Exhibit 10.43

 

 

SECURITY AGREEMENT

 

MADE BY

 

WARREN RESOURCES, INC.

 

AND CERTAIN OF ITS SUBSIDIARIES

 

IN FAVOR OF

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

 

AS ADMINISTRATIVE AGENT

 

DATED AS OF MAY 22, 2015

 

 

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TABLE OF CONTENTS

 

ARTICLE I Definitions

1

 

 

 

Section 1.01

Definitions

1

Section 1.02

Other Definitional Provisions; References

4

 

 

ARTICLE II Grant of Security Interest

4

 

 

 

Section 2.01

Grant of Security Interest

4

Section 2.02

[Reserved]

6

Section 2.03

Grantors Remain Liable under Accounts, Chattel Paper and Payment Intangibles

6

 

 

ARTICLE III Acknowledgments, Waivers and Consents

6

 

 

 

Section 3.01

Acknowledgments, Waivers and Consents

6

Section 3.02

No Subrogation, Contribution or Reimbursement

9

 

 

ARTICLE IV Representations and Warranties

9

 

 

 

Section 4.01

Representations in Credit Agreement

9

Section 4.02

Perfected Liens

10

Section 4.03

Legal Name, Organizational Status, Chief Executive Office

10

Section 4.04

Prior Names, Addresses, Locations of Tangible Assets

10

Section 4.05

[Reserved]

10

Section 4.06

Instruments and Chattel Paper

10

Section 4.07

Accounts

10

Section 4.08

Governmental Obligors

10

Section 4.09

Commercial Tort Claims

11

Section 4.10

Intellectual Property

11

 

 

ARTICLE V Covenants

11

 

 

 

Section 5.01

Covenants in Credit Agreement

11

Section 5.02

Maintenance of Perfected Security Interest; Further Documentation

11

Section 5.03

Maintenance of Records

12

Section 5.04

Further Identification of Collateral

13

Section 5.05

[Reserved]

13

Section 5.06

Notices

13

Section 5.07

Changes in Name; Location, etc

13

Section 5.08

Instruments and Tangible Chattel Paper

13

Section 5.09

Commercial Tort Claims

13

Section 5.10

Intellectual Property

14

 

 

ARTICLE VI Remedial Provisions

15

 

 

 

Section 6.01

[Reserved]

15

Section 6.02

Collections on Accounts, Etc.

15

Section 6.03

Proceeds

15

Section 6.04

Remedies

16

Section 6.05

[Reserved]

17

Section 6.06

Deficiency

17

 

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Section 6.07

Non-Judicial Enforcement

17

Section 6.08

IP Licenses

18

 

 

 

ARTICLE VII The Administrative Agent

18

 

 

 

Section 7.01

Administrative Agent’s Appointment as Attorney-in-Fact, Etc.

18

Section 7.02

Duty of Administrative Agent

20

Section 7.03

Financing Statements

20

Section 7.04

Authority of Administrative Agent

21

 

 

 

ARTICLE VIII Subordination of Indebtedness

21

 

 

 

Section 8.01

Subordination of All Grantor Claims

21

Section 8.02

Claims in Bankruptcy

21

Section 8.03

Payments Held in Trust

22

Section 8.04

Liens Subordinate

22

Section 8.05

Notation of Records

22

 

 

 

ARTICLE IX Miscellaneous

22

 

 

 

Section 9.01

Waiver

22

Section 9.02

Notices

22

Section 9.03

Payment of Expenses, Indemnities, Etc.

23

Section 9.04

Amendments in Writing

23

Section 9.05

Successors and Assigns

23

Section 9.06

Invalidity

23

Section 9.07

Counterparts

23

Section 9.08

Survival

23

Section 9.09

Captions

24

Section 9.10

No Oral Agreements

24

Section 9.11

Governing Law; Submission to Jurisdiction

24

Section 9.12

Waiver of Jury Trial

24

Section 9.13

Acknowledgments

25

Section 9.14

Additional Grantors

25

Section 9.15

Set-Off

25

Section 9.16

Releases

26

Section 9.17

Intercreditor Agreements

27

Section 9.18

Reinstatement

27

Section 9.19

Acceptance

27

 

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SCHEDULES:

 

1.                                      Notice Addresses of Grantors

2.                                      [Reserved]

3.                                      Filings and Other Actions Required to
Perfect Security Interests

4.                                      Legal Name, Location of Jurisdiction of
Organization, Organizational Identification Number, Taxpayer Identification
Number and Chief Executive Office

5.                                      Prior Names, Prior Chief Executive
Office, Location of Tangible Assets

6.                                      Locations of Inventory, Equipment and
Other Assets Constituting Collateral and Books and Records Pertaining to the
Collateral

7.                                      Commercial Tort Claims

8.                                      Deposit and Securities Accounts

9.                                      Intellectual Property

 

ANNEX:

 

1.                                      Form of Assumption Agreement

2.                                      Form of Intellectual Property Security
Agreement

 

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This SECURITY AGREEMENT, dated as of May 22, 2015, is made by WARREN
RESOURCES, INC., a Maryland (the “Borrower”), and each of the other signatories
party hereto as of the date hereof other than the Administrative Agent (together
with any other entity that becomes a party hereto from time to time after the
date hereof to Section 9.14 below, the “Grantors”) in favor of Wilmington Trust,
National Association, as administrative agent for the Secured Parties (as
defined below) (in such capacity, together with its successors in such capacity,
the “Administrative Agent”).

 

R E C I T A L S

 

A.            WHEREAS, Borrower is party to that certain Credit Agreement (as
amended, restated, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”) dated as of even date herewith among the
Borrower, the financial institutions or other entities from time to time party
thereto (the “Lenders”) and the Administrative Agent.

 

B.            WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each Grantor;

 

C.            WHEREAS, it is a condition precedent to the obligation of each of
the Initial Lenders (as defined in the Credit Agreement) to extend credit that
each Grantor shall have executed and delivered this Agreement to the
Administrative Agent for the ratable benefit of the Lenders.

 

D.            NOW, THEREFORE, in consideration of the premises herein and to
induce the Administrative Agent and the Initial Lenders to enter into the Credit
Agreement, to induce the Initial Lenders to extend credit, each Grantor hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:

 

ARTICLE I
Definitions

 

Section 1.01          Definitions.

 

(a)           As used in this Agreement, each term defined above shall have the
meaning indicated above. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement, and the following terms, as well as all uncapitalized terms
which are defined in the UCC on the date hereof, are used herein as so defined:
Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents,
Electronic Chattel Paper, Equipment, Fixtures, General Intangibles,
Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights,
Payment Intangibles, Proceeds, Supporting Obligations, and Tangible Chattel
Paper.

 

(b)           The following terms shall have the following meanings:

 

“Account Debtor” shall mean a Person (other than any Grantor) obligated on an
Account, Chattel Paper, or General Intangible.

 

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“Administrative Agent” shall have the meaning assigned to such term in the
preamble hereto.

 

“Agreement” shall mean this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

 

“Applicable IP Office” means the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or outside
the United States.

 

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

 

“Collateral” shall have the meaning assigned to such term in Section 2.01.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.).

 

“Contract Rights” means all rights, title and interests in and to all
“contracts,” as such term is defined in the UCC of any applicable jurisdiction,
now owned or hereafter acquired by any Grantor, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Grantor may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to copyrights and
all mask work, database and design rights, whether or not registered or
published, all registrations and recordations thereof and all applications in
connection therewith.

 

“Credit Agreement” shall have the meaning assigned such term in the recitals
hereto.

 

“Excluded Property” means: (a) rights of any Grantor in any general intangible
to the extent such intangible by its terms or by the terms of any related
agreement with a Person other than a Subsidiary or by the terms of any
applicable law under which it arises (A) validly prohibits the creation of a
security interest therein by such Grantor or the type otherwise created hereby,
(B) validly requires the consent of any third party to the creation of a
security interest of the type otherwise created hereby and said third party
refuses to provide such consent, or (C) validly gives rise to any right of
termination or default remedy by reason of the creation of a security interest
therein of the type otherwise created hereby; (b) rights of any Grantor in any
property in respect of which the terms of any related agreement with a Person
other than a Subsidiary or by the terms of any applicable law (A) validly
prohibits the creation of a security interest therein by such Grantor of the
type otherwise created hereby, (B) validly requires the consent of any third
party to the creation of a security interest therein of the type otherwise
created hereby and said third party refuses to provide such consent, or
(C) validly gives rise to any right of termination or default remedy by reason
of the creation of a security interest therein

 

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of the type otherwise created hereby; and (c) rights of any Grantor in Equity
Interests in Unrestricted Subsidiaries.(1)

 

“Excluded Swap Obligation” means, with respect to any Grantor, any guarantee of
any Swap Obligations under a Secured Swap Agreement if, and only to the extent
that and for so long as, all or a portion of the guarantee of such Grantor of,
or the grant by such Grantor of a security interest to secure, such Swap
Obligation under a Secured Swap Agreement (or any guarantee thereof) is or
becomes illegal under the Commodity Exchange Act or any rule, regulation or
order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue of such Grantor’s failure for
any reason to constitute an “eligible contract participant” as defined in the
Commodity Exchange Act at the time the guarantee of such Grantor or the grant of
such security interest becomes effective with respect to such Swap Obligation
under a Secured Swap Agreement. If a Swap Obligation under a Secured Swap
Agreement arises under a master agreement governing more than one swap, such
exclusion shall apply only to the portion of such Swap Obligation under a
Secured Swap Agreement that is attributable to swaps for which such guarantee or
security interest is or becomes illegal.

 

“Grantors” shall have the meanings assigned such terms in the preamble hereto.

 

“Intellectual Property” means all rights, title and interests in or relating to
intellectual property and industrial property arising under any Requirement of
Law and all IP Ancillary Rights relating thereto, including all Copyrights,
Patents, Trademarks and IP Licenses.

 

“Investment Property” means the collective reference to all “investment
property” as such term is defined in Section 9-102(a)(49) of the UCC, including,
for avoidance doubt, all certificated securities, uncertificated securities,
security entitlements, securities accounts, commodity contracts or commodity
accounts.

 

“IP Ancillary Rights” means, with respect to any Intellectual Property, as
applicable, all foreign counterparts to, and all divisionals, reversions,
continuations, continuations-in-part, reissues, reexaminations, renewals and
extensions of, such Intellectual Property and all income, royalties, proceeds
and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property,
including all rights to sue or recover at law or in equity for any past, present
or future infringement, misappropriation, dilution, violation or other
impairment thereof, and, in each case, all rights to obtain any other IP
Ancillary Right.

 

“IP License” means all Contractual Obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right, title and interest in or
relating to any Intellectual Property.

 

“Lenders” shall have the meaning assigned to such term in the recitals hereto.

 

“Material Intellectual Property” means Intellectual Property that is owned by or
licensed to a Grantor and material to the conduct of any Grantor’s business.

 

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(1)  NTD: The definition of “Excluded Property” is consistent with the
definition in the existing mortgages.

 

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“Secured Parties” shall mean each Lender, the Administrative Agent, each
Eligible Secured Swap Counterparty and their respective successors and assigns.

 

“Secured Swap Agreement” shall mean any Swap Agreement between the Borrower and
any Eligible Secured Swap Counterparty.

 

“Security Termination” means such time as when each of the following shall have
occurred: (i) the Obligations have been indefeasibly paid in full in cash,
(ii) the Loans and all commitments under the Credit Agreement have been
terminated and (iii) all Secured Swap Agreements have been terminated (other
than Secured Swap Agreements with respect to which other arrangements
satisfactory to the Eligible Secured Swap Counterparty and the Borrower have
been made). For purposes of clarification, “Security Termination” shall have
occurred for purposes of this Agreement if the four events provided in clauses
(i)-(iii) above have occurred, and the occurrence of “Security Termination”
shall not be affected by inchoate indemnity obligations under the Financing
Documents that survive the termination of any such Financing Document.

 

“Swap Obligation” means, with respect to any Grantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“Trademark” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers and, in each case, all goodwill associated therewith, all
registrations and recordations thereof and all applications in connection
therewith.

 

“UCC” means the Uniform Commercial Code of the State of New York.

 

Section 1.02          Other Definitional Provisions; References. The meanings
given to terms defined herein shall be equally applicable to both the singular
and plural forms of such terms. The gender of all words shall include the
masculine, feminine, and neuter, as appropriate.  The words “herein,” “hereof,”
“hereunder” and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection. Any reference herein to a Section shall be deemed to refer to the
applicable Section of this Agreement unless otherwise stated herein.  Any
reference herein to an exhibit, schedule or annex shall be deemed to refer to
the applicable exhibit, schedule or annex attached hereto unless otherwise
stated herein.  Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor’s Collateral or the relevant part thereof. The rules of construction set
forth in Sections 1.2 and 1.3 in the Credit Agreement shall apply to this
Agreement as if specifically incorporated herein mutatis mutandis.

 

ARTICLE II
Grant of Security Interest

 

Section 2.01          Grant of Security Interest. Each Grantor hereby pledges,
assigns and transfers to the Administrative Agent, and grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in all of the following property now owned or at

 

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any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest and whether
now existing or hereafter coming into existence (collectively, the
“Collateral”), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations:

 

(1)           all Accounts, including all Receivables;

 

(2)           all cash and cash equivalents;

 

(3)           all Chattel Paper (whether Tangible Chattel Paper or Electronic
Chattel Paper);

 

(4)           all Commercial Tort Claims set forth on Schedule 7;

 

(5)           all Contract Rights;

 

(6)           all Deposit Accounts;

 

(7)           all Documents;

 

(8)           all General Intangibles (including, without limitation, rights in
and under any Swap Agreements);

 

(9)           all Goods (including, without limitation, all Inventory and all
Equipment);

 

(10)         all Instruments;

 

(11)         all Insurance;

 

(12)         all Intellectual Property;

 

(13)         all Investment Property, including all Securities Accounts and
Commodity Accounts;

 

(14)         all Letter-of-Credit Rights (whether or not the letter of credit is
evidenced by a writing);

 

(15)         all Money;

 

(16)         all Supporting Obligations;

 

(17)         all Vehicles;

 

(18)         all books and records pertaining to the Collateral;

 

(19)         all other personal property of any Grantor, whether tangible or
intangible and wherever located;

 

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(20)                          all other property of any Grantor held by the
Administrative Agent or any other Secured Party, including all property of every
description, in the possession or custody of or in transit to the Administrative
Agent or such Secured Party for any purpose, including safekeeping, collection
or pledge, for the account of such Grantor or as to which such Grantor may have
any right or power; and

 

(21)                          to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral security,
guarantees and other Supporting Obligations given with respect to any of the
foregoing.

 

Notwithstanding the foregoing, (x) this Section 2.01 does not grant a security
interest in any Excluded Property and (y) such property under clause (x) shall
not be included as “Collateral” for purposes of this Agreement.

 

Section 2.02                             [Reserved].

 

Section 2.03                             Grantors Remain Liable under Accounts,
Chattel Paper and Payment Intangibles.  Anything herein to the contrary
notwithstanding, each Grantor shall remain liable under each of the Accounts,
Chattel Paper and Payment Intangibles to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account, Chattel Paper
or Payment Intangible.  Neither the Administrative Agent nor any other Secured
Party shall have any obligation or liability under any Account, Chattel Paper or
Payment Intangible (or any agreement giving rise thereto) by reason of or
arising out of this Agreement or the receipt by the Administrative Agent or any
such other Secured Party of any payment relating to such Account, Chattel Paper
or Payment Intangible pursuant hereto, nor shall the Administrative Agent or any
other Secured Party be obligated in any manner to perform any of the obligations
of any Grantor under or pursuant to any Account, Chattel Paper or Payment
Intangible (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account, Chattel
Paper or Payment Intangible (or any agreement giving rise thereto), to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.

 

ARTICLE III
Acknowledgments, Waivers and Consents

 

Section 3.01                             Acknowledgments, Waivers and Consents.

 

(a)                                 Each Grantor acknowledges and agrees that
the obligations undertaken by it under this Agreement may involve the guarantee
and the provision of collateral security for the obligations of Persons other
than such Grantor and that such Grantor’s guarantee and provision of collateral
security for the Obligations are absolute, irrevocable and unconditional under
any and all circumstances.  In full recognition and furtherance of the
foregoing, each Grantor understands and agrees, to the fullest extent permitted
under applicable law and except as may otherwise be expressly and specifically
provided in the Credit Agreement or any other Financing Document, that each
Grantor shall remain obligated hereunder (including, without limitation,

 

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with respect to any guarantee made by such Grantor hereby and the collateral
security provided by such Grantor herein) and the enforceability and
effectiveness of this Agreement and the liability of such Grantor, and the
rights, remedies, powers and privileges of the Administrative Agent and the
other Secured Parties under this Agreement, the other Financing Documents and
the Secured Swap Agreements shall not be affected, limited, reduced, discharged
or terminated in any way:

 

(i)                                     notwithstanding that, without any
reservation of rights against any Grantor and without notice to or further
assent by any Grantor, (A) any demand for payment of any of the Obligations made
by the Administrative Agent or any other Secured Party may be rescinded by the
Administrative Agent at the direction of the Lead Lenders or such other Secured
Party and any of the Obligations continued; (B) the Obligations, the liability
of any other Person upon or for any part thereof or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by, or any indulgence or
forbearance in respect thereof granted by, the Administrative Agent at the
direction of the Lead Lenders or any other Secured Party; (C) the Credit
Agreement, the other Financing Documents, any Secured Swap Agreement and any
other documents executed and delivered in connection therewith may be amended,
restated, amended and restated, modified, supplemented or terminated, in whole
or in part, in accordance with the terms thereof, as the Administrative Agent
(or the Lead Lenders, or all Lenders, as the case may be) and the Eligible
Secured Swap Counterpartys, as applicable, and the Borrower, as applicable, may
deem advisable from time to time; (D) the Borrower, any other Grantor or any
other Person may from time to time accept or enter into new or additional
agreements, security documents, guarantees or other instruments in addition to,
in exchange for or relative to, any Financing Document or Secured Swap
Agreement, all or any part of the Obligations or any Collateral now or in the
future serving as security for the Obligations, in each case pursuant to the
terms and conditions thereof; (E) any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any other Secured Party
for the payment of the Obligations may be sold, exchanged, waived, surrendered
or released; and (F) any other event shall occur which constitutes a defense or
release of sureties generally; and

 

(ii)                                  without regard to, and each Grantor hereby
expressly waives to the fullest extent permitted by law any defense now or in
the future arising by reason of, (A) the illegality, invalidity or
unenforceability against any Grantor of the Credit Agreement, any other
Financing Document, any Secured Swap Agreement,  any of the Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or any
other Secured Party, (B) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by any other Grantor or any other Person against the Administrative
Agent or any other Secured Party, (C) the insolvency, bankruptcy arrangement,
reorganization, adjustment, composition, liquidation, disability, dissolution or
lack of power of any other Grantor or any other Person at any time liable for
the payment of all or part of the Obligations or the failure of the
Administrative Agent or any other Secured Party to file or enforce a claim in
bankruptcy or other proceeding with respect to any Person; or any sale, lease or
transfer of any or all of the assets of any Grantor, or any changes in the
shareholders of any Grantor; (D) the fact that any Collateral or Lien
contemplated or intended to be given, created or granted as security for the
repayment of the Obligations shall not be properly perfected or created, or
shall prove to be

 

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unenforceable or subordinate to any other Lien, it being recognized and agreed
by each of the Grantors that it is not entering into this Agreement in reliance
on, or in contemplation of the benefits of, the validity, enforceability,
collectability or value of any of the Collateral for the Obligations; (E) any
failure of the Administrative Agent or any other Secured Party to marshal assets
in favor of any Grantor or any other Person, to exhaust any Collateral for all
or any part of the Obligations, to pursue or exhaust any right, remedy, power or
privilege it may have against any Grantor or any other Person or to take any
action whatsoever to mitigate or reduce any Grantor’s liability under this
Agreement, any other Financing Document, or any Secured Swap Agreement; (F) any
law which provides that the obligation of a surety or guarantor must neither be
larger in amount nor in other respects more burdensome than that of the
principal or which reduces a surety’s or guarantor’s obligation in proportion to
the principal obligation; (G) the possibility that the Obligations may at any
time and from time to time exceed the aggregate liability of such Grantor under
this Agreement; or (H) any other circumstance or act whatsoever, including any
action or omission of the type described in this Section 3.01 (with or without
notice to or knowledge of any Grantor), which constitutes, or might be construed
to constitute, an equitable or legal discharge or defense of the Borrower for
the Obligations, or of such Grantor under the guarantee contained in the
Guaranty or with respect to the collateral security provided by such Grantor
herein, or which might be available to a surety or guarantor, in bankruptcy or
in any other instance.

 

(b)                                 Each Grantor hereby waives to the extent
permitted by law:  (i) except as expressly provided otherwise in any Financing
Document, all notices to such Grantor, or to any other Person, including but not
limited to, notices of the acceptance of this Agreement, the guarantee contained
in the Guaranty or the provision of collateral security provided herein, or the
creation, renewal, extension, modification, accrual of any Obligations, or
notice of or proof of reliance by the Administrative Agent or any other Secured
Party upon the guarantee contained in the Guaranty or upon the collateral
security provided herein, or of default in the payment or performance of any of
the Obligations owed to the Administrative Agent or any other Secured Party and
enforcement of any right or remedy with respect thereto; or notice of any other
matters relating thereto; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in the Guaranty and
the collateral security provided herein and no notice of creation of the
Obligations already or hereafter contracted by the Borrower need be given to any
Grantor; and all dealings between the Borrower and any of the Grantors, on the
one hand, and the Administrative Agent and the other Secured Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in the Guaranty and on the
collateral security provided herein; (ii) diligence and demand of payment,
presentment, protest, dishonor and notice of dishonor; (iii) all rights of
revocation with respect to the Obligations, the guarantee contained in the
Guaranty and the provision of collateral security herein; and (iv) all
principles or provisions of law which conflict with the terms of this Agreement
and which can, as a matter of law, be waived.

 

(c)                                  When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Grantor, the
Administrative Agent or any other Secured Party may, but shall be under no
obligation to, join or make a similar demand on or otherwise pursue or exhaust
such rights and remedies as it may have against the Borrower, any other Grantor
or any other Person or against any collateral security or guarantee for the
Obligations or any right of

 

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offset with respect thereto, and any failure by the Administrative Agent or any
other Secured Party to make any such demand, to pursue such other rights or
remedies or to collect any payments from the Borrower, any other Grantor or any
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any Grantor
or any other Person or any such collateral security, guarantee or right of
offset, shall not relieve any Grantor of any obligation or liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative Agent or any other
Secured Party against any Grantor.  For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.  Neither the
Administrative Agent nor any other Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Obligations or for the guarantee contained in the Guaranty or any
property subject thereto.

 

Section 3.02                             No Subrogation, Contribution or
Reimbursement. Notwithstanding any payment made by any Grantor hereunder or any
set-off or application of funds of any Grantor by the Administrative Agent or
any other Secured Party, no Grantor shall be entitled to be subrogated to any of
the rights of the Administrative Agent or any other Secured Party against the
Borrower or any other Grantor or any collateral security or guarantee or right
of offset held by the Administrative Agent or any other Secured Party for the
payment of the Obligations, nor shall any Grantor seek or be entitled to seek
any indemnity, exoneration, participation, contribution or reimbursement from
the Borrower or any other Grantor in respect of payments made by such Grantor
hereunder until Security Termination, and each Grantor hereby expressly waives,
releases, and agrees not to exercise any such rights of subrogation,
reimbursement, indemnity and contribution until Security Termination.  Each
Grantor further agrees that to the extent that such waiver and release set forth
herein is found by a court of competent jurisdiction to be void or voidable for
any reason, any rights of subrogation, reimbursement, indemnity and contribution
such Grantor may have against the Borrower, any other Grantor or against any
collateral or security or guarantee or right of offset held by the
Administrative Agent or any other Secured Party shall be junior and subordinate
to any rights the Administrative Agent and the other Secured Parties may have
against the Borrower and such Grantor and to all right, title and interest the
Administrative Agent and the other Secured Parties may have in any collateral or
security or guarantee or right of offset.  Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent, for the benefit of
the Secured Parties, may use, sell or dispose of any item of Collateral or
security as it sees fit, subject to Section 6.04, without regard to any
subrogation rights any Grantor may have, and upon any disposition or sale, any
rights of subrogation any Grantor may have shall terminate.

 

ARTICLE IV
Representations and Warranties

 

To induce the Lenders to enter into the Credit Agreement and to extend credit,
each Grantor hereby represents and warrants to the Administrative Agent and each
Secured Party that:

 

Section 4.01                             Representations in Credit Agreement. In
the case of each Grantor, the representations and warranties set forth in
Article 3 of the Credit Agreement as they relate to such Grantor or to the
Financing Documents to which such Grantor is a party are true and correct in all
material respects (or, to the extent such representations and warranties
specifically relate to

 

9

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an earlier date, on and as of such earlier date); provided that each reference
in each such representation and warranty to the Borrower’s knowledge shall, for
the purposes of this Section 4.01, be deemed to be a reference to such Grantor’s
knowledge.

 

Section 4.02                             Perfected Liens. The security interests
granted pursuant to this Agreement, upon filing of a UCC-1 financing statement
in the appropriate filing office listed on Schedule 3, will constitute valid
perfected first priority security interests (subject to Permitted Encumbrances)
in all of the Collateral which may be perfected by filing such financing
statement in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, as collateral security for such Grantor’s obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor.

 

Section 4.03                             Legal Name, Organizational Status,
Chief Executive Office. On the date hereof, the correct legal name of such
Grantor, such Grantor’s jurisdiction of organization, organizational number,
taxpayer identification number and the location of such Grantor’s chief
executive office or sole place of business are specified on Schedule 4.

 

Section 4.04                             Prior Names, Addresses, Locations of
Tangible Assets. Schedule 5 correctly sets forth (a) all names and trade names
that such Grantor has used in the last five years and (b) the chief executive
office of such Grantor over the last five years (if different from that which is
set forth in Section 4.03 above). As of the date hereof, Schedule 6 correctly
sets forth all of the locations where the Grantors hold inventory, equipment and
other assets constituting Collateral (other than inventory or equipment in
transit or out for repair) with a value in excess of $1,000,000 in the aggregate
at any location and the locations of the books and records concerning the
Collateral.

 

Section 4.05                             [Reserved].

 

Section 4.06                             Instruments and Chattel Paper. Such
Grantor has delivered to the Administrative Agent all Collateral constituting
Instruments and Chattel Paper having the outstanding or stated amount of greater
than $1,000,000.  No Collateral constituting Chattel Paper or Instruments
contains any statement therein to the effect that such Collateral has been
assigned to an identified party other than the Administrative Agent, and the
grant of a security interest in such Collateral in favor of the Administrative
Agent hereunder does not violate the rights of any other Person as a secured
party.

 

Section 4.07                             Accounts. The amount represented by
such Grantor to the Administrative Agent and the Lenders from time to time as
owing by each Account Debtor or by all Account Debtors in respect of the
Accounts, Chattel Paper and Payment Intangibles will at such time be the
materially correct amount actually owing by such Account Debtor or Account
Debtors thereunder.  The place where each Grantor keeps its records concerning
the Accounts, Chattel Paper and Payment Intangibles is the address set forth on
Schedule 6.

 

Section 4.08                             Governmental Obligors. None of the
Account Debtors on such Grantor’s Accounts, Chattel Paper or Payment Intangibles
is a Governmental Authority.

 

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Section 4.09                             Commercial Tort Claims. On the Closing
Date, except to the extent listed on Schedule 7, no Grantor has knowledge of
rights in any Commercial Tort Claim with potential value in excess of
$1,500,000.

 

Section 4.10                             Intellectual Property.

 

(a)                                 Schedule 9 sets forth as of the Closing Date
a true and complete list of all Material Intellectual Property which is
registered with the U.S. Patent and Trademark Office or the U.S. Copyright
Office or is the subject of an application for registration, separately
identifying that owned and licensed to such Grantor and including (1) the owner,
(2) the title, (3) the jurisdiction in which such item has been registered or
otherwise arises or in which an application for registration has been filed,
(4) as applicable, the registration or application number and registration or
application date and (5) any IP Licenses or other rights (including franchises)
granted by the Grantor with respect thereto.

 

(b)                                 On the Closing Date, all Material
Intellectual Property owned by such Grantor is valid, in full force and effect,
subsisting, unexpired and enforceable, and no Material Intellectual Property has
been abandoned. No breach or default of any material IP License shall be caused
by any of the following, and none of the following shall limit or impair the
ownership, use, validity or enforceability of, or any rights of such Grantor in,
any Material Intellectual Property:

 

(i)                                     the consummation of the transactions
contemplated by any Financing Document or (ii) any holding, decision, judgment
or order rendered by any Governmental Authority.  There are no pending (or, to
the knowledge of such Grantor, threatened) actions, investigations, suits,
proceedings, audits, claims, demands, orders or disputes challenging the
ownership, use, validity, enforceability of, or such Grantor’s rights in, any
Material Intellectual Property of such Grantor. To such Grantor’s knowledge, no
Person has been or is infringing, misappropriating, diluting, violating or
otherwise impairing any Material Intellectual Property of such Grantor.  Such
Grantor, and to such Grantor’s knowledge each other party thereto, is not in
material breach or default of any material IP License.

 

ARTICLE V
Covenants

 

Each Grantor covenants and agrees that, from and after the date of this
Agreement until Security Termination:

 

Section 5.01                             Covenants in Credit Agreement. In the
case of each Grantor, such Grantor shall take, or shall refrain from taking, as
the case may be, each action that is necessary to be taken or not taken, as the
case may be, so that no Default or Event of Default is caused by the failure to
take such action or to refrain from taking such action by such Grantor or any of
its Subsidiaries.

 

Section 5.02                             Maintenance of Perfected Security
Interest; Further Documentation.

 

(a)                                 Such Grantor shall maintain the security
interest created by this Agreement as a perfected security interest (subject
only to Permitted Encumbrances) and shall defend such security interest against
the claims and demands of all Persons whomsoever.

 

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(b)                                 At any time and from time to time, and at
the sole expense of such Grantor, such Grantor will promptly and duly give,
execute, deliver, indorse, file or record any and all financing statements,
continuation statements, amendments, notices (including, without limitation,
notifications to financial institutions and any other Person), contracts,
agreements, assignments, certificates, stock powers or other instruments, obtain
any and all governmental approvals and consents and take or cause to be taken
any and all steps or acts that may be necessary or as the Administrative Agent
or any Secured Party may reasonably request to create, perfect, establish the
priority of, or to preserve the validity, perfection or priority of, the Liens
granted by this Agreement or to enable the Administrative Agent or any other
Secured Party to enforce its rights, remedies, powers and privileges under this
Agreement with respect to such Liens or to otherwise obtain or preserve the full
benefits of this Agreement and the rights, powers and privileges herein granted.

 

(c)                                  Without limiting the obligations of the
Grantors under Section 5.02(b):  (i) upon the reasonable request of the
Administrative Agent at the direction of the Lead Lenders or any other Secured
Party, such Grantor shall take or cause to be taken all actions (other than any
actions required to be taken by the Administrative Agent at the direction of the
Lead Lenders or any Lender) reasonably requested by the Administrative Agent to
cause the Administrative Agent to (A) have “control” (within the meaning of
Sections 9-104, 9-105, 9-106, and 9-107 of the UCC) over any Collateral
constituting Deposit Accounts, Electronic Chattel Paper, Investment Property, or
Letter-of-Credit Rights, including, without limitation, executing and delivering
any agreements, in form and substance satisfactory to the Lead Lenders, with
securities intermediaries, Borrowers or other Persons in order to establish
“control”, and each Grantor shall promptly notify the Administrative Agent and
the other Secured Parties of such Grantor’s acquisition of any such Collateral,
and (B) be a “protected purchaser” (as defined in Section 8-303 of the UCC);
(ii) with respect to Collateral other than certificated securities and Goods
covered by a document in the possession of a Person other than such Grantor or
the Administrative Agent, such Grantor shall obtain written acknowledgment that
such Person holds possession for the Administrative Agent’s benefit; and
(iii) with respect to any Collateral constituting Goods that are in the
possession of a bailee, such Grantor shall provide prompt notice to the
Administrative Agent of any such Collateral then in the possession of such
bailee, and such Grantor shall take or cause to be taken all actions (other than
any actions required to be taken by the Administrative Agent or any other
Secured Party) necessary or reasonably requested by the Administrative Agent to
cause the Administrative Agent to have a perfected security interest in such
Collateral under applicable law.

 

(d)                                 This Section 5.02 and the obligations
imposed on each Grantor by this Section 5.02 shall be interpreted as broadly as
possible in favor of the Administrative Agent and the other Secured Parties in
order to effectuate the purpose and intent of this Agreement.

 

Section 5.03                             Maintenance of Records.  Such Grantor
will keep and maintain, at its own cost and expense records of the Collateral in
accordance with sound and prudent business practices. For the Administrative
Agent’s and the other Secured Parties’ further security, the Administrative
Agent, for the ratable benefit of the Secured Parties, shall have a security
interest in all of such Grantor’s books and records pertaining to the
Collateral, and such Grantor shall allow inspection of any such books and
records by the Administrative Agent, any Lender or by their representatives
during normal business hours at the reasonable request of the

 

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Administrative Agent or any Lender and shall provide such clerical and other
assistance as may be reasonably requested with regard thereto.

 

Section 5.04                             Further Identification of Collateral. 
Such Grantor will furnish to the Administrative Agent and the Secured Parties
from time to time, at such Grantor’s sole cost and expense, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.

 

Section 5.05                             [Reserved].

 

Section 5.06                             Notices. Each Grantor will advise the
Administrative Agent and the Lenders promptly, in reasonable detail, of:

 

(a)                                 any Lien (other than security interests
created hereby or Permitted Encumbrances) on any of the Collateral which could
adversely affect the ability of the Administrative Agent to exercise any of its
remedies; or

 

(b)                                 the occurrence of any other event which
could reasonably be expected to have a Material Adverse Effect on the aggregate
value of the Collateral or on the security interests created hereby.

 

Section 5.07                             Changes in Name; Location, etc.  Except
upon ten (10) days’ prior written notice to the Administrative Agent and
delivery to the Administrative Agent of all additional financing statements and
other documents reasonably requested in writing by the Administrative Agent or
the Required Lenders to maintain the validity, perfection and priority of the
security interests provided for herein, such Grantor will not:

 

(a)                                 change its jurisdiction of organization or
the location of its chief executive office; or.

 

(b)                                 change its name, identity or corporate
structure to such an extent that would render any financing statement filed in
connection with this Agreement “seriously misleading” (as such term in used in
Section 9-506(b) of the UCC).

 

Section 5.08                             Instruments and Tangible Chattel Paper.
If any amount payable under or in connection with any of the Collateral shall be
or become evidenced by any Instrument or Tangible Chattel Paper in the
outstanding or stated amount of greater than $1,000,000, such Instrument or
Tangible Chattel Paper shall be promptly, but in any event within twenty (20)
days, delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Lead Lenders, to be held as Collateral pursuant to this
Agreement.

 

Section 5.09                             Commercial Tort Claims. If such Grantor
shall at any time hold or acquire a Commercial Tort Claim that satisfies the
requirements of the following sentence, such Grantor shall, within thirty (30)
days after such Commercial Tort Claim satisfies such requirements, notify the
Administrative Agent and the other Secured Parties in a writing signed by such
Grantor containing a brief description thereof, and granting to the
Administrative Agent in such writing (for the benefit of the Secured Parties) a
security interest therein and in the Proceeds

 

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thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to the Lead Lenders.  The provisions of the preceding
sentence shall apply only to a Commercial Tort Claim that satisfies the
following requirements:  (i) the monetary value claimed by or payable to the
relevant Grantor in connection with such Commercial Tort Claim shall exceed
$1,500,000, and (ii) either (A) such Grantor shall have filed a law suit or
counterclaim or otherwise commenced legal proceedings (including, without
limitation, arbitration proceedings) against the Person against whom such
Commercial Tort Claim is made, or (B) such Grantor and the Person against whom
such Commercial Tort Claim is asserted shall have entered into a settlement
agreement with respect to such Commercial Tort Claim. In addition, to the extent
that the existence of any Commercial Tort Claim held or acquired by any Grantor
is disclosed by such Grantor in any public filing with the Securities Exchange
Commission or any successor thereto or analogous Governmental Authority, or to
the extent that the existence of any such Commercial Tort Claim is disclosed in
any press release issued by any Grantor, then, upon the request of the
Administrative Agent or the Lead Lenders, the relevant Grantor shall, within
thirty (30) days after such request is made, transmit to the Administrative
Agent and the other Secured Parties a writing signed by such Grantor containing
a brief description of such Commercial Tort Claim and granting to the
Administrative Agent in such writing (for the benefit of the Secured Parties) a
security interest therein and in the Proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Lead Lenders.

 

Section 5.10                             Intellectual Property.

 

(a)                                 Within thirty (30) days after any change to
Schedule 9 for such Grantor, such Grantor shall provide Administrative Agent and
the Lead Lenders notification thereof and the short-form intellectual property
agreements and assignments as described in this Section 5.10 and any other
documents that Administrative Agent reasonably requests with respect thereto.

 

(b)                                 Such Grantor shall (and shall cause all its
licensees to) (i) (1) continue to use each Trademark included in the Material
Intellectual Property in order to maintain such Trademark in full force and
effect with respect to each class of goods for which such Trademark is currently
used, free from any claim of abandonment for non-use, (2) maintain at least the
same standards of quality of products and services offered under such Trademark
as are currently maintained, (3) use such Trademark with the appropriate notice
of registration and all other notices and legends required by applicable
Requirements of Law and (4) not adopt or use any other Trademark that is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent shall obtain a perfected security interest in such other
Trademark pursuant to this Agreement and (ii) not do any act or omit to do any
act whereby (w) such Trademark (or any goodwill associated therewith) may become
destroyed, invalidated, impaired or harmed in any way, (x) any Patent included
in the Material Intellectual Property may become forfeited, misused,
unenforceable, abandoned or dedicated to the public, or (y) any portion of the
Copyrights included in the Material Intellectual Property may become
invalidated, otherwise impaired or fall into the public domain.

 

(c)                                  Such Grantor shall notify the
Administrative Agent and the Lead Lenders immediately if it knows, or has reason
to know, that any application or registration relating to any Material
Intellectual Property may become forfeited, misused, unenforceable, abandoned or
dedicated to the public, or of any adverse determination or development
regarding the validity or

 

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enforceability or such Grantor’s ownership of, interest in, right to use,
register, own or maintain any Material Intellectual Property (including the
institution of, or any such determination or development in, any proceeding
relating to the foregoing in any Applicable IP Office).  Such Grantor shall take
all actions that are necessary or reasonably requested by Administrative Agent
to maintain and pursue each application (and to obtain the relevant registration
or recordation) and to maintain each registration and recordation included in
the Material Intellectual Property.

 

(d)                                 Such Grantor shall not knowingly do any act
or omit to do any act to infringe, misappropriate, dilute, violate or otherwise
impair the Intellectual Property of any other Person. In the event that any
Material Intellectual Property of such Grantor is or has been infringed,
misappropriated, violated, diluted or otherwise impaired by a third party, such
Grantor shall take such action as it reasonably deems appropriate under the
circumstances in response thereto, including promptly bringing suit and
recovering all damages therefor.

 

(e)                                  Such Grantor shall execute and deliver to
Administrative Agent in form and substance reasonably acceptable to
Administrative Agent and suitable for filing in the Applicable IP Office the
short-form intellectual property security agreements in the form attached hereto
as Annex 2 for all Copyrights, Trademarks, Patents and IP Licenses of such
Grantor.

 

ARTICLE VI
Remedial Provisions

 

Section 6.01                             [Reserved].

 

Section 6.02                             Collections on Accounts, Etc.  The
Administrative Agent hereby authorizes each Grantor to collect upon the
Accounts, Instruments, Chattel Paper and Payment Intangibles and the
Administrative Agent may (in consultation with the Lead Lenders) curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. Upon the request of the Administrative Agent
(at the direction of the Lead Lenders), at any time after the occurrence and
during the continuance of an Event of Default, each Grantor shall notify the
Account Debtors that the applicable Accounts, Chattel Paper and Payment
Intangibles have been assigned to the Administrative Agent for the ratable
benefit of the Secured Parties and that payments in respect thereof shall be
made directly to the Administrative Agent. Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may in its own name
or in the name of others communicate with the Account Debtors to verify with
them to its satisfaction (as determined in consultation with the Lead Lenders)
the existence, amount and terms of any Accounts, Chattel Paper or Payment
Intangibles.

 

Section 6.03                             Proceeds. If required by the
Administrative Agent at any time after the occurrence and during the continuance
of an Event of Default, any payments of Accounts, Instruments, Chattel Paper and
Payment Intangibles, when collected or received by each Grantor, and any other
cash or non-cash Proceeds received by each Grantor upon the sale or other
disposition of any Collateral, shall be forthwith (and, in any event, within two
(2) Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such Grantor to the Administrative Agent if required, in a special
collateral account maintained by the Administrative Agent, subject to withdrawal
by the Administrative Agent at the direction of the Lead Lenders for the ratable
benefit of the Secured Parties only, as hereinafter provided, and,

 

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until so turned over, shall be held by such Grantor in trust for the
Administrative Agent for the ratable benefit of the Secured Parties, segregated
from other funds of any such Grantor.  Each deposit of any such Proceeds shall
be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.  All Proceeds (including,
without limitation, Proceeds constituting collections of Accounts, Chattel
Paper, Instruments) while held by the Administrative Agent (or by any Grantor in
trust for the Administrative Agent for the ratable benefit of the Secured
Parties) shall continue to be collateral security for all of the Obligations and
shall not constitute payment thereof until applied as hereinafter provided.  At
such intervals as may be agreed upon by each Grantor and the Administrative
Agent, or, if an Event of Default shall have occurred and be continuing, at any
time at the Lead Lenders’ election, the Administrative Agent shall apply all or
any part of the funds on deposit in said special collateral account on account
of the Obligations in accordance with Section 2.10 of the Credit Agreement.

 

Section 6.04                             Remedies.

 

(a)                                 If an Event of Default t shall occur and be
continuing, the Administrative Agent at the direction of the Lead Lenders, on
behalf of the Secured Parties, may exercise in its discretion, in addition to
all other rights, remedies, powers and privileges granted to them in this
Agreement, the other Financing Documents, any Secured Swap Agreement, and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights, remedies, powers and privileges of a secured party
under applicable law or otherwise available at law or equity. Without limiting
the generality of the foregoing, the Administrative Agent at the direction of
the Lead Lenders, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon any Grantor or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Administrative Agent or any other Secured Party or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  The Administrative Agent or any other Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released. 
If an Event of Default shall occur and be continuing, each Grantor further
agrees, at the Administrative Agent’s request (acting at the direction of the
Lead Lenders), to assemble the Collateral and make it available to the
Administrative Agent at places which the Lead Lenders shall reasonably select,
whether at such Grantor’s premises or elsewhere.  Any such sale or transfer by
the Administrative Agent either to itself or to any other Person shall be
absolutely free from any claim of right by Grantor, including any equity or
right of redemption, stay or appraisal which Grantor has or may have under any
rule of law, regulation or statute now existing or hereafter adopted. Upon any
such sale or transfer, the Administrative Agent at the direction of the Lead
Lenders shall have the right to deliver, assign and transfer to the purchaser or
transferee thereof the Collateral so sold or transferred.  The Administrative
Agent shall apply

 

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the net proceeds of any action taken by it pursuant to this Section 6.04, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Administrative Agent
and the other Secured Parties hereunder, including, without limitation,
reasonable attorneys’ fees and disbursements, in accordance with the applicable
Intercreditor Agreement, or if no Intercreditor Agreement is then in effect,
then in accordance with Section 2.10 of the Credit Agreement, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation,
Section 9-615 of the UCC, will the Administrative Agent account for the surplus,
if any, to any Grantor.  To the extent permitted by applicable law, each Grantor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any other Secured Party arising out of the exercise by them of any
rights hereunder, except to the extent caused by the gross negligence or willful
misconduct of the Administrative Agent or such Secured Parties or their
respective agents (as determined by a final non-appealable judgment of a court
of competent jurisdiction).  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least ten (10) days before such sale or other
disposition.

 

(b)                                 In the event that the Administrative Agent
at the direction of the Lead Lenders elects not to sell the Collateral, the
Administrative Agent retains its rights to dispose of or utilize the Collateral
or any part or parts thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards payment of the
Obligations.  Each and every method of disposition of the Collateral described
in this Agreement shall constitute disposition in a commercially reasonable
manner.  The Administrative Agent at the direction of the Lead Lenders may
appoint any Person as agent to perform any act or acts necessary or incident to
any sale or transfer of the Collateral.

 

Section 6.05                             [Reserved].

 

Section 6.06                             Deficiency. Each Grantor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay its Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent or any other
Secured Party to collect such deficiency.

 

Section 6.07                             Non-Judicial Enforcement. The
Administrative Agent at the direction of the Lead Lenders may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by law, each Grantor expressly waives any and all legal rights which
might otherwise require the Administrative Agent to enforce its rights by
judicial process. The proceeds of any sale of the Collateral or any part thereof
and all other monies received by any Secured Party in any proceedings for the
enforcement hereof or otherwise, whose application has not elsewhere herein been
specifically provided for, shall be applied in the following order: first, to
all fees, costs, indemnities, liabilities, obligations and expenses incurred by
or owing to Administrative Agent with respect to this Agreement, the other
Financing Documents or the Collateral, second, to all fees, costs, indemnities
and expenses incurred by or owing to any Lender with respect to this Agreement,
the other Financing Documents or the Collateral, third, to accrued and unpaid
interest on the Obligations, fourth, to the principal

 

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amount of the Obligations outstanding, and fifth, to any other indebtedness or
obligations of Borrower owing to Administrative Agent or any Lender under the
Financing Documents.

 

Section 6.08                             IP Licenses.  For the purpose of
enabling the Administrative Agent to exercise rights and remedies under this
Article VI (including in order to take possession of, collect, receive,
assemble, process, appropriate, remove, realize upon, sell, assign, convey,
transfer or grant options to purchase any Collateral) at such time as
Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to Administrative Agent, for the benefit of
the Secured Parties, (i) an irrevocable, nonexclusive, worldwide license
(exercisable without payment of royalty or other compensation to such Grantor),
including in such license the right to sublicense, use and practice any
Intellectual Property now owned or hereafter acquired by such Grantor and
(ii) an irrevocable license (without payment of rent or other compensation to
such Grantor) to use, operate and occupy all real Property owned, operated,
leased, subleased or otherwise occupied by such Grantor.

 

ARTICLE VII
The Administrative Agent

 

Section 7.01                             Administrative Agent’s Appointment as
Attorney-in-Fact, Etc.

 

(a)                                 Each Grantor hereby irrevocably constitutes
and appoints the Administrative Agent and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all reasonably appropriate action and
to execute any and all documents and instruments which may be reasonably
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:

 

(i)                                     pay or discharge taxes and Liens levied
or placed on or threatened against the Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;

 

(ii)                                  execute, in connection with any sale
provided for in Section 6.04 or Section 6.05, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the Collateral; and

 

(iii)                               (A) direct any party liable for any payment
under any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent at the direction of the Lead Lenders shall direct; (B) take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Account, Instrument,
General Intangible, Chattel Paper or Payment Intangible or with respect to any
other Collateral, and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent at the direction of the Lead Lenders for the purpose of
collecting any all such moneys due under any Account, Instrument or  General

 

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Intangible or with respect to any other Collateral whenever payable; (C) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (D) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (E) receive, change the address for delivery, open
and dispose of mail addressed to any Grantor, and to execute, assign and indorse
negotiable and other instruments for the payment of money, documents of title or
other evidences of payment, shipment or storage for any form of Collateral on
behalf of and in the name of any Grantor; (F) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce any
other right in respect of any Collateral; (G) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(H) settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Administrative
Agent at the direction of the Lead Lenders may deem appropriate; (I) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option, at the direction of the Lead Lenders, and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent’s and the other Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do, (J) in the case of any
Intellectual Property owned by or licensed to such Grantor, execute, deliver and
have recorded any document that Administrative Agent may request to evidence,
effect, publicize or record Administrative Agent’s security interest in such
Intellectual Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby and (K) assign any Intellectual Property
owned by such Grantor or any IP Licenses of such Grantor throughout the world on
such terms and conditions and in such a manner as Administrative Agent shall
determine (in consultation with the Lead Lenders), including the execution and
filing of any document necessary to effectuate and record such assignment.

 

Anything in this Section 7.01(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.01(a) unless an Event of Default
shall have occurred and be continuing.

 

(b)                                 If any Grantor fails to perform or comply
with any of its agreements contained herein within the applicable grace periods,
the Lead Lenders may direct the Administrative Agent, at their option, but
without any obligation so to do, to perform or comply, or otherwise cause
performance or compliance, with such agreement.

 

(c)                                  The reasonable expenses of the
Administrative Agent incurred in connection with actions undertaken as provided
in this Section 7.01, together with interest thereon at the Default Rate, but in
no event to exceed the Highest Lawful Rate, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.

 

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(d)                                 Each Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue and in compliance
hereof.  All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.

 

Section 7.02                             Duty of Administrative Agent. The
Administrative Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the UCC or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account and shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral.  Neither the Administrative Agent, any other Secured Party nor any
of their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent and the other Secured Parties
hereunder are solely to protect the Administrative Agent’s and the other Secured
Parties’ interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any other Secured Party to exercise any such powers. 
The Administrative Agent and the other Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct (as
determined by a final non-appealable judgment of a court of competent
jurisdiction).  To the fullest extent permitted by applicable law, the
Administrative Agent and the Secured Parties shall be under no duty whatsoever
to make or give any presentment, notice of dishonor, protest, demand for
performance, notice of non­performance, notice of intent to accelerate, notice
of acceleration, or other notice or demand in connection with any Collateral or
the Obligations, or to take any steps necessary to preserve any rights against
any Grantor or other Person or ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not it has or is deemed to have knowledge of such
matters.  Each Grantor, to the extent permitted by applicable law, waives any
right of marshaling in respect of any and all Collateral, and waives any right
to require the Administrative Agent or any other Secured Party to proceed
against any Grantor or other Person, exhaust any Collateral or enforce any other
remedy which the Administrative Agent or any other Secured Party now has or may
hereafter have against each Grantor, any Grantor or other Person.

 

Section 7.03                             Financing Statements. Pursuant to the
UCC and any other applicable law, each Grantor authorizes the Administrative
Agent, its counsel or its representative, at any time and from time to time, to
file or record financing statements, continuation statements, amendments thereto
and other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Lead Lenders reasonably determine necessary or appropriate to
perfect the security interests of the Administrative Agent under this Agreement.
Additionally, each Grantor authorizes the Administrative Agent, its counsel or
its representative, at any time and from time to time, to file or record such
financing statements that describe the collateral covered thereby as “all assets
of

 

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the Grantor”, “all personal property of the Grantor” or words of similar
effect.  A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.

 

Section 7.04                             Authority of Administrative Agent. 
Each Grantor acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the other Secured Parties, be governed by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Grantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.

 

ARTICLE VIII
Subordination of Indebtedness

 

Section 8.01                             Subordination of All Grantor Claims. As
used herein, the term “Grantor Claims” shall mean all debts and obligations of
any Grantor, whether such debts and obligations now exist or are hereafter
incurred or arise, or whether the obligation of the debtor thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or obligations be evidenced by note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such debts or obligations may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by. After and during the continuation of an Event of Default, no
Grantor shall receive or collect, directly or indirectly, from any obligor in
respect thereof any amount upon the Grantor Claims.

 

Section 8.02                             Claims in Bankruptcy.  In the event of
receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other
insolvency proceedings involving any Grantor, (a) the Administrative Agent on
behalf of the Secured Parties shall have the right to prove their claim in any
proceeding, so as to establish their rights hereunder and receive directly from
the receiver, trustee or other court custodian, dividends and payments which
would otherwise be payable upon Grantor Claims and (b) each Grantor hereby
assigns such dividends and payments to the Administrative Agent for the benefit
of the Secured Parties for application against the Obligations as provided under
the terms of the applicable Intercreditor Agreement, and if no Intercreditor
Agreement is then in effect, then as provided in Section 2.10 of the Credit
Agreement.  Should the Administrative Agent or any Secured Party receive, for
application upon the Obligations, any such dividend or payment which is
otherwise payable to any Grantor, and which, as between such Grantor, shall
constitute a credit upon the Grantor Claims, then upon Security Termination, the
intended recipient shall become subrogated to the rights of the Administrative
Agent and the other Secured Parties to the extent that such payments to the
Administrative Agent and the other Secured Parties on the Grantor Claims have
contributed toward the liquidation of the Obligations, and such subrogation
shall be with respect to that proportion of the Obligations which would have
been unpaid if the Administrative Agent and the other Secured Parties had not
received dividends or payments upon the Grantor Claims.

 

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Section 8.03                             Payments Held in Trust.  In the event
that notwithstanding Section 8.01 and Section 8.02, any Grantor should receive
any funds, payments, claims or distributions that are prohibited by such
Sections, then it agrees: (a) to hold in trust for the Administrative Agent and
the other Secured Parties an amount equal to the amount of all funds, payments,
claims or distributions so received, and (b) that it shall have absolutely no
dominion over the amount of such funds, payments, claims or distributions except
to pay them promptly to the Administrative Agent, for the benefit of the Secured
Parties; and each Grantor covenants promptly to pay the same to the
Administrative Agent.

 

Section 8.04                             Liens Subordinate. Each Grantor agrees
that, until Security Termination, any Liens securing payment of the Grantor
Claims shall be and remain inferior and subordinate to any Liens securing
payment of the Obligations, regardless of whether such encumbrances in favor of
such Grantor, the Administrative Agent or any other Secured Party presently
exist or are hereafter created or attach.  Without the prior written consent of
the Administrative Agent, no Grantor, during the period prior to Security
Termination, shall (a) exercise or enforce any creditor’s right it may have
against any debtor in respect of the Grantor Claims, or (b) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceeding (judicial or otherwise, including without limitation the commencement
of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or
insolvency proceeding) to enforce any Lien held by it.

 

Section 8.05                             Notation of Records. Upon the
reasonable request of the Administrative Agent, all promissory notes and all
accounts receivable ledgers or other evidence of the Grantor Claims accepted by
or held by any Grantor shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this
Agreement.

 

ARTICLE IX
Miscellaneous

 

Section 9.01                             Waiver. No failure on the part of the
Administrative Agent or any other Secured Party to exercise and no delay in
exercising, and no course of dealing with respect to, any right, remedy, power
or privilege under any of the Financing Documents shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any of the Financing Documents preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges provided herein are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. The exercise by the Administrative Agent or any Secured Party
of any one or more of the rights, powers and remedies herein shall not be
construed as a waiver of any other rights, powers and remedies, including,
without limitation, any rights of set-off.

 

Section 9.02                             Notices. All notices and other
communications provided for herein shall be given in the manner and subject to
the terms of Section 11.3 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Grantor shall be addressed to such
Grantor at its notice address set forth on Schedule 1.

 

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Section 9.03                             Payment of Expenses, Indemnities, Etc.

 

(a)                                 Each Grantor agrees that the Administrative
Agent and each other Secured Party shall be entitled to reimbursement of its
expenses incurred hereunder and indemnification as provided in Article 9 of the
Credit Agreement.

 

(b)                                 Any such amounts payable as provided
hereunder shall be additional Obligations secured hereby and by the other
Financing Documents.  The provisions of this Section 9.03 shall remain operative
and in full force and effect regardless of of the termination of this Agreement
or any other Financing Document, the consummation of the transactions
contemplated hereby, the repayment of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other
Financing Document, or any investigation made by or on behalf of the
Administrative Agent or any other Secured Party.

 

Section 9.04                             Amendments in Writing. None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except in accordance with the Credit Agreement.

 

Section 9.05                             Successors and Assigns. The provisions
of this Agreement shall be binding upon each Grantor and its successors and
assigns and shall inure to the benefit of the Administrative Agent and the other
Secured Parties and their respective successors and assigns; provided that such
transfers and assignments are permitted by and have been made pursuant to the
Credit Agreement.

 

Section 9.06                             Invalidity.  In the event that any one
or more of the provisions contained in this Agreement or in any of the Financing
Documents to which a Grantor is a party shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or such
other Financing Document.

 

Section 9.07                             Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart.

 

Section 9.08                             Survival. The obligations of the
parties under Section 9.03 shall survive Security Termination.  To the extent
that any payments on the Obligations or proceeds of any Collateral are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause, then to such
extent, the Obligations so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Administrative Agent’s and the
other Secured Parties’ Liens, security interests, rights, powers and remedies
under this Agreement and each Collateral Document shall continue in full force
and effect. In such event, each Collateral Document shall be automatically
reinstated and each Grantor shall take such action as may be reasonably
requested by the Administrative Agent to effect such reinstatement.

 

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Section 9.09                             Captions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

 

Section 9.10                             No Oral Agreements. This Agreement, the
Credit Agreement, the other Financing Documents and the Secured Swap Agreements
embody the entire agreement and understanding between the parties and supersede
all other agreements and understandings between such parties relating to the
subject matter hereof and thereof.  This Agreement, the Credit Agreement, the
other Financing Documents and the Secured Swap Agreements represent 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.

 

Section 9.11                             Governing Law; Submission to
Jurisdiction.EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THIS AGREEMENT,
EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR
THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR
OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE
OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. 
BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.

 

Section 9.12                             Waiver of Jury Trial. EACH OF BORROWER,
ADMINISTRATIVE AGENT AND LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY. EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS.  EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER
WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF

 

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REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

Section 9.13                             Acknowledgments.  Each Grantor hereby
acknowledges that:

 

(a)                                 it has been advised by counsel in the
negotiation, execution and delivery of this Agreement;

 

(b)                                 neither the Administrative Agent nor any
other Secured Party has any fiduciary relationship with or duty to any Grantor
arising out of or in connection with this Agreement, the Credit Agreement, any
of the other Financing Documents, or any Secured Swap Agreement and the
relationship between the Grantors, on the one hand, and the Administrative Agent
and the other Secured Parties, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby, by the
Credit Agreement, any Secured Swap Agreement or any other Financing Document or
by or otherwise exists by virtue of the transactions contemplated hereby among
the Secured Parties or among the Grantors and the Lenders.

 

(d)                                 Each party hereto agrees and covenants that
it will not contest the validity or enforceability of any exculpatory provision
of this Agreement and the other Collateral Documents on the basis that the party
had no notice or knowledge of such provision or that the provision is not
“conspicuous.”

 

(e)                                  Each Grantor warrants and agrees that each
of the waivers and consents set forth in this Agreement are made voluntarily and
unconditionally after consultation with outside legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which such Grantor otherwise may have against
the Borrower, any other Grantor, the Administrative Agent or the other Secured
Parties or any other Person or against any collateral.  If, notwithstanding the
intent of the parties that the terms of this Agreement shall control in any and
all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.

 

Section 9.14                             Additional Grantors. Each Subsidiary of
the Borrower that is required to become a party to this Agreement pursuant to
the Credit Agreement and is not a signatory hereto shall become a Grantor for
all purposes of this Agreement upon execution and delivery by such Subsidiary of
an Assumption Agreement in the form of Annex I.

 

Section 9.15                             Set-Off. Each Grantor agrees that, in
addition to (and without limitation of) any right of set-off, bankers’ lien or
counterclaim a Secured Party may otherwise have, each Secured Party shall have
the right and be entitled (after consultation with the Administrative Agent), at
its option, to offset (i) balances held by it or by any of its Affiliates for
account of any Grantor or any Subsidiary at any of its offices, in U.S. dollars
or in any other currency, and (ii) amounts due and payable to such Secured Party
under any Secured Swap Agreement, against any principal of or interest on any of
such Secured Party’s Loans, or any other amount due and

 

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payable to such Secured Party hereunder, which is not paid when due (regardless
of whether such balances are then due to such Person), in which case it shall
promptly notify the Borrower, the Administrative Agent and Lead Lenders thereof,
provided that such Secured Party’s failure to give such notice shall not affect
the validity thereof.

 

Section 9.16                             Releases.

 

(a)                                 Releases Upon Payment in Full. The grant of
a security interest hereunder and all of rights, powers and remedies in
connection herewith shall, to the extent permitted by law, remain in full force
and effect until Security Termination or in connection with a transaction
described in clause (b) below.  Upon the occurrence of Security Termination or a
transaction described in clause (b) below, the Administrative Agent, at the
written request and expense of the Borrower, will promptly release, reassign and
transfer the Collateral to the Grantors and declare this Agreement to be of no
further force or effect subject to the first sentence of Section 9.08 of this
Agreement.

 

(b)                                 Further Assurances. Pursuant to Section 10.9
of the Credit Agreement, the Administrative Agent shall (i) release any Lien
granted to or held by the Administrative Agent under any Security Document
constituting property sold or disposed of as part of or in connection with any
disposition permitted under any Financing Document (it being understood and
agreed that Administrative Agent may conclusively rely without further inquiry
on a certificate of a Responsible Officer as to the sale or other disposition of
property being made in full compliance with the provisions of the Financing
Documents) and (ii) release or subordinate any Lien granted to or held by the
Administrative Agent under any Security Document constituting property described
in Section 5.2(d) of the Credit Agreement (it being understood and agreed that
Administrative Agent may conclusively rely without further inquiry on a
certificate of a Responsible Officer as to the identification of any property
described in Section 5.2(d)), in each case, unless such release is prohibited by
any Intercreditor Agreement.  At the request and sole expense of the Borrower, a
Grantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Grantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Credit Agreement; provided that
the Borrower shall have delivered to the Administrative Agent, at least ten
(10) Business Days prior to the date of the proposed release, a written request
for release identifying the relevant Grantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrower stating
that such transaction is in compliance with the Credit Agreement, the Secured
Swap Agreements and the other Financing Documents, in each case, unless such
release is prohibited by any Intercreditor Agreement.

 

(c)                                  Retention in Satisfaction. Except as may be
expressly applicable pursuant to Section 9-620 of the UCC, no action taken or
omission to act by the Administrative Agent or the other Secured Parties
hereunder, including, without limitation, any exercise of voting or consensual
rights or any other action taken or inaction, shall be deemed to constitute a
retention of the Collateral in satisfaction of the Obligations or otherwise to
be in full satisfaction of the Obligations, and the Obligations shall remain in
full force and effect, until the Administrative Agent and the other Secured
Parties shall have applied payments (including, without limitation,

 

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collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is provided in Section 9.16(a).

 

Section 9.17                             Intercreditor Agreements.
Notwithstanding anything herein to the contrary, this Agreement and the exercise
of any right or remedy hereunder are subject to the provisions of any applicable
Intercreditor Agreements, and further, to the extent any provision herein
contained shall be inconsistent with any provision contained in any
Intercreditor Agreement, the provisions of such Intercreditor Agreement shall
prevail.

 

Section 9.18                             Reinstatement. The obligations of each
Grantor under this Agreement (including, without limitation, with respect to the
guarantee contained in the Guaranty and the provision of Collateral herein)
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any other
Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Grantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any Grantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.

 

Section 9.19                             Acceptance.  Each Grantor hereby
expressly waives notice of acceptance of this Agreement, acceptance on the part
of the Administrative Agent and the other Secured Parties being conclusively
presumed by their request for this Agreement and delivery of the same to the
Administrative Agent.

 

[Signatures begin next page]

 

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IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written

 

GRANTORS:

Warren Resources, Inc.

 

 

 

 

 

By:

 /s/ Stewart P. Skelly

 

Name:

Stewart P. Skelly

 

Title:

Vice President and Chief Financial

Officer

 

 

 

 

 

 

 

Warren E&P, Inc.

Warren Marcellus LLC

Warren Resources of California, Inc.

 

 

 

 

 

 

 

By:

/s/ Stewart P. Skelly

 

Name:

 Stewart P. Skelly

 

Title:

 Vice President and Treasurer

 

Signature Page to
Security Agreement

 

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ADMINISTRATIVE AGENT:

Wilmington Trust, National Association

 

 

 

 

 

By:

 /s/ Joshua G. James

 

Name:

Joshua G. James

 

Title:

Vice President

 

Signature Page to
Security Agreement

 

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Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

Warren Resources, Inc.
1114 Ave of the Americas, 34th Floor
New York, NY 10036

 

Warren E&P, Inc.
100 Oceangate, Suite 950
Long Beach, CA 90802

 

Warren Marcellus LLC
1331 17th Street, Suite 720
Denver, CO 80202

 

Warren Resources of California, Inc.
100 Oceangate, Suite 950
Long Beach, CA 90802

 

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Schedule 2

 

[RESERVED]

 

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Schedule 3

 

FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS

 

1.                                      Filing of UCC-1 Financing Statements
with respect to the Collateral with the Secretary of State of the state set
forth below opposite each Grantor’s name:

 

Owner/Pledgor

 

State(s)

Warren Resources, Inc.

 

Maryland

Warren E&P, Inc.

 

New Mexico

Warren Marcellus LLC

 

Delaware

Warren Resources of California, Inc.

 

California

 

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Schedule 4

 

CORRECT LEGAL NAME, LOCATION OF JURISDICTION OF ORGANIZATION,
ORGANIZATIONAL IDENTIFICATION NUMBER, TAXPAYER IDENTIFICATION
NUMBER AND CHIEF EXECUTIVE OFFICE

 

Warren Resources, Inc.

 

Jurisdiction of Organization: Maryland
Organizational Identification Number: D10015659 (MD)
EIN: 11-3024080
Chief Executive Office: 1114 Ave of the Americas, 34th Floor, New York, NY 10036

 

Warren E&P, Inc.

 

Jurisdiction of Organization: New Mexico
Organizational Identification Number: 762948(NM)
EIN: 85-0224052
Chief Executive Office: 100 Oceangate, Suite 950, Long Beach, CA 90802

 

Warren Marcellus LLC

 

Jurisdiction of Organization: Delaware
Organizational Identification Number: 5557132 (DE)
EIN: 47-1370150
Chief Executive Office: 1331 17th Street, Suite 720, Denver, CO 80202

 

Warren Resources of California, Inc.

 

Jurisdiction of Organization: California
Organizational Identification Number: 2181533(CA)
EIN: 33-0980072
Chief Executive Office: 100 Oceangate, Suite 950, Long Beach, CA 90802

 

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Schedule 5

 

PRIOR NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.                                      Warren Resources, Inc.

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:

(a)                                 105 W. 3rd St., Suite 302, Roswell, NM 88201

(b)                                 800 Werner Court, Suite 295, Casper WY 82601

(c)                                  322 4th St., Rawlins, WY 82301     Delivery
Address: PO Box 1619, Rawlins, WY 82301

 

2.                                      Warren E&P, Inc.

 

a.                                      Prior Names: Petroleum Development
Corporation (name change in 2003)

b.                                      Prior Chief Executive Offices:
same as above

 

3.                                      Warren Marcellus LLC

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:
same as above

 

4.                                      Warren Resources of California, Inc.

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:
same as above

 

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Schedule 6

 

LOCATIONS OF INVENTORY, EQUIPMENT AND OTHER ASSETS CONSTITUTING
COLLATERAL AND BOOKS AND RECORDS PERTAINING TO THE COLLATERAL

 

(excluding Oil and Gas Properties as defined in the Credit Agreement)

 

Company

 

Address

 

Landlord

 

Lease Term

Warren Resources, Inc.

 

1114 AVE OF THE AMERICAS, NEW YORK, NY 10036

 

1114 6TH AVENUE CO. LLC

 

May 31, 2023

 

 

 

 

 

 

 

Warren E&P, Inc.

 

100 OCEANGATE, SUITE 950, LONG BEACH, CA 90802

And

39 WASHINGTON PARK ROAD, TUNKHANNOCK, PA 18657

 

SEE BELOW

And

ALDERICE CO.

 

See below

And

September 1, 2017 (yard lease)

September 1, 2019 (office lease)

 

 

 

 

 

 

 

Warren Marcellus LLC

 

1331 17TH STREET, SUITE 720, DENVER, CO 80202

 

ZELLER-GBB, L.L.C.

 

78 months; on or about June 1, 2021

 

 

 

 

 

 

 

Warren Resources of California, Inc.

 

100 OCEANGATE, SUITE 950, LONG BEACH, CA 90802

 

LEGACY PARTNERS I LONG BEACH OCEANGATE, LLC

 

September 30, 2020

 

 

 

 

 

 

 

 

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Schedule 7

 

COMMERCIAL TORT CLAIMS

 

None having a potential value in excess of $1,500,000.

 

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Schedule 8

 

DEPOSIT AND SECURITIES ACCOUNTS

 

Company

 

Name and Address

 

Type of Account

 

Account Number

Warren Resources, Inc.

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

4591517471

Warren Resources, Inc.

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

9015477

Warren E&P, Inc.

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

530503751

Warren Marcellus LLC

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

622696115

Warren Energy Services

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

957035209

Warren Resources, Inc.

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

530393794

Warren Development Corporation

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

910859222

Warren Resources of California, Inc.

 

JPMorgan Chase Bank
395 North Service Road
Suite 302
Melville, NY 11747

 

Checking

 

556892888

 

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Schedule 9

 

INTELLECTUAL PROPERTY

 

None that is owned by a Company and that is material to the conduct of any
Company’s business.

 

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Annex I

 

Form of Assumption Agreement

 

ASSUMPTION AGREEMENT, dated as of                 , 201  , made by
                              , a                [corporation] (the “Additional
Grantor”), in favor of Wilmington Trust, National Association, as Administrative
Agent for the Secured Parties (as defined below) (in such capacity, the
“Administrative Agent”). All capitalized terms not defined herein shall have the
meaning ascribed to them in such Credit Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Warren Resources, Inc. (the “Borrower”), the Lenders and the
Administrative Agent have entered into a Credit Agreement, dated as of May 22,
2015 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”);

 

WHEREAS, in connection with the Credit Agreement, the Borrower has entered into
the Security Agreement, dated as of May 22, 2015 (as amended, supplemented or
otherwise modified from time to time, the “Security Agreement”) in favor of the
Administrative Agent for the benefit of the Secured Parties (as defined in the
Security Agreement);

 

WHEREAS, the Credit Agreement requires the Additional Grantor to become a party
to the Security Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Security Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Security Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 9.14 of the Security Agreement, hereby becomes a party to the Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder and expressly grants to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in all Collateral owned by
such Additional Grantor to secure all of such Additional Grantor’s obligations
and liabilities thereunder.  The information set forth in Annex 1-A hereto is
hereby added to the information set forth in Schedules 1 through 6 to the
Security Agreement.  The Additional Grantor hereby represents and warrants that
each of the representations and warranties contained in Article IV of the
Security Agreement is true and correct on and as the date hereof (after giving
effect to this Assumption Agreement) as if made on and as of such date.

 

2.                                      Governing Law. THIS ASSUMPTION AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

 

A-1-1

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IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

 

 

[ADDITIONAL GRANTOR]

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

A-1-2

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Annex II

 

Form of Intellectual Property Security Agreement

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT(2)

 

THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of May 22,
2015, is made by each of the entities listed on the signature pages hereof (each
a “Grantor” and, collectively, the “Grantors”), in favor of Wilmington Trust,
National Association, as Administrative Agent (in such capacity, together with
its successors and permitted assigns, the “Administrative Agent”) for the
Secured Parties (as defined in the Credit Agreement referred to below) and the
other Secured Parties.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Credit Agreement, dated as of May 22, 2015 (as the same
may be amended, restated, supplemented and/or modified from time to time, the
“Credit Agreement”), among Warren Resources, Inc. as Borrower, the financial
institutions and other entities from time to time party thereto (the “Lenders”)
and the Administrative Agent;

 

WHEREAS, each Grantor has agreed, pursuant to a Security Agreement of even date
herewith in favor of the Administrative Agent (and such agreement may be
amended, restated, supplemented or otherwise modified from time to time, the
“Security Agreement”), to guarantee the Obligations (as defined in the Credit
Agreement) of the Borrower; and

 

WHEREAS, all of the Grantors are party to the Security Agreement pursuant to
which the Grantors are required to execute and deliver this [Copyright] [Patent]
[Trademark] Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement, each
Grantor hereby agrees with the Administrative Agent as follows:

 

Section 9.20                             Defined Terms.  Capitalized terms used
herein without definition are used as defined in the Security Agreement.

 

Section 9.21                             Grant of Security Interest in
[Copyright] [Trademark] [Patent] Collateral. Each Grantor, as collateral
security for the prompt and complete payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of the Obligations of such
Grantor, hereby mortgages, pledges and hypothecates to the Administrative Agent
for the benefit of the Secured Parties, and grants to the Administrative Agent
for the benefit of the Secured Parties a Lien on and security interest in, all
of its right, title and interest in, to and under the following Collateral of
such Grantor (the “[Copyright] [Patent] [Trademark] Collateral”):

 

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(2) NTD: Separate agreements should be executed relating to each Grantor’s
respective Copyrights, Patents, and Trademarks.

 

A-2-1

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(i)                                     [all of its Copyrights and all IP
Licenses providing for the grant by or to such Grantor of any right under any
Copyright, including, without limitation, those referred to on Schedule 1
hereto;

 

(ii)                                  all renewals, reversions and extensions of
the foregoing; and

 

(iii)                               all income, royalties, proceeds and
Liabilities at any time due or payable or asserted under and with respect to any
of the foregoing, including, without limitation, all rights to sue and recover
at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]

 

or

 

(b)                                 [all of its Patents and all IP Licenses
providing for the grant by or to such Grantor of any right under any Patent,
including, without limitation, those referred to on Schedule 1 hereto;

 

(i)                                     all reissues, reexaminations,
continuations, continuations-in-part, divisionals, renewals and extensions of
the foregoing; and

 

(ii)                                  all income, royalties, proceeds and
Liabilities at any time due or payable or asserted under and with respect to any
of the foregoing, including, without limitation, all rights to sue and recover
at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]

 

or

 

(c)                                  [all of its Trademarks and all IP Licenses
providing for the grant by or to such Grantor of any right under any Trademark,
including, without limitation, those referred to on Schedule 1 hereto;

 

(i)                                     all renewals and extensions of the
foregoing;

 

(ii)                                  all goodwill of the business connected
with the use of, and symbolized by, each such Trademark; and

 

(iii)                               all income, royalties, proceeds and
Liabilities at any time due or payable or asserted under and with respect to any
of the foregoing, including, without limitation, all rights to sue and recover
at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]

 

Section 9.22                             Security Agreement. The security
interest granted pursuant to this [Copyright] [Patent] [Trademark] Security
Agreement is granted in conjunction with the security interest granted to the
Administrative Agent pursuant to the Security Agreement and each Grantor hereby
acknowledges and agrees that the rights and remedies of the Administrative Agent
with respect to the security interest in the [Copyright] [Patent] [Trademark]
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

 

A-2-2

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Section 9.23                             Grantor Remains Liable. Each Grantor
hereby agrees that, anything herein to the contrary notwithstanding, such
Grantor shall assume full and complete responsibility for the prosecution,
defense, enforcement or any other necessary or desirable actions in connection
with their [Copyrights] [Patents] [Trademarks] and IP Licenses subject to a
security interest hereunder.

 

Section 9.24                             Counterparts. This [Copyright] [Patent]
[Trademark] Security Agreement may be executed in any number of counterparts and
by different parties in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.  Signature pages may be detached from
multiple separate counterparts and attached to a single counterpart.

 

Section 9.25                             Governing Law. This [Copyright]
[Patent] [Trademark] Security Agreement and the rights and obligations of the
parties hereto shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York.

 

[SIGNATURE PAGES FOLLOW]

 

A-2-3

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IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent]
[Trademark] Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.

 

 

 

[GRANTOR]

 

as Grantor

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

ACCEPTED AND AGREED

 

as of the date first above written:

 

Wilmington Trust, National Association

as Administrative Agent

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

 

A-2-4

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ACKNOWLEDGMENT OF GRANTOR

 

 

State of                                               

)

 

  

)

ss.

County of                                           

)

 

 

 

On this     day of                , 201   before me personally appeared
                      , proved to me on the basis of satisfactory evidence to be
the person who executed the foregoing instrument on behalf of                 ,
who being by me duly sworn did depose and say that he is an authorized officer
of said corporation, that the said instrument was signed on behalf of said
corporation as authorized by its Board of Directors and that he acknowledged
said instrument to be the free act and deed of said corporation.

 

 

 

 

Notary Public

 

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

 

A-2-5

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SCHEDULE I
TO
[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT

 

[Copyright] [Patent] [Trademark] Registrations

 

1.                                      REGISTERED [COPYRIGHTS] [PATENTS]
[TRADEMARKS]

 

[Include Registration Number and Date]

 

2.                                      [COPYRIGHT] [PATENT] [TRADEMARK]
APPLICATIONS

 

[Include Application Number and Date]

 

3.                                      IP LICENSES

 

[Include complete legal description of agreement (name of
agreement, parties and date)]

 

Annex II - Schedule to [Copyright][Patent][Trademark] Security Agreement

 

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