Exhibit 10.1
 
PLEDGE AND SECURITY AGREEMENT
 
THIS PLEDGE AND SECURITY AGREEMENT (as modified, amended, renewed, extended or
restated from time to time, this “Security Agreement”) is entered into as of
October [__], 2014 by and among Electronic Cigarettes International Group, Ltd.
(f/k/a Victory Electronic Cigarettes Corp.), a Nevada corporation (“Borrower”),
VCIG LLC, a Delaware limited liability company (“VCIG”), FIN Branding Group,
LLC, an Illinois limited liability company (“FIN”), Hardwire Interactive
Acquisition Company, a Delaware limited liability company (“Hardwire”) (together
with each other Person that guarantees all or any portion of the Obligations
from time to time, and together with Borrower, VCIG, FIN and each other Person
that executes a supplement hereto and becomes an additional Grantor hereunder,
each a "Grantor" and collectively, the "Grantors"), and JGB (Cayman) Cambridge
Ltd., a company organized under the laws of the Cayman Islands (the “Lender”).
 
RECITALS
 
WHEREAS, Lender is the holder of a 6% Senior Convertible Note, dated April 22,
2014 (as amended, supplemented or restated from time to time, the “Note”) issued
pursuant to that certain Securities Purchase Agreement, dated April 22, 2014 (as
amended, supplemented or restated from time to time, the “SPA”). Pursuant to the
Note and the SPA, Lender will extend certain financial accommodations to or for
the benefit of Borrower.
 
WHEREAS, FIN is party to a Continuing Guarantee, dated as of even date hereof,
(the “FIN Guarantee”), under which FIN has agreed to guarantee Borrower’s
obligations under the Note.
 
WHEREAS, VCIG is party to a Continuing Guarantee, dated as of even date hereof,
(the “VCIG Guarantee”), under which VCIG has agreed to guarantee Borrower’s
obligations under the Note.
 
WHEREAS, Hardwire is party to a Continuing Guarantee, dated as of even date
hereof, under which Hardwire has agreed to guarantee Borrower’s obligations
under the Note, (the “Hardwire Guarantee”, and together with the Note, the SPA,
the FIN Guarantee, the VCIG Guarantee and any other agreement, instrument and
other document executed and delivered pursuant hereto or thereto or otherwise
evidencing or relating to the extension of credit by Lender to Borrower under
the Note and the SPA, the “Note Agreements”).
 
WHEREAS, as a prerequisite to the Lender making any loan and providing any other
financial accommodation to the Borrower pursuant to the Note and the SPA, (a)
Borrower shall have executed and delivered to the Lender a pledge, and the grant
to the Lender of a security interest in and Lien on the outstanding shares of
Equity Interests in VCIG and Hardwire and (b) each other Grantor shall have
executed and delivered to the Lender a pledge, and the grant to the Lender of
(i) a security interest in and Lien on the outstanding shares of Equity
Interests and indebtedness from time to time owned by such Grantor of each
Person now or hereafter existing and in which such Grantor has any interest at
any time, and (ii) a security interest in all other personal property and
fixtures of such Grantor;
 
WHEREAS, the Grantors are mutually dependent on each other in the conduct of
their respective businesses as an integrated operation, with credit needed from
time to time by each Grantor often being provided through financing obtained by
the other Grantors and the ability to obtain such financing being dependent on
the successful operations of all of the Grantors as a whole; and
 
WHEREAS, each Grantor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the best interest of,
such Grantor;
 
 
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NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Lender to provide financial accommodations to the
Borrower pursuant to the Note and the SPA, the Grantors hereby jointly and
severally agree with the Lender as follows:
 
1. DEFINITIONS
 
1.1. Reference to Security Agreement.  Unless otherwise specified, all
references herein to Articles, Sections, Recitals, and Schedules refer to
Articles and Sections of, and Recitals and Schedules to, this Security
Agreement. All Schedules include amendments and supplements thereto from time to
time.
 
1.2. Principles of Construction.  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, (i) any definition of or
reference to any agreement, instrument or other document (including any
Organization Document) 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 or in any other Note Agreement), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns except as otherwise limited or restricted herein,
(iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of
similar import when used in any Note Agreement, shall be construed to refer to
such Note Agreement in its entirety and not to any particular provision thereof,
(iv) all references in a Note Agreement to Articles, Sections, Preliminary
Statements, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Preliminary Statements, Exhibits and Schedules to, the Note
Agreement in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending,
replacing or interpreting such law and any reference to any law or regulation
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) 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.
 
1.3. Definitions.  Unless otherwise defined herein, or the context hereof
otherwise requires, each term defined in either a Note Agreement or the UCC is
used in this Security Agreement with the same meaning; provided that, if the
definition given to such term in a Note Agreement conflicts with the definition
given to such term in the UCC, the Note Agreement definition shall control to
the extent legally allowable; and if any definition given to such term in
Article 9 of the UCC conflicts with the definition given to such term in any
other chapter of the UCC, the Article 9 definition shall prevail. As used
herein, the following terms have the meanings indicated:
 
“Account” means any “account,” as such term is defined in Section 9.102(a)(2) of
the UCC.
 
“Account Debtor” means any person who is obligated on a Receivable.
 
“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified; provided, that any director,
executive officer or beneficial owner of less than five percent (5%) of the
Equity Interests of a Person shall not be deemed an “Affiliate”.
 
“Cash Collateral Account” has the meaning set forth in Section 5.5.
 
 
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“Chattel Paper” means any “chattel paper”, as such term is defined in
Section 9.102(a)(11) of the UCC, including all Electronic Chattel Paper and
Tangible Chattel Paper.
 
“Claims” has the meaning set forth in Section 6.18.
 
“Code” means the Internal Revenue Code of 1986.
 
“Collateral” has the meaning set forth in Section 2.1.
 
“Collateral Note Security” means all rights, titles, interests, and Liens any
Grantor (other than Borrower) may have, be, or become entitled to under all
present and future loan agreements, security agreements, pledge agreements,
deeds of trust, mortgages, guarantees, or other Documents assuring or securing
payment of or otherwise evidencing the Collateral Notes, including those set
forth on Schedule 3.10.
 
“Collateral Notes” means all rights, titles, and interests of any Grantor (other
than Borrower) in and to all promissory notes and other Instruments payable to
such Grantor, including all inter-company notes from the subsidiaries of such
Grantor and those set forth on Schedule 3.10.
 
“Collateral Records” means books, records, ledger cards, files, correspondence,
customer lists, blueprints, technical specifications, manuals, computer
software, computer printouts, tapes, disks and related data processing software
and similar items that at any time 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 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 any “commercial tort claim”, as such term is
defined in Section 9.102(a)(13) of the UCC, including all commercial tort claims
listed on Schedule 3.10.
 
“Commodity Account” means any “commodity account”, as such term is defined in
Section 9.102(a)(14) of the UCC, and all sub-accounts thereof.
 
“Control” has the meaning set forth in Sections 8.106, 9.104, 9.105, 9.106, or
9.107 of the UCC, as applicable.
 
“Copyright Licenses” means any and all agreements providing for the granting of
any right in or to Copyrights (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.17.
 
“Copyrights” means all United States and foreign copyrights (including Community
designs), including copyrights in software and databases, and all Mask Works (as
defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or
unregistered, and, with respect to any and all of the foregoing: (a) all
registrations and applications therefor, including the registrations and
applications referred to on Schedule 3.17; (b) all extensions and renewals
thereof; (c) all rights corresponding thereto throughout the world; (d) all
rights to sue for past, present and future infringements thereof; and (e) all
products and Proceeds of the foregoing, including any income, royalties, and
awards and any claim by any Grantor (other than Borrower) against third parties
for past, present, or future infringement of any Copyright or any Copyright
licensed under any Copyright License.
 
 
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“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect.
 
“Deposit Accounts” means any “deposit account”, as such term is defined in
Section 9.102(a)(29) of the UCC, including those deposit accounts identified on
Schedule 3.10, and any account which is a replacement or substitute for any of
such accounts, together with all monies, Instruments, certificates, checks,
drafts, wire transfer receipts, and other property deposited therein and all
balances therein.
 
“Documents” means any “document”, as such term is defined in
Section 9.102(a)(30) of the UCC.
 
“Electronic Chattel Paper” means any “electronic chattel paper”, as such term is
defined in Section 9.102(a)(31) of the UCC.
 
“Equipment” means: (a) any “equipment”, as such term is defined in
Section 9.102(a)(33) of the UCC; (b) all machinery, equipment, furnishings,
Fixtures, and Vehicles; and (c) any and all additions, substitutions, and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment, and accessories installed thereon or
affixed thereto (in each case, regardless of whether characterized as equipment
under the UCC).
 
“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.
 
“Excluded Assets” means, collectively, any assets of Borrower other than the
Pledged Equity Interests held by Borrower and the Proceeds thereof.
 
“Fixtures” means any “fixtures”, as such term is defined in Section 9.102(a)(41)
of the UCC.
 
“General Intangibles” means: (a) any “general intangibles”, as such term is
defined in Section 9.102(a)(42) of the UCC; and (b) all interest rate or
currency protection or hedging arrangements, computer software, computer
programs, all tax refunds and tax refund claims, all licenses, permits,
concessions and authorizations, all contract rights, all joint venture
interests, partnership interests, or membership interests that do not constitute
a Security, all Material Agreements, and all Intellectual Property (in each
case, regardless of whether characterized as general intangibles under the UCC).
 
“Goods” means: (a) “goods”, as that term is defined in Section 9.102(a)(44) of
the UCC; (b) all Inventory; and (c) all Equipment (in each case, regardless of
whether characterized as goods under the UCC).
 
“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).
 
 
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“Grantors” has the meaning set forth in the introductory paragraph, and
“Grantor” means any one of the Grantors.
 
“Guarantors” means, collectively, FIN and Hardwire.
 
“Instrument” means any “instrument”, as such term is defined in
Section 9.102(a)(47) of the UCC, including the Collateral Notes.
 
“Intellectual Property” means, collectively, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark
Licenses, the Trade Secrets, and the Trade Secret Licenses.
 
“Inventory” means: (a) any “inventory”, as such term is defined in
Section 9.102(a)(48) of the UCC; (b) all wrapping, packaging, advertising, and
shipping materials; (c) all goods that have been returned, repossessed, or
stopped in transit; (d) all Documents evidencing any of the foregoing; and
(e) all computer programs embedded in any goods and all accessions thereto and
products thereof (in each case, regardless of whether characterized as inventory
under the UCC).
 
“Investment Related Property” means: (a) any “investment property”, as such term
is defined in Section 9.102(a)(49) of the UCC; and (b) all Pledged Equity
Interests (regardless of whether such interest is classified as investment
property under the UCC).
 
“Letter-of-Credit Right” means any “letter-of-credit right”, as such term is
defined in Section 9.102(a)(51) of the UCC.
 
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, easement, right-of-way or other encumbrance on title
to real property, lien (statutory or other), charge, or preference, priority or
other security interest or preferential arrangement in the nature of a security
interest of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, and any financing lease having substantially
the same economic effect as any of the foregoing).
 
“Loan Parties” means, collectively, Borrower and each Guarantor.
 
“Material Agreements” means: (a) all of Grantors’ (other than Borrower) rights,
titles, and interests in, to, and under those contracts listed on Schedule 3.10,
including all rights of any Grantor (other than Borrower) to receive moneys due
and to become due under or pursuant to the Material Agreements; (b) all rights
of any Grantor (other than Borrower) to receive Proceeds of any insurance,
indemnity, warranty, or guaranty with respect to the Material Agreements;
(c) all claims of any Grantor (other than Borrower) for damages arising out of
or for breach of or default under the Material Agreements; and (d) all rights of
any Grantor (other than Borrower) to compel performance and otherwise exercise
all rights and remedies under the Material Agreements.
 
“Maximum Liability” has the meaning set forth in Section 6.2(a).
 
“Money” means “money” as defined in Section 1.201(b)(24) of the UCC.
 
 
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“Note Agreements” has the meaning set forth in the introductory paragraph, and
“Note Agreement” means any one of the Note Agreements.
 
“Obligations” means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Loan Party arising under any Note Agreement or
otherwise with respect to any loan, in each case whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Laws naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding.
 
“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
 
“Patent Licenses” means all agreements providing for the granting of any right
in or to Patents (whether a Grantor is licensee or licensor thereunder),
including each agreement referred to on Schedule 3.17.
 
“Patents” means all United States and foreign patents and certificates of
invention, or similar industrial property rights, and applications for any of
the foregoing, including: (a) each patent and patent application referred to on
Schedule 3.17; (b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals, and reexaminations thereof; (c) all
rights corresponding thereto throughout the world; (d) all inventions and
improvements described therein; (e) all rights to sue for past, present and
future infringements thereof; (f) all licenses, claims, damages, and Proceeds of
suit arising therefrom; and (g) all products and Proceeds of the foregoing,
including any income, royalties, and awards and any claim by any Grantor (other
than Borrower) against third parties for past, present, or future infringement
of any Patent or any Patent licensed under any Patent License.
 
“Permitted Liens” means (i) carriers’, warehousemen’s, mechanics’, landlords’,
materialmen’s, repairmen’s or other similar Liens arising in the ordinary course
of business which relate to sums not delinquent or which are being contested in
good faith and by appropriate proceedings diligently prosecuted, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto and for which adequate reserves in accordance with GAAP are
being maintained, (ii) Liens in cash Collateral in any Deposit Account in favor
of the institution holding such Deposit Account, and (iii) Liens existing on the
date hereof pursuant to that certain Amended and Restated Security Agreement
among Borrower and the holders of Borrower’s 15% Senior Secured Convertible
Promissory Notes, dated as of February 28, 2014.
 
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
 
“Pledged Equity Interests” means all Pledged Stock, Pledged LLC Interests, and
Pledged Partnership Interests.
 
 
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“Pledged LLC Interests” means all membership interests owned by a Grantor in any
limited liability company, including all membership interests listed on
Schedule 3.10 and the certificates, if any, representing such membership
interests as such interest may be increased or otherwise adjusted from time to
time, including (a) all of such Grantor’s right, title, and interest in any and
all distributions, issues, profits, and shares (including rights in the nature
of warrants, purchase options, or options to acquire any property or further
interest in such limited liability company) payable or distributable by such
limited liability company, whether in cash or otherwise, whether for capital or
income or surplus or otherwise, including distributions upon liquidation,
dissolution, revision, reclassification, split-up, or other change or
transaction affecting such limited liability company, or as a sale, refinancing,
or other capital transaction affecting any assets or property of such limited
liability company; (b) all of such Grantor’s right, title, and interest as a
member with respect to such limited liability company and the applicable limited
liability company agreement; (c) all of such Grantor’s rights under the
applicable limited liability company agreement; (d) all of such Grantor’s right
to vote upon, approve, or consent to (or withhold consent or approval to) any
matter pursuant to the applicable limited liability company agreement, or
otherwise to control, manage, or direct the affairs of such limited liability
company; and (e) all of such Grantor’s right to terminate, amend, supplement,
modify or waive performance under, the applicable limited liability company
agreement, or perform thereunder, and to compel performance and otherwise to
exercise all remedies thereunder; and (f) all Proceeds therefrom.
 
“Pledged Partnership Interests” means all partnership interests owned by a
Grantor in any general partnership, limited partnership, limited liability
partnership or other partnership, including all partnership interests listed on
Schedule 3.10 and the certificates, if any, representing such partnership
interests as such interest may be increased or otherwise adjusted from time to
time, including (a) all of such Grantor’s right, title, and interest in any and
all distributions, issues, profits, and shares (including rights in the nature
of warrants, purchase options, or options to acquire any property or further
interest in such partnership) payable or distributable by such partnership,
whether in cash or otherwise, whether for capital or income or surplus or
otherwise, including distributions upon liquidation, dissolution, revision,
reclassification, split-up, or other change or transaction affecting such
partnership, or as a sale, refinancing, or other capital transaction affecting
any assets or property of such partnership; (b) all of such Grantor’s right,
title, and interest as a partner with respect to such partnership and the
applicable partnership agreement; (c) all of such Grantor’s rights under the
applicable partnership agreement; (d) all of such Grantor’s right to vote upon,
approve, or consent to (or withhold consent or approval to) any matter pursuant
to the applicable partnership agreement, or otherwise to control, manage, or
direct the affairs of such partnership; and (e) all of such Grantor’s right to
terminate, amend, supplement, modify or waive performance under, the applicable
partnership agreement, or perform thereunder, and to compel performance and
otherwise to exercise all remedies thereunder; and (f) all Proceeds therefrom.
 
“Pledged Stock” means all shares of capital stock owned by a Grantor, including
all shares of capital stock described on Schedule 3.10, and the certificates, if
any, representing such shares and any interest of such Grantor in the entries on
the books of the issuer of such shares or on the books of any securities
intermediary pertaining to such shares, including all voting rights with respect
to such Pledged Stock and all dividends, distributions, cash, warrants, rights,
options, Instruments, securities, 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 shares.
 
“Proceeds” means any “proceeds,” as such term is defined in Section 9.102(a)(64)
of the UCC.
 
“Receivables” means the Accounts, Chattel Paper, Documents, Investment Related
Property, Instruments, or Commercial Tort Claims, and any other rights or claims
to receive Money which are General Intangibles or which are otherwise included
as Collateral, together with all of the applicable Grantor’s rights, if any, in
all Collateral Support and Supporting Obligations related thereto.
 
 
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“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees and advisors
of such Person and of such Person’s Affiliates.
 
“Requirement of Law” means, as to any Person, any law (statutory or common),
ordinance, treaty, rule, regulation, order, policy, other legal requirement or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
 
“Security Agreement Supplement” has the meaning set forth in Section 4.21.
 
“Secured Obligations” means:
 
(a)           the Obligations;
 
(b)           all costs and expenses, including all fees, disbursements and
other charges of counsel to the Lender, incurred by Lender, or any of Lender’s
Affiliates to preserve and maintain the Collateral, collect the obligations
herein described, and enforce this Security Agreement or any rights under any
other Note Agreement; and
 
(c)           all amounts owed under any extension, renewal, or modification of
any of the foregoing;
 
in each case whether or not (i) such obligations arise or accrue before or after
the filing by or against any Grantor of a petition under the Bankruptcy Code, or
any similar filing by or against any Grantor under the laws of any jurisdiction,
or any bankruptcy, insolvency, receivership or other similar proceeding, (ii)
such obligations are allowable under Section 502(b)(2) of the Bankruptcy Code or
under any other insolvency  proceedings, (iii) the right of payment in respect
of such obligations is reduced to judgment, or (iv) such obligations are
liquidated, unliquidated, similar, dissimilar, related, unrelated, direct,
indirect, fixed, contingent, primary, secondary, joint, several, or joint and
several, matured, disputed, undisputed, legal, equitable, secured, or unsecured.
 
“Securities Account” means any “securities account”, as such term is defined in
Section 8.501(a) of the UCC, and all sub-accounts thereof.
 
“Security” has the meaning set forth in Section 8.102(a)(15) of the UCC.
 
“Supporting Obligation” means all “supporting obligations” as defined in
Section 9.102(a)(77) of the UCC.
 
“Tangible Chattel Paper” means any “tangible chattel paper”, as such term is
defined in Section 9.102(a)(78) of the UCC.
 
“Trademark Licenses” means any and all agreements providing for the granting of
any right in or to Trademarks (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.17.
 
“Trademarks” means all United States and foreign trademarks, trade names,
corporate names, company names, business names, fictitious business names,
Internet domain names, service marks, certification marks, collective marks,
logos, other source or business identifiers, designs and general intangibles of
a like nature, all registrations and applications for any of the foregoing,
including: (a) the registrations and applications referred to on Schedule 3.17;
(b) all extensions or renewals of any of the foregoing; (c) all of the goodwill
of the business connected with the use of and symbolized by the foregoing;
(d) the right to sue for past, present and future infringement or dilution of
any of the foregoing or for any injury to goodwill; and (e) all products and
Proceeds of the foregoing, including any income, royalties, and awards and any
claim by any Grantor (other than Borrower) against third parties for past,
present, or future infringement of any Trademark or any Trademark licensed under
any Trademark License.
 
 
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“Trade Secret Licenses” means any and all agreements providing for the granting
of any right in or to Trade Secrets (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.17.
 
“Trade Secrets” means all trade secrets and all other confidential or
proprietary information and know-how, whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all Documents and things
embodying, incorporating, or referring in any way to such Trade Secret,
including: (a) the right to sue for past, present and future misappropriation or
other violation of any Trade Secret; and (b) all products and Proceeds of the
foregoing, including any income, royalties, and awards and any claim by any
Grantor (other than Borrower) against third parties for past, present, or future
infringement of any Trade Secrets or any Trade Secrets  licensed under any Trade
Secret License.
 
“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, however, that in any event, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority (or terms of similar import in any applicable jurisdiction) of
Lender’s security interest in any Collateral is governed by the Uniform
Commercial Code (or other similar law) as in effect in a jurisdiction (whether
within or outside the United States) other than the State of New York, the term
“UCC” shall mean the Uniform Commercial Code (or other similar law) as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority (or terms of similar import in such
jurisdiction) and for purposes of definitions related to such provisions.
 
“Vehicles” means all present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, or other motor vehicles or rolling stock, now owned or
hereafter acquired by a Grantor (other than Borrower).
 
2. GRANT OF SECURITY INTEREST
 
2.1. Security Interest.  To secure the prompt and complete payment and
performance of the Secured Obligations 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 the Bankruptcy Code or any similar
provisions of other applicable laws), each Grantor hereby grants to Lender a
continuing security interest in, a Lien upon, and a right of set off against,
and hereby assigns to Lender as security, all personal property of such Grantor,
whether now owned or hereafter acquired or existing, and wherever located
(together with all other collateral security for the Secured Obligations at any
time granted to or held or acquired by or under the Control of Lender,
collectively, the “Collateral”), including:
 
(a) Accounts;
 
(b) Chattel Paper;
 
(c) Commercial Tort Claims;
 
 
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(d) Deposit Accounts, Securities Accounts, and Commodity Accounts;
 
(e) Documents;
 
(f) General Intangibles;
 
(g) Goods;
 
(h) Instruments;
 
(i) Investment Related Property;
 
(j) Letter of Credit Rights;
 
(k) Money;
 
(l) Fixtures;
 
(m) Intellectual Property;
 
(n) Material Agreements;
 
(o) Vehicles;
 
(p) to the extent not otherwise included above, all Collateral Records,
Collateral Support, and Supporting Obligations relating to any of the foregoing;
and
 
(q) to the extent not otherwise included above, all accessions to, substitutions
for, and all replacements, products, Proceeds of the foregoing, including
Proceeds of and unearned premiums with respect to insurance policies, and claims
against any Person for loss, damage, or destruction of any Collateral.
 
Notwithstanding the foregoing, no Lien or security interest is hereby granted on
any Excluded Assets. Notwithstanding any contrary provision, each Grantor agrees
that, if, but for the application of this paragraph, granting a security
interest in the Collateral would constitute a fraudulent conveyance under 11
U.S.C. § 548 or a fraudulent conveyance or transfer under any state fraudulent
conveyance, fraudulent transfer, or similar law in effect from time to time
(each a “fraudulent conveyance”), then the security interest remains enforceable
to the maximum extent possible without causing such security interest to be a
fraudulent conveyance, and this Security Agreement is automatically amended to
carry out the intent of this sentence.
 
2.2. Grantors Remain Liable.  Notwithstanding anything to the contrary contained
herein, (a) each Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of its
respective duties and Obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by Lender of any of
its rights hereunder shall not release any Grantor from any of its duties or
Obligations under the contracts and agreements included in the Collateral, and
(c) Lender shall not have any obligation or liability under any of the contracts
and agreements included in the Collateral by reason of this Security Agreement,
nor shall Lender be obligated to perform any of the Obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
 
 
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2.3. Authorization to File Financing Statements.  Each Grantor hereby
irrevocably authorizes Lender at any time and from time to time to file in any
UCC jurisdiction any financing statements and amendments thereto that
(a) indicate the Collateral (i) as all assets of such Grantor or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC, or (ii) as being of
an equal or lesser scope or with greater detail, and (b) contain any other
information required by Article 9 of the UCC for the sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
such Grantor is an organization, the type of organization and any organization
identification number issued to such Grantor and (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as as-extracted
collateral or timber to be cut, a sufficient description of real property to
which the Collateral relates.  Each Grantor agrees to furnish any such
information to Lender promptly upon request.
 
3. REPRESENTATIONS AND WARRANTIES.  Each Grantor represents and warrants to
Lender that:
 
3.1. Note Agreements.  Certain representations and warranties in the Note
Agreements to which a Grantor is a party are applicable to such Grantor or its
assets or operations, and each such representation and warranty is true and
correct.
 
3.2. Title; Authorization; Enforceability; Perfection.  (a) Each Grantor has
good and valid rights in and title to the Collateral with respect to which it
has purported to grant a security interest hereunder, free and clear of all
Liens except for Permitted Liens, and has full power and authority to grant to
Lender the security interest in such Collateral; (b) the execution and delivery
by each Grantor of this Security Agreement has been duly authorized, and this
Security Agreement constitutes a legal, valid and binding obligation of such
Grantor and creates a security interest enforceable against such Grantor in all
now owned and hereafter acquired Collateral; (c)(i) upon the filing of all UCC
financing statements naming each Grantor as “debtor” and Lender as “secured
party” and describing the Collateral in the filing offices set forth opposite
such Grantor’s name on Schedule 3.5 hereof, (ii) upon delivery of all
Instruments, Chattel Paper, certificated Pledged Equity Interests, and
Collateral Notes, (iii) upon sufficient identification of Commercial Tort
Claims, (iv) upon execution of a control agreement establishing Lender’s Control
with respect to any Deposit Account, Securities Account, or Commodity Account,
(v) upon consent of the issuer or any nominated person with respect to Letter of
Credit Rights, and (vi) to the extent not subject to Article 9 of the UCC, upon
recordation of the security interests granted hereunder in Intellectual Property
in the applicable intellectual property registries, including the United States
Patent and Trademark Office and the United States Copyright Office, the security
interests granted to Lender hereunder constitute valid and perfected first
priority Liens (subject in the case of priority only to the rights of the United
States government (including any agency or department thereof) with respect to
United States government Receivables) on all of the Collateral.
 
3.3. Conflicting Legal Requirements and Contracts.  Neither the execution and
delivery by any Grantor of this Security Agreement, the creation and perfection
of the security interest in the Collateral granted hereunder, nor compliance
with the terms and provisions hereof will (a) violate (i) any legal requirement
binding on such Grantor, (ii) such Grantor’s Organization Documents, or
(iii) the provisions of any indenture, Instrument or agreement to which such
Grantor is a party or is subject, or by which it, or its property, is bound; or
(b) conflict with or constitute a default under, or result in the creation or
imposition of any Lien pursuant to, the terms of any such indenture, Instrument
or agreement (other than any Lien of Lender).
 
3.4. Governmental Authority.  No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority or any other Person
is required either (a) for the pledge by any Grantor of the Collateral pursuant
to this Security Agreement or for the execution, delivery, or performance of
this Security Agreement by any Grantor, or (b) for the exercise by Lender of the
voting or other rights provided for in this Security Agreement or the remedies
in respect of the Collateral pursuant to this Security Agreement (except as may
be required in connection with the disposition of the Pledged Equity Interests
by legal requirements affecting the offering and sale of securities generally).
 
 
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3.5. Grantor Information.  Each Grantor’s exact legal name, jurisdiction of
organization, type of entity, state issued organizational identification number
and the location of its principal place of business, or chief executive office
(or the principal residence if such Grantor is a natural person) and of the
books and records relating to the Receivables, are disclosed on Schedule 3.5; no
Grantor has any other places of business except those set forth on Schedule 3.5.
Except as noted on Schedule 3.5 hereto, all such books, records, and Collateral
are in such Grantor’s possession. No Grantor has done in the last five (5)
years, and does, business under any other name (including any trade-name or
fictitious business name) except for those names set forth on Schedule 3.5.
Except as provided on Schedule 3.5, no Grantor has changed its name,
jurisdiction of organization, principal place of business, or chief executive
office (or principal residence if such Grantor is a natural person) or its
corporate structure in any way (e.g., by merger, consolidation, change in
corporate form or otherwise) within the past five (5) years.
 
3.6. Property Locations.  Subject to Section 4.4(f), the Inventory, Equipment,
and Fixtures are located solely at the locations described on Schedule 3.6.  All
of such locations are owned by a Grantor except for locations (a) which are
leased by a Grantor as lessee and designated in Part B of Schedule 3.6, and
(b) at which Inventory is held in a public warehouse or is otherwise held by a
bailee or on consignment as designated in Part C of Schedule 3.6, with respect
to which Inventory such Grantor has delivered bailment agreements, warehouse
receipts, financing statements or other Documents satisfactory to Lender to
protect Lender’s security interest in such Inventory.
 
3.7. Litigation.  Except as set forth on Schedule 3.7, there are no actions,
suits, proceedings, claims or disputes pending or, to the knowledge of any
Grantor after due and diligent investigation, threatened in writing or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, by or against Grantor or any of its properties which, either
individually or in the aggregate, if adversely determined would result in a
Material Adverse Event.
 
3.8. No Financing Statements or Control Agreements.  Other than the financing
statements and control agreements with respect to this Security Agreement, there
are no other financing statements or control agreements covering any Collateral,
other than those evidencing Permitted Liens and set forth on Schedule 3.8.
 
3.9. Maintenance of Collateral.  All tangible Collateral which is necessary to
any Grantor’s business is in good repair and condition, ordinary wear and tear
excepted, and none thereof is a Fixture except as specifically referred to
herein on Schedule 3.6.
 
3.10. Collateral.  Schedule 3.10 accurately lists all Pledged Equity Interests,
Securities Accounts, Commodity Accounts, Deposit Accounts, Collateral Notes,
Collateral Note Security, Commercial Tort Claims, Material Agreements, and all
letters of credit, in which any Grantor has any right, title, or interest. All
information supplied by any Grantor to the Lender with respect to any of the
Collateral (in each case taken as a whole with respect to any particular
Collateral) is true, correct, and complete in all material respects.
 
3.11. Deposit, Commodity, and Securities Accounts.  Schedule 3.10 correctly
identifies all Deposit Accounts, Commodity Accounts, and Securities Accounts in
which a Grantor has an interest and the institutions holding such
accounts.  Each Grantor is the sole account holder of each such account, and
such Grantor has not consented to, and is not otherwise aware of, any person
(other than Lender) having Control over, or any other interest in, any such
account or the property credited thereto.
 
 
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3.12. Receivables.
 
(a) Each Receivable (i) is and will be the legal, valid and binding obligation
of the Account Debtor in respect thereof, representing an unsatisfied obligation
of such Account Debtor, (ii) is and will be enforceable in accordance with its
terms, (iii) is not and will not be subject to any setoffs, defenses, taxes,
counterclaims (except with respect to refunds, returns and allowances in the
ordinary course of business), and (iv) is and will be in compliance with all
applicable laws, whether federal, state, local or foreign.
 
(b) None of the Account Debtors in respect of any Receivable is the government
of the United States, any agency or instrumentality thereof, any state or
municipality or any foreign sovereign.  No Receivable requires the consent of
the Account Debtor in respect thereof in connection with the pledge hereunder,
except any consent which has been obtained.
 
(c) The names of the Account Debtors, amounts owing, due dates and other
information with respect to each Account or Chattel Paper are and will be
correctly stated in all records of each Grantor relating thereto and in all
invoices and reports with respect thereto furnished to Lender by each Grantor
from time to time.  As of the time when each Account or each item of Chattel
Paper arises, the applicable Grantor (other than Borrower) shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, and all records relating thereto, are genuine and in all respects what
they purport to be.
 
3.13. Letter of Credit Rights.  All letters of credit to which any Grantor
(other than Borrower) has rights is listed on Schedule 3.10, and such Grantor
has obtained the consent of each issuer or the nominated person of any letter of
credit to the assignment of the Proceeds of the letter of credit to Lender.
 
3.14. Instruments; Chattel Paper; Collateral Notes; and Collateral Note
Security.  All Instruments and Chattel Paper, including the Collateral Notes,
have been delivered to Lender, together with corresponding endorsements duly
executed by the applicable Grantor in favor of Lender, and such endorsements
have been duly and validly executed and are binding and enforceable against such
Grantor in accordance with their terms.  Each Collateral Note and the Documents
evidencing the Collateral Note Security are in full force and effect; there have
been no renewals or extensions of, or amendments, modifications, or supplements
to, any thereof about which Lender has not been advised in writing; and no
“default” or “potential default” has occurred and is continuing under any such
Collateral Note or Documents evidencing the Collateral Note Security, except as
disclosed on Schedule 3.10.
 
3.15. Material Agreements.  All Material Agreements to which any Grantor (other
than Borrower) is a party are set forth on Schedule 3.10.  True and correct
copies of all such Material Agreements have been furnished to Lender.  Each
Material Agreement is in full force and effect; there have been no amendments,
modifications, or supplements to any Material Agreement of which Lender has not
been advised in writing; and no default, breach, or potential default or breach
has occurred and is continuing under any Material Agreement, except as disclosed
on Schedule 3.10.  No Material Agreement prohibits assignment or requires
consent of or notice to any person in connection with the assignment to Lender
hereunder, except such as has been given or made (or currently being sought by
such Grantor using its best efforts).
 
 
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3.16. Investment Related Property.
 
(a) Schedule 3.10 sets forth all of the Pledged Stock, Pledged LLC Interests,
and Pledged Partnership Interests owned by any Grantor and such Pledged Equity
Interests constitute the percentage of issued and outstanding shares of stock,
percentage of membership interests, percentage of partnership interests or
percentage of beneficial interest of the respective issuers thereof indicated on
such Schedule.
 
(b) Except as set forth on Schedule 3.10, no Grantor has acquired any equity
interests of another entity or substantially all the assets of another entity
within the past five (5) years.
 
(c) Each Grantor is the record and beneficial owner of the Pledged Equity
Interests owned by it free of all Liens, rights or claims of other persons other
than Permitted Liens, and there are no outstanding warrants, options or other
rights to purchase, or shareholder, voting trust or similar agreements
outstanding with respect to, or property that is convertible into, or that
requires the issuance or sale of, any Pledged Equity Interests.
 
(d) No consent of any person including any other general or limited partner, any
other member of a limited liability company, any other shareholder or any other
trust beneficiary is necessary or desirable in connection with the creation,
perfection or first priority status of the security interest of Lender in any
Pledged Equity Interests or the exercise by Lender of the voting or other rights
provided for in this Security Agreement or the exercise of remedies in respect
thereof.
 
(e) None of the Pledged LLC Interests or Pledged Partnership Interests are or
represent interests in issuers that (i) are registered as investment companies
or (ii) are dealt in or traded on securities exchanges or markets.
 
(f) Except as otherwise set forth on Schedule 3.10, all of the Pledged LLC
Interests and Pledged Partnership Interests are or represent interests in
issuers that have not opted to be treated as securities under the UCC of any
jurisdiction.
 
(g) (i) Each Grantor has delivered to Lender all stock certificates, or other
Instruments or Documents representing or evidencing the Pledged Equity
Interests, together with corresponding assignment or transfer powers duly
executed in blank by such Grantor, and such powers have been duly and validly
executed and are binding and enforceable against such Grantor in accordance with
their terms and (ii) to the extent such Pledged Equity Interests are
uncertificated, each Grantor has taken all actions necessary or desirable to
establish Lender’s Control over such Pledged Equity Interests.
 
3.17. Intellectual Property.
 
(a) All of the Intellectual Property is subsisting, valid, and enforceable. The
information contained on Schedule 3.17 is true, correct, and complete.  All
issued Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights,
Copyright Licenses, Trade Secret, and Trade Secret Licenses of each Grantor
(other than Borrower) are identified on Schedule 3.17.
 
(b) Each Grantor (other than Borrower) is the sole and exclusive owner of the
entire and unencumbered right, title, and interest in and to the Intellectual
Property purported to be owned by such Grantor free and clear of any Liens,
including any pledges, assignments, licenses, user agreements, and covenants by
such Grantor not to sue third persons, other than Permitted Liens.
 
 
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(c) To the best of each Grantor’s knowledge, no third party is infringing, or in
such Grantor’s reasonable business judgment, may be infringing, any of such
Grantor’s rights under the Intellectual Property.
 
(d) Each Grantor has performed and will continue to perform all acts and has
paid and will continue to pay all required fees and taxes to maintain each and
every item of the Intellectual Property in full force and effect throughout the
world, as applicable.
 
(e) Each of the Patents and Trademarks identified on Schedule 3.17 has been
properly registered with the United States Patent and Trademark Office and in
corresponding offices throughout the world (where appropriate) and each of the
Copyrights identified on Schedule 3.17 has been properly registered with the
United States Copyright Office and in corresponding offices throughout the world
(where appropriate).
 
(f) To the best of each Grantor’s knowledge, except as set forth on
Schedule 3.7, no claims with respect to the Intellectual Property have been
asserted and are pending (i) to the effect that the sale, licensing, pledge, or
use of  any of the products of such Grantor’s business infringes any other
party’s valid copyright, trademark, service mark, trade secret, or other
intellectual property right, (ii) against the use by such Grantor of any
Intellectual Property used in such Grantor’s business as currently conducted, or
(iii) challenging the ownership or use by such Grantor of any of the
Intellectual Property that such Grantor purports to own or use, nor, to such
Grantor’s knowledge, is there a valid basis for such a claim described in this
Section 3.17.
 
The foregoing representations and warranties will be true and correct in all
respects with respect to any additional Collateral or additional specific
descriptions of certain Collateral delivered to Lender in the future by any
Grantor.  The failure of any of these representations or warranties or any
description of Collateral therein to be accurate or complete shall not impair
the security interest in any such Collateral.
 
4. COVENANTS.  From the date of this Security Agreement, and thereafter until
this Security Agreement is terminated:
 
4.1. Note Agreements.  Each Grantor shall (a) comply with, perform, and be bound
by all covenants and agreements in the Note Agreements that are applicable to
it, its assets, or its operations, each of which is hereby ratified and
confirmed (INCLUDING THE INDEMNIFICATION AND RELATED PROVISIONS IN ARTICLE 5 OF
THE SPA); AND (b) CONSENT TO AND AGREE TO BE BOUND BY THE VENUE AND SERVICE OF
PROCESS IN SECTION 6.2 OF THE SPA, AND WAIVER OF JURY TRIAL PROVISIONS OF
SECTION 11.15 OF THE CREDIT AGREEMENT.
 
4.2. General.
 
(a) Inspection.  Each Grantor will permit Lender or any other Secured Party, by
its representatives and agents (i) to inspect the Collateral, (ii) to examine
and make copies of the records of such Grantor relating to the Collateral, and
(iii) to discuss the Collateral and the related records of such Grantor with,
and to be advised as to the same by, such Grantor’s officers, employees, and
accountants (and, in the case of any Receivable, with any Account Debtor), all
at such reasonable times and intervals as Lender or such other Secured Party may
determine, and all at such Grantor’s expense.
 
 
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(b) Records and Reports; Notification of Default or Event of Default.  Each
Grantor will maintain true, complete, and accurate books and records with
respect to the Collateral, and furnish to Lender such reports relating to the
Collateral at such intervals as Lender shall from time to time request.  Each
Grantor will give prompt notice in writing to Lender of the occurrence of any
Default or Event of Default and of any other development, financial or
otherwise, which might materially and adversely affect the Collateral.  Each
Grantor shall mark its books and records to reflect the security interest of
Lender under this Security Agreement.
 
(c) Schedules.  Each Grantor shall immediately update any Schedules if any
information therein shall become inaccurate or incomplete.  The failure of
property descriptions to be accurate or complete on any Schedule shall not
impair Lender’s security interest in such property.
 
(d) Financing Statements and Other Actions; Defense of Title.  Each Grantor will
deliver to Lender all financing statements and execute and deliver control
agreements and other Documents and take such other actions as may from time to
time be reasonably requested by Lender in order to maintain a first priority
perfected security interest in and, in the case of Investment Related Property,
Deposit Accounts, Letter-of-Credit-Rights, and Electronic Chattel Paper, Control
of, the Collateral.  Each Grantor will take any and all actions necessary to
defend title to the Collateral against all persons and to defend the security
interest of Lender in the Collateral and the priority thereof against any Lien
not expressly permitted hereunder.
 
(e) Disposition of Collateral.  No Grantor will sell, lease, license or
otherwise dispose of the Collateral except (i) prior to the occurrence of an
Event of Default, sales or leases of Inventory in the ordinary course of
business, and (ii) until such time as such Grantor receives a notice from Lender
pursuant to Section 5.4, Proceeds of Inventory and Accounts collected in the
ordinary course of business.
 
(f) Liens.  No Grantor will create, incur, or suffer to exist any Lien on the
Collateral except Permitted Liens.
 
(g) Change in Location, Jurisdiction of Organization or Name.  No Grantor will
(i) have any Inventory, Equipment, Fixtures, or Proceeds or products thereof
(other than Inventory and Proceeds thereof disposed of as permitted by
Section 4.2(e)) at a location other than a location specified on Schedule 3.6,
(ii) maintain records relating to the Receivables at a location other than at
the location specified on Schedule 3.10, (iii) maintain a place of business at a
location other than a location specified on Schedule 3.6, (iv) change its name
or taxpayer identification number, (v) change its mailing address, or
(vi) change its jurisdiction of organization, unless such Grantor shall have
given Lender not less than ten (10) days’ prior written notice thereof, and
Lender shall have reasonably determined that such change will not adversely
affect the validity, perfection or priority of Lender’s security interest in the
Collateral. Prior to making any of the foregoing changes, each Grantor shall
execute and deliver all such additional Documents and perform all additional
acts as Lender, in its sole discretion, may reasonably request in order to
continue or maintain the existence and priority of its security interest in all
of the Collateral.
 
(h) Taxes.  Each Grantor will pay when due and payable all taxes, assessments
and governmental charges and levies upon the Collateral, unless the same are
being contested in good faith by appropriate proceedings diligently conducted
(which proceedings have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien) and adequate reserves in accordance
with GAAP are being maintained by such Grantor.
 
 
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(i) Compliance with Agreements.  Each Grantor shall comply in all material
respects with all mortgages, deeds of trust, Instruments, and other agreements
binding on it or affecting its properties or business.
 
(j) Compliance with Legal Requirements.  Each Grantor shall comply with all
applicable laws, rules, regulations, and orders of any court or Governmental
Authority.
 
(k) Other Financing Statements.  No Grantor will authorize any other financing
statement naming it as debtor covering all or any portion of the Collateral,
except as permitted by Section 4.2(f).
 
4.3. Receivables.
 
(a) Certain Agreements on Receivables.  No Grantor (other than Borrower) will
make or agree to make any discount, credit, rebate or other reduction in the
original amount owing on a Receivable or accept in satisfaction of a Receivable
less than the original amount thereof, except that, prior to the occurrence of
an Event of Default, such Grantor may reduce the amount of Accounts arising from
the sale of Inventory in accordance with its present policies and in the
ordinary course of business.
 
(b) Collection of Receivables.  Except as otherwise provided in this Security
Agreement, each Grantor (other than Borrower) will, at such Grantor’s sole
expense, use its commercially reasonable efforts to collect all amounts due or
hereafter due to such Grantor under the Receivables and enforce such Grantor’s
rights under all Collateral Support or Supporting Obligation with respect to the
Receivables.
 
(c) Delivery of Invoices. Each Grantor (other than Borrower) will deliver to
Lender immediately upon its request after the occurrence of an Event of Default
duplicate invoices with respect to each Account bearing such language of
assignment as Lender shall specify.
 
(d) Disclosure of Counterclaims on Receivables.  If (i) any discount, credit or
agreement to make a rebate or to otherwise reduce the amount owing on a
Receivable exists or (ii) if, to the knowledge of any Grantor, any dispute,
setoff, claim, counterclaim or defense exists or has been asserted or threatened
with respect to a Receivable, each Grantor will promptly disclose such fact to
Lender in writing in connection with the inspection by Lender of any record of
such Grantor relating to such Receivable and in connection with any invoice or
report furnished by such Grantor to Lender relating to such Receivable.
 
4.4. Inventory and Equipment.
 
(a) Maintenance of Goods.  Each Grantor will do all things reasonably necessary
to maintain, preserve, protect and keep the Inventory and the Equipment in good
repair and working and saleable condition.
 
(b) Insurance.  Each Grantor will (i) maintain fire and extended coverage
insurance on the Inventory and Equipment containing a lender’s loss payable
clause in favor of Lender, and providing that said insurance will not be
terminated except after at least thirty (30) days’ written notice from the
insurance company to Lender, (ii) maintain such other insurance on the
Collateral for the benefit of Lender as Lender shall from time to time request,
(iii) furnish to Lender upon request from time to time the originals of all
policies of insurance on the Collateral and certificates with respect to such
insurance, and (iv) maintain general liability insurance naming Lender as an
additional insured.
 
 
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(c) Safekeeping of Inventory; Inventory Covenants.  No Secured Party shall be
responsible for (i) the safekeeping of the Inventory, (ii) any loss or damage
thereto or destruction thereof occurring or arising in any manner or fashion
from any cause, (iii) any diminution in the value of Inventory, or (iv) any act
or default of any carrier, warehouseman, bailee or forwarding agency or any
other person in any way dealing with or handling the Inventory, except to the
extent that any Grantor incurs any loss, cost, claim or damage from any of the
foregoing as a result of the gross negligence or willful misconduct of such
Secured Party as determined by a court of competent jurisdiction in final and
nonappealable judgment.  All risk of loss, damage, distribution or diminution in
value of the Inventory shall, except as noted in the previous sentence, be borne
by Grantors.
 
(d) Records and Schedules of Inventory.  Each Grantor (other than Borrower)
shall keep correct and accurate daily records on a first-in, first-out basis,
itemizing and describing the kind, type, quality and quantity of Inventory, such
Grantor’s cost therefor and selling price thereof, and the daily withdrawals
therefrom and additions thereto and Inventory then on consignment, and shall, at
the request of Lender, furnish to Lender daily copies of the working papers
related thereto.  A physical count of the Inventory shall be conducted no less
often than annually and a report based on such count of Inventory shall promptly
thereafter be provided to Lender together with such supporting information
including invoices relating to such Grantor’s purchase of goods listed in said
report, as Lender shall, in its sole and absolute discretion, request.
 
(e) Certificates of Title.  With respect to any item of Equipment which is
covered by a certificate of title and indication of a security interest on such
certificate is required as a condition of perfection, upon the request of
Lender, the applicable Grantor shall cause Lender’s security interest to be
properly indicated thereon.
 
(f) Instruments.  (i) Each Grantor has, and agrees that it will maintain,
exclusive possession of its Documents, Instruments, Goods, Equipment and
Inventory, other than (x) Inventory in transit in the ordinary course of
business, (y) Inventory that is in the possession or control of a warehouseman,
bailee, agent or other Person in the Grantor’s ordinary course of business and
(z) Documents, Instruments or Promissory Notes that have been delivered to
Lender pursuant to subclause (f)(ii).  (ii) If any Collateral shall be evidenced
by an Instrument, negotiable Document, promissory note or Tangible Chattel
Paper, each Grantor shall deliver and pledge to Lender hereunder such
Instrument, negotiable Document, Promissory Note or Tangible Chattel Paper duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Lender.
 
4.5. Investment Related Property.
 
(a) No Modification of Rights and Obligation. Without the prior written consent
of Lender, no Grantor shall vote to enable or take any other action to: (i) 
amend or terminate any partnership agreement, limited liability company
agreement, certificate of incorporation, by-laws or other organizational
documents in any way that materially changes the rights of such Grantor with
respect to any Investment Related Property or adversely affects the validity,
perfection or priority of Lender’s security interest; (ii) permit any issuer of
any Pledged Equity Interest to issue any additional stock, partnership
interests, limited liability company interests or other equity interests of any
nature or to issue securities convertible into or granting the right of purchase
or exchange for any stock or other equity interest of any nature of such issuer;
(iii) other than as permitted under the Note Agreements, permit any issuer of
any Pledged Equity Interest to dispose of all or a material portion of its
assets, other than sales of Inventory in the ordinary course of business;
(iv) waive any default under or breach of any terms of Organization Documents
relating to the issuer of any Pledged Equity Interest; or (v) cause any issuer
of any Pledged Partnership Interests or Pledged LLC Interests which are not
securities (for purposes of the UCC) on the date hereof to elect or otherwise
take any action to cause such Pledged Partnership Interests or Pledged LLC
Interests to be treated as securities for purposes of the UCC; provided,
however, notwithstanding the foregoing, if any issuer of any Pledged Partnership
Interests or Pledged LLC Interests takes any such action in violation of the
foregoing in this clause (v), such Grantor shall promptly notify Lender in
writing of any such election or action and, in such event, shall take all steps
necessary or advisable to establish Lender’s Control thereof.
 
 
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(b) Performance of Underlying Obligations. Each Grantor shall comply with all of
its Obligations under any partnership agreement or limited liability company
agreement relating to Pledged Partnership Interests or Pledged LLC Interests and
shall enforce all of its rights with respect to any Investment Related Property.
 
(c) Changes in Capital Structure of Issuers. Without the prior written consent
of Lender, no Grantor shall permit any issuer of any Pledged Equity Interest to
merge or consolidate unless (i) such issuer creates a security interest that is
perfected by a filed financing statement (that is not effective solely under
Section 9-508 of the UCC) in collateral in which such new debtor has or acquires
rights, and (ii) all the outstanding Equity Interests of the surviving or
resulting corporation, limited liability company, partnership or other entity
is, upon such merger or consolidation, pledged hereunder and no cash, securities
or other property is distributed in respect of the outstanding Equity Interests
of the constituent issuer.
 
(d) Consent of Grantor. To the extent the consent of a Grantor, whether in its
capacity as a partner, member, general partner, managing member, shareholder,
issuer, or otherwise, is required for the transfer, conveyance, or encumbrance
of all or any portion of the Pledged Equity Interests in any corporation,
partnership or limited liability company, such Grantor hereby irrevocably (i)
consents to the grant of the security interests herein by all applicable
Grantors described in this Security Agreement, (ii) consents to the transfer or
conveyance of the Pledged Equity Interests pursuant to Lender’s exercise of its
rights and remedies under this Security Agreement or any of the other Note
Agreements, at law or in equity, (iii) consents to the admission of Lender, its
nominees, or any other transferee of any Pledged Equity Interest as a partner
(including as the general partner) or member (including as the managing member)
of such partnership or limited liability company, and (iv) agrees that all terms
and conditions in the constituent documents applicable to the pledge of any
Pledged Equity Interest, the enforcement thereof, the transfer of any Pledged
Equity Interest or the admission of Lender, its nominees, or any other
transferee of any Pledged Equity Interest as a partner (including as the general
partner) or member (including as the managing member) of such partnership or
limited liability company have been satisfied or waived. Each Grantor hereby
irrevocably agrees not to vote to amend the applicable constituent documents to
provide that its equity interests are securities governed by Article 8 of the
UCC, and hereby agrees and acknowledges that any such vote shall be invalid and
any such amendment shall be void ab initio.
 
 
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(e) Voting of Securities.  Prior to the occurrence of an Event of Default, each
Grantor is entitled to exercise all voting rights pertaining to any Pledged
Equity Interests; provided, however, that no vote shall be cast or consent,
waiver, or ratification given or action taken without the prior written consent
of Lender which would (i) be inconsistent with or violate any provision of this
Security Agreement or any other Note Agreement or (ii) amend, modify, or waive
any term, provision or condition of the certificate of incorporation, bylaws,
certificate of formation, or other charter document, or other agreement relating
to, evidencing, providing for the issuance of, or securing any Collateral in a
way adverse to Lender; and provided further that such Grantor shall give Lender
at least five (5) Business Days’ prior written notice in the form of an
officers’ certificate of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any voting or other consensual rights
pertaining to the Collateral or any part thereof which might have a material
adverse effect on the value of the Collateral or any part thereof.  After the
occurrence and during the continuance of an Event of Default and if Lender
elects to exercise such right, the right to vote any Pledged Equity Interests
shall be vested exclusively in Lender.  To this end, each Grantor hereby
irrevocably constitutes and appoints Lender the proxy and attorney-in-fact of
such Grantor, with full power of substitution, to vote, and to act with respect
to, any and all Collateral that is Pledged Equity Interests standing in the name
of such Grantor or with respect to which such Grantor is entitled to vote and
act, subject to the understanding that such proxy may not be exercised unless an
Event of Default has occurred and is continuing.  The proxy herein granted is
coupled with an interest, is irrevocable, and shall continue until the
termination of this Security Agreement pursuant to Section 6.16.
 
4.6. Accounts.
 
(a) Verification of Accounts.  Lender shall have the right, at any time or times
hereafter, in its name or in the name of a nominee of Lender, to verify the
validity, amount or any other matter relating to any Accounts, by mail,
telephone, telegraph or otherwise.
 
(b) Disputed Accounts; Limitation on Modification of Accounts.  Each Grantor
(other than Borrower) shall give Lender prompt written notice of any Accounts
which are in dispute between any Account Debtor and such Grantor in a material
amount.  No Grantor (other than Borrower) will, without Lender’s prior written
consent, grant any extension of the time for payment of any of the Accounts,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof, or allow
any credit or discount whatsoever thereon other than trade discounts granted in
the ordinary course of business of such Grantor.
 
(c) Notice to Account Debtor.  Lender may, in its sole discretion, at any time
or times after an Event of Default has occurred, and without prior notice to any
Grantor, notify any or all Account Debtors that the Accounts have been assigned
to Lender and that Lender has a security interest therein.  Lender may direct
any or all Account Debtors to make all payments upon the Accounts directly to
Lender.  Lender shall furnish Grantors with a copy of such notice.
 
4.7. Intellectual Property.
 
(a) Prosecution of Applications. Each Grantor shall prosecute diligently all
applications in respect of Intellectual Property, now or hereafter pending.
 
(b) Federal Applications. Except to the extent not required in such Grantor’s
reasonable business judgment, each Grantor shall make federal applications on
all of its unpatented but patentable inventions and all of its registerable but
unregistered Copyrights and Trademarks.
 
 
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(c) Maintenance of Rights. Each Grantor shall preserve and maintain all of its
material rights in the Intellectual Property and protect its Intellectual
Property from infringement, unfair competition, cancellation, or dilution by all
appropriate action necessary in such Grantor’s reasonable business judgment,
including the commencement and prosecution of legal proceedings to recover
damages for infringement and to defend and preserve its rights in the
Intellectual Property.
 
(d) No Abandonment.  No Grantor may abandon any of the Intellectual Property
necessary to the conduct of its business in the exercise of such Grantor’s
reasonable business judgment.
 
(e) Licenses.  (i) No Grantor shall sell or assign any of its interest in any of
the Intellectual Property other than in the ordinary course of business for full
and fair consideration without the prior written consent of Lender; (ii) no
Grantor shall grant any license or sublicense with respect to any of its
Intellectual Property other than in the ordinary course of business for full and
fair consideration without the prior written consent of Lender; and (iii) each
Grantor shall maintain the quality of any and all products and services with
respect to which the Intellectual Property is used.
 
(f) No Conflicting Agreements. No Grantor shall enter into any agreement,
including any licensing agreement, that is or may be inconsistent with such
Grantor’s Obligations under this Security Agreement or any of the other Note
Agreements.
 
(g) Additional Intellectual Property.  Each Grantor shall give Lender prompt
written notice if such Grantor shall obtain rights to or become entitled to the
benefit of any Intellectual Property not identified on Schedule 3.17.  Each
Grantor shall execute and deliver any and all Patent Security Agreements,
Copyright Security Agreements, or Trademark Security Agreements, each in form
and substance satisfactory to Lender, as Lender may request to evidence Lender’s
Lien on such Intellectual Property.
 
(h) Obligation upon Default.  On and after the occurrence of an Event of
Default, each Grantor shall use its reasonable efforts to obtain any consents,
waivers, or agreements necessary to enable Lender to exercise its rights and
remedies with respect to the Intellectual Property.
 
4.8. Collateral Notes and Collateral Note Security.  Without the prior written
consent of Lender, no Grantor (other than Borrower) may (a) modify or
substitute, or permit the modification, or substitution of, any Collateral Note
or any Document evidencing the Collateral Note Security or (b) release any
Collateral Note Security unless specifically required by the terms thereof.
 
4.9. Instruments; Chattel Paper; and Documents.  Each Grantor (other than
Borrower) will (a) deliver to Lender immediately upon execution of this Security
Agreement the originals of all Chattel Paper and Instruments (if any then
exists), (b) hold in trust for Lender upon receipt and immediately thereafter
deliver to Lender any Chattel Paper and Instruments constituting Collateral,
(c) mark conspicuously all Chattel Paper and Instruments (other than any
delivered to Lender) with an appropriate reference to the security interest of
Lender, and (d) upon Lender’s request, deliver to Lender (and thereafter hold in
trust for Lender upon receipt and immediately deliver to Lender) any Document
evidencing or constituting Collateral.
 
 
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4.10. Deposit, Commodity, and Securities Accounts.  With respect to any Deposit
Account, Commodity Account, or Securities Account, each Grantor shall
(a) maintain such accounts at the institutions described on Schedule 3.10 or
such additional institutions as have complied with clause (b) hereof; (b) cause
each bank and other financial institution with an account referred to in
Schedule 3.10 hereto to execute and deliver to the Lender (or its designee) a
control agreement, in form and substance satisfactory to the Lender and such
Grantor, duly executed by such Grantor and such bank or financial institution,
pursuant to which such institution shall irrevocably agree, among other things,
that (i) it will comply at any time with the instructions originated by Lender
(or its designee) to such bank or financial institution directing the
disposition of cash, commodity contracts, securities, Investment Property and
other items from time to time credited to such account, without further consent
of such Grantor, (ii) all cash, commodity contracts, securities, Investment
Property and other items of such Grantor deposited with such institution shall
be subject to a perfected, first priority security interest in favor of Lender
(or its designee) and (iii) Lender shall have exclusive Control over such
account; (c) deliver to Lender all certificates or Instruments, if any, now or
hereafter representing or evidencing such accounts, accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to Lender. Without Lender’s consent, no Grantor shall
establish any additional Deposit Account, Commodity Account, or Securities
Account, unless at the time such account is established it is subject to
Lender’s exclusive Control.  The provisions of this Section 4.10 shall not apply
to Deposit Accounts specially and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of a
Grantor's salaried employees; provided that the funds on deposit in such Deposit
Accounts shall at no time exceed the actual payroll, payroll taxes and other
employee wage and benefit payments then owing by such Grantor for the
immediately succeeding payroll period.
 
4.11. Commercial Tort Claims.  If any Grantor (other than Borrower) at any time
holds or acquires a Commercial Tort Claim in an amount in excess of
$[_________], such Grantor shall (a) immediately forward to Lender written
notification of any and all Commercial Tort Claims, including any and all
actions, suits and proceedings before any court or Governmental Authority by or
affecting such Grantor; and (b) execute and deliver such statements, Documents
and notices and do and cause to be done all such things as may be required by
Lender, or required by law, including all things which may from time to time be
necessary under the UCC to fully create, preserve, perfect and protect the
priority of Lender’s security interest in any Commercial Tort Claims.
 
4.12. Letters-of-Credit Rights.  If any Grantor (other than Borrower) is at any
time a beneficiary under a letter of credit now or hereafter issued in favor of
any Grantor in an amount in excess of $[_________], such Grantor shall promptly
notify Lender thereof in writing and, at Lender’s request, such Grantor shall,
pursuant to an agreement in form and substance satisfactory to Lender, either
(a) arrange for the issuer or any confirmer of such letter of credit to consent
to an assignment to Lender of the Proceeds of any drawing under the letter of
credit or (b) arrange for Lender to become the transferee beneficiary of the
letter of credit, with Lender agreeing, in each case, that the Proceeds of any
drawing under the letter of credit are to be applied to the Secured Obligations
as provided in the Note Agreements.
 
4.13. Fixtures.  For any Collateral that is a Fixture or an accession which has
been attached to real estate or other goods prior to the perfection of the
security interest of Lender, the applicable Grantor (other than Borrower) shall
furnish Lender, upon reasonable demand, a disclaimer of interest in each such
Fixture or accession and a consent in writing to the security interest of Lender
therein, signed by all persons having any interest in such Fixture or accession
by virtue of any interest in the real estate or other goods to which such
Fixture or accession has been attached.
 
 
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4.14. Federal, State or Municipal Claims.  Each Grantor will notify Lender of
any Collateral which constitutes a claim against a Governmental Authority, or
any instrumentality or agency thereof, the assignment of which claim is
restricted by federal, state or municipal law.
 
4.15. Warehouse Receipts Non-Negotiable.  Each Grantor agrees that if any
warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its inventory, such warehouse receipt or receipt in the nature
thereof shall not be “negotiable” (as such term is used in Section 7-104 of the
UCC).
 
4.16. Mortgagee’s and Landlord Waivers.  Each Grantor (other than Borrower)
shall cause each mortgagee of real property owned by such Grantor (upon request
by Lender) and each landlord of real property leased by such Grantor to execute
and deliver Instruments satisfactory in form and substance to Lender by which
such mortgagee or landlord waives their rights, if any, in the Collateral and
permits Lender to enter the subject property on and after the occurrence of an
Event of Default.
 
4.17. Lockboxes  Upon request of Lender, each Grantor (other than Borrower)
shall execute and deliver to Lender irrevocable lockbox agreements in the form
provided by or otherwise acceptable to Lender, which agreements shall be
accompanied by an acknowledgment by the bank where the lockbox is located of the
Lien of Lender granted hereunder and of irrevocable instructions to wire all
amounts collected therein to a special collateral account as determined by
Lender.
 
4.18. Use and Operation of Collateral.  Should any Collateral come into the
possession of Lender, Lender may use or operate such Collateral for the purpose
of preserving it or its value, pursuant to the order of a court of appropriate
jurisdiction or in accordance with any other rights held by Lender in respect of
such Collateral.  Each Grantor covenants to promptly reimburse and pay to
Lender, at Lender’s request, the amount of all expenses (including the cost of
any insurance and payment of taxes or other charges) incurred by Lender in
connection with its custody and preservation of the Collateral, and all such
expenses, costs, taxes, and other charges shall bear interest at the default
interest rate until repaid and, together with such interest, shall be payable by
Grantors to Lender upon demand and shall become part of the Secured Obligations.
However, the risk of accidental loss or damage to, or diminution in value of,
the Collateral is on Grantors, and Lender shall have no liability whatever for
failure to obtain or maintain insurance, nor to determine whether any insurance
ever in force is adequate as to amount or as to the risks insured. With respect
to the Collateral that is in the possession of Lender, Lender shall have no duty
to fix or preserve rights against prior parties to such Collateral and shall
never be liable for any failure to use diligence to collect any amount payable
in respect of such Collateral, but shall be liable only to account to Grantors
for what it may actually collect or receive thereon. The provisions of this
subparagraph are applicable whether or not an Event of Default has occurred.
 
4.19. Certain Proceeds.  Notwithstanding any contrary provision herein, any and
all Proceeds of any Collateral consisting of cash, checks and other non-cash
items shall be part of the Collateral hereunder, and shall, if received by any
Grantor, be held in trust for the benefit of Lender, and shall forthwith be
delivered to Lender (accompanied by proper instruments of assignment and/or
stock and/or bond powers executed by such Grantor in accordance with Lender’s
instructions) to be held subject to the terms of this Security Agreement.  Any
cash Proceeds of the Collateral which come into the possession of Lender on and
after the occurrence and during the continuance of an Event of Default
(including insurance Proceeds) may, at Lender’s option, be applied in whole or
in part to the Secured Obligations (to the extent then due), be released in
whole or in part to or on the written instructions of such Grantor for any
general or specific purpose, or be retained in whole or in part by Lender as
additional Collateral.  The provisions of this subparagraph are applicable
whether or not an Event of Default has occurred.
 
 
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4.20. Further Assurances.  At any time and from time to time, upon the
reasonable request (in writing) of Lender, and at the sole expense of Grantors,
each Grantor shall promptly execute and deliver all such further Instruments and
Documents and take such further actions as Lender may deem reasonably necessary
or desirable (a) to assure Lender that its security interests hereunder are
perfected with a first priority Lien, and (b) to carry out the provisions and
purposes of this Security Agreement, including (i) filing such financing
statements as Lender may require, (ii) executing control agreements with respect
to the Collateral, in each case naming Lender, as secured party, in form and
substance reasonably satisfactory to Lender, (iii) furnishing to Lender from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Lender
may reasonably request, all in reasonable detail, and (iv) taking all actions
required by law in any relevant UCC, or by other law as applicable in any
foreign jurisdiction, such Grantor shall use its best efforts to obtain any
required consents from any Person other than Borrower and its Affiliates with
respect to any permit or license or any Contractual Obligation with such Person
entered into by such Grantor that requires such consent as a condition to the
creation by such Grantor of a Lien on any right, title or interest in such
permit, license or Contractual Obligation related thereto.  A carbon,
photographic, or other reproduction of this Security Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
 
4.21. Additional Grantors. Upon the execution and delivery by any person of a
security agreement supplement in form and substance satisfactory to Lender (each
a “Security Agreement Supplement”), (a) such person shall be and become a
Grantor hereunder and each reference in this Security Agreement and the other
Note Agreements to “Grantor” shall also mean and be a reference to such person,
and (b) the supplemental Schedules3.5, 3.6, 3.10, and 3.17 attached to each
Security Agreement Supplement shall be incorporated into and become a part of
Schedules 3.5, 3.6, 3.10, and 3.17 respectively, hereto, and Lender may attach
such supplemental exhibits to such Schedules; each reference to such Schedules
means a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.
 
5. REMEDIES UPON EVENT OF DEFAULT
 
5.1. Remedies.  On and after the occurrence of an Event of Default, Lender may
(but subject to the terms of the Note Agreements) exercise any or all of the
following rights and remedies:
 
(a) Contractual Remedies. Those rights and remedies provided in this Security
Agreement, the Note, or any other Note Agreement, provided that this
Section 5.1(a) shall not limit any rights or remedies available to Lender prior
to the occurrence of an Event of Default.
 
(b) Legal Remedies.  Those rights and remedies available to a secured party
under the UCC (whether or not the UCC applies to the affected Collateral) or
under any other applicable law (including any law governing the exercise of a
bank’s right of setoff or bankers’ lien) when a debtor is in default under a
security agreement.
 
(c) Disposition of Collateral.  Without notice except as specifically provided
in Section 5.2(c) or elsewhere herein, sell, lease, assign, grant an option or
options to purchase or otherwise dispose of the Collateral or any part thereof
in one or more parcels at public or private sale, for cash, on credit or for
future delivery, and upon such other terms as Lender may deem commercially
reasonable. Neither Lender’s compliance with any applicable state or federal law
in the conduct of such sale, nor its disclaimer of any warranties relating to
the Collateral, shall be considered to affect the commercial reasonableness of
such sale. Each Grantor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
 
 
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(d) Distributions. On and after the occurrence of an Event of Default, all
payments and distributions made to any Grantor upon or with respect to the
Collateral shall be paid or delivered to Lender, and each Grantor agrees to take
all such action as Lender may deem necessary or appropriate to cause all such
payments and distributions to be made to Lender.  Further, Lender shall have the
right, at any time after the occurrence of any Event of Default, to notify and
direct any issuer to thereafter make all payments, dividends, and any other
distributions payable in respect thereof directly to Lender.  Such issuer shall
be fully protected in relying on the written statement of Lender that it then
holds a security interest which entitles it to receive such payments and
distributions.  Any and all Money and other property paid over to or received by
Lender hereunder shall be retained by Lender as additional collateral hereunder
and may be applied in accordance with Section 5.10 hereof.
 
(e) Use of Premises.  Lender shall be entitled to occupy and use any premises
owned or leased by any Grantor where any of the Collateral or any records
relating to the Collateral are located until the Secured Obligations are paid or
the Collateral is removed therefrom, whichever first occurs, without any
obligation to pay such Grantor for such use and occupancy.
 
5.2. Grantors’ Obligations Upon Event of Default.  Upon the request of Lender on
and after the occurrence of an Event of Default, each Grantor will:
 
(a) Assembly of Collateral.  Assemble and make available to Lender the
Collateral and all records relating thereto at any place or places specified by
Lender.
 
(b) Lender Access.  Permit Lender, by Lender’s representatives and agents, to
enter any premises where all or any part of the Collateral, or the books and
records relating thereto, or both, are located, to take possession of all or any
part of the Collateral and to remove all or any part of the Collateral.
 
(c) Notice of Disposition of Collateral.  Each Grantor hereby waives notice of
the time and place of any public sale or the time after which any private sale
or other disposition of all or any part of the Collateral may be made.  To the
extent such notice may not be waived under applicable law, any notice made shall
be deemed reasonable if sent to any Grantor, addressed as set forth in
Section 6.13, at least ten (10) days prior to (i) the date of any such public
sale or (ii) the time after which any such private sale or other disposition may
be made. Lender shall not be obligated to make any sale or other disposition of
the Collateral regardless of notice having been given.  Subject to the
provisions of applicable law, Lender may postpone or cause the postponement of
the sale of all or any portion of the Collateral by announcement at the time and
place of such sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was postponed,
or Lender may further postpone such sale by announcement made at such time and
place.
 
5.3. Condition of Collateral; Warranties.  Lender has no obligation to clean-up
or otherwise prepare the Collateral for sale.  Lender may sell the Collateral
without giving any warranties as to the Collateral.  Lender may specifically
disclaim any warranties of title or the like.  This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
 
 
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5.4. Collection of Receivables.  On and after the occurrence of an Event of
Default, Lender may at any time in its sole discretion, by giving Grantors
written notice, elect to require that the Receivables be paid directly to
Lender.  In such event, each Grantor shall, and shall permit Lender to, promptly
notify the Account Debtors under the Receivables of Lender’s interest therein
and direct such Account Debtors to make payment of all amounts then or
thereafter due under the Receivables directly to Lender.  Upon receipt of any
such notice from Lender, each Grantor shall thereafter hold in trust for Lender,
all amounts and Proceeds received by it with respect to the Receivables and
immediately and at all times thereafter deliver to Lender all such amounts and
Proceeds in the same form as so received, whether by cash, check, draft or
otherwise, with any necessary endorsements.  Lender shall hold and apply funds
so received as provided by the terms of Section 5.10.  If after the occurrence
of an Event of Default, any Account Debtor fails or refuses to make payment on
any Collateral when due, Lender is authorized, in its sole discretion, either in
its own name or in the name of Grantors, to take such action as Lender shall
deem appropriate for the collection of any amounts owed with respect to
Collateral or upon which a delinquency exists.  Each Grantor agrees that Lender
may at any time and from time to time, if an Event of Default has occurred,
compromise with the obligor on any Receivable, accept in full payment of any
Receivable such amount as Lender in its sole discretion shall determine or
abandon any Receivable, and any such action by Lender shall be commercially
reasonable so long as Lender acts in good faith based on information known to it
at the time it takes any such action. Regardless of any other provision hereof,
however, Lender shall never be liable for its failure to collect, or for its
failure to exercise diligence in the collection of, any amounts owed with
respect to Collateral, nor shall it be under any duty whatsoever to anyone
except Grantors to account for funds that it shall actually receive hereunder.
 
5.5. Cash Collateral Account.  On and after the occurrence of an Event of
Default, Lender shall have, and each Grantor hereby grants to Lender, the right
and authority to transfer all funds on deposit in the Deposit Accounts to a
“Cash Collateral Account” (herein so called) maintained with a depository
institution acceptable to Lender and subject to the exclusive direction, domain,
and Control of Lender, and no disbursements or withdrawals shall be permitted to
be made by any Grantor from such Cash Collateral Account.  Such Cash Collateral
Account shall be subject to the security interest in favor of Lender herein
created, and each Grantor hereby grants a security interest to Lender in and to,
such Cash Collateral Account and all checks, drafts, and other items ever
received by any Grantor for deposit therein.  Furthermore, if an Event of
Default has occurred, Lender shall have the right, at any time in its discretion
without notice to any Grantor, (a) to transfer to or to register in the name of
Lender or any other Secured Party or nominee any certificates of deposit or
deposit instruments constituting Deposit Accounts and shall have the right to
exchange such certificates or Instruments representing Deposit Accounts for
certificates or Instruments of smaller or larger denominations and (b) to take
and apply against the Obligations any and all funds then or thereafter on
deposit in the Cash Collateral Account or otherwise constituting Deposit
Accounts.
 
5.6. Intellectual Property.  For purposes of enabling Lender to exercise its
rights and remedies under this Security Agreement and enabling Lender and its
successors and assigns to enjoy the full benefits of the Collateral, each
Grantor hereby grants to Lender an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to any Grantor) to
use, license, or sublicense any of the Intellectual Property.  Each Grantor
shall provide Lender with reasonable access to all media in which any of the
Intellectual Property may be recorded or stored and all computer programs used
for the completion or printout thereof.  This license shall also inure to the
benefit of all successors, assigns, and transferees of Lender.  On and after the
occurrence of an Event of Default, Lender may require that Grantors assign all
of their right, title, and interest in and to the Intellectual Property or any
part thereof to Lender or such other person as Lender may designate pursuant to
Documents satisfactory to Lender.  If no Event of Default has occurred, Grantors
shall have the exclusive, non-transferable right and license to use the
Intellectual Property in the ordinary course of business and the exclusive right
to grant to other persons licenses and sublicenses with respect to the
Intellectual Property for full and fair consideration.
 
 
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5.7. Record Ownership of Securities. On and after the occurrence of an Event of
Default, Lender may have any Collateral that is Pledged Equity Interests and
that is in the possession of Lender, or its nominee or nominees, registered in
its name, or in the name of its nominee or nominees, as Lender; and, as to any
Collateral that is Pledged Equity Interests so registered, Lender shall execute
and deliver (or cause to be executed and delivered) to the applicable Grantor
all such proxies, powers of attorney, dividend coupons or orders, and other
Documents as such Grantor may reasonably request for the purpose of enabling
such Grantor to exercise the voting rights and powers which it is entitled to
exercise under this Security Agreement or to receive the dividends and other
distributions and payments in respect of such Collateral that is Pledged Equity
Interests or Proceeds thereof which it is authorized to receive and retain under
this Security Agreement.
 
5.8. Investment Related Property.  Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (collectively, the “Securities
Act”) and applicable state securities laws, Lender may be compelled, with
respect to any sale of all or any part of the Investment Related Property
conducted without prior registration or qualification of such Investment Related
Property under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire the
Investment Related Property for their own account, for investment and not with a
view to the distribution or resale thereof.  Each Grantor acknowledges that any
such private sale may be at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, each Grantor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Lender shall have no obligation to engage in public sales and no
obligation to delay the sale of any Investment Related Property for the period
of time necessary to permit the issuer thereof to register it for a form of
public sale requiring registration under the Securities Act or under applicable
state securities laws, even if such issuer would, or should, agree to so
register it.  If Lender determines to exercise its right to sell any or all of
the Investment Related Property, upon written request, each Grantor shall and
shall cause each issuer of any Pledged Stock to be sold hereunder, each
partnership and each limited liability company from time to time to furnish to
Lender all such information as Lender may request in order to determine the
number and nature of interest, shares or other Instruments included in the
Investment Related Property which may be sold by Lender in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder. In case of any sale of all or any part of the
Investment Related Property on credit or for future delivery, such Collateral so
sold may be retained by Lender until the selling price is paid by the purchaser
thereof, but Lender shall not incur any liability in case of the failure of such
purchaser to take up and pay for such assets so sold and in case of any such
failure, such Collateral may again be sold upon like notice.  Lender, instead of
exercising the power of sale herein conferred upon them, may proceed by a suit
or suits at law or in equity to foreclose security interests created hereunder
and sell such Investment Related Property, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
 
5.9. Sales on Credit.  If Lender sells any of the Collateral upon credit,
Grantors will be credited only with payments actually made by the purchaser,
received by Lender, and applied to the indebtedness of the purchaser.  In the
event the purchaser fails to pay for the Collateral, Lender may resell the
Collateral and Grantors shall be credited with the Proceeds of the sale.
 
5.10. Application of Proceeds.  On and after the occurrence of an Event of
Default, the Proceeds of the Collateral shall be applied by Lender to payment of
the Secured Obligations in accordance with the terms and conditions of the Note
Agreements. If the Proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be liable
for the deficiency and the fees of any attorneys employed by Lender to collect
such deficiency.
 
 
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5.11. Power of Attorney.  Each Grantor hereby appoints Lender and Lender’s
designee as its attorney, with power: (a) on and after the occurrence of an
Event of Default, to endorse such Grantor’s name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come into
Lender’s possession; (b) to sign such Grantor’s name on any invoice, bill of
lading, warehouse receipt, or other negotiable or non-negotiable Document
constituting Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements, and other public
records, and to file any such financing statements by electronic means with or
without a signature as authorized or required by applicable law or filing
procedure; (c) so long as any Event of Default has occurred, to notify the post
office authorities to change the address for delivery of any Grantor’s mail to
an address designated by Lender and to receive, open, and dispose of all mail
addressed to any Grantor; (d) to send requests for verification of Accounts to
customers or Account Debtors; (e) to complete in any Grantor’s name or Lender’s
name, any order, sale, or transaction, obtain the necessary Documents in
connection therewith, and collect the Proceeds thereof; (f) to clear Inventory
through customs in any Grantor’s name, Lender’s name, or the name of Lender’s
designee, and to sign and deliver to customs officials powers of attorney in any
Grantor’s name for such purpose; (g) to the extent that any Grantor’s
authorization given in Section 2.3 of this Security Agreement is not sufficient,
to file such financing statements with respect to this Security Agreement or to
file a photocopy of this Security Agreement in substitution for a financing
statement, as Lender may deem appropriate; and (h) subject to the terms and
conditions of this Security Agreement and, if applicable, after Lender has
determined that any Grantor has failed to take any action required under the
Note Agreements, this Security Agreement or any other Note Agreement, to do all
things reasonably necessary to carry out the terms and conditions of the Note
Agreements and this Security Agreement.  Each Grantor ratifies and approves all
acts of such attorney.  No Secured Party nor its attorneys will be liable for
any acts or omissions or for any error of judgment or mistake of fact or law
except for such Secured Party’s willful misconduct or gross negligence as
determined by a court of competent jurisdiction in final and nonappealable
judgment.  This power, being coupled with an interest, is irrevocable until this
Security Agreement is terminated in accordance with Section 6.16.
 
6. GENERAL PROVISIONS
 
6.1. Joint and Several Obligations of Grantors.
 
(a) Each Grantor is accepting joint and several liability hereunder with other
persons that have executed or will execute a Security Agreement in consideration
of the financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each Grantor
and in consideration of the undertakings of each Grantor to accept joint and
several liability for the Obligations of each of them.
 
(b) Each Grantor jointly and severally hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Grantors with respect to the payment and performance of
all of the Secured Obligations, it being the intention of the parties hereto
that all the Secured Obligations shall be the joint and several Obligations of
each Grantor without preferences or distinction among them.
 
 
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6.2. Limitation of Obligations.
 
(a) The provisions of this Security Agreement are severable, and in any action
or proceeding involving any applicable law affecting the rights of creditors
generally, if the Obligations of any Grantor under this Security Agreement would
otherwise be held or determined to be avoidable, invalid or unenforceable on
account of the amount of such Grantor’s liability under this Security Agreement,
then, notwithstanding any other provision of this Security Agreement to the
contrary, the amount of such liability shall, without any further action by
Grantors or Lender, be automatically limited and reduced to the highest amount
that is valid and enforceable as determined in such action or proceeding (such
highest amount determined hereunder being the relevant Grantor’s “Maximum
Liability”).  This Section 6.2 with respect to the Maximum Liability of each
Grantor is intended solely to preserve the rights of Lender hereunder to the
maximum extent not subject to avoidance under applicable law, and none of
Grantors or any other Person shall have any right or claim under this
Section 6.2(a) with respect to the Maximum Liability, except to the extent
necessary to ensure that the Obligations of Grantors hereunder shall not be
rendered voidable under applicable law.
 
(b) Each Grantor agrees that the Secured Obligations may at any time and from
time to time exceed the Maximum Liability of such Grantor, and may exceed the
aggregate Maximum Liability of all other Grantors, without impairing this
Security Agreement or affecting the rights and remedies of Lender.  Nothing in
this Section 6.2(b) shall be construed to increase any Grantor’s Obligations
hereunder beyond its Maximum Liability.
 
(c) Notwithstanding any or all of the Secured Obligations becoming unenforceable
against any Grantor or the determination that any or all of the Secured
Obligations shall have become discharged, disallowed, invalid, illegal, void or
otherwise unenforceable as against any Grantor (whether by operation of any
present or future law or by order of any court or governmental agency), the
Secured Obligations shall, for the purposes of this Security Agreement, continue
to be outstanding and in full force and effect.
 
6.3. NO RELEASE OF GRANTORS.  THE OBLIGATIONS OF GRANTORS UNDER THIS SECURITY
AGREEMENT SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL GRANTORS BE
DISCHARGED FROM ANY OBLIGATION HEREUNDER, FOR ANY REASON WHATSOEVER (other than
pursuant to Section 6.16), including (and whether or not the same shall have
occurred or failed to occur once or more than once and whether or not Grantors
shall have received notice thereof):
 
(a) (i) any increase in the principal amount of, or interest rate applicable to,
(ii) any extension of the time of payment, observance or performance of,
(iii) any other amendment or modification of any of the other terms and
provisions of, (iv) any release, composition or settlement (whether by way of
acceptance of a plan of reorganization or otherwise) of, (v) any subordination
(whether present or future or contractual or otherwise) of, or (vi) any
discharge, disallowance, invalidity, illegality, voidness or other
unenforceability of, the Secured Obligations;
 
(b) (i) any failure to obtain, (ii) any release, composition or settlement of,
(iii) any amendment or modification of any of the terms and provisions of,
(iv) any subordination of, or (v) any discharge, disallowance, invalidity,
illegality, voidness or other unenforceability of, any Note Agreements;
 
 
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(c) (i) any failure to obtain or any release of, any failure to protect or
preserve, (ii) any release, compromise, settlement or extension of the time of
payment of any Obligations constituting, (iii) any failure to perfect or
maintain the perfection or priority of any Lien upon, (iv) any subordination of
any Lien upon, or (v) any discharge, disallowance, invalidity, illegality,
voidness or other unenforceability of any Lien or intended Lien upon, any
collateral now or hereafter securing, the Secured Obligations or any other
guaranties thereof;
 
(d) any termination of or change in any relationship between Grantors and any
Secured Party or the addition or release of any Grantor;
 
(e) any exercise of, or any failure or election not to exercise, delay in the
exercise of, waiver of, or forbearance of or other indulgence with respect to,
any right, remedy or power available to any Secured Party, including (i) any
election not to or failure to exercise any right of setoff, recoupment or
counterclaim, (ii) any election of remedies effected by Lender, including the
foreclosure upon any real estate constituting collateral, whether or not such
election affects the right to obtain a deficiency judgment, and (iii) any
election by Lender in any proceeding under the Bankruptcy Code of the
application of Section 1111(b)(2) of the Bankruptcy Code; and
 
(f) ANY OTHER ACT OR FAILURE TO ACT OR ANY OTHER EVENT OR CIRCUMSTANCE THAT
(i) VARIES THE RISK OF GRANTORS UNDER THIS SECURITY AGREEMENT OR (ii) BUT FOR
THE PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR EQUITY,
OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF GRANTORS HEREUNDER OR
DISCHARGE GRANTORS FROM ANY OBLIGATION HEREUNDER.
 
6.4. Subordination of Certain Claims.  Any and all rights and claims of Grantors
against Borrower or against any other Person or property, arising by reason of
any payment by any Grantors to any Secured Party pursuant to the provisions, or
in respect, of this Security Agreement shall be subordinate, junior and subject
in right of payment to the prior and indefeasible payment in full of all Secured
Obligations, and until such time, Grantors defer all rights of subrogation,
contribution or any similar right and until such time agree not to enforce any
such right or remedy Grantors may now or hereafter have against Borrower, any
endorser or any other Grantor of all or any part of the Secured Obligations and
any right to participate in, or benefit from, any security given to Lender to
secure any of the Secured Obligations.  All Liens and security interests of
Grantors, whether now or hereafter arising and howsoever existing, in assets of
Borrower or any assets securing the Secured Obligations shall be and hereby are
subordinated to the rights and interests of Lender and in those assets until the
prior and indefeasible final payment in full of all Secured Obligations.  If any
amount shall be paid to Grantors contrary to the provisions of this Section 6.4
at any time when any of the Secured Obligations shall not have been indefeasibly
paid in full, such amount shall be held in trust for the benefit of Lender and
shall forthwith be turned over in kind in the form received to Lender (duly
endorsed if necessary) to be credited and applied against the Secured
Obligations, whether matured or unmatured, in accordance with the terms of the
Note Agreements.
 
6.5.  Recovered Payments. The Secured Obligations shall be deemed not to have
been paid, observed or performed, and Grantors’ Obligations under this Security
Agreement in respect thereof shall continue and not be discharged, to the extent
that any payment, observance or performance thereof by any Grantor is recovered
from or paid over by or for the account of Lender for any reason, including as a
preference or fraudulent transfer or by virtue of any subordination (whether
present or future or contractual or otherwise) of the Secured Obligations,
whether such recovery or payment over is effected by any judgment, decree or
order of any court or governmental agency, by any plan of reorganization or by
settlement or compromise by Lender (whether or not consented to by Grantors) of
any claim for any such recovery or payment over.  Each Grantor hereby expressly
waives the benefit of any applicable statute of limitations and agrees that it
shall be liable hereunder whenever such a recovery or payment over occurs.
 
 
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6.6. No Waiver. No delay or omission of Lender to exercise any right or remedy
granted under this Security Agreement shall impair such right or remedy or be
construed to be a waiver of any Event of Default, or an acquiescence therein,
and any single or partial exercise of any such right or remedy shall not
preclude any other or further exercise thereof or the exercise of any other
right or remedy.  No waiver, amendment or other variation of the terms,
conditions or provisions of this Security Agreement whatsoever shall be valid
unless in writing signed by Lender and then only to the extent in such writing
specifically set forth.  All rights and remedies contained in this Security
Agreement or by law afforded shall be cumulative and all shall be available to
any Secured Party until the Secured Obligations have been paid in full.
 
6.7. Lender Performance of Grantors’ Obligations.  Without having any obligation
to do so, Lender may perform or pay any Obligation which any Grantor has agreed
to perform or pay in this Security Agreement and each Grantor shall, jointly and
severally, reimburse Lender for any amounts paid by Lender pursuant to this
Section 6.7.  Each Grantor’s Obligation to reimburse Lender pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.
 
6.8. Specific Performance of Certain Covenants.  Each Grantor acknowledges and
agrees that a breach of any of the covenants contained in
Sections 4.2(d), 4.2(f), 4.9, 4.17, 5.4, 5.5, 5.6, 5.10, 5.11, or 6.9 will cause
irreparable injury to the Lender, that the Lender have no adequate remedy at law
in respect of such breaches and therefore agrees, without limiting the right of
the Lender to seek and obtain specific performance of other Obligations of such
Grantor contained in this Security Agreement, that the covenants of such Grantor
contained in the Sections referred to in this Section 6.8 shall be specifically
enforceable against such Grantor.
 
6.9. Dispositions Not Authorized.  No Grantor is authorized to sell or otherwise
dispose of the Collateral except as set forth in Section 4.2(e) and
notwithstanding any course of dealing between any Grantor and Lender or other
conduct of Lender, no authorization to sell or otherwise dispose of the
Collateral (except as set forth in Section 4.2(e)) shall be binding upon Lender
unless such authorization is in writing signed by Lender.
 
6.10. Waivers.  Except to the extent expressly otherwise provided herein or in
other Note Agreements and to the fullest extent permitted by applicable law,
each Grantor waives (a) any right to require Lender to proceed against any other
Person, to exhaust its rights in Collateral, or to pursue any other right which
Lender may have; (b) with respect to the Secured Obligations, presentment and
demand for payment, protest, notice of protest and nonpayment, notice of intent
to accelerate, and notice of acceleration; and (c) all rights of marshaling in
respect of any and all of the Collateral.
 
6.11. Benefit of Agreement.
 
(a) The terms and provisions of this Security Agreement shall be binding upon
and inure to the benefit of Grantors, Lender and their respective successors and
assigns, except that no Grantor shall have the right to assign its rights or
delegate its Obligations under this Security Agreement or any interest herein,
without the prior written consent of Lender.
 
(b) Lender is the agent for each Secured Party, the security interest granted
hereunder and all rights granted to Lender hereunder or in connection herewith
are for the benefit of each Secured Party, and Lender may, subject to the terms
and conditions of the Note Agreements, without the joinder of any Secured Party,
exercise any and all rights in favor of Lender or Lender hereunder, including,
without limitation, conducting any foreclosure sales hereunder, and executing
full or partial releases hereof, amendments or modifications hereto, or consents
or waivers hereunder.  The rights of Lender are subject to the Note Agreements
and may (to the extent permitted under the Note Agreements) be subject to one or
more separate agreements between or among such parties, but no Grantor need
inquire about any such agreement or be subject to any terms thereof unless such
Grantor specifically joins therein; and consequently, no Grantor nor any
Grantor’s successors or assigns shall be entitled to any benefits or provisions
of any such separate agreements or be entitled to rely upon or raise as a
defense, in any manner whatsoever, the failure or refusal of any party thereto
to comply with the provisions thereof except to the extent the Borrower’s
consent is expressly required under the Note Agreements to consent to certain
amendments thereunder.
 
 
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6.12. Survival.  All representations and warranties of each Grantor contained in
this Security Agreement shall survive the execution and delivery of this
Security Agreement. Without prejudice to the survival of any other Obligation of
each Grantor hereunder, the Obligations of each Grantor under Sections 6.14 and
6.18 shall survive termination of this Security Agreement.
 
6.13. Sending Notices.  All demands, notices and other communications provided
for hereunder shall be in writing, and shall be delivered in the same manner and
on the same terms as provided for in the Note Agreements, with any notices to
any Grantor to be given at its address set forth on Schedule 3.5 hereto, and in
the case of any Secured Party, set forth in the Note Agreements.
 
6.14. Taxes and Expenses.  Any taxes (including income taxes) payable or ruled
payable by federal or state authority in respect of this Security Agreement
shall be paid by each Grantor, together with interest and penalties, if
any.  Grantors shall jointly and severally reimburse Lender for any and all
reasonable out-of-pocket expenses (including reasonable attorneys’, auditors’
and accountants’ fees and reasonable time charges of attorneys, paralegals,
auditors and accountants) paid or incurred by Lender in connection with the
audit, analysis, administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated with any periodic or
special audit of the Collateral). In addition, Grantors shall be jointly and
severally obligated to pay all of the costs and expenses incurred by Lender,
including attorneys’ fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against Lender or any
Grantor concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including any of the
foregoing arising in, arising under or related to a case under any bankruptcy,
insolvency or similar law.   Any and all costs and expenses incurred by each
Grantor in the performance of actions required pursuant to the terms hereof
shall be borne solely by such Grantor.
 
6.15. Headings.  The title of and section headings in this Security Agreement
are for convenience of reference only, and shall not govern the interpretation
of any of the terms and provisions of this Security Agreement.
 
6.16. Termination.  This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (a) the Note has terminated pursuant to its
express terms and (b) all of the Secured Obligations have been indefeasibly paid
and performed in full (other than unasserted contingent indemnification
obligations) and no commitments of Lender which would give rise to any Secured
Obligations are outstanding; provided that the termination of this Security
Agreement under this Section 6.16 is subject to Section 6.5.
 
 
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6.17. GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
 
6.18. Indemnity.  Each Grantor does hereby assume all liability for the
Collateral, for the security interest of Lender, and for any use, possession,
maintenance, and management of, all or any of the Collateral, including any
taxes arising as a result of, or in connection with, the transactions
contemplated herein, and agrees to assume liability for, and to indemnify and
hold Lender and Lender’s Related Parties, successors, assigns, and attorneys
harmless from and against, any and all claims, causes of action, or liability,
for injuries to or deaths of persons and damage to property, howsoever arising
from or incident to such use, possession, maintenance, and management, whether
such persons be agents or employees of any Grantor or of third parties, or such
damage be to property of any Grantor or of others.  Each Grantor does hereby
indemnify, save, and hold Lender and Lender’s Related Parties, successors,
assigns, and attorneys harmless from and against, and covenants to defend Lender
against, any and all losses, damages, claims, costs, penalties, liabilities, and
expenses (collectively, “Claims”), including court costs and attorneys’ fees,
and any of the foregoing, ARISING FROM THE NEGLIGENCE OF LENDER OR ANY OF
LENDER’S RESPECTIVE RELATED PARTIES, howsoever arising or incurred because of,
incident to, or with respect to Collateral or any use, possession, maintenance,
or management thereof; provided, however, that the indemnity set forth in this
Section 6.18 will not apply to Claims caused by the gross negligence or willful
misconduct of Lender or any of Lender’s Related Parties, as determined by a
court of competent jurisdiction in final and nonappealable judgment.
 
6.19. FINAL AGREEMENT.  THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
Remainder of page intentionally left blank.
Signature page to follow.
 
 
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IN WITNESS WHEREOF, Grantors and Lender have executed this Security Agreement as
of the date first above written.
 
BORROWER:
 
ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD.
 

 
 
By:
_____________________________________________  

 
 
Name:

 
 
Title:

 
GRANTORS:
 
FIN BRANDING GROUP, LLC
 

 
 
By:
_____________________________________________  

 
 
Name:

 
 
Title:

 
HARDWIRE INTERACTIVE ACQUISITION COMPANY
 
 
By:
_____________________________________________  

 
 
Name:

 
 
Title:

 
LENDER:
 
JGB (CAYMAN) CAMBRIDGE LTD.
 

 
 
By:
_____________________________________________  

 
 
Name:

 
 
Title:

 
 
 

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SCHEDULE 3.5
 
GRANTOR INFORMATION
 
1.  
Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief
Executive Office / Place of Business (or Residence if Grantor is a Natural
Person) and Organizational Identification Number of each Grantor:

 
Full Legal Name
Type of Organization
Jurisdiction of Organization
Chief Executive Office / Place
of Business (or Residence if Grantor is a Natural Person)
Organization I.D.#
 
         

 
2.  
Other Names (including any Trade-Name or Fictitious Business Name) under which
each Grantor has conducted business for the past five (5) years:

 
Full Legal Name
Trade Name or Fictitious Business Name
   

 
3.  
Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole
Place of Business (or Principal Residence if Grantor is a Natural Person) and
Corporate Structure within past five (5) years:

 
Full Legal Name
Trade Name or Fictitious Business Name
   

 
4.  
Financing Statements:

 
Name of Grantor
Filing Jurisdiction(s)
   

 
 
 

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SCHEDULE 3.6
 
PROPERTY LOCATIONS
 
1.  
Locations owned by Grantor

 
Name of Grantor
Location of Equipment, Inventory, and Fixtures
   

 
2.  
Locations leased by Grantor as lessee

 
Name of Grantor
Location of Equipment, Inventory, and Fixtures
   

 
3.  
Locations at which Inventory is held in a public warehouse or is otherwise held
by a bailee or on consignment

 
Name of Grantor
Location of Equipment, Inventory, and Fixtures
   

 
 
 

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SCHEDULE 3.10
 
COLLATERAL
 
1.  
Investment Related Property:

 
Pledged Shares
 
Grantor
Stock Issuer
Class of Stock
Certificated (Y/N)
Stock Certificate No.
Par Value
No. of Pledged Stock
% of Outstanding Stock of the Stock Issuer
               

 
Pledged Partnership Interests (Limited Liability Companies)
 
Grantor
Limited Liability Company
Certificated (Y/N)
Certificate No. (if any)
No. of Pledged Units
% of Outstanding LLC Interests of the Limited Liability Company
           

 
Pledged Partnership Interests (Partnerships)
 
Grantor
Partnership
Type of Partnership Interests (e.g., general or limited)
Certificated (Y/N)
Certificate No.
(if any)
% of Outstanding Partnership Interests of the Partnership
           

 
Securities Accounts
 
Grantor
Share of Securities Intermediary
Account Number
Account Name
       

 
Commodity Accounts
 
Grantor
Name of Commodities Intermediary
Account Number
Account Name
       

 
 
 

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2.  
Deposit Accounts:

 
Grantor
Name of Depositary Bank
Account Number
Account Name
       

 
3.  
Collateral Notes:

 
Grantor
Issuer
Original Principal Amount
Outstanding Principal Balance
Issue Date
Maturity Date
           

 
4.  
Collateral Note Security:

 
Name of Grantor
Collateral Notes Secured
Description of Collateral Note Security
     

 
5.  
Commercial Tort Claims:

 
Name of Grantor
Commercial Tort Claims
   

 
6.  
Material Agreements:

 
Name of Grantor
Material Agreements
   

 
7.  
Letters of Credit:

 
Name of Grantor
Description of Letters of Credit
   

 
 
 

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SCHEDULE 3.17
 
INTELLECTUAL PROPERTY
 
PATENTS AND PATENT LICENSES
 
1.  
Patents

 
Country
Patent No.
Issue Date
Inventor(s)
Title
         
Pending Patent Applications
Country
Serial No.
Filing Date
Inventor(s)
Title
         
Patent Applications in Preparation
Country
Docket No.
Expected
Filing Date
Inventor(s)
Title
         

 
2.  
Patent Licenses

 
Country or
Territory
Licensor
Licensee
Effective
Date
Expiration
Date
Subject
Matter
           

 
TRADEMARKS AND TRADEMARK LICENSES
 
 
3.  
Trademarks

 
Registered Trademarks
Country
Trademark
Registration No.
Registration Date
       
Pending Trademark Applications
Country
Trademark
Serial No.
Filing Date
       
Trademark Applications in Preparation
Country
Trademark
Docket No.
Expected
Filing Date
Products/
Services
         

 
 
 

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4.  
Trademark Licenses

 
Country or
Territory
Trademark
Licensor
Licensee
Effective
Date
Expiration
Date
           

 
COPYRIGHTS AND COPYRIGHT LICENSES
 
 
5.  
Copyrights/Mask Works

 
Registered Copyrights/Mask Works
Country
Registration No.
Registration Date
Author(s)
Title
         
Copyright/Mask Work Pending Registration Applications
Country
Serial No.
Filing Date
Author(s)
Title
         
Copyright/Mask Work Registration Applications in Preparation
Country
Docket No.
Expected
Filing Date
Author(s)
Title
         

 
6.  
Copyright/Mask Work Licenses

 
Country or Territory
Licensor
Licensee
Effective
Date
Expiration
Date
         

 
TRADE SECRETS AND TRADE SECRET LICENSES
 
 
7.  
Trade Secrets

 
Name of Grantor
Description of Trade Secrets
   

 
8.  
Trade Secret Licenses

 
Trade Secrets
Licensor
Licensee
Effective
Date
Expiration
Date
         

 
 

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