Exhibit 10.6

 

 
PLEDGE AND SECURITY AGREEMENT
 
AMONG

 
NEUTRON ENERGY, INC.

 
AND

 
URANIUM RESOURCES, INC.

 

 
DATED AS OF MARCH 1, 2012
 
 
 

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

 
 
TABLE OF CONTENTS
 
Page
 
ARTICLE 1.
DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND PRIORITY
1
Section 1.1
Credit Agreement
1
Section 1.2
UCC
1
Section 1.3
Other Defined Terms
2
Section 1.4
Other Definitions; Interpretation
5
ARTICLE 2.
GRANT OF SECURITY
5
Section 2.1
Grant of Security
5
Section 2.2
Security for Secured Obligations
7
Section 2.3
No Assumption of Liability
7
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES AND COVENANTS
7
Section 3.1
Generally
7
Section 3.2
Equipment and Inventory
9
Section 3.3
Receivables
10
Section 3.4
Investment-Related Property
11
Section 3.5
Letter-of-Credit Rights
14
Section 3.6
Commercial Tort Claims
14
Section 3.7
Financing Statements
14
ARTICLE 4.
FURTHER ASSURANCES; FILING AUTHORIZATION
15
Section 4.1
Further Assurances
15
Section 4.2
Filings
15
ARTICLE 5.
REMEDIES UPON DEFAULT
15
Section 5.1
Remedies Generally
15
Section 5.2
Application of Proceeds of Collateral
17
Section 5.3
Investment-Related Property
18
Section 5.4
Registration, etc
18
Section 5.5
Deficiency
19
ARTICLE 6.
CONCERNING THE LENDER
19
Section 6.1
In General
19
Section 6.2
Lender Appointed Attorney-in-Fact
19
Section 6.3
Reimbursement of Lender
20
ARTICLE 7.
WAIVERS; AMENDMENTS
21
ARTICLE 8.
SECURITY INTEREST ABSOLUTE
21

 
 
-i-

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

 

ARTICLE 9.
TERMINATION; RELEASE
21
Section 9.1
Termination
21
Section 9.2
Other Releases of Collateral
22
ARTICLE 10.
NOTICES
22
ARTICLE 11.
BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS
22
ARTICLE 12.
SURVIVAL OF AGREEMENT; SEVERABILITY
23
ARTICLE 13.
MISCELLANEOUS
23
Section 13.1
GOVERNING LAW
23
Section 13.2
Counterparts; Integration
23
Section 13.3
Headings
23
Section 13.4
Jurisdiction; Venue; Consent to Service of Process
23
Section 13.5
WAIVER OF JURY TRIAL
24
Section 13.6
Reinstatement
24
Section 13.7
Intercreditor Agreement
24

 
 
-ii-

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

 
 
SCHEDULES:
 
Schedule 3.2(a)
Collateral Locations
Schedule 3.4
List of Investment-Related Property
Schedule 3.5
Letter-of-Credit Rights
Schedule 3.6
Commercial Tort Claims
Schedule 3.7(a)
Financing Statements
Schedule 3.7(b)
Applicable Filing Offices

 
-iii-

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

 
 
This PLEDGE AND SECURITY AGREEMENT, dated as of March 1, 2012, is by and between
NEUTRON ENERGY, INC., a Nevada corporation (the “Borrower”), and URANIUM
RESOURCES, INC., a Delaware corporation (the “Lender”), under the Credit
Agreement referred to in the next paragraph (as amended, supplemented or
otherwise modified from time to time, the “Security Agreement”).
 
RECITALS
 
A.           Reference is made to the Credit and Funding Agreement even dated
herewith among the Borrower, Cibola Resources LLC and the Lender (as the same
may be amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”).
 
B.           The Lender has agreed to make Funding Loans to the Borrower or for
the joint account of the Borrower and one or more Subsidiaries pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement.  The Borrower acknowledges that it and its Subsidiaries’ business is
a mutual and collective enterprise and that the Funding Loans and other
financial accommodations made under the Loan Documents will enhance the credit
availability to the Borrower and facilitate its loan relationship with the
Lender, all to the advantage of the Borrower.
 
C.           The Borrower acknowledges that it will derive substantial direct
and indirect benefit from the making of the Funding Loans.
 
D.           This Security Agreement is given by the Borrower in favor of the
Lender for the benefit of the Secured Parties (as hereinafter defined) to secure
the payment and performance of all of the Secured Obligations (as hereinafter
defined).
 
E.           The execution and delivery by the Borrower of this Security
Agreement is a condition precedent to the effectiveness of the Credit Agreement,
and the Lender would not have entered into the Credit Agreement if the Borrower
had not executed and delivered this Security Agreement.
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the Borrower and the Lender, on behalf of itself and each other Secured Party
(and each of their respective successors or assigns), hereby agree as follows:
 
ARTICLE 1.               
 
DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND PRIORITY
 
Section 1.1 Credit Agreement.  Capitalized terms used in this Security Agreement
and not otherwise defined herein have the meanings set forth in the Credit
Agreement.
 
Section 1.2 UCC.  Unless otherwise defined herein or in the Credit Agreement,
capitalized terms used herein that are defined in the UCC (as defined below)
have the meanings assigned to them in the UCC, including the following:
“Accounts”; “Chattel Paper”; “Documents”; “Fixtures”; “General Intangibles”;
“Goods”; “Instruments”; “Inventory”; “Investment Property”; Letter-of-Credit
Rights”; “Letters of Credit”; “Proceeds”; “Records”; “Security”; “Security
Certificate” and “Supporting Obligations”.
 
 
 

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

 
 
Section 1.3 Other Defined Terms.  As used in this Security Agreement, the
following terms have the meanings specified below:
 
“Account Debtor” means each Person who is obligated in respect of any Receivable
or any Supporting Obligation or Collateral Support relating thereto.
 
“Applicable Date” means the date hereof.
 
“Applicable Filing Offices” means the filing offices set forth on Schedule
3.7(b).
 
“Authorization” means, collectively, any license, approval, permit or other
authorization issued by any Governmental Authority.
 
“Borrower” has the meaning assigned to such term in the Preamble.
 
“Claim Proceeds” means, with respect to any Commercial Tort Claim or any
Collateral Support or Supporting Obligation relating thereto, all Proceeds
thereof, including all insurance proceeds and other amounts and recoveries
resulting or arising from the settlement or other resolution thereof, in each
case regardless of whether characterized as a “commercial tort claim” under
Article 9 of the UCC or “proceeds” under the UCC.
 
“Collateral” has the meaning assigned to such term in Section 2.1.
 
“Collateral Records” means all books, instruments, certificates, Records, ledger
cards, files, correspondence, customer lists, blueprints, models, drawings,
technical specifications, manuals, warranties and other documents, and all
computer software, computer printouts, tapes, disks and related data processing
software and similar items, in each case that at any time represent, cover or
otherwise evidence, or contain information relating to, any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon.
 
“Collateral Support” means all property (real or personal) assigned,
hypothecated or otherwise securing any of the Collateral, and shall include any
security agreement or other agreement granting a lien or security interest in
such real or personal property.
 
“Commercial Tort Claims” means all “commercial tort claims” as defined in
Article 9 of the UCC and all Claim Proceeds; including all claims described on
Schedule 3.6 hereto.
 
“Credit Agreement” has the meaning assigned to such term in the Recitals.
 
“Equipment” means any “equipment,” as such term is defined in the UCC and, in
any event, shall include, Motor Vehicles.
 
“Equity Interests” means (a) shares of corporate stock, partnership interests,
membership interests and any other interest that convers on a Person the right
to receive a share of the profits and losses of, or a distribution of the assets
of, the issuing person and (b) all warrants, options or other rights to acquire
any Equity Interest set forth in clause (a) of this defined term.
 
“Excluded Accounts” means zero balance, payroll, payroll taxes, withholding tax,
employee wage and benefit payments and other tax and employee fiduciary
accounts.
 
 
-2-

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

 
 
“Federal Securities Laws” has the meaning assigned to such term in Section 5.3.
 
“Financing Statements” means the UCC-1 Financing Statements in the forms
attached hereto as Schedule 3.7(a) in the Applicable Filing Offices.
 
“Insurance” means all insurance policies covering any or all of the Collateral
(regardless of whether the Lender or any other Secured Party is the loss payee
thereof) and all business interruption insurance policies.
 
“Investment-Related Property” means (a) all Pledged Collateral and (b) all other
Investment Property owned or held by or on behalf of the Borrower.
 
“Material Commercial Tort Claims” means, with respect to the Borrower, (a) all
Commercial Tort Claims asserted by it, or on its behalf, in writing, and (b)
each Commercial Tort Claim in excess of $25,000 individually, or $150,000 in the
aggregate, to which it has any right, title or interest and of which it is
aware.
 
“Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like
property, whether or not the title thereto is governed by a certificate of title
or ownership.
 
“Person” means any corporation, limited liability company, trust, joint venture,
association, company, partnership or other entity.
 
“Pledged Collateral” means, collectively, the Pledged Debt and the Pledged
Equity Interests.
 
“Pledged Debt” means all debt owed or owing to the Borrower, including all such
debt described on Part C of Schedule 3.4, all Pledged Debt Securities and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such debt. Notwithstanding the foregoing, the parties acknowledge
and agree that while Receivables with respect to Accounts constitute “Pledged
Debt” as defined herein, such Receivables shall not be required to be included
on Part C of Schedule 3.4.  The parties further agree that the exclusion of
Receivables from Part C of Schedule 3.4 in no way excludes such debt owed from
the definition of “Pledged Debt.”
 
“Pledged Debt Securities” means, collectively, (a) all debt Securities held by
the Borrower, whether now owned or hereafter acquired (including all such debt
Securities listed in Part C of Schedule 3.4), and (b) all promissory notes and
any other instruments evidencing such Debt Securities.
 
“Pledged Equity Interests” means, collectively, all Equity Interests owned by
the Borrower in each, in each case whether now owned or hereafter created or
acquired, together with all Security Certificates evidencing such Equity
Interests, including (i) in the case of certificated Equity Interests
constituting Securities, the Equity Interests listed in Part A of Schedule 3.4
and (ii) in the case of Equity Interests constituting Uncertificated Securities,
Uncertificated Limited Liability Company Interests and Uncertificated
Partnership Interests, the Equity Interests listed in Part B of Schedule 3.4.
 
“Receivables” means all rights to payment, whether or not earned by performance,
for goods or other property sold, leased, licensed, assigned or otherwise
disposed of, or services rendered or to be rendered, including all such rights
constituting or evidenced by any Account, Chattel Paper, Instrument or other
document, General Intangible or Investment-Related Property, together with all
of the Borrower’s rights, if any, in any goods or other property giving rise to
such right to payment, and all Collateral Support and Supporting Obligations
relating thereto and all Receivables Records.
 
 
-3-

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

 
 
“Receivables Records” means (a) all originals of all documents, instruments or
other writings or electronic records or other Records evidencing any Receivable,
(b) all books, correspondence, credit or other files, Records, ledger sheets or
cards, invoices, and other papers relating to any Receivable, including all
tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems and other papers and documents relating to any Receivable, whether in
the possession or under the control of the Borrower or any computer bureau or
agent from time to time acting for the Borrower or otherwise, (c) all evidences
of the filing of Financing Statements and the registration of other instruments
in connection therewith, and amendments, supplements or other modifications
thereto, notices to other creditors or secured parties, and certificates,
acknowledgments, or other writings, including lien search reports, from filing
or other registration officers, (d) all credit information, reports and
memoranda relating thereto, and (e) all other written forms of information
related in any way to the foregoing or any Receivable.
 
“Secured Obligations” means, collectively, (a) the unpaid principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Funding
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) all other monetary obligations, fees,
commissions, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties, or that are otherwise payable to the
Lender, in each case under the Loan Documents and (c) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Borrower or any other party (other than the Lender) under or pursuant to the
Loan Documents.
 
“Secured Parties” means (a) the Lender, (b) the beneficiaries of each
indemnification obligation undertaken by or on behalf of the Borrower under any
Loan Document, and (c) the successors and assigns of each of the foregoing.
 
“Security Interest” has the meaning assigned to such term in Section 2.1.
 
“Supporting Obligations” means (a) all “supporting obligations” as defined in
Article 9 of the UCC and (b) all Guarantees and other secondary obligations
supporting any of the Collateral, in each case regardless of whether
characterized as a “supporting obligation” under the UCC.
 
“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of Nevada; provided, however, that, at any time, if by reason of
mandatory provisions of law, any or all of the perfection or priority of the
Lender’s and the Secured Parties’ security interest in any item or portion of
the Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Nevada, the term “UCC” shall mean the
Uniform Commercial Code as in effect, at such time, in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or priority
and for purposes of definitions relating to such provisions.
 
“Uncertificated Equity Interests” means, collectively, Uncertificated Limited
Liability Company Interests, Uncertificated Partnership Interests and
Uncertificated Securities.
 
 
-4-

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

 
 
“Uncertificated Limited Liability Company Interest” means a limited liability
company membership interest at any time owned by the Borrower in any Subsidiary
which is a limited liability company and which limited liability company
membership interest is not a Security and not represented by a Security
Certificate.
 
“Uncertificated Partnership Interest” means a general partnership interest or
limited partnership interest at any time owned by the Borrower in any Subsidiary
which is a limited partnership and which general partnership interest or limited
partnership interest is not a Security and not represented by a Security
Certificate.
 
“Uncertificated Security” means an Equity Interest constituting a Security at
any time owned by the Borrower in any Subsidiary, which Equity Interest is not
represented by a Security Certificate.
 
Section 1.4 Other Definitions; Interpretation.
 
(a) Rules of Interpretation.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include,” “includes” and “including”
shall be deemed to be followed by the phrase “without limitation.”  The word
“will” shall be construed to have the same meaning and effect as the word
“shall.”  Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) the words “herein,” “hereof” and
“hereunder,” and words of similar import, shall be construed to refer to this
Security Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Security Agreement, (e) any reference to any law or regulation herein
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (f) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights. All references herein to provisions of
the UCC shall include all successor provisions under any subsequent version or
amendment to any Article of the UCC.
 
(b) Resolution of Drafting Ambiguities.  The Borrower acknowledges and agrees
that it was represented by counsel in connection with the execution and delivery
of this Security Agreement, that it and its counsel reviewed and participated in
the preparation and negotiation of this Security Agreement and that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation hereof.
 
ARTICLE 2.
 
GRANT OF SECURITY
 
Section 2.1 Grant of Security.
 
 
-5-

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

 
 
(a) As security for the payment or performance, as applicable, in full when due
(whether at the stated maturity, by acceleration or otherwise) of the Secured
Obligations, the Borrower hereby bargains, sells, conveys, assigns, sets over,
mortgages, pledges, hypothecates and transfers to the Lender (and its successors
and assigns), and hereby grants to the Lender (and its successors and assigns) a
security interest (the “Security Interest”) in, all personal property and
fixtures of the Borrower, including all of the Borrower’s right, title and
interest in, to and under the following, in each case whether now owned or
existing or hereafter acquired or arising and wherever located (all of which
being hereinafter collectively referred to as the “Collateral”):
 
(i) all Accounts,
 
(ii) all Chattel Paper (whether tangible or electronic),
 
(iii) all Commercial Tort Claims,
 
(iv) all Documents,
 
(v) all Equipment,
 
(vi) all Fixtures,
 
(vii) all General Intangibles,
 
(viii) all Goods, not covered by the other clauses of this Section 2.1(a),
 
(ix) all Instruments, including the Pledged Debt Securities,
 
(x) all Insurance,
 
(xi) all Inventory,
 
(xii) all Investment-Related Property,
 
(xiii) all cash and cash equivalents,
 
(xiv) all Letters of Credit and Letter-of-Credit Rights,
 
(xv) all Proceeds of Authorizations and, subject to the provisions of Section
2.1(c), all Authorizations and the goodwill associated with all Authorizations,
 
(xvi) all Receivables and Receivables Records,
 
(xvii) all other goods and other personal property of the Borrower,
 
(xviii) to the extent not otherwise included in clauses (i) through (xvii) of
this Section, all Collateral Records, Collateral Support and Supporting
Obligations in respect of any of the foregoing, and
 
(xix) to the extent not otherwise included in clauses (i) through (xvii) of this
Section, all Proceeds, products, substitutions, accessions, rents and profits of
or in respect of any of the foregoing, whether cash or non-cash, immediate or
remote, and any indemnities, warranties and guaranties payable by reason of loss
or damage to or otherwise with respect to any of the foregoing.
 
 
-6-

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

 
 
(b) Revisions to UCC.  For the avoidance of doubt, it is expressly understood
and agreed that, to the extent the UCC is revised after the date hereof such
that the definition of any of the foregoing terms included in the description or
definition of the Collateral is changed, the parties hereto desire that any
property which is included in such changed definitions, but which would not
otherwise be included in the Security Interest on the date hereof, nevertheless
be included in the Security Interest upon the effective date of such revision.
Notwithstanding the immediately preceding sentence, the Security Interest is
intended to apply immediately on the Applicable Date to all of the Collateral to
the fullest extent permitted by applicable law, regardless of whether any
particular item of the Collateral was then subject to the UCC.
 
(c) Certain Limited Exclusions.  Notwithstanding anything in this Section 2.1 to
the contrary, in no event shall the Collateral include, and the Borrower shall
be deemed to not have granted a Security Interest in, (i) any right under any
Authorization, lease, license or other contract or agreement, but only to the
extent that the granting of a security interest therein or an assignment thereof
would violate any applicable law or would result in an invalidation thereof or
constitute a breach or violation of such lease, license or other contract or
agreement, as applicable (other than any contractual prohibition on the
assignment of accounts or payment intangibles that is unenforceable under
Section 9-406, 9-407, 9-408, or 9-409 of the UCC or any other section under the
UCC or any other applicable law), provided that to the extent such security
interest at any time hereafter shall no longer be prohibited by law or
agreement, and/or immediately upon such provision no longer being enforceable,
as the case may be, the Collateral shall automatically and without any further
action include, and the Borrowers shall be deemed to have granted automatically
and without any further action a Security Interest in, such right as if such law
or agreement had never existed or such provision had never been enforceable, as
the case may be, (ii) any margin stock, (iii) any assets as to which the Lender
and the Borrower agree in writing that (A) the cost of obtaining a security
interest is excessive in relation to the value of the security to be afforded
thereby or (B) obtaining such security interest is not commercially practical,
(iv) Excluded Accounts and (v) any Investment Property, or any General
Intangibles to the extent, in each case, that (1) a security interest may not be
granted by the Borrower in such directly held investment property or general
intangibles as a matter of law, or under the terms of the governing document
applicable thereto, without the consent of one or more applicable parties
thereto and (2) such consent has not been obtained.
 
Section 2.2 Security for Secured Obligations.  This Security Agreement secures,
and the Collateral is collateral security for, the prompt and complete payment
or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of Title 11 of the United States Code, or any similar
provision of any other bankruptcy, insolvency, receivership or other similar
law), of all Secured Obligations.
 
Section 2.3 No Assumption of Liability.  Notwithstanding anything to the
contrary herein, the Security Interest is granted as security only and shall not
subject the Lender or any other Secured Party to, or in any way alter or modify,
any obligation or liability of the Borrower with respect to or arising out of
the Collateral.
 
 
-7-

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

 
 
ARTICLE 3.
 
REPRESENTATIONS AND WARRANTIES AND COVENANTS
 
Section 3.1 Generally.
 
(a) Representations and Warranties.  The Borrower represents and warrants to the
Lender and the other Secured Parties that:
 
(i) The Borrower has good and valid rights in or title to the Collateral with
respect to which it has purported to grant the Security Interest, except for
minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such Collateral for its intended
purposes, and except for Permitted Encumbrances.  Except in connection with the
Existing Senior Loan Documents and the other Loan Documents, the Borrower has
not filed or consented to the filing of (A) any Financing Statement or analogous
document under the UCC or any other applicable laws covering any such Collateral
or any assignment in which it assigns any such Collateral or any security
agreement or similar instrument covering any such Collateral with any foreign
governmental, municipal or other office, in each case which Financing Statement,
analogous document, assignment or other instrument, as applicable, is still in
effect, except for Permitted Encumbrances.
 
(ii) No individual lease, license or other contract or agreement as to which no
security interest is granted by virtue of Section 2.1(c) is material to the
business (when taken as a whole) of the Borrower; provided however, that this
representation and warranty is limited to those leases, licenses and other
contracts and agreements that, on their face, prohibit the granting of a
security interest therein.  This representation and warranty does not apply to
any leases, licenses and other contracts and agreements in which the granting of
a security interest therein or an assignment thereof is prohibited by applicable
law.
 
(b) Covenants and Agreements.  The Borrower hereby covenants and agrees as
follows:
 
(i) It shall maintain, at its own cost and expense, such complete and accurate
Records with respect to the Collateral owned or held by it or on its behalf as
is consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which it is engaged, but in any event to include complete accounting Records
indicating in all material respects all payments and proceeds received with
respect to any part of such Collateral, and, at such time or times as the Lender
may reasonably request, promptly to prepare and deliver to the Lender a duly
certified schedule or schedules in form and detail satisfactory to the Lender
showing the identity and amount of any and all such Collateral.
 
(ii) It shall, at its own cost and expense, take any and all actions reasonably
necessary to defend title to the Collateral owned or rights in Collateral held
by it or on its behalf against all Persons and to defend the Security Interest
in such Collateral and the priority thereof against any Lien or other interest
not expressly permitted by the Loan Documents or the Existing Senior Loan
Documents, and in furtherance thereof, it shall not take, or permit to be taken,
any action not otherwise expressly permitted by the Loan Documents or the
Existing Senior Loan Documents that could impair the Security Interest or the
priority thereof or any Secured Party’s rights in or to such Collateral.
 
 
-8-

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

 
 
(iii) During normal business hours, the Lender and such Persons as the Lender
may reasonably designate shall, as often as reasonably requested have the right
to inspect all of its Records (and to make extracts and copies from such
Records), to discuss its affairs with its officers and independent accountants
and to verify under reasonable procedures the validity, amount, quality,
quantity, value, condition and status of, or any other matter relating to, the
Collateral owned or rights in Collateral held by or on behalf of the Borrower;
provided, that, in the case of Receivables, Pledged Debt, General Intangibles,
Commercial Tort Claims or Collateral in the possession of any third person, the
Lender shall not, unless an Event of Default has occurred and is continuing,
contact Account Debtors, contract parties or other obligors thereon or any third
person possessing such Collateral for the purpose of making such a
verification.  The Lender shall have the absolute right to share on a
confidential basis any information it gains from such inspection or verification
with any Secured Party.
 
(iv) At its option, the Lender may discharge past due taxes, assessments,
charges, fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral owned or held by or on behalf of the
Borrower, and not permitted by the Loan Documents or the Existing Senior Loan
Documents, and may pay for the maintenance and preservation of such Collateral
to the extent the Borrower fails to do so as required by the Loan Documents, and
the Borrower agrees to reimburse the Lender on demand for any payment made or
any expense incurred by the Lender pursuant to the foregoing authorization;
provided, however, that nothing in this paragraph shall be interpreted as
excusing the Borrower from the performance of, or imposing any obligation on the
Lender or any other Secured Party to cure or perform, any covenants or other
promises of the Borrower with respect to taxes, assessments, charges, fees,
Liens, security interests or other encumbrances and maintenance as set forth
herein or in the other Loan Documents.
 
(v) It shall remain liable for the failure to observe and perform all the
conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Collateral owned or held by it
or on its behalf, all in accordance with the terms and conditions thereof, and
it agrees to indemnify and hold harmless the Lender and the other Secured
Parties from and against any and all liability for such performance.
 
(vi) It shall not make, or permit to be made, an assignment, pledge or
hypothecation of the Collateral owned or held by it or on its behalf, or grant
any other Lien in respect of such Collateral, except as expressly permitted by
the Loan Documents or the Existing Senior Loan Documents. Except for Liens or
transfers expressly permitted by the Loan Documents and the Existing Senior Loan
Documents, it shall not make or permit to be made any transfer of such
Collateral, and it shall remain at all times in possession of such Collateral
and the direct owner, beneficially and of record, of the Pledged Equity
Interests included in such Collateral, except that (A) Inventory may be sold in
the ordinary course of business and (B) unless and until the Lender shall notify
it that an Event of Default shall have occurred and be continuing and that,
during the continuance thereof, it shall not sell, convey, lease, assign,
transfer or otherwise dispose of any such Collateral (which notice may be given
by telephone if promptly confirmed in writing), it may use and dispose of such
Collateral in any lawful manner not inconsistent with the provisions of this
Security Agreement, any other Loan Document or the Existing Senior Loan
Documents.
 
(vii) It shall, at its own cost and expense, maintain or cause to be maintained
insurance covering physical loss or damage to the Collateral owned or held by it
or on its behalf against all risks and liability arising from the use or
intended use, or otherwise attributable or relating to, such Collateral, in each
case in accordance with Section 6.9 of the Credit Agreement.  The Borrower
irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender) as the Borrower’s true and lawful
agent (and attorney-in-fact) for the purpose, during the continuance of an Event
of Default, of making, settling and adjusting claims in respect of such
Collateral under policies of insurance, endorsing the name of the Borrower on
any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect thereto.
 
 
-9-

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

 
 
(viii) It will not (A) change its state of organization, maintain its place of
business (if it has only one) or its chief executive office (if it has more than
one place of business) at a location other than as same exists on the Applicable
Date, (B) reincorporate or reorganize itself under the laws of any jurisdiction
other than the jurisdiction in which it is incorporated or organized on the
Applicable Date or (C) change its name, identity, state organization number or
taxpayer identification number, unless the Borrower shall have given the Lender
not less than 15 days’ prior written notice of such event or occurrence and the
Lender shall have either (x) determined that such event or occurrence will not
adversely affect the validity, perfection or priority of the Lender’s security
interest in the Collateral, or (y) taken such steps (with the cooperation of the
Borrower to the extent necessary or advisable) as are necessary or advisable to
properly maintain the validity, perfection and priority of the Lender’s security
interest in the Collateral.
 
(ix) The Borrower acknowledges that it is not authorized to file any Financing
Statement with respect to the Collateral (in each case, except for Financing
Statements related to Liens permitted under the Loan Documents or the Existing
Senior Loan Documents) or amendment or termination statement with respect to any
such Financing Statement (in each case, except for Financing Statements related
to Liens permitted under the Loan Documents or in connection with the Existing
Senior Loan Documents) without the prior written consent of the Lender and
agrees that it will not do so without the prior written consent of the Lender,
subject to the Borrower’s rights under Section 9-509(d)(2) of the UCC.
 
Section 3.2 Equipment and Inventory.
 
(a) Representations and Warranties.  The Borrower represents and warrants to the
Lender and the other Secured Parties that, as of the Applicable Date, all of the
Equipment and Inventory included in the Collateral owned or held by it or on its
behalf (other than mobile goods, Inventory and Equipment in transit, Motor
Vehicles and other Collateral in which possession is not maintained in the
ordinary course of its business) is kept only at the locations specified in
Schedule 3.2(a) hereto, which sets forth with respect to the Borrower, where
Equipment and Inventory is (i) maintained at the premises owned by the Borrower,
(ii) maintained at leased premises, (iii) in the possession of a warehouseman or
other bailee and (iv) on consignment.
 
(b) Covenants and Agreements.  The Borrower covenants and agrees that it shall
not permit any Equipment or Inventory owned or held by it or on its behalf to be
in the possession or control of any warehouseman, bailee, agent or processor for
a period of greater than thirty (30) consecutive days, unless such warehouseman,
bailee, agent or processor shall have been notified of the Security Interest
and, at the request of the Lender, shall have agreed in writing to hold such
Equipment or Inventory subject to the Security Interest and the instructions of
the Lender.  The Borrower shall, promptly upon the request of the Lender, cause
the Lender to be listed as lienholder on each certificate of title or ownership
covering any items of Equipment, including Motor Vehicles (but only if the
aggregate value of such Motor Vehicles is in excess of $50,000).
 
Section 3.3 Receivables.
 
 
-10-

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

 
 
(a) Representations and Warranties. The Borrower represents and warrants to the
Lender and the other Secured Parties that no Receivable included in the
Collateral owned or held by it or on its behalf is evidenced by an Instrument or
Chattel Paper that has not been delivered to the Lender or the Senior Lender.
 
(b) Covenants and Agreements. The Borrower hereby covenants and agrees that:
 
(i) At the request of the Lender, the Borrower shall mark conspicuously, in form
and manner reasonably satisfactory to the Lender, all Chattel Paper, Instruments
and other evidence of any Receivables included in the Collateral owned or held
by it or on its behalf (other than any delivered to the Lender as provided
herein), as well as the related Receivables Records, with an appropriate
reference to the fact that the Lender has a security interest therein.
 
(ii) It will not, without the Lender’s prior written consent (which consent
shall not be unreasonably withheld), grant any extension of the time of payment
of any such Receivable, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partly, any Supporting Obligation or
Collateral Support relating thereto, or allow any credit or discount whatsoever
thereon, other than extensions, credits, discounts, releases, compromises or
settlements granted or made in the ordinary course of business and consistent
with its current practices or in accordance with such practices reasonably
believed by the Borrower to be prudent.
 
(iii) Except as otherwise provided in this Section, it shall continue to collect
all amounts due or to become due to it under all such Receivables and any
Supporting Obligations or Collateral Support relating thereto, and diligently
exercise each material right it may have thereunder, in each case at its own
cost and expense, and in connection with such collections and exercise, it
shall, upon the occurrence and during the continuance of an Event of Default,
take such action as it or the Lender may reasonably deem necessary.
Notwithstanding the foregoing, the Lender shall have the right at any time after
the occurrence and during the continuance of an Event of Default to notify, or
require the Borrower to notify, any Account Debtor with respect to any such
Receivable, Supporting Obligation or Collateral Support of the Lender’s security
interest therein, and in addition, at any time during the continuation of an
Event of Default, the Lender may: (A) direct such Account Debtor to make payment
of all amounts due or to become due to the Borrower thereunder directly to the
Lender and (B) enforce, at the cost and expense of the Borrower, collection
thereof and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as the Borrower would be able to have
done.  If the Lender notifies the Borrower that it has elected to collect any
such Receivable, Supporting Obligation or Collateral Support in accordance with
the preceding sentence, any payments thereof received by the Borrower shall not
be commingled with any of its other funds or property but shall be held separate
and apart therefrom, shall be held in trust for the benefit of the Lender
hereunder and shall be forthwith delivered to the Lender in the same form as so
received (with any necessary endorsement), and the Borrower shall not grant any
extension of the time of payment thereof, compromise, compound or settle the
same for less than the full amount thereof, release the same, wholly or partly,
or allow any credit or discount whatsoever thereon.
 
(iv) During the continuance of an Event of Default, at the request of the
Lender, it shall direct each Account Debtor to make payment on each Receivable
to an account designated by the Lender.
 
Section 3.4 Investment-Related Property.
 
 
-11-

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

 
 
(a) Representations and Warranties.  The Borrower represents and warrants to the
Lender and the other Secured Parties that:
 
(i) Schedule 3.4 sets forth, as of the Applicable Date, all of the Pledged
Collateral.
 
(ii) Part A and Part B of Schedule 3.4 correctly set forth the percentage of the
issued and outstanding shares of each class of the Equity Interests of the
issuer thereof represented by the Pledged Equity Interests and includes all
Pledged Equity Interests required to be pledged hereunder.  The Pledged Equity
Interests are fully paid and nonassessable.  Part C of Schedule 3.4 correctly
sets forth Pledged Debt and includes all Pledged Debt required to be pledged
hereunder.
 
(iii) Other than Uncertificated Equity Interests (set forth in Part B of
Schedule 3.4), there is no Investment-Related Property other than Securities
represented by Security Certificates or Instruments in the possession of the
Lender or the Senior Lender.
 
(iv) All Pledged Equity Interests included in the Collateral owned or held by it
or on its behalf have been duly authorized and validly issued and are fully paid
and non-assessable, and the Borrower is the direct owner, beneficially and of
record, thereof, free and clear of all Liens (other than Liens expressly
permitted by the Loan Documents or the Existing Senior Loan Documents).
 
(v) All Pledged Debt included in the Collateral owned or held by it or on its
behalf has been duly authorized, issued and delivered and, where necessary,
authenticated, and, to the knowledge of the Borrower, constitutes the legal,
valid and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally.
 
(vi) (A) To the knowledge of the Borrower, none of the Pledged Collateral owned
by it has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which
such issuance or transfer may be subject, (B) except as set forth on Schedule
3.4, there are existing no options, warrants, calls or commitments of any
character whatsoever relating to such Pledged Collateral or which obligate the
issuer of any Equity Interest included in the Pledged Collateral to issue
additional Equity Interests, and (C) no consent, approval, authorization, or
other action by, and no giving of notice to or filing with, any governmental
authority or any other Person is required for the pledge by the Borrower of such
Pledged Collateral pursuant to this Security Agreement or for the execution,
delivery and performance of this Security Agreement by the Borrower, or for the
exercise by the Lender of the voting or other rights provided for in this
Security Agreement or for the remedies in respect of the Pledged Collateral
pursuant to this Security Agreement, except as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally.
 
(vii) No Person other than the Lender or the Senior Lender has “control” (within
the meaning of Article 8 of the UCC) over any Investment-Related Property of the
Borrower.
 
(b) Registration in Nominee Name; Denominations.  The Borrower hereby agrees
that (i) the Lender, on behalf of the Secured Parties, shall have the right (in
its sole and absolute discretion) to hold, where applicable, Investment-Related
Property included in the Collateral owned or held by it or on its behalf in the
name of the Borrower, endorsed or assigned, where applicable, in blank or in
favor of the Lender, (ii) at the Lender’s request, the Borrower will promptly
give to the Lender copies of any material notices or other written
communications received by it with respect to any Investment-Related Property
included in the Collateral owned or held by it or on its behalf registered in
its name and (iii) the Lender shall at all times have the right to exchange any
certificates, instruments or other documents representing or evidencing any
Investment-Related Property included in the Collateral owned or held by or on
behalf of the Borrower for certificates, instruments or other documents of
smaller or larger denominations for any reasonable purpose consistent with this
Security Agreement.
 
 
-12-

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

 
 
(c) Voting and Distributions.
 
(i) Unless and until an Event of Default shall have occurred and be continuing:
 
(A) The Borrower shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of the Investment-Related
Property included in the Collateral owned or held by it or on its behalf, or any
part thereof, for any purpose consistent with the terms of this Security
Agreement and the other Loan Documents and the Existing Senior Loan Documents;
provided, however, that the Borrower will not be entitled to exercise any such
right if the result thereof could materially and adversely affect the rights
inuring to a holder of the Investment-Related Property or the rights and
remedies of any of the Secured Parties under this Security Agreement or any
other Loan Document or the ability of any of the Secured Parties to exercise the
same.
 
(B) The Lender shall execute and deliver to the Borrower, or cause to be
executed and delivered to the Borrower, all such proxies, powers of attorney and
other instruments as the Borrower may reasonably request for the purpose of
enabling it to exercise the voting and/or consensual rights and powers it is
entitled to exercise pursuant to subsection (c)(i)(A) and to receive the cash
payments it is entitled to receive pursuant to subsection (c)(i)(C).
 
(C) The Borrower shall be entitled to receive, retain and use any and all cash
dividends, interest and principal paid on the Investment-Related Property
included in the Collateral owned or held by it or on its behalf to the extent
and only to the extent that such cash dividends, interest and principal are not
prohibited by, and not otherwise paid in a manner that violates the terms and
conditions of the Credit Agreement, the other Loan Documents and applicable
laws.  All non-cash dividends, interest and principal, and all dividends,
interest and principal paid or payable in cash or otherwise in connection with a
partial or total liquidation or dissolution, return of capital, capital surplus
or paid in surplus, and all other distributions (other than distributions
referred to in the preceding sentence) made on or in respect of the
Investment-Related Property included in the Collateral owned or held by it or on
its behalf, whether resulting from a subdivision, combination or
reclassification of the outstanding Equity Interests in any issuer or received
in exchange for any Investment-Related Property, or any part thereof, or in
redemption thereof, or as a result of any merger, consolidation, acquisition or
other exchange of assets to which such issuer may be a party or otherwise, shall
be and become part of the Collateral, and, if received by the Borrower, shall
not be commingled with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of the
Lender hereunder and shall to the extent certificated be forthwith delivered to
the Lender in the same form as so received (with any necessary endorsement).
 
(ii) Without limiting the generality of the foregoing, upon the occurrence and
during the continuance of an Event of Default:
 
 
-13-

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

 
 
(A) all rights of the Borrower to dividends, interest or principal that it is
authorized to receive pursuant to subsection (c)(i)(C) shall cease, and all such
rights shall thereupon become vested in the Lender, which shall have the sole
and exclusive right and authority to receive and retain such dividends, interest
or principal, as applicable. All dividends, interest and principal received by
or on behalf of the Borrower contrary to the provisions of this Section shall be
held in trust for the benefit of the Lender, shall be segregated from other
property or funds of the Borrower and shall be forthwith delivered to the Lender
upon demand in the same form as so received (with any necessary
endorsement).  Any and all money and other property paid over to or received by
the Lender pursuant to the provisions of this subsection (c)(ii)(A) shall be
retained by the Lender in an account to be established in the name of the
Lender, for the benefit of Lender and the other Secured Parties, upon receipt of
such money or other property and shall be applied in accordance with the
provisions of Section 5.2.  Subject to the provisions of this subsection
(c)(ii)(A), such account shall at all times be under the sole dominion and
control of the Lender, and the Lender shall at all times have the sole right to
make withdrawals therefrom and to exercise all rights with respect to the funds
and other property from time to time therein or credited thereto as set forth in
the Loan Documents. After all Events of Default have been cured or waived, the
Lender shall, within five Business Days after all such Events of Default have
been cured or waived, repay to the Borrower all cash dividends, interest and
principal (without interest) that the Borrower would otherwise be permitted to
retain pursuant to the terms of subsection (c)(i)(C) and which remain in such
account.
 
(B) all rights of the Borrower to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to subsection (c)(i)(A), and the
obligations of the Lender under subsection (c)(i)(B), shall cease, and all such
rights shall thereupon become vested in the Lender, which shall have the sole
and exclusive right and authority to exercise such voting and consensual rights
and powers, provided that the Lender shall have the right from time to time
following and during the continuance of an Event of Default to permit the
Borrower to exercise such rights.  After all Events of Default have been cured
or waived, the Borrower will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of subsection (c)(i)(A).
 
(d) Covenants and Agreements.  The Borrower hereby covenants and agrees as
follows:
 
(i) The Borrower hereby agrees that all certificates or Instruments representing
or evidencing Investment-Related Property acquired by the Borrower after the
Applicable Date shall be delivered either to the Lender pursuant to the Credit
Agreement or the Senior Lender pursuant to the Existing Senior Loan Documents.
 
(ii) At the request of the Lender, the Borrower as pledgor of Uncertificated
Securities shall deliver to the Lender an agreement among the issuer thereof,
the Lender and the Borrower, in form and substance reasonably satisfactory to
the Lender, pursuant to which such issuer agrees to comply, upon notice by
Lender that an Event of Default has occurred and is continuing, with any and all
instructions originated by the Lender without further consent by the Borrower
and not to comply with instructions regarding such Uncertificated Equity
Interests originated by any other person other than a court of competent
jurisdiction.  The Lender agrees with the Borrower that the Lender shall not
give any such notice, instructions or directions to any such issuer unless an
Event of Default has occurred and is continuing.
 
 
-14-

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

 
 
(e) Limited Liability Company and Partnership Interests.  The Borrower
acknowledges and agrees that (i) each interest in any limited liability company
or limited partnership which is a Subsidiary, pledged hereunder and represented
by a certificate shall be a Security and shall be governed by Article 8 of the
UCC and (ii) each such interest shall at all times hereafter be represented by a
certificate.  The Borrower has taken or will, prior to the pledge of any such
certificated interest, will take, all steps necessary to cause the
Organizational Documents of such limited liability company or limited
partnership to provide that it is a Security governed by Article 8 of the
UCC.  The Borrower further acknowledges and agrees that (A) each interest in any
limited liability company or limited partnership which is a Subsidiary, pledged
hereunder and not represented by a certificate shall not be a Security and shall
not be governed by Article 8 of the UCC, and (B) the Borrower shall at no time
elect to treat any such interest as a Security or issue any certificate
representing such interest, unless the Borrower provides prior written
notification to the Lender of such election and promptly delivers any such
certificate to the Lender pursuant to the terms hereof together with appropriate
undated stock powers or instruments of transfer executed in blank.
 
Section 3.5 Letter-of-Credit Rights.  The Borrower represents and warrants to
the Lender and the other Secured Parties that Schedule 3.5 hereto sets forth, as
of the Applicable Date, each letter of credit giving rise to a Letter-of-Credit
Right included in the Collateral owned or held by or on behalf of the Borrower.
 
Section 3.6 Commercial Tort Claims.
 
(a) Representations and Warranties.  The Borrower represents and warrants to the
Lender and the other Secured Parties that Schedule 3.6 hereto sets forth, as of
the Applicable Date, all Material Commercial Tort Claims.
 
(b) Covenants and Agreements.  The Borrower hereby covenants and agrees that it
shall provide the Lender with prompt written notice of each Material Commercial
Tort Claim, and any judgment, settlement or other disposition thereof and will
take such action as the Lender may request to grant and perfect a security
interest therein in favor of the Lender and the other Secured Parties.
 
Section 3.7 Financing Statements.  The Borrower represents and warrants to the
Lender and the other Secured Parties that:
 
(a) Financing statements in substantially the form of Schedule 3.7(a) hereto
have been prepared by the Borrower and such form of financing statements
contain: (i) the true and correct name of the Borrower, (ii) the true and
correct mailing address of the Borrower, (iii) the true and correct jurisdiction
of organization of the Borrower, and (iv) the true and correct organizational
identification number of the Borrower, if any.
 
(b) Attached hereto as Schedule 3.7(b) is a schedule setting forth, with respect
to the filings described in Section 3.7(a) above, the filing office in the
jurisdiction in which the Borrower is incorporated.
 
 
-15-

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

 
 
ARTICLE 4.

 
FURTHER ASSURANCES; FILING AUTHORIZATION
 
Section 4.1 Further Assurances.  The Borrower hereby covenants and agrees, at
its own cost and expense, to execute, acknowledge, deliver and/or cause to be
duly filed all such further agreements, instruments and other documents
(including favorable legal opinions in connection with the acquisition of any
material assets or the acquisition or creation of a subsidiary by the Borrower)
if reasonably required by the Lender and take all such further actions, that the
Lender may from time to time reasonably request to preserve, protect and perfect
the Security Interest granted by it and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with its
execution and delivery of this Security Agreement, the granting by it of the
Security Interest and the filing of any Financing Statements or other documents
in connection herewith or therewith, transferring Collateral to the Lender’s
possession (if a security interest in such Collateral can be perfected by
possession), placing the interest of the Lender as lienholder on the certificate
of title of any Motor Vehicle (subject to the limitations in Section 3.2(b)
hereof) and, to the extent reasonably required by the Lender using commercially
reasonable efforts to obtain waivers of Liens from landlords and mortgagees on
forms reasonably satisfactory to the Lender.
 
Section 4.2 Filings.  The Borrower hereby irrevocably authorizes the Lender at
any time and from time to time to file in any relevant jurisdiction any
Financing Statements and amendments thereto that contain the information
required by Article 9 of the Uniform Commercial Code of each applicable
jurisdiction for the filing of any Financing Statement or amendment relating to
the Collateral, including (i) whether the Borrower is an organization, the type
of organization and any organizational identification number issued to the
Borrower, (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, (iii)
any financing or continuation statements or other documents without the
signature of the Borrower where permitted by law, including the filing of a
Financing Statement describing the Collateral as (A) “all assets now owned or
hereafter acquired by the Borrower or in which Borrower otherwise has rights” or
any similar phrase, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC, or as being of an
equal or lesser scope or with greater detail, and (B) 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.  The Borrower agrees to provide all information
described in the immediately preceding sentence to the Lender promptly upon the
reasonable request by the Lender.  The Borrower also ratifies its authorization
for the Lender to have filed in any Uniform Commercial Code jurisdiction any
like Financing Statements or amendments thereto if filed prior to the date
hereof.
 
ARTICLE 5.
 
REMEDIES UPON DEFAULT
 
Section 5.1 Remedies Generally.
 
(a) General Rights.  Upon the occurrence and during the continuance of an Event
of Default, the Borrower agrees to deliver each item of Collateral owned or held
by it or on its behalf to the Lender on demand, and it is agreed that the Lender
shall have the right to take any of or all the following actions at the same or
different times: (i) with respect to any Collateral consisting of Commercial
Tort Claims, on demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any such Collateral by the Borrower to the Lender,
or, (ii) with or without legal process and with or without prior notice or
demand for performance, to take possession of the Collateral owned or held by it
or on its behalf and without liability for trespass to enter any premises where
such Collateral may be located for the purpose of taking possession of or
removing such Collateral and, generally, to exercise any and all rights afforded
to a secured party under the UCC or other applicable law, and (iii) appoint a
receiver for all or any portion of the Collateral.  Without limiting the
generality of the foregoing, the Borrower agrees that the Lender shall have the
right, upon the occurrence and during the continuance of an Event of Default,
subject to the mandatory requirements of applicable law, to sell or otherwise
dispose of any of the Collateral owned or held by or on behalf of the Borrower,
at public or private sale or at any broker’s board or on any securities
exchange, for cash, upon credit or for future delivery as the Lender shall deem
appropriate. The Lender shall be irrevocably authorized at any such sale of such
Collateral constituting securities (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing such Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale, the Lender shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Collateral so
sold.  Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of the Borrower, and the
Borrower hereby waives (to the extent permitted by law) all rights of
redemption, stay, valuation and appraisal which the Borrower now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
 
 
-16-

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

 
 
(b) Sale of Collateral.  The Lender shall give the Borrower ten days’ written
notice (which the Borrower agrees is reasonable notice within the meaning of
Section 9-611 of the UCC as in effect in the State of Colorado or its equivalent
in other jurisdictions (or any successor provisions)) of the Lender’s intention
to make any sale of any of the Collateral owned or held by or on behalf of the
Borrower.  Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which such Collateral will first be offered for sale at
such board or exchange. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Lender may fix
and state in the notice (if any) of such sale.  At any such sale, the Collateral
to be sold may be sold in one lot as an entirety or in separate parcels, as the
Lender may (in its sole and absolute discretion) determine. The Lender shall not
be obligated to make any sale of any Collateral if it shall determine not to do
so, regardless of the fact that notice of sale of such Collateral shall have
been given.  The Lender may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of any of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Lender until the
sale price is paid by the purchaser or purchasers thereof, but the Lender shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. At any public (or, to the
extent permitted by applicable law, private) sale made pursuant to this Section,
any Secured Party may bid for or purchase, free (to the extent permitted by
applicable law) from any right of redemption, stay, valuation or appraisal on
the part of the Borrower (all said rights being also hereby waived and released
to the extent permitted by law), any of the Collateral offered for sale and may
make payment on account thereof by using any claim then due and payable to such
Secured Party from the Borrower as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to the Borrower
therefor.  For purposes hereof, (i) a written agreement to purchase any of the
Collateral shall be treated as a sale thereof, (ii) the Lender shall be free to
carry out such sale pursuant to such agreement, and (iii) the Borrower shall not
be entitled to the return of any of the Collateral subject thereto,
notwithstanding the fact that after the Lender shall have entered into such an
agreement all Events of Default shall have been remedied and the Secured
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Lender may proceed by a suit or suits at law or in
equity to foreclose upon any of the Collateral and to sell any of the Collateral
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.  Any
sale pursuant to the provisions of this Article shall be deemed to conform to
the commercially reasonable standards as provided in Part 6 of Article 9 of the
UCC as in effect in the State of Colorado or its equivalent in other
jurisdictions (or any successor provisions).  Without limiting the generality of
the foregoing, the Borrower agrees as follows: (A) if the proceeds of any sale
of the Collateral owned or held by it or on its behalf pursuant to this Article
are insufficient to pay all the Secured Obligations, it shall be liable for the
resulting deficiency and the fees, charges and disbursements of any counsel
employed by the Lender or any other Secured Party to collect such deficiency,
(B) it hereby waives any claims against the Lender arising by reason of the fact
that the price at which any such Collateral may have been sold at any private
sale pursuant to this Article was less than the price that might have been
obtained at a public sale, even if the Lender accepts the first offer received
and does not offer such Collateral to more than one offeree, (C) there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements in this Section may be specifically
enforced, (D) the Lender may sell any such Collateral without giving any
warranties as to such Collateral, and the Lender may specifically disclaim any
warranties of title or the like, and (E) the Lender shall have no obligation to
marshal any such Collateral.
 
 
-17-

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

 
 
Section 5.2 Application of Proceeds of Collateral.
 
(a) Except as expressly provided elsewhere in this Security Agreement and in
Section 8.3 of the Credit Agreement, all proceeds received by the Lender in
respect of any sale, any collection from, or other realization upon all or any
part of the Collateral as well as any Collateral consisting of cash shall be
applied in full or in part by the Lender against, the Secured Obligations in the
following order of priority:
 
FIRST, to the payment of all reasonable and documented out-of-pocket costs and
expenses incurred by the Lender (in its capacity as such hereunder or under any
other Loan Document) in connection with such collection or sale or otherwise in
connection with this Security Agreement, any other Loan Document or any of the
Secured Obligations, including all reasonable and documented out-of-pocket court
costs and the reasonable and documented fees and expenses of its agents and
legal counsel, all amounts for which the Lender is entitled to indemnification
under the Credit Agreement, the repayment of all advances made by the Lender
hereunder or under any other Loan Document on behalf of the Borrower and any
other reasonable and documented out-of-pocket costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any other
Loan Document;
 
SECOND, to the extent of any excess of such proceeds, to the payment in full of
the Secured Obligations; and
 
THIRD, to the extent of any excess of such proceeds to the Borrower, its
successors or assigns, or as a court of competent jurisdiction may otherwise
direct.
 
The Lender shall have sole and absolute discretion as to the time of application
of any such proceeds, monies or balances in accordance with this Security
Agreement.  Upon any sale of the Collateral by the Lender (including pursuant to
a power of sale granted by statute or under a judicial proceeding), the receipt
of the purchase money by the Lender or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Lender or such
officer or be answerable in any way for the misapplication thereof.
 
 
-18-

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

 
 
Section 5.3 Investment-Related Property.  In view of the position of the
Borrower in relation to the Investment-Related Property, or because of other
current or future circumstances, a question may arise under the Securities Act
of 1933, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being called the “Federal Securities Laws”) with respect
to any disposition of the Investment-Related Property permitted hereunder. The
Borrower understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Lender if the Lender were to attempt
to dispose of all or any part of the Investment-Related Property, and might also
limit the extent to which or the manner in which any subsequent transferee of
any Investment-Related Property could dispose of the same. Similarly, there may
be other legal restrictions or limitations affecting the Lender in any attempt
to dispose of all or part of the Investment-Related Property under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect.  The Borrower recognizes that in light of such restrictions and
limitations the Lender may, with respect to any sale of Investment-Related
Property that is subject to such restrictions and limitations, limit the
purchasers to those who will agree, among other things, to acquire such
Investment-Related Property for their own account, for investment, and not with
a view to the distribution or resale thereof.  The Borrower acknowledges and
agrees that in light of such restrictions and limitations, the Lender, upon and
during the continuance of any Event of Default, in its sole and absolute
discretion, (i) may proceed to make such a sale whether or not a registration
statement for the purpose of registering such Investment-Related Property that
is subject to such restrictions and limitations, or any part thereof, shall have
been filed under the Federal Securities Laws and (ii) may approach and negotiate
with a single potential purchaser to effect such sale.  The Borrower
acknowledges and agrees that any such sale might result in prices and other
terms less favorable to the seller than if such sale were a public sale without
such restrictions. In the event of any such sale, the Lender shall incur no
responsibility or liability for selling all or any part of the
Investment-Related Property at a price that the Lender, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached.  The provisions of this Section
will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at which
the Lender sells any such Investment-Related Property.
 
Section 5.4 Registration, etc.  The Borrower agrees that, upon the occurrence
and during the continuance of an Event of Default, if for any reason the Lender
desires to sell any of the Pledged Collateral owned or held by or on behalf of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Lender, use its commercially reasonable efforts to
take or to cause, where applicable, the issuer of such Pledged Collateral to
take such action and prepare, distribute and/or file such documents, as are
required or advisable in the reasonable opinion of counsel for the Lender to
permit the public sale of such Pledged Collateral.  The Borrower further agrees
to indemnify, defend and hold harmless the Lender, each other Secured Party, any
underwriter and their respective officers, directors, affiliates and controlling
Persons from and against all loss, liability, expenses, costs of counsel
(including reasonable fees and expenses of legal counsel), and claims (including
the costs of investigation) that they may incur, insofar as such loss,
liability, expense or claim, as applicable, relates to the Borrower or any of
its property, and arises out of or is based upon any alleged untrue statement of
a material fact contained in any prospectus (or any amendment or supplement
thereto) or in any notification or offering circular, or arises out of or is
based upon any alleged omission to state a material fact required to be stated
therein or necessary to make the statements in any thereof not misleading,
except insofar as the same may have been caused by any untrue statement or
omission based upon information furnished in writing to the Borrower or the
issuer of such Pledged Collateral, as applicable, by the Lender or any other
Secured Party expressly for use therein.  The Borrower further agrees, upon such
written request referred to above, to use its commercially reasonable efforts to
qualify, file or register, or cause, where applicable, the issuer of such
Pledged Collateral to qualify, file or register, any of the Pledged Collateral
owned or held by or on behalf of the Borrower under the Blue Sky or other
securities laws of such states as may be requested by the Lender and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations.  The Borrower will bear all costs and expenses of carrying out
its obligations under this Section.  The Borrower acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section may be
specifically enforced.
 
 
-19-

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

 
 
Section 5.5 Deficiency.  The Borrower shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay its Secured Obligations and the reasonable and documented out-of-pocket
fees and disbursements of any attorneys employed by the Lender to collect such
deficiency.
 
ARTICLE 6.
 
CONCERNING THE LENDER
 
Section 6.1 In General.  The Lender shall have the right hereunder to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking action (including the release or substitution of
the Collateral), in accordance with this Security Agreement and the Credit
Agreement.  The Lender may employ agents and attorneys-in-fact in connection
herewith and shall not be liable for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it in good faith except for gross
negligence or willful misconduct.
 
Section 6.2 Lender Appointed Attorney-in-Fact.  The Borrower hereby appoints the
Lender and any officer or agent thereof, as its true and lawful agent and
attorney-in-fact for the purpose of carrying out the provisions of this Security
Agreement and taking any action and executing any instrument that the Lender may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest, and without limiting the generality
of the foregoing, the Lender shall have the right, with power of substitution
for the Borrower and in the Borrower’s name or otherwise, for the use and
benefit of the Lender and the other Secured Parties, upon the occurrence and
during the continuance of an Event of Default, (i) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral owned or held by it or on
its behalf or any part thereof; (ii) to demand, collect, receive payment of,
give receipt for, and give discharges and releases of, any of such Collateral;
(iii) to sign the name of the Borrower on any invoice or bill of lading relating
to any of such Collateral; (iv) to send verifications of Receivables included in
the Collateral owned or held by it or on its behalf to any Account Debtor; (v)
to commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
any of the Collateral owned or held by it or on its behalf or to enforce any
rights in respect of any of such Collateral; (vi) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to any of
such Collateral; (vii) to notify, or to require the Borrower to notify, Account
Debtors and other obligors to make payment directly to the Lender, (viii) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with any of such Collateral, and (ix) to do all other acts and
things necessary to carry out the purposes of this Security Agreement, as fully
and completely as though the Lender were the absolute owner of such Collateral
for all purposes; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Lender or any other Secured Party to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Lender or any other Secured Party, or to present or
file any claim or notice, or to take any action with respect to any of the
Collateral or the monies due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted to be taken by the Lender or any
other Secured Party with respect to any of the Collateral shall give rise to any
defense, counterclaim or offset in favor of the Borrower or to any claim or
action against the Lender or any other Secured Party. The provisions of this
Article shall in no event relieve the Borrower of any of its obligations
hereunder or under the other Loan Documents with respect to any of the
Collateral or impose any obligation on the Lender or any other Secured Party to
proceed in any particular manner with respect to any of the Collateral, or in
any way limit the exercise by the Lender or any other Secured Party of any other
or further right that it may have on the date of this Security Agreement or
hereafter, whether hereunder, under any other Loan Document, by law or
otherwise. Any sale pursuant to the provisions of this paragraph shall be deemed
to conform to the commercially reasonable standards as provided in Section 9-611
of the UCC as in effect in the State of Colorado or its equivalent in other
jurisdictions (or any successor provisions).
 
 
-20-

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

 
 
Section 6.3 Reimbursement of Lender.  The Borrower agrees to pay to the Lender
the amount of any and all reasonable out-of-pocket expenses, including the
reasonable fees, other charges and disbursements of counsel and of any experts
or agents, that the Lender may incur in connection with (i) the administration
of this Security Agreement relating to the Borrower or any of its property, (ii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral owned or held by or on behalf of the
Borrower, (iii) the exercise, enforcement or protection of any of the rights of
the Lender hereunder relating to the Borrower or any of its property, or (iv)
the failure by the Borrower to perform or observe any of the provisions hereof.
Without limitation of its indemnification obligations under the other Loan
Documents, the Borrower agrees to indemnify the Lender and the other Indemnitees
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related out-of-pocket expenses, including reasonable
counsel fees, other charges and disbursements, incurred by or asserted against
any Indemnitee arising out of, in any way connected with, or as a result of (a)
the execution or delivery by the Borrower of this Security Agreement or any
other Loan Document or any agreement or instrument contemplated hereby or
thereby, or the performance by the Borrower of its obligations under the Loan
Documents and the other transactions contemplated thereby or (b) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee. Any amounts
payable as provided hereunder shall be additional Secured Obligations secured
hereby and by the other Security Documents.  The provisions of this Section
shall remain operative and in full force and effect regardless of the
termination of this Security Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby or thereby, the repayment
of any of the Secured Obligations, the invalidity or unenforceability of any
term or provision of this Security Agreement or any other Loan Document or any
investigation made by or on behalf of the Lender or any other Secured
Party.  All amounts due under this Section shall be payable within ten days of
written demand therefor and shall bear interest at the rate specified in Section
3.1 of the Credit Agreement.
 
 
-21-

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

 
 
ARTICLE 7.
 
WAIVERS; AMENDMENTS
 
No failure or delay of the Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power.  The rights and remedies of the Lender
and the other Secured Parties hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of this Security Agreement or any
other Loan Document or consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be permitted by this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given.  No notice or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances. Neither this Security Agreement nor any
provision hereof may be waived, amended, supplemented or otherwise modified, or
any departure therefrom consented to, except pursuant to an agreement or
agreements in writing entered into by, between or among the Lender and the
Borrower with respect to which such waiver, amendment, other modification or
consent is to apply, subject to any consent required in accordance with Section
10.2 of the Credit Agreement.
 
ARTICLE 8.

 
SECURITY INTEREST ABSOLUTE
 
In each case to the extent permitted by law, all rights of the Lender hereunder,
the Security Interest and all obligations of the Borrower hereunder shall be
absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Secured Obligations, or any other agreement or
instrument relating to any of the foregoing, (ii) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Secured
Obligations, or any other waiver, amendment, supplement or other modification
of, or any consent to any departure from, the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(iii) except as otherwise expressly permitted under the Loan Documents or
effected pursuant thereto, any exchange, release or non-perfection of any Lien
on any other collateral, or any release or waiver, amendment, supplement or
other modification of, or consent under, or departure from, any guaranty,
securing or guaranteeing all or any of the Secured Obligations, or (iv) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower in respect of the Secured Obligations or in respect
of this Security Agreement or any other Loan Document.
 
ARTICLE 9.
 
TERMINATION; RELEASE
 
Section 9.1 Termination.  At such time as the Funding Loans and the other
Secured Obligations shall have been paid in full in cash, and the Funding
Commitments shall have expired or been shall be outstanding, the Collateral
shall be released from the Security Interest created hereby, and this Security
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Lender and the Borrower hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Borrower.  At the request and
sole expense of the Borrower following any such termination, the Lender shall
deliver to Borrower any Collateral held by the Lender hereunder, and execute and
deliver to the Lender such documents as the Lender shall reasonably request to
evidence such termination.
 
 
-22-

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

 
 
Section 9.2 Other Releases of Collateral.
 
(a) Upon the effectiveness of any written consent to the release of the Security
Interest in any Collateral pursuant to Section 10.2 of the Credit Agreement, the
Security Interest in such Collateral shall be automatically released.
 
(b) Upon any sale, transfer or other disposition of Collateral permitted by the
Loan Documents (other than to the Borrower), the Security Interest in such
Collateral shall be automatically released (other than to the extent any such
sale, transfer or other disposition of such Collateral would, immediately after
giving effect thereto, result in the receipt by the Borrower of any other
property (whether in the form of Proceeds or otherwise) that would, but for the
release of the Security Interest therein pursuant to this clause, constitute
Collateral, in which event the Lien created hereunder shall continue in such
property).
 
(c) If any of the Pledged Equity Interests in any Subsidiary are sold,
transferred or otherwise disposed of pursuant to a transaction permitted by the
Loan Documents and, immediately after giving effect thereto, such Subsidiary
would no longer be a Subsidiary, then the obligations of such Subsidiary under
this Security Agreement and the Security Interest in the Collateral owned or
rights in Collateral held by or on behalf of such Subsidiary shall be
automatically released.
 
In connection with any termination or release pursuant to this Section, the
Lender shall execute and deliver to the Borrower, at the Borrower’s own cost and
expense, all Uniform Commercial Code termination statements, certificates for
terminating the Liens on the Motor Vehicles (if any) and other similar documents
that the Borrower may reasonably request to evidence such termination or
release.  Any execution and delivery of documents pursuant to this Article shall
be without recourse to or warranty by the Lender or any other Secured Party.
 
ARTICLE 10.
 
NOTICES
 
All communications and notices hereunder shall be in writing and given as
provided in Section 10.1 of the Credit Agreement.  All communications and
notices hereunder to the Lender or the Borrower shall be given to it at its
address for notices set forth in such Section.
 
ARTICLE 11.
 
BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS
 
Whenever in this Security Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party, and all covenants, promises and agreements by or on behalf of the
Borrower that are contained in this Security Agreement shall bind and inure to
the benefit of each party hereto and its successors and assigns.  This Security
Agreement shall become effective as to the Borrower when a counterpart hereof
executed on behalf of the Borrower shall have been delivered to the Lender and a
counterpart hereof shall have been executed on behalf of the Lender, and
thereafter shall be binding upon the Borrower and the Lender and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Lender and the other Secured Parties, and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights or obligations hereunder or any interest herein or in any of
the Collateral (and any such attempted assignment shall be void), except as
expressly contemplated or permitted by this Security Agreement or the other Loan
Documents.
 
 
-23-

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

 
 
ARTICLE 12.

 
SURVIVAL OF AGREEMENT; SEVERABILITY
 
All covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Security Agreement or any other Loan
Document shall be considered to have been relied upon by the Lender and the
other Secured Parties and shall survive the execution and delivery of any Loan
Document and the making of any Funding Loan, regardless of any investigation
made by the Secured Parties or on their behalf, and shall continue in full force
and effect until this Security Agreement shall terminate. In the event any one
or more of the provisions contained in this Security Agreement or in any other
Loan Document should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
such invalid, illegal or unenforceable provisions.
 
ARTICLE 13.

 
MISCELLANEOUS
 
Section 13.1 GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
 
Section 13.2 Counterparts; Integration.  This Security Agreement may be executed
in counterparts (and by different parties hereto on different counterparts),
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one contract (subject to Article 12), and shall
become effective as provided in Article 12.  This Security Agreement constitutes
the entire contract among the parties relating to the subject matter hereof and
supersedes any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof.  Delivery of an executed counterpart of
this Security Agreement by facsimile transmission or by email in .pdf format
shall be as effective as delivery of a manually executed counterpart of this
Security Agreement.
 
Section 13.3 Headings.  Article and Section headings used herein are for
convenience of reference only, are not part of this Security Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Security Agreement.
 
Section 13.4 Jurisdiction; Venue; Consent to Service of Process.  The Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the courts of the State of Colorado, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Security Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such Colorado court or, to the extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Security Agreement shall affect any right that
the Lender or any other Secured Party may otherwise have to bring any action or
proceeding relating to this Security Agreement or the other Loan Documents
against the Borrower or any of its property in the courts of any jurisdiction.
The Borrower hereby irrevocably and unconditionally waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Security Agreement or the other Loan Documents in any foregoing
court referred to in this Article. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court. Each of the parties hereto irrevocably consents to service of process in
the manner provided for notices in Article 10. Nothing in this Security
Agreement will affect the right of any party hereto to serve process in any
other manner permitted by law.
 
 
-24-

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

 
 
Section 13.5 WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS SECURITY AGREEMENT. EACH PARTY HERETO HEREBY (I)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS ARTICLE.
 
Section 13.6 Reinstatement.  To the extent that any payment made or received
with respect to the Secured Obligations is subsequently set aside, defeased or
required to be repaid to any Person for any reason, then such Secured
Obligations, and the Liens corresponding thereto, shall be automatically revived
as if such payment had not been received and this Security Agreement shall
continue to be in full force and effect or reinstated, as the case may be.
 
Section 13.7 Intercreditor Agreement.  Notwithstanding anything herein to the
contrary, the lien and security interest granted to the Lender pursuant to this
Security Agreement and the exercise of any right or remedy by the Lender
hereunder are subject to the provisions of the Intercreditor Agreement, dated as
of March 1, 2012 (as amended, restated, supplemented or otherwise modified from
time to time, the “Intercreditor Agreement”), among the Senior Lender, the
Lender, the Borrower, the Subsidiary Guarantor and RMB Resources, Inc., a
Delaware corporation, in its capacity as administrative agent under the Existing
Senior Facility Agreement, and certain other persons party or that may become
party thereto from time to time. In the event of any conflict between the terms
of the Intercreditor Agreement and this Security Agreement, the terms of the
Intercreditor Agreement shall govern and control.
 
 
-25-

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

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

 
BORROWER
         
NEUTRON ENERGY, INC., a Nevada corporation
                  By:       Name:       Title:                      
LENDER
         
URANIUM RESOURCES, INC., a Delaware corporation
                  By:       Name:      
Title:
   

                                                                           
 
 

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

 
                                                                           
Schedule 3.2(a)

Collateral Locations

Corporate Headquarters – Englewood, Colorado
9000 E. Nichols Ave, Suite 225
Englewood, CO 80112

Field Office – Albuquerque, New Mexico
2511 Broadbent Parkway, Suite A
Albuquerque, NM 87107

Juan Tafoya Field Locations
Surface properties under Lease from Juan Tafoya Land Corporation

Cebolleta Field Locations
Surface properties under Lease from La Merced del Pueblo de Cebolleta
 
 
 

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

 
 
Schedule 3.4
 
Part A – Certificated Equity Interests:
 
None.
 
Part B – Uncertificated Equity Interests:
 

Subsidiary
Jurisdiction of Organization
Ownership Interest
Percentage of Class
Cibola Resources LLC
Delaware
Membership interests
100%

 
Part C – Pledged Debt
 
 

A. Arizona Business Bank Certificate of Deposit in the amount of $81,250.00 (No.
210009187) in support of an Irrevocable Standby Letter of Credit No. 1479, dated
March 24, 2009, between Arizona Business Bank and Neutron Energy, Inc. B.
Arizona Business Bank Certificate of Deposit in the amount of $33,780.00 (No.
210009179) in support of an Irrevocable Standby Letter of Credit No. 1480, dated
March 24, 2009, between Arizona Business Bank and Neutron Energy, Inc. C.
Arizona Business Bank Certificate of Deposit in the amount of $52,000.00 (No.
210009438) in support of an Irrevocable Standby Letter of Credit No. 1505, dated
August 25, 2009, between Arizona Business Bank and Neutron Energy, Inc.
D.
Arizona Business Bank Certificate of Deposit in the amount of $18,270.00 (No.
210009411) in support of an Irrevocable Standby Letter of Credit No. 1506, dated
August 25, 2009, between Arizona Business Bank and Neutron Energy, Inc.
E.
Arizona Business Bank Certificate of Deposit in the amount of $41,625.00 (No.
100040292) in support of an Irrevocable Standby Letter of Credit No. 1575, dated
January 6, 2009, between Arizona Business Bank and Neutron Energy, Inc. F.
Arizona Business Bank Certificate of Deposit in the amount of $46,980.00 (No.
100040306) in support of an Irrevocable Standby Letter of Credit No. 1576, dated
January 6, 2009, between Arizona Business Bank and Neutron Energy, Inc. G.
Arizona Business Bank Certificate of Deposit in the amount of $25,000.00 (No.
210010398) in support of an Irrevocable Standby Letter of Credit No. 148, dated
April 17, 2008, between Arizona Business Bank and Neutron Energy, Inc.

  
 
 

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

 

Schedule 3.5

Letter-of-Credit Rights

None.
 
 
 

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

 
 
Section 3.6

Commercial Tort Claims

None.
 
 
 

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

 

 
Schedule 3.7(a)
 
Financing Statements
 
[Attached.]
 
 
 

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

 

 
Schedule 3.7(b)
 
Applicable Filing Offices

Borrower
Applicable Filing Office
Neutron Energy, Inc.
Secretary of State of the State of Nevada