SECURITY AND PLEDGE AGREEMENT

SECURITY AND PLEDGE AGREEMENT, dated as of March [ ], 2013 (this “Agreement”)
made by Worlds Inc., a Delaware corporation with offices located at 11 Royal
Road, Brookline, MA 02445 (the “Company”), and each of the undersigned
subsidiaries of the Company from time to time, if any (each a “Grantor” and
collectively and together with the Company the “Grantors”), in favor of Hudson
Bay IP Opportunities Master Fund LP in its capacity as collateral agent (in such
capacity, the “Collateral Agent”) for the “Buyers” (as defined below) party to
the Securities Purchase Agreement, dated as of March 14, 2013 (as amended,
restated or otherwise modified from time to time, the “Securities Purchase
Agreement”).

W I T N E S S E T H:

WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of
Buyers attached to the Securities Purchase Agreement (collectively, the
“Buyers”) are parties to the Securities Purchase Agreement, pursuant to which
the Company shall be required to sell, and the Buyers shall purchase or have the
right to purchase, the “Notes” (as defined therein) issued pursuant thereto (as
such Notes may be amended, restated, replaced or otherwise modified from time to
time in accordance with the terms thereof, collectively, the “Notes”);

WHEREAS, certain Grantors from time to time (other than the Company)
(collectively, the “Guarantors”) may execute and deliver one or more guarantees
(each, a “Guaranty”) in form and substance acceptable to and in favor of the
Collateral Agent for the benefit of itself and the Buyers, with respect to the
Company’s obligations under the Securities Purchase Agreement, the Notes and the
other “Transaction Documents” (as defined in the Securities Purchase Agreement)
(collectively, the “Transaction Documents”);

WHEREAS, it is a condition precedent to the Buyers purchasing the Notes issued
pursuant to the Securities Purchase Agreement that the Grantors shall have
executed and delivered to the Collateral Agent this Agreement providing for the
grant to the Collateral Agent, for the benefit of the Buyers, of a security
interest in all personal property of each Grantor to secure all of the Company’s
obligations under the Transaction Documents and the Guarantors’ obligations
under any such Guaranty, as applicable; and

WHEREAS, the Grantors have determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of,
the Grantors.

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyers to perform under the Securities Purchase
Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the
Buyers, as follows:

(1)

 

 

Section 1.      Definitions.

(a)             Reference is hereby made to the Securities Purchase Agreement
and the Notes for a statement of the terms thereof. All terms used in this
Agreement and the recitals hereto which are defined in the Securities Purchase
Agreement, the Notes or in Articles 8 or 9 of the Uniform Commercial Code as in
effect from time to time in the State of New York (the “Code”), and which are
not otherwise defined herein shall have the same meanings herein as set forth
therein; provided that terms used herein which are defined in the Code as in
effect in the State of New York on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as the Collateral Agent may otherwise determine; provided, further that, if
perfection or the effect of perfection or non-perfection or the priority of any
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, “Code” means
the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

(b)            The following terms shall have the respective meanings provided
for in the Code: “Accounts”, “Cash Proceeds”, “Certificate of Title”, “Chattel
Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”,
“Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”,
“Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory
Notes”, “Security”, “Record”, “Security Account”, “Software”, and “Supporting
Obligations”.

(c)             As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

“Capital Stock” means (i) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership, membership or
other equity interests of such Person.

“Collateral” has the meaning set forth in Section 2 of this Agreement.

“Controlled Account Agreement” means a control agreement, in form and substance
satisfactory to Collateral Agent, executed and delivered by a Grantor,
Collateral Agent either an applicable securities intermediary (with respect to a
Securities Account) or bank (with respect to a Deposit Account) with respect to
a Controlled Account, as may be amended, restated, supplemented, or otherwise
modified from time to time.

“Controlled Accounts” means any Operating Account or Master Restricted Account.

“Copyright Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

“Copyrights” means all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

“Event of Default” shall have the meaning set forth in the Notes.

“Foreign Currency Controlled Accounts” means any account of the Company or its
Subsidiaries holding non-United States dollar deposits.

“Foreign Subsidiary” has the meaning set forth in Section 2 of this Agreement.

“GAAP” has the meaning set forth in Section 4(c) of this Agreement.

“Governmental Authority” means any nation or government, any Federal, state,
city, town, municipality, county, local or other political subdivision thereof
or thereto and any department, commission, board, bureau, instrumentality,
agency or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

“Intellectual Property” means the Copyrights, Trademarks and Patents.

“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

“Lien” means any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights).

“Master Restricted Account” means account number [ ] held at [ ] subject to a
Controlled Account Agreement in favor of the Collateral Agent in the form
attached hereto as Exhibit B or such other form reasonably acceptable to the
Collateral Agent.

“Obligations” has the meaning set forth in Section 3 of this Agreement.

“Operating Accounts” means, such accounts (other than the Master Restricted
Account) required to be subject to a Controlled Account Agreement pursuant to
Section 13(m) of the Notes, in favor of the Collateral Agent in a form
reasonably acceptable to the Collateral Agent.

(2)

 

 

“Patent Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).

“Patents” means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.

“Perfection Requirement” or “Perfection Requirements” has the meaning set forth
in Section 4(i) of this Agreement.

“Person” means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.

“Pledged Entity” means, each Person listed from time to time on Schedule IV
hereto as a “Pledged Entity,” together with each other Person all or a portion
of whose Capital Stock is acquired or otherwise owned by a Grantor after the
date hereof.

“Pledged Equity” means all of each Grantor’s right, title and interest in and to
all of the Securities and Capital Stock now or hereafter owned by such Grantor,
regardless of class or designation, including all substitutions therefore and
replacements thereof, all proceeds thereof and all rights relating thereto, also
including any certificates representing the Securities and/or Capital Stock, the
right to receive any certificates representing any of the Securities and/or
Capital Stock, all warrants, options, share appreciation rights and other
rights, contractual or otherwise, in respect thereof, and the right to receive
dividends, distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

“Pledged Operating Agreements” means all of each Grantor’s rights, powers, and
remedies under the limited liability company operating agreements of each
Pledged Entity that are limited liability companies, as may be amended,
restated, supplemented, or otherwise modified from time to time.

“Pledged Partnership Agreements” means all of each Grantor’s rights, powers, and
remedies under the partnership agreements of each Pledged Entity that are
partnerships, as may be amended, restated, supplemented, or otherwise modified
from time to time.

“Subsidiary” shall have the meaning set forth in the Notes.

“Trademark Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).

“Trademarks” means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a’s,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a’s, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

(3)

 

 

SECTION 2.      Grants of Security Interest. As collateral security for all of
the “Obligations” (as defined in Section 3 hereof), each Grantor hereby pledges
and assigns to the Collateral Agent for itself and for the benefit of the
Buyers, and grants to the Collateral Agent for itself and for the benefit of the
Buyers, a continuing security interest in all personal property and assets of
such Grantor, wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired, of every kind and description, tangible or
intangible (collectively, the “Collateral”), including, without limitation, the
following:

(a)            all Accounts;

(b)            all Chattel Paper (whether tangible or electronic);

(c)            the Commercial Tort Claims specified on Schedule VI hereto;

(d)            all Deposit Accounts, all cash and other property from time to
time deposited therein and the monies and property in the possession or under
the control of the Collateral Agent or any Buyer or any affiliate,
representative, agent or correspondent of the Collateral Agent or any such
Buyer;

(e)            all Documents;

(f)             all Equipment;

(g)            all Fixtures;

(h)            all General Intangibles (including, without limitation, all
Payment Intangibles);

(i)             all Goods;

(j)             all Instruments (including, without limitation, Promissory Notes
and each certificated Security);

(k)            all Inventory;

(l)             all Investment Property (and, regardless of whether classified
as Investment Property under the Code, all Pledged Equity, Pledged Operating
Agreements and Pledged Partnership Agreements);

(m)          all Copyrights and Trademarks, and all Licenses;

(n)           all Letter-of-Credit Rights;

(o)           all Supporting Obligations;

(p)           all other tangible and intangible personal property of each
Grantor (whether or not subject to the Code), including, without limitation, all
bank and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of any Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by each Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor, in each case, to the extent of such Grantor’s
rights therein, that at any time evidence or contain information relating to any
of the property described in the preceding clauses of this Section 2 or are
otherwise necessary or helpful in the collection or realization thereof; and

(q)           all Proceeds, including all Cash Proceeds and Noncash Proceeds,
and products of any and all of the foregoing Collateral;

in each case howsoever any Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise). For the avoidance
of doubt, the parties hereby acknowledge that the Collateral shall not include
any Patents.

Each Grantor has agreed not to further encumber any of its Copyrights, Copyright
applications, Copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any Licenses,
Patents, Patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, Trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of such Grantor connected with and
symbolized thereby, know-how, operating manuals, trade secret rights, rights to
unpatented inventions, and any claims for damage by way of any past, present, or
future infringement of any of the foregoing, without the Collateral Agent’s
prior written consent (which consent may be withheld or given in Collateral
Agent’s sole discretion).

The Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of any and all Persons now or hereafter existing who is a Subsidiary
organized under the laws of a jurisdiction other than the United States, any
states thereof or the District of Columbia (a “Foreign Subsidiary”) may be
supplemented by one or more separate pledge agreements, deeds of pledge, share
charges, or other similar agreements or instruments, executed and delivered by
the relevant Grantors in favor of the Collateral Agent, which pledge agreements
will provide for the pledge of such shares of Capital Stock in accordance with
the laws of the applicable foreign jurisdiction. With respect to such shares of
Capital Stock, the Collateral Agent may, at any time and from time to time, in
its sole discretion, take actions in such foreign jurisdictions that will result
in the perfection of the Lien created in such shares of Capital Stock.

In addition, to secure the prompt and complete payment, performance and
observance of the Obligations and in order to induce the Buyers as aforesaid,
each Grantor hereby grants to Collateral Agent for itself and for the ratable
benefit of the Buyers, a right of set-off against the property of such Grantor
held by the Collateral Agent for itself and for the ratable benefit of the
Buyers, consisting of property described above in Section 2 now or hereafter in
the possession or custody of or in transit to the Collateral Agent, for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor, or as to which such Grantor may have any right or power; provided that
such right shall only to be exercised after an Event of Default has occurred and
is continuing.

(4)

 

 

SECTION 3.      Security for Obligations. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, whether direct or indirect, absolute or contingent, and
whether now existing or hereafter incurred (collectively, the “Obligations”):

(a)        for so long as the Notes are outstanding, (i) the payment by the
Company, as and when due and payable (by scheduled maturity, required
prepayment, acceleration, demand or otherwise), of all amounts from time to time
owing by it in respect of the Securities Purchase Agreement, this Agreement, the
Notes and the other Transaction Documents, and (ii) in the case of any
Guarantors, the payment by such Guarantors, as and when due and payable of all
“Guaranteed Obligations” under (and as defined in) each Guaranty (if any), as
applicable, including, without limitation, in both cases, (A) all principal of
and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of any Grantor,
whether or not the payment of such interest is unenforceable or is not allowable
due to the existence of such Insolvency Proceeding), and (B) all fees, interest,
premiums, penalties, contract causes of action, costs, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under this Agreement or any of the Transaction Documents; and

(b)       for so long as the Notes are outstanding, the due performance and
observance by each Grantor of all of its other obligations from time to time
existing in respect of any of the Transaction Documents, including without
limitation, with respect to any conversion or redemption rights of the Buyers
under the Notes.

SECTION 4.      Representations and Warranties. Each Grantor represents and
warrants as of the date of this Agreement as follows:

(a)       Schedule I hereto sets forth (i) the exact legal name of each Grantor,
and (ii) the state of incorporation, organization or formation and the
organizational identification number of each Grantor in such state. The
information set forth in Schedule I hereto with respect to such Grantor is true
and accurate in all respects. Such Grantor has not previously changed its name,
jurisdiction of organization or organizational identification number from those
set forth in Schedule I hereto except as disclosed in Schedule I hereto.

(b)       There is no pending or, to its knowledge, written notice threatening
any action, suit, proceeding or claim affecting any Grantor before any
Governmental Authority or any arbitrator, or any order, judgment or award issued
by any Governmental Authority or arbitrator, in each case, that may adversely
affect the grant by any Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or the exercise by the
Collateral Agent of any of its rights or remedies hereunder.

(c)       All Federal, state and local tax returns and other reports required by
applicable law to be filed by any Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon any Grantor or any property of any Grantor (including, without limitation,
all federal income and social security taxes on employees’ wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied (“GAAP”).

(d)      All Equipment, Fixtures, Goods and Inventory of each Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of each Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that each Grantor will give the
Collateral Agent written notice of any change in the location of any such
Collateral within 20 days of such change, other than to locations set forth on
Schedule III hereto (or a new Schedule III delivered by Grantors to Collateral
Agent from time to time) and with respect to which the Collateral Agent has
filed financing statements and otherwise fully perfected its Liens thereon or
will take such actions pursuant to Section 5(n). Each Grantor’s chief place of
business and chief executive office, the place where each Grantor keeps its
Records concerning Accounts and all originals of all Chattel Paper are located
at the addresses specified therefor in Schedule III hereto. None of the Accounts
is evidenced by Promissory Notes or other Instruments. Set forth in Schedule IV
hereto is a complete and accurate list, as of the date of this Agreement, of (i)
each Promissory Note, Security and other Instrument owned by each Grantor, (ii)
each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which each
such account is maintained, the account number for each such account and a
description of the purpose of each such account and (iii) the name of each
Foreign Currency Controlled Account, together with the name and address of each
institution at which each such account is maintained and the amount of cash or
cash equivalents held in each such Foreign Currency Controlled Account. Set
forth in Schedule II hereto is a complete and correct list of each trade name
used by each Grantor and the name of, and each trade name used by, each person
from which each Grantor has acquired any substantial part of the Collateral.

(e)      Each Grantor has delivered to the Collateral Agent complete and correct
copies of each License described in Schedule II hereto, including all schedules
and exhibits thereto, which represent all of the Licenses existing on the date
of this Agreement. Each such License sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of such Grantor or any of
its affiliates in respect thereof. Each material License now existing is, and
any material License entered into in the future will be, the legal, valid and
binding obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default under any material License by any such
party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.

(f)       Each Grantor owns and controls, or otherwise possesses adequate rights
to use, all Trademarks, Patents and Copyrights, which are the only trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, and rights of publicity necessary to conduct its
business in substantially the same manner as conducted as of the date hereof.
Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses owned or used by each
Grantor as of the date hereof. To the best knowledge of each Grantor, all such
Intellectual Property of each Grantor is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is valid and enforceable
and has not been abandoned in whole or in part. Except as set forth in
Schedule II, no such Intellectual Property is the subject of any licensing or
franchising agreement. Except as set forth in Schedule II, no Grantor has any
knowledge of any conflict with the rights of others to any such Intellectual
Property and, to the best knowledge of each Grantor, each Grantor is not now
infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of each Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by each Grantor. Except as set forth in Schedule
II, no Grantor has received any notice that it is violating or has violated the
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity or other
intellectual property rights of any third party.

(5)

 

 

(g)      Each Grantor is and will be at all times the sole and exclusive owner
of, or otherwise has and will have adequate rights in, the Collateral free and
clear of any Liens, except for Permitted Liens. No effective financing statement
or other instrument similar in effect covering all or any part of the Collateral
is on file in any recording or filing office except such as (i) may have been
filed in favor of the Collateral Agent and/or the Buyers relating to this
Agreement or the other Transaction Documents and (ii) are securing Permitted
Liens as of the date hereof and disclosed on Schedule 4(g).

(h)      The exercise by the Collateral Agent of any of its rights and remedies
hereunder will not contravene any law or any contractual restriction binding on
or otherwise affecting each Grantor or any of its properties and will not result
in or require the creation of any Lien, upon or with respect to any of its
properties.

(i)       No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or other regulatory body, is required
for (i) the grant by each Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or (ii) the exercise by the
Collateral Agent of any of its rights and remedies hereunder, except (A) for the
filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule V hereto, all of
which financing statements have been duly filed and are in full force and
effect, (B) with respect to Deposit Accounts, and all cash and other property
from time to time deposited therein, for the execution of a Controlled Account
Agreement with the depository institution with which such account is maintained,
as provided in Section 5(i), (C) with respect to Commodity Contracts, for the
execution of a control agreement with the commodity intermediary with which such
commodity contract is carried, as provided in Section 5(i), (D) with respect to
the perfection of the security interest created hereby in the United States
Intellectual Property and Licenses, for the recording of the appropriate
Assignment for Security, substantially in the form of Exhibit A hereto in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, (E) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to such foreign Intellectual Property and
Licenses, (F) with respect to the perfection of the security interest created
hereby in any Letter-of-Credit Rights, for the consent of the issuer of the
applicable letter of credit to the assignment of proceeds as provided in the
Uniform Commercial Code as in effect in the applicable jurisdiction, (G) with
respect to Investment Property constituting un-certificated securities, the
applicable Grantor will cause the issuer thereof either (i) to register the
Collateral Agent as the registered owner of such security or (ii) to agree in an
authenticated record with such Grantor and the Collateral Agent that such issuer
will comply with instructions with respect to such security originated by the
Collateral Agent without further consent of such Grantor, such authenticated
record to be in form and substance satisfactory to the Collateral Agent, (H)
with respect to Investment Property constituting certificated securities or
instruments, such items shall be delivered to and held by or on behalf of the
Collateral Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Collateral
Agent, (I) with respect to any action that may be necessary to obtain control of
Collateral constituting Deposit Accounts, Commodity Contracts, Electronic
Chattel Paper, or Letter of Credit Rights, the taking of such actions, and (J)
the Collateral Agent having possession of all Documents, Chattel Paper,
Instruments and cash constituting Collateral (subclauses (A), (B), (C), (D),
(E), (F), (G), (H), (I) and (J) each a “Perfection Requirement” and
collectively, the “Perfection Requirements”).

(j)       This Agreement creates in favor of the Collateral Agent a legal, valid
and enforceable security interest in the Collateral, as security for the
Obligations. The performance of the Perfection Requirements results in the
perfection of such security interests. Such security interests are, or in the
case of Collateral in which each Grantor obtains rights after the date hereof,
will be, perfected, first priority security interests, subject only to Permitted
Liens and the Perfection Requirements. Such recordings and filings and all other
action necessary to perfect and protect such security interest have been duly
taken or will be taken pursuant to Section 5(l), and, in the case of Collateral
in which any Grantor obtains rights after the date hereof, will be duly taken,
except for the Collateral Agent’s having possession of all Documents, Chattel
Paper, Instruments and cash constituting Collateral after the date hereof and
the other actions, filings and recordations described above, including the
Perfection Requirements.

(k)       As of the date hereof, no Grantor holds any Commercial Tort Claims or
has knowledge of any pending Commercial Tort Claims, except for such Commercial
Tort Claims described in Schedule VI.

(l)        All of the Pledged Equity is presently owned by the applicable
Grantor as set forth in Schedule IV, and is presently represented by the
certificates listed on Schedule IV hereto. As of the date hereof, there are no
existing options, warrants, calls or commitments of any character whatsoever
relating to the Pledged Equity other than as contemplated and permitted by the
Transaction Documents. Each Grantor is the sole holder of record and the sole
beneficial owner of the Pledged Equity, as applicable. None of the Pledged
Equity has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which
such issuance or transfer may be subject. The Pledged Equity constitutes 100% or
such other percentage as set forth of Schedule IV of the issued and outstanding
shares of Capital Stock of the applicable Pledged Entity.

(m)      Each Grantor hereby represents and warrants as of the date first
written above as follows:

(i)              Such Grantor (A) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (B) has all requisite
corporate, limited liability company or limited partnership power and authority
to conduct its business as now conducted and as presently contemplated and to
execute and deliver this Agreement and each other Transaction Document to which
such Grantor is a party, and to consummate the transactions contemplated hereby
and thereby and (C) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary
except where the failure to be so qualified would not result in a Material
Adverse Effect.

(ii)            The execution, delivery and performance by each Grantor of this
Agreement and each other Transaction Document to which such Grantor is a party
(A) have been duly authorized by all necessary corporate, limited liability
company or limited partnership action, (B) do not and will not contravene its
charter or by-laws, its limited liability company or operating agreement or its
certificate of partnership or partnership agreement, as applicable, or any
applicable law or any contractual restriction binding on such Grantor or its
properties, (C) do not and will not result in or require the creation of any
lien (other than pursuant to any Transaction Document) upon or with respect to
any of its properties, and (D) do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or non-renewal of
any material permit, license, authorization or approval applicable to it or its
operations or any of its properties.

(iii)          Each of this Agreement and the other Transaction Documents to
which any Grantor is or will be a party, when delivered, will be, a legal, valid
and binding obligation of the Grantor, enforceable against such Grantor in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or
other similar laws and equitable principles (regardless of whether enforcement
is sought in equity or at law); provided, that where any such document involves
a counter-party to the Grantor, the counter-party to such document executed such
document and it is similarly legal, valid and binding on such counter-party.

(iv)          There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.

(6)

 

 

SECTION 5.      Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:

(a)            Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral, including, without
limitation, the Master Restricted Account and the Operating Accounts; or
(iii) otherwise effect the purposes of this Agreement, including, without
limitation: (A) marking conspicuously all Chattel Paper and each License and, at
the request of the Collateral Agent, each of its Records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such Chattel Paper, License or Collateral is subject to
the security interest created hereby, (B) delivering and pledging to the
Collateral Agent each Promissory Note, Security (subject to the limitations set
forth in Section 2), Chattel Paper or other Instrument, now or hereafter owned
by any Grantor, duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the Collateral
Agent, (C) executing and filing (to the extent, if any, that any Grantor’s
signature is required thereon) or authenticating the filing of, such financing
or continuation statements, or amendments thereto, as may be necessary or that
the Collateral Agent may reasonably request in order to perfect and preserve the
security interest purported to be created hereby, (D) furnishing to the
Collateral Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral in each case as the Collateral Agent may reasonably request, all in
reasonable detail, (E) if any Collateral shall be in the possession of a third
party, notifying such Person of the Collateral Agent’s security interest created
hereby and obtaining a written acknowledgment from such Person that such Person
holds possession of the Collateral for the benefit of the Collateral Agent,
which such written acknowledgement shall be in form and substance reasonably
satisfactory to the Collateral Agent, (F) if at any time after the date hereof,
any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the
Collateral Agent in a writing signed by such Grantor setting forth a brief
description of such Commercial Tort Claim and granting to the Collateral Agent a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by any Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with
Section 5 hereof; and (H) taking all actions required by 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.

(b)            Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory (i) at the locations specified therefore on Schedule III
hereto, or (ii) at such other locations set forth on Schedule III and with
respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon, or (iii) at such other locations in
the United States, provided that within 20 days following the relocation of
Equipment or Inventory to such other location or the acquisition of Equipment or
Inventory, Grantor shall deliver to the Collateral Agent a new Schedule III
indicating such new locations.

(c)            Condition of Equipment. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of any
Grantor within a commercially reasonable time after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may request to such end. Any Grantor
will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage in excess of $25,000 per occurrence to
any Equipment.

(d)            Taxes, Etc. Each Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.

(e)             [Intentionally Omitted]

(f)             Provisions Concerning the Accounts and the Licenses.

(i)              Each Grantor will (A) give the Collateral Agent at least 30
days’ prior written notice of any change in such Grantor’s name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation,
organization or formation as set forth in Schedule I hereto, (C) immediately
notify the Collateral Agent upon obtaining an organizational identification
number, if on the date hereof such Grantor did not have such identification
number, and (D) keep adequate records concerning the Accounts and Chattel Paper
and permit representatives of the Collateral Agent during normal business hours
on reasonable notice to such Grantor, to inspect and make abstracts from such
Records and Chattel Paper.

(ii)            Each Grantor will (except as otherwise provided in this
subsection (f)), in accordance with Section 13(m) of each Note, continue to
collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, any Grantor may (and, at the
Collateral Agent’s direction, will) take such action as any Grantor or the
Collateral Agent may deem necessary or advisable to enforce collection or
performance of the Accounts; provided, however, that the Collateral Agent shall
have the right at any time following the occurrence and during the continuance
of an Event of Default to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to the Collateral Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to any Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of any Grantor
and to the extent permitted by applicable law, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as any Grantor might have done. After
receipt by any Grantor of a notice from the Collateral Agent that the Collateral
Agent has notified, intends to notify, or has enforced or intends to enforce any
Grantor’s rights against the account debtors or obligors under any Accounts as
referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including Instruments) received by any Grantor in respect
of the Accounts shall be received in trust for the benefit of the Collateral
Agent hereunder, shall be segregated from other funds of any Grantor and shall
be forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be applied as specified in Section 7(b)
hereof, and (B) no Grantor will adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which any Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall be applied as specified in
accordance with Section 7(b) hereof.

 

(iii)          Upon the occurrence and during the continuance of any breach or
default under any material License referred to in Schedule II hereto by any
party thereto other than any Grantor, each Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Collateral Agent written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto and thereafter will take reasonable
steps to protect and preserve its rights and remedies in respect of such breach
or default, or will obtain or acquire an appropriate substitute License.

(iv)          Each Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor thereto.

(v)            Each Grantor will exercise promptly and diligently each and every
right which it may have under each material License (other than any right of
termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Collateral Agent, cancel, terminate,
amend or otherwise modify in any respect, or waive any provision of, any
material License referred to in Schedule II hereto.

(7)

 

 

(g)            Transfers and Other Liens.

(i)              Except as expressly permitted in Section 13(f) of the Notes, no
Grantor will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral, except
(A) Inventory in the ordinary course of business, and (B) worn out or obsolete
assets, not necessary to the business.

(ii)            No Grantor will create, suffer to exist or grant any Lien upon
or with respect to any Collateral other than a Permitted Lien.

(h)            Intellectual Property.

(i)              If applicable, each Grantor shall duly execute and deliver the
applicable Assignment for Security in the form attached hereto as Exhibit A.
Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force and free from any claim of abandonment for non-use, and each Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit to do
any act whereby any Intellectual Property may become invalidated; provided,
however, that so long as no Event of Default has occurred and is continuing, no
Grantor shall have an obligation to use or to maintain any Intellectual Property
(A) that relates solely to any product or work, that has been, or is in the
process of being, discontinued, abandoned or terminated, (B) that is being
replaced with Intellectual Property substantially similar to the Intellectual
Property that may be abandoned or otherwise become invalid, so long as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by
this Agreement or (C) that is substantially the same as another Intellectual
Property that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all necessary steps in any proceeding before
the United States Patent and Trademark Office and the United States Copyright
Office or any similar office or agency in any other country or political
subdivision thereof to maintain each registration of the Intellectual Property
(other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property described in the proviso to the second
sentence of subsection (i) of this clause (h)) is infringed, misappropriated,
diluted or otherwise violated in any material respect by a third party, each
Grantor shall (x) upon learning of such infringement, misappropriation, dilution
or other violation, promptly notify the Collateral Agent and (y) promptly sue
for infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, each Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and do
such acts as shall be necessary or, in the reasonable judgment of the Collateral
Agent, desirable to subject such Intellectual Property and Licenses to the Lien
and security interest created by this Agreement. Notwithstanding anything herein
to the contrary, upon the occurrence and during the continuance of an Event of
Default, no Grantor may abandon or otherwise permit any Intellectual Property to
become invalid without the prior written consent of the Collateral Agent, and if
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, each Grantor will take such
reasonable action as the Collateral Agent shall deem appropriate under the
circumstances to protect such Intellectual Property.

(ii)            In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the United States Copyright Office or the
United States Patent and Trademark Office, as applicable, or in any similar
office or agency of the United States or any country or any political
subdivision thereof unless it gives the Collateral Agent prior written notice
thereof. Upon request of the Collateral Agent, any Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to evidence
the Collateral Agent’s security interest hereunder in such Intellectual Property
and the General Intangibles of any Grantor relating thereto or represented
thereby, and each Grantor hereby appoints the Collateral Agent its
attorney-in-fact to execute and/or authenticate and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the indefeasible payment in full in cash of all of the Obligations in
full.

(i)           Deposit, Commodities and Securities Accounts. (A) As of the date
hereof, each Grantor shall cause each bank and other financial institution with
a Controlled Account referred to in Schedule IV hereto to execute and deliver to
the Collateral Agent a Controlled Account Agreement, in form and substance
satisfactory to the Collateral Agent (which, with respect to the Master
Restricted Account, shall be in the form of Exhibit B), duly executed by each
Grantor and such bank or financial institution, or enter into other arrangements
in form and substance satisfactory to the Collateral Agent, pursuant to which
such institution shall irrevocably agree, inter alia, subject to Section 13(m)
of each Note, with respect to each Controlled Account, that (i) it will comply
at any time with the instructions originated by the Collateral Agent to such
bank or financial institution directing the disposition of cash, Commodity
Contracts, securities, Investment Property and other items from time to time
credited to such account, without further consent of each Grantor, (ii) all
Commodity Contracts, securities, Investment Property and other items of each
Grantor deposited with such institution shall be subject to a perfected, first
priority security interest in favor of the Collateral Agent, (iii) any right of
set off (other than recoupment of standard fees), banker’s Lien or other similar
Lien, security interest or encumbrance shall be fully waived as against the
Collateral Agent, and (iv) upon receipt of written notice from the Collateral
Agent during the continuance of an Event of Default, such bank or financial
institution shall immediately send to the Collateral Agent by wire transfer (to
such account as the Collateral Agent shall specify, or in such other manner as
the Collateral Agent shall direct) all such cash, the value of any Commodity
Contracts, securities, Investment Property and other items held by it. Without
the prior written consent of the Collateral Agent, no Grantor shall create or
maintain any Deposit Account, Commodity Account or Securities Account without
the prior written consent of the Collateral Agent and complying with Section
13(m) of the Notes in connection therewith.

(j)              Motor Vehicles.

(i)              Upon the Collateral Agent’s written request, each Grantor shall
deliver to the Collateral Agent originals of the certificates of title or
ownership for all motor vehicles with a value in excess of $10,000, owned by it
with the Collateral Agent listed as lienholder, for the benefit of the Buyers.

(ii)            Each Grantor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of (A) executing on behalf of such Grantor
title or ownership applications for filing with appropriate state agencies to
enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such
applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, such
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are indefeasibly paid in full in cash.

(iii)          Any certificates of title or ownership delivered pursuant to the
terms hereof shall be accompanied by odometer statements for each motor vehicle
covered thereby.

(iv)          So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Collateral Agent shall execute
and deliver to any Grantor such instruments as such Grantor shall reasonably
request to remove the notation of the Collateral Agent as lienholder on any
certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by
the Collateral Agent of a certificate from any Grantor stating that such motor
vehicle is to be sold or has suffered a casualty loss (with title thereto in
such case passing to the casualty insurance company therefore in settlement of
the claim for such loss) and the amount that any Grantor will receive as sale
proceeds or insurance proceeds. Any proceeds of such sale or casualty loss shall
be paid to the Collateral Agent hereunder immediately upon receipt, to be
applied to the Obligations then outstanding.

(k)            Control. Each Grantor hereby agrees to take any or all action
that may be necessary or that the Collateral Agent may reasonably request in
order for the Collateral Agent to obtain control in accordance with Sections
9-105 – 9-107 of the Code with respect to the following Collateral:
(i) Electronic Chattel Paper, (ii) Investment Property, and (iii)
Letter-of-Credit Rights.

(l)             Inspection and Reporting. Each Grantor shall permit the
Collateral Agent, or any agent or representatives thereof or such professionals
or other Persons as the Collateral Agent may designate (at Grantors’ sole cost
and expense) (i) to examine and make copies of and abstracts from any Grantor’s
records and books of account, (ii) to visit and inspect its properties, (iii) to
verify materials, leases, Instruments, Accounts, Inventory and other assets of
any Grantor from time to time, (iii) to conduct audits, physical counts,
appraisals and/or valuations, examinations at the locations of any Grantor. Each
Grantor shall also permit the Collateral Agent, or any agent or representatives
thereof or such professionals or other Persons as the Collateral Agent may
designate to discuss such Grantor’s affairs, finances and accounts with any of
its directors, officers, managerial employees, independent accountants or any of
its other representatives. Without limiting the foregoing, the Collateral Agent
may, at any time, in the Collateral Agent’s own name, in the name of a nominee
of the Collateral Agent, or in the name of any Grantor communicate (by mail,
telephone, facsimile or otherwise) with the Account Debtors of such Grantor,
parties to contracts with such Grantor and/or obligors in respect of Instruments
of such Grantor to verify with such Persons, to the Collateral Agent’s
satisfaction, the existence, amount, terms of, and any other matter relating to,
Accounts, Instruments, Chattel Paper, payment intangibles and/or other
receivables.

(m)          Future Subsidiaries. If any Grantor hereafter creates or acquires
any Subsidiary, simultaneously with the creation or acquisition of such
Subsidiary, such Grantor shall (i) cause such Subsidiary to become a party to
this Agreement as an additional “Grantor” hereunder, (ii) deliver to Collateral
Agent revised Schedules to this Agreement, as appropriate (including, without
limitation, a revised Schedule IV to reflect the grant by such Grantor of a lien
on all Pledged Equity now or hereafter owned by such Grantor), (iii) cause such
Subsidiary to duly execute and deliver a guaranty of the Obligations in favor of
the Collateral Agent in form and substance acceptable to the Collateral Agent,
and (iv) duly execute and/or cause to be delivered such opinions of counsel and
other documents, in form and substance acceptable to the Collateral Agent, as
the Collateral Agent shall request with respect thereto. Each Grantor hereby
authorizes Collateral Agent to attach such revised Schedules to this Agreement
and agrees that all Pledged Equity listed on any revised Schedule delivered to
Collateral Agent shall for all purposes hereunder be considered Collateral. The
Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of Foreign Subsidiary may be supplemented by one or more separate pledge
agreements, deeds of pledge, share charges, or other similar agreements or
instruments, executed and delivered by the relevant Grantor in favor of the
Collateral Agent, which pledge agreements will provide for the pledge of such
shares of Capital Stock in accordance with the laws of the applicable foreign
jurisdiction. With respect to such shares of Capital Stock, the Collateral Agent
may, at any time and from time to time, in its sole discretion, take actions in
such foreign jurisdictions that will result in the perfection of the Lien
created in such shares of Capital Stock.

(8)

 

 

Section 6.      Additional Provisions Concerning the Collateral.

(a)             To the maximum extent permitted by applicable law, and for the
purpose of taking any action that the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, each Grantor hereby (i)
authorizes the Collateral Agent to execute any such agreements, instruments or
other documents in such Grantor’s name and to file such agreements, instruments
or other documents in such Grantor’s name and in any appropriate filing office,
(ii) authorizes the Collateral Agent at any time and from time to time to file,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral (including, without limitation, any such financing
statements that (A) describe the Collateral as “all assets” or “all personal
property” (or words of similar effect) or that describe or identify the
Collateral by type or in any other manner as the Collateral Agent may determine
regardless of whether any particular asset of such Grantor falls within the
scope of Article 9 of the Uniform Commercial Code or whether any particular
asset of such Grantor constitutes part of the Collateral, and (B) contain any
other information required by Part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including, without limitation, whether such Grantor is
an organization, the type of organization and any organizational identification
number issued to such Grantor) and (iii) ratifies such authorization to the
extent that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

(b)            Each Grantor hereby irrevocably appoints the Collateral Agent as
its attorney-in-fact and proxy, with full authority in the place and stead of
such Grantor and in the name of such Grantor or otherwise, from time to time in
the Collateral Agent’s discretion, to take any action and to execute any
instrument which the Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation, (i)
to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) above,
(iii) to file any claims or take any action or institute any proceedings which
the Collateral Agent may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Collateral Agent and the
Buyers with respect to any Collateral, (iv) to execute assignments, licenses and
other documents to enforce the rights of the Collateral Agent and the Buyers
with respect to any Collateral and (v) to verify any and all information with
respect to any and all Accounts. This power is coupled with an interest and is
irrevocable until all of the Obligations are indefeasibly paid in full in cash.

(c)             For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder, at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to any Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, 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.
Notwithstanding anything contained herein to the contrary, but subject to the
provisions of the Securities Purchase Agreement that limit the right of any
Grantor to dispose of its property, and Section 5(g) and Section 5(h) hereof, so
long as no Event of Default shall have occurred and be continuing, any Grantor
may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of
or take other actions with respect to the Intellectual Property in the ordinary
course of its business. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor’s judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the indefeasible payment in full in cash of all of the
Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall
release and reassign to any Grantor all of the Collateral Agent’s right, title
and interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Collateral Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by each Grantor in
accordance with the second sentence of this clause (c). Each Grantor hereby
releases the Collateral Agent from any claims, causes of action and demands at
any time arising out of or with respect to any actions taken or omitted to be
taken by the Collateral Agent under the powers of attorney granted herein other
than actions taken or omitted to be taken through the Collateral Agent’s gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.

(d)            If any Grantor fails to perform any agreement or obligation
contained herein, the Collateral Agent may itself perform, or cause performance
of, such agreement or obligation, in the name of such Grantor or the Collateral
Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Grantor pursuant to Section 8 hereof and shall be
secured by the Collateral.

(e)             The powers conferred on the Collateral Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.

(f)             Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed,
(ii) the exercise by the Collateral Agent of any of its rights hereunder shall
not release any Grantor from any of its obligations under the Licenses or
otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not
have any obligation or liability by reason of this Agreement under the Licenses
or with respect to any of the other Collateral, nor shall the Collateral Agent
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

(g)            As long as no Event of Default shall have occurred and be
continuing and until written notice shall be given to the applicable Grantor:

(i)              Each Grantor shall have the right, from time to time, to vote
and give consents with respect to the Pledged Equity, or any part thereof for
all purposes not inconsistent with the provisions of this Agreement, the
Securities Purchase Agreement or any other Transaction Document; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position or interest of
Collateral Agent in respect of the Pledged Equity or which would authorize,
effect or consent to (unless and to the extent expressly permitted by the
Securities Purchase Agreement):

(A) the dissolution or liquidation, in whole or in part, of a Pledged Entity;

(B) the consolidation or merger of a Pledged Entity with any other Person;

(C) the sale, disposition or encumbrance of all or substantially all of the
assets of a Pledged Entity, except for Liens in favor of Collateral Agent;

(D) any change in the authorized number of shares, the stated capital or the
authorized share capital of a Pledged Entity or the issuance of any additional
shares of its Capital Stock; or

(E) the alteration of the voting rights with respect to the Capital Stock of a
Pledged Entity.

(h)            (i) Each Grantor shall be entitled, from time to time, to collect
and receive for its own use all cash dividends and interest paid in respect of
the Pledged Equity to the extent not in violation of the Securities Purchase
Agreement other than any and all: (A) dividends and interest paid or payable
other than in cash in respect of any Pledged Equity, and instruments and other
property received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Equity; (B) dividends and other distributions paid or
payable in cash in respect of any Pledged Equity in connection with a partial or
total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in capital of a Pledged Entity; and (C) cash paid,
payable or otherwise distributed, in respect of principal of, or in redemption
of, or in exchange for, any Pledged Equity; provided, however, that until
actually paid all rights to such distributions shall remain subject to the Lien
created by this Agreement; and

(ii) all dividends and interest (other than such cash dividends and interest as
are permitted to be paid to any Grantor in accordance with clause (i) above) and
all other distributions in respect of any of the Pledged Equity, whenever paid
or made, shall be delivered to Collateral Agent to hold as Pledged Equity and
shall, if received by any Grantor, be received in trust for the benefit of
Collateral Agent, be segregated from the other property or funds of such
Grantor, and be forthwith delivered to Collateral Agent as Pledged Equity in the
same form as so received (with any necessary endorsement).

(9)

 

 

SECTION 7.      Remedies Upon Event of Default. If any Event of Default shall
have occurred and be continuing:

(a)             The Collateral Agent may exercise in respect of the Collateral,
in addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Buyers, all payments made
thereon, give all consents, waivers and ratifications in respect thereof and
otherwise act with respect thereto as though it were the outright owner thereof,
(ii) require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of its respective Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place or places to be designated by the
Collateral Agent that is reasonably convenient to both parties, and the
Collateral Agent may enter into and occupy any premises owned or leased by any
Grantor where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Collateral Agent’s rights and
remedies hereunder or under law, without obligation to any Grantor in respect of
such occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private sale
(including, without limitation, by credit bid), at any of the Collateral Agent’s
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Collateral Agent may deem
commercially reasonable and/or (B) lease, license or dispose of the Collateral
or any part thereof upon such terms as the Collateral Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
or any other disposition of its respective Collateral shall be required by law,
at least ten (10) days’ notice to any Grantor of the time and place of any
public sale or the time after which any private sale or other disposition of its
respective Collateral is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale or other
disposition of any Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each
Grantor hereby waives any claims against the Collateral Agent and the Buyers
arising by reason of the fact that the price at which its respective Collateral
may have been sold at a private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Collateral Agent accepts the first offer received and
does not offer such Collateral to more than one offeree, and waives all rights
that any Grantor may have to require that all or any part of such Collateral be
marshaled upon any sale (public or private) thereof. Each Grantor hereby
acknowledges that (i) any such sale of its respective Collateral by the
Collateral Agent shall be made without warranty, (ii) the Collateral Agent may
specifically disclaim any warranties of title, possession, quiet enjoyment or
the like, and (iii) such actions set forth in clauses (i) and (ii) above shall
not adversely affect the commercial reasonableness of any such sale of
Collateral. In addition to the foregoing, (1) upon written notice to any Grantor
from the Collateral Agent after and during the continuance of an Event of
Default, such Grantor shall cease any use of the Intellectual Property or any
trademark, patent or copyright similar thereto for any purpose described in such
notice; (2) the Collateral Agent may, at any time and from time to time after
and during the continuance of an Event of Default, upon 10 days’ prior notice to
such Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Collateral Agent shall in its sole discretion determine; and (3) the
Collateral Agent may, at any time, pursuant to the authority granted in
Section 6 hereof or otherwise (such authority being effective upon the
occurrence and during the continuance of an Event of Default), execute and
deliver on behalf of such Grantor, one or more instruments of assignment of the
Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.

(b)            Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
shall be applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 8 hereof) by the Collateral Agent against, all or any part
of the Obligations in such order as the Collateral Agent shall elect, consistent
with the provisions of the Securities Purchase Agreement. Any surplus of such
cash or Cash Proceeds held by the Collateral Agent and remaining after the
indefeasible payment in full in cash of all of the Obligations shall be paid
over to whomsoever shall be lawfully entitled to receive the same or as a court
of competent jurisdiction shall direct.

(c)             In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, each Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in the
Notes for interest on overdue principal thereof or such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the Collateral Agent to collect such deficiency.

(d)            To the extent that applicable law imposes duties on the
Collateral Agent to exercise remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it is commercially reasonable for the
Collateral Agent (i) to fail to incur expenses deemed significant by the
Collateral Agent to prepare Collateral for disposition or otherwise to transform
raw material or work in process into finished goods or other finished products
for disposition, (ii) 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, (iii) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) 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, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as any Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) 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 capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Collateral Agent against risks of loss, collection or
disposition of Collateral or to provide to the Collateral Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent
deemed appropriate by the Collateral Agent, to obtain the services of brokers,
investment bankers, consultants, attorneys and other professionals to assist the
Collateral Agent in the collection or disposition of any of the Collateral. Each
Grantor acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by the Collateral Agent
would be commercially reasonable in the Collateral Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Collateral
Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this section. Without limitation upon the foregoing, nothing
contained in this section shall be construed to grant any rights to any Grantor
or to impose any duties on the Collateral Agent that would not have been granted
or imposed by this Agreement or by applicable law in the absence of this
section.

(e)             The Collateral Agent 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 the Collateral Agent’s
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 any Grantor lawfully may, each Grantor
hereby agrees that it will not invoke any law relating to the marshaling of
collateral which might cause delay in or impede the enforcement of the
Collateral Agent’s 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.

(10)

 

 

Section 8.      Indemnity and Expenses.

(a)             Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Collateral Agent and each of the Buyers, jointly and
severally, harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, reasonable legal fees, costs, expenses, and disbursements of
such Person’s counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), except to the extent resulting from such Person’s gross negligence
or willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.

(b)            Each Grantor agrees, jointly and severally, to pay to the
Collateral Agent upon demand the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral
Agent), which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the
failure by any Grantor to perform or observe any of the provisions hereof.

SECTION 9.      Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, e-mailed or delivered, if to
any Grantor that is a Foreign Subsidiary at the address of the Company, if to
any Grantor that is not a Foreign Subsidiary at its address specified on the
signature pages below and if to the Collateral Agent to it, at its address
specified on the signature pages below; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to all other
parties hereto complying as to delivery with the terms of this Section 9. All
such notices and other communications shall be effective (a) if sent by
certified mail, return receipt requested, when received or three days after
deposited in the mails, whichever occurs first, (b) if telecopied or e-mailed,
when transmitted (during normal business hours) and confirmation is received,
and otherwise, the day after the notice or communication was transmitted and
confirmation is received, or (c) if delivered in person, upon delivery. For the
avoidance of doubt, the Foreign Subsidiaries, as Grantors, hereby appoint the
Company as its agent for receipt of service of process and all notices and other
communications in the United States at the address specified below.

Section 10.   Miscellaneous.

(a)           No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
each Grantor therefrom, shall be effective unless it is in writing and signed by
each Grantor and the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

(b)           No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Collateral Agent or any Buyer under any of the other
Transaction Documents against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights under any
of the other Transaction Documents against such party or against any other
Person, including but not limited to, any Grantor.

(c)           Any provision of this Agreement that 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.

(d)           This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations, and (ii) be binding on each Grantor
and all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the
Collateral Agent and the Buyers and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, without notice to any Grantor, the Collateral
Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any of the other Transaction Documents, to
any other Person and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to the Collateral Agent and the Buyers
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Collateral Agent or any such Buyer shall mean the assignee
of the Collateral Agent or such Buyer. None of the rights or obligations of any
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
without the consent of the Collateral Agent shall be null and void.

(e)           Upon the indefeasible payment in full in cash of the Obligations,
(i) this Agreement and the security interests created hereby shall terminate and
all rights to the Collateral shall revert to the respective Grantor that granted
such security interests hereunder, and (ii) the Collateral Agent will, upon any
Grantor’s request and at such Grantor’s expense, (A) return to such Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, (B) execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever and
(C) authorize the filing of a UCC-3 termination statement.

(f)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT 5-1401 OF
THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK
SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR
WITH THIS AGREEMENT WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT 5-1401
OF THE NEW YORK GENERAL OBLIGATION LAW).

(g)          CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT
RELATED HERETO SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK IN THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH GRANTOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE FOREGOING COURTS. EACH GRANTOR
HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS
ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND
FURTHER IRREVOCABLY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS DEEMED APPROPRIATE BY ANY OF THE FOREGOING COURTS. EACH GRANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE FOREGOING COURTS AND IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES AS SET FORTH ON THE
SIGNATURE PAGE HERETO AND TO THE SECRETARY OF STATE OF THE STATE OF NEW YORK,
SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO SERVE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST EACH GRANTOR IN ANY OTHER JURISDICTION. ANY GRANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY OF THE FOREGOING COURTS REFERRED TO
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, EACH GRANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.

(h)          WAIVER OF JURY TRIAL, ETC. EACH PARTY HERETO HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR
WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH GRANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE
COLLATERAL AGENT OR ANY BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
COLLATERAL AGENT OR ANY BUYER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING
OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GRANTOR HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT ENTERING INTO THIS AGREEMENT.

(i)           Each Grantor irrevocably consents to the service of process of any
of the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to any Grantor at its address provided herein,
such service to become effective 10 days after such mailing.

(j)           Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against any Grantor or any property of any
Grantor in any other jurisdiction.

(k)          Each Grantor irrevocably and unconditionally waives any right it
may have to claim or recover in any legal action, suit or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.

(l)           Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.

(m)         This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one and the same
Agreement. Delivery of any executed counterpart of a signature page of this
Agreement by pdf, facsimile or other electronic transmission shall be effective
as delivery of a manually executed counterpart of this Agreement.

(n)          This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Obligations is
rescinded or must otherwise be returned by Collateral Agent, any Buyer or any
other Person (upon (i) the occurrence of any Insolvency Proceeding of any of the
Company or any Grantor or (ii) otherwise, in all cases as though such payment
had not been made.

SECTION 11.   Material Non-Public Information. Upon receipt or delivery by the
Company of any notice in accordance with the terms of this Agreement, unless the
Company has in good faith determined that the matters relating to such notice do
not constitute material, non-public information relating to the Company or any
of its Subsidiaries, the Company shall within one (1) Business Day after any
such receipt or delivery publicly disclose such material, non-public information
on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to the
Company or any of its Subsidiaries, the Company so shall indicate to the
Collateral Agent and any applicable Buyer contemporaneously with delivery of
such notice, and in the absence of any such indication, the Collateral Agent and
each Buyer shall be allowed to presume that all matters relating to such notice
do not constitute material, non-public information relating to the Company or
its Subsidiaries. Nothing contained in this Section 11 shall limit any
obligations of the Company, or any rights of the Collateral Agent or any Buyer,
under Section 4(i) of the Securities Purchase Agreement.

(11)

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

 

COMPANY:

 

 

WORLDS INC.

 

 

By:_________________________________

Name:
Title:
Address: 11 Royal Road, Brookling, MA 02445
Facsimile: (617) 975-3888

 

ACCEPTED BY:

COMPANY:

 

  HUDSON BAY IP OPPORTUNITIES MASTER FUND LP,
as Collateral Agent  

  By:_________________________________ Name:
Title:
Address: c/o Hudson Bay Capital Management LP 777 Third   Avenue, 30th Floor New
York, NY 10017 Attention: Yoav Roth
Facsimile: (212) 571-1279 E-mail: investments@hudsonbaycapital.com

  

(12)

 

 

SCHEDULE I

Legal Names; Organizational Identification Numbers;
States or Jurisdiction of Organization

Grantor’s Name State of Organization Federal
Employer I.D. Organizational I.D.        

 

(13)

 

 

SCHEDULE II

Intellectual Property

Trademarks

Grantor Country Trademark Application or
Registration No. Filing Date Registration
Date Assignees                                                                  
                               

 

Patents

Grantor Country Patent Patent No. Filing Date Issue Date Assignees              
                                                                               
   

 

Design Patents

Grantor Country Patent Patent No. Filing Date Issue Date Assignees              
                                                                               
   

 

Patent Applications Pending

Grantor Country Application Application No. Filing Date Status Assignees        
                                                                               
         

 

Copyrights

Notice of Potential Patent Claim

(14)

 

 

SCHEDULE III

Locations

Grantor’s Name Chief Executive Office Chief Place of Business Books and Records
Inventory,
Equipment, Etc.          

 

(15)

 

 

 SCHEDULE IV

Promissory Notes, Securities, Deposit Accounts,
Securities Accounts and Commodities Accounts

Securities

Grantor Name of Issuer / Pledged Entity Number
of Shares Class Certificate
No.(s)          

 

Deposit Accounts, Securities Accounts and Commodities Accounts

Grantor Name and Address of Institution Purpose of the Account Account No.      
                                                 

 

Foreign Currency Controlled Accounts

 

Entity Name and Address of Institution Amount Held in Account                  
                       

  

(16)

 

 

 

SCHEDULE V

Financing Statements

Grantors Jurisdictions For Filing Financing Statements                

 

(17)

 

 

SCHEDULE VI

Commercial Tort Claims

(18)

 

 

EXHIBIT A

Assignment For Security
[Trademarks] [Copyrights]

WHEREAS, ______________________________ (the “Assignor”) [has adopted, used and
is using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule 1A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the “Trademarks”)][holds all right, title and interest in the copyrights
listed on the annexed Schedule 1A, which copyrights are registered in the United
States Copyright Office (the “Copyrights”)];

WHEREAS, the Assignor has entered into a Security and Pledge Agreement, dated as
of March __, 2013 (as amended, restated or otherwise modified from time to time
the “Security Agreement”), in favor of _____________, as collateral agent for
certain purchasers (the “Assignee”);

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the
Assignee and granted to the Assignee for the benefit of the Buyers (as defined
in the Security Agreement) a continuing security interest in all right, title
and interest of the Assignor in, to and under the [Trademarks, together with,
among other things, the good-will of the business symbolized by the
Trademarks][Copyrights] and the applications and registrations thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the “Collateral”), to
secure the payment, performance and observance of the “Obligations” (as defined
in the Security Agreement);

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee for
the benefit of the Buyers a continuing security interest in the Collateral to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.

The Assignor does hereby further acknowledge and affirm that the rights and
remedies of the Assignee with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.

 IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of _____________, 2013

 

[GRANTORS]

By: __________________________
Name:
Title:

 

 

 

 

 

STATE OF ____________
ss.:
COUNTY OF __________

On this ____ day of _______________, 2013, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.

 

(19)

 

 

SCHEDULE 1A TO ASSIGNMENT FOR SECURITY

[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________

 

(20)

 

 

SCHEDULE 4(g)

Effective Financing Statements