SUCH PARTY TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

(C)           FOR PURPOSES OF ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE ENFORCEMENT OF ANY
PROVISION OF THIS AGREEMENT OR THE LOAN DOCUMENTS, EACH PARTY HERETO HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSES OF ANY SUCH SUIT, ACTION OR LEGAL PROCEEDING, INCLUDING TO ENFORCE ANY
SETTLEMENT, ORDER OR AWARD; AND AGREES THAT SUCH STATE AND FEDERAL COURTS SHALL
BE DEEMED TO BE A CONVENIENT FORUM; AND WAIVES AND AGREES NOT TO ASSERT (BY WAY
OF MOTION, AS A DEFENSE OR OTHERWISE), IN ANY SUCH LEGAL PROCEEDING COMMENCED IN
SUCH COURT ANY CLAIM THAT SUCH PARTY IS NOT SUBJECT PERSONALLY TO THE
JURISDICTION OF SUCH COURT, THAT SUCH LEGAL PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF SUCH PROCEEDING IS IMPROPER OR THAT THE
LOAN DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE ENFORCED IN OR BY SUCH
COURT.

 

(D)           EACH PARTY HERETO AGREES TO THE ENTRY OF AN ORDER TO ENFORCE ANY
RESOLUTION, SETTLEMENT, ORDER OR AWARD MADE PURSUANT TO THIS SECTION BY THE
COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IN
CONNECTION THEREWITH HEREBY WAIVES, AND AGREES NOT TO ASSERT BY WAY OF MOTION,
AS A DEFENSE, OR OTHERWISE, ANY CLAIM THAT SUCH RESOLUTION, SETTLEMENT, ORDER OR
AWARD IS INCONSISTENT WITH OR VIOLATIVE OF THE LAWS OR PUBLIC POLICY OF THE LAWS
OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION.

 

Section 15.   Entire Agreement; Amendment. This Agreement and the other Loan
Documents contain the entire agreement of the parties with respect to the
subject matter hereof and supersede any prior agreements, commitments, drafts,
communication, discussions and understandings, oral or written, with respect
thereto. No amendment to this Agreement, or any waiver of any provision hereof,
shall be effective unless it is in writing and signed by the Secured Party and
(in the case of any amendment) the Debtor. Any such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

Section 16.   Severability. If any provision of this Agreement shall be
prohibited by or invalid under any applicable law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid

 

14

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only to the extent of such prohibition or invalidity without affecting the
remaining provisions of this Agreement, or the validity or effectiveness of such
provision in any other jurisdiction.

 

Section 17.   Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.

 

Section 18.   Termination. Upon payment and performance in full of all
Obligations (other than inchoate indemnity obligations and any other obligations
which by their terms are to survive the termination of the Loan Documents), the
security interest created under this Agreement shall terminate and Secured Party
shall promptly execute and deliver to Debtor such documents and instruments
reasonably requested by Debtor as shall be necessary to evidence termination of
all security interests given by Debtor to Secured Party hereunder.

 

 

[Signature Pages Following]

 

15

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

 

 

DEBTOR:

 

 

 

AKSYS, LTD.

 

 

 

 

 

By

/s/ Laurence P. Birch

 

 

 

Name: Laurence P. Birch

 

 

Title: CEO

 

 

 

Address:

 

 

 

Two Marriot Drive

 

Lincolnshire, IL 60069

 

Attn:

 

 

 

Fax: 847-229-2080

 

 

 

With a copy to:

 

 

 

Keith S. Crow P.C.

 

Kirkland & Ellis LLP

 

200 East Randolph Drive

 

Chicago, Illinois 60601

 

Fax: 312-861-2200

 

s-1

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SECURED PARTY:

 

 

 

DURUS LIFE SCIENCES MASTER
FUND LTD.

 

 

 

By

/s/ Leslie Lake

 

 

 

Name: Leslie Lake

 

 

Title: Director

 

 

 

Address:

 

 

 

Durus Life Sciences Master Fund Ltd.

 

c/o International Fund Services (Ireland) Ltd.

 

3rd Floor, Bishops Square

 

Redmonds Hill

 

Dublin 2, Ireland

 

Attention: Susan Byrne

 

Fax: (011) 35-31-707-5013

 

 

 

 

 

With a copy to:

 

 

 

Gavin Grover, Esq.

 

Morrison & Foerster LLP

 

425 Market Street

 

San Francisco, California 94105 

 

Fax: 415-269-7522

 

 

 

And with a copy to:

 

 

 

Paul N. Roth, Esq.

 

Schulte, Roth & Zabel

 

919 Third Avenue

 

New York, New York 10022

 

Fax: 212-593-5955

 

s-2

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SCHEDULE 1
to the Security Agreement

 

1.             Jurisdiction of Organization

 

 

2.             Organizational ID Number

 

 

3.             Chief Executive Office and Principal Place of Business

 

 

4.             Other locations where Debtor conducts business or Collateral is
kept

 

 

5.             Deposit Accounts and Security Accounts

 

1

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SCHEDULE 2
to the Security Agreement

 

1.             Patents and Patent Applications.

 

 

2.             Copyrights (Registered and Unregistered) and Copyright
Applications.

 

 

3.             Trademarks, Service Marks and Trade Names and Trademark, Service
Mark and Trade Name Applications.

 

2

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SCHEDULE 3
to the Security Agreement

 

PLEDGED SUBSIDIARIES

 

1.             Pledged Collateral consisting of interests in each limited
liability company that is a subsidiary of Debtor as follows:

 

Subsidiary

 

Number of Units

 

Date of Issuance of Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.             Pledged Collateral consisting of interests in each general
partnership, limited partnership, limited liability partnership or other
partnership that is a subsidiary of Debtor as follows:

 

Subsidiary

 

Type of
Partnership Interest
(e.g., general,
limited)

 

Date of Issuance
or Formation

 

Number of Units or
Other Ownership
Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.             Pledged Collateral consisting of capital stock of each corporate
subsidiary of Debtor being represented by stock certificates as follows:

 

Subsidiary

 

Certificate No.

 

Certificate Date

 

No. and Class
of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

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