EXHIBIT 10.3

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This Intellectual Property Security Agreement (this “Agreement”), dated as of
October 24, 2005, is made by and among Grantors listed on the signature pages
hereof (collectively, jointly and severally, “Grantors” and each individually
“Grantor”), and WELLS FARGO FOOTHILL, INC., in its capacity as administrative
agent for the Lender Group and the Bank Product Provider (together with its
successors, “Agent”), with respect to the following facts:

 

A. Each Grantor has adopted certain trademarks and service marks, as identified
herein and in Schedule A annexed hereto and made a part hereof.

 

B. Each Grantor is the owner and holder of certain patents, patent applications,
inventions and trade secret information, as identified herein and in Schedule B
annexed hereto and made a part hereof.

 

C. Each Grantor is the owner of the copyrights in certain works of authorship,
as described herein and in Schedule C annexed hereto and made a part hereof.

 

D. Pursuant to that certain Third Amended and Restated Credit Agreement of even
date herewith (as amended, restated, supplemented or otherwise modified from
time to time, including all schedules thereto, the “Credit Agreement”) among
Silicon Graphics, Inc., a Delaware corporation (“Parent”) and each of Parent’s
Subsidiaries identified on the signature pages thereof (such Subsidiaries,
together with Parent, are referred to hereinafter as a “Borrower” and
individually and collectively, jointly and severally, as the “Borrowers”), the
lenders party thereto as “Lenders” (“Lenders”), and Agent, the Lender Group is
willing to make available to Borrowers a secured credit facility of $100,000,000
from time to time pursuant to the terms and conditions thereof. Capitalized
terms which are used herein but not otherwise defined, shall have the meaning
ascribed to them in the Credit Agreement.

 

E. Agent has agreed to act as agent for the benefit of the Lender Group and the
Bank Product Provider in connection with the transactions contemplated by this
Agreement.

 

F. In order to induce the Lender Group to enter into the Credit Agreement and
the other Loan Documents and to induce the Lender Group to make financial
accommodations to Borrowers as provided for in the Credit Agreement, Grantors
have agreed to grant a continuing security interest in and to substantially all
of each Grantor’s assets in order to secure the prompt and complete payment,
observance and performance of, among other things, (a) the obligations of
Grantors arising from this Agreement, the Credit Agreement, and the other Loan
Documents, (b) all Bank Product Obligations, and (c) all Obligations of any
Borrower (including, without limitation, any interest, fees or expenses that
accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding), plus reasonable attorneys fees and expenses if the obligations
represented thereunder are collected by law, through an attorney-at-law, or
under advice therefrom (clauses (a), (b), and (c) being hereinafter referred to
as the “Secured Obligations”), by the granting of the security interests
contemplated by the Security Agreement and this Agreement.

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G. As a condition to making the financial accommodations to Borrowers as
provided for in the Credit Agreement, the Lender Group has required that,
concurrently herewith, Grantors execute and deliver to Agent this Agreement; any
and all other documents which Agent deems necessary to protect the Lender
Group’s interests hereunder or with respect to the Obligations.

 

NOW, THEREFORE, IT IS AGREED that, for and in consideration of the premises set
forth above, the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1. As collateral security for the prompt payment and performance in full when
due (whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations, each Grantor hereby pledges and grants to Agent, for the benefit of
the Lender Group and the Bank Product Provider, a lien and security interest in
and to the following property and interests in property, whether now owned by
such Grantor or hereafter acquired and whether now existing or hereafter coming
into existence and wherever located (all being collectively referred to herein
as “Intellectual Property Collateral”):

 

(a) all of such Grantor’s right, title and interest in and to trademarks, trade
names, trade styles, service marks, logos, emblems, prints and labels, all
elements of package or trade dress of goods, and all general intangibles of like
nature, now existing or hereafter adopted or acquired by such Grantor, together
with the goodwill of such Grantor’s business connected with the use thereof and
symbolized thereby, and all registration applications, registrations and
recordings thereof, including, without limitation, registration applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States or in any office of the
Secretary of State (or equivalent) of any state thereof, or in any similar
office or agency of any country or political subdivision thereof throughout the
world, whether now owned or hereafter acquired by such Grantor, including, but
not limited to, those described in Schedule A annexed hereto and made a part
hereof (provided that no security interest shall be granted in United States
intent-to-use trademark applications to the extent that, and solely during the
period in which, the grant of a security interest therein would impair the
validity or enforceability of such intent-to-use trademark applications under
applicable federal law), together with all extensions, renewals and corrections
thereof and all licenses thereof or pertaining thereto (but with respect to any
such license, only to the extent permitted by the applicable licensing
agreement) (all of the foregoing assets encompassed by this subparagraph 1(a)
being hereinafter collectively referred to as the “Trademarks”);

 

(b) all of such Grantor’s right, title and interest in and to all inventions and
letters patent and registration applications therefor, and all registrations and
recordings thereof, including, without limitation, registration applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States or any state thereof, or in
any similar office or agency of any country or political subdivision thereof
throughout the world, whether now owned or hereafter acquired by such Grantor,
including, but not limited to, those described in Schedule B annexed hereto and
made a part hereof, together with all re-examinations, reissues, continuations,
continuations-in-part, divisions, improvements and extensions thereof and all
licenses thereof or pertaining thereto and all licenses of patent rights to such
Grantor now in effect or entered into during the term of this Agreement (but
with

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respect to any such license, only to the extent permitted by the applicable
licensing agreement) and the rights to make, use and sell, and all other rights
with respect to, the inventions disclosed or claimed therein, all inventions,
designs, proprietary or technical information, know-how, other data or
information, software, databases, all embodiments or fixations thereof and
related documentation, all information having value in connection with such
Grantor’s business and all other trade secret rights not described above (all of
the foregoing assets encompassed by this subparagraph 1(b) being hereinafter
collectively referred to as the “Patents”);

 

(c) all of such Grantor’s right, title and interest in and to copyrights in
works of authorship of any kind, and all registration applications,
registrations and recordings thereof in the Office of the United States Register
of Copyrights, Library of Congress, or in any similar office or agency of any
country or political subdivision thereof throughout the world, whether now owned
or hereafter acquired by such Grantor, including, but not limited to, those
described in Schedule C annexed hereto and made a part hereof, together with all
extensions, renewals, reversionary rights, and corrections thereof and all
licenses thereof or pertaining thereto (but with respect to any such license,
only to the extent permitted by the applicable licensing agreement) (all of the
foregoing assets encompassed by this subparagraph 1(c) hereinafter collectively
referred to as the “Copyrights”);

 

(d) all of such Grantor’s customer lists and other records of such Grantor
relating to the distribution of products bearing, constituting or incorporating
the Trademarks, Patents and Copyrights; and

 

(e) the proceeds and products, whether tangible or intangible, of any of the
foregoing, including (w) proceeds from any claims by such Grantor against third
parties for past, present or future infringement of the Trademarks, Patents or
Copyrights and any royalties from licenses to third parties of the Trademarks,
Patents or Copyrights, (x) proceeds of insurance covering any or all of the
foregoing, and (y) any and all money, deposit accounts, or other tangible or
intangible property, solely to the extent, in the case of each of the foregoing
clauses (w) and (x), resulting from the sale, exchange, collection or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof; provided, however, that the Intellectual Property
Collateral shall not include such General Intangibles: (i) which cannot be
subject to a consensual security interest in favor of Agent without the consent
of the licensor or other party thereto, (ii) as to which any such restriction
described in clause (i) is effective and enforceable under applicable law
including Section 9408 of the Code, and (iii) to which such consent described in
clause (i) has not been obtained by the party granting the security interest.

 

2. Each Grantor hereby represents, warrants, covenants and agrees as follows:

 

(a) Each Grantor has the sole, full and clear title to the Trademarks for the
goods and services with which the Trademarks are used (except for Permitted
Liens and as provided in paragraph 2(g) below and in Schedule A attached
hereto). The registrations of the Trademarks are valid and subsisting and in
full force and effect. No Grantor has granted a license or otherwise agreed to
allow any third party to use any Trademark (except in the ordinary course of
business consistent with such Grantor’s business judgment). Each Grantor has
used

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and will continue to use for the duration of this Agreement standards of quality
in the manufacture of products sold under the Trademarks that are at least equal
to those standards in effect as of the date of this Agreement to the extent that
the failure to do so would cause a Material Adverse Change.

 

(b) Each Grantor (either itself or through its licensees) will continue to use
the Trademarks on its current lines of goods as reflected in its current
catalogs, brochures and price lists in order to maintain the Trademarks in full
force and effect, in the ordinary course of business, and no Grantor will (or
will permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated (except in the ordinary course of
business consistent with such Grantor’s business judgment).

 

(c) Each Grantor has the sole, full and clear title to the Patents shown on
Schedule B hereto and such Patents are valid and subsisting and in full force
and effect and have not been adjudged or, to such Grantor’s knowledge, claimed
invalid or unenforceable in whole or in part (except for Permitted Liens and as
provided in paragraph 2(g) below and in Schedule B attached hereto). No Grantor
has granted a license or otherwise agreed to allow any third party to use any
Patent (except in the ordinary course of business consistent with such Grantor’s
business judgment). Each Grantor shall diligently prosecute any patent
application now pending or acquired or made by it during the term of this
Agreement, and shall preserve and maintain all rights of any kind in the
Patents, which, in each case, such Grantor believes in its reasonable business
judgment are in the best business interests of such Grantor. Each Grantor
believes that none of the Patents has been abandoned or dedicated and no Grantor
will do any act, or omit to do any act, or permit any licensee thereof to do any
act whereby any Patent may become abandoned or dedicated, except and to the
extent Grantor believes in its reasonable business judgment that such action or
inaction is in the best business interest of such Grantor including discretion
to make Patents available to the “open source community”; and if it knows or has
reason to believe that any material Patent has become or may become abandoned or
dedicated, it shall notify Agent within thirty (30) days following the date
Grantor first knows or first has reason to believe that such material patent has
become or may become abandoned or dedicated.

 

(d) Each Grantor (either itself or through its licensees) will place appropriate
notice of Copyright on all copies embodying copyrighted works covered by the
copyright which are publicly distributed and no Grantor will (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Copyright may become invalidated or dedicated to the public domain,
except and to the extent Grantor believes in its reasonable business judgment
that such action or inaction is in the best interest of such Grantor including
discretion to make Copyrights available to the “open source community.”

 

(e) Each Grantor will promptly perform all acts and execute all documents,
including, without limitation, grants of security in forms acceptable to Agent
and suitable for recording with (i) the United States Patent and Trademark
Office and the United States Register of Copyrights, and (ii) the appropriate
offices and agencies of foreign jurisdictions reasonably requested by Agent at
any time to evidence, perfect, maintain, record or enforce the Agent’s security
interest in the Intellectual Property Collateral or otherwise in furtherance of
the provisions of this Agreement. Each Grantor hereby authorizes Agent to

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execute and file one or more financing statements (and any similar documents) or
copies thereof or of this Agreement with respect to the Intellectual Property
Collateral (with a copy sent to Administrative Borrower).

 

(f) In the event that any Grantor, either itself or through any subsidiary,
affiliate, agent, employee, licensee or designee, shall file an application for
the issuance of any Patent or registration of any Trademark with the United
States Patent and Trademark Office, or any similar office of the United States
or in any office of the Secretary of State (or equivalent) of any state thereof,
or for the registration of any Copyright with the United States Register of
Copyrights, or for the registration of any Patent, Trademark or Copyright in any
similar office or agency of any country or political subdivision thereof
throughout the world, or shall obtain issuance of any Patent or registration of
any Trademark or Copyright previously applied for, or shall adopt, acquire or
obtain rights to any new trademark, patent application or work for which a
copyright application has been or is expected to be filed, or become entitled to
the benefit of any patent application or any patent or any part thereof for
reissue, re-examination, continuation, continuation-in-part, division,
improvement or extension, the applicable Grantor shall (i) inform Agent of any
such event or action in semi-annual reports which Borrowers shall deliver to
Agent concurrently with the delivery to Agent of the respective second quarter
and fourth quarter financial information of Borrower pursuant to the Credit
Agreement, and (ii) execute and deliver any and all assignments, agreements,
instruments, documents and papers as are necessary or appropriate or as Agent
may reasonably request to evidence the Agent’s security interest in such
Trademark, Patent or Copyright and the goodwill and general intangibles of
Grantors relating thereto or represented thereby (provided that no security
interest shall be granted in United States intent-to-use trademark applications
to the extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law). Each Grantor
hereby constitutes Agent, or Agent’s agent, its attorney-in-fact to execute and
file all such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power being coupled with an interest
is irrevocable until the Secured Obligations are indefeasibly paid in full. Each
Grantor authorizes the amendment of the schedules hereto to include any future
Trademark, Patent or Copyright registrations or applications which may be
acquired or made by such Grantor.

 

(g) Each Grantor has the authority, right and power to enter into this Agreement
and to perform its terms and to grant the security interest herein granted, and
has not entered and will not enter into any oral or written agreements which
would prevent such Grantor from complying with the terms hereof, provided,
however, each Grantor may enter into or maintain in effect such non-exclusive
license agreements with respect to the Intellectual Property Collateral as such
Grantor believes in its reasonable business judgment are in the best interest of
such Grantor’s business, so long as any such license agreement does not prohibit
the assignment thereof to Agent, for the benefit of the Lender Group and the
Bank Product Provider. The Intellectual Property Collateral is not now, and at
all times will not be, subject to any liens (other than Permitted Liens),
charges, mortgages, assignments, security interests, except in favor of the
Agent; provided, however, each Grantor may enter into such non-exclusive license
agreements with respect to the Intellectual Property Collateral as such Grantor
believes in its reasonable business judgment are in the best interest of such
Grantor’s business, so long as any such license agreement does not prohibit the
assignment thereof to Agent, for the benefit of the Lender Group

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and the Bank Product Provider. To the best knowledge of each Grantor, none of
the Intellectual Property Collateral is subject to any claims of any other
party, except as may be indicated on Schedules A, B and C to this Agreement.

 

(h) Except for Permitted Liens, or as may be indicated on Schedule D to this
Agreement, or to the extent that Agent upon prior written notice from Grantor,
shall consent in writing, no Grantor will assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon, grant
an exclusive license, or otherwise dispose of any of the Intellectual Property
Collateral, and nothing in this Agreement shall be deemed a consent by Agent to
any such action except as expressly permitted herein. Agent agrees to
expeditiously release its interests in any assets set forth on Schedule D that
are transferred in accordance with this subparagraph 2(h).

 

(i) As of the date hereof, no Borrower has any Trademarks, Patents or Copyrights
registered, or which are the subject of any pending application, in the United
States Patent and Trademark Office, or any similar office of the United States
or in any office of the Secretary of State (or equivalent) of any state thereof,
or the United States Register of Copyrights, or in any similar office or agency
of any country or political subdivision thereof throughout the world, other than
those identified in Schedules A, B and C hereto and other than those Trademarks,
Patents and Copyrights which collectively are not material to the business and
operations of Grantors.

 

(j) Each Grantor will in its business judgment take commercially reasonable
steps in any proceeding before the United States Patent and Trademark Office,
United States Register of Copyrights or similar office or agency of the United
States or any office of the Secretary of State (or equivalent) of any state
thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, to maintain each registration
application and registration of the Intellectual Property Collateral, including,
without limitation, filing of renewals, extensions, affidavits of use and
incontestability, and opposition, interference and cancellation proceedings
(except to the extent that dedication, abandonment or invalidation is permitted
under subparagraphs 2(b) and 2(c) hereof). Each Grantor shall notify Agent
promptly in writing if any material registration application or registration
relating to any Intellectual Property Collateral may become abandoned or
dedicated or subject to an adverse final determination in any proceeding in the
United States Patent and Trademark Office or United States Register of
Copyrights or in any similar office or agency of any country or political
subdivision thereof throughout the world or in any court regarding such
Grantor’s ownership of such Patent or Trademark, its right to register same, or
to keep or maintain the validity of same.

 

(k) In the event that any Grantor acquires actual knowledge that any Trademark,
Patent or Copyright is infringed, misappropriated or diluted by a third party,
such Grantor shall promptly sue for infringement, misappropriation and/or
dilution and to obtain injunctive relief and recover damages therefore, unless
such Grantor shall determine in its reasonable business judgment that such suit
is not in the best interest of such Grantor’s business, and the applicable
Grantor shall take such other actions reasonably required to protect such
Trademark, Patent or Copyright as such Grantor shall deem appropriate in its
reasonable business judgment under the circumstances. Upon and during the
continuation of an Event of Default, Agent shall have the right, but in no way
shall be obligated, to bring suit in its own

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name to enforce the Trademarks, Patents and Copyrights and any licenses
thereunder, in which event the applicable Grantor shall, at the request of
Agent, do any and all lawful acts requested by Agent and execute any and all
documents required by Agent to aid such enforcement, and the applicable Grantor
shall, upon demand, promptly reimburse and indemnify Agent for all costs and
expenses incurred in such enforcement.

 

3. Upon the occurrence and during the continuation of an Event of Default, Agent
may, except to the extent otherwise expressly provided or required below, do any
one or more of the following, all of which are authorized by each Grantor, in
addition to all other rights and remedies provided for in the Loan Documents,
all such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, without (except as provided herein
or in the other Loan Documents) notice to, or consent by, any Grantor or any
Borrower:

 

(a) Agent may (without assuming any obligations or liability thereunder), at any
time, enforce (and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of the applicable Grantor in, to
and under any one or more license agreements with respect to the Intellectual
Property Collateral, and take or refrain from taking any action under any
thereof, and each Grantor hereby releases Agent from, and agrees to hold Agent
free and harmless from and against any claims arising out of, any action taken
or omitted to be taken with respect to any such license agreement except for
such claims that a court of competent jurisdiction finally determines to have
arisen from the gross negligence or willful misconduct of Agent;

 

(b) Agent may, at any time and from time to time, upon ten (10) days’ prior
notice to Grantors, assign, sell, or otherwise dispose of the Intellectual
Property Collateral or any of it, either with or without special or other
conditions or stipulations, with power to buy the Intellectual Property
Collateral or any part of it, and do all other acts and things for completing
the assignment, sale or disposition which Agent shall, in its sole discretion,
deem appropriate or proper;

 

(c) In addition to the foregoing, in order to implement the assignment, sale,
license or other disposal of any of the Intellectual Property Collateral
pursuant to subparagraphs 3(a) and (b) hereof, Agent may, at any time, pursuant
to the authority granted in the Powers of Attorney described in paragraph 4
hereof (such authority becoming effective upon an Event of Default), execute and
deliver on behalf of any Grantor one or more instruments of assignment, sale,
license or other disposition of the Intellectual Property Collateral. Each
Grantor agrees to pay when due all reasonable costs incurred in any such
transfer of the Intellectual Property Collateral, including any taxes, fees and
reasonable attorneys’ fees, and all such costs shall be added to the Secured
Obligations. Agent may apply the proceeds actually received from any such
license, assignment, sale or other disposition in accordance with
subparagraph 3(d); and each Grantor shall remain liable and will pay Agent on
demand any deficiency remaining, together with interest thereon at a rate equal
to the rate then payable on the Obligations and the balance of any expenses
unpaid. Nothing herein contained shall be construed as requiring Agent to take
any such action at any time; and

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(d) Except as otherwise herein expressly provided, the proceeds of any
collection, sale or other realization of all or any part of the Intellectual
Property Collateral pursuant hereto shall be applied to the Secured Obligations
until the Secured Obligations shall have been paid in full in cash. The
application of proceeds hereunder to the Secured Obligations shall be made as
provided in the Credit Agreement.

 

4. The following documents will be concurrently executed and delivered to Agent
as conditions precedent to the execution and delivery of this Agreement: three
original Powers of Attorney, in the form of Exhibit A, Exhibit B, and Exhibit C
hereto, respectively, executed by Grantors, for the implementation of any
assignment, sale or other disposition of the Trademarks, Patents or Copyrights,
respectively, pursuant to subparagraphs 3(a) and 3(b) hereof.

 

5. No provision hereof shall be modified, altered or limited except by a written
instrument expressly referring to this Agreement and executed by the party to be
charged. The execution and delivery of this Agreement has been properly
authorized by the board of directors of each Grantor and by any necessary vote
or consent of stockholders thereof. This Agreement shall be binding upon the
successors, permitted assigns or other legal representatives of each Grantor,
and shall, together with the rights and remedies of the Lender Group hereunder
inure to the benefit of the Lender Group and the Bank Product Provider, and
their respective successors, permitted assigns or other legal representatives.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby. The obligations of Grantors hereunder are joint and several.

 

6. This Agreement shall continue to be effective and shall be reinstated in the
event that at any time after the Secured Obligations have been paid in full, any
payment of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Lender Group or the Bank Product Provider.

 

7. Upon payment and performance in full in cash by Borrowers of all of the
Secured Obligations (other than indemnification obligations for which no claim
has been made) and upon the termination of the Credit Agreement, this Agreement
shall terminate and Agent shall execute, file and record in each office in which
any financing statement or assignment relative to the Intellectual Property
Collateral, or any part thereof, shall have been filed, a termination statement,
assignment or other appropriate instrument releasing its interest therein, all
without recourse to or warranty by the Lender Group or the Bank Product Provider
and at the sole cost and expense of the Grantors.

 

8. 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.

 

9. This Agreement is hereby deemed to be the Intellectual Property Security
Agreement referenced in the Loan Agreement and constitutes a Loan Document.

 

10. This Agreement and the Loan Documents reflect the entire understanding of
the parties with respect to the transactions contemplated hereby and shall not
be contradicted or qualified by any other agreement, oral or written, before the
date hereof.

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11. This Agreement shall be construed under and governed by the laws of the
State of New York (without regard for its conflicts of laws principles but
including and giving effect to Sections 5-401 and 5-1402 of the New York General
Obligations Law).

 

12. JURY TRIAL WAIVER. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS RELATED THERETO, AND AGREES THAT ANY SUCH
ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.

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

 

SILICON GRAPHICS, INC., a Delaware corporation By:  

/s/ Jean Furter

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Its:   Vice President, Treasurer

SILICON GRAPHICS FEDERAL, INC.,

a Delaware corporation

By:  

/s/ Jeff Zellmer

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Its:   Vice President

SILICON GRAPHICS WORLD TRADE CORPORATION,

a Delaware corporation

By:  

/s/ Warren Pratt

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Its:   Executive Vice President

WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent

By:  

/s/ Mara Vaisz

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Its:   Vice President