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Exhibit 10.28

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SECURITY AGREEMENT
 
Dated as of August 18, 2009
 
among
 
SCHIFF NUTRITION GROUP, INC.,
as a Grantor
 
and
 
SCHIFF NUTRITION INTERNATIONAL, INC.,
as a Grantor
 
and
 
WNG HOLDINGS (INTERNATIONAL) LTD.,
as a Grantor
 
and
 
COPPAL RESEARCH, INC.,
as a Grantor
 
and
 
U.S. BANK NATIONAL ASSOCIATION,
as Agent

 

 
 

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                TABLE OF CONTENTS Page            
ARTICLE I
DEFINED TERMS
1
 
Section 1.1
Definitions
1
 
Section 1.2
Certain Other Terms
3
     
ARTICLE II
GRANT OF SECURITY INTEREST
4
 
Section 2.1
Collateral
4
 
Section 2.2
Grant of Security Interest in Collateral
4
     
ARTICLE III
REPRESENTATIONS AND WARRANTIES
4
 
Section 3.1
Title; No Other Liens
4
 
Section 3.2
Perfection and Priority
5
 
Section 3.3
Jurisdiction of Organization; Chief Executive Office
5
 
Section 3.4
Locations of Inventory, Equipment and Books and Records
5
 
Section 3.5
Pledged Collateral
5
 
Section 3.6
Instruments and Tangible Chattel Paper Formerly Accounts
6
 
Section 3.7
Intellectual Property
6
 
Section 3.8
Commercial Tort Claims
6
 
Section 3.9
Enforcement
6
     
ARTICLE IV
COVENANTS
7
 
Section 4.1
Maintenance of Perfected Security Interest; Further Documentation and Consents
7
 
Section 4.2
Changes in Locations, Name, Organizational Documents, Etc
7
 
Section 4.3
Pledged Collateral
8
 
Section 4.4
Delivery of Instruments and Tangible Chattel Paper and Control of Investment
Property, Letter-of-Credit
  Rights and Electronic Chattel Paper
8
 
Section 4.5
Intellectual Property
9
 
Section 4.6
Notices
10
 
Section 4.7
Notice of Commercial Tort Claims
10
       
ARTICLE V
REMEDIAL PROVISIONS
10
 
Section 5.1
Remedies
10
 
Section 5.2
Accounts and Payments in Respect of General Intangibles
13
 
Section 5.3
Pledged Collateral
13
 
Section 5.4
Proceeds to be Turned over to Secured Party
14
 
Section 5.5
Registration Rights
14
 
Section 5.6
Deficiency
15
       
ARTICLE VI
THE SECURED PARTY
15
 
Section 6.1
Secured Party’s Appointment as Attorney-in-Fact
15
 
Section 6.2
Authorization to File Financing Statements
17
 
Section 6.3
[Reserved]
17
 
Section 6.4
Duty; Obligations and Liabilities
17
       
ARTICLE VII
MISCELLANEOUS
17
 
Section 7.1
Reinstatement
17
 
Section 7.2
Release of Collateral
18
 
Section 7.3
Independent Obligations
18
 
Section 7.4
No Waiver by Course of Conduct
18
 
Section 7.5
Amendments in Writing
18
 
Section 7.6
Additional Pledged Collateral
18
 
Section 7.7
Notices
19
 
Section 7.8
Successors and Assigns
19
 
Section 7.9
Counterparts
19
 
Section 7.10
Severability
19
 
Section 7.11
Governing Law
19
 
Section 7.12
   WAIVER OF JURY TRIAL
19

 
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ANNEXES AND SCHEDULES
 
 
Annex 1
Form of Pledge Amendment
Annex 2
Form of Joinder Agreement
Annex 3
Form of Intellectual Property Security Agreement
   
Schedule 1
Commercial Tort Claims
Schedule 2
Filings
Schedule 3
Jurisdiction of Organization; Chief Executive Office
Schedule 4
Location of Inventory and Equipment
Schedule 5
Pledged Collateral
Schedule 6
Intellectual Property

 

 

 
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SECURITY AGREEMENT, dated as of August 18, 2009, by Schiff Nutrition Group,
Inc., a Utah corporation (“Borrower”), Schiff Nutrition International, Inc., a
Delaware corporation (“Parent”), WNG Holdings (International) Ltd., a Nevada
corporation (“WNG”), Coppal Research, Inc., a Utah corporation (“Coppal”)
(Borrower, Parent, WNG, and Coppal shall be referred to each as a “Grantor” and
collectively as the “Grantors”), in favor of U.S. Bank National Association, as
administrative agent (in such capacity, together with its successors and
assigns, the “Agent”) for the Lenders (as defined in the Loan Agreement referred
to below).
 
W I T N E S S E T H:
 
WHEREAS, pursuant to the Loan Agreement dated as of the date hereof (as the same
may be amended, restated, modified or otherwise supplemented from time to time,
the “Loan Agreement”) among Borrower, Agent, and the Lenders from time to time
party thereto, the Lenders, subject to the terms and conditions contained
therein, have agreed to make available to Borrower credit in the aggregate
principal amount of the respective Revolving Credit Commitments;
 
WHEREAS, as a condition precedent under the terms of the Loan Agreement, each
Grantor has agreed to grant a lien and security interest in all of its assets to
secure the Secured Obligations (as defined herein);
 
WHEREAS, each Grantor will derive substantial direct and indirect benefits of
reasonably equivalent value from the transactions evidenced by the Transaction
Documents; and
 
NOW, THEREFORE, in consideration of the premises and to induce the Agent and the
Lenders to enter into the transactions evidenced by the Transaction Documents,
each Grantor hereby agrees with the Agent as follows:
 
ARTICLE I

 
DEFINED TERMS
 
Section 1.1      Definitions.  (a)  Capitalized terms used herein without
definition shall have the meanings given in the Loan Agreement.
 
(b) The following terms have the meanings given to them in the UCC and terms
used herein without definition that are defined in the UCC have the meanings
given to them in the UCC (such meanings to be equally applicable to both the
singular and plural forms of the terms defined): “account”, “account debtor”,
“certificated security”, “chattel paper”, “commercial tort claim”, “commodity
contract”, “deposit account”, “documents”, “electronic chattel paper”,
“equipment”, “fixture”, “general intangible”, “goods”, “instruments”,
“inventory”, “investment property”, “letter-of-credit right”, “proceeds”,
“record”, “securities account”, “security”, “supporting obligation” and
“tangible chattel paper”.
 
(c) The following terms shall have the following meanings:
 
“Agreement” shall mean this Security Agreement, as amended, restated, modified
or otherwise supplemented from time to time.
 
“Applicable IP Office” shall mean the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency within or
outside the United States.

 
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“Collateral” has the meaning specified in Section 2.1.
 
“Contractual Obligations” shall mean, with respect to any Person, any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
 
“Control Agreement” shall mean with respect to any deposit account, any
securities account, any commodity account, securities entitlement or commodity
contract, an agreement, in form and substance satisfactory to the Agent, among
the Agent, the financial institution or Person at which such account is
maintained or with which such entitlement or contract is carried, and the
respective Grantor.
 
“Equity Interests” shall mean, with respect to any Person, any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, units, participations or other
equivalents of or interest in (regardless of how designated) equity of such
Person, whether voting or nonvoting, including common stock, preferred stock,
convertible securities or any other equity security.
 
“Excluded Property” shall mean the outstanding Equity Interests of (1) the
Excluded Subsidiaries and (2) a Foreign Subsidiary in excess of sixty-five
percent (65%) of the voting Equity Securities (within the meaning of Treasury
Regulation Section 1.956-2(c)(2) promulgated under the IRC) of such Foreign
Subsidiary.
 
“Governmental Authority” shall mean the government of any nation, state, city,
locality or other political subdivision of any thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
 
“Intellectual Property” shall mean all rights, title and interest in or related
to intellectual property and all IP Ancillary Rights related thereto, including
all copyrights, patents, trademarks, Internet domain names, trade secrets, and
intellectual property licenses.
 
“IP Ancillary Rights”  shall mean with respect to any other Intellectual
Property, as applicable, all foreign counterparts to, and all divisionals,
reversions, continuations, continuations-in-part, reissues, reexaminations,
renewals and extensions of, such Intellectual Property and all income,
royalties, proceeds and liabilities at any time due or payable or asserted under
or with respect to any of the foregoing or otherwise with respect to such
Intellectual Property, including all rights to sue or recover at law or in
equity for the past, present or future infringement, misappropriation, dilution,
violation or other impairment thereof.
 
“IRC” shall mean the Internal Revenue Code of 1986, as amended from time to time
(or any successor statute thereto), and the regulations promulgated and rulings
issued thereunder.
 
“Material Intellectual Property” shall mean Intellectual Property that is owned
by or licensed to a Grantor and material to the conduct of any Grantor’s
business.
 
“Pledged Certificated Stock” shall mean all certificated securities and any
other Equity Interests of any Person evidenced by a certificate, instrument or
other similar document (as defined in the UCC), in each case owned by any
Grantor, and any distribution of property made on, in respect of or in exchange
for the foregoing from time to time, including all Equity Interests listed on
Schedule 5.  Pledged Certificated Stock excludes any Excluded Property.

 
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“Pledged Collateral” shall mean, collectively, the Pledged Stock and the Pledged
Debt Instruments.
 
“Pledged Debt Instruments” shall mean all right, title and interest of any
Grantor in instruments evidencing any indebtedness owed to such Grantor or other
obligations owed to such Grantor, and any distribution of property made on, in
respect of or in exchange for the foregoing from time to time, including all
indebtedness described on Schedule 5, issued by the obligors named therein.
 
“Pledged Investment Property” shall mean any investment property of any Grantor,
and any distribution of property made on, in respect of or in exchange for the
foregoing from time to time, other than any Pledged Stock or Pledged Debt
Instruments.  Pledged Investment Property excludes any Excluded Property.
 
“Pledged Stock” shall mean all Pledged Certificated Stock and all Pledged
Uncertificated Stock.
 
“Pledged Uncertificated Stock” shall mean any Equity Interests of any Person
that is not Pledged Certificated Stock, including all right, title and interest
of any Grantor as a limited or general partner in any partnership not
constituting Pledged Certificated Stock or as a member of any limited liability
company, all right, title and interest of any Grantor in, to and under any
Organizational Document of any partnership or limited liability company to which
it is a party, and any distribution of property made on, in respect of or in
exchange for the foregoing from time to time, including in each case those
interests set forth on Schedule 5, to the extent such interests are not
certificated.  Pledged Certificated Stock excludes any Excluded Property.
 
“Requirements of Law” shall mean, as to any Person, the organizational and
governing documents of such Person and any law, treaty, rule, regulation, right,
qualification or determination of a court or other Governmental Authority, in
each case applicable or binding on such Person or its property.
 
“Secured Obligations” shall mean all Borrower’s Obligations including without
limitation all obligations of Grantors under this Agreement.
 
“Software” shall mean (a) all computer programs, including source code and
object code versions, (b) all data, databases and compilations of data, whether
machine readable or otherwise, and (c) all documentation, training materials and
configurations related to any of the foregoing.
 
“UCC” shall mean the Uniform Commercial Code as from time to time in effect in
the State of Utah; provided, however, that, in the event that, by reason of
mandatory provisions of any applicable Requirement of Law, any of the
attachment, perfection or priority of the Agent’s security interest in any
Collateral is governed by the Uniform Commercial Code of a jurisdiction other
than the State of Utah, “UCC” shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of the definitions
related to or otherwise used in such provisions.  Section references in this
Agreement to the UCC shall be deemed to be to the equivalent section in the UCC
in the applicable State.
 
“Vehicles” shall mean all vehicles covered by a certificate of title law of any
state.
 
Section 1.2      Certain Other Terms.  (a)  The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms.  The terms “herein”, “hereof” and similar terms refer to this Agreement
as a whole and not to any particular Article, Section or clause in this
Agreement.  References herein to an Annex, Schedule, Article, Section or clause
refer to the appropriate Annex or Schedule to, or Article, Section or clause in
this Agreement.  Where the context requires, provisions relating to any
Collateral when used in relation to a Grantor shall refer to such Grantor’s
Collateral or any relevant part thereof.

 
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ARTICLE II

 
GRANT OF SECURITY INTEREST
 
Section 2.1      Collateral.  For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by a Grantor or
in which a Grantor now has or at any time in the future may acquire any right,
title or interests is collectively referred to as the “Collateral”:
 
(a) all accounts, chattel paper, deposit accounts, documents, equipment, general
intangibles (including the Intellectual Property), goods, instruments,
inventory, investment property (including the Pledged Stock and the Pledged
Investment Property), letter-of-credit rights and any supporting obligations
related thereto;
 
(b) the commercial tort claims described on Schedule 1 and on any supplement
thereto received by the Agent pursuant to Section 3.8;
 
(c) all books and records pertaining to any of the property described in this
Section 2.1;
 
(d) all property of such Grantor held by the Agent, including all property of
every description, in the custody of or in transit to the Agent for any purpose,
including safekeeping, collection or pledge, for the account of such Grantor or
as to which such Grantor may have any right or power, including but not limited
to deposit accounts and cash;
 
(e) all other goods (including but not limited to fixtures) and all other
personal property of such Grantor, whether tangible or intangible and wherever
located; and
 
(f) to the extent not otherwise included, all proceeds and products of the
foregoing;
 
provided, however, that “Collateral” shall not include any Excluded Property.
 
Section 2.2      Grant of Security Interest in Collateral.  Each Grantor, as
collateral security for the prompt and complete payment and performance of the
Secured Obligations, hereby mortgages, pledges and hypothecates to the Agent,
and grants to the Agent a Lien on and security interest in, all of its right,
title and interest in, to and under the Collateral of such Grantor.
 
ARTICLE III

 
REPRESENTATIONS AND WARRANTIES
 
To induce the Agent and the Lenders to enter into the Loan Agreement, each
Grantor hereby represents and warrants each of the following to the Agent:
 
Section 3.1      Title; No Other Liens.  Except for the Lien granted to the
Agent pursuant to this Agreement, the Liens granted by the Transaction
Documents, and other Permitted Liens, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others.  Such
Grantor (a) is the record and beneficial owner of the Collateral pledged by it
hereunder constituting instruments or certificates and (b) has rights in or the
power to transfer each other item of Collateral in which a Lien is granted by it
hereunder, free and clear of any other Lien other than Permitted Liens.

 
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Section 3.2      Perfection and Priority.  The security interest granted
pursuant to this Agreement constitutes a valid and continuing security interest
in favor of the Agent in all Collateral, with perfection thereof to include
without limitation the following:  (i) in the case of all Collateral in which a
security interest may be perfected by filing a financing statement under the
UCC, the completion of the filings and other actions specified on Schedule 2,
(ii) with respect to any deposit account, the execution of a Control Agreement
other than deposit accounts for which the Agent is the depository bank and has
automatic control, (iii) in the case of all copyrights, trademarks and patents,
all appropriate filings having been made with the Applicable IP Office, (iv) in
the case of letter-of-credit rights that are not supporting obligations of
Collateral, the execution of a Contractual Obligation granting control to the
Agent over such letter-of-credit rights, (v) in the case of electronic chattel
paper, the completion of all steps necessary to grant control to the Agent over
such electronic chattel paper, (vi) in the case of Vehicles, the actions
required under Section 4.1(e), and (vii) in the case of Pledged Collateral or
Pledged Investment Property issued by a Foreign Subsidiary, such filings and
actions as may be required under the laws of the jurisdiction under which such
Foreign Subsidiary was formed.  In the case of all Pledged Certificated Stock,
Pledged Debt Instruments and Pledged Investment Property, delivery shall be made
to the Agent of such Pledged Certificated Stock, Pledged Debt Instruments and
Pledged Investment Property consisting of instruments and certificates, in each
case properly endorsed for transfer to the Agent or in blank.  In the case of
all Pledged Investment Property not in certificated form, Control Agreements
shall be executed with respect to such investment property.  In the case of all
other instruments and tangible chattel paper that are not Pledged Certificated
Stock, Pledged Debt Instruments or Pledged Investment Property, the delivery
shall be made the Agent of such instruments and tangible chattel paper.  Such
security interest shall be prior to all other Liens on the Collateral except for
any Permitted Liens having priority over the Agent’s Lien by operation of law or
unless otherwise granted or permitted by any Transaction Document.
 
Section 3.3      Jurisdiction of Organization; Chief Executive Office.  Such
Grantor’s jurisdiction of organization, legal name and organizational
identification number, if any, and the location of such Grantor’s chief
executive office or sole place of business, in each case as of the date hereof,
is specified on Schedule 3 and such Schedule 3 also lists all jurisdictions of
incorporation, legal names and locations of such Grantor’s chief executive
office or sole place of business for the five years preceding the date hereof.
 
Section 3.4      Locations of Inventory, Equipment and Books and Records.  On
the date hereof, such Grantor’s inventory and equipment (other than inventory or
equipment in transit) and books and records concerning the Collateral are kept
at the locations listed on Schedule 4 and such Schedule 4 also lists the
locations of such inventory, equipment and books and records for the five years
preceding the date hereof.
 
Section 3.5      Pledged Collateral.  (a)  The Pledged Stock pledged by such
Grantor hereunder (i) is listed on Schedule 5 and constitutes that percentage of
the issued and outstanding equity of all classes of each issuer thereof as set
forth on Schedule 5, (ii) has been duly authorized, validly issued and is fully
paid and nonassessable (other than Pledged Stock in limited liability companies
and partnerships).  The pledge by such Grantor of the Pledged Stock hereunder
constitutes the legal, valid and binding obligation of the obligor with respect
thereto, enforceable in accordance with its terms.

 
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(b) As of the Closing Date, all Pledged Collateral (other than Pledged
Uncertificated Stock) and all Pledged Investment Property consisting of
instruments and certificates has been delivered to the Agent in accordance with
Section 4.3(a).
 
Section 3.6      Instruments and Tangible Chattel Paper Formerly Accounts.  As
of the date hereof, no amount payable to such Grantor under or in connection
with any account is evidenced by any instrument or tangible chattel paper that
has not been delivered to the Agent, properly endorsed for transfer, to the
extent delivery is required by Section 4.4(a).
 
Section 3.7      Intellectual Property.  (a)  Schedule 6 sets forth a true and
complete list of the following Intellectual Property such Grantor owns, licenses
or otherwise has the right to use:  (i) Intellectual Property that is registered
or subject to applications for registration, (ii) Internet domain names and
(iii) other Material Intellectual Property and material Software, separately
identifying that owned and licensed to such Grantor and including for each of
the foregoing items (1) the owner, (2) the title, (3) the jurisdiction in which
such item has been registered or otherwise arises or in which an application for
registration has been filed, (4) as applicable, the registration or application
number and registration or application date and (5) any intellectual property
licenses or other rights (including franchises) granted by the Grantor with
respect thereto.
 
(b) On the Closing Date, all Material Intellectual Property owned by such
Grantor is valid, in full force and effect, subsisting, unexpired and
enforceable, and no Material Intellectual Property has been abandoned.  On the
Closing Date, no breach or default of any Material Intellectual Property license
shall be caused by any of the following, and none of the following shall limit
or impair the ownership, use, validity or enforceability of, or any rights of
such Grantor in, any Material Intellectual Property: (i) the consummation of the
transactions contemplated by any Transaction Document or (ii) to such Grantor’s
knowledge, any holding, decision, judgment or order rendered by any Governmental
Authority.  There are no pending (or, to the knowledge of such Grantor,
threatened) actions, investigations, suits, proceedings, audits, claims,
demands, orders or disputes challenging the ownership, use, validity,
enforceability of, or such Grantor’s rights in, any Material Intellectual
Property of such Grantor.  To such Grantor’s knowledge, no Person has been or is
infringing, misappropriating, diluting, violating or otherwise impairing any
Intellectual Property of such Grantor.  Such Grantor, and to such Grantor’s
knowledge each other party thereto, is not in material breach or default of any
Material Intellectual Property license.
 
Section 3.8      Commercial Tort Claims.  The only commercial tort claims of any
Grantor existing on the date hereof (regardless of whether the amount, defendant
or other material facts can be determined and regardless of whether such
commercial tort claim has been asserted, threatened or has otherwise been made
known to the obligee thereof or whether litigation has been commenced for such
claims) are those listed on Schedule 1, which sets forth such information
separately for each Grantor.
 
Section 3.9      Enforcement.  No permit, notice to or filing with any
Governmental Authority or any other Person or any consent from any Person is
required for the exercise by the Agent of its rights (including voting rights)
provided for in this Agreement or the enforcement of remedies in respect of the
Collateral pursuant to this Agreement, including the transfer of any Collateral,
except as may be required in connection with the disposition of any portion of
the Pledged Collateral by laws affecting the offering and sale of securities
generally or any approvals that may be required to be obtained from any bailees
or landlords to collect the Collateral.

 
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ARTICLE IV

 
COVENANTS
 
Each Grantor agrees with the Agent to the following, as long as any Secured
Obligations remain outstanding:
 
Section 4.1      Maintenance of Perfected Security Interest; Further
Documentation and Consents.  (a)  Such Grantor shall (i) not use or permit any
Collateral to be used unlawfully or in violation of any provision of any
Transaction Document, any Requirement of Law or any policy of insurance covering
the Collateral and (ii) not enter into any Contractual Obligation or undertaking
restricting the right or ability of such Grantor or the Agent to sell any
Collateral if such restriction would have a Material Adverse Effect.
 
(b) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having the priority described in Section 3.2
and shall defend such security interest and such priority against the claims and
demands of all Persons not constituting Permitted Liens.
 
(c) Such Grantor shall furnish to the Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
documents in connection with the Collateral as the Agent may reasonably request,
all in reasonable detail and in form and substance satisfactory to the Agent.
 
(d) At any time and from time to time, upon the written request of the Agent,
such Grantor shall, for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, (i) promptly and
duly execute and deliver, and have recorded, such further documents, including
an authorization to file any financing statement or amendment under the UCC (or
other filings under similar Requirements of Law) in effect in any jurisdiction
with respect to the security interest created hereby and (ii) take such further
action as the Agent may reasonably request, including (A) during the continuance
of an Event of Default using its best efforts to secure all approvals necessary
or appropriate for the assignment to or for the Agent to enforce the security
interests granted hereunder and (B) executing and delivering any Control
Agreements with respect to deposit accounts and securities accounts.
 
(e) If requested by the Agent, the Grantor shall arrange for the Agent’s
security interest to be noted on the certificate of title of each Vehicle and
shall file any other necessary documentation in each jurisdiction that the Agent
shall deem advisable to perfect its security interests in any Vehicle.
 
Section 4.2      Changes in Locations, Name, Organizational Documents,
Etc.  Except upon thirty (30) days’ prior written notice to the Agent and
delivery to the Agent of (a) all documents reasonably requested by the Agent to
maintain the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, a written supplement to Schedule 4
showing any additional locations at which inventory or equipment shall be kept,
such Grantor shall not do any of the following:
 
(i) permit any inventory or equipment to be kept at a location other than those
listed on Schedule 4, except for inventory or equipment in transit;

 
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(ii) change its jurisdiction of organization or its location, in each case from
that referred to in Section 3.3; or
 
(iii) change its legal name or organizational identification number, if any, or
corporation, limited liability company, partnership or other form of legal
entity.
 
Section 4.3      Pledged Collateral.  (a)  Delivery of Pledged Collateral.  Such
Grantor shall (i) deliver to the Agent, in suitable form for transfer and in
form and substance satisfactory to the Agent, (i) all Pledged Certificated
Stock, (ii) all Pledged Debt Instruments and (iii) all certificates and
instruments evidencing Pledged Investment Property.
 
(b) Event of Default.  During the continuance of an Event of Default, the Agent
shall have the right, at any time in its discretion and without notice to the
Grantor, to (i) transfer to or to register in its name or in the name of its
nominees any Pledged Collateral or any Pledged Investment Property and (ii)
exchange any certificate or instrument representing or evidencing any Pledged
Collateral or any Pledged Investment Property for certificates or instruments of
smaller or larger denominations.
 
(c) Cash Distributions with respect to Pledged Collateral.  Except as provided
in Article V, such Grantor shall be entitled to receive all cash or other
distributions paid in respect of the Pledged Collateral or Pledged Investment
Property.
 
(d) Voting Rights.  Except as provided in Article V, such Grantor shall be
entitled to exercise all voting, consent and corporate, partnership, limited
liability company and similar rights with respect to the Pledged Collateral and
the Pledged Investment Property; provided, however, that no vote shall be cast,
consent given or right exercised or other action taken by such Grantor that
would impair the Collateral or be inconsistent with or result in any violation
of any provision of any Transaction Document.
 
(e) Organizational Documents.  No Grantor shall amend any of its organizational
documents, or participate in any amendment to the organizational documents of
any issuer of Pledged Stock, that in any way adversely affects the perfection of
the Agent’s Lien in the Pledged Stock including, without limitation, any
amendment electing to treat any membership interest of any issuer of Pledged
Stock as a security under Section 8-103 of the UCC, or any election to turn any
previously uncertificated membership interest of any issuer of Pledged Stock
into a certificated membership interest.
 
Section 4.4      Delivery of Instruments and Tangible Chattel Paper and Control
of Investment Property, Letter-of-Credit Rights and Electronic Chattel
Paper.  (a)  If any amount in excess of $100,000 payable under or in connection
with any Collateral owned by such Grantor shall be or become evidenced by an
instrument or tangible chattel paper other than such instrument delivered in
accordance with Section 4.3(a) and in the possession of the Agent, such Grantor
shall mark all such instruments and tangible chattel paper with the following
legend:  “This writing and the obligations evidenced or secured hereby are
subject to the security interest of U.S. Bank National Association as Agent”
and, at the request of the Agent, shall immediately deliver such instrument or
tangible chattel paper to the Agent, duly indorsed in a manner satisfactory to
the Agent.
 
(b) Such Grantor shall not grant “control” (within the meaning of such term
under Section 9-106 of the UCC) over any deposit account or investment property
to any Person other than the Agent.

 
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(c) If such Grantor is or becomes the beneficiary of a letter of credit that is
(i) not a supporting obligation of any Collateral and (ii) has a face amount in
excess of $100,000, such Grantor shall promptly (and in any event within two (2)
Domestic Business Days) after becoming a beneficiary, notify the Agent thereof
and as soon as practicable thereafter enter into a Contractual Obligation with
the Agent, the issuer of such letter of credit or any nominated person with
respect to the letter-of-credit rights under such letter of credit.  Such
Contractual Obligation shall assign the proceeds of such letter of credit to the
Agent and such assignment shall be sufficient to grant control for the purposes
of Section 9-107 of the UCC (or any similar section under any equivalent
UCC).  The provisions of the Contractual Obligation shall be in form and
substance reasonably satisfactory to the Agent.
 
(d) If any amount in excess of $100,000 payable under or in connection with any
Collateral owned by such Grantor shall be or become evidenced by electronic
chattel paper, such Grantor shall take all steps necessary to grant the Agent
control of all such electronic chattel paper for the purposes of Section 9-105
of the UCC.
 
Section 4.5      Intellectual Property.  (a)  Within sixty (60) days after any
change to Schedule 6 for such Grantor, such Grantor shall provide the Agent
notification thereof and the short-form intellectual property agreements and
assignments as described in this Section 4.5 and other documents that the Agent
reasonably requests with respect thereto.
 
(b) Such Grantor shall (and shall require all its licensees to) (i) (A) continue
to use each trademark included in the Material Intellectual Property in order to
maintain such trademark in full force and effect with respect to each class of
goods for which such trademark is currently used, free from any claim of
abandonment for non-use, (B) maintain at least the same standards of quality of
products and services offered under such trademark as are currently maintained,
(C) use such trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (D) not adopt or
use any other trademark that is confusingly similar or a colorable imitation of
such trademark unless the Agent shall obtain a perfected security interest in
such other trademark pursuant to this Agreement and (ii) not do any act or omit
to do any act whereby (A) such trademark (or any goodwill associated therewith)
may become destroyed, invalidated, impaired or harmed in any way, (B) any patent
included in the Material Intellectual Property may become forfeited, misused,
unenforceable, abandoned or dedicated to the public, (C) any portion of the
copyright included in the Material Intellectual Property may become invalidated,
otherwise impaired or fall into the public domain or (D) any trade secret that
is Material Intellectual Property may become publicly available or otherwise
unprotectable.
 
(c) Such Grantor shall notify the Agent immediately if it knows, or has reason
to know, that any application or registration relating to any Material
Intellectual Property may become forfeited, misused, unenforceable, abandoned or
dedicated to the public, or of any adverse determination or development
regarding the validity or enforceability or such Grantor’s ownership of,
interest in, right to use, register, own or maintain any Material Intellectual
Property (including the institution of, or any such determination or development
in, any proceeding relating to the foregoing in any Applicable IP Office).  Such
Grantor shall take all actions that are necessary or reasonably requested by the
Agent to maintain and pursue each application (and to obtain the relevant
registration or recordation) and to maintain each registration and recordation
included in the Material Intellectual Property.
 
(d) Such Grantor shall not knowingly do any act or omit to do any act to
infringe, misappropriate, dilute, violate or otherwise impair in any material
respect the Intellectual Property of any other Person.  In the event that any
Material Intellectual Property of such Grantor is or has been infringed,
misappropriated, violated, diluted or otherwise impaired by a third party, such
Grantor shall take such action as it reasonably deems appropriate under the
circumstances in response thereto, including promptly bringing suit and
recovering all damages therefor.

 
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(e) Such Grantor shall execute and deliver to the Agent in form and substance
reasonably acceptable to the Agent and suitable for (i) filing in the Applicable
IP Office the short-form intellectual property security agreements in the form
attached hereto as Annex 3 for all copyrights, trademarks and patents of such
Grantor and (ii) upon the request of the Agent, recording with the appropriate
Internet domain name registrar, a duly executed form of assignment for all
Internet domain names of such Grantor (together with appropriate supporting
documentation as may be requested by the Agent).
 
Section 4.6      Notices.  Such Grantor shall promptly notify the Agent in
writing of its acquisition of any interest hereafter in property that is of a
type where a security interest or lien must be or may be registered, recorded or
filed under, or notice thereof given under, any federal statute or regulation.
 
Section 4.7      Notice of Commercial Tort Claims.  Such Grantor agrees that, if
it shall acquire any interest in any commercial tort claim (whether from another
Person or because such commercial tort claim shall have come into existence),
(i) such Grantor shall, promptly (but in no event more than two (2) Domestic
Business Days) upon such acquisition, deliver to the Agent, in each case in form
and substance satisfactory to the Agent, a notice of the existence and nature of
such commercial tort claim and a supplement to Schedule 1 containing a specific
description of such commercial tort claim, (ii) Section 2.2 shall apply to such
commercial tort claim and (iii) such Grantor shall execute and deliver to the
Agent, in each case in form and substance satisfactory to the Agent, any
document, and take all other action, deemed by the Agent to be reasonably
necessary or appropriate for the Agent to obtain a perfected security interest
having at least the priority set forth in Section 3.2 in all such commercial
tort claims.  Any supplement to Schedule 1 delivered pursuant to this
Section 4.7 shall, after the receipt thereof by the Agent, become part of
Schedule 1 for all purposes hereunder other than in respect of representations
and warranties made prior to the date of such receipt.
 
ARTICLE V

 
REMEDIAL PROVISIONS
 
Section 5.1      Remedies.  (a)  UCC Remedies.  During the continuance of an
Event of Default, the Agent may exercise, in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to any Secured Obligations, all
rights and remedies of a secured party under the UCC or any other applicable
law.
 
(b) Disposition of Collateral.  Without limiting the generality of the
foregoing, the Agent  may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived to the extent permitted by law), during the continuance of any Event of
Default (personally or through its agents or attorneys), (i) enter upon the
premises where any Collateral is located, without any obligation to pay rent,
through self-help, without judicial process, without first obtaining a final
judgment or giving any Grantor or any other Person notice or opportunity for a
hearing on the Agent’s claim or action, (ii) collect, receive, appropriate and
realize upon any Collateral and (iii) sell, grant option or options to purchase
and deliver any Collateral (enter into Contractual Obligations to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of the Agent or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit
risk.  The Agent shall have the right, upon any such public sale or sales and,
to the extent permitted by the UCC and other applicable Requirements of Law,
upon any such private sale, to purchase the whole or any part of the Collateral
through a credit bid.

 
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(c) Management of the Collateral.  Each Grantor further agrees, that, during the
continuance of any Event of Default, (i) at the Agent’s request, it shall
assemble the Collateral and make it available to the Agent at places that the
Agent shall reasonably select, whether at such Grantor’s premises or elsewhere,
(ii) without limiting the foregoing, the Agent also has the right to require
that each Grantor store and keep any Collateral pending further action by the
Agent and, while any such Collateral is so stored or kept, provide such guards
and maintenance services as shall be necessary to protect the same and to
preserve and maintain such Collateral in good condition, (iii) until the Agent
is able to sell any Collateral, the Agent shall have the right to hold or use
such Collateral to the extent that it deems appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by the Agent and (iv) the Agent may, if it so elects, seek the
appointment of a receiver or keeper to take possession of any Collateral and to
enforce any of the Agent’s remedies, with respect to such appointment without
prior notice or hearing as to such appointment.  The Agent shall not have any
obligation to any Grantor to maintain or preserve the rights of any Grantor as
against third parties with respect to any Collateral while such Collateral is in
the possession of the Agent.
 
(d) Application of Proceeds.  The Agent shall apply the cash proceeds of any
action taken by it pursuant to this Section 5.1, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any Collateral or in any way relating to the
Collateral or the rights of the Agent hereunder, including Attorneys’ Fees and
disbursements, to the payment in whole or in part of the Secured Obligations,
and only after such application and after the payment by the Agent of any other
amount required by any Requirement of Law, the Agent shall deliver the surplus,
if any, to the Grantors.
 
(e) Direct Obligation.  Neither the Agent shall be required to make any demand
upon, or pursue or exhaust any right or remedy against, any Grantor or any other
Person with respect to the payment of the Secured Obligations or to pursue or
exhaust any right or remedy with respect to any Collateral therefor or any
direct or indirect guaranty thereof.  All of the rights and remedies of the
Agent under any Transaction Document shall be cumulative, may be exercised
individually or concurrently and not exclusive of any other rights or remedies
provided by any Requirement of Law.  To the extent it may lawfully do so, each
Grantor absolutely and irrevocably waives and relinquishes the benefit and
advantage of, and covenants not to assert against the Agent, any valuation,
stay, appraisement, extension, redemption or similar laws and any and all rights
or defenses it may have as a surety, now or hereafter existing, arising out of
the exercise by them of any rights hereunder.  If any notice of a proposed sale
or other disposition of any Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least ten (10) days before
such sale or other disposition.
 
(f) Commercially Reasonable.  To the extent that applicable Requirements of Law
impose duties on the Agent to exercise remedies in a commercially reasonable
manner, each Grantor acknowledges and agrees that it is not commercially
unreasonable for the Agent to do any of the following:
 
(i) fail to incur significant costs, expenses or other liabilities reasonably
deemed as such by the Agent to prepare any Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition;
 
(ii) fail to obtain permits or other consents for access to any Collateral to
sell or for the collection or sale of any Collateral, or, if not required by
other Requirements of Law, fail to obtain permits or other consents for the
collection or disposition of any Collateral;

 
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(iii) fail to exercise remedies against account debtors or other Persons
obligated on any Collateral or to remove Liens on any Collateral or to remove
any adverse claims against any Collateral;
 
(iv) advertise dispositions of any Collateral through publications or media of
general circulation, whether or not such Collateral is of a specialized nature
or to contact other Persons, whether or not in the same business as any Grantor,
for expressions of interest in acquiring any such Collateral;
 
(v) exercise collection remedies against account debtors and other Persons
obligated on any Collateral, directly or through the use of collection agencies
or other collection specialists, hire one or more professional auctioneers to
assist in the disposition of any Collateral, whether or not such Collateral is
of a specialized nature or, to the extent deemed appropriate by the Agent,
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Agent in the collection or disposition of any
Collateral, or utilize internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets to dispose of any
Collateral;
 
(vi) dispose of assets in wholesale rather than retail markets;
 
(vii) disclaim disposition warranties, such as title, possession or quiet
enjoyment; or
 
(viii) purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of any Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of any Collateral.
 
Each Grantor acknowledges that the purpose of this Section 5.1 is to provide a
non-exhaustive list of actions or omissions that are commercially reasonable
when exercising remedies against any Collateral and that other actions or
omissions by the Agent shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 5.1.  Without limitation upon the
foregoing, nothing contained in this Section 5.1 shall be construed to grant any
rights to any Grantor or to impose any duties on the Agent that would not have
been granted or imposed by this Agreement or by applicable Requirements of Law
in the absence of this Section 5.1.
 
(g) Intellectual Property Licenses.  For the purpose of enabling the Agent to
exercise rights and remedies under this Section 5.1 (including in order to take
possession of, collect, receive, assemble, process, appropriate, remove, realize
upon, sell or grant options to purchase any Collateral) at such time as the
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to the Agent, (i) an irrevocable, nonexclusive, worldwide
license (exercisable without payment of royalty or other compensation to such
Grantor), including in such license the right to sublicense, use and practice
any Intellectual Property now owned or hereafter acquired by such Grantor and
access to all media in which any of the licensed items may be recorded or stored
and to all Software and programs used for the compilation or printout thereof
and (ii) an irrevocable license (without payment of rent or other compensation
to such Grantor) to use, operate and occupy all real property owned, operated,
leased, subleased or otherwise occupied by such Grantor.

 
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Section 5.2      Accounts and Payments in Respect of General
Intangibles.  (a)   If required by the Agent at any time during the continuance
of an Event of Default, any payment of accounts or payment in respect of general
intangibles, when collected by any Grantor, shall be promptly (and, in any
event, within two (2) Domestic Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Agent, in an account
controlled by the Agent, subject to withdrawal by the Agent as provided in
Section 5.4.  Until so turned over, such payment shall be held by such Grantor
in trust for the Agent, segregated from other funds of such Grantor.  Each such
deposit of proceeds of accounts and payments in respect of general intangibles
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.
 
(b) At any time during the continuance of an Event of Default:
 
(i) each Grantor shall, upon the Agent’s request, deliver to the Agent all
original and other documents evidencing, and relating to, the Contractual
Obligations and transactions that gave rise to any account or any payment in
respect of general intangibles, including all original orders, invoices and
shipping receipts and notify account debtors that the accounts or general
intangibles have been collaterally assigned to the Agent and that payments in
respect thereof shall be made directly to the Agent;
 
(ii) the Agent may, without notice, at any time during the continuance of an
Event of Default, limit or terminate the authority of a Grantor to collect its
accounts or amounts due under general intangibles or any thereof and, in its own
name or in the name of others, communicate with account debtors to verify with
them to the Agent’s satisfaction the existence, amount and terms of any account
or amounts due under any general intangible.  In addition, the Agent may at any
time enforce such Grantor’s rights against such account debtors and obligors of
general intangibles; and
 
(iii) each Grantor shall take all actions, deliver all documents and provide all
information necessary or reasonably requested by the Agent to ensure any
Internet domain name is registered.
 
(c) Anything herein to the contrary notwithstanding, each Grantor shall remain
liable under each account and each payment in respect of general intangibles to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto.  Neither the Agent shall have any obligation or liability
under any agreement giving rise to an account or a payment in respect of a
general intangible by reason of or arising out of any Transaction Document or
the receipt by the Agent of any payment relating thereto, nor shall the Agent be
obligated in any manner to perform any obligation of any Grantor under or
pursuant to any agreement giving rise to an account or a payment in respect of a
general intangible, to make any payment, to make any inquiry as to the nature or
the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts that
may have been assigned to it or to which it may be entitled at any time or
times.
 
Section 5.3      Pledged Collateral.  (a)  Voting Rights.  During the
continuance of an Event of Default, upon notice by the Agent to the relevant
Grantor or Grantors, the Agent or its nominee may exercise (i) any voting,
consent, corporate and other right pertaining to the Pledged Collateral at any
meeting of shareholders, partners or members, as the case may be, of the
relevant issuer or issuers of Pledged Collateral or otherwise and (ii) any right
of conversion, exchange and subscription and any other right, privilege or
option pertaining to the Pledged Collateral as if it were the absolute owner
thereof (including the right to exchange at its discretion any Pledged
Collateral upon the merger, amalgamation,

 
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consolidation, reorganization, recapitalization or other fundamental change in
the corporate or equivalent structure of any issuer of Pledged Stock, the right
to deposit and deliver any Pledged Collateral with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Agent may determine), all without liability except to account
for property actually received by it; provided, however, that neither the Agent
shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
 
(b) Proxies.  In order to permit the Agent to exercise the voting and other
consensual rights that it may be entitled to exercise pursuant hereto and to
receive all dividends and other distributions that it may be entitled to receive
hereunder, (i) each Grantor shall promptly execute and deliver (or cause to be
executed and delivered) to the Agent all such proxies, dividend payment orders
and other instruments as the Agent may from time to time reasonably request and
(ii) without limiting the effect of clause (i) above, such Grantor hereby grants
to the Agent an irrevocable proxy to vote all or any part of the Pledged
Collateral and to exercise all other rights, powers, privileges and remedies to
which a holder of the Pledged Collateral would be entitled (including giving or
withholding written consents of shareholders, partners or members, as the case
may be, calling special meetings of shareholders, partners or members, as the
case may be, and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Collateral on the record books of the issuer thereof) by any other
Person (including the issuer of such Pledged Collateral or any officer or agent
thereof) during the continuance of an Event of Default and which proxy shall
only terminate upon the payment in full of the Secured Obligations.
 
(c) Authorization of Issuers.  Each Grantor hereby expressly irrevocably
authorizes and instructs, without any further instructions from such Grantor,
each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i)
comply with any instruction received by it from the Agent in writing that states
that an Event of Default is continuing and is otherwise in accordance with the
terms of this Agreement and each Grantor agrees that such issuer shall be fully
protected from liabilities to such Grantor in so complying and (ii) unless
otherwise expressly permitted hereby, pay any dividend or make any other payment
with respect to the Pledged Collateral directly to the Agent.
 
Section 5.4      Proceeds to be Turned over to the Agent.  All proceeds of any
Collateral received by any Grantor hereunder in cash shall be held by such
Grantor in trust for the Agent, segregated from other funds of such Grantor, and
shall, following the occurrence and during the continuance of an Event of
Default, promptly upon receipt by any Grantor, be turned over to the Agent in
the exact form received (with any necessary endorsement).  All proceeds being so
received by the Agent shall be applied to the Secured Obligations.
 
Section 5.5      Registration Rights.  (a)  If, in the opinion of the Agent, it
is necessary or advisable to sell any portion of the Pledged Collateral by
registering such Pledged Collateral under the provisions of the Securities Act,
each relevant Grantor shall, if such issuer is a Grantor or a Subsidiary of a
Grantor, cause the issuer thereof to do or cause to be done all acts, or if such
issuer is not a Grantor or a Subsidiary of a Grantor, use commercially
reasonable efforts to cause the issuer thereof to do or cause to be done all
acts, in each case, as may be, in the opinion of the Agent, necessary or
advisable to register such Pledged Collateral or that portion thereof to be sold
under the provisions of the Securities Act, all as directed by the Agent in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto and in
compliance with the securities or “Blue Sky” laws of any jurisdiction that the
Agent shall designate.

 
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(b) Each Grantor recognizes that the Agent may be unable to effect a public sale
of any Pledged Collateral by reason of certain prohibitions contained in the
Securities Act and applicable state or foreign securities laws or otherwise or
may determine that a public sale is impracticable, not desirable or not
commercially reasonable and, accordingly, may resort to one or more private
sales thereof to a restricted group of purchasers that shall be obliged to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.  Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.  The Agent shall
be under no obligation to delay a sale of any Pledged Collateral for the period
of time necessary to permit the issuer thereof to register such securities for
public sale under the Securities Act or under applicable state securities laws
even if such issuer would agree to do so.
 
(c) Each Grantor agrees to use its commercially reasonable efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of any portion of the Pledged Collateral pursuant to this Section 5.5
valid and binding and in compliance with all applicable Requirements of
Law.  Each Grantor further agrees that a breach of any covenant contained in
this Section 5.5 will cause irreparable injury to the Agent, that the
Agent  have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 5.5 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defense against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Transaction Documents.
 
Section 5.6      Deficiency.  Grantors, in their capacity as Obligors, shall
remain jointly and severally liable for any deficiency if the proceeds of any
sale or other disposition of any Collateral are insufficient to pay the Secured
Obligations.
 
ARTICLE VI

 
THE SECURED PARTY
 
Section 6.1      The Agent’s Appointment as Attorney-in-Fact.  (a)  Each Grantor
hereby irrevocably constitutes and appoints the Agent and its agents, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, but subject to the limitations set forth in this
Section 6.1, to take any appropriate action and to execute any document or
instrument that may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Agent and its agents the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any of the following
when an Event of Default shall be continuing:
 
(i) in the name of such Grantor, in its own name or otherwise, take possession
of and indorse and collect any check, draft, note, acceptance or other
instrument for the payment of moneys due under any account or general intangible
or with respect to any other Collateral and file any claim or take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any such moneys due under
any account or general intangible or with respect to any other Collateral
whenever payable;

 
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(ii) in the case of any Intellectual Property owned by or licensed to the
Grantors, execute, deliver and have recorded any document that the Agent may
request to evidence, effect, publicize or record the Agent’s security interest
in such Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
 
(iii) pay or discharge taxes and Liens levied or placed on or threatened against
any Collateral, effect any repair or pay any insurance called for by the terms
of the Loan Agreement (including all or any part of the premiums therefor and
the costs thereof);
 
(iv) execute, in connection with any sale provided for in Section 5.1 or
Section 5.5, any document to effect or otherwise necessary or appropriate in
relation to evidence the sale of any Collateral; or
 
(v) (A) direct any party liable for any payment under any Collateral to make
payment of any moneys due or to become due thereunder directly to the Agent or
as the Agent shall direct, (B) ask or demand for, and collect and receive
payment of and receipt for, any moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral, (C) sign
and indorse any invoice, freight or express bill, bill of lading, storage or
warehouse receipt, draft against debtors, assignment, verification, notice and
other document in connection with any Collateral, (D) commence and prosecute any
suit, action or proceeding at law or in equity in any court of competent
jurisdiction to collect any Collateral and to enforce any other right in respect
of any Collateral, (E) defend any actions, suits, proceedings, audits, claims,
demands, orders or disputes brought against such Grantor with respect to any
Collateral, (F) settle, compromise or adjust any such actions, suits,
proceedings, audits, claims, demands, orders or disputes and, in connection
therewith, give such discharges or releases as the Agent may deem appropriate,
(G) assign any Intellectual Property owned by the Grantors or any Intellectual
Property licenses of the Grantors throughout the world on such terms and
conditions and in such manner as the Agent shall in its sole discretion
determine, including the execution and filing of any document necessary to
effectuate or record such assignment and (H) generally sell, grant a Lien on,
make any Contractual Obligation with respect to and otherwise deal with, any
Collateral as fully and completely as though the Agent were the absolute owner
thereof for all purposes and do, at the Agent’s option, at any time or from time
to time, all acts and things that the Agent deems necessary to protect, preserve
or realize upon any Collateral and the Agent’s security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
 
(b) If any Grantor fails to perform or comply with any Contractual Obligation
contained herein, the Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
Contractual Obligation.
 
(c) The expenses of the Agent incurred in connection with actions undertaken as
provided in this Section 6.1, together with interest thereon at a rate set forth
in the Loan Agreement, from the date of payment by the Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Agent on demand.
 
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue of this Section 6.1.  All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.

 
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Section 6.2      Authorization to File Financing Statements.  Each Grantor
authorizes the Agent and its agents, at any time and from time to time, to file
or record financing statements, amendments thereto, and other filing or
recording documents or instruments with respect to any Collateral in such form
and in such offices as the Agent reasonably determines appropriate to perfect
the security interests of the Agent under this Agreement, and such financing
statements and amendments may described the Collateral covered thereby as “all
assets of the debtor”.  Such Grantor also hereby ratifies its authorization for
the Agent to have filed any initial financing statement or amendment thereto
under the UCC (or other similar laws) in effect in any jurisdiction if filed
prior to the date hereof.
 
Section 6.3      [Reserved]
 
Section 6.4      Duty; Secured Obligations and Liabilities.  (a)  Duty of the
Agent.  The Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession shall be to deal with
it in the same manner as the Agent deals with similar property for its own
account.  The powers conferred on the Agent hereunder are solely to protect the
Agent’s interest in the Collateral and shall not impose any duty upon the Agent
to exercise any such powers.  The Agent shall be accountable only for amounts
that it receives as a result of the exercise of such powers, and shall not be
responsible to any Grantor for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction.  In addition, the Agent shall not be liable or
responsible for any loss or damage to any Collateral, or for any diminution in
the value thereof, by reason of the act or omission of any warehousemen,
carrier, forwarding agency, consignee or other bailee if such Person has been
selected by the Agent in good faith.
 
(b) Secured Obligations and Liabilities with respect to Collateral.  The Agent
shall not be liable for failure to demand, collect or realize upon any
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to any
Collateral.  The powers conferred on the Agent hereunder shall not impose any
duty upon the Agent to exercise any such powers.  The Agent shall be accountable
only for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their respective officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
 
ARTICLE VII

 
MISCELLANEOUS
 
Section 7.1      Reinstatement.  Each Grantor agrees that, if any payment made
by the Grantors or other Person and applied to the Secured Obligations is at any
time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by the Agent to such
party, its estate, trustee, receiver or any other party, including any Grantor,
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, any Lien or other Collateral
securing such liability shall be and remain in full force and effect, as fully
as if

 
17

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such payment had never been made.  If, prior to any of the foregoing, any Lien
or other Collateral securing such Grantor’s liability hereunder shall have been
released or terminated by virtue of the foregoing, such Lien or other Collateral
shall be reinstated in full force and effect and such prior release,
termination, cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of any such Grantor in respect of any
Lien or other Collateral securing such obligation or the amount of such payment.
 
Section 7.2      Release of Collateral.  Upon payment and termination of all
Secured Obligations, the Collateral shall be released from the Lien created
hereby and this Agreement and all obligations (other than those expressly stated
to survive such termination) of the Agent and each Grantor 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 Grantors.  Each
Grantor acknowledges that it is not authorized to file any financing statement
or amendment or termination statement with respect to any financing statement
without the prior written consent of the Agent and agrees that it will not do so
without the prior written consent of the Agent, subject to such Grantor’s rights
under Section 9-509(d)(2) of the UCC.  At the request of any Grantor following
any such termination, the Agent shall deliver to such Grantor any Collateral of
such Grantor held by the Agent hereunder and execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination.
 
Section 7.3      Independent Obligations.  The obligations of each Grantor
hereunder are independent, joint and several.  If any Secured Obligation is not
paid when due, or upon any Event of Default, the Agent may, at its sole
election, proceed directly and at once, without notice, against any Grantor and
any Collateral to collect and recover the full amount of the Secured
Obligations, without first proceeding against any other Grantor, or any other
Collateral and without first joining any other Grantor in any proceeding.
 
Section 7.4      No Waiver by Course of Conduct.  Neither the Agent shall by any
act (except by a written instrument pursuant to Section 7.5), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default.  No failure to exercise,
nor any delay in exercising, on the part of the Agent, any right, power or
privilege hereunder shall operate as a waiver thereof.  No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  A waiver by the Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the Agent
would otherwise have on any future occasion.
 
Section 7.5      Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
writing signed by all parties; provided, however, that annexes to this Agreement
may be supplemented (but no existing provisions may be modified and no
Collateral may be released).
 
Section 7.6      Additional Pledged Collateral.  To the extent any Pledged
Collateral has not been delivered as of the Closing Date, such Grantor shall
deliver a pledge amendment duly executed by the Grantor in substantially the
form of Annex 1 (each, a “Pledge Amendment”).  Such Grantor authorizes the Agent
to attach each Pledge Amendment to this Agreement.

 
18

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Section 7.7      Notices.  All notices, requests and demands to or upon the
Agent or any Grantor hereunder shall be effected in the manner provided for in
the Loan Agreement.
 
Section 7.8      Successors and Assigns.  This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of the
Agent and their successors and assigns.
 
Section 7.9      Counterparts.  This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.  Signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart.  Delivery of an executed signature page of this Agreement by
facsimile transmission or by electronic transmission shall be as effective as
delivery of a manually executed counterpart hereof.
 
Section 7.10    Severability.  Any provision of this Agreement being held
illegal, invalid or unenforceable in any jurisdiction shall not affect any part
of such provision not held illegal, invalid or unenforceable, any other
provision of this Agreement or any part of such provision in any other
jurisdiction.
 
Section 7.11    Governing Law.  This Agreement and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the law of the State of Utah.
 
Section 7.12    WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN OR RELATED
THERETO (WHETHER FOUNDED IN CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY
HERETO (A) CERTIFIES THAT NO OTHER PARTY AND NO RELATED PERSON OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 7.12.
 
[Signature Page Follows]

 
19

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IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
 
SCHIFF NUTRITION GROUP, INC.,
as a Grantor
 
By:
/s/ Joseph W. Baty   Name: Joseph W. Baty   Title:  Executive Vice President and
Chief Financial Officer

 
 
SCHIFF NUTRITION INTERNATIONAL, INC.,
as a Grantor
 
By:
/s/ Joseph W. Baty   Name: Joseph W. Baty   Title:  Executive Vice President and
Chief Financial Officer

 
 
WNG HOLDINGS (INTERNATIONAL) LTD.,
as a Grantor
 
By:
/s/ Joseph W. Baty   Name: Joseph W. Baty   Title:  Executive Vice President and
Treasurer

 

 
COPPAL RESEARCH, INC.,
as a Grantor
 
By:
/s/ Joseph W. Baty   Name: Joseph W. Baty   Title:  Executive Vice President and
Treasurer

 
 
 
 
ACCEPTED AND AGREED
as of the date first above written:
 
U.S. BANK NATIONAL ASSOCIATION,
as the Agent
 
By:
/s/ Adam M. Hill   Name: Adam M. Hill   Title: Relationship Manager

 
 
 

 
20

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

 

 
ANNEX 1
TO
SECURITY AGREEMENT
 
FORM OF PLEDGE AMENDMENT
 
This Pledge Amendment, dated as of __________, 20__, is delivered pursuant to
Section 7.6 of the Security Agreement, dated as of August 18, 2009, by
_______________ (“__________”), the undersigned Grantor and the other Affiliates
of ___________ from time to time party thereto as Grantors in favor of U.S. Bank
National Association, as the Agent (as amended, restated, modified or otherwise
supplemented from time to time, the “Security Agreement”). Capitalized terms
used herein without definition are used as defined in the Security Agreement.
 
The undersigned hereby agrees that this Pledge Amendment may be attached to the
Security Agreement and that the Pledged Collateral listed on Exhibit-A to this
Pledge Amendment shall be and become part of the Collateral referred to in the
Security Agreement and shall secure all Secured Obligations.
 
The undersigned hereby represents and warrants that each of the representations
and warranties contained in Sections 3.1 and 3.5 of the Security Agreement is
true and correct and as of the date hereof as if made on and as of such date
(except for such representations and warranties that expressly relate to a prior
date, in which case such representations and warranties shall have been true and
accurate on and as of such earlier date).
 
[GRANTOR]
 

 
By:
/s/    Name:    Title:

 
ACKNOWLEDGED AND AGREED
as of the date first above written:
 
U.S. BANK NATIONAL ASSOCIATION,
as the Agent
 

 
By:
/s/    Name:    Title:

 
Annex 1 – Page 1
 

 
 
 

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Exhibit-A to
Pledge Amendment
 
PLEDGED STOCK
ISSUER
 
CLASS
 
CERTIFICATE NO(S).
 
PAR VALUE
 
NUMBER OF SHARES, UNITS OR INTERESTS
1.
               
 
2.
               
 
3.
               
 
4.
                                 

PLEDGED DEBT INSTRUMENTS
ISSUER
 
DESCRIPTION OF DEBT
 
CERTIFICATE NO(S).
 
FINAL MATURITY
 
PRINCIPAL AMOUNT
 
1.
 
               
2.
 
               
3.
 
               
4.
 
                                                   

 
Annex 1 – Page 2
 

 
 

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ANNEX 2
TO
SECURITY AGREEMENT
 
FORM OF JOINDER AGREEMENT
 
This JOINDER AGREEMENT, dated as of __________ __, 20__, is delivered pursuant
to Section 7.6 of the Security Agreement, dated as of August 18, 2009 by Schiff
Nutrition Group, Inc., a Utah corporation (“Borrower”), Schiff Nutrition
International, Inc., a Delaware corporation (“Parent”), WNG Holdings
(International) Ltd., a Nevada corporation (“WNG”), Coppal Research, Inc., a
Utah corporation (“Coppal”) (Borrower, Parent, WNG, and Coppal shall be referred
to each as a “Grantor” and collectively as the “Grantors”), in favor of U.S.
Bank National Association, as administrative agent (in such capacity, together
with its successors and assigns, the “Agent”) for the Lenders (as defined in the
Loan Agreement referred to therein) (as amended, restated, modified or otherwise
supplemented from time to time, the “Security Agreement”).  Capitalized terms
used herein without definition are used as defined in the Security Agreement.
 
By executing and delivering this Joinder Agreement, the undersigned, as provided
in Section 5.02(m) of the Loan Agreement, hereby becomes a party to the Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named as a Grantor therein and, without limiting the generality of
the foregoing, as collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations of the undersigned, hereby mortgages, pledges and
hypothecates to the Agent for the benefit of the Purchasers, and grants to the
Agent for the benefit of the Purchasers a Lien on and security interest in, all
of its right, title and interest in, to and under the Collateral of the
undersigned and expressly assumes all obligations and liabilities of a Grantor
thereunder.  The undersigned hereby agrees to be bound as a Grantor for the
purposes of the Security Agreement.
 
The information set forth in Exhibit-A is hereby added to the information set
forth in Schedules 1 through 6 to the Security Agreement.  By acknowledging and
agreeing to this Joinder Agreement, the undersigned hereby agree that this
Joinder Agreement may be attached to the Security Agreement and that the Pledged
Collateral listed on Exhibit -A to this Joinder Agreement shall be and become
part of the Collateral referred to in the Security Agreement and shall secure
all Secured Obligations of the undersigned.
 
The undersigned hereby represents and warrants that each of the representations
and warranties contained in Article III of the Security Agreement applicable to
it is true and correct on and as the date hereof as if made on and as of such
date (except for such representations and warranties that expressly relate to a
prior date, in which case such representations and warranties shall have been
true and accurate on and as of such earlier date).
 
IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly
executed and delivered as of the date first above written.
 
[ADDITIONAL GRANTOR]
   
By:
/s/    Name:    Title:

 

 
Annex 2 – Page 1
 

 
 

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ACKNOWLEDGED AND AGREED
as of the date first above written:

U.S. BANK NATIONAL ASSOCIATION,
as Administrative Agent

By:
/s/    Name:    Title:

 

 
Annex 2 – Page 2
 

 
 

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Exhibit-A to
Joinder Agreement

Schedule 1                      Commercial Tort Claim

Schedule 2                      Filings

Schedule 3                      Jurisdiction of Organization;
 Chief Executive Office

Schedule 4                      Location of Inventory and Equipment

Schedule 5                      Pledged Collateral

Schedule 6                      Intellectual Property

 
Annex 2 – Page 3
 

 
 

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ANNEX 3
TO
SECURITY AGREEMENT
 
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
 
THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of _________
__, 20__, is made by each of the entities listed on the signature pages hereof
(each a “Grantor” and, collectively, the “Grantors”), in favor of in favor of
U.S. Bank National Association, as administrative agent (in such capacity,
together with its successors and assigns, the “Agent”) for the Lenders (as
defined in the Loan Agreement referred to below).
 
W I T N E S S E T H:
 
WHEREAS, pursuant to the Loan Agreement dated as of the date hereof (as the same
may be amended, restated, modified or otherwise supplemented from time to time,
the “Loan Agreement”) among Borrower, Agent, and the Lenders from time to time
party thereto, the Lenders, subject to the terms and conditions contained
therein, has agreed to make available to Borrower a loan in the aggregate
principal amount of the Revolving Credit Commitments;
 
WHEREAS, all of the Grantors are party to the Security Agreement, dated as of
August 18, 2009 in favor of the Agent (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Security Agreement”),
pursuant to which the Grantors are required to execute and deliver this
[Copyright] [Patent] [Trademark] Security Agreement;
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Grantor hereby agrees with the Agent as follows:
 
Section 1.      Defined Terms. Capitalized terms used herein without definition
are used as defined in the Loan Agreement or the Security Agreement.
 
Section 2.      Grant of Security Interest in [Copyright] [Trademark] [Patent]
Collateral.  Each Grantor, as collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges
and hypothecates to the Agent for the benefit of the Purchasers, and grants to
the Agent a Lien on and security interest in, all of its right, title and
interest in, to and under the following Collateral of such Grantor (the
“[Copyright] [Patent] [Trademark] Collateral”):
 
(a) [all of its Copyrights, including, without limitation, those referred to on
Schedule 1 hereto;
 
(b) all renewals, reversions and extensions of the foregoing; and
 
(c) all income, royalties, proceeds and Liabilities at any time due or payable
or asserted under and with respect to any of the foregoing, including, without
limitation, all rights to sue and recover at law or in equity for any past,
present and future infringement, misappropriation, dilution, violation or other
impairment thereof.]
 
or
 
Annex 3 – Page 1
 

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

 
(a) [all of its Patents, including, without limitation, those referred to on
Schedule 1 hereto;
 
(b) all reissues, reexaminations, continuations, continuations-in-part,
divisionals, renewals and extensions of the foregoing; and
 
(c) all income, royalties, proceeds and Liabilities at any time due or payable
or asserted under and with respect to any of the foregoing, including, without
limitation, all rights to sue and recover at law or in equity for any past,
present and future infringement, misappropriation, dilution, violation or other
impairment thereof.]
 
or
 
(a) [all of its Trademarks, including, without limitation, those referred to on
Schedule 1 hereto;
 
(b) all renewals and extensions of the foregoing;
 
(c) all goodwill of the business connected with the use of, and symbolized by,
each such Trademark; and
 
(d) all income, royalties, proceeds and Liabilities at any time due or payable
or asserted under and with respect to any of the foregoing, including, without
limitation, all rights to sue and recover at law or in equity for any past,
present and future infringement, misappropriation, dilution, violation or other
impairment thereof.]
 
Section 3.      Security Agreement.  The security interest granted pursuant to
this [Copyright] [Patent] [Trademark] Security Agreement is granted in
conjunction with the security interest granted to the Agent pursuant to the
Security Agreement and each Grantor hereby acknowledges and agrees that the
rights and remedies of the Agent with respect to the security interest in the
[Copyright] [Patent] [Trademark] Collateral made and granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
 
Section 4.      Grantor Remains Liable.  Each Grantor hereby agrees that,
anything herein to the contrary notwithstanding, such Grantor shall assume full
and complete responsibility for the prosecution, defense, enforcement or any
other necessary or desirable actions in connection with such Grantor’s
[Copyright] [Patents] [Trademarks] and Intellectual Property licenses subject to
a security interest hereunder.
 
Section 5.      Counterparts.  This [Copyright] [Patent] [Trademark] Security
Agreement may be executed in any number of counterparts and by different parties
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.  Signature pages may be detached from multiple separate counterparts
and attached to a single counterpart.
 
Section 6.      Governing Law.  This [Copyright] [Patent] [Trademark] Security
Agreement and the rights and obligations of the parties hereto shall be governed
by, and construed and interpreted in accordance with, the law of the State of
Utah.
 
[Signature Page Follows]

 
Annex 3 – Page 2
 

 
 

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IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent]
[Trademark] Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.
 
Very truly yours,
 
[GRANTOR], as a Grantor
 
 
By:
/s/    Name:    Title:

 

 

 

 
ACCEPTED AND AGREED
as of the date first above written:
 
U.S. BANK NATIONAL ASSOCIATION,
as the Agent
 

 
By:
/s/    Name:    Title:

 
 

 
Annex 3 – Page 3
 

 
 

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SCHEDULE 1
TO
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
 
[Copyright] [Patent] [Trademark] Registrations
 
A.  
REGISTERED [COPYRIGHT] [PATENTS] [TRADEMARKS]

 
[Include Registration Number and Date]
 
B.  
[COPYRIGHT] [PATENT] [TRADEMARK] APPLICATIONS

 
[Include Application Number and Date]
 

 
Schedule 1 – Page 1
 

 
 

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