Exhibit 10.3

    
    

FOURTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
dated as of
August 5, 2016
Among
PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P.
as a Grantor,

THE OTHER GRANTORS NAMED HEREIN,

and

KEYBANK NATIONAL ASSOCIATION,
as the Administrative Agent,

for the benefit of

THE SECURED CREDITORS NAMED HEREIN

    
    

    

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

TABLE OF CONTENTS

Page

ARTICLE I.
DEFINITIONS AND TERMS    2

Section 1.01
Defined Terms 2

Section 1.02
Additional Defined Terms 2

Section 1.03
Terms Generally 7

ARTICLE II.
SECURITY INTEREST 7

Section 2.01
Grant of Security Interest 7

Section 2.02
Excluded Property 8

Section 2.03
No Assumption of Liability 9

Section 2.04
Power of Attorney 9

Section 2.05
Irrevocable Proxy 9

ARTICLE III.
REPRESENTATIONS AND WARRANTIES 10

Section 3.01
Title and Authority 10

Section 3.02
Absence of Other Liens 10

Section 3.03
Validity of Security Interest 10

Section 3.04
Perfection of Security Interest under UCC 10

Section 3.05
Perfection Certificates 10

Section 3.06
Places of Business; Jurisdiction of Organization; Locations of Collateral 11

Section 3.07
Pledged Collateral 11

Section 3.08
[Intentionally Omitted.] 11

Section 3.09
Deposit Accounts 11

Section 3.10
Securities Accounts 11

Section 3.11
Status of Pledged Collateral 11

ARTICLE IV.
GENERAL COVENANTS 12

Section 4.01
No Other Liens; Defense of Title 12

Section 4.02
Further Assurances; Filings and Recordings 12

Section 4.03
Use and Disposition of the Collateral 12

Section 4.04
Delivery or Marking of Chattel Paper; Other Actions 13

Section 4.05
Authorization to File Financing Statements 13

Section 4.06
Maintenance of Records 13

Section 4.07
Perfection Certificates; Collateral Reports 13

Section 4.08
Legal Status 14

Section 4.09
Inspections and Verification 14

Section 4.10
Insurance 15

 
i
 

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

TABLE OF CONTENTS
(continued)
Page

Section 4.11
Proceeds of Casualty Insurance, Condemnation or Taking 15

Section 4.12
Commercial Tort Claims 15

Section 4.13
Electronic Chattel Paper and Transferable Records 15

Section 4.14
Letter-of-Credit Rights 16

Section 4.15
Protective Advances by the Administrative Agent 16

ARTICLE V.
ACCOUNTS AND COLLECTION OF ACCOUNTS 16

Section 5.01
Deposit Accounts 16

Section 5.02
Securities Accounts 16

Section 5.03
Operation of Collateral Accounts 17

Section 5.04
Collection of Accounts 17

Section 5.05
Collateral Concentration Account 17

ARTICLE VI.
PLEDGED COLLATERAL 18

Section 6.01
Delivery of Certificates and Instruments for Pledged Collateral 18

Section 6.02
No Assumption of Liability 19

Section 6.03
Registration of Collateral in the Name of the Administrative Agent19

Section 6.04
Appointment of Sub-Agents; Endorsements; etc 19

Section 6.05
Voting Rights 19

Section 6.06
Entitlement of Grantors to Cash Dividends and Distributions 19

Section 6.07
Entitlement of Administrative Agent to Dividends and Distributions 20

Section 6.08
Application of Dividends and Distributions 20

Section 6.09
Turnover by Grantors 20

Section 6.10
Registration under 1933 Act 20

Section 6.11
Sale of Pledged Equity Interests in Connection with Enforcement 21

ARTICLE VII.
Intellectual property 21

Section 7.01
Collateral Assignments; Further Assurances 21

Section 7.02
Remedies Relating to Intellectual Property 21

ARTICLE VIII.
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 22

Section 8.01
Remedies Generally 22

Section 8.02
Disposition of the Collateral 23

Section 8.03
Grant of License to Use Intellectual Property 24

Section 8.04
Waiver of Claims 24

Section 8.05
Application of Proceeds    24

Section 8.06
Remedies Cumulative    25

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

TABLE OF CONTENTS
(continued)
Page

Section 8.07
Discontinuance of Proceedings    25

Section 8.08
Purchasers of Collateral    25

ARTICLE IX.
MISCELLANEOUS    25

Section 9.01
Notices    25

Section 9.02
Entire Agreement    26

Section 9.03
Obligations Absolute    26

Section 9.04
Successors and Assigns    26

Section 9.05
Headings Descriptive    27

Section 9.06
Severability    27

Section 9.07
Enforcement Expenses, etc    27

Section 9.08
Release of Portions of Collateral    27

Section 9.09
Termination    27

Section 9.10
Administrative Agent    28

Section 9.11
Only Administrative Agent to Enforce on Behalf of Secured Creditors    28

Section 9.12
Other Creditors, etc. Not Third-Party Beneficiaries    28

Section 9.13
Counterparts    28

Section 9.14
Amendments; Additional Grantors    28

Section 9.15
Separate Actions    28

Section 9.16
Full Recourse Obligations; Effect of Fraudulent Transfer Laws    29

Section 9.17
Governing Law; Venue; Waiver of Jury Trial    29

Section 9.18
Amended and Restated Pledge and Security Agreement    29

EXHIBITS

Exhibit A        Security Agreement Joinder
Exhibit B        Perfection Certificate

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

THIS FOURTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of
August 5, 2016 (as the same may be amended, restated or otherwise modified from
time to time, this “Agreement”), among: (i)  PREFERRED APARTMENT COMMUNITIES
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Borrower”);
(ii) each of the Subsidiaries (as defined in the Credit Agreement referred to
below) of the Borrower that is a signatory hereto (each such Subsidiary,
together with each Additional Grantor (defined below) that becomes a party
hereto pursuant to Section 9.14 hereof and together with the Borrower,
collectively, the “Grantors” and, individually, each a “Grantor”); and (iii)
KEYBANK NATIONAL ASSOCIATION, as administrative agent (the “Administrative
Agent”), for the benefit of the Secured Creditors (as defined below):
RECITALS:

(1)    Borrower, Preferred Apartment Communities, Inc., a Maryland corporation
(the “Parent”), the financial institutions from time to time party to the
Original Credit Agreement (as defined below) (together with their successors and
assigns, the “Lenders”), and the Administrative Agent previously executed a
Third Amended and Restated Credit Agreement, dated as of August 28, 2015 (as
amended, restated, supplemented or otherwise modified as of the date hereof, the
“Original Credit Agreement”), whereby Lenders agreed to make revolving loans
available to Borrower in the maximum principal amount of Seventy Million Dollars
($70,000,000) (the “Existing Revolving Commitment”). In connection with the
Original Credit Agreement and the Existing Revolving Commitment, Borrower and
certain Subsidiaries of Borrower executed a Third Amended and Restated Pledge
and Security Agreement, dated as of August 28, 2015, in favor of Administrative
Agent (as so amended, the “Original Pledge Agreement”).
(2)    Pursuant to the Fourth Amended and Restated Credit Agreement, dated as of
the date hereof, among the Borrower, the Parent, the Lenders, and the
Administrative Agent (as the same may be amended, restated or otherwise modified
from time to time, the “Credit Agreement”), the Lenders have agreed to, among
other things, increase the Revolving Commitment to $135,000,000.
(3)    It is a condition precedent to the making of Loans under the Credit
Agreement that each Grantor shall have executed and delivered to the
Administrative Agent this Agreement, which amends, restates and replaces the
Original Pledge Agreement in its entirety.
(4)    Each Subsidiary Grantor is a direct or indirect Subsidiary of the
Borrower.
(5)    Each Grantor will obtain benefits from the Credit Agreement and,
accordingly, desires to execute this Agreement in order to satisfy the condition
described above and to induce the Secured Creditors to extend credit pursuant to
the Credit Agreement and other Loan Documents.
NOW, THEREFORE, in consideration of the benefits accruing to each Grantor, the
receipt and sufficiency of which are hereby acknowledged, each Grantor hereby
makes the following representations and warranties to the Administrative Agent
and to the other Secured Creditors and hereby covenants and agrees with the
Administrative Agent and to the other Secured Creditors as follows:
ARTICLE I.

DEFINITIONS AND TERMS
Section 1.01    Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined in this Agreement shall have the meanings given to such terms
in the Credit Agreement. Unless otherwise defined herein, all terms used herein
and defined in the UCC shall have the same definitions

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

herein as specified therein; provided, however, that if a term is defined in
Article 9 of the UCC differently than in another Article of the UCC, the term
shall have the meaning specified in Article 9 of the UCC.
Section 1.02    Additional Defined Terms. The following terms shall have the
meanings herein specified unless the context otherwise requires:
“Accounts Receivable” means (i) all accounts, now existing or hereafter arising;
and (ii) without limitation of the foregoing, in any event including (A) all
right to a payment, whether or not earned by performance, for goods or other
property (other than money) that has been or is to be sold, consigned, leased,
licensed, assigned or otherwise disposed of, for services rendered or to be
rendered, for a policy of insurance issued or to be issued, for a suretyship
obligation incurred or to be incurred, for energy provided or to be provided, or
for the use or hire of a vessel under a charter or other contract whether due or
to become due, whether or not it has been earned by performance, and whether now
existing or hereafter acquired or arising in the future, including Accounts
Receivable from employees and Affiliates of any Grantor, (B) all rights
evidenced by an account, invoice, purchase order, requisition, bill of exchange,
note, contract, security agreement, lease, chattel paper, or any evidence of
indebtedness or security related to the foregoing, (C) all security pledged,
assigned, hypothecated or granted to or held by a Grantor to secure the
foregoing, including all supporting obligations, (D) all guarantees, letters of
credit, banker’s acceptances, drafts, endorsements, credit insurance and
indemnifications on, for or of, any of the foregoing, including all rights to
make drawings, claims or demands for payment thereunder, and (E) all powers of
attorney for the execution of any evidence of indebtedness, guaranty, letter of
credit or security or other writing in connection therewith.
“Additional Grantor” has the meaning provided in Section 9.14.
“Administrative Agent” has the meaning provided in the first paragraph of this
Agreement.
“Agreement” has the meaning provided in the first paragraph of this Agreement.
“Borrower” has the meaning provided in the first paragraph of this Agreement.
“Collateral” has the meaning provided in Section 2.01 hereof.
“Collateral Account” means any Controlled Deposit Account or Controlled
Securities Account.
“Collateral Assignment Agreement” means a Collateral Assignment of Patents, a
Collateral Assignment of Trademarks or a Collateral Assignment of Copyrights.
“Collateral Assignment of Copyrights” means a Collateral Assignment of
Copyrights in form and substance acceptable to the Administrative Agent.
“Collateral Assignment of Patents” means a Collateral Assignment of Patents in
form and substance acceptable to the Administrative Agent.
“Collateral Assignment of Trademarks” means a Collateral Assignment of
Trademarks in form and substance acceptable to the Administrative Agent.
“Collateral Concentration Account” means a cash collateral deposit account
established in the name of the Administrative Agent, and under the sole dominion
and control of the Administrative Agent, for the benefit of the Secured
Creditors, at an office of the Administrative Agent.

Exhibit 10.3

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

“Contract Rights” means all rights of a Grantor under or in respect of a
Contract, including all rights to payment, damages, liquidated damages, and
enforcement.
“Contract” means any contract, agreement or other writing between a Grantor and
one or more additional parties.
“Control” means (i) when used with respect to any security or security
entitlement, the meaning specified in Section 8-106 of the UCC; and (ii) when
used with respect to any deposit account, the meaning specified in Section 9-104
of the UCC.
“Control Agreement” means any Deposit Account Control Agreement or Securities
Account Control Agreement or any other control agreement delivered in connection
with this Agreement.
“Controlled Deposit Account” means a deposit account (i) that is subject to a
Deposit Account Control Agreement or (ii) as to which the Administrative Agent
is the Depositary Bank’s “customer” (as defined in Section 4-104 of the UCC).
“Controlled Securities Account” means a securities account that (i) is
maintained in the name of a Grantor at an office of a Securities Intermediary
located in the United States of America and (ii) together with all financial
assets credited thereto and all related security entitlements, is subject to a
Securities Account Control Agreement.
“Copyrights” means any copyright to which a Grantor now or hereafter has title,
as well as any application for a copyright hereafter made by such Grantor.
“Credit Agreement” has the meaning provided in the Recitals of this Agreement.
“Deposit Account Control Agreement” means, with respect to a deposit account of
a Grantor, a Deposit Account Control Agreement in form and substance acceptable
to the Administrative Agent among such Grantor, the Administrative Agent and the
relevant Depositary Bank.
“Depositary Bank” means a bank at which a deposit account of any Grantor is
maintained.
“Equity Interests” means (i) all of the issued and outstanding shares of all
classes of capital stock of any corporation at any time directly owned by any
Grantor and the certificates representing such capital stock, (ii) all of the
membership interests in a limited liability company at any time owned or held by
any Grantor, and (iii) all of the equity interests in any other form of
organization at any time owned or held by any Grantor.
“Event of Default” means any Event of Default under, and as defined in, the
Credit Agreement.
“Governing Documents” means all agreements and instruments evidencing or
relating to investments in or ownership, voting or disposition of, any of the
Pledged Collateral.
“Grantor” and “Grantors” have the meaning provided in the first paragraph of
this Agreement.
“Intercompany and Third-Party Notes” means all promissory notes, instruments,
debentures, bonds, evidences of indebtedness and similar securities from time to
time issued to, or held by, any Grantor.
“Issuer” means the issuer of any Pledged Collateral.

Exhibit 10.3

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

“Intellectual Property” means (i) all Trademarks, together with the
registrations and right to all renewals thereof, and the good will of the
business of any Grantor symbolized by the Trademarks; (ii) all Patents; (iii)
all Copyrights; (iv) all computer programs and software applications and source
codes of such Grantor and all intellectual property rights therein and all other
Proprietary Information of such Grantor, including Trade Secrets; and (v) all
Permits.
“Inventory” means (i) all inventory; and (ii) without limitation of the
foregoing, and in all cases including all merchandise and other goods held for
sale or lease, or furnished or to be furnished under contracts for service,
including raw materials, works in process, finished goods, products made or
processed, intermediates, packing materials, shipping materials, labels,
semi-finished inventory, scrap inventory, spare parts inventory, manufacturing
supplies, consumable supplies, other substances commingled therewith or added
thereto, and all such goods that have been returned, reclaimed, repossessed or
exchanged.
“Lender” has the meaning provided in the Recitals of this Agreement.
“Loan Document Obligations” means, collectively, (i) the principal of and
interest on the Notes issued by, and the Loans made to, the Borrower under the
Credit Agreement, (ii) all indebtedness and other obligations of Parent and each
Subsidiary Grantor under the Guaranty, (iii) all other indebtedness, obligations
and liabilities owing by the Borrower and the other Credit Parties to the
Administrative Agent or any of the Lenders under the Credit Agreement and the
other Loan Documents to which the Borrower or any other Credit Party is now or
may hereafter become a party (including indemnities, fees and other amounts
payable thereunder), whether primary, secondary, direct, contingent, fixed or
otherwise, in all cases whether now existing, or hereafter incurred or arising,
including any such interest or other amounts incurred or arising during the
pendency of any bankruptcy, insolvency, reorganization, receivership or similar
proceeding, regardless of whether allowed or allowable in such proceeding or
subject to an automatic stay under Section 362(a) of the Bankruptcy Code and
(iv) all other Obligations. Notwithstanding anything to the contrary in this
definition, “Loan Document Obligations” shall not include any Excluded Swap
Obligations.
“Notice of Exclusive Control” means a “Notice of Exclusive Control” as defined
in each of the Control Agreements.
“Patents” means any patent to which a Grantor now or hereafter has title, as
well as any application for a patent now or hereafter made by a Grantor.
“Perfection Certificate” means a certificate in the form of Exhibit B hereto,
completed and supplemented with the schedules contemplated thereby to the
reasonable satisfaction of the Administrative Agent, and signed by an Authorized
Officer of the applicable Grantor delivering the same.
“Permits” means all licenses, permits, rights, orders, variances, franchises or
authorizations of or from any Governmental Authority.
“Pledged Collateral” means the Pledged Equity Interests and the Pledged Debt.
“Pledged Debt” means all of the Intercompany and Third-Party Notes presently
owned or hereafter acquired from time to time by any Grantor, and all interest,
cash, instruments and other property hereafter from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing.
“Pledged Entity” means the Issuer of any Pledged Equity Interests.

Exhibit 10.3

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

“Pledged Equity Interests” means all of the Equity Interests now owned or
hereafter acquired by each Grantor (other than Equity Interests that are
excluded from the Collateral pursuant to Section 2.02), and all of such
Grantor’s other rights, title and interests in, or in any way related to, each
Pledged Entity to which any of such Equity Interests relate, including: (i) all
dividends, cash, instruments and other property hereafter from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such Equity Interests and in all profits, losses and other
distributions to which such Grantor shall at any time be entitled in respect of
any such Equity Interest; (ii) all other payments due or to become due to such
Grantor in respect of any such Equity Interest, whether under any partnership
agreement, limited liability company agreement, other agreement or otherwise,
whether as contractual obligations, damages, insurance proceeds or otherwise;
(iii) all of such Grantor’s claims, rights, powers, privileges, authority, puts,
calls, options, security interests, liens and remedies, if any, under any
partnership agreement, limited liability company agreement, other agreement or
at law or otherwise in respect of any such Equity Interest; (iv) all present and
future claims, if any, of such Grantor against any such Pledged Entity for
moneys loaned or advanced, for services rendered or otherwise; (v) all of such
Grantor’s rights under any partnership agreement, limited liability company
agreement, other agreement or at law to exercise and enforce every right, power,
remedy, authority, option and privilege of such Grantor relating to any such
Equity Interest; (vi) all other property hereafter delivered in substitution for
or in addition to any of the foregoing; (vii) all certificates and instruments
representing or evidencing any of the foregoing; and (vii) all cash, securities,
interest, distributions, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof.
“Proceeds” means (i) all proceeds; and (ii) without limitation of the foregoing
and in all cases, including (A) whatever is acquired upon the sale, lease,
license, exchange, or other disposition of any Collateral, (B) whatever is
collected on, or distributed on account of, any Collateral, (C) rights arising
out of any Collateral, (D) claims arising out of the loss or nonconformity of,
defects in, or damage to any Collateral, (E) claims and rights to any proceeds
of any insurance, indemnity, warranty or guaranty payable to a Grantor (or the
Administrative Agent, as assignee, loss payee or an additional insured) with
respect to any of the Collateral, (G) claims and rights to payments (in any form
whatsoever) made or due and payable to a Grantor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any Governmental Authority (or any Person
acting under color of Governmental Authority), (H) all cash, money, checks and
negotiable instruments received or held on behalf of the Administrative Agent
pursuant to any lockbox or similar arrangement relating to the payment of
Accounts Receivable or other Collateral, and (I) any and all other amounts from
time to time paid or payable under or in connection with any of the Collateral.
“Proprietary Information” means all information and know-how worldwide,
including technical data; manufacturing data; research and development data;
data relating to compositions, processes and formulations, manufacturing and
production know-how and experience; management know-how; training programs;
manufacturing, engineering and other drawings; specifications; performance
criteria; operating instructions; maintenance manuals; technology; technical
information; software; computer programs; engineering and computer data and
databases; design and engineering specifications; catalogs; promotional
literature; financial, business and marketing plans; and inventions and
invention disclosures.
“Secured Creditors” means, collectively, the Administrative Agent, the Lenders,
each Secured Hedge Provider and each Designated Hedge Creditor and the
respective successors and assigns of each of the foregoing.
“Secured Obligations” means, collectively, (i) all Loan Document Obligations;
(ii) any and all sums advanced by the Administrative Agent in order to preserve
any of the Collateral or to preserve or protect its

Exhibit 10.3

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

security interest in such Collateral, including sums advanced to pay or
discharge insurance premiums, taxes, Liens and claims; and (iii) in the event of
any proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities referred to in clauses (i) and (ii) above, the
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on any of the Collateral, or of any exercise
by the Administrative Agent of its rights hereunder in respect of any Grantor or
any of the Collateral, together with reasonable out-of-pocket attorneys’ fees
and court costs. Notwithstanding anything to the contrary in this definition,
“Secured Obligations” shall not include any Excluded Swap Obligations.
“Securities Account Control Agreement” means, with respect to a securities
account of a Grantor, a Securities Account Control Agreement in form and
substance acceptable to the Administrative Agent among the relevant Securities
Intermediary, such Grantor and the Administrative Agent.
“Securities Intermediary” means a clearing corporation or a Person, including a
bank or broker, that in the ordinary course of its business maintains securities
accounts for others and is acting in that capacity.
“Security Agreement Joinder” means a Security Agreement Joinder, substantially
in the form of Exhibit A hereto, or otherwise in form and substance acceptable
to the Administrative Agent.
“SPE” means the entities set forth on Schedule 2 attached hereto.
“Subsidiary Grantor” means each Grantor other than the Borrower.
“Trademarks” means any trademarks and service marks now held or hereafter
acquired by a Grantor, any unregistered marks used by a Grantor and trade dress
including logos and/or designs in connection with which any of these registered
or unregistered marks are used.
“Trade Secrets” means any secretly held existing engineering and other data,
information, production procedures and other know-how relating to the design,
manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of a Grantor worldwide whether written or
not written.
“UCC” means the Uniform Commercial Code, as at any time adopted and in effect in
the State of New York, or if the context indicates otherwise, in effect in the
applicable jurisdiction, in each case specifically including and taking into
account all amendments, supplements, revisions and other modifications thereto.
Section 1.03    Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include,” “includes” and “including” shall
be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
restated, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein), (b) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, and (d) unless otherwise
specified, all references herein to Sections, Schedules, Annexes and Exhibits
shall be construed to refer to Sections of, and Schedules, Annexes and Exhibits
to, this Agreement.

Exhibit 10.3

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

ARTICLE II.
    

SECURITY INTEREST
Section 2.01    Grant of Security Interest. As security for the prompt and
complete payment and performance when due of all of the Secured Obligations,
each Grantor does hereby pledge, sell, assign and transfer unto the
Administrative Agent, and does hereby grant to the Administrative Agent, for the
benefit of the Secured Creditors, a continuing security interest in all of the
right, title and interest of such Grantor in, to and under all of the following
of each Grantor, whether now existing or hereafter from time to time arising or
acquired and wherever located (collectively, the “Collateral”):
(i)    all accounts, including each and every Account Receivable;
(ii)    all goods;
(iii)    all Inventory;
(iv)    all equipment;
(v)    all documents;
(vi)    all instruments;
(vii)    all chattel paper;
(viii)    all money;
(ix)    all deposit accounts, including the Collateral Concentration Account and
all Controlled Deposit Accounts, together with all monies, securities and
instruments at any time deposited in any such deposit account or otherwise held
for the credit thereof;
(x)    all securities accounts, together with all financial assets credited
therein from time to time, and all financial assets, monies, securities, cash
and other property held therein or credited thereto;
(xi)    all investment property;
(xii)    all fixtures;
(xiii)    all as-extracted collateral, including all minerals;
(xiv)    all general intangibles, including all Contract Rights;
(xv)    all commercial tort claims;
(xvi)    all Intellectual Property;
(xvii)    all letters of credit and letter-of-credit rights;
(xviii)    all payment intangibles;

Exhibit 10.3

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

(xix)    all promissory notes;
(xx)    all supporting obligations;
(xxi)    all Pledged Debt and Pledged Equity Interests;
(xxii)    all other items, kinds and types of personal property, tangible or
intangible, of whatever nature, and regardless of whether the creation or
perfection or effect of perfection or non-perfection of a security interest
therein is governed by the UCC of any particular jurisdiction or by any other
applicable treaty, convention, statute, law or regulation of any applicable
jurisdiction;
(xxiii)    all additions, modifications, alterations, improvements, upgrades,
accessions, components, parts, appurtenances, substitutions and/or replacements
of, to or for any of the foregoing; and
(xxiv)    all Proceeds and products of any and all of the foregoing.
Section 2.02    Excluded Property. Notwithstanding anything in Section 2.01
hereof to the contrary, the term Collateral shall not include: (i) any equipment
or goods that are subject to a “purchase money security interest” to the extent
that such purchase money security interest (x) constitutes a Permitted Lien
under the Credit Agreement and (y) prohibits the creation by a Grantor of a
junior security interest therein, unless the holder thereof has consented to the
creation of such a junior security interest; (ii) any Equity Interests in any
Real Estate Subsidiary, if (a) the terms of the Property Senior Loan Documents
of such Subsidiary or (b) a provision of such Subsidiary Organizational
Documents included either as a condition of the Property Senior Loan Documents
or as a condition to the negotiated business arrangement with the holder of an
Equity Interest in any such Subsidiary that is a Non-Wholly Owned Subsidiary, in
either case, do not permit the grant of a security interest in such Equity
Interests by the owner thereof or the applicable Grantor has been unable to
obtain any approval or consent to the creation of a security interest therein
which is required under such Property Senior Loan Documents or Organizational
Documents; provided that such security interest shall attach immediately and
automatically to such Equity Interests in such Subsidiary if such Subsidiary is
no longer subject to such restrictions or such approval or consent is obtained;
(iii) any Equity Interests in a Real Estate Subsidiary in excess of 49% of the
Equity Interests in such Real Estate Subsidiary; provided that such security
interest shall attach immediately and automatically to the remaining 51% of the
Equity Interests in such Real Estate Subsidiary if such Real Estate Subsidiary
is no longer subject to a any restriction in any document or agreement entered
into in connection with the incurrence of Indebtedness permitted by the Credit
Agreement that prohibits the Grantor that owns the Equity Interests in such Real
Estate Subsidiary from granting a security interest in more than 49% of the
Equity Interests of such Real Estate Subsidiary, (iv) any Equity Interests in
any Subsidiary whose assets consist solely of Equity Interests in another
Subsidiary, (v) so long as the Anderson Interim Loan Agreement is in effect, any
Equity Interest in New Market-Anderson or any property of New Market Anderson
that would otherwise constitute Collateral, provided that such security interest
shall attach upon termination of the Anderson Interim Loan Agreement unless
excluded pursuant to either of clauses (ii) or (iii) of this Section, and (vi)
any Equity Interests owned or acquired by a Grantor in a Subsidiary of such
Grantor, which Subsidiary does not own or have any interests in any property;
provided that, subject to the foregoing clauses (ii) and (iii), such Equity
Interests shall be Pledged Equity Interests and constitute Collateral upon such
Subsidiary owing or having any interests in any property.
Section 2.03    No Assumption of Liability. The security interest hereunder of
any Grantor is granted as security only and shall not subject the Administrative
Agent or any other Secured Creditor to,

Exhibit 10.3

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

or in any way alter or modify, any obligation or liability of such Grantor with
respect to or arising out of any of the Collateral.
Section 2.04    Power of Attorney. Each Grantor hereby irrevocably constitutes
and appoints the Administrative Agent its true and lawful agent and
attorney-in-fact, and in such capacity the Administrative Agent shall have, upon
the occurrence and continuance of an Event of Default, without any further
action required by or on behalf of any Grantor, the right, with full power of
substitution, in the name of such Grantor or otherwise, for the use and benefit
of the Administrative Agent and the other Secured Creditors: (i) to receive,
endorse, present, assign, deliver and/or otherwise deal with any and all notes,
acceptances, letters of credit, checks, drafts, money orders, or other evidences
of payment relating to the Collateral of such Grantor or any part thereof; (ii)
to demand, collect, receive payment of, and give receipt for and give credits,
allowances, discounts, discharges, releases and acquittances of and for any or
all of the Collateral of such Grantor; (iii) to sign the name of such Grantor on
any invoice or bill of lading relating to any of the Collateral of such Grantor;
(iv) to send verifications of any or all of the Accounts Receivable of such
Grantor to its account debtors; (v) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in or before any court or other
tribunal (including any arbitration proceedings) to collect or otherwise realize
on all or any of the Collateral of such Grantor, or to enforce any rights of
such Grantor in respect of any of its Collateral; (vi) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to any or
all of the Collateral of such Grantor; (vii) to notify, or require such Grantor
to notify or cause to be notified, its account debtors to make payment directly
to the Administrative Agent or to a Controlled Deposit Account; or (viii) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with any or all of the Collateral of such Grantor, and to do all
other acts and things necessary or appropriate to carry out the intent and
purposes of this Agreement, as fully and completely as though the Administrative
Agent were the absolute owner of the Collateral of such Grantor for all
purposes.
Section 2.05    Irrevocable Proxy. Each Grantor hereby irrevocably grants and
appoints Administrative Agent, from the date of this Agreement until the
termination of this Agreement in accordance with its terms, as such Grantor’s
true and lawful proxy, for and in such Grantor’s name, place and stead to vote,
upon the occurrence and continuance of an Event of Default, the Pledged Equity
Interest in any Pledged Entity by such Grantor, whether directly or indirectly,
beneficially or of record, now owned or hereafter acquired. The proxy granted
and appointed in this Section 2.05 shall include the right to sign any Grantor’s
name (as a member of a Pledged Entity) to any consent, certificate or other
document relating to the Pledged Equity Interests that applicable law may permit
or require, to cause the Pledged Equity Interests to be voted in accordance with
the preceding sentence. Each Grantor hereby represents and warrants that there
are no other proxies and powers of attorney and the Pledged Equity Interests
that any Grantor may have granted or appointed. No Grantor will give a
subsequent proxy or power of attorney or enter into any other voting agreement
with respect to the Pledged Equity Interests and any attempt to do so shall be
void and of no effect. The proxies and powers granted by each Grantor pursuant
to this Agreement are coupled with an interest and are given to secure the
performance of such Grantor’s obligations.
ARTICLE III.
                 REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Administrative Agent and the other
Secured Creditors, which representations and warranties shall survive the
execution and delivery of this Agreement until the termination of this Agreement
in accordance with Section 9.09, as follows:

Exhibit 10.3

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

Section 3.01    Title and Authority. Such Grantor has (i) good, valid and
unassailable title to all tangible items owned by it and constituting any
portion of the Collateral with respect to which it has purported to grant the
security interest, and good, valid and unassailable rights in all other
Collateral with respect to which it has purported to grant the security
interest, and (ii) full power and authority to grant to the Administrative Agent
the security interest in such Collateral pursuant hereto and to execute, deliver
and perform its obligations in accordance with the terms of this Agreement,
without the consent or approval of any other Person other than any consent or
approval that has been obtained.
Section 3.02    Absence of Other Liens.
(a)    There is no financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering or purporting to cover
any interest of any kind of such Grantor in the Collateral, except for any
filings or recordings made in connection with any Permitted Liens.
(b)    Such Grantor is, and as to any Collateral acquired by it from time to
time after the date hereof such Grantor will be, the owner of all of its
Collateral free and clear of any Lien except for Permitted Liens, and the
security interest of such Grantor in its Collateral is and will be superior and
prior to any other security interest or other Lien, except for Permitted Liens
that are prior by operation of applicable law.
Section 3.03    Validity of Security Interest. The security interest of such
Grantor constitutes a legal, valid and enforceable first priority (except as to
any Permitted Liens that are prior by operation of applicable law) security
interest in all of the Collateral of such Grantor, securing the payment and
performance of the Secured Obligations.
Section 3.04    Perfection of Security Interest under UCC.
(a)    All notifications and other actions, including (i) all deposits of
certificates and instruments evidencing any Collateral (duly endorsed or
accompanied by appropriate instruments of transfer), (ii) all notices to and
acknowledgments of any bailee or other Person, (iii) all acknowledgments and
agreements respecting the right of the Administrative Agent to obtain control
with respect to any Collateral, and (iv) all filings, registrations and
recordings, which are (x) required by the terms of this Agreement to have been
given, made, obtained, done and accomplished, and (y) necessary to create,
preserve, protect and perfect the security interest granted by such Grantor to
the Administrative Agent hereby in respect of its portion of the Collateral,
have been given, made, obtained, done and accomplished.
(b)    After giving effect to all such actions, the security interest granted by
such Grantor to the Administrative Agent pursuant to this Agreement in and to
its portion of the Collateral will be perfected to the maximum extent a security
interest in such Grantor’s portion of the Collateral can be perfected under the
UCC of any applicable jurisdiction.
Section 3.05    Perfection Certificates. Each Perfection Certificate delivered
by any Grantor (whether delivered pursuant to Section 4.07(a) of this Agreement
or pursuant to the Credit Agreement), and all information set forth therein, is
true and correct in all respects, except to the extent that such Perfection
Certificate has been supplemented or replaced in each case in accordance with
this Agreement.
Section 3.06    Places of Business; Jurisdiction of Organization; Locations of
Collateral. Each Grantor represents and warrants that (i) the principal place of
business of such Grantor, or its chief executive office, if it has more than one
place of business, is located at the address indicated on the most

Exhibit 10.3

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

recent Perfection Certificate executed and delivered by such Grantor to the
Administrative Agent; (ii) the jurisdiction of formation or organization of such
Grantor is set forth on the most recent Perfection Certificate executed and
delivered by such Grantor to the Administrative Agent; and (iii) the U.S.
Federal Tax I.D. Number and, if applicable, the organizational identification
number of such Grantor is set forth on the most recent Perfection Certificate
executed and delivered by such Grantor to the Administrative Agent. Such Grantor
does not, at and as of the date hereof, conduct business in any jurisdiction,
and except as set forth in the most recent Perfection Certificate delivered to
the Administrative Agent, in the preceding five years, such Grantor and any
predecessors in interest have not conducted business in any jurisdiction, under
any trade name, fictitious name or other name (including any names of divisions
or predecessor entities), except the current legal name of such Grantor and such
other trade, fictitious and other names as are listed on the most recent
Perfection Certificate executed and delivered by such Grantor to the
Administrative Agent.
Section 3.07    Pledged Collateral. Schedule 1 hereto sets forth a true and
complete list of all of the Pledged0 Collateral owned by each Grantor as of the
Closing Date. As of the Closing Date, all of the Equity Interests that
constitute Pledged Equity Interests are “Securities” under Article 8 of the UCC
(other than the Equity Interests of the SPEs that constitute Pledged Equity
Interests).
Section 3.08    [Intentionally Omitted.]
Section 3.09    Deposit Accounts. The most recent Perfection Certificate
delivered by each Grantor to the Administrative Agent sets forth a true and
complete list of all deposit accounts owned by each Grantor or in which any such
Grantor’s Collateral is held. To the extent required pursuant to Section 5.01 of
this Agreement, all of the deposit accounts of each Grantor are, and all cash
and money of each Grantor is held in, Controlled Deposit Accounts.
Section 3.10    Securities Accounts. The most recent Perfection Certificate
delivered by each Grantor to the Administrative Agent sets forth a true and
complete list of all securities accounts owned by each Grantor or in which any
such Grantor’s Collateral is held. Unless otherwise permitted pursuant to
Section 5.02 of this Agreement, no Grantor has any securities accounts or
otherwise owns or is entitled to any financial assets or securities entitlements
other than Controlled Securties Accounts and financial assets or securities
entitlements that are subject to a Controlled Securities Account.
Section 3.11    Status of Pledged Collateral. All of the Pledged Equity
Interests of each Grantor hereunder have been duly and validly issued and are
fully paid and non-assessable (to the extent such concepts are applicable to the
respective Equity Interests). All of the Pledged Debt of each Grantor is the
legal, valid and binding obligation of the Issuer thereof, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors’ rights and by equitable
principles. Except as permitted pursuant to the Credit Agreement, no Grantor has
any obligation to make any further or additional loans or advances to, or
purchases of securities from, any Issuer with respect to any of the Pledged
Debt. No Grantor is in default in the payment of any portion of any mandatory
capital contribution, cash call, or other funding, if any, required to be made
under any Governing Document relating to any of the Pledged Equity Interests of
such Grantor. No Grantor is in violation or default of any other material
provisions of any such Governing Document. No Pledged Collateral of any Grantor
is subject to any defense, offset or counterclaim, nor have any of the foregoing
been asserted or alleged against such Grantor by any Person.

Exhibit 10.3

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

ARTICLE IV.
    

GENERAL COVENANTS
Section 4.01    No Other Liens; Defense of Title. No Grantor will make or grant,
or suffer or permit to exist, any Lien on any of its Collateral, other than the
Permitted Liens that are prior by operation of applicable law. Each Grantor, at
its sole cost and expense, will take any and all actions reasonably necessary
and appropriate to defend title to its Collateral against any and all Persons
and to defend the validity, enforceability, perfection and effectiveness of the
security interest of the Administrative Agent therein against any Lien other
than Permitted Liens and the priority of the security interest of the
Administrative Agent therein against any Lien other than any Permitted Lien that
has priority by operation of applicable law.
Section 4.02    Further Assurances; Filings and Recordings.
(a)    Each Grantor, at its sole cost and expense, will duly execute,
acknowledge and deliver all such agreements, instruments and other documents and
take all such actions (including (i) physically pledging instruments, documents,
promissory notes, chattel paper and certificates evidencing any investment
property or any of the Pledged Collateral with the Administrative Agent, (ii)
obtaining securities account Control Agreements and Deposit Account Control
Agreements in accordance with this Agreement as the Administrative Agent
requests, (iii) obtaining from other Persons lien waivers and bailee letters as
the Administrative Agent shall reasonably request, (iv) obtaining from other
Persons agreements evidencing the exclusive control and dominion of the
Administrative Agent over any of the Collateral, in instances where obtaining
control over such Collateral is the only or best method of perfection, and (v)
making filings, recordings and registrations), as the Administrative Agent may
from time to time instruct to better assure, preserve, protect and perfect the
security interest of the Administrative Agent in the Collateral of such Grantor,
and the rights and remedies of the Administrative Agent hereunder, or otherwise
to further effectuate the intent and purposes of this Agreement and to carry out
the terms hereof.
(b)    Each Grantor, at its sole cost and expense, will (i) at all times cause
this Agreement (and/or proper notices, financing statements or other
registrations or filings in respect hereof, and supplemental collateral
assignments or collateral security agreements in respect of any portion of the
Collateral) to be duly filed, recorded, registered and published, and re-filed,
re-recorded, re-registered and re-published in such manner and in such places as
may be required under the UCC or other applicable law in order to establish,
perfect, preserve and protect the rights, remedies and security interest of the
Administrative Agent in or with respect to the Collateral of such Grantor, and
(ii) pay all taxes, fees and charges and comply with all statutes and
regulations applicable to such filing, recording, registration and publishing
and such re-filing, re-recording, re-registration and re-publishing.
Section 4.03    Use and Disposition of the Collateral. Unless and until an Event
of Default shall have occurred and be continuing and the Administrative Agent
shall have notified the Grantors thereof in writing that the rights of any or
all of the Grantors under this Section 4.03(a) are suspended during the
continuance of such Event of Default, each Grantor may use and dispose of its
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document.
Section 4.04    Delivery or Marking of Chattel Paper; Other Actions. Without
limitation of any of the provisions of Section 4.02(a) or Section 4.13 hereof:

Exhibit 10.3

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

(a)    If any amount payable to a Grantor under or in connection with any of the
Collateral shall be or become evidenced by any chattel paper, document,
promissory note or instrument, such Grantor will, unless otherwise agreed to in
writing by the Administrative Agent, cause such chattel paper, document,
promissory note or instrument to be delivered to the Administrative Agent and
pledged as part of the Collateral hereunder, accompanied by any appropriate
instruments or endorsements or transfer. In the case of any chattel paper, the
Administrative Agent may require, in lieu of the delivery thereof to the
Administrative Agent, that the writings evidencing the chattel paper be legended
to reflect the security interest of the Administrative Agent therein, all in a
manner acceptable to the Administrative Agent.
(b)    If at any time any Grantor shall take and perfect a security interest in
any property of an account debtor, as security for the Accounts Receivable owed
by such account debtor and/or any of its Affiliates, or take and perfect a
security interest arising out of the consignment to any Person of any Inventory
or other Collateral, such Grantor shall, if requested by the Administrative
Agent (which request may be made by the Administrative Agent only upon the
written instructions of the Required Lenders, issued by the Required Lenders, in
their sole respective discretion), promptly execute and deliver to the
Administrative Agent a separate assignment of all financing statements and other
filings made to perfect the same. Such separate assignment need not be filed of
public record unless necessary to continue the perfected status of the security
interest of such Grantor against creditors of any transferees from the account
debtor or consignee.
Section 4.05    Authorization to File Financing Statements. Each Grantor
irrevocably authorizes the Administrative Agent at any time and from time to
time to file in any jurisdiction any initial financing statements and all
amendments thereto that (a) indicate the Collateral (i) as “all assets” or “all
personal property” of such Grantor or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of the UCC, or (ii) as being of an equal or lesser scope or with greater detail,
and (b) contain any other information required pursuant to the UCC for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether such Grantor is an organization, the type of organization
and any organization identification number, and (ii) in the case of a financing
statement that is filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates.
Section 4.06    Maintenance of Records. Each Grantor will keep and maintain at
its own cost and expense reasonably satisfactory and complete records of its
Accounts Receivable, Contracts and other Collateral, including the originals of
all documentation with respect thereto, records of all payments received, all
credits granted thereon, all merchandise returned and all other dealings
therewith. All billings and invoices issued by a Grantor with respect to its
Accounts Receivable will be in compliance with, and conform to, the requirements
of all applicable federal, state and local laws and any applicable laws of any
relevant foreign jurisdiction. If an Event of Default shall have occurred and be
continuing and the Administrative Agent so directs, each Grantor shall legend,
in form and manner reasonably satisfactory to the Administrative Agent, its
Accounts Receivable and Contracts, as well as books, records and documents of
such Grantor evidencing or pertaining thereto with an appropriate reference to
the fact that such Accounts Receivable and Contracts have been assigned to the
Administrative Agent and that the Administrative Agent has a security interest
therein.
Section 4.07    Perfection Certificates; Collateral Reports.
(a)    Each Grantor shall provide to the Administrative Agent a completed
Perfection Certificate, duly executed by an Authorized Officer of such Grantor,
together with all schedules required

Exhibit 10.3

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

to be delivered in connection therewith (i) on the Closing Date as required
pursuant to the Credit Agreement, (ii) on the date that a Subsidiary is
required, pursuant to Section 6.09 of the Credit Agreement, to execute a
Guaranty Supplement and provide documentation and other deliverables to the
Administrative Agent and (iii) any other date reasonably requested by the
Administrative Agent.
(b)    Collateral Reports. Whenever requested to do so by the Administrative
Agent, each Grantor will promptly, at its own sole cost and expense, deliver to
the Administrative Agent, in written hard copy form or other readable form, as
specified by the Administrative Agent, such listings, agings, descriptions,
schedules and other reports with respect to its Accounts Receivable, Inventory,
equipment and other Collateral as the Administrative Agent may instruct, all of
the same to be in such scope, categories and detail as the Administrative Agent
may reasonably request and to be accompanied by copies of invoices and other
documentation as and to the extent instructed by the Administrative Agent.
Section 4.08    Legal Status. Each Grantor agrees that (a) it will not change
its name, place of business or if more than one, chief executive office, or its
mailing address or organizational identification number if it has one, in each
case without providing the Administrative Agent at least thirty days’ prior
written notice thereof, (b) if such Grantor does not have an organizational
identification number and later obtains one, it will promptly notify the
Administrative Agent of such organizational identification number, and (c) it
will not change its type of organization, jurisdiction of organization or other
legal structure in each case unless (i) it shall have provided the
Administrative Agent at least thirty days’ prior written notice thereof, and
(ii) such action is permitted pursuant to the Credit Agreement.
Section 4.09    Inspections and Verification. The Administrative Agent and such
Persons as the Administrative Agent may designate shall have the right, at the
Administrative Agent’s and the Lenders’ cost and expense (or if an Event of
Default has occurred and is continuing, the Grantor’s own cost and expense), at
any time or from time to time, on not less than two Business Days’ prior notice
to the Borrower (on behalf of any applicable Grantor) if no Event of Default has
occurred and is continuing, and in the event an Event of Default has occurred
and is continuing, on not less than one Business Day’s prior notice to the
Borrower (on behalf of any applicable Grantor), to inspect the Collateral of
such Grantor, all books and records related thereto (and to make extracts and
copies thereof) and the premises upon which any of such Collateral is located,
to discuss such Grantor’s affairs with the officers of such Grantor and its
independent accountants, and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, such Collateral, including, in the case of accounts or other
Collateral in the possession of any third Person, by contacting account debtors
or the third Person possessing such Collateral (after not less than two days’
prior notice to the applicable Grantor) for the purpose of making such
verification. Any procedures or actions taken, prior to the occurrence and
continuance of an Event of Default, in order to verify accounts by contacting
account debtors, shall be effected by the Borrower’s independent accountants,
acting at the direction of the Administrative Agent, in such manner (consistent
with their normal auditing procedures) so as not to reveal the identity of the
Administrative Agent or the existence of the security interest to the account
debtors. The Borrower will instruct its independent accountants to undertake any
such verification when and as requested by the Administrative Agent. The results
of any such verification by independent accountants shall be reported by such
independent accountants to both the Administrative Agent and the Borrower. The
Administrative Agent shall have the absolute right to share any information it
gains from any such inspection or verification or from collateral reports
furnished to it by a Grantor with the other Secured Creditors.

Exhibit 10.3

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

Section 4.10    Insurance. Each Grantor will at all times keep its business and
its Collateral insured in accordance with Section 6.03 of the Credit Agreement.
Section 4.11    Proceeds of Casualty Insurance, Condemnation or Taking.
(a)    All amounts recoverable under any policy of casualty insurance or any
award for the condemnation or taking by any governmental authority of any
portion of the Collateral are hereby assigned to the Administrative Agent.
(b)    Each Grantor will apply any such proceeds or amounts received by it in
the manner provided in the Credit Agreement, including, if required under the
terms of the Credit Agreement, by paying over the same directly to the
Administrative Agent.
(c)    In the event any portion of the Collateral suffers a casualty loss or is
involved in any proceeding for condemnation or taking by any Governmental
Authority, then if an Event of Default has occurred and is continuing, the
Administrative Agent is authorized and empowered, at its option, to participate
in, control, direct, adjust, settle and/or compromise any such loss or
proceeding, to collect and receive the proceeds therefrom and, after deducting
from such proceeds any expenses incurred by it in connection with the collection
or handling thereof, to apply the net proceeds to the Secured Obligations in
accordance with Section 8.03 of the Credit Agreement.
(d)    If any proceeds are received by the Administrative Agent as a result of a
casualty, condemnation or taking involving the Collateral and no Event of
Default has occurred and is continuing, then the Administrative Agent will
promptly release such proceeds to the applicable Grantor, unless the Credit
Agreement provides otherwise.
Section 4.12    Commercial Tort Claims. If any Grantor shall at any time hold or
acquire a commercial tort claim, the recovery from which could reasonably be
expected to exceed $1,000,000, such Grantor shall promptly notify the
Administrative Agent thereof in a writing signed by such Grantor, which sets
forth the details thereof and grants to the Administrative Agent (for the
benefit of the Secured Parties) a Lien thereon and on the Proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to the Administrative Agent.
Section 4.13    Electronic Chattel Paper and Transferable Records. If any
Grantor at any time holds or acquires an interest in any electronic chattel
paper or any “transferable record,” as defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act, as in effect in any relevant
jurisdiction, such Grantor shall promptly notify the Administrative Agent
thereof and, at the request of the Administrative Agent, shall take such action
as the Administrative Agent may reasonably request to vest in the Administrative
Agent control under the UCC or control under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in
such jurisdiction, of such transferable record. The Administrative Agent agrees
with such Grantor that the Administrative Agent will arrange, pursuant to
procedures reasonably satisfactory to the Administrative Agent and so long as
such procedures will not result in the Administrative Agent’s loss of control,
for the Grantor to make alterations to the electronic chattel paper or
transferable record permitted under the UCC or, as the case may be, Section 201
of the Federal Electronic Signatures in Global and National Commerce Act or
Section 16 of the Uniform Electronic Transactions Act for a party in control to
allow without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Grantor
with respect to such electronic chattel paper or transferable record.

Exhibit 10.3

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

Section 4.14    Letter-of-Credit Rights. If any Grantor is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of such
Grantor, such Grantor shall promptly notify the Administrative Agent thereof
and, at the request of the Administrative Agent, such Grantor shall, pursuant to
an agreement in form and substance satisfactory to the Administrative Agent,
either (i) arrange for the issuer or any confirming bank of such letter of
credit to consent to an assignment to the Administrative Agent of the proceeds
of any drawing under the letter of credit or (ii) arrange for the Administrative
Agent to become the transferee beneficiary of the letter of credit, with the
Administrative Agent agreeing, in each case, that the proceeds of any drawing
under the letter of credit are to be paid to the applicable Grantor unless an
Event of Default has occurred and is continuing.
Section 4.15    Protective Advances by the Administrative Agent. At its option,
but without being obligated to do so, the Administrative Agent may, upon prior
notice to any applicable Grantor, after the occurrence and during the
continuance of an Event of Default, (i) pay and discharge past due taxes,
assessments and governmental charges, at any time levied on or with respect to
any of the Collateral of such Grantor which such Grantor has failed to pay and
discharge in accordance with the requirements of this Agreement or any of the
other Loan Documents, (ii) pay and discharge any claims of other creditors of
such Grantor which are secured by any Lien on any Collateral, other than a
Permitted Lien, (iii) pay for the maintenance, repair, restoration and
preservation of the Collateral to the extent such Grantor fails to comply with
its obligations in regard thereto under this Agreement and the other Loan
Documents or the Administrative Agent reasonably believes payment of the same is
necessary or appropriate to avoid a material loss or material diminution in
value of the Collateral, and/or (iv) obtain and pay the premiums on insurance
for the Collateral which such Grantor fails to maintain in accordance with the
requirements of this Agreement and the other Loan Documents, and each Grantor
agrees to reimburse the Administrative Agent, on demand, for all payments and
expenses incurred by the Administrative Agent with respect to such Grantor or
any of its Collateral pursuant to the foregoing authorization, provided,
however, that nothing in this Section shall be construed as excusing any Grantor
from the performance of, or imposing any obligation on the Administrative Agent
or any other Secured Creditor to cure or perform, any covenants or other
agreements of any Grantor with respect to any of the foregoing matters as set
forth herein or in any of the other Loan Documents.
ARTICLE V.
    

ACCOUNTS AND COLLECTION OF ACCOUNTS
Section 5.01    Deposit Accounts.
(a)    Upon the request of the Administrative Agent, the Grantors shall cause
any deposit accounts that are not Controlled Deposit Accounts of the type
described in clause (ii) of the definition of that term to be subject to Deposit
Account Control Agreements.
(b)    Promptly upon the creation or acquisition of any new deposit account or
any interest therein by any Grantor held at a depositary institution other than
KeyBank National Association, which, in the case of the Borrower, the
Administrative Agent must have provided consent pursuant to Section 7.14 of the
Credit Agreement, such Grantor, upon the request of the Administrative Agent,
shall cause such deposit account to become subject to a Deposit Account Control
Agreement, prior to the deposit of any funds therein.
Section 5.02    Securities Accounts.

Exhibit 10.3

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

(a)    Upon the request of the Administrative Agent, the Grantors shall cause
all securities accounts to be Controlled Securities Accounts.
(b)    Promptly upon the creation or acquisition of any new securities account
or any interest therein by any Grantor, such Grantor shall promptly notify the
Administrative Agent, and upon the request of the Administrative Agent, shall
cause such securities account to be a Controlled Securities Account, prior to
the crediting of any financial asset with respect to which any Grantor is an
entitlement holder.
Section 5.03    Operation of Collateral Accounts. Upon the request of the
Administrative Agent, the Grantors shall cause all cash and Cash Equivalents and
all securities entitlements to be maintained in Collateral Accounts. If required
to hold all cash and Cash Equivalents in any Collateral Account pursuant to this
Agreement or the Credit Agreement, prior to the occurrence and continuance of an
Event of Default, the Grantors may withdraw, or direct the disposition of, funds
and other investments or financial assets held in the Collateral Accounts. Upon
the occurrence and during the continuance of an Event of Default, upon written
notice to any Grantor, the Administrative Agent shall be permitted to (i)
retain, or instruct the relevant Securities Intermediary or Depositary Bank to
retain, all cash and investments held in any Collateral Account, (ii) liquidate
or issue entitlement orders with respect to, or instruct the relevant Securities
Intermediary or Depositary Bank to liquidate, any or all investments or
financial assets held in any Collateral Account, (iii) issue a Notice of
Exclusive Control or other similar instructions with respect to any Collateral
Account and instruct the Depositary Bank or Securities Intermediary to follow
the instructions of the Administrative Agent, and (iv) withdraw any amounts held
in any Collateral Account and apply such amounts in accordance with the terms of
this Agreement.
Section 5.04    Collection of Accounts.
(a)    Each Grantor shall, in a manner consistent with the provisions of this
Article V, endeavor to cause to be collected from the account debtor named in
each of its Accounts Receivable, as and when due (including amounts which are
delinquent, such amounts to be collected in accordance with generally accepted
lawful collection procedures), any and all amounts owing under or on account of
such Accounts Receivable and shall, if required to do so pursuant to the terms
of this Agreement, cause such collections to deposited or held in a Collateral
Account.
(b)    Each Grantor shall, and the Administrative Agent hereby authorizes each
Grantor to, enforce and collect all amounts owing to it on its Inventory and
Accounts Receivable, for the benefit and on behalf of the Administrative Agent
and the other Secured Creditors; provided, however, that such privilege may at
the sole option of the Administrative Agent, by notice to the Borrower (on
behalf of all Grantors), be terminated upon the occurrence and during the
continuance of any Event of Default.
Section 5.05    Collateral Concentration Account.
(a)    After the occurrence and during the continuance of an Event of Default,
the Administrative Agent shall have the right, upon written notice to the
Borrower, to establish the Collateral Concentration Account pursuant to which,
among other things, the Administrative Agent shall have sole dominion and
control over all funds held to the credit of, and all disbursements from, the
Collateral Concentration Account.
(b)    Upon the establishment of the Collateral Concentration Account, (i) all
of the funds on deposit in or credited to any Controlled Deposit Account (other
than, in the discretion of the Administrative Agent, balances of $1,000 or less)
shall, upon the instruction of the Administrative Agent

Exhibit 10.3

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

to the appropriate Depositary Banks after the issuance of a Notice of Exclusive
Control, be transferred to the Collateral Concentration Account on a daily or
other basis specified by the Administrative Agent, (ii) no Grantor will have the
right of withdrawal from the Collateral Concentration Account or any of the
Collateral Accounts, (iii) the Administrative Agent shall have the right to
liquidate any investments held in any Controlled Securities Account and have the
proceeds thereof deposited in the Collateral Concentration Account, and (iv) all
amounts held in the Collateral Concentration Account or any of the Collateral
Accounts may be applied, in the Administrative Agent’s discretion, towards
payment of the Secured Obligations in accordance with the terms of this
Agreement.
(c)    Upon the establishment of the Collateral Concentration Account and at all
times thereafter, each Grantor agrees (i) to cause all payments by its account
debtors to be promptly deposited in Controlled Deposit Accounts, if such account
debtors have not already been instructed to do so, and (ii) to deposit promptly
all payments received by it from any other sale of any of its Collateral,
whether in the form of cash, checks, notes, drafts, bills of exchange, money
orders or otherwise, in a Controlled Deposit Account precisely in the form
received (but with any endorsements of such Grantor necessary for deposit or
collection). Until any such payments are so deposited, such payments shall be
held in trust by such Grantor for and as the property of the Administrative
Agent, for the benefit of the Administrative Agent and the other Secured
Creditors hereunder.
ARTICLE VI.
    

PLEDGED COLLATERAL
Section 6.01    Delivery of Certificates and Instruments for Pledged Collateral.
(a)    On or prior to the Closing Date, each Grantor shall pledge and deposit
with the Administrative Agent all certificates or instruments, if any,
representing any of the Pledged Collateral at the time owned by such Grantor and
subject to the security interest hereof, duly endorsed in blank in the case of
any instrument, and accompanied by undated stock powers duly executed in blank
by such Grantor or such other instruments of transfer as are acceptable to the
Administrative Agent, in the case of Pledged Equity Interests.
(b)    If a Grantor shall acquire (by purchase, conversion, exchange, stock
dividend or otherwise) any additional Pledged Collateral, at any time or from
time to time after the date hereof which is or are intended to be subjected to
the security interest hereof and which is or are represented by certificates or
instruments, such Grantor shall (i) forthwith pledge and deposit with the
Administrative Agent all such certificates or instruments, duly endorsed in
blank in the case of Intercompany and Third-Party Notes, and accompanied by
undated stock powers duly executed in blank by such Grantor or such other
instruments of transfer as are acceptable to the Administrative Agent, in the
case of Equity Interests, and (ii) promptly thereafter deliver to the
Administrative Agent a certificate executed by an authorized officer of such
Grantor describing such additional Pledged Collateral and certifying that the
same have been duly pledged with the Administrative Agent hereunder.
(c)    Without limitation of any other provision of this Agreement, if any of
the Pledged Collateral of a Grantor (whether or not now owned or hereafter
acquired) which is intended to be subjected to the security interest hereof is
(i) an uncertificated security, each such Grantor shall cause each such
uncertificated security to be certificated in all respects in accordance with
applicable laws, accompanied by undated stock powers duly executed in blank by
each such Grantor or by such other instruments of transfer as are acceptable to
the Administrative Agent, and promptly thereafter deposited

Exhibit 10.3

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

with the Administrative Agent or otherwise provide the Administrative Agent
control with respect to such uncertificated security, or (ii) held in a
securities account that is not already subject to a Securities Account Control
Agreement, such Grantor shall promptly take all actions required to make such
securities account subject to a Securities Account Control Agreement. Each
Grantor further agrees to take such actions as the Administrative Agent deems
reasonably necessary or desirable to effect the foregoing and to permit the
Administrative Agent to exercise any of its rights and remedies hereunder in
respect thereof, and agrees to provide an opinion of counsel reasonably
satisfactory to the Administrative Agent with respect to any such pledge of any
of the securities described in clauses (i) and (ii) above, promptly upon the
request of the Administrative Agent.
(d)    After the Closing Date, no Grantor shall permit any SPE to elect to opt
into or voluntarily allow any Equity Interest to be governed by Article 8 of the
applicable Uniform Commercial Code without the prior written consent of the
Secured Party. Grantor shall cause all Issuers that are limited liability
companies or limited partnerships (other than the SPEs) to elect to opt into and
cause all Equity Interests in such Issuers to be securities governed by, Article
8 of the applicable Uniform Commercial Code.
Section 6.02    No Assumption of Liability. The security interest of any Grantor
is granted as security only and shall not subject the Administrative Agent or
any other Secured Creditor to, or in any way alter or modify, any obligation or
liability of such Grantor with respect to or arising out of any of the Pledged
Collateral. Nothing herein shall be construed to make the Administrative Agent
liable as a general partner or limited partner of any Pledged Entity or a
shareholder of any corporation, and the Administrative Agent by virtue of this
Agreement or any actions taken as contemplated hereby (except as referred to in
the following sentence) shall not have any of the duties, obligations or
liabilities of a general partner or limited partner of any Pledged Entity or a
stockholder of any corporation. The parties hereto expressly agree that, unless
the Administrative Agent shall become the absolute owner of an Equity Interest
pursuant hereto, this Agreement shall not be construed as creating a partnership
or joint venture among the Administrative Agent and/or a Grantor or any other
Person.
Section 6.03    Registration of Collateral in the Name of the Administrative
Agent. The Administrative Agent shall have the right, at any time in its
discretion and without notice to any Grantor, to transfer to or to register in
the name of the Administrative Agent or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable voting and similar rights
specified in this Article VI. In addition, the Administrative Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing any Pledged Collateral for certificates or instruments of smaller or
larger denominations.
Section 6.04    Appointment of Sub-Agents; Endorsements; etc. The Administrative
Agent shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the instruments and certificates evidencing any
of the Pledged Collateral, which may be held (in the sole discretion of the
Administrative Agent) in the name of the relevant Grantor, endorsed or assigned
in blank or in favor of the Administrative Agent or any nominee or nominees of
the Administrative Agent or a sub-agent appointed by the Administrative Agent.
Section 6.05    Voting Rights. Unless and until an Event of Default shall have
occurred and be continuing, each Grantor shall be entitled to exercise all
voting rights attaching to any and all Pledged Collateral owned by it, and to
give consents, waivers or ratifications in respect thereof, provided that no
vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate, result in breach of any covenant contained in or be
inconsistent with any of the terms of this Agreement,

Exhibit 10.3

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

any other Loan Document, or which would have the effect of impairing the
position or interests of the Administrative Agent or any Secured Creditor
therein. All such rights of such Grantor to vote and to give consents, waivers
and ratifications shall cease in case an Event of Default shall occur and be
continuing.
Section 6.06    Entitlement of Grantors to Cash Dividends and Distributions. A
Grantor shall be entitled to receive all cash dividends or distributions payable
in respect of its Pledged Collateral, except as otherwise provided in this
Article VI.
Section 6.07    Entitlement of Administrative Agent to Dividends and
Distributions. The Administrative Agent shall be entitled to receive and to
retain as part of the Pledged Collateral:
(a)    all cash dividends and distributions payable in respect of the Pledged
Collateral at any time when an Event of Default shall have occurred and be
continuing; and
(b)    regardless of whether or not an Event of Default shall have occurred and
be continuing at the time of payment or distribution thereof, and except to the
extent any of the following is otherwise permitted by the Credit Agreement: (i)
all cash dividends and distributions in respect of the Pledged Collateral which
are reasonably determined by the Administrative Agent to represent in whole or
in part an extraordinary, liquidating or other distribution in return of
capital; (ii) all other or additional stock, other securities, partnership
interests, membership interests or property (other than cash to which a Grantor
is entitled under Section 6.06) paid or distributed by way of dividend
(including any payment in kind dividend) or otherwise in respect of the Pledged
Collateral; (iii) all other or additional stock, other securities, partnership
interests, membership interests or property (including cash) paid or distributed
in respect of the Pledged Collateral by way of stock split, spin-off, split up,
reclassification, combination of shares or similar rearrangement; and (iv) all
other or additional stock, other securities, partnership interests, membership
interests or property (including cash) which may be paid in respect of the
Pledged Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate, partnership or limited
liability company reorganization.
Section 6.08    Application of Dividends and Distributions. If no Event of
Default shall have occurred and be continuing at such time, the Administrative
Agent will, at the request of the Borrower (on behalf of any applicable Grantor
or Grantors), pay over to the Administrative Agent, for application to the
payment or prepayment of any of the Loan Document Obligations, any cash held by
it as Pledged Collateral which is attributable to dividends or distributions
received by it and then held as part of the Collateral pursuant to this Article
VI. If an Event of Default shall have occurred and be continuing, all dividends
and distributions received by the Administrative Agent and then held by it
pursuant to this Article VI as part of the Pledged Collateral will be applied as
provided in Section 8.05 hereof.
Section 6.09    Turnover by Grantors. All dividends, distributions or other
payments that are received by any Grantor contrary to the provisions of this
Agreement shall be received in trust for the benefit of the Administrative
Agent, shall be segregated from other property or funds of such Grantor and
shall be forthwith paid over to the Administrative Agent as Collateral in the
same form as so received (with any necessary endorsement).
Section 6.10    Registration under 1933 Act. If an Event of Default shall have
occurred and be continuing and a Grantor shall have received from the
Administrative Agent a written request or requests that such Grantor cause any
registration, qualification or compliance under any Federal or state securities
law or laws to be effected with respect to all or any part of the Pledged Equity
Interest of its Subsidiaries, such Grantor as soon as practicable and at its
expense will use its best efforts to cause such registration to be effected (and
be kept effective) and will use its best efforts to cause such qualification and
compliance

Exhibit 10.3

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

to be effected (and be kept effective) as may be so requested and as would
permit or facilitate the sale and distribution of such stock, including
registration under the Securities Act of 1933, as then in effect (the
“Securities Act”) (or any similar statute then in effect), appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with any other governmental requirements, provided that
the Administrative Agent shall furnish to such Grantor such information
regarding the Administrative Agent as such Grantor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. The relevant Grantor will advise the Administrative Agent in writing
as to the progress of each such registration, qualification or compliance and as
to the completion thereof, will furnish to the Administrative Agent such number
of prospectuses, offering circulars and other documents incident thereto as the
Administrative Agent from time to time may reasonably request, and will
indemnify the Administrative Agent and all others participating in the
distribution of such Pledged Equity Interests against all claims, losses,
damages or liabilities caused by any untrue statement (or alleged untrue
statement) of a material fact contained therein (or in any related registration
statement, notification or the like) or by any omission (or alleged omission) to
state therein (or in any related registration statement, notification or the
like) a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same may have been
caused by an untrue statement or omission based upon information furnished in
writing to such Grantor by the Administrative Agent expressly for use therein.
Section 6.11    Sale of Pledged Equity Interests in Connection with Enforcement.
If at any time when the Administrative Agent shall determine to exercise its
right to sell all or any part of the Pledged Equity Interests pursuant to
Section 8.01, such Pledged Equity Interests or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the Securities
Act of 1933, as then in effect, the Administrative Agent may, in its sole and
absolute discretion and to the fullest extent permitted by applicable law now or
hereafter in effect, sell such Pledged Equity Interests or part thereof by
private sale in such manner and under such circumstances as the Administrative
Agent may deem necessary or advisable in order that such sale may legally be
effected without such registration, provided that at least ten days’ notice of
the time and place of any such sale shall be given to the relevant Grantor.
Without limiting the generality of the foregoing, in any such event the
Administrative Agent, in its sole and absolute discretion, (a) may proceed to
make such private sale notwithstanding that a registration statement for the
purpose of registering such Pledged Equity Interests or part thereof shall have
been filed under such Securities Act, (b) may approach and negotiate with a
single possible purchaser to effect such sale and (c) may restrict such sale to
a purchaser who will represent and agree that such purchaser is purchasing for
its own account, for investment, and not with a view to the distribution or sale
of such Pledged Equity Interests or part thereof. In the event of any such sale,
the Administrative Agent shall incur no responsibility or liability to any
Grantor for selling all or any part of the Pledged Equity Interests at a price
which the Administrative Agent may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until the registration as aforesaid.
ARTICLE VII.
    

INTELLECTUAL PROPERTY
Section 7.01    Collateral Assignments; Further Assurances. Upon request of the
Administrative Agent whenever made, any Grantor shall promptly execute and
deliver to the Administrative Agent such Collateral Assignment Agreements as the
Administrative Agent shall reasonably request in connection with such Grantor’s
Intellectual Property. Each Grantor agrees that it will take such action, and
deliver

Exhibit 10.3

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

such documents or instruments, as the Administrative Agent shall reasonably
request in connection with the preparation, filing or registration and
enforcement of any Collateral Assignment Agreement.
Section 7.02    Remedies Relating to Intellectual Property. If an Event of
Default shall occur and be continuing, the Administrative Agent may, by written
notice to the relevant Grantor, take any or all of the following actions: (i)
declare the entire right, title and interest of such Grantor in and to each of
the Copyrights, Patents and Trademarks, together with all trademark rights and
rights of protection to the same, vested, in which event such rights, title and
interest shall immediately vest in the Administrative Agent for the benefit of
the Secured Creditors, in which case such Grantor agrees to execute an
assignment in form and substance reasonably satisfactory to the Administrative
Agent of all its rights, title and interest in and to the Copyrights, Patents
and Trademarks to the Administrative Agent for the benefit of the Secured
Creditors; (ii) take and practice or sell the Copyrights or Patents and take and
use or sell the Trademarks and the good will of such Grantor’s business
symbolized by the Trademarks and the right to carry on the business and use the
assets of the Grantor in connection with which the Trademarks have been used;
and (iii) direct such Grantor to refrain, in which event such Grantor shall
refrain, from using the Copyrights, Patents and Trademarks in any manner
whatsoever, directly or indirectly, and, if requested by the Administrative
Agent, change such Grantor’s corporate name to eliminate therefrom any use of
any mark and execute such other and further documents that the Administrative
Agent may request in connection with such Grantor’s obligations under this
Agreement and to transfer ownership of the Copyrights, Patents and Trademarks,
and registrations and any pending trademark application, to the Administrative
Agent for the benefit of the Secured Parties.
ARTICLE VIII.
    

REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 8.01    Remedies Generally. Each Grantor agrees that, if any Event of
Default shall have occurred and be continuing, then and in every such case,
subject to any mandatory requirements of applicable law then in effect, the
Administrative Agent, in addition to any rights now or hereafter existing under
applicable law, shall have all rights as a secured creditor under the UCC in all
relevant jurisdictions and may exercise any or all of the following rights (all
of which each Grantor hereby agrees is commercially reasonable to the fullest
extent permitted under applicable law now or hereafter in effect):
(a)    personally, or by agents’ attorneys or other authorized representatives,
immediately retake possession of the Collateral or any part thereof from such
Grantor or any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Grantor’s or such other Person’s premises where any of the Collateral is located
and remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of such Grantor;
(b)    instruct the obligor or obligors on any Account Receivable, agreement,
instrument or other obligation (including account debtors) constituting the
Collateral to make any payment required by the terms of such Account Receivable,
agreement, instrument or other obligation directly to the Administrative Agent
and/or directly to a lockbox under the sole dominion and control of the
Administrative Agent or to the Collateral Concentration Account;
(c)    sell, assign or otherwise liquidate, or direct such Grantor to sell,
assign or otherwise liquidate, any or all of the Collateral or any part thereof,
and take possession of the proceeds of any such sale or liquidation;

Exhibit 10.3

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

(d)    issue a Notice of Exclusive Control with respect to any or all of the
Collateral Accounts and issue entitlement orders or instructions with respect
thereto;
(e)    withdraw any or all monies, securities and/or instruments in the
Collateral Concentration Account or any Collateral Account for application to
the Secured Obligations in accordance with Section 8.05 hereof;
(f)    pay and discharge taxes, Liens or claims on or against any of the
Collateral;
(g)    pay, perform or satisfy, or cause to be paid, performed or satisfied, for
the benefit of any Grantor, any of the obligations, terms, covenants, provisions
or conditions to be paid, observed, performed or satisfied by such Grantor under
any contract, agreement or instrument relating to its Collateral, all in
accordance with the terms, covenants, provisions and conditions thereof, as and
to the extent that such Grantor fails or refuses to perform or satisfy the same;
(h)    enter into any extension of, or any other agreement in any way relating
to, any of the Collateral;
(i)    make any compromise or settlement the Administrative Agent deems
desirable or necessary with respect to any of the Collateral; and/or
(j)    take possession of the Collateral or any part thereof, by directing such
Grantor or any other Person in possession thereof in writing to deliver the same
to the Administrative Agent at any place or places designated by the
Administrative Agent, in which event such Grantor shall at its own expense:
(i)    forthwith cause the same to be moved to the place or places so designated
by the Administrative Agent and delivered to the Administrative Agent,
(ii)    store and keep any Collateral so delivered to the Administrative Agent
at such place or places pending further action by the Administrative Agent as
provided in Section 8.02, and
(iii)    while the Collateral shall be so stored and kept, provide such guards
and maintenance services as shall be necessary to protect the same and to
preserve and maintain them in substantially the same condition prior to such
action;
it being understood that such Grantor’s obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Administrative Agent shall be entitled
to a decree requiring specific performance by such Grantor of said obligation.
Section 8.02    Disposition of the Collateral. Upon the occurrence and
continuance of an Event of Default, any Collateral repossessed by the
Administrative Agent under or pursuant to Section 8.01 and any other Collateral
whether or not so repossessed by the Administrative Agent, may be sold,
assigned, leased or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of sale of the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Administrative Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Administrative Agent or after any overhaul or repair which the Administrative
Agent shall

Exhibit 10.3

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

determine to be commercially reasonable. Except in the case of any Collateral
that is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, (i) in the case of any such disposition
which shall be a private sale or other private proceedings permitted by such
requirements, such sale shall be made upon not less than ten days’ written
notice to such Grantor specifying the time at which such disposition is to be
made and the intended sale price or other consideration therefor, and shall be
subject, for the ten days after the giving of such notice, to the right of the
relevant Grantor or any nominee of the relevant Grantor to acquire the
Collateral involved at a price or for such other consideration at least equal to
the intended sale price or other consideration so specified, and (ii) in the
case of any such disposition which shall be a public sale permitted by such
requirements, such sale shall be made upon not less than ten days’ written
notice to the relevant Grantor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
(which may, at the Administrative Agent’s sole option, be subject to reserve),
after publication of notice of such auction not less than ten days prior thereto
in two newspapers in general circulation in the city where such Collateral is
located. To the extent permitted by any such requirement of law, the
Administrative Agent on behalf of the Secured Creditors (or certain of them) may
bid for and become the purchaser (by bidding in Secured Obligations or
otherwise) of the Collateral or any item thereof offered for sale in accordance
with this Section without accountability to the relevant Grantor (except to the
extent of surplus money received as provided in Section 8.05). Unless so
obligated under mandatory requirements of applicable law, the Administrative
Agent shall not be required to make disposition of the Collateral within a
period of time which does not permit the giving of notice to the Grantor as
hereinabove specified. The Administrative Agent need give the relevant Grantor
only such notice of disposition as the Administrative Agent shall deem to be
reasonably practicable in view of such mandatory requirements of applicable law.
Section 8.03    Grant of License to Use Intellectual Property. For the purpose
of enabling the Administrative Agent to exercise rights and remedies under this
Article VIII at such time as the Administrative Agent shall be lawfully entitled
to exercise such rights and remedies and for no other purpose, each Grantor
hereby grants to the Administrative Agent an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to the Grantor) to
use, assign or sublicense any of the Intellectual Property of such Grantor, now
owned or hereafter acquired by such Grantor, and wherever the same may be
located, including in such license reasonable access to all media in which any
of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof.
Section 8.04    Waiver of Claims. Except as otherwise provided in this
Agreement, EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT’S
TAKING POSSESSION OR THE ADMINISTRATIVE AGENT’S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
each Grantor hereby further waives, to the extent permitted by law: (i) all
damages occasioned by such taking of possession except any damages which are the
direct result of the Administrative Agent’s gross negligence or willful
misconduct; (ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Administrative
Agent’s rights hereunder; and (iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and each Grantor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may,

Exhibit 10.3

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

hereby waives the benefit of all such laws to the fullest extent permitted by
applicable law now or hereafter in effect. Any sale of, or the grant of options
to purchase, or any other realization upon, any Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of the relevant Grantor therein and thereto, and shall be a perpetual bar both
at law and in equity against the relevant Grantor and against any and all
Persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under the relevant
Grantor.
Section 8.05    Application of Proceeds. All Collateral and proceeds of
Collateral obtained and realized by the Administrative Agent in connection with
the enforcement of this Agreement pursuant to this Article VIII shall be applied
as follows:
(i)    first, to the payment to the Administrative Agent, for application to the
Secured Obligations as provided in Section 8.03 of the Credit Agreement; and
(ii)    second, to the extent remaining after the application pursuant to the
preceding clause (i) and following the termination of this Agreement pursuant to
Section 9.09 hereof, to the relevant Grantor or to whomever may be lawfully
entitled to receive such payment.
Section 8.06    Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Administrative Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement or
the other Loan Documents, any Designated Hedge Agreements or any agreement in
respect of Banking Services Obligations or now or hereafter existing at law or
in equity, or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time or simultaneously and as often and in such order as may be deemed expedient
by the Administrative Agent. All such rights, powers and remedies shall be
cumulative and the exercise or the beginning of exercise of one shall not be
deemed a waiver of the right to exercise any other or others. No delay or
omission of the Administrative Agent in the exercise of any such right, power or
remedy, or partial or single exercise thereof, and no renewal or extension of
any of the Secured Obligations, shall impair or constitute a waiver of any such
right, power or remedy or shall be construed to be a waiver of any Default or
Event of Default or an acquiescence therein. No notice to or demand on any
Grantor in any case shall entitle it to any other or further notice or demand in
similar or other circumstances or constitute a waiver of any of the rights of
the Administrative Agent to any other or further action in any circumstances
without notice or demand. In the event that the Administrative Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Administrative Agent may recover reasonable,
actual expenses, including attorneys’ fees, and the amounts thereof shall be
included in such judgment.
Section 8.07    Discontinuance of Proceedings. In case the Administrative Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Administrative Agent, then and in every such case
the relevant Grantor, the Administrative Agent and each holder of any of the
Secured Obligations shall be restored to their former positions and rights
hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies and powers of the
Administrative Agent shall continue as if no such proceeding had been
instituted.
Section 8.08    Purchasers of Collateral. Upon any sale of any of the Collateral
by the Administrative Agent hereunder (whether by virtue of the power of sale
herein granted, pursuant to judicial process or otherwise), the receipt of the
Administrative Agent or the officer making the sale shall

Exhibit 10.3

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

be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold, and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication or
nonapplication thereof.
ARTICLE IX.
    

MISCELLANEOUS
Section 9.01    Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing,
sent by telecopier, mailed or delivered, (i) if to the Borrower, at its address
specified in or pursuant to the Credit Agreement, (ii) if to any Subsidiary
Grantor, to it c/o the Borrower at its address specified in or pursuant to the
Credit Agreement, (iii) if to the Administrative Agent, to it at the Notice
Office of the Administrative Agent, and (iv) if to any Lender, at its address
specified in or pursuant to the Credit Agreement; or in any case at such other
address as any of the Persons listed above may hereafter notify the others in
writing. All such notices and communications shall be mailed, telecopied, sent
by overnight courier or delivered, and shall be effective when received.
Section 9.02    Entire Agreement. This Agreement and the other Loan Documents
represent the final agreement among the parties with respect to the subject
matter hereof and thereof, supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof and
thereof, and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements among the parties. There are no unwritten oral
agreements among the parties.
Section 9.03    Obligations Absolute. The obligations of each Grantor under this
Agreement shall be absolute and unconditional and shall remain in full force and
effect without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence whatsoever,
other than indefeasible payment in full of, and complete performance of, all of
the Secured Obligations, including:
(a)    any renewal, extension, amendment or modification of, or addition or
supplement to, or deletion from other Loan Documents, or any other instrument or
agreement referred to therein, or any assignment or transfer of any thereof;
(b)    any waiver, consent, extension, indulgence or other action or inaction
under or in respect of any such agreement or instrument or this Agreement except
as expressly provided in such renewal, extension, amendment, modification,
addition, supplement, assignment or transfer;
(c)    any furnishing of any additional security to the Administrative Agent or
its assignee or any acceptance thereof or any release of any security by the
Administrative Agent or its assignee;
(d)    any limitation on any Person’s liability or obligations under any such
instrument or agreement or any invalidity or unenforceability, in whole or in
part, of any such instrument or agreement or any term thereof;
(e)    any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to a Grantor or any
Subsidiary of a Grantor, or any action

Exhibit 10.3

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

taken with respect to this Agreement by any trustee or receiver, or by any
court, in any such proceeding, whether or not a Grantor shall have notice or
knowledge of any of the foregoing; or
(f)    to the fullest extent permitted by applicable law now or hereafter in
effect, any other event or circumstance which, but for this provision, might
release or discharge a guarantor or other surety from its obligations as such.
Section 9.04    Successors and Assigns. This Agreement shall be binding upon
each Grantor and its successors and assigns and shall inure to the benefit of
the Administrative Agent and each other Secured Creditor and their respective
successors and assigns, provided that no Grantor may transfer or assign any or
all of its rights or obligations hereunder without the written consent of the
Administrative Agent. All agreements, statements, representations and warranties
made by each Grantor herein or in any certificate or other instrument delivered
by such Grantor or on its behalf under this Agreement shall be considered to
have been relied upon by the Secured Creditors and shall survive the execution
and delivery of this Agreement and the other Loan Documents regardless of any
investigation made by the Secured Creditors on their behalf.
Section 9.05    Headings Descriptive. The headings of the several Sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
Section 9.06    Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9.07    Enforcement Expenses, etc. The Grantors hereby jointly and
severally agree to pay, to the extent not paid pursuant to Section 11.01 of the
Credit Agreement, all reasonable, actual out-of-pocket costs and expenses of the
Administrative Agent and each other Secured Creditor in connection with the
enforcement of this Agreement, the preservation of the Collateral, the
perfection of the security interest, and any amendment, waiver or consent
relating hereto (including the reasonable fees and disbursements of counsel
employed by the Administrative Agent or any of the other Secured Creditors).
Section 9.08    Release of Portions of Collateral.
(a)    So long as no Event of Default is in existence or would exist after the
application of proceeds as provided below, the Administrative Agent shall, at
the request of a Grantor, release any or all of the Collateral of such Grantor,
provided that (i) such release is permitted by the terms of the Credit Agreement
(it being agreed for such purposes that a release will be deemed “permitted by
the terms of the Credit Agreement” if the proposed transaction constitutes an
exception contained in Section 7.02 of the Credit Agreement) or otherwise has
been approved in writing by the Required Lenders (or, to the extent required by
Section 11.12 of the Credit Agreement, all of the applicable Lenders) and (ii)
the proceeds of such Collateral are to be applied as required pursuant to the
Credit Agreement or any consent or waiver entered into with respect thereto.
(b)    At any time that a Grantor desires that the Administrative Agent take any
action to give effect to any release of Collateral pursuant to the foregoing
Section 9.08(a), it shall deliver to the Administrative Agent a certificate
signed by a principal executive officer stating that the release of the
respective Collateral is permitted pursuant to Section 9.08(a). In the event
that any part of the Collateral

Exhibit 10.3

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

is released as provided in Section 9.08(a), the Administrative Agent, at the
request and expense of a Grantor, will duly release such Collateral and assign,
transfer and deliver to such Grantor (without recourse and without any
representation or warranty) such of the Collateral as is then being (or has
been) so sold and as may be in the possession of the Administrative Agent and
has not theretofore been released pursuant to this Agreement. The Administrative
Agent shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 9.08.
Section 9.09    Termination. After the termination of all of the Commitments and
when all Loans and other Secured Obligations (other than unasserted indemnity
obligations) have been paid in full, this Agreement shall terminate, and the
Administrative Agent, at the request and expense of the Grantors, will execute
and deliver to the relevant Grantor a proper instrument or instruments
(including UCC termination statements on form UCC-3) acknowledging the
satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to the relevant Grantor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Administrative Agent and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement.
Section 9.10    Administrative Agent. The Administrative Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. The acceptance by the Administrative Agent of this
Agreement, with all the rights, powers, privileges and authority so created,
shall not at any time or in any event obligate the Administrative Agent to
appear in or defend any action or proceeding relating to the Collateral to which
it is not a party, or to take any action hereunder or thereunder, or to expend
any money or incur any expenses or perform or discharge any obligation, duty or
liability under the Collateral. By accepting the benefits of this Agreement,
each Secured Creditor acknowledges and agrees that the rights and obligations of
the Administrative Agent shall be as set forth in Article IX of the Credit
Agreement. Notwithstanding anything to the contrary contained in Section 9.03 of
this Agreement or Section 11.12 of the Credit Agreement, this Section 9.10, and
the duties and obligations of the Administrative Agent set forth in this Section
9.10, may not be amended or modified without the consent of the Administrative
Agent.
Section 9.11    Only Administrative Agent to Enforce on Behalf of Secured
Creditors. The Secured Creditors agree by their acceptance of the benefits
hereof that this Agreement may be enforced on their behalf only by the action of
the Administrative Agent, acting upon the instructions of the Required Lenders
and that no other Secured Creditor shall have any right individually to seek to
enforce or to enforce this Agreement or to realize upon the security to be
granted hereby, it being understood and agreed that such rights and remedies may
be exercised by the Administrative Agent, for the benefit of the Secured
Creditors, upon the terms of this Agreement.
Section 9.12    Other Creditors, etc. Not Third-Party Beneficiaries. No creditor
of any Grantor or any of its Affiliates, or other Person claiming by, through or
under any Grantor or any of its Affiliates, other than the Administrative Agent
and the other Secured Creditors, and their respective successors and assigns,
shall be a beneficiary or third-party beneficiary of this Agreement or otherwise
shall derive any right or benefit herefrom.
Section 9.13    Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, including
via facsimile transmission or other electronic transmission capable of
authentication, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same agreement.
A set of counterparts executed by all the parties hereto shall be lodged with
the Borrower and the Administrative Agent.

Exhibit 10.3

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

Section 9.14    Amendments; Additional Grantors. No amendment or waiver of any
provision of this Agreement and no consent to any departure by any Grantor shall
in any event be effective unless the same shall be in writing and signed by the
Administrative Agent acting at the direction of the requisite number of Lenders,
if any, required pursuant to Section 11.12 of the Credit Agreement, and the
applicable Grantor or Grantors, as the case may be, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Upon the execution and delivery by any Person of a
Security Agreement Joinder, (a) such Person shall be referred to as an
“Additional Grantor” and shall become and be a Grantor hereunder, and each
reference in this Agreement to a “Grantor” shall also mean and be a reference to
such Additional Grantor, and each reference in any other Loan Document to a
“Grantor” shall also mean and be a reference to such Additional Grantor, and (b)
each reference herein to “this Agreement,” “hereunder,” “hereof” or words of
like import referring to this Agreement, and each reference in any other Loan
Document to the “Security Agreement,” “thereunder,” “thereof” or words of like
import referring to this Agreement, shall mean and be a reference to this
Agreement as supplemented by such Security Agreement Joinder.
Section 9.15    Separate Actions. A separate action may be brought and
prosecuted against any Grantor, any other guarantor or obligor or the Borrower,
and whether or not any other Grantor, any other guarantor or obligor or the
Borrower be joined in such action or actions.
Section 9.16    Full Recourse Obligations; Effect of Fraudulent Transfer Laws.
It is the desire and intent of each Grantor, the Administrative Agent and the
other Secured Creditors that this Agreement shall be enforced as a full recourse
obligation of each Grantor to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
and to the extent that the obligations of any Grantor under this Agreement
would, in the absence of this sentence, be adjudicated to be invalid or
unenforceable because of any applicable state or federal law relating to
fraudulent conveyances or transfers, then the amount of such Grantor liability
hereunder in respect of the Secured Obligations shall be deemed to be reduced ab
initio to that maximum amount that would be permitted without causing such
Grantor’s obligations hereunder to be so invalidated.
Section 9.17    Governing Law; Venue; Waiver of Jury Trial.
(a)    THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.
(b)    EACH GRANTOR HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK CITY IN ANY LITIGATION OR OTHER PROCEEDING BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE SECURED CREDITORS, OR THE GRANTORS IN CONNECTION
HEREWITH OR THEREWITH; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND; PROVIDED, FURTHER, THAT NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY SECURED CREDITOR TO BRING PROCEEDINGS
AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.

Exhibit 10.3

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

(c)    EACH GRANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.05 OF THE CREDIT
AGREEMENT. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY HAVE OR HEREAFTER MAY HAVE TO
THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
IN CLAUSE (b) ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GRANTOR HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH
GRANTOR HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR THE LOAN
DOCUMENTS. EACH GRANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT THAT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
(d)    THE ADMINISTRATIVE AGENT, EACH SECURED CREDITOR AND EACH GRANTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, SUCH SECURED CREDITOR OR
SUCH GRANTOR IN CONNECTION THEREWITH. EACH GRANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND EACH
SECURED CREDITOR ENTERING INTO THIS AGREEMENT.
Section 9.18    Amended and Restated Pledge and Security Agreement. This
Agreement amends, restates and replaces the Original Pledge Agreement in its
entirety; provided, all accrued liabilities of Borrower and Grantor under the
Original Pledge Agreement (if any) and the Liens granted in favor of the
Administrative Agent for the benefit of the Secured Creditors thereunder shall
continue under this Agreement.
[Remainder of page intentionally left blank]

Exhibit 10.3

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
 
PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P.

By:    Preferred Apartment Advisors, LLC, its manager

By:/s/ Jeffrey R. Sprain                                           
Name: Jeffrey R. Sprain
Title: Senior Vice President,
                      General Counsel & Secretary

 
SUNBELT RETAIL, LLC
HAVEN WEST MEZZANINE LENDING, LLC
STARKVILLE MEZZANINE LENDING, LLC
SUMMIT CROSSING III MEZZANINE LENDING, LLC
OXFORD OVERTURE LENDING, LLC
HAVEN LUBBOCK LENDING, LLC
NEWPORT KENNESAW MEZZANINE LENDING, LLC
BRISTOL BIRMINGHAM LENDING, LLC
360 IRVINE LENDING, LLC
CITY PARK II CAPITAL LENDING, LLC
CITY PARK MEZZANINE LENDING, LLC
CRESCENT AVE LENDING, LLC
ENCORE CAPITAL LENDING, LLC
HAVEN LUBBOCK II LENDING, LLC
HAVEN NORTHGATE LENDING, LLC
HAVEN TAMPA LENDING, LLC
HAVEN WACO LENDING, LLC
HIDDEN RIVER CAPITAL LENDING, LLC
MAIN STREET APARTMENT HOMES, LLC
NEW MARKET PROPERTIES, LLC
NEWPORT BISHOP LENDING, LLC
OXFORD HIDDEN RIVER LENDING, LLC
PAC CARVEOUT, LLC
PAC DAWSON LENDING, LLC
PAC LENDING, LLC
PAC LENOX, LLC
PREFERRED CAMPUS COMMUNITIES, LLC
SE GROCERY LLC
PAC CITY VISTA APARTMENTS, LLC

  By:    Preferred Apartment Advisors, LLC, its agent

By:_/s/ Jeffrey R. Sprain                                           
Name: Jeffrey R. Sprain
Title: Senior Vice President,
                         General Counsel & Secretary

Signature Page – Fourth Amended and Restated Pledge and Security Agreement

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

Accepted by:

KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent

By: /s/ James K. Komperda                  
   Name: James K. Komperda
   Title: Vice President

Signature Page – Amended and Restated Pledge and Security Agreement
C:\Users\jseff.PAA\Desktop\8-k keybank\NAI_1501138587_6_KeyBank - PAC - Fourth
A&R Pledge and Security Agreement.DOC

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

SCHEDULE 1
Pledged Collateral
I.    Equity Interests
Grantor
Issuer and Type of Organization
Certificate Number
Percent of Equity Interest Owned
Percent of Equity Interest Pledged
Preferred Apartment Communities Operating Partnership, L.P.
Haven West Mezzanine Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Starkville Mezzanine Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Summit Crossing III Mezzanine Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Oxford Overture Lending, LLC (f/k/a Iris Crosstown Mezzanine Lending II, LLC)
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Haven Lubbock Lending, LLC (f/k/a Lubbock Mezzanine Lending, LLC)
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Newport Kennesaw Mezzanine Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Stone Rise Apartments, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Summit Crossing, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
WAM McNeil Ranch, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Lake Cameron, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Ashford Park, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Summit Crossing II, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Stoneridge Farms Hunt Club, LLC
1
100%
49%

    

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

Grantor
Issuer and Type of Organization
Certificate Number
Percent of Equity Interest Owned
Percent of Equity Interest Pledged
Preferred Apartment Communities Operating Partnership, L.P.
PAC Vineyards, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Enclave at Vista Ridge, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Sandstone Creek, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Northpointe, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Cypress, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Haven Waco Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Haven Tampa Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
360 Irvine Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Sarasota, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Naples, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Citypark View, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
Newport Bishop Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Oxford Hidden River Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Hidden River Capital Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Encore Capital Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
City Park Mezzanine Lending, LLC
1
100%
100%

    

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

Grantor
Issuer and Type of Organization
Certificate Number
Percent of Equity Interest Owned
Percent of Equity Interest Pledged
Preferred Apartment Communities Operating Partnership, L.P.
City Park II Capital Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
Crescent Ave Lending, LLC
1
100%
100%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Crosstown Walk, LLC
1
100%
49%
Preferred Apartment Communities Operating Partnership, L.P.
PAC Overton Rise, LLC
1
100%
49%
New Market Properties, LLC
Spring Hill Plaza, LLC
1
100%
49%
New Market Properties, LLC
Parkway Town Centre, LLC
1
100%
49%
New Market Properties, LLC
Woodstock Crossing Center, LLC
1
100%
49%
New Market Properties, LLC
Sunbelt Retail, LLC
1
100%
49%
New Market Properties, LLC
PAC Dawson Lending, LLC
1
100%
100%
Sunbelt Retail, LLC
Deltona Landing, LLC
1
100%
49%
Sunbelt Retail, LLC
Powder Springs-Macland Retail, LLC
1
100%
49%
Sunbelt Retail, LLC
NMP Kingwood Glen, LLC
1
100%
49%
Sunbelt Retail, LLC
Barclay Crossing, LLC
1
100%
49%
Sunbelt Retail, LLC
Sweetgrass Corner, LLC
1
100%
49%
Sunbelt Retail, LLC
Parkway Centre, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market –Plano, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Royal Lakes, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Summit Point, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Overlook, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Wade Green, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Cumming, LLC
1
100%
49%
Sunbelt Retail, LLC
New Market – Victory Village, LLC
1
100%
49%

    

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

Grantor
Issuer and Type of Organization
Certificate Number
Percent of Equity Interest Owned
Percent of Equity Interest Pledged
PAC Carveout, LLC
PAC Citilakes, LLC
1
100%
49%
PAC Carveout, LLC
PAC Galleria 75, LLC
1
100%
49%
PAC Carveout, LLC
PAC City Vista Apartments, LLC
1
100%
49%
PAC Lenox, LLC
PAC Lenox Regent, LLC
1
100%
49%
PAC Lenox, LLC
PAC Lenox Retreat, LLC
1
100%
49%
PAC Lenox, LLC
PAC Lenox Village, LLC
1
100%
49%
Main Street Apartment Homes, LLC
Main Street Stone Creek, LLC
1
100%
49%
Main Street Apartment Homes, LLC
Main Street Baldwin, LLC
1
100%
49%
Main Street Apartment Homes, LLC
525 Avalon Park, LLC
1
100%
49%
Preferred Campus Communities, LLC
PCC Tallahassee, LLC
1
100%
49%
PAC Lending, LLC
Haven Northgate Lending, LLC
1
100%
100%
PAC Lending, LLC
Haven Lubbock II Lending, LLC
1
100%
100%
PAC Lending, LLC
Bristol Birmingham Lending, LLC
1
100%
100%
SE Grocery LLC
New Market – Rosewood LLC
1
100%
49%
SE Grocery LLC
New Market – East Gate LLC
1
100%
49%
SE Grocery LLC
New Market – Fairview LLC
1
100%
49%
SE Grocery LLC
New Market – Thompson Bridge, LLC
1
100%
49%
SE Grocery LLC
New Market – Sandy Plains, LLC
1
100%
49%
SE Grocery LLC
New Market – University Palms, LLC
1
100%
49%
SE Grocery LLC
New Market – Oak Park, LLC
1
100%
49%
SE Grocery LLC
New Market – Anderson, LLC
1
100%
49%
SE Grocery LLC
New Market – Southgate LLC
1
100%
49%
SE Grocery LLC
New Market – Furys Ferry LLC
1
100%
49%
SE Grocery LLC
New Market – Cherokee, LLC
1
100%
49%
SE Grocery LLC
New Market – Parkland, LLC
1
100%
49%

    

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

Grantor
Issuer and Type of Organization
Certificate Number
Percent of Equity Interest Owned
Percent of Equity Interest Pledged
SE Grocery LLC
New Market – Heritage, LLC
1
100%
49%

    

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

II.    Instruments
Grantor
Obligor
Amount of Instrument
Date of Instrument
Preferred Apartment Communities Operating Partnership, L.P.
Preferred Apartment Advisors, LLC

$15,000,000

January 27, 2016
Preferred Apartment Communities Operating Partnership, L.P.
Oxford Contracting LLC

$1,500,000

August 27, 2013
Preferred Apartment Communities Operating Partnership, L.P.
Preferred Capital Marketing Services, LLC

$1,500,000

December 31, 2014
Preferred Apartment Communities Operating Partnership, L.P.
360 Residential, LLC

$2,000,000

June 30, 2016
Preferred Apartment Communities Operating Partnership, L.P.
Haven Campus Communities, LLC

$11,500,000

March 14, 2016
Preferred Apartment Communities Operating Partnership, L.P.
Newport Development Partners, LLC

$3,000,000

June 30, 2016
Preferred Apartment Communities Operating Partnership, L.P.
Oxford Capital Partners, LLC

$13,400,000

October 5, 2015
Preferred Apartment Communities Operating Partnership, L.P.
Hendon Properties, LLC

$2,000,000

December 8, 2015
Preferred Apartment Communities Operating Partnership, L.P.
360 Residential, LLC II

$3,255,000

December 30, 2015
Preferred Apartment Communities Operating Partnership, L.P.
Mulberry Development Group, LLC

$500,000

March 31, 2016
Preferred Apartment Communities Operating Partnership, L.P.
360 Capital Company, LLC

$2,000,000

May 24, 2016
Haven West Mezzanine Lending, LLC
Haven Campus Communities Member, LLC

$6,940,795

July 15, 2013
Starkville Mezzanine Lending, LLC
Haven Campus Communities Starkville Member, LLC

$6,116,384

June 16, 2014
360 Irvine Lending, LLC
Fusion Mezzanine Borrower, LLC

$59,052,583

July 1, 2015
Oxford Overture Lending, LLC
Overture Partners, LLC

$6,920,000

July 21, 2015
Haven Lubbock Lending, LLC
Haven Lubbock Partners, LLC

$15,598,352

April 9, 2015
Newport Kennesaw Mezzanine Lending, LLC
Newport Town Village Holdings, LLC

$10,975,000

January 27, 2015
Haven Waco Lending, LLC
Haven Waco Partners, LLC

$15,455,668

May 1, 2015

    

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

Grantor
Obligor
Amount of Instrument
Date of Instrument
Haven Tampa Lending, LLC
Haven Tampa Partners, LLC

$9,819,662

March 29, 2016
PAC Dawson Lending, LLC
Hendon-Bre Dawson Capital, LLC

$12,857,005

December 16, 2015
Hidden River Capital Lending, LLC
Mill Green Capital, LLC

$5,380,000

December 4, 2015
Oxford Hidden River Lending, LLC
Hidden River Capital, LLC

$4,734,960

December 4, 2015
Encore Capital Lending, LLC
Encore Capital Member, LLC

$9,758,200

October 9, 2015
Crescent Ave Lending, LLC
1122 Crescent Land Holdings, LLC

$6,000,000

January 13, 2016
Newport Bishop Lending, LLC
Bishop Street Capital Member, LLC

$12,693,457

February 18, 2016
City Park II Capital Lending, LLC
City Park II Capital Member, LLC

$3,916,000

January 8, 2016
City Park Mezzanine Lending, LLC
Oxford City Park Capital II LLC

$3,364,800

January 8, 2016
Haven Lubbock II Lending, LLC
Haven Lubbock II Partners, LLC

$9,357,171

April 19, 2016
Haven Northgate Lending, LLC
Haven Campus Communities-Northgate, LLC

$64,678,549
   

June 21, 2016

    

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

SCHEDULE 2

360 Irvine Lending, LLC
525 Avalon Park, LLC
Ashford Park, LLC
Barclay Crossing, LLC
Bristol Birmingham Lending, LLC
City Park Mezzanine Lending, LLC
City Park II Capital Lending, LLC
Crescent Ave Lending, LLC
Deltona Landing, LLC
Encore Capital Lending, LLC
Haven Fayetteville Lending, LLC
Haven Lubbock II Lending, LLC
Haven Northgate Lending, LLC
Haven West Mezzanine Lending, LLC
Haven Waco Lending, LLC
Haven Lubbock Lending, LLC
Haven Tampa Lending, LLC
Hidden River Capital Lending, LLC
Lake Cameron, LLC
Main Street Apartment Homes, LLC
Main Street Stone Creek, LLC
Main Street Baldwin, LLC
New Market Properties, LLC
New Market –Anderson, LLC
New Market – Cherokee, LLC
New Market – Cumming, LLC
New Market – East Gate LLC
New Market – Fairview LLC
New Market – Furys Ferry LLC
New Market – Heritage, LLC
New Market – Oak Park, LLC
New Market – Overlook, LLC

    

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

New Market – Parkland, LLC
New Market – Plano, LLC
New Market – Rosewood LLC
New Market – Royal Lakes, LLC
New Market – Sandy Plains, LLC
New Market – Southgate LLC
New Market – Summit Point, LLC
New Market – Thompson Bridge, LLC
New Market – University Palms, LLC
New Market – Victory Village, LLC
New Market – Wade Green, LLC
Newport Bishop Lending, LLC
Newport Kennesaw Mezzanine Lending, LLC
NMP Kingwood Glen, LLC
Oxford City Vista Apartments, LLC
Oxford City Vista Development, LLC
Oxford Hidden River Lending, LLC
Oxford Overture Lending, LLC
PAC Brookwood Center, LLC
PAC Carveout, LLC
PAC Citilakes, LLC
PAC Citypark View, LLC
PAC City Vista Apartments, LLC
PAC Creekside, LLC
PAC Crosstown Walk, LLC
PAC Cypress, LLC
PAC Dawson Lending, LLC
PAC Enclave at Vista Ridge, LLC
PAC Galleria 75, LLC
PAC Lending, LLC
PAC Lenox, LLC
PAC Lenox Regent, LLC
PAC Lenox Retreat, LLC
PAC Lenox Village, LLC
PAC Naples, LLC

    

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

PAC Northpointe, LLC
PAC Overton Rise, LLC
PAC Sarasota, LLC
PAC Sorrel, LLC
PAC Summit Crossing, LLC
PAC Summit Crossing II, LLC
PAC Vineyards, LLC
Parkway Centre, LLC
Parkway Town Centre, LLC
PCC Tallahassee, LLC
Powder Springs-Macland Retail, LLC
Preferred Campus Communities, LLC
Sandstone Creek, LLC
Salem Cove, LLC
SE Grocery LLC
Spring Hill Plaza, LLC
Starkville Mezzanine Lending, LLC
Stone Rise Apartments, LLC
Stoneridge Farms Hunt Club, LLC
Summit Crossing III Mezzanine Lending, LLC
Sunbelt Retail, LLC
Sweetgrass Corner, LLC
WAM McNeil Ranch, LLC
Woodstock Crossing Center, LLC

    

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

Exhibit A
to Pledge and Security Agreement
SECURITY AGREEMENT JOINDER
SECURITY AGREEMENT JOINDER dated as of _________, ____ (this “Agreement”) made
by [Insert Name of New Grantor], a [Insert State of Organization] [corporation,
limited partnership or limited liability company] (the “New Grantor”) in favor
of KeyBank National Association, as Administrative Agent (the “Administrative
Agent”) for the benefit of the Secured Creditors (as defined in the Security
Agreement referred to below).
RECITALS:

(1)    Preferred Apartment Communities Operating Partnership, L.P., a Delaware
limited partnership (the “Borrower”), Preferred Apartment Communities, Inc., a
Maryland corporation (the “Parent”), the lenders party thereto (the “Lenders”)
and the Administrative Agent are parties to a Fourth Amended and Restated Credit
Agreement, dated as of August 5, 2016 (as the same may from time to time be
amended, restated or otherwise modified, the “Credit Agreement”).
(2)    In connection with the Credit Agreement, the Borrower and certain of its
subsidiaries (such subsidiaries, together with the Borrower, collectively, the
“Grantors” and individually, each a “Grantor”) entered into a Fourth Amended and
Restated Pledge and Security Agreement (as the same may from time to time be
amended, restated or otherwise modified, the “Security Agreement”), pursuant to
which the Grantors granted to the Administrative Agent, for the benefit of the
Secured Creditors a security interest in and pledge of substantially all of
their assets.
(3)    The New Grantor is a Subsidiary (as defined in the Credit Agreement), of
the Borrower and desires to become a party to the Security Agreement pursuant to
Section 9.14 of the Security Agreement and to become a “Grantor” thereunder.
(4)    Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Security Agreement.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, the New Grantor
hereby agrees as follows:
Section 1.    Assumption and Joinder.
(a)    The New Grantor hereby expressly assumes, and hereby agrees to perform
and observe, each and every one of the covenants, rights, promises, agreements,
terms, conditions, obligations, appointments, duties and liabilities of a
“Grantor” under the Security Agreement and all of the other Loan Documents (as
defined in the Credit Agreement) applicable to it as a Grantor under the
Security Agreement. By virtue of the foregoing, the New Grantor hereby accepts
and assumes any liability of a Grantor related to each representation, warranty,
covenant or obligation made by a Grantor in the Security Agreement, and hereby
expressly affirms, as of the date hereof, each of such representations,
warranties, covenants and obligations. In connection with the foregoing, the New
Grantor hereby grants to the Administrative Agent for the benefit of the Secured
Creditors a security interest in, and hereby pledges to the Administrative
Agent, for the benefit of the Secured Creditors, all of the Collateral of the
New Grantor on the terms and conditions set forth in the Security Agreement.

E-4    

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

(b)    All references to the term Grantor in the Security Agreement or in any
document or instrument executed and delivered or furnished, or to be executed
and delivered or furnished, in connection therewith shall be deemed to be a
reference to, and shall include, the New Grantor.
Section 2.    Representations and Warranties. The New Grantor hereby represents
and warrants to the Administrative Agent and the Secured Creditors as follows:
(a)    The New Grantor has the requisite [corporate, partnership or company]
power and authority to enter into this Agreement and to perform its obligations
hereunder and under the Security Agreement and any other Loan Document to which
it is a party. The execution, delivery and performance of this Agreement by the
New Grantor and the performance of its obligations under this Agreement, the
Security Agreement, and any other Loan Document have been duly authorized by the
[Board of Directors of the New Grantor] and no other [corporate, partnership or
company] proceedings on the part of the New Grantor are necessary to authorize
the execution, delivery or performance of this Agreement, the transactions
contemplated hereby or the performance of its obligations under this Agreement,
the Security Agreement or any other Loan Document. This Agreement has been duly
executed and delivered by the New Grantor. This Agreement, the Security
Agreement and each Loan Document constitutes the legal, valid and binding
obligation of the New Grantor enforceable against it in accordance with its
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally and by general principles of equity, whether such
enforceability is considered in a proceeding at law or in equity.
(b)    The representations and warranties set forth in the Security Agreement
are true and correct in all material respects on and as of the date hereof as
such representations and warranties apply to the New Grantor (except to the
extent that any such representations and warranties expressly relate to an
earlier date) with the same force and effect as if made on the date hereof.
Section 3.    Perfection Certificate. Attached hereto is a copy of a fully
completed Perfection Certificate executed by the New Grantor. The information
contained in the Perfection Certificate delivered by the New Grantor is true and
correct in all respects.
Section 4.    Further Assurances. At any time and from time to time, upon the
Administrative Agent’s request and at the sole expense of the New Grantor, the
New Grantor will promptly and duly execute and deliver any and all further
instruments and documents and take such further action as the Administrative
Agent reasonably deems necessary to effect the purposes of this Agreement.
Section 5.    Binding Effect. This Agreement shall be binding upon the New
Grantor and shall inure to the benefit of the Administrative Agent and the other
Secured Creditors and their respective successors and assigns.
Section 6.    Governing Law. This Agreement and the rights of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of [Ohio][New York], without application of the rules regarding conflicts
of laws.
Section 7.    JURY TRIAL WAIVER. THE NEW GRANTOR HEREBY IRREVOCABLY WAIVES ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

E-5    

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

Section 8.    Miscellaneous. Delivery of an executed signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
copy of this Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed and delivered by its duly authorized officer as of the date first above
written.
 
[___________________________]

By:__________________________________
   Name:
   Title:

E-6    

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

Exhibit B to
Pledge and Security Agreement
PERFECTION CERTIFICATE

In connection with a proposed transaction by and among Preferred Apartment
Communities Operating Partnership, L.P., a Delaware limited partnership (the
“Borrower”), certain lending institutions (the “Lenders”), KeyBank National
Association, as the administrative agent for the Lenders (“Administrative
Agent”) and the other grantors specified in Section 1 below under the heading
“Name of Grantor” (together with the Borrower, collectively, the “Grantors” and,
individually, “Grantor”), each Grantor hereby certifies as follows:
Section 1.    Legal Names, Organizations and Jurisdictions of Organization. The
exact legal name, the type of organization and the jurisdiction of organization
or formation, as applicable, of each Grantor are as follows:
Grantor
Type of 
Organization
Jurisdiction of
Organization/ 
Formation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Section 2.    Organizational and Federal Taxpayer Identification Numbers. The
state issued organizational identification number and federal taxpayer
identification number of each Grantor are as follows:
Grantor
Organizational  
Identification Number
Federal Taxpayer 
Identification Number
 
 
 
 
 
 
 
 
 

Section 3.    Chief Executive Offices and Mailing Addresses. The chief executive
office address and mailing address, including, in each case, street address,
city, county, state and ZIP code, of each Grantor are as follows:

Grantor
Chief Executive Office
Mailing Address
 
 
 
 
 
 

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

Section 4.    Changes in Name, Jurisdiction of Organization or Corporate
Structure. Except as set forth below, no Grantor has changed its legal name,
jurisdiction of organization or corporate structure in any way (e.g., merger,
consolidation, conversion, change in corporate form, change in jurisdiction of
organization or otherwise) within the past five years:

Grantor
Date of Change
Description of Change
 
 
 
 
 
 
 
 
 

Section 5.    Prior Addresses. Except as set forth below, no Grantor has changed
its chief executive office within the past five years:

Grantor
Prior Address of Chief Executive Office
 
 
 
 
 
 

Section 6.    Trade Names. Set forth below is each trade name or assumed name
used by any Grantor during the past five years or by which any Grantor has been
known or has transacted any business during the past five years:
Grantor
Trade/Assumed Name
 
 
 
 
 
 

Section 7.    Acquisitions of Equity Interests or Assets. Except as set forth
below, no Grantor has acquired any equity interests of another entity or
substantially all the assets of another entity within the past five years:

Grantor
Date of Acquisition
Description of Acquisition
 
 
 
 
 
 
 
 
 

Section 8.    Intellectual Property. Set forth below is a list of all
copyrights, trademarks, patents, and applications therefor owned or used by any
Grantor:

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

(a)    Copyrights:

Grantor
Copyright
Registration Number
Registration Date
 
 
 
 
 
 
 
 

(b)    Trademarks:
Grantor
Trademark
Country
Application No. and/or  
Registration No. 
Application Filing Date and/or Registration Date
 
 
 
 
 
 
 
 
 
 

(c)    Patents:
Grantor
Patent
Country
Application No. or Registration No.  
(as applicable)
Application Filing Date or Registration Date (as applicable)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Section 10.    Securities. Set forth below is a list of all equity interests
owned by each Grantor, together with the type of organization that issued such
equity interests (e.g., corporation, limited liability company, partnership or
trust):
Grantor
Issuer and Type  
of Organization
# of
Shares/Equity Interests 
Owned
Total
Shares/Equity Interests 
Outstanding
% of
Interest Pledged
Certificate No. (if any)
 
 
 
 
 
 
 
 
 
 
 
 

Section 11.    Securities Accounts. Set forth below is a list of all securities
accounts in which any Grantor maintains securities or other similar assets:

Grantor
Securities Intermediary 
& Address
Account Number
Type of Account
 
 
 
 
 
 
 
 
 
 
 
 

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

Section 12.    Deposit Accounts. Set forth below is a list of all deposit
accounts of each Grantor:

Grantor
Depositary Institution 
& Address
Account Number
Type of Account
 
 
 
 
 
 
 
 
 
 
 
 

Section 13.    Instruments. Set forth below is a list of all instruments that
evidence amounts owed to any Grantor:

Grantor
Amount
Date of Instrument
Date of Maturity
 
 
 
 
 
 
 
 
 
 
 
 

Section 14.    Commercial Tort Claims. The following is a list of each
commercial tort claim held by each Grantor:

Grantor
Amount of Claim
Brief Description  
of Claim
 
 
 

Section 15.    Authorization to File Financing Statements. Each Grantor hereby
authorizes the Administrative Agent to file financing or continuation
statements, and amendments thereto, in all jurisdictions and with all filing
offices as the Administrative Agent may determine, in its sole discretion, are
necessary or advisable to perfect the security interest granted or to be granted
to Administrative Agent for the benefit of the Lenders. Such financing
statements may describe the collateral in the same manner as described in the
agreement(s) granting a security interest or may contain an indication or
description of collateral that describes such property in any other manner as
the Administrative Agent may determine, in its sole discretion, is necessary or
advisable to ensure the perfection of the security interest in the collateral
granted or to be granted to the Administrative Agent for the benefit of the
Lenders, including describing such property as “all assets” or “all personal
property.”

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

IN WITNESS WHEREOF, each Grantor has caused this Perfection Certificate to be
executed as of the ___ day of ________, ____ by its officer thereunto duly
authorized.