Exhibit 10.2

 

PLEDGE AND SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of March 31, 2006, is
by and among Primal Solutions, Inc., a Delaware corporation (the “Borrower”),
Wireless Billing Solutions, a California corporation (“WBS”), and such other
parties as may become Grantors hereunder on or after the date hereof (together
with the Borrower and WBS, the “Grantors” and, individually, a “Grantor”) and
the Investors named as such in the Purchase Agreement, dated March 31, 2006 (the
“Purchase Agreement”), among the Borrower and such Investors (collectively, the
“Purchasers”).

 

WHEREAS, pursuant to the terms of the Purchase Agreement, the Purchasers are
acquiring from the Borrower, $1,500,000 in an aggregate principal amount of the
Borrower’s 5% Senior Secured Convertible Notes (the “Notes”); and

 

WHEREAS, the Grantors wish to grant security interests in favor of the
Purchasers as herein provided to secure the obligations of the Borrower under
the Notes;

 

NOW THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             DEFINITIONS. ALL CAPITALIZED TERMS USED HEREIN WITHOUT
DEFINITIONS SHALL HAVE THE RESPECTIVE MEANINGS PROVIDED THEREFOR IN THE PURCHASE
AGREEMENT OR THE NOTES. AS USED HEREIN THE TERM “OBLIGATIONS” SHALL MEAN ALL
PRINCIPAL, INTEREST (INCLUDING INTEREST ACCRUED AFTER THE FILING OF A BANKRUPTCY
OR SIMILAR PETITION WHETHER OR NOT A CLAIM THEREFOR IS ENFORCEABLE), FEES,
EXPENSES AND INDEMNITIES PAYABLE FROM TIME TO TIME BY THE GRANTORS UNDER THE
NOTES AND THE OTHER TRANSACTION DOCUMENTS, INCLUDING REIMBURSEMENTS UNDER
SECTION 9.5 OF THE PURCHASE AGREEMENT. THE TERM “STATE,” AS USED HEREIN, MEANS
THE STATE OF NEW YORK. ALL TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE OF THE
STATE AND USED HEREIN SHALL HAVE THE SAME DEFINITIONS HEREIN AS SPECIFIED
THEREIN. HOWEVER, IF A TERM IS DEFINED IN ARTICLE 9 OF THE UNIFORM COMMERCIAL
CODE OF THE STATE DIFFERENTLY THAN IN ANOTHER ARTICLE OF THE UNIFORM COMMERCIAL
CODE OF THE STATE, THE TERM HAS THE MEANING SPECIFIED IN ARTICLE 9.

 

2.             GRANT OF SECURITY INTEREST. EACH GRANTOR HEREBY GRANTS TO THE
PURCHASERS, TO SECURE THE PAYMENT AND PERFORMANCE IN FULL OF ALL OF THE
OBLIGATIONS, A SECURITY INTEREST IN AND SO PLEDGES TO THE PURCHASERS THE
FOLLOWING PROPERTIES, ASSETS AND RIGHTS OF SUCH GRANTOR, WHEREVER LOCATED,
WHETHER NOW OWNED OR HEREAFTER ACQUIRED OR ARISING, AND ALL PROCEEDS AND
PRODUCTS THEREOF (ALL OF THE SAME BEING HEREINAFTER CALLED THE “COLLATERAL”):

 

(I)            GOODS (INCLUDING INVENTORY, EQUIPMENT AND ANY ACCESSIONS
THERETO),

 

(II)           INSTRUMENTS (INCLUDING PROMISSORY NOTES),

 

(III)          DOCUMENTS,

 

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(IV)          ACCOUNTS,

 

(V)           CHATTEL PAPER (WHETHER TANGIBLE OR ELECTRONIC),

 

(VI)          DEPOSIT ACCOUNTS,

 

(VII)         LETTER-OF-CREDIT RIGHTS (WHETHER OR NOT THE LETTER OF CREDIT IS
EVIDENCED BY A WRITING),

 

(VIII)        COMMERCIAL TORT CLAIMS,

 

(IX)           SECURITIES AND ALL OTHER INVESTMENT PROPERTY (“INVESTMENT
PROPERTY”),

 

(X)            SUPPORTING OBLIGATIONS,

 

(XI)           CONTRACT RIGHTS OR RIGHTS TO THE PAYMENT OF MONEY, INSURANCE
CLAIMS AND PROCEEDS,

 

(XII)          GENERAL INTANGIBLES INCLUDING, WITHOUT LIMITATION, ALL PAYMENT
INTANGIBLES, PATENTS, PATENT APPLICATIONS, TRADEMARKS, TRADEMARK APPLICATIONS,
TRADE NAMES, COPYRIGHTS, COPYRIGHT APPLICATIONS, SOFTWARE, ENGINEERING DRAWINGS,
SERVICE MARKS, CUSTOMER LISTS, GOODWILL, AND ALL LICENSES, PERMITS, AGREEMENTS
OF ANY KIND OR NATURE PURSUANT TO WHICH THE GRANTORS POSSESS, USE OR HAVE
AUTHORITY TO POSSESS OR USE PROPERTY (WHETHER TANGIBLE OR INTANGIBLE) OF OTHERS
OR OTHERS POSSESS, USE OR HAVE AUTHORITY TO POSSESS OR USE PROPERTY (WHETHER
TANGIBLE OR INTANGIBLE) OF THE GRANTORS, AND ALL RECORDED DATA OF ANY KIND OR
NATURE, REGARDLESS OF THE MEDIUM OF RECORDING INCLUDING, WITHOUT LIMITATION, ALL
SOFTWARE, WRITINGS, PLANS, SPECIFICATIONS AND SCHEMATICS; AND

 

(XIII)         ALL NOW EXISTING AND HEREAFTER ACQUIRED OR ARISING (A) CAPITAL
STOCK, EQUITY SECURITIES OR INTERESTS OR OTHER INVESTMENT PROPERTY (INCLUDING
THE CAPITAL STOCK DESCRIBED ON SCHEDULE A HERETO), (B) ALL CASH DIVIDENDS AND
CASH DISTRIBUTIONS WITH RESPECT TO THE FOREGOING (“DIVIDENDS”), (C) ALL NON-CASH
DIVIDENDS PAID ON CAPITAL SECURITIES, LIQUIDATING DIVIDENDS PAID ON CAPITAL
SECURITIES, SHARES OF CAPITAL SECURITIES RESULTING FROM (OR IN CONNECTION WITH
THE EXERCISE OF) STOCK SPLITS, RECLASSIFICATIONS, WARRANTS, OPTIONS, NON-CASH
DIVIDENDS, MERGERS, CONSOLIDATIONS, AND ALL OTHER DISTRIBUTIONS (WHETHER SIMILAR
OR DISSIMILAR TO THE FOREGOING) ON OR WITH RESPECT TO ANY CAPITAL SECURITIES
CONSTITUTING COLLATERAL (EXCLUDING DIVIDENDS, “DISTRIBUTIONS”), AND (D) ALL
CERTIFICATES, AGREEMENTS (INCLUDING STOCKHOLDERS AGREEMENTS, PARTNERSHIP
AGREEMENTS, OPERATING AGREEMENTS AND LIMITED LIABILITY COMPANY AGREEMENTS),
BOOKS, RECORDS, WRITINGS, DATA BASES, INFORMATION AND OTHER PROPERTY RELATING
TO, USED OR USEFUL IN CONNECTION WITH, EVIDENCING, EMBODYING, INCORPORATING OR
REFERRING TO, ANY OF THE FOREGOING.

 

THE PURCHASERS ACKNOWLEDGE THAT THE ATTACHMENT OF THE SECURITY INTEREST IN ANY
COMMERCIAL TORT CLAIM AS ORIGINAL COLLATERAL IS SUBJECT TO THE GRANTOR’S
COMPLIANCE WITH §4.7.

 

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Notwithstanding the foregoing, Collateral shall not include any of the following
(collectively, the “Excluded Collateral”) (1) vehicles subject to a certificate
of title statute, and (2) rights under licenses, permits and contracts and other
general intangibles to the extent that the granting of a security interest
therein or assignment thereof would violate any applicable law or any
enforceable provision of any such license, permit, contract or other general
intangible, provided, that the Grantors shall not permit any such prohibitions
in any contracts, licenses, general intangibles and permits entered into after
the date hereof except in the ordinary course on usual and customary terms or
consistent with past practice.

 

3.             AUTHORIZATION TO FILE FINANCING STATEMENTS. THE GRANTORS HEREBY
IRREVOCABLY AUTHORIZE THE PURCHASERS AT ANY TIME AND FROM TIME TO TIME TO FILE
IN ANY APPLICABLE UNIFORM COMMERCIAL CODE JURISDICTION ANY INITIAL FINANCING
STATEMENTS AND AMENDMENTS THERETO AGAINST EACH GRANTOR THAT (A) INDICATE THE
COLLATERAL (I) AS ALL ASSETS OF SUCH GRANTOR OR WORDS OF SIMILAR EFFECT,
REGARDLESS OF WHETHER ANY PARTICULAR ASSET COMPRISED IN THE COLLATERAL FALLS
WITHIN THE SCOPE OF ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OR
SUCH JURISDICTION, OR (II) AS BEING OF AN EQUAL OR LESSER SCOPE OR WITH GREATER
DETAIL, AND (B) CONTAIN ANY OTHER INFORMATION REQUIRED BY PART 5 OF ARTICLE 9 OF
THE UNIFORM COMMERCIAL CODE OF THE STATE FOR THE SUFFICIENCY OR FILING OFFICE
ACCEPTANCE OF ANY FINANCING STATEMENT OR AMENDMENT, INCLUDING WHETHER SUCH
GRANTOR IS AN ORGANIZATION, THE TYPE OF ORGANIZATION AND ANY ORGANIZATION
IDENTIFICATION NUMBER ISSUED TO SUCH GRANTOR. THE GRANTORS AGREE TO FURNISH ANY
SUCH INFORMATION TO THE PURCHASERS PROMPTLY UPON REQUEST. EACH GRANTOR ALSO
RATIFIES ITS AUTHORIZATION FOR THE PURCHASERS TO HAVE FILED IN ANY UNIFORM
COMMERCIAL CODE JURISDICTION ANY LIKE INITIAL FINANCING STATEMENTS OR AMENDMENTS
THERETO IF FILED PRIOR TO THE DATE HEREOF.

 

4.             OTHER ACTIONS. FURTHER TO INSURE THE ATTACHMENT, PERFECTION AND
FIRST PRIORITY (SUBJECT TO PERMITTED LIENS) OF, AND THE ABILITY OF THE
PURCHASERS TO ENFORCE, THE PURCHASERS’ SECURITY INTEREST IN THE COLLATERAL, THE
GRANTORS AGREE, IN EACH CASE AT THE GRANTOR’S OWN EXPENSE, TO TAKE THE FOLLOWING
ACTIONS WITH RESPECT TO THE FOLLOWING COLLATERAL:

 

4.1.         PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. IF ANY GRANTOR SHALL
AT ANY TIME HOLD OR ACQUIRE ANY PROMISSORY NOTES OR TANGIBLE CHATTEL PAPER, SUCH
GRANTOR SHALL FORTHWITH ENDORSE, PLEDGE AND DELIVER THE SAME TO THE PURCHASERS,
ACCOMPANIED BY SUCH INSTRUMENTS OF TRANSFER OR ASSIGNMENT DULY EXECUTED IN BLANK
AS THE PURCHASERS MAY FROM TIME TO TIME SPECIFY.

 

4.2.         DEPOSIT ACCOUNTS. FOR EACH DEPOSIT ACCOUNT (EACH, A “DEPOSIT
ACCOUNT”) THAT ANY GRANTOR AT ANY TIME OPENS OR MAINTAINS AT ANY DEPOSITORY BANK
(EACH, A “DEPOSITORY BANK”), THE GRANTOR SHALL, AT THE PURCHASERS’ REQUEST AND
OPTION, PURSUANT TO AN AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE
PURCHASERS (EACH, A “DEPOSIT ACCOUNT CONTROL AGREEMENT”), UPON AN EVENT OF
DEFAULT EITHER (A) CAUSE THE DEPOSITARY BANK TO AGREE TO COMPLY AT ANY TIME WITH
INSTRUCTIONS FROM THE PURCHASERS TO SUCH DEPOSITARY BANK DIRECTING THE
DISPOSITION OF FUNDS FROM TIME TO TIME CREDITED TO SUCH DEPOSIT ACCOUNT, WITHOUT
FURTHER

 

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CONSENT OF THE GRANTOR, OR (B) ARRANGE FOR THE PURCHASERS TO BECOME THE
CUSTOMERS OF THE DEPOSITARY BANK WITH RESPECT TO THE DEPOSIT ACCOUNT, WITH THE
GRANTORS BEING PERMITTED, ONLY WITH THE CONSENT OF THE PURCHASERS, TO EXERCISE
RIGHTS TO WITHDRAW FUNDS FROM SUCH DEPOSIT ACCOUNT. THE PURCHASERS AGREE WITH
THE GRANTORS THAT THE PURCHASERS SHALL NOT GIVE ANY SUCH INSTRUCTIONS OR
WITHHOLD ANY WITHDRAWAL RIGHTS FROM THE GRANTORS, UNLESS AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, OR, AFTER GIVING EFFECT TO ANY WITHDRAWAL NOT
OTHERWISE PERMITTED BY THE TRANSACTION DOCUMENTS, WOULD OCCUR. THE PROVISIONS OF
THIS PARAGRAPH SHALL NOT APPLY TO (I) ANY DEPOSIT ACCOUNT FOR WHICH THE
GRANTORS, THE DEPOSITARY BANK AND THE PURCHASERS HAVE ENTERED INTO A CASH
COLLATERAL AGREEMENT SPECIALLY NEGOTIATED AMONG ANY GRANTOR, THE DEPOSITARY BANK
AND THE PURCHASERS FOR THE SPECIFIC PURPOSE SET FORTH THEREIN (II) DEPOSIT
ACCOUNTS FOR WHICH ANY PURCHASER IS THE DEPOSITARY, AND (III) ANY DEPOSIT
ACCOUNT WHICH HOLDS EXCLUSIVELY SALES TAX AND/OR WITHHOLDING REMITTANCES.

 

4.3.         INVESTMENT PROPERTY. IF ANY GRANTOR SHALL AT ANY TIME HOLD OR
ACQUIRE ANY CERTIFICATED SECURITIES, THE GRANTOR SHALL FORTHWITH ENDORSE, PLEDGE
AND DELIVER THE SAME TO THE PURCHASERS, ACCOMPANIED BY SUCH INSTRUMENTS OF
TRANSFER OR ASSIGNMENT DULY EXECUTED IN BLANK AS THE PURCHASERS MAY FROM TIME TO
TIME SPECIFY. IF ANY SECURITIES NOW OR HEREAFTER ACQUIRED BY ANY GRANTOR ARE
UNCERTIFICATED AND ARE ISSUED TO THE GRANTOR OR ITS NOMINEE DIRECTLY BY THE
ISSUER THEREOF, THE GRANTOR SHALL IMMEDIATELY NOTIFY THE PURCHASERS THEREOF AND,
AT THE PURCHASERS’ REQUEST AND OPTION, PURSUANT TO AN AGREEMENT IN FORM AND
SUBSTANCE SATISFACTORY TO THE PURCHASERS, EITHER (A) CAUSE THE ISSUER TO AGREE
TO COMPLY WITH INSTRUCTIONS FROM THE PURCHASERS AS TO SUCH SECURITIES, WITHOUT
FURTHER CONSENT OF THE GRANTOR OR SUCH NOMINEE, OR (B) ARRANGE FOR THE
PURCHASERS TO BECOME THE REGISTERED OWNERS OF THE SECURITIES. IF ANY SECURITIES,
WHETHER CERTIFICATED OR UNCERTIFICATED, OR OTHER INVESTMENT PROPERTY NOW OR
HEREAFTER ACQUIRED BY ANY GRANTOR ARE HELD BY THE GRANTOR OR ITS NOMINEE THROUGH
A SECURITIES INTERMEDIARY OR COMMODITY INTERMEDIARY, THE GRANTOR SHALL
IMMEDIATELY NOTIFY THE PURCHASERS THEREOF AND, AT THE PURCHASERS’ REQUEST AND
OPTION, PURSUANT TO AN AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE
PURCHASERS, EITHER (I) CAUSE SUCH SECURITIES INTERMEDIARY OR (AS THE CASE MAY
BE) COMMODITY INTERMEDIARY TO AGREE TO COMPLY WITH ENTITLEMENT ORDERS OR OTHER
INSTRUCTIONS FROM THE PURCHASERS TO SUCH SECURITIES INTERMEDIARY AS TO SUCH
SECURITIES OR OTHER INVESTMENT PROPERTY, OR (AS THE CASE MAY BE) TO APPLY ANY
VALUE DISTRIBUTED ON ACCOUNT OF ANY COMMODITY CONTRACT AS DIRECTED BY THE
PURCHASERS TO SUCH COMMODITY INTERMEDIARY, IN EACH CASE WITHOUT FURTHER CONSENT
OF THE GRANTOR OR SUCH NOMINEE, OR (II) IN THE CASE OF FINANCIAL ASSETS OR OTHER
INVESTMENT PROPERTY HELD THROUGH A SECURITIES INTERMEDIARY, ARRANGE FOR THE
PURCHASERS TO BECOME THE ENTITLEMENT HOLDERS WITH RESPECT TO SUCH INVESTMENT
PROPERTY, WITH THE GRANTOR BEING PERMITTED, ONLY WITH THE CONSENT OF THE
PURCHASERS, TO EXERCISE RIGHTS TO WITHDRAW OR OTHERWISE DEAL WITH SUCH
INVESTMENT PROPERTY. THE PURCHASERS AGREE WITH THE GRANTORS THAT THE PURCHASERS
SHALL NOT GIVE ANY SUCH ENTITLEMENT ORDERS OR INSTRUCTIONS OR DIRECTIONS TO ANY
SUCH ISSUER, SECURITIES INTERMEDIARY OR COMMODITY INTERMEDIARY, AND SHALL NOT
WITHHOLD ITS CONSENT TO THE EXERCISE OF ANY WITHDRAWAL OR DEALING RIGHTS BY THE
GRANTORS,

 

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UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, OR, AFTER GIVING
EFFECT TO ANY SUCH INVESTMENT AND WITHDRAWAL RIGHTS NOT OTHERWISE PERMITTED BY
THE TRANSACTION DOCUMENTS, WOULD OCCUR. THE PROVISIONS OF THIS PARAGRAPH SHALL
NOT APPLY TO ANY FINANCIAL ASSETS CREDITED TO A SECURITIES ACCOUNT FOR WHICH ANY
PURCHASER IS THE SECURITIES INTERMEDIARY.

 

4.4.         COLLATERAL IN THE POSSESSION OF A BAILEE. IF ANY GOODS ARE AT ANY
TIME IN THE POSSESSION OF A BAILEE, THE GRANTORS SHALL PROMPTLY NOTIFY THE
PURCHASERS THEREOF AND, IF REQUESTED BY THE PURCHASERS, SHALL PROMPTLY OBTAIN AN
ACKNOWLEDGMENT FROM THE BAILEE, IN FORM AND SUBSTANCE SATISFACTORY TO THE
PURCHASERS, THAT THE BAILEE HOLDS SUCH COLLATERAL FOR THE BENEFIT OF THE
PURCHASERS AND SHALL ACT UPON THE INSTRUCTIONS OF THE PURCHASERS, WITHOUT THE
FURTHER CONSENT OF THE GRANTOR. THE PURCHASERS AGREE WITH THE GRANTORS THAT THE
PURCHASERS SHALL NOT GIVE ANY SUCH INSTRUCTIONS UNLESS AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING OR WOULD OCCUR AFTER TAKING INTO ACCOUNT ANY ACTION
BY THE GRANTORS WITH RESPECT TO THE BAILEE.

 

4.5.         ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. IF ANY GRANTOR
AT ANY TIME HOLDS OR ACQUIRES AN INTEREST IN ANY ELECTRONIC CHATTEL PAPER, THE
GRANTOR SHALL PROMPTLY NOTIFY THE PURCHASERS THEREOF AND, AT THE REQUEST OF THE
PURCHASERS, SHALL TAKE SUCH ACTION AS THE PURCHASERS MAY REASONABLY REQUEST TO
VEST IN THE PURCHASERS CONTROL, UNDER §9-105 OF THE UNIFORM COMMERCIAL CODE, OF
SUCH ELECTRONIC CHATTEL PAPER. THE PURCHASERS AGREE WITH THE GRANTORS THAT THE
PURCHASERS WILL ARRANGE, PURSUANT TO PROCEDURES SATISFACTORY TO THE PURCHASERS
AND SO LONG AS SUCH PROCEDURES WILL NOT RESULT IN THE PURCHASERS’ LOSS OF
CONTROL, FOR THE GRANTORS TO MAKE ALTERATIONS TO THE ELECTRONIC CHATTEL PAPER OR
TRANSFERABLE RECORD PERMITTED UNDER UCC §9-105, UNLESS AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING OR WOULD OCCUR AFTER TAKING INTO ACCOUNT ANY ACTION
BY THE GRANTORS WITH RESPECT TO SUCH ELECTRONIC CHATTEL PAPER OR TRANSFERABLE
RECORD.

 

4.6.         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 THE
GRANTOR, THE GRANTOR SHALL PROMPTLY NOTIFY THE PURCHASERS THEREOF AND, AT THE
REQUEST AND OPTION OF THE PURCHASERS, THE GRANTOR SHALL, PURSUANT TO AN
AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE PURCHASERS, EITHER (I) USE
COMMERCIALLY REASONABLE EFFORTS (INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF
CUSTOMARY TRANSFER AND ASSIGNMENT FEES) TO HAVE THE ISSUER AND ANY CONFIRMER OF
SUCH LETTER OF CREDIT TO CONSENT TO AN ASSIGNMENT TO THE PURCHASERS OF THE
PROCEEDS OF ANY DRAWING UNDER THE LETTER OF CREDIT OR (II) USE COMMERCIALLY
REASONABLE EFFORTS (INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF CUSTOMARY
TRANSFER AND ASSIGNMENT FEES) TO HAVE THE PURCHASERS BECOME THE TRANSFEREE
BENEFICIARIES OF THE LETTER OF CREDIT, WITH THE PURCHASERS AGREEING, IN EACH
CASE, THAT THE PROCEEDS OF ANY DRAWING UNDER THE LETTER TO CREDIT ARE TO BE
APPLIED AS PROVIDED IN THE NOTE.

 

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4.7.         COMMERCIAL TORT CLAIMS. IF ANY GRANTOR SHALL AT ANY TIME HOLD OR
ACQUIRE A COMMERCIAL TORT CLAIM, THE GRANTOR SHALL IMMEDIATELY NOTIFY THE
PURCHASERS IN A WRITING SIGNED BY THE GRANTOR OF THE BRIEF DETAILS THEREOF AND
GRANT TO THE PURCHASERS IN SUCH WRITING A SECURITY INTEREST THEREIN AND IN THE
PROCEEDS THEREOF, ALL UPON THE TERMS OF THIS AGREEMENT, WITH SUCH WRITING TO BE
IN FORM AND SUBSTANCE SATISFACTORY TO THE PURCHASERS.

 

5.             OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. THE GRANTORS FURTHER
AGREE TO TAKE ANY OTHER ACTION REASONABLY REQUESTED BY THE PURCHASERS TO INSURE
THE ATTACHMENT, PERFECTION AND FIRST PRIORITY (SUBJECT TO PERMITTED LIENS) OF,
AND THE ABILITY OF THE PURCHASERS TO ENFORCE, THE PURCHASERS’ SECURITY INTEREST
IN ANY AND ALL OF THE COLLATERAL INCLUDING, WITHOUT LIMITATION, (A) EXECUTING,
DELIVERING AND, WHERE APPROPRIATE, FILING FINANCING STATEMENTS AND AMENDMENTS
RELATING THERETO UNDER THE UNIFORM COMMERCIAL CODE, TO THE EXTENT, IF ANY, THAT
ANY GRANTOR’S SIGNATURE THEREON IS REQUIRED THEREFOR, (B) CAUSING THE
PURCHASERS’ NAMES TO BE NOTED AS SECURED PARTIES ON ANY CERTIFICATE OF TITLE FOR
A TITLED GOOD IF SUCH NOTATION IS A CONDITION TO ATTACHMENT, PERFECTION OR
PRIORITY OF, OR ABILITY OF THE PURCHASERS TO ENFORCE, THE PURCHASERS’ SECURITY
INTEREST IN SUCH COLLATERAL, (C) COMPLYING WITH ANY PROVISION OF ANY STATUTE,
REGULATION OR TREATY OF THE UNITED STATES AS TO ANY COLLATERAL IF COMPLIANCE
WITH SUCH PROVISION IS A CONDITION TO ATTACHMENT, PERFECTION OR PRIORITY OF, OR
ABILITY OF THE PURCHASERS TO ENFORCE, THE PURCHASERS’ SECURITY INTEREST IN SUCH
COLLATERAL, (D) OBTAINING GOVERNMENTAL AND OTHER THIRD PARTY CONSENTS AND
APPROVALS, INCLUDING WITHOUT LIMITATION ANY CONSENT OF ANY LICENSOR, LESSOR OR
OTHER PERSON OBLIGATED ON COLLATERAL, (E) UTILIZING COMMERCIALLY REASONABLE
EFFORTS (INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF A REASONABLE FEE TO THE
APPLICABLE LANDLORD) TO OBTAIN WAIVERS FROM LANDLORDS IN FORM AND SUBSTANCE
SATISFACTORY TO THE PURCHASERS, (F) TAKING ALL ACTIONS REQUIRED BY ANY EARLIER
VERSIONS OF THE UNIFORM COMMERCIAL CODE OR BY OTHER LAW, AS APPLICABLE IN ANY
RELEVANT UNIFORM COMMERCIAL CODE JURISDICTION, OR BY OTHER LAW AS APPLICABLE IN
ANY FOREIGN JURISDICTION, AND (G) DELIVERY TO THE PURCHASERS OF STOCK
CERTIFICATES (AND STOCK POWERS DULY EXECUTED IN BLANK IN FAVOR OF THE
PURCHASERS) COVERING ALL OF THE CAPITAL STOCK DESCRIBED ON SCHEDULE A.

 

6.             RELATION TO OTHER SECURITY DOCUMENTS. THE PROVISIONS OF THIS
AGREEMENT SUPPLEMENT THE PROVISIONS OF THE OTHER TRANSACTION DOCUMENTS. NOTHING
CONTAINED IN ANY SUCH TRANSACTION DOCUMENT SHALL DEROGATE FROM ANY OF THE RIGHTS
OR REMEDIES OF THE PURCHASERS HEREUNDER. THE PROVISIONS OF THIS AGREEMENT SHALL
BE READ AND CONSTRUED WITH THE OTHER SECURITY DOCUMENTS REFERRED TO BELOW IN THE
MANNER SO INDICATED.

 

6.1.         COPYRIGHT SECURITY AGREEMENTS. IF REQUESTED BY THE PURCHASERS, EACH
GRANTOR SHALL EXECUTE AND DELIVER TO THE PURCHASERS THE COPYRIGHT SECURITY
AGREEMENT (ATTACHED HERETO AS EXHIBIT I) PURSUANT TO WHICH THE GRANTOR SHALL
GRANT TO THE PURCHASERS SECURITY INTERESTS IN CERTAIN COLLATERAL CONSISTING OF
COPYRIGHTS, AND COPYRIGHT REGISTRATIONS. THE PROVISIONS OF THE COPYRIGHT
SECURITY AGREEMENT ARE SUPPLEMENTAL TO THE PROVISIONS OF THIS AGREEMENT, AND
NOTHING CONTAINED IN THE COPYRIGHT SECURITY AGREEMENT SHALL DEROGATE FROM ANY OF
THE RIGHTS OR REMEDIES OF THE PURCHASERS HEREUNDER. NEITHER THE DELIVERY OF, NOR
ANYTHING CONTAINED IN, THE COPYRIGHT SECURITY AGREEMENT SHALL BE DEEMED TO
PREVENT OR POSTPONE THE TIME OF ATTACHMENT OR PERFECTION OF ANY SECURITY
INTEREST IN SUCH COLLATERAL CREATED HEREBY.

 

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6.2.         TRADEMARK SECURITY AGREEMENTS. IF REQUESTED BY THE PURCHASERS, EACH
GRANTOR SHALL EXECUTE AND DELIVER TO THE PURCHASERS THE TRADEMARK SECURITY
AGREEMENT (ATTACHED HERETO AS EXHIBIT II) PURSUANT TO WHICH THE GRANTOR SHALL
GRANT TO THE PURCHASERS SECURITY INTERESTS IN CERTAIN COLLATERAL CONSISTING OF
TRADEMARKS, AND TRADEMARK REGISTRATIONS. THE PROVISIONS OF THE TRADEMARK
SECURITY AGREEMENT ARE SUPPLEMENTAL TO THE PROVISIONS OF THIS AGREEMENT, AND
NOTHING CONTAINED IN THE TRADEMARK SECURITY AGREEMENT SHALL DEROGATE FROM ANY OF
THE RIGHTS OR REMEDIES OF THE PURCHASERS HEREUNDER. NEITHER THE DELIVERY OF, NOR
ANYTHING CONTAINED IN, THE TRADEMARK SECURITY AGREEMENT SHALL BE DEEMED TO
PREVENT OR POSTPONE THE TIME OF ATTACHMENT OR PERFECTION OF ANY SECURITY
INTEREST IN SUCH COLLATERAL CREATED HEREBY.

 

6.3.         PATENT SECURITY AGREEMENTS. IF REQUESTED BY THE PURCHASERS, EACH
GRANTOR SHALL EXECUTE AND DELIVER TO THE PURCHASERS THE PATENT SECURITY
AGREEMENT (ATTACHED HERETO AS EXHIBIT III) PURSUANT TO WHICH THE GRANTOR SHALL
GRANT TO THE PURCHASERS SECURITY INTERESTS IN CERTAIN COLLATERAL CONSISTING OF
PATENTS, AND PATENT REGISTRATIONS. THE PROVISIONS OF THE PATENT SECURITY
AGREEMENT ARE SUPPLEMENTAL TO THE PROVISIONS OF THIS AGREEMENT, AND NOTHING
CONTAINED IN THE PATENT SECURITY AGREEMENT SHALL DEROGATE FROM ANY OF THE RIGHTS
OR REMEDIES OF THE PURCHASERS HEREUNDER. NEITHER THE DELIVERY OF, NOR ANYTHING
CONTAINED IN, THE PATENT SECURITY AGREEMENT SHALL BE DEEMED TO PREVENT OR
POSTPONE THE TIME OF ATTACHMENT OR PERFECTION OF ANY SECURITY INTEREST IN SUCH
COLLATERAL CREATED HEREBY.

 

7.             REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR’S LEGAL STATUS.
EACH GRANTOR HAS PREVIOUSLY DELIVERED TO THE PURCHASERS A CERTIFICATE SIGNED BY
EACH GRANTOR AND ENTITLED “PERFECTION CERTIFICATE” (THE “PERFECTION
CERTIFICATE”). EACH GRANTOR REPRESENTS AND WARRANTS TO THE PURCHASERS AS
FOLLOWS: (A) THE GRANTOR’S EXACT LEGAL NAME IS THAT INDICATED ON THE PERFECTION
CERTIFICATE AND ON THE SIGNATURE PAGE HEREOF, (B) THE GRANTOR IS AN ORGANIZATION
OF THE TYPE AND ORGANIZED IN THE JURISDICTION SET FORTH IN THE PERFECTION
CERTIFICATE, (C) THE PERFECTION CERTIFICATE ACCURATELY SETS FORTH THE GRANTOR’S
ORGANIZATIONAL IDENTIFICATION NUMBER OR ACCURATELY STATES THAT THE GRANTOR HAS
NONE, (D) THE PERFECTION CERTIFICATE ACCURATELY SETS FORTH THE GRANTOR’S PLACE
OF BUSINESS OR, IF MORE THAN ONE, ITS CHIEF EXECUTIVE OFFICE AS WELL AS THE
GRANTOR’S MAILING ADDRESS IF DIFFERENT AND (E) ALL OTHER INFORMATION SET FORTH
ON THE PERFECTION CERTIFICATE PERTAINING TO THE GRANTOR IS ACCURATE AND
COMPLETE.

 

8.             COVENANTS CONCERNING GRANTOR’S LEGAL STATUS. EACH GRANTOR
COVENANTS WITH THE PURCHASERS AS FOLLOWS: (A) WITHOUT PROVIDING AT LEAST 30 DAYS
PRIOR WRITTEN NOTICE TO THE PURCHASERS, THE GRANTOR WILL NOT CHANGE ITS NAME,
ITS PLACE OF BUSINESS OR, IF MORE THAN ONE, CHIEF EXECUTIVE OFFICE, OR ITS
MAILING ADDRESS OR ORGANIZATIONAL IDENTIFICATION NUMBER IF IT HAS ONE, (B) IF
THE GRANTOR DOES NOT HAVE AN

 

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ORGANIZATIONAL IDENTIFICATION NUMBER AND LATER OBTAINS ONE, THE GRANTOR SHALL
FORTHWITH NOTIFY THE PURCHASERS OF SUCH ORGANIZATIONAL IDENTIFICATION NUMBER,
AND (C) THE GRANTOR WILL NOT CHANGE ITS TYPE OF ORGANIZATION, JURISDICTION OF
ORGANIZATION OR OTHER LEGAL STRUCTURE.

 

9.             REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. EACH
GRANTOR FURTHER REPRESENTS AND WARRANTS TO THE PURCHASERS AS FOLLOWS:  (A) THE
GRANTOR IS THE OWNER OF OR HAS OTHER RIGHTS IN THE COLLATERAL, FREE FROM ANY
ADVERSE LIEN, SECURITY INTEREST OR OTHER ENCUMBRANCE, EXCEPT FOR THE SECURITY
INTEREST CREATED BY THIS AGREEMENT AND THE PERMITTED LIENS, (B) NONE OF THE
COLLATERAL CONSTITUTES, OR IS THE PROCEEDS OF, “FARM PRODUCTS” AS DEFINED IN
§9-102(A)(34) OF THE UNIFORM COMMERCIAL CODE OF THE STATE, (C) NONE OF THE
ACCOUNT DEBTORS OR OTHER PERSONS OBLIGATED ON ANY OF THE COLLATERAL IS A
GOVERNMENTAL AUTHORITY SUBJECT TO THE FEDERAL ASSIGNMENT OF CLAIMS ACT OR LIKE
FEDERAL, STATE OR LOCAL STATUTE OR RULE IN RESPECT OF SUCH COLLATERAL, (D) THE
GRANTOR HOLDS NO COMMERCIAL TORT CLAIM EXCEPT AS INDICATED ON SCHEDULE B HERETO
AS MODIFIED FROM TIME TO TIME, (E) THE GRANTOR HAS AT ALL TIMES OPERATED ITS
BUSINESS IN COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF THE FEDERAL FAIR LABOR
STANDARDS ACT, AS AMENDED, AND WITH ALL APPLICABLE PROVISIONS OF FEDERAL, STATE
AND LOCAL STATUTES AND ORDINANCES DEALING WITH THE CONTROL, SHIPMENT, STORAGE OR
DISPOSAL OF HAZARDOUS MATERIALS OR SUBSTANCES AND (F) ALL OTHER INFORMATION SET
FORTH ON THE PERFECTION CERTIFICATE PERTAINING TO THE COLLATERAL IS ACCURATE AND
COMPLETE.

 

10.          COVENANTS CONCERNING COLLATERAL ETC. EACH GRANTOR FURTHER COVENANTS
WITH THE PURCHASERS AS FOLLOWS: (A) THE COLLATERAL, TO THE EXTENT NOT DELIVERED
TO THE PURCHASERS PURSUANT TO §4 OR IN TRANSIT WITHIN THE UNITED STATES WILL BE
KEPT AT THOSE LOCATIONS LISTED ON THE PERFECTION CERTIFICATE AND THE GRANTOR
WILL NOT REMOVE THE COLLATERAL FROM SUCH LOCATIONS, WITHOUT PROVIDING AT LEAST
20 DAYS PRIOR WRITTEN NOTICE TO THE PURCHASERS, (B) EXCEPT FOR THE SECURITY
INTEREST HEREIN GRANTED AND PERMITTED LIENS, THE GRANTOR SHALL BE THE OWNER OF
OR HAVE OTHER RIGHTS IN THE COLLATERAL FREE FROM ANY LIEN, SECURITY INTEREST OR
OTHER ENCUMBRANCE, AND THE GRANTOR SHALL DEFEND THE SAME AGAINST ALL CLAIMS AND
DEMANDS OF ALL PERSONS AT ANY TIME CLAIMING THE SAME OR ANY INTERESTS THEREIN
ADVERSE TO THE PURCHASERS, (C) THE GRANTOR SHALL NOT PLEDGE, MORTGAGE OR CREATE,
OR SUFFER TO EXIST A SECURITY INTEREST IN THE COLLATERAL IN FAVOR OF ANY PERSON
OTHER THAN THE PURCHASERS EXCEPT FOR PERMITTED LIENS, (D) THE GRANTOR WILL NOT
USE THE COLLATERAL IN VIOLATION OF ANY POLICY OF INSURANCE THEREON, (E) THE
GRANTOR WILL PERMIT THE PURCHASERS, OR THEIR DESIGNEE, TO INSPECT THE
COLLATERAL, WHEREVER LOCATED, AT ANY REASONABLE TIME DURING BUSINESS HOURS UPON
PRIOR NOTICE OF AT LEAST THREE BUSINESS DAYS (UNLESS A DEFAULT OR AN EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING, IN WHICH EVENT NO PRIOR NOTICE SHALL BE
REQUIRED), (F) THE GRANTOR WILL PAY PROMPTLY WHEN DUE ALL TAXES, ASSESSMENTS,
GOVERNMENTAL CHARGES AND LEVIES UPON THE COLLATERAL OR INCURRED IN CONNECTION
WITH THE USE OR OPERATION OF SUCH COLLATERAL OR INCURRED IN CONNECTION WITH THIS
AGREEMENT OTHER THAN ANY TAXES CONTESTED IN GOOD FAITH AND FOR WHICH APPROPRIATE
RESERVES HAVE BEEN ESTABLISHED BY THE GRANTOR, (G) THE GRANTOR WILL CONTINUE TO
OPERATE, ITS BUSINESS IN COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF THE
FEDERAL FAIR LABOR STANDARDS ACT, AS AMENDED, AND WITH ALL APPLICABLE PROVISIONS
OF FEDERAL, STATE AND LOCAL STATUTES AND ORDINANCES DEALING WITH THE CONTROL,
SHIPMENT, STORAGE OR DISPOSAL OF HAZARDOUS MATERIALS

 

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OR SUBSTANCES, AND (H) THE GRANTOR WILL NOT SELL OR OTHERWISE DISPOSE, OR OFFER
TO SELL OR OTHERWISE DISPOSE, OF THE COLLATERAL OR ANY INTEREST THEREIN EXCEPT
FOR AS PERMITTED BY THE NOTES AND EXCEPT FOR EQUIPMENT NOT USED BY THE COMPANY
IN THE ORDINARY COURSE OF ITS BUSINESS.

 

11.          INSURANCE.

 

11.1.       MAINTENANCE OF INSURANCE. EACH GRANTOR WILL MAINTAIN WITH
FINANCIALLY SOUND AND REPUTABLE INSURERS INSURANCE WITH RESPECT TO ITS
PROPERTIES AND BUSINESS AGAINST SUCH CASUALTIES AND CONTINGENCIES AS SHALL BE IN
ACCORDANCE WITH GENERAL PRACTICES OF BUSINESSES ENGAGED IN SIMILAR ACTIVITIES IN
SIMILAR GEOGRAPHIC AREAS; PROVIDED, HOWEVER, THAT THE BORROWER SHALL AT ALL
TIMES MAINTAIN WITH FINANCIALLY SOUND AND REPUTABLE INSURERS SUCH INSURANCE IN
AMOUNTS NOT LESS THAN THE INSURANCE MAINTAINED BY THE BORROWER AS OF THE DATE
HEREOF, EXCEPT WITH THE PURCHASERS’ PRIOR WRITTEN CONSENT (WHICH WILL NOT BE
UNREASONABLY WITHHELD OR DELAYED). SUCH INSURANCE SHALL BE IN SUCH MINIMUM
AMOUNTS THAT THE GRANTOR WILL NOT BE DEEMED A COINSURER UNDER APPLICABLE
INSURANCE LAWS, REGULATIONS AND POLICIES AND OTHERWISE SHALL BE IN SUCH AMOUNTS,
CONTAIN SUCH TERMS, BE IN SUCH FORMS AND BE FOR SUCH PERIODS AS MAY BE
REASONABLY SATISFACTORY TO THE PURCHASERS. IN ADDITION, ALL SUCH INSURANCE SHALL
BE PAYABLE TO THE PURCHASERS AS LOSS PAYEE. WITHOUT LIMITING THE FOREGOING, THE
GRANTORS WILL (I) KEEP ALL OF ITS PHYSICAL PROPERTY INSURED WITH CASUALTY OR
PHYSICAL HAZARD INSURANCE ON AN “ALL RISKS” BASIS, WITH BROAD FORM FLOOD AND
EARTHQUAKE COVERAGES AND ELECTRONIC DATA PROCESSING COVERAGE, (II) MAINTAIN ALL
SUCH WORKERS’ COMPENSATION OR SIMILAR INSURANCE AS MAY BE REQUIRED BY LAW AND
(III) MAINTAIN, IN AMOUNTS AND WITH DEDUCTIBLES EQUAL TO THOSE GENERALLY
MAINTAINED BY BUSINESSES ENGAGED IN SIMILAR ACTIVITIES IN SIMILAR GEOGRAPHIC
AREAS, GENERAL PUBLIC LIABILITY INSURANCE AGAINST CLAIMS OF BODILY INJURY, DEATH
OR PROPERTY DAMAGE OCCURRING, ON, IN OR ABOUT THE PROPERTIES OF THE GRANTORS;
BUSINESS INTERRUPTION INSURANCE; AND PRODUCT LIABILITY INSURANCE.

 

11.2.       INSURANCE PROCEEDS. THE PROCEEDS OF ANY CASUALTY INSURANCE IN
RESPECT OF ANY CASUALTY LOSS OF ANY OF THE COLLATERAL SHALL, SUBJECT TO THE
RIGHTS, IF ANY, OF OTHER PARTIES WITH A PRIOR INTEREST IN THE PROPERTY COVERED
THEREBY, (I) SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING AND TO THE EXTENT THAT THE AMOUNT OF SUCH PROCEEDS IS LESS THAN
$150,000, BE DISBURSED TO THE GRANTOR FOR DIRECT APPLICATION BY THE GRANTOR
SOLELY TO THE REPAIR OR REPLACEMENT OF THE GRANTOR’S PROPERTY SO DAMAGED OR
DESTROYED AND (II) IN ALL OTHER CIRCUMSTANCES, BE HELD BY THE PURCHASERS AS CASH
COLLATERAL FOR THE OBLIGATIONS AND (EXCEPT TO THE EXTENT DISBURSED PURSUANT TO
THE NEXT SENTENCE) MAY BE APPLIED TO THE OBLIGATIONS. THE PURCHASERS MAY, AT
THEIR SOLE OPTION, DISBURSE FROM TIME TO TIME ALL OR ANY PART OF SUCH PROCEEDS
SO HELD AS CASH COLLATERAL (IN AN INTEREST-BEARING ACCOUNT, PROVIDED THAT THE
GRANTOR SHALL EXECUTE AND DELIVER TO THE PURCHASERS A PROPERLY COMPLETED FORM
W-9), UPON SUCH TERMS AND CONDITIONS AS THE PURCHASERS MAY REASONABLY PRESCRIBE,
FOR DIRECT APPLICATION BY THE GRANTOR SOLELY TO THE REPAIR OR REPLACEMENT OF THE
GRANTOR’S PROPERTY SO DAMAGED OR DESTROYED, OR THE PURCHASERS MAY APPLY ALL OR
ANY PART OF SUCH PROCEEDS TO THE OBLIGATIONS.

 

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11.3.       NOTICE OF CANCELLATION ETC. ALL POLICIES OF INSURANCE SHALL PROVIDE
FOR AT LEAST 30 DAYS PRIOR WRITTEN CANCELLATION NOTICE TO THE PURCHASERS, UNLESS
A SHORTER PERIOD IS MANDATED UNDER APPLICABLE LAW. IN THE EVENT OF FAILURE BY
ANY GRANTOR TO PROVIDE AND MAINTAIN INSURANCE AS HEREIN PROVIDED, THE PURCHASERS
MAY, AT THEIR OPTION, PROVIDE SUCH INSURANCE AND CHARGE THE AMOUNT THEREOF TO
THE GRANTOR. EACH GRANTOR SHALL FURNISH THE PURCHASERS WITH CERTIFICATES OF
INSURANCE AND POLICIES EVIDENCING COMPLIANCE WITH THE FOREGOING INSURANCE
PROVISION.

 

12.          COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

 

12.1.       EXPENSES INCURRED BY PURCHASERS. IN THEIR DISCRETION, THE PURCHASERS
MAY DISCHARGE ENCUMBRANCES AT ANY TIME LEVIED OR PLACED ON ANY OF THE COLLATERAL
(OTHER THAN TO THE EXTENT CONSTITUTING PERMITTED LIENS), MAKE REPAIRS THERETO
AND PAY ANY NECESSARY FILING FEES OR, IF ANY GRANTOR FAILS TO DO SO, INSURANCE
PREMIUMS. EACH GRANTOR AGREES TO REIMBURSE THE PURCHASERS ON DEMAND FOR ANY AND
ALL EXPENDITURES SO MADE. THE PURCHASERS SHALL HAVE NO OBLIGATION TO THE
GRANTORS TO MAKE ANY SUCH EXPENDITURES, NOR SHALL THE MAKING THEREOF RELIEVE THE
GRANTOR OF ANY DEFAULT. ANY EXPENSES INCURRED UNDER THIS SECTION 12 SHALL
CONSTITUTE OBLIGATIONS.

 

12.2.       PURCHASERS’ OBLIGATIONS AND DUTIES. ANYTHING HEREIN TO THE CONTRARY
NOTWITHSTANDING, EACH GRANTOR SHALL REMAIN LIABLE UNDER EACH CONTRACT OR
AGREEMENT COMPRISED IN THE COLLATERAL TO BE OBSERVED OR PERFORMED BY THE GRANTOR
THEREUNDER. THE PURCHASERS SHALL NOT HAVE ANY OBLIGATION OR LIABILITY UNDER ANY
SUCH CONTRACT OR AGREEMENT BY REASON OF OR ARISING OUT OF THIS AGREEMENT OR THE
RECEIPT BY THE PURCHASERS OF ANY PAYMENT RELATING TO ANY OF THE COLLATERAL, NOR
SHALL THE PURCHASERS BE OBLIGATED IN ANY MANNER TO PERFORM ANY OF THE
OBLIGATIONS OF THE GRANTOR UNDER OR PURSUANT TO ANY SUCH CONTRACT OR AGREEMENT,
TO MAKE INQUIRY AS TO THE NATURE OR SUFFICIENCY OF ANY PAYMENT RECEIVED BY THE
PURCHASERS IN RESPECT OF THE COLLATERAL OR AS TO THE SUFFICIENCY OF ANY
PERFORMANCE BY ANY PARTY UNDER ANY SUCH CONTRACT OR AGREEMENT, TO PRESENT OR
FILE ANY CLAIM, TO TAKE ANY ACTION TO ENFORCE ANY PERFORMANCE OR TO COLLECT THE
PAYMENT OF ANY AMOUNTS WHICH MAY HAVE BEEN ASSIGNED TO THE PURCHASERS OR TO
WHICH THE PURCHASERS MAY BE ENTITLED AT ANY TIME OR TIMES. THE PURCHASERS’ SOLE
DUTY WITH RESPECT TO THE CUSTODY, SAFE KEEPING AND PHYSICAL PRESERVATION OF THE
COLLATERAL IN THEIR POSSESSION, UNDER §9-207 OF THE UNIFORM COMMERCIAL CODE OF
THE STATE OR OTHERWISE, SHALL BE TO DEAL WITH SUCH COLLATERAL IN THE SAME MANNER
AS THE PURCHASERS DEAL WITH SIMILAR PROPERTY FOR THEIR OWN ACCOUNTS.

 

13.          SECURITIES AND DEPOSITS. THE PURCHASERS MAY AT ANY TIME FOLLOWING
AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, AT THEIR OPTION, TRANSFER TO
THEMSELVES OR ANY NOMINEE ANY SECURITIES CONSTITUTING COLLATERAL, RECEIVE ANY
INCOME THEREON AND HOLD SUCH INCOME AS ADDITIONAL COLLATERAL OR APPLY IT TO THE
OBLIGATIONS. WHETHER OR NOT ANY

 

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OBLIGATIONS ARE DUE, THE PURCHASERS MAY FOLLOWING AND DURING THE CONTINUANCE OF
AN EVENT OF DEFAULT DEMAND, SUE FOR, COLLECT, OR MAKE ANY SETTLEMENT OR
COMPROMISE WHICH IT DEEMS DESIRABLE WITH RESPECT TO THE COLLATERAL. REGARDLESS
OF THE ADEQUACY OF COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, ANY
DEPOSITS OR OTHER SUMS AT ANY TIME CREDITED BY OR DUE FROM THE PURCHASERS TO THE
GRANTORS MAY AT ANY TIME BE APPLIED TO OR SET OFF AGAINST ANY OF THE OBLIGATIONS
THEN DUE AND OWING.

 

14.          NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL. IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE
GRANTORS SHALL, AT THE REQUEST OF THE PURCHASERS, NOTIFY ACCOUNT DEBTORS AND
OTHER PERSONS OBLIGATED ON ANY OF THE COLLATERAL OF THE SECURITY INTEREST OF THE
PURCHASERS IN ANY ACCOUNT, CHATTEL PAPER, GENERAL INTANGIBLE, INSTRUMENT OR
OTHER COLLATERAL AND THAT PAYMENT THEREOF IS TO BE MADE DIRECTLY TO THE
PURCHASERS OR TO ANY FINANCIAL INSTITUTION DESIGNATED BY THE PURCHASERS AS THEIR
AGENT THEREFOR, AND THE PURCHASERS MAY THEMSELVES, IF AN EVENT OF DEFAULT SHALL
HAVE OCCURRED AND BE CONTINUING, WITHOUT NOTICE TO OR DEMAND UPON THE GRANTOR,
SO NOTIFY ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL. AFTER THE
MAKING OF SUCH A REQUEST OR THE GIVING OF ANY SUCH NOTIFICATION, THE GRANTORS
SHALL HOLD ANY PROCEEDS OF COLLECTION OF ACCOUNTS, CHATTEL PAPER, GENERAL
INTANGIBLES, INSTRUMENTS AND OTHER COLLATERAL RECEIVED BY THE GRANTOR AS TRUSTEE
FOR THE PURCHASERS WITHOUT COMMINGLING THE SAME WITH OTHER FUNDS OF THE GRANTOR
AND SHALL TURN THE SAME OVER TO THE PURCHASERS IN THE IDENTICAL FORM RECEIVED,
TOGETHER WITH ANY NECESSARY ENDORSEMENTS OR ASSIGNMENTS. THE PURCHASERS SHALL
APPLY THE PROCEEDS OF COLLECTION OF ACCOUNTS, CHATTEL PAPER, GENERAL
INTANGIBLES, INSTRUMENTS AND OTHER COLLATERAL RECEIVED BY THE PURCHASERS TO THE
OBLIGATIONS, SUCH PROCEEDS TO BE IMMEDIATELY ENTERED AFTER FINAL PAYMENT IN CASH
OR OTHER IMMEDIATELY AVAILABLE FUNDS OF THE ITEMS GIVING RISE TO THEM.

 

15.          INVESTMENT PROPERTY. (I)  THE GRANTORS, AT THEIR COST AND EXPENSE
(INCLUDING THE COST AND EXPENSE OF ANY OF THE FOLLOWING REFERENCED CONSENTS,
APPROVALS ETC.) WILL PROMPTLY EXECUTE AND DELIVER OR CAUSE THE EXECUTION AND
DELIVERY OF ALL APPLICATIONS, CERTIFICATES, INSTRUMENTS, REGISTRATION
STATEMENTS, AND ALL OTHER DOCUMENTS AND PAPERS THE PURCHASERS MAY REQUEST DURING
THE CONTINUANCE OF AN EVENT OF DEFAULT IN CONNECTION WITH THE OBTAINING OF ANY
CONSENT, APPROVAL, REGISTRATION, QUALIFICATION, PERMIT, LICENSE, ACCREDITATION,
OR AUTHORIZATION OF ANY OTHER OFFICIAL BODY OR OTHER PERSON NECESSARY OR
APPROPRIATE FOR THE EFFECTIVE EXERCISE OF ANY RIGHTS HEREUNDER OR UNDER THE
OTHER TRANSACTION DOCUMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
THE GRANTORS AGREE THAT IN THE EVENT THE PURCHASERS SHALL EXERCISE THEIR RIGHTS
HEREUNDER OR PURSUANT TO THE OTHER TRANSACTION DOCUMENTS DURING THE CONTINUANCE
OF AN EVENT OF DEFAULT, TO SELL, TRANSFER, OR OTHERWISE DISPOSE OF, OR VOTE,
CONSENT, OPERATE, OR TAKE ANY OTHER ACTION IN CONNECTION WITH ANY OF THE
COLLATERAL, THE GRANTORS SHALL EXECUTE AND DELIVER (OR CAUSE TO BE EXECUTED AND
DELIVERED) ALL APPLICATIONS, CERTIFICATES, ASSIGNMENTS AND OTHER DOCUMENTS THAT
THE PURCHASERS REQUEST TO FACILITATE SUCH ACTIONS AND SHALL OTHERWISE PROMPTLY,
FULLY, AND DILIGENTLY COOPERATE WITH THE PURCHASERS AND ANY OTHER PERSONS IN
MAKING ANY APPLICATION FOR THE PRIOR CONSENT OR APPROVAL OF ANY OFFICIAL BODY OR
ANY OTHER PERSON TO THE EXERCISE BY THE PURCHASERS OF ANY SUCH RIGHTS RELATING
TO ALL OR ANY OF THE COLLATERAL.

 

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(II)           THE GRANTORS AGREE PROMPTLY UPON THE OCCURRENCE AND CONTINUANCE
OF AN EVENT OF DEFAULT AND WITHOUT ANY REQUEST THEREFOR BY THE PURCHASERS, SO
LONG AS SUCH EVENT OF DEFAULT SHALL CONTINUE, TO DELIVER (PROPERLY ENDORSED
WHERE REQUIRED HEREBY OR REQUESTED BY PURCHASERS) TO THE PURCHASERS ALL
DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO INVESTMENT PROPERTY AND ALL PROCEEDS
OF THE COLLATERAL, IN EACH CASE THEREAFTER RECEIVED BY THE GRANTOR, ALL OF WHICH
SHALL BE HELD BY PURCHASERS AS ADDITIONAL COLLATERAL.

 

(III)          EXCEPT WHEN AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING,
THE GRANTORS MAY CONTINUE TO VOTE ALL INVESTMENT PROPERTY INCLUDED IN THE
COLLATERAL EXCEPT IN A MANNER WHICH IS INCONSISTENT OR IN VIOLATION OF THE
TRANSACTION DOCUMENTS. THE GRANTORS AGREE PROMPTLY UPON THE OCCURRENCE AND
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, (I) THAT PURCHASERS MAY EXERCISE
(TO THE EXCLUSION OF THE GRANTOR) THE VOTING POWER AND ALL OTHER INCIDENTAL
RIGHTS OF OWNERSHIP WITH RESPECT TO ANY COLLATERAL CONSTITUTING INVESTMENT
PROPERTY OF THE GRANTOR AND THE GRANTOR HEREBY GRANTS PURCHASERS AN IRREVOCABLE
PROXY, EXERCISABLE UNDER SUCH CIRCUMSTANCES, TO VOTE SUCH INVESTMENT PROPERTY;
AND (II) THAT IT SHALL PROMPTLY DELIVER TO THE PURCHASERS SUCH ADDITIONAL
PROXIES AND OTHER DOCUMENTS AS MAY BE NECESSARY TO ALLOW THE PURCHASERS TO
EXERCISE SUCH VOTING POWER.

 

(IV)          ALL DIVIDENDS, DISTRIBUTIONS, INTEREST, PRINCIPAL, CASH PAYMENTS,
PAYMENT INTANGIBLES AND PROCEEDS WHICH MAY AT ANY TIME AND FROM TIME TO TIME BE
HELD BY ANY GRANTOR BUT WHICH THE GRANTOR IS THEN OBLIGATED TO DELIVER TO THE
PURCHASERS, SHALL, UNTIL DELIVERY TO THE PURCHASERS, BE HELD BY THE GRANTOR
SEPARATE AND APART FROM ITS OTHER PROPERTY IN TRUST FOR THE PURCHASERS. THE
PURCHASERS AGREE THAT UNLESS AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING, THE GRANTORS WILL HAVE THE EXCLUSIVE VOTING POWER WITH RESPECT TO
ANY INVESTMENT PROPERTY CONSTITUTING THE GRANTOR’S COLLATERAL AND THE PURCHASERS
WILL, UPON THE WRITTEN REQUEST OF ANY GRANTOR, PROMPTLY DELIVER SUCH PROXIES AND
OTHER DOCUMENTS, IF ANY, AS SHALL BE REASONABLY REQUESTED BY THE GRANTOR WHICH
ARE NECESSARY TO ALLOW THE GRANTOR TO EXERCISE THAT VOTING POWER; PROVIDED THAT
NO VOTE SHALL BE CAST, OR CONSENT, WAIVER, OR RATIFICATION GIVEN, OR ACTION
TAKEN BY THE GRANTOR THAT WOULD VIOLATE ANY PROVISION OF ANY TRANSACTION
DOCUMENT.

 

The Grantors hereby acknowledge that the sale by Purchasers of any Investment
Property pursuant to the terms hereof in compliance with the Securities Act, as
well as applicable “Blue Sky” or other state securities laws may require strict
limitations as to the manner in which Purchasers or any subsequent transferee of
the Investment Property may dispose thereof. The Grantors acknowledge and agree
that, to protect Purchasers’ interests, it may be necessary to sell the
Investment Property at a price less than the maximum price attainable if a sale
were delayed or made in another manner, such as a public offering under the
Securities Act. The Grantors do not have an objection to a sale in such manner
and the Grantors agree that Purchasers do not have an obligation to obtain the
maximum possible price for all or any part of the Investment Property. Without
limiting the generality of the foregoing, the Grantors agree that Purchasers
may, pursuant to the terms hereof and subject to applicable law, from time to
time attempt to sell all or any part of the Investment Property by a private
placement, restricting the bidders and prospective purchasers to those Persons
who will represent and agree that they are

 

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purchasing for investment only and not for distribution. In so doing, Purchasers
may solicit offers to buy the Investment Property or any part thereof for cash
from a limited number of investors deemed by Purchasers, in their reasonable
judgment, to be institutional investors or other responsible Persons who might
be interested in purchasing the Investment Property. If Purchasers shall solicit
such offers, then acceptance by Purchasers of one of the offers shall be deemed
to be a commercially reasonable method of disposition of the Collateral.

 

16.          POWER OF ATTORNEY.

 

16.1.       APPOINTMENT AND POWERS OF PURCHASERS. THE GRANTORS HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT THE PURCHASERS AND ANY OFFICER OR AGENT
THEREOF, WITH FULL POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT WITH FULL IRREVOCABLE POWER AND AUTHORITY IN THE PLACE AND
STEAD OF THE GRANTORS OR IN THE PURCHASERS’ OWN NAME, FOR THE PURPOSE OF
CARRYING OUT THE TERMS OF THIS AGREEMENT, TO TAKE ANY AND ALL APPROPRIATE ACTION
AND TO EXECUTE ANY AND ALL DOCUMENTS AND INSTRUMENTS THAT MAY BE NECESSARY OR
DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY GIVES SAID ATTORNEY THE POWER AND RIGHT, ON
BEHALF OF THE GRANTORS, WITHOUT NOTICE TO OR ASSENT BY THE GRANTORS, TO DO THE
FOLLOWING:

 

(A)  UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
GENERALLY TO SELL, TRANSFER, PLEDGE, MAKE ANY AGREEMENT WITH RESPECT TO OR
OTHERWISE DEAL WITH ANY OF THE COLLATERAL IN SUCH MANNER AS IS CONSISTENT WITH
THE UNIFORM COMMERCIAL CODE OF THE STATE AND AS FULLY AND COMPLETELY AS THOUGH
THE PURCHASERS WERE THE ABSOLUTE OWNERS THEREOF FOR ALL PURPOSES, AND TO DO AT
THE GRANTORS’ EXPENSE, AT ANY TIME, OR FROM TIME TO TIME, ALL ACTS AND THINGS
WHICH THE PURCHASERS DEEM NECESSARY TO PROTECT, PRESERVE OR REALIZE UPON THE
COLLATERAL AND THE PURCHASERS’ SECURITY INTEREST THEREIN, IN ORDER TO EFFECT THE
INTENT OF THIS AGREEMENT, ALL AS FULLY AND EFFECTIVELY AS THE GRANTOR MIGHT DO,
INCLUDING, WITHOUT LIMITATION, (I) THE FILING AND PROSECUTING OF REGISTRATION
AND TRANSFER APPLICATIONS WITH THE APPROPRIATE FEDERAL OR LOCAL AGENCIES OR
AUTHORITIES WITH RESPECT TO TRADEMARKS, COPYRIGHTS AND PATENTABLE INVENTIONS AND
PROCESSES, (II) UPON WRITTEN NOTICE TO THE GRANTORS, THE EXERCISE OF VOTING
RIGHTS WITH RESPECT TO VOTING SECURITIES, WHICH RIGHTS MAY BE EXERCISED, IF THE
PURCHASERS SO ELECT, WITH A VIEW TO CAUSING THE LIQUIDATION IN A COMMERCIALLY
REASONABLE MANNER OF ASSETS OF THE ISSUER OF ANY SUCH SECURITIES AND (III) THE
EXECUTION, DELIVERY AND RECORDING, IN CONNECTION WITH ANY SALE OR OTHER
DISPOSITION OF ANY COLLATERAL, OF THE ENDORSEMENTS, ASSIGNMENTS OR OTHER
INSTRUMENTS OF CONVEYANCE OR TRANSFER WITH RESPECT TO SUCH COLLATERAL; AND

 

(B)  TO THE EXTENT THAT THE GRANTORS’ AUTHORIZATION GIVEN IN §3 IS NOT
SUFFICIENT, TO FILE SUCH FINANCING STATEMENTS WITH RESPECT HERETO, WITH OR
WITHOUT THE GRANTOR’ SIGNATURE, AS THE PURCHASERS MAY DEEM APPROPRIATE AND TO
EXECUTE IN THE GRANTOR’S NAME SUCH FINANCING STATEMENTS AND AMENDMENTS THERETO
AND CONTINUATION STATEMENTS WHICH MAY REQUIRE THE GRANTOR’S SIGNATURE.

 

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16.2.       RATIFICATION BY GRANTORS. TO THE EXTENT PERMITTED BY LAW, THE
GRANTORS HEREBY RATIFY ALL THAT SAID ATTORNEY SHALL LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF. THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE.

 

16.3.       NO DUTY ON PURCHASERS. THE POWERS CONFERRED ON THE PURCHASERS
HEREUNDER ARE SOLELY TO PROTECT ITS INTERESTS IN THE COLLATERAL AND SHALL NOT
IMPOSE ANY DUTY UPON IT TO EXERCISE ANY SUCH POWERS. THE PURCHASERS SHALL BE
ACCOUNTABLE ONLY FOR THE AMOUNTS THAT THEY ACTUALLY RECEIVE AS A RESULT OF THE
EXERCISE OF SUCH POWERS AND NEITHER ANY PURCHASER NOR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS SHALL BE RESPONSIBLE TO THE GRANTOR FOR ANY ACT
OR FAILURE TO ACT, EXCEPT FOR SUCH PURCHASER’S OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

 

16.4. PURCHASERS HEREBY AGREE THAT THEY WILL NOT EXERCISE ANY RIGHTS CONFERRED
BY THIS SECTION 16 ABSENT THE OCCURRENCE OF AN EVENT OF DEFAULT.

 

17.          REMEDIES. IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING, THE PURCHASERS MAY, WITHOUT NOTICE TO OR DEMAND UPON THE GRANTORS,
DECLARE THIS AGREEMENT TO BE IN DEFAULT, AND THE PURCHASERS SHALL THEREAFTER
HAVE IN ANY JURISDICTION IN WHICH ENFORCEMENT HEREOF IS SOUGHT, IN ADDITION TO
ALL OTHER RIGHTS AND REMEDIES, THE RIGHTS AND REMEDIES OF A PURCHASER UNDER THE
UNIFORM COMMERCIAL CODE OF THE STATE OR OF ANY JURISDICTION IN WHICH COLLATERAL
IS LOCATED, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TAKE POSSESSION OF THE
COLLATERAL, AND FOR THAT PURPOSE THE PURCHASERS MAY, SO FAR AS THE GRANTORS CAN
GIVE AUTHORITY THEREFOR, ENTER UPON ANY PREMISES ON WHICH THE COLLATERAL MAY BE
SITUATED AND REMOVE THE SAME THEREFROM. THE PURCHASERS MAY IN THEIR DISCRETION
REQUIRE THE GRANTORS TO ASSEMBLE ALL OR ANY PART OF THE COLLATERAL AT SUCH
LOCATION OR LOCATIONS WITHIN THE JURISDICTION(S) OF THE GRANTORS’ PRINCIPAL
OFFICE(S) OR AT SUCH OTHER LOCATIONS AS THE PURCHASERS MAY REASONABLY DESIGNATE.
UNLESS THE COLLATERAL IS PERISHABLE OR THREATENS TO DECLINE SPEEDILY IN VALUE OR
IS OF A TYPE CUSTOMARILY SOLD ON A RECOGNIZED MARKET, THE PURCHASERS SHALL GIVE
TO THE GRANTORS AT LEAST TEN BUSINESS DAYS PRIOR WRITTEN NOTICE OF THE TIME AND
PLACE OF ANY PUBLIC SALE OF COLLATERAL OR OF THE TIME AFTER WHICH ANY PRIVATE
SALE OR ANY OTHER INTENDED DISPOSITION IS TO BE MADE. THE GRANTORS HEREBY
ACKNOWLEDGE THAT TEN BUSINESS DAYS PRIOR WRITTEN NOTICE OF SUCH SALE OR SALES
SHALL BE REASONABLE NOTICE. IN ADDITION, THE GRANTORS WAIVE ANY AND ALL RIGHTS
THAT IT MAY HAVE TO A JUDICIAL HEARING IN ADVANCE OF THE ENFORCEMENT OF ANY OF
THE PURCHASERS’ RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, ITS RIGHT
FOLLOWING AN EVENT OF DEFAULT TO TAKE IMMEDIATE POSSESSION OF THE COLLATERAL AND
TO EXERCISE ITS RIGHTS WITH RESPECT THERETO.

 

18.          STANDARDS FOR EXERCISING REMEDIES. TO THE EXTENT THAT APPLICABLE
LAW IMPOSES DUTIES ON THE PURCHASERS TO EXERCISE REMEDIES IN A COMMERCIALLY
REASONABLE MANNER, THE GRANTORS ACKNOWLEDGE AND AGREE THAT IT IS NOT
COMMERCIALLY UNREASONABLE FOR THE PURCHASERS (A) TO FAIL TO INCUR EXPENSES
REASONABLY DEEMED SIGNIFICANT BY THE

 

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PURCHASERS TO PREPARE COLLATERAL FOR DISPOSITION OR OTHERWISE TO COMPLETE RAW
MATERIAL OR WORK IN PROCESS INTO FINISHED GOODS OR OTHER FINISHED PRODUCTS FOR
DISPOSITION, (B) TO FAIL TO OBTAIN THIRD PARTY CONSENTS FOR ACCESS TO COLLATERAL
TO BE DISPOSED OF, OR TO OBTAIN OR, IF NOT REQUIRED BY OTHER LAW, TO FAIL TO
OBTAIN GOVERNMENTAL OR THIRD PARTY CONSENTS FOR THE COLLECTION OR DISPOSITION OF
COLLATERAL TO BE COLLECTED OR DISPOSED OF, (C) TO FAIL TO EXERCISE COLLECTION
REMEDIES AGAINST ACCOUNT DEBTORS OR OTHER PERSONS OBLIGATED ON COLLATERAL OR TO
REMOVE LIENS OR ENCUMBRANCES ON OR ANY ADVERSE CLAIMS AGAINST COLLATERAL, (D) TO
EXERCISE COLLECTION REMEDIES AGAINST ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED
ON COLLATERAL DIRECTLY OR THROUGH THE USE OF COLLECTION AGENCIES AND OTHER
COLLECTION SPECIALISTS, (E) TO ADVERTISE DISPOSITIONS OF COLLATERAL THROUGH
PUBLICATIONS OR MEDIA OF GENERAL CIRCULATION, WHETHER OR NOT THE COLLATERAL IS
OF A SPECIALIZED NATURE, (F) TO CONTACT OTHER PERSONS, WHETHER OR NOT IN THE
SAME BUSINESS AS THE GRANTOR, FOR EXPRESSIONS OF INTEREST IN ACQUIRING ALL OR
ANY PORTION OF THE COLLATERAL, (G) TO HIRE ONE OR MORE PROFESSIONAL AUCTIONEERS
TO ASSIST IN THE DISPOSITION OF COLLATERAL, WHETHER OR NOT THE COLLATERAL IS OF
A SPECIALIZED NATURE, (H) TO DISPOSE OF COLLATERAL BY UTILIZING INTERNET SITES
THAT PROVIDE FOR THE AUCTION OF ASSETS OF THE TYPES INCLUDED IN THE COLLATERAL
OR THAT HAVE THE REASONABLE CAPABILITY OF DOING SO, OR THAT MATCH BUYERS AND
SELLERS OF ASSETS, (I) TO DISPOSE OF ASSETS IN WHOLESALE RATHER THAN RETAIL
MARKETS, (J) TO DISCLAIM DISPOSITION WARRANTIES, (K) TO PURCHASE INSURANCE OR
CREDIT ENHANCEMENTS TO INSURE THE PURCHASERS AGAINST RISKS OF LOSS, COLLECTION
OR DISPOSITION OF COLLATERAL OR TO PROVIDE TO THE PURCHASERS A GUARANTEED RETURN
FROM THE COLLECTION OR DISPOSITION OF COLLATERAL, OR (1) TO THE EXTENT DEEMED
APPROPRIATE BY THE PURCHASERS, TO OBTAIN THE SERVICES OF OTHER BROKERS,
INVESTMENT BANKERS, CONSULTANTS AND OTHER PROFESSIONALS TO ASSIST THE PURCHASERS
IN THE COLLECTION OR DISPOSITION OF ANY OF THE COLLATERAL. THE GRANTORS
ACKNOWLEDGE THAT THE PURPOSE OF THIS §18 IS TO PROVIDE NON-EXHAUSTIVE
INDICATIONS OF WHAT ACTIONS OR OMISSIONS BY THE PURCHASERS WOULD NOT BE
COMMERCIALLY UNREASONABLE IN THE PURCHASERS’ EXERCISE OF REMEDIES AGAINST THE
COLLATERAL AND THAT OTHER ACTIONS OR OMISSIONS BY THE PURCHASERS SHALL NOT BE
DEEMED COMMERCIALLY UNREASONABLE SOLELY ON ACCOUNT OF NOT BEING INDICATED IN
THIS §18. WITHOUT LIMITATION UPON THE FOREGOING, NOTHING CONTAINED IN THIS §18
SHALL BE CONSTRUED TO GRANT ANY RIGHTS TO THE GRANTORS OR TO IMPOSE ANY DUTIES
ON THE PURCHASERS THAT WOULD NOT HAVE BEEN GRANTED OR IMPOSED BY THIS AGREEMENT
OR BY APPLICABLE LAW IN THE ABSENCE OF THIS §18.

 

19.          NO ORAL CHANGE; AMENDMENTS; SECURITY AGREEMENT SUPPLEMENTS FOR
ADDITIONAL GRANTORS. NO AMENDMENT OF ANY PROVISION OF THIS AGREEMENT SHALL BE
EFFECTIVE UNLESS IT IS IN WRITING AND SIGNED BY THE GRANTORS AND THE PURCHASERS,
AND NO WAIVER OF ANY PROVISION OF THIS AGREEMENT, AND NO CONSENT TO ANY
DEPARTURE BY THE GRANTORS THEREFROM, SHALL BE EFFECTIVE UNLESS IT IS IN WRITING
AND SIGNED BY THE PURCHASERS, AND THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE
ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH GIVEN.
NOTWITHSTANDING THE FOREGOING, ADDITIONAL PERSONS MAY BECOME GRANTORS UNDER THIS
AGREEMENT WITHOUT CONSENT OF ANY OTHER GRANTOR THROUGH EXECUTION AND DELIVERY TO
THE PURCHASERS OF AN ASSUMPTION AGREEMENT IN THE FORM OF ANNEX 1 HERETO OR ANY
OTHER FORM OF SUPPLEMENT ACCEPTABLE TO THE PURCHASERS. NOTHING IN THIS SECTION
19 SHALL BE CONSTRUED TO PERMIT ANY GRANTOR TO FORM A SUBSIDIARY UNLESS
EXPRESSLY PERMITTED TO DO SO UNDER THE NOTE.

 

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20.          SURETYSHIP WAIVERS BY GRANTORS. EACH GRANTOR WAIVES DEMAND, NOTICE,
PROTEST, NOTICE OF ACCEPTANCE OF THIS AGREEMENT, NOTICE OF LOANS MADE, CREDIT
EXTENDED, COLLATERAL RECEIVED OR DELIVERED OR OTHER ACTION TAKEN IN RELIANCE
HEREON AND ALL OTHER DEMANDS AND NOTICES OF ANY DESCRIPTION. WITH RESPECT TO
BOTH THE OBLIGATIONS AND THE COLLATERAL, THE GRANTORS ASSENT TO ANY EXTENSION OR
POSTPONEMENT OF THE TIME OF PAYMENT OR ANY OTHER INDULGENCE, TO ANY
SUBSTITUTION, EXCHANGE OR RELEASE OF OR FAILURE TO PERFECT ANY SECURITY INTEREST
IN ANY COLLATERAL, TO THE ADDITION OR RELEASE OF ANY PARTY OR PERSON PRIMARILY
OR SECONDARILY LIABLE, TO THE ACCEPTANCE OF PARTIAL PAYMENT THEREON AND THE
SETTLEMENT, COMPROMISING OR ADJUSTING OF ANY THEREOF, ALL IN SUCH MANNER AND AT
SUCH TIME OR TIMES AS THE PURCHASERS MAY DEEM ADVISABLE. THE PURCHASERS SHALL
HAVE NO DUTY AS TO THE COLLECTION OR PROTECTION OF THE COLLATERAL OR ANY INCOME
THEREON, NOR AS TO THE PRESERVATION OF RIGHTS AGAINST PRIOR PARTIES, NOR AS TO
THE PRESERVATION OF ANY RIGHTS PERTAINING THERETO BEYOND THE SAFE CUSTODY
THEREOF AS SET FORTH IN §11.2. THE GRANTORS FURTHER WAIVE ANY AND ALL OTHER
SURETYSHIP DEFENSES.

 

21.          MARSHALLING. THE PURCHASERS SHALL NOT BE REQUIRED TO MARSHAL ANY
PRESENT OR FUTURE COLLATERAL SECURITY (INCLUDING BUT NOT LIMITED TO THIS
AGREEMENT AND THE COLLATERAL) FOR, OR OTHER ASSURANCES OF PAYMENT OF, THE
OBLIGATIONS OR ANY OF THEM OR TO RESORT TO SUCH COLLATERAL SECURITY OR OTHER
ASSURANCES OF PAYMENT IN ANY PARTICULAR ORDER, AND ALL OF ITS RIGHTS HEREUNDER
AND IN RESPECT OF SUCH COLLATERAL SECURITY AND OTHER ASSURANCES OF PAYMENT SHALL
BE CUMULATIVE AND IN ADDITION TO ALL OTHER RIGHTS, HOWEVER EXISTING OR ARISING.
TO THE EXTENT THAT IT LAWFULLY MAY, EACH GRANTORS HEREBY AGREES THAT IT WILL NOT
INVOKE ANY LAW RELATING TO THE MARSHALLING OF COLLATERAL WHICH MIGHT CAUSE DELAY
IN OR IMPEDE THE ENFORCEMENT OF THE PURCHASERS’ RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY OTHER INSTRUMENT CREATING OR EVIDENCING ANY OF THE OBLIGATIONS OR
UNDER WHICH ANY OF THE OBLIGATIONS IS OUTSTANDING OR BY WHICH ANY OF THE
OBLIGATIONS IS SECURED OR PAYMENT THEREOF IS OTHERWISE ASSURED, AND, TO THE
EXTENT THAT IT LAWFULLY MAY, EACH GRANTOR HEREBY IRREVOCABLY WAIVES THE BENEFITS
OF ALL SUCH LAWS.

 

22.          PROCEEDS OF DISPOSITIONS; EXPENSES. THE GRANTORS SHALL PAY TO THE
PURCHASERS ON DEMAND ANY AND ALL EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES
AND DISBURSEMENTS, INCURRED OR PAID BY THE PURCHASERS IN PROTECTING, PRESERVING
OR ENFORCING THE PURCHASERS’ RIGHTS UNDER OR IN RESPECT OF ANY OF THE
OBLIGATIONS OR ANY OF THE COLLATERAL. AFTER DEDUCTING ALL OF SAID EXPENSES, THE
RESIDUE OF ANY PROCEEDS OF COLLECTION OR SALE OF THE OBLIGATIONS OR COLLATERAL
SHALL, TO THE EXTENT ACTUALLY RECEIVED IN CASH, BE APPLIED TO THE PAYMENT OF THE
OBLIGATIONS IN SUCH ORDER OR PREFERENCE AS THE PURCHASERS MAY DETERMINE, PROPER
ALLOWANCE AND PROVISION BEING MADE FOR ANY OBLIGATIONS NOT THEN DUE. UPON THE
FINAL PAYMENT AND SATISFACTION IN FULL OF ALL OF THE OBLIGATIONS (OTHER THAN
INDEMNIFICATION OBLIGATIONS WHICH HAVE NOT MATURED AS OF THE DATE THEREOF) AND
AFTER MAKING ANY PAYMENTS REQUIRED BY SECTIONS 9-608(A)(1)(C) OR 9615(A)(3) OF
THE UNIFORM COMMERCIAL CODE OF THE STATE, ANY EXCESS SHALL BE RETURNED TO THE
GRANTORS, AND THE GRANTORS SHALL REMAIN LIABLE FOR ANY DEFICIENCY IN THE PAYMENT
OF THE OBLIGATIONS.

 

23.          OVERDUE AMOUNTS. UNTIL PAID, ALL AMOUNTS DUE AND PAYABLE BY THE
GRANTORS HEREUNDER SHALL BE A DEBT SECURED BY THE COLLATERAL AND SHALL BEAR,
WHETHER BEFORE OR AFTER JUDGMENT, INTEREST AT THE RATE OF INTEREST SET FORTH IN
THE NOTE.

 

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24.          GOVERNING LAW; CONSENT TO JURISDICTION.

 

(A)           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE (OTHER THAN THOSE CONFLICT OF LAW RULES
THAT WOULD DEFER TO THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION). WITHOUT IN
ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE PARTIES ELECT TO BE GOVERNED
BY THE LAW OF THE STATE IN ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART)
ON, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE, AS AMENDED, OR
ANY CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

 

(B)           SUBMISSION TO JURISDICTION. THE GRANTORS HEREBY SUBMIT TO THE
EXCLUSIVE PERSONAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF THE SUPREME COURT OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY (INCLUDING ITS APPELLATE DIVISION), AND OF ANY OTHER
APPELLATE COURT IN THE STATE OF NEW YORK, FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

(C)           WAIVER OF VENUE. THE GRANTORS HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. WITHOUT IN ANY WAY LIMITING THE PRECEDING
CONSENTS TO PERSONAL JURISDICTION AND VENUE, THE PARTIES AGREE TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ACCORDANCE WITH SECTION
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE, AS AMENDED, OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

 

(D)           SERVICE OF PROCESS; NOTICES. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS AND DELIVERY OF NOTICES PROVIDED FOR
HEREUNDER IN THE MANNER PROVIDED FOR NOTICES IN THE PURCHASE AGREEMENT. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

25.          WAIVER OF JURY TRIAL. THE GRANTORS AND THE PURCHASERS HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

26.          MISCELLANEOUS; AGREEMENT TO BE BOUND BY PROVISIONS OF TRANSACTION
DOCUMENTS APPLICABLE TO GRANTOR. THE HEADINGS OF EACH SECTION OF THIS AGREEMENT
ARE FOR CONVENIENCE ONLY AND SHALL NOT DEFINE OR LIMIT THE PROVISIONS THEREOF.
THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE BINDING UPON
THE GRANTORS AND THEIR

 

17

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RESPECTIVE SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT OF THE
PURCHASERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. IF ANY TERM OF THIS
AGREEMENT SHALL BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY OF
ALL OTHER TERMS HEREOF SHALL IN NO WAY BE AFFECTED THEREBY, AND THIS AGREEMENT
SHALL BE CONSTRUED AND BE ENFORCEABLE AS IF SUCH INVALID, ILLEGAL OR
UNENFORCEABLE TERM HAD NOT BEEN INCLUDED HEREIN. THE GRANTORS ACKNOWLEDGE
RECEIPT OF A COPY OF THIS AGREEMENT. EACH GRANTOR AGREES TO BE BOUND BY EACH
PROVISION OF EVERY OTHER TRANSACTION DOCUMENT WHICH PURPORTS TO BE APPLICABLE TO
IT AS IF SUCH PROVISION WERE SET FORTH HEREIN.

 

27.          SUBSIDIARIES. BORROWER SHALL CAUSE EACH EXISTING AND FUTURE
SUBSIDIARY THAT HAS ASSETS OF $10,000 OR MORE TO COMPLETE, EXECUTE AND DELIVER
TO THE PURCHASERS, THE FORM OF ASSUMPTION AGREEMENT ATTACHED AS ANNEX 1 AND SUCH
OTHER DOCUMENTS AS THE PURCHASERS SHALL REASONABLY REQUEST, INCLUDING, WITHOUT
LIMITATION, EVIDENCE OF GOOD STANDING OF SUCH AFFILIATE AND LIEN SEARCHES, ALL
IN FORM AND SUBSTANCE ACCEPTABLE TO THE PURCHASERS.

 

28.          LIMITED RECOURSE GUARANTY. EACH SUBSIDIARY THAT BECOMES A GRANTOR
(EACH A “SUBSIDIARY GRANTOR”) HEREBY UNCONDITIONALLY GUARANTEES THE PAYMENT WHEN
DUE OF ALL OBLIGATIONS, PROVIDED, HOWEVER, THAT RECOURSE UNDER THIS PROVISION IS
LIMITED TO THE ASSETS OF THE SUBSIDIARY GRANTOR THAT ARE, OR WILL BE, INCLUDED
AS PART OF THE COLLATERAL. THIS GUARANTY IS IRREVOCABLE AND WILL NOT BE AFFECTED
BY ANY RELEASE OF ANY GRANTOR OR SURRENDER, EXCHANGE, COMPROMISE OR RELEASE ANY
COLLATERAL, BY ANY FAILURE TO PERFECT ANY LIENS, BY ANY IRREGULARITY,
ENFORCEABILITY OR INVALIDITY OF ANY OBLIGATIONS OR ANY PART THEREOF OR ANY
SECURITY OR GUARANTY THEREOF. EACH SUBSIDIARY GRANTOR WAIVES ALL DEFENSES BASED
ON SURETYSHIP OR ON IMPAIRMENT OF COLLATERAL. WITHOUT NOTICE TO, OR THE CONSENT
OF, ANY SUBSIDIARY GRANTOR, THE TERMS OF THE OBLIGATIONS AND ANY RELATED
DOCUMENTS MAY BE CHANGED, EXTENDED, RENEWED OR COMPROMISED.

 

29.          FURTHER ASSURANCES. BORROWER AND EACH SUBSIDIARY GRANTOR SHALL
EXECUTE AND DELIVER ALL SUCH FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE ALL SUCH
OTHER ACTIONS AS MAY REASONABLY BE REQUIRED TO CARRY OUT THE TRANSACTIONS
CONTEMPLATED HEREBY AND TO EVIDENCE THE FULFILLMENT OF THE AGREEMENTS HEREIN
CONTAINED.

 

30.          ADMINISTRATIVE AND COLLATERAL AGENCY; ACTIONS OF PURCHASERS.
PURCHASERS HEREBY DESIGNATE SPECIAL SITUATIONS FUND III (QP), L.P. (THE “AGENT”)
AS THEIR AGENT HEREUNDER TO ACT ON THEIR BEHALF AND TO DEAL WITH THE GRANTOR IN
ALL MATTERS IN CONNECTION WITH THIS AGREEMENT; AND GRANTORS MAY DELIVER TO AGENT
ALL ITEMS REQUIRED TO BE DELIVERED FROM TIME TO TIME TO PURCHASERS HEREUNDER.
ALL ACTIONS AUTHORIZED TO BE TAKEN OR TO NOT TAKEN BY THE PURCHASERS HEREUNDER
SHALL BE TAKEN OR NOT TAKEN BY THE AGENT ON BEHALF OF THE PURCHASERS.

 

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IN WITNESS WHEREOF, intending to be legally bound, the Grantors and Purchasers
have caused this Agreement to be duly executed as of the date first above
written.

 

 

GRANTORS:

 

 

 

PRIMAL SOLUTIONS, INC.

 

 

 

 

 

By:

/s/ Joseph R. Simrell

 

 

 

Name:

Joseph R. Simrell

 

 

Title:

Chief Executive Officer

 

 

 

 

 

WIRELESS BILLING SYSTEMS

 

 

 

 

 

By:

/s/ Joseph R. Simrell

 

 

 

Name:

Joseph R. Simrell

 

 

Title:

Chief Executiv Officer

 

PURCHASERS:

 

 

SPECIAL SITUATIONS FUND III (QP), L.P.

SPECIAL SITUATIONS FUND III, L.P.

SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.

SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.

 

By:

 /s/ Austin W. Marxe

 

 

Name:

Austin W. Marxe

 

Title:

General Partner

 

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