Exhibit 10.2
EXECUTION COPY
SECURITY AGREEMENT
     This Security Agreement (this “Agreement”), dated as of December 27, 2006,
is made by MBI FINANCIAL INC., a Nevada corporation (“Borrower”), in favor of
OLD MASTER GIOTTO FUND LIMITED, a Cayman Islands exempt company (“Lender”).
W I T N E S S E T H
     WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”) entered into by and among Borrower and Lender, Lender has
agreed to make a loan (collectively with any other loan made to Borrower under
the Credit Agreement, the “Loan”) to Borrower, upon the terms and subject to the
conditions set forth therein, to be evidenced by a promissory note issued by
Borrower thereunder (the “Note”).
     WHEREAS, as a condition to extending the Loan to Borrower, Lender has
required Borrower to execute and deliver this Agreement and certain other
security documents to secure Borrower’s Obligations (as defined below) under the
Credit Agreement.
     ACCORDINGLY, in consideration of the mutual covenants contained in the
Credit Agreement and herein, the parties hereby agree as follows:
     1. Definitions. All terms defined in the UCC and not otherwise defined
herein have the meanings assigned to them in the UCC. In addition, the following
terms have the meanings set forth below or in the referenced Section of this
Agreement:
     “Accounts” and “Accounts Receivable” means all of Borrower’s “accounts”, as
such term is defined in the UCC, including each and every right of Borrower to
the payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out of a
loan, out of the overpayment of taxes or other liabilities, or otherwise arises
under any contract or agreement, whether such right to payment is created,
generated or earned by Borrower or by some other Person who subsequently
transfers such Person’s interest to Borrower, whether such right to payment is
or is not already earned by performance, and howsoever such right to payment may
be evidenced, together with all other rights and interests (including all Liens)
which Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor; all including but not limited
to all present and future Accounts, Contract Rights, loans and obligations
receivable, credit card receivables, Health-Care-Insurance Receivables, Chattel
Paper, bonds, notes and other debt instruments, tax refunds and rights to
payment in the nature of general intangibles.
     “Account Control Agreement” has the meaning given that term in the Credit
Agreement.
     “Affiliate” shall mean, with respect to any specified Person, any other
Person that directly or indirectly, through one or more intermediaries, has
control of, is controlled by, or is under common control with, such specified
Person. For these purposes, “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the

 

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management of any Person, whether through the ownership of voting securities, by
contract or otherwise.
     “Business Day” means a day of the year other than a Saturday or Sunday on
which banks are not required or authorized to close in New York, New York.
     “Chattel Paper” has the meaning given that term in the UCC.
     “Collateral” means all of Borrower’s Accounts (including Health Care
Insurance Receivables), Accounts Receivable, Contract Rights, Commercial Tort
Claims, Chattel Paper (whether Tangible or Electronic), Deposit Accounts,
Documents, Equipment, General Intangibles (including Payment Intangibles and
Software), Goods, Instruments (including any Promissory Notes), Inventory,
Investment Property, Letter-of-Credit Rights, all Patents (including all patent
applications), all Patent Licenses, all Trademarks (including all trademark
applications), all Trademark Licenses, Vehicles and all Supporting Obligations;
together with (i) all substitutions and replacements for and products of any of
the foregoing; (ii) in the case of all goods, all accessions; (iii) all
accessories, attachments, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any goods; (iv) all warehouse receipts,
bills of lading and other documents of title now or hereafter covering such
goods; (v) any money, or other assets of Borrower that now or hereafter come
into Lender’s possession, custody, or control; and (vi) proceeds of any and all
of the foregoing.
     “Commercial Tort Claims” has the meaning given that term in the UCC.
     “Contract Rights” includes, without limitation, “contract rights” as now or
formerly defined in the UCC and also any right to payment under a contract not
yet earned by performance and not evidenced by an instrument or Chattel Paper.
     “Contractual Obligations” has the meaning given that term in the Credit
Agreement.
     “Deposit Accounts” means a demand, time, savings, passbook, or other
similar account maintained by a bank. The term does not include investment
property or accounts evidenced by an instrument.
     “Documents” has the meaning given that term in the UCC.
     “Electronic Chattel Paper” means Chattel Paper evidenced by a record or
records consisting of information stored in an electronic medium.
     “Equipment” means all of Borrower’s equipment, as such term is defined in
the UCC, whether now owned or hereafter acquired, including but not limited to
all present and future machinery, vehicles, furniture, fixtures, manufacturing
equipment, shop equipment, office and recordkeeping equipment, parts, tools,
supplies, and including specifically the goods described in any equipment
schedule or list herewith or hereafter furnished to Lender by Borrower.
     “Event of Default” has the meaning given in Section 5.
     “Facility Documents” has the meaning given that term in the Credit
Agreement.

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     “Farm Products” has the meaning given that term in the UCC.
     “Financial Assets” has the meaning given such term in the UCC.
     “General Intangibles” means all of Borrower’s general intangibles, as such
term is defined in the UCC, whether now owned or hereafter acquired; and also
all rights to payment for credit extended; deposits; amounts due to Borrower;
credit memoranda in favor of Borrower; warranty claims; tax refunds and
abatements; insurance refunds and premium rebates; all means and vehicles of
investment or hedging, including, without limitation, options, warrants, and
futures contracts; records; customer lists; telephone numbers; goodwill; causes
of action; judgments; payments under any settlement or other agreement; literary
rights; rights to performance; royalties; license and/or franchise fees; rights
of admission; licenses; franchises; license agreements, including all rights of
Borrower to enforce same; permits, certificates of convenience and necessity,
and similar rights granted by any governmental authority; patents, patent
applications, patents pending, and other intellectual property; developmental
ideas and concepts; proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals; technical data;
computer software programs (including the source and object codes therefor),
computer records, computer software, rights of access to computer record service
bureaus, service bureau computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights, copyrights, mask work
rights and interests, and derivative works and interests; user, technical
reference, and other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; applications for registration of the
foregoing; and all other general intangible property of Borrower in the nature
of intellectual property; proposals; cost estimates, and reproductions on paper,
or otherwise, of any and all concepts or ideas, and any matter related to, or
connected with, the design, development, manufacture, sale, marketing, leasing,
or use of any or all property produced, sold, or leased, by Borrower or credit
extended or services performed, by Borrower, whether intended for an individual
customer or the general business of Borrower, or used or useful in connection
with research by Borrower.
     “Goods” has the meaning given that term in the UCC.
     “Health-Care-Insurance Receivables” means an interest in, or claim under, a
policy of insurance which is a right to payment of a monetary obligation for
healthcare goods or services provided.
     “Instruments” has the meaning given that term in the UCC.
     “Inventory” means all of Borrower’s inventory, as such term is defined in
the UCC, whether now owned or hereafter acquired, whether consisting of whole
goods, spare parts or components, supplies or materials, whether acquired, held
or furnished for sale, for lease or under service contracts or for manufacture
or processing, and wherever located.
     “Investment Property” means all of Borrower’s investment property, as such
term is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all securities, security entitlements, securities accounts,
commodity contracts, commodity accounts, stocks, bonds, mutual fund shares,
money market shares and U.S. Government securities.

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     “Letter-of-Credit Rights” means a right to payment or performance under a
letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance. The term does not include the right
of a beneficiary to demand payment or performance under a letter of credit.
     “Lien” means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.
     “Material Adverse Effect” has the meaning given the term in the Credit
Agreement.
     “Obligations” means the unpaid principal amount of, and interest on, the
Loan and all other obligations and liabilities of Borrower to Lender, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Note, the other Facility Documents, the Loan or
this Agreement and any other document executed and delivered in connection
therewith or herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees and disbursements of counsel to Lender), or otherwise.
     “Patents” means (a) all letters patent of the United States and all
reissues and extension thereof, including, without limitation, any thereof
referred to in Schedule I hereto, and (b) all applications for letters patent of
the United States and all divisions, continuations and continuations-in-part
thereof or any other country, including, without limitation, any thereof
referred to in Schedule I thereto.
     “Patent License” means all agreements, whether written or oral, providing
for the grant by Borrower of any right to manufacture, use or sell any invention
covered by a Patent, including, without limitation, any thereof referred to in
Schedule I hereto.
     “Payment Intangibles” means a General Intangible under which the Account
debtor’s principal obligation is a monetary obligation.
     “Permitted Liens” means (i) the Security Interest and (ii) Liens permitted
under Section 5.02(b) of the Credit Agreement.
     “Person” shall mean any individual, partnership, corporation, limited
liability company, unincorporated organization or association, trust or other
entity.
     “Promissory Notes” means an instrument that evidences a promise to pay a
monetary obligation, does not evidence an order to pay, and does not contain an
acknowledgment by a bank that the bank has received for deposit a sum of money
of funds.
     “Quarterly Cash Reserve Account” has the meaning given in Section 3(r).
     “Securities” has the meaning given that term in the UCC.
     “Security Interest” has the meaning given in Section 2.

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     “Software” means a computer program and any supporting information provided
in connection with a transaction relating to the program. The term does not
include a computer program that is included in the definition of Goods.
     “Supporting Obligations” means a Letter-of-Credit Right, or secondary
obligation that supports the payment or performance of an Account, Chattel
Paper, a Document, a General Intangible, an Instrument or Investment Property.
     “Tangible Chattel Paper” means Chattel Paper evidenced by a record or
records consisting of information that is inscribed on a tangible medium.
     “Trademarks” means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether 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, or otherwise, including, without
limitation, any thereof referred to in Schedule II hereto, and (b) all renewals
thereof.
     “UCC” means Uniform Commercial Code as in effect from time to time in the
State of New York; provided, however, if by mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the security
interest granted hereunder in the Collateral is governed by the Uniform
Commercial Code of a jurisdiction other than New York, “UCC” means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of
provisions hereof relating to such perfection or effect of perfection of
non-perfection.
     “Vehicles” means all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law or any state
and, in any event, shall include, without limitation, the vehicles listed on
Schedule III hereto and all tires and other appurtenances to any of the
foregoing.
     2. Grant of Security Interest. As security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, Borrower hereby grants to Lender
a security interest (the “Security Interest”) in the Collateral now owned or at
any time hereafter acquired by Borrower or in which Borrower now has or at any
time in the future may acquire any right, title or interest.
     3. Representations, Warranties and Agreements. Borrower hereby represents,
warrants and agrees as follows:
     (a) Power and Authority; Authorization. Borrower has the corporate power
and authority and the legal right to execute and deliver, to perform its
obligations under, and to grant the Security Interest in the Collateral pursuant
to, this Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Security Interest in
the Collateral pursuant to, this Agreement.

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     (b) Enforceability. This Agreement constitutes a legal, valid and binding
obligation of Borrower enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally.
     (c) No Conflict. The execution, delivery and performance by Borrower of
this Agreement and the grant of the security interest contemplated hereby with
respect to the Collateral are within its corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
Borrower’s constitutive documents, (ii) contravene any contractual restriction
binding on it or require any consent under any agreement or instrument to which
it or any of its Affiliates is a party or by which any of its properties or
assets is bound which has not been obtained, (iii) result in or require the
creation or imposition of any Liens upon any property or assets of Borrower
other than Liens permitted by Section 5.02, or (iv) violate any Law. Borrower
shall not be deemed to be in violation of any such Law or in breach of any
contractual restriction binding upon it, unless such violation or breach could
reasonably be expected to cause a Material Adverse Effect.
     (d) No Consent, Etc. Except for any filings specifically provided for
herein or in the Credit Agreement, no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption or waiver by, any Governmental Authority or any other third-party
(except such as have been obtained or made and are in full force and effect) is
required to authorize, or is required in connection to which it is a party with,
(i) the execution, delivery and performance by Borrower of any Facility Document
or (ii) the legality, validity, binding effect or enforceability of any Facility
Document to which it is a party.
     (e) No Litigation. There is no pending or threatened action or proceeding
affecting Borrower or any Subsidiary of Borrower before any court, governmental
agency or arbitrator which (i) is reasonably likely to have a Material Adverse
Effect or (ii) purports to affect the legality, validity or enforceability of
this Agreement, the Credit Agreement, the Note or any other Facility Document.
     (f) Title. Borrower (i) has absolute title to each item of Collateral in
existence on the date hereof, free and clear of all Liens except the Security
Interest and the Permitted Liens, (ii) will have, at the time Borrower acquires
any rights in Collateral hereafter arising, absolute title to each such item of
Collateral free and clear of all Liens except Permitted Liens, (iii) will keep
all Collateral free and clear of all Liens except Permitted Liens, and (iv) will
defend the Collateral against all claims or demands of all Persons other than
Lender. Without the prior written consent of Lender, Borrower will not sell or
otherwise dispose of, or grant any option with respect to, the Collateral or any
interest therein, outside the ordinary course of business.
     (g) First Priority Security Interest. This Agreement creates a valid and
perfected first priority security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken. No
certificate or other instrument has been issued at any time to evidence any
Securities included in the Collateral that has not been delivered to Lender
pursuant to Section 3(s)(i) of this Agreement;

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     (h) Chief Executive Office; Identification Number. Borrower’s chief
executive office and principal place of business is located at the address set
forth under its signature below. Borrower’s federal employer identification
number is correctly set forth under its signature below.
     (i) Changes in Name or Location. Borrower will not change its name without
prior written notice to Lender. Borrower will not change its chief executive
office, principal business address or jurisdiction of organization without prior
written notice to Lender.
     (j) Fixtures; Real Property. Borrower will not permit any tangible
Collateral to become part of or to be affixed to any real property without first
assuring to the reasonable satisfaction of Lender that the Security Interest
will be prior and senior to any Lien then held or thereafter acquired by any
mortgagee of such real property or the owner or purchaser of any interest
therein. Borrower does not own any interest in any real property except as
previously disclosed in writing to Lender.
     (k) Accounts. The amount represented by Borrower to Lender from time to
time as owing by each Account debtor or by all Account debtors in respect of the
Accounts will at such time be the correct amount actually owing by such Account
debtor or debtors thereunder. No amount payable to Borrower under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to Lender.
     (l) Rights to Payment. Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral is (or
will be when arising, issued or assigned to Lender) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim
(other than those arising in the ordinary course of business), of the account
debtor or other obligor named therein or in Borrower’s records pertaining
thereto as being obligated to pay such obligation. Other than in the ordinary
course of business, Borrower will neither agree to any material modification or
amendment nor agree to any forbearance, release or cancellation of any such
obligation, and will not subordinate any such right to payment to claims of
other creditors of such account debtor or other obligor.
     (m) Farm Products, Fixtures, As-extracted Collateral. None of the
Collateral constitutes, or is the Proceeds of, Farm Products, Fixtures or
As-extracted Collateral.
     (n) Patents and Trademarks. Schedule I hereto includes all Patents and
Patent Licenses owned by Borrower in its own name as of the date hereof.
Schedule II hereto includes all Trademarks and Trademark Licenses owned by
Borrower in its own name as of the date hereof. To the best of Borrower’s
knowledge, each Patent and Trademark is valid, subsisting, unexpired,
enforceable and has not been abandoned. Except as set forth in either such
Schedule, none of such Patents and Trademarks is the subject of any licensing or
franchise agreement. No holding, decision or judgment has been rendered by any
governmental authority which would limit, cancel or question the validity of any
Patent or Trademark. No action or proceeding is pending (i) seeking to limit,
cancel or question the validity of any Patent or Trademark, or (ii) which, if
adversely determined, would have material adverse effect on the value of any
Patent or Trademark.

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     (o) Vehicles. Schedule III is a complete and correct list of all Vehicles
owned by Borrower.
     (p) Governmental Obligors. None of the obligors on any Accounts, and none
of the parties to any agreements with Borrower constituting Collateral, is a
governmental authority.
     (q) Miscellaneous Covenants. Borrower will:
     (i) keep all tangible Collateral in good repair, working order and
condition, normal wear and tear and depreciation excepted, and will, from time
to time, replace any worn, broken or defective parts thereof;
     (ii) file all income tax returns and all other material tax returns which
are required to be filed by it with Governmental Authorities, and will pay all
material taxes, assessments, claims, governmental charges or levies imposed on
it or its properties by any Governmental Authority, except for taxes contested
in good faith as to which adequate reserves have been provided in accordance
with GAAP;
     (iii) permit representatives of Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of Borrower
with officers and employees of Borrower during regular business hours and with
its independent certified public accountants; provided that so long as no
Default or Event of Default has occurred, any visits or inspections in excess of
once per Quarter shall be at Lender’s expense;
     (iv) keep accurate and complete records pertaining to the Collateral and
pertaining to Borrower’s business and financial condition and submit to Lender
such periodic reports concerning the Collateral and Borrower’s business and
financial condition as Lender may from time to time reasonably request;
     (v) promptly notify Lender of any loss of or material damage to any
Collateral or of any adverse change, known to Borrower, in the prospect of
payment of any material sums due on or under any Instrument, Chattel Paper, or
Account constituting Collateral;
     (vi) promptly deliver to Lender any Instrument, Document or Chattel Paper
constituting Collateral, duly endorsed or assigned by Borrower;
     (vii) maintain with financially sound and reputable companies, insurance
policies (i) insuring all tangible Collateral against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to Lender and
(ii) insuring Borrower and Lender against liability for personal injury and
property damage relating to such tangible Collateral, such policies to be in
such form and amounts and having such coverage as may be reasonably satisfactory
to Lender, with losses payable to Borrower and Lender as their respective
interests may appear. All such insurance shall (i) contain a breach of warranty
clause in favor of Lender, (ii) provide that no cancellation, material reduction
in amount or material change in coverage

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thereof shall be effective until at least thirty (30) days after receipt by
Lender of written notice thereof, (iii) name Lender as an insured and (iv) be
reasonably satisfactory in all other respects to Lender.
     (viii) from time to time execute such financing statements as Lender may
reasonably require in order to perfect the Security Interest and, if any
Collateral consists of a Vehicle, execute such documents as may be required to
have the Security Interest properly noted on a certificate of title;
     (ix) pay, discharge or otherwise satisfy at or before maturity, or before
they become delinquent, as the case may be, all payment obligations of whatever
nature under any Contractual Obligations, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of Borrower or its Subsidiaries, as the case may be, or where the
failure to satisfy such payment obligations could not reasonably be expected to
have a Material Adverse Effect;
     (x) execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings, at the sole
expense of Borrower, which Lender may at any time reasonably request in order to
secure, protect, perfect or enforce the Security Interest and Lender’s rights
under this Agreement;
     (xi) not use or keep any Collateral, or permit it to be used or kept, for
any unlawful purpose or in violation of any material federal, state or local
law, statute or ordinance;
     (xii) Other than in the ordinary course of business as generally conducted
by Borrower over a period of time, Borrower will not grant any extension of the
time of payment of any of the Accounts, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon; and
     (xiii) not exercise any right or take any action with respect to the
Collateral that would materially, adversely affect Lender’s rights in the
Collateral, or impose any restrictions upon the sale, transfer or disposition
thereof, other than in the ordinary course of Borrower’s business.
     (r) Deposit Accounts. If Borrower maintains any Deposit Account at any
depository bank, Borrower shall promptly notify Lender thereof and, upon
Lender’s request, cause the depository bank to comply at any time with
instructions of Lender directing the direction of funds credited to such deposit
account without further consent of Borrower, pursuant to a control agreement in
form and substance satisfactory to Lender in Lender’s sole discretion. Borrower
shall cause Bank to enter into an Account Control Agreement in form and
substance satisfactory to Lender in Lender’s sole discretion relating to the
Quarterly Cash Reserve Account and each other deposit account and securities
account of the Borrower as soon as possible and in no event later than ninety
(90) days from the dater hereof.

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     (s) Investment Property.
     (i) Certificated Securities. If Borrower shall now or hereafter at any time
hold or acquire any certificated Securities, Borrower shall forthwith endorse,
assign and deliver the same to Lender, accompanied by such instruments of
transfer of assignment duly executed in blank as Lender may from time to time
specify.
     (ii) Uncertificated Securities; Financial Assets. If any Securities now or
hereafter acquired by Borrower are uncertificated and are issued to Borrower or
its nominee directly by the issuer thereof, Borrower shall immediately notify
Lender thereof and, at Lender’s request and option, pursuant to an agreement in
form and substance satisfactory to Lender, cause the issuer to agree to comply
with instructions from Lender as to such Securities, without further consent of
Borrower or such nominee. If any Securities, whether certificated or
uncertificated, Financial Assets or other Investment Property now or hereafter
acquired by Borrower are held by Borrower or its nominee through a securities
intermediary or commodity intermediary, Borrower shall immediately notify Lender
thereof and, at Lender’s request and option, pursuant to a control agreement in
form and substance satisfactory to Lender, cause such securities intermediary or
(as the case may be) commodity intermediary to agree to comply with entitlement
orders or other instructions from Lender to such securities intermediary as to
such Securities, Financial Assets or other Investment Property (including
securities entitlements), or (as the case may be) to apply any value distributed
on account of any commodity contract as directed by Lender to such commodity
intermediary, in each case without further consent of Borrower or such nominee.
     (t) Collateral in the Possession of a Bailee. If any Goods of material
value are at any time in the possession of a bailee, Borrower shall promptly
notify Lender thereof and, if reasonably requested by Lender, shall promptly
obtain an acknowledgement from the bailee, in form and substance satisfactory to
Lender, that the bailee holds such Collateral for the benefit of Lender and
shall act upon the instructions of Lender, without the further consent of
Borrower.
     (u) Electronic Chattel Paper and Transferable Records. If Borrower at any
time holds or acquires an interest in any electronic chattel paper or any
“transferable record,” as that term is defined in Section 201 of the Electronic
Signatures in Global and National Commerce Act, or in §16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, Borrower
shall promptly notify Lender thereof and, at the request of Lender , shall take
such action as Lender may reasonably request to vest in Lender control under UCC
§9-105 of such electronic chattel paper or control under Section 201 of the
Electronic Signatures in Global and National Commerce Act or, as the case may
be, §16 of the Uniform Electronics Transactions Act, as so in effect in such
jurisdiction, of such transferable record.
     (v) Letter-of-Credit Rights. If Borrower is at any time a beneficiary under
a Letter of Credit now or hereafter issued in favor of Borrower, Borrower shall
promptly notify Lender thereof and, at the request and option of Lender,
Borrower shall, pursuant to an agreement in form and substance satisfactory to
Lender, arrange for the issuer and any

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confirmer of such Letter of Credit to consent to an assignment to Lender of the
proceeds of any drawing under the Letter of Credit.
     (w) Patents and Trademarks.
     (i) Borrower (either itself or through licensees) will, except with respect
to any Trademark that Borrower shall reasonably determine is of negligible
economic value to it, (i) continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) employ such Trademark with the appropriate notice of registration,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless Lender shall obtain a perfected security
interest in such mark pursuant to this Agreement, and (v) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
     (ii) Borrower will not, except with respect to any Patent that Borrower
shall reasonably determine is of negligible economic value to it, do any act, or
omit to do any act, whereby any Patent may become abandoned or dedicated.
     (iii) Borrower will notify Lender immediately if it knows, or has reason to
know, that any application or registration relating to any Patent or Trademark
may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country) regarding Borrower’s
ownership of any Patent or Trademark or its right to register the same or to
keep and maintain the same.
     (iv) Whenever Borrower, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Patent or Trademark with the United States Patent and Trademark Office or any
similar office or agency in any other country or any political subdivision
thereof, Borrower shall report such filing to Lender within five (5) Business
Days after the last day of the fiscal quarter in which such filing occurs. Upon
request of Lender, Borrower shall execute and deliver any and all agreements,
instruments, documents, and papers as Lender may request to evidence Lender’s
security interest in any Patent or Trademark and the goodwill and general
intangibles of Borrower relating thereto or represented thereby, and Borrower
hereby constitutes Lender its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Obligations are paid in full.
     (v) Borrower will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country or any
political subdivision thereof, to maintain and pursue each application (and to
obtain the

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relevant registration) and to maintain each registration of the Patents and
Trademarks, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
     (vi) In the event that any Patent or Trademark included in the Collateral
is infringed, misappropriated or diluted by a third party, Borrower shall
promptly notify Lender after it learns thereof and shall, unless Borrower shall
reasonably determine that such Patent or Trademark is of negligible economic
value to Borrower, promptly sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution, or take such other actions
as Borrower shall reasonably deem appropriate under the circumstances to protect
such Patent or Trademark.
     (x) Commercial Tort Claims. If Borrower shall at any time hold or acquire a
commercial tort claim, Borrower shall immediately notify Lender in writing
signed by Borrower of the details thereof and grant to Lender in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Lender.
     (y) Lender’s Right to Take Action. Borrower authorizes Lender to file such
financing statements and continuation statements without the signature of
Borrower as Lender deems reasonably necessary to perfect (or continue the
perfection of) the Security Interest in the Collateral. Borrower hereby ratifies
its authorization for Lender to have filed any financing or continuation
statements or amendments thereto if such have been filed prior to the date
hereof. Further, if Borrower at any time fails to perform or observe any
agreement contained in Section 3(f), and if such failure continues for a period
of ten (10) Business Days after Lender gives Borrower written notice thereof,
Lender may (but need not) perform or observe such agreement on behalf and in the
name, place and stead of Borrower (or, at Lender’s option, in Lender’s own name)
and may (but need not) take any and all other actions which Lender may
reasonably deem necessary to cure or correct such failure (including, without
limitation the payment of taxes, the satisfaction of security interests, liens,
or encumbrances, the performance of obligations under contracts or agreements
with account debtors or other obligors, the procurement and maintenance of
insurance, the execution of financing statements, the endorsement of
instruments, and the procurement of repairs or transportation); and, except to
the extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable law,
Borrower shall thereupon pay Lender on demand the amount of all moneys expended
and all costs and expenses (including reasonable attorneys’ fees) incurred by
Lender in connection with or as a result of Lender’s performing or observing
such agreements or taking such actions, together with interest thereon from the
date expended or incurred by Lender at the highest rate then applicable to any
of the Obligations.
     (z) Power of Attorney. Borrower hereby irrevocably appoints (which
appointment is coupled with an interest) Lender, or its delegate, as the
attorney-in-fact of Borrower with the right (but not the duty) from time to
time, following the occurrence and during the continuance of an Event of
Default, to: (a) create, prepare, complete, execute, deliver, endorse or file,
in the name and on behalf of Borrower, any and all instruments, documents,
financing statements, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by Borrower
under this Section 3; (b) to

12

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convert the Collateral into cash, including, without limitation, the sale
(either public or private) of all or any portion or portions of the Collateral;
(c) to enforce collection of the Collateral, either in its own name or in the
name of Borrower, including, without limitation, executing releases,
compromising or settling with any Account debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral; (d) to receive,
open and dispose of all mail addressed to Borrower and to take therefrom any
remittances or proceeds of Collateral in which Lender has a security interest;
(e) to notify post office authorities to change the address for delivery of mail
addressed to Borrower to such address as Lender shall designate; (f) to endorse
the name of Borrower in favor of Lender upon any and all checks, drafts, money
orders, notes, acceptances or other instruments of the same or different nature;
(g) to sign and endorse the name of Borrower on and to receive as secured party
any of the Collateral, any invoices, schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of the same or different nature relating to the Collateral;
(h) to sign the name of Borrower on any notice to the Account debtors or on
verification of the Collateral; and (i) to sign and file or record on behalf of
Borrower any financing or other statement in order to perfect or protect
Lender’s security interest. Lender shall not be obliged to do any of the acts or
exercise any of the powers hereinabove authorized, but if Lender elects to do
any such act or exercise any such power, it shall not be accountable for more
than it actually receives as a result of such exercise of power, and it shall
not be responsible to Borrower except for willful misconduct in bad faith. All
powers conferred upon Lender by this Agreement, being coupled with an interest,
shall be irrevocable so long as any Obligation of Borrower to Lender shall
remain unpaid.
     4. Assignment of Insurance. Borrower hereby assigns to Lender, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Borrower under or
with respect to, any and all policies of insurance covering the Collateral, and
Borrower hereby directs the issuer of any such policy to pay any such moneys
directly to Lender, following the occurrence and during the continuance of an
Event of Default. After the occurrence of an Event of Default, Lender may (but
need not), in its own name or in Borrower’s name, execute and deliver proofs of
claim, receive all such moneys, endorse checks and other instruments
representing payment of such moneys, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
     5. Events of Default. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called “Event of Default”): (i) an
Event of Default shall occur under (and as defined in) the Credit Agreement; or
(ii) Borrower shall fail to observe or perform any covenant or agreement herein
binding on it and such failure is not cured within eight (8) Business Days after
notice thereof is given to Borrower.
     6. Remedies upon Event of Default. Upon the occurrence and during the
continuance of an Event of Default, Lender may exercise any one or more of the
following rights and remedies: (i) declare all unmatured Obligations to be
immediately due and payable, and the same shall thereupon be immediately due and
payable, without presentment or other notice or demand; (ii) exercise and
enforce any or all rights and remedies available upon default to a secured party
under the UCC, including but not limited to the right to take possession of any
Collateral, proceeding without judicial process or by judicial process (without
a prior hearing or notice thereof, which Borrower

13

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hereby expressly waives), and the right to sell, lease or otherwise dispose of
any or all of the Collateral, and in connection therewith, Lender may require
Borrower to make the Collateral available to Lender at a place to be designated
by Lender which is reasonably convenient to both parties, and if notice to
Borrower of any intended disposition of Collateral or any other intended action
is required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section 10 at least
ten (10) days prior to the date of intended disposition or other action; and
(iii) exercise or enforce any or all other rights or remedies available to
Lender by law or agreement against the Collateral, against Borrower or against
any other Person or property. Subject to the occurrence, and only during the
continuance of an Event of Default, Lender is hereby granted a nonexclusive,
worldwide and royalty-free license to use or otherwise exploit all intellectual
property owned by or licensed to Borrower that Lender deems necessary or
appropriate to the disposition of any Collateral.
     7. Other Personal Property. Unless, at the time Lender takes possession of
any tangible Collateral, or within seven (7) days thereafter, Borrower gives
written notice to Lender of the existence of any goods, papers or other property
of Borrower, not affixed to or constituting apart of such Collateral, but which
are located or found upon or within such Collateral, describing such property,
Lender shall not be responsible or liable to Borrower for any action taken or
omitted by or on behalf of Lender with respect to such property.
     8. Security Interest Absolute. All rights of Lender hereunder, the grant of
a security interest in the Collateral and all obligations of Borrower hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any of the other Facility Documents, the
Loan, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (ii) any change in
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, other Facility Documents or any other agreement or
instrument, (iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to (other than
the defense of indefeasible payment), or a discharge of, Borrower in respect of
the Obligations or in respect of this Agreement.
     9. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect until the indefeasable payment in full of the Obligations and all other
amounts payable under this Agreement. Upon the indefeasable payment in full of
the Obligations and all other amounts payable under this Agreement, the Security
Interest granted in this Agreement shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, Lender shall
(i) return to Borrower such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms of this Agreement, and (ii) execute and
deliver to Borrower such documents as Borrower shall reasonably request to
evidence such termination.
     10. Notice. All notices and other communications hereunder shall be in
writing and shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or
(d) transmitted by facsimile, in each case addressed or telecopied to the party
to whom notice is being given at its address or telecopier number as set forth
below its signature or, as to each party, at such other address or facsimile
number as may hereafter be designated by such party in a written notice to the
other party complying as to delivery with the terms of this Section.

14

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     All such notices, requests, demands and other communications shall be
deemed to have been given on (i) the date received if personally delivered,
(ii) five (5) days after being deposited in the mail if delivered by mail,
(iii) the date received if sent by overnight courier, or (iv) the date of
receipt if delivered by facsimile.
     11. Miscellaneous. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Lender, and, in the case of amendment or
modification, in a writing signed by both parties. A waiver signed by Lender
shall be effective only in the specific instance and for the specific purpose
given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Lender’s rights or remedies. All rights and remedies of
Lender shall be cumulative and may be exercised singularly or concurrently, at
Lender’s option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. Lender’s duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if Lender exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third Person, exercises reasonable
care in the selection of the bailee or other third Person, and Lender need not
otherwise preserve, protect, insure or care for any Collateral. Lender shall not
be obligated to preserve any rights Borrower may have against prior parties, to
realize on the Collateral at all or in any particular manner or order, or to
apply any cash proceeds of Collateral in any particular order of application.
This Agreement shall be binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns and shall take effect when
signed by Borrower and delivered to Lender, and Borrower waives notice of
Lender’s acceptance hereof. A carbon, photographic or other reproduction of this
Agreement or of any financing statement signed by Borrower shall have the same
force and effect as the original for all purposes of a financing statement. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of New York, except to the extent
that the validity or perfection of the Security Interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York. If any provision or application
of this Agreement is held unlawful or unenforceable in any respect, such
illegality or unenforceability shall not affect other provisions or applications
which can be given effect and this Agreement shall be construed as if the
unlawful or unenforceable provision or application had never been contained
herein or prescribed hereby. All representations and warranties contained in
this Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. Borrower hereby
submits to the non-exclusive jurisdiction of the courts of the State of New York
sitting in New York City and the United States District Court for the Southern
District of New York with respect to all suits and actions arising under or out
of this Agreement and hereby waives any objection to the venue of any such court
with respect to any such suit or action and any claim that any such suit or
action brought in such court has been brought in an inconvenient forum.
     THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, Borrower has executed this Agreement as of the date and
year first above written.

                  MBI FINANCIAL INC.    
 
           
 
  By:        
 
           
 
  Name:        
 
  Title:        
 
                1845 WOODALL RODGERS FRWY         SUITE 1225         DALLAS TX
75201         Tel: (214) 468-0000    

ACCEPTED AND AGREED TO:
OLD MASTER GIOTTO FUND LIMITED

         
By:
       
 
 
 
Name:    
 
  Title:    
 
       
 
  c/o Maricorp Services Ltd.,    
 
  4th Floor, West Wind Building    
 
  70 Harbour Drive    
 
  PO Box 2075GT    
 
  George Town, Grand Cayman    
 
  Cayman Islands, British West Indies    
 
       
 
  with a copy to each of:    
 
       
 
  Old Master Capital, LLC    
 
  152 West 57th Street 6th Floor    
 
  New York, New York 10038    
 
  Fax: (212) 974-0404    
 
  Attn: Matt Kishlansky    
 
       
 
  Katten Muchin Rosenman LLP    
 
  575 Madison Avenue    
 
  New York, New York 10025    
 
  Fax: (212) 940-8876    
 
  Attn: Jack P. Governale, Esq.    
 
            Marilyn S. Okoshi, Esq.    

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STATE OF
       
COUNTY OF
 
 
   
 
       

     On ___, 200[ ], before me, the undersigned, personally appeared
                    , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same, and that by
his/her signature on the instrument the person executed the instrument.
WITNESS my hand and official seal.

                       
 
  Notary Public   [Affix Seal]    
 
           
 
  My Commission Expires:        
 
     
 
   

17

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Schedule I
Patents and Patent Licenses
[None]

18

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Schedule II
Trademarks and Trademarks Licenses
[None]

19

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Schedule III
Vehicles
[None]

20