Exhibit 10.3


 


EXECUTION COPY


 


SECURITY AGREEMENT


 


January 19, 2006


 


CGI
Holding Corporation


5
Revere Drive


Suite 510


Northbrook,
Illinois 60062


(“Borrower”,
and collectively with the Guarantors party hereto, “Debtor”)


 


Wachovia
Bank, National Association


301
South Tryon Street


Charlotte,
North Carolina 28202


(Hereinafter
referred to as “Bank”)


 


For
value received and to secure payment and performance of any and all obligations
of (i) Guarantors under the Guaranty Agreement of even date herewith and (ii) Borrower
to Bank however created, arising or evidenced, whether direct or indirect,
absolute or contingent, now existing or hereafter arising or acquired,
including swap agreements (as defined in 11 U.S.C. § 101, as in effect
from time to time), future advances, and all costs and expenses incurred by
Bank to obtain, preserve, perfect and enforce the security interest granted
herein and to maintain, preserve and collect the property subject to the
security interest (collectively, “Obligations”), Debtor hereby grants to Bank a
continuing security interest in and first
priority lien upon, and
for security purposes assigns and transfers to Bank until all of the
Obligations are repaid in full and Bank’s obligation to make Advances has
expired, the following described property, whether now owned or hereafter
acquired, and any additions, replacements, accessions, or substitutions thereof
and all cash and non-cash proceeds and products thereof (collectively, “Collateral”):


 


All of Debtor’s rights, title and interest in and to the
following described property, now owned or hereafter acquired, any additions,
accessions, replacements or substitutions thereof and thereto,
and all cash and non-cash proceeds, profits and products thereof, wherever
located and all books and records in whatever form maintained: all of
the personal property and fixtures of Debtor of every kind and nature
including, without limitation, all accounts, chattel paper, instruments,
general intangibles, equipment, accessions, fixtures, inventory, documents,
letter-of-credit rights, deposits, goods, money and securities.


 


Debtor
hereby represents and agrees that:


 


OWNERSHIP.  Debtor owns the Collateral.  The Collateral is free and clear of all
liens, security interests, and claims except those previously reported in
writing to and approved by Bank, and Debtor will keep the Collateral free and
clear from all liens, security interests and claims, other than as permitted
under the Loan Documents and any liens created by the Loan Documents.  All securities and security entitlements
pledged as Collateral are fully paid and non-assessable and if certificated,
have been delivered to Bank with unrestricted endorsements.  All income, dividends, earnings and profits
with respect to the Collateral shall be reported for state and federal income
tax purposes as attributable to the Debtor and not Bank, and Bank or


 

















 


any
other person authorized to report income distributions, is authorized to issue
IRS Forms 1099 indicating Debtor as the recipient of such income, earnings and
profits.


 


NAME AND OFFICES; JURISDICTION OF ORGANIZATION.  The name and address of Debtor, as set
forth on Schedule 1, are
Debtor’s exact legal name and the address of its chief executive office.  There has been no change in the name of
Debtor, or the name under which Debtor conducts business, within the five years
preceding the date hereof except as previously reported in writing to
Bank.  Debtor has not moved its chief
executive office within the five years preceding the date hereof except as
previously reported in writing to Bank. 
Debtor has not changed the jurisdiction of its organization within the
five years preceding the date hereof except as previously reported in writing
to Bank.


 


TITLE/TAXES.  Debtor has good and marketable title to
Collateral and will warrant and defend same against all claims.  Debtor will not transfer, sell, or lease
Collateral (except as permitted herein). 
Debtor agrees to pay promptly all taxes and assessments upon or for the
use of Collateral and on this Security Agreement.  At its option, Bank may discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
Collateral.  Debtor agrees to reimburse
Bank, on demand, for any such payment made by Bank.  Any amounts so paid shall be added to the
Obligations.


 


WAIVERS.  Debtor agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a counterclaim, or otherwise,
any claims Debtor may have against any seller or lessor that provided personal
property or services relating to any part of the Collateral or against any
other party liable to Bank for all or any part of the Obligations.  Debtor waives all exemptions and homestead
rights with regard to the Collateral. 
Debtor waives any and all rights to any bond or security which might be
required by applicable law prior to the exercise of any of Bank’s remedies
against any Collateral.  All rights of
Bank and security interests hereunder, and all obligations of Debtor hereunder,
shall be absolute and unconditional, not discharged or impaired irrespective of
(and regardless of whether Debtor receives any notice of):  (i) any lack of validity or
enforceability of any Loan Document; (ii) any change in the time, manner
or place of payment or performance, or in any term, of all or any of the
Obligations or the Loan Documents or any other amendment or waiver of or any
consent to any departure from any Loan Document; (iii) any exchange,
insufficiency, unenforceability, enforcement, release, impairment or non-perfection
of any collateral, or (iv) any amendment or waiver of or consent to
departure from any Loan Document or other agreement.  To the extent permitted by law, Debtor hereby
waives any rights under any valuation, stay, appraisement, extension or redemption
laws now existing or which may hereafter exist and which, but for this
provision, might be applicable to any sale or disposition of the Collateral by
Bank; and any other circumstance which might otherwise constitute a defense
available to, or a discharge of any party with respect to the Obligations.


 


NOTIFICATIONS; LOCATION OF COLLATERAL. 
Debtor will notify Bank in writing at least 30 days prior to any change
in:  (i) Debtor’s chief place of
business and/or residence; (ii) Debtor’s name or identity; (iii) Debtor’s
corporate/organizational structure; provided that the prior written notice
requirement set forth above shall not be applicable with respect to
acquisitions constituting Permitted Acquisitions (as defined in the Loan
Agreement) or (iv) the


 


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jurisdiction
in which Debtor is organized.  In
addition, Debtor shall promptly notify Bank of any claims or alleged claims of
any other person or entity to the Collateral or the institution of any
litigation, arbitration, governmental investigation or administrative
proceedings against or affecting the Collateral.  Debtor will keep Collateral at the
location(s) specified on Schedule 1 hereto under such Debtor’s
name.  Debtor will bear the cost of
preparing and filing any documents necessary to protect Bank’s liens.


 


COLLATERAL CONDITION AND LAWFUL USE. 
Debtor represents that the Collateral is in good repair and condition
and that Debtor shall use reasonable care to prevent Collateral from being
damaged or depreciating, normal wear and tear excepted.  Debtor shall immediately notify Bank of any
material loss or damage to Collateral. 
Debtor shall not permit any item of Collateral to become an accession to
other property unless such property is also Collateral hereunder.


 


FINANCING STATEMENTS, CERTIFICATES OF TITLE, POWER OF ATTORNEY.  No
financing statement (other than any filed or approved by Bank) covering any
Collateral is on file in any public filing office.  Debtor authorizes the filing of one or more financing
statements covering the Collateral in form satisfactory to Bank, and without
Debtor’s signature where authorized by law, agrees to deliver certificates of
title on which Bank’s lien has been indicated covering any Collateral subject
to a certificate of title statute, and will pay all costs and expenses of
filing or applying for the same or of filing this Security Agreement in all
public filing offices, where filing is deemed by Bank to be desirable.  Debtor hereby constitutes and appoints Bank
the true and lawful attorney of Debtor with full power of substitution to take
any and all appropriate action and to execute any and all documents,
instruments or applications that may be necessary or desirable to accomplish
the purpose and carry out the terms of this Security Agreement.  The foregoing power of attorney is coupled
with an interest and shall be irrevocable until all of the Obligations have
been paid in full.  Neither Bank nor
anyone acting on its behalf shall be liable for acts, omissions, errors in
judgment, or mistakes in fact in such capacity as attorney-in-fact, except to the extent such liability arises from
Bank’s gross negligence or willful misconduct.  Debtor ratifies all acts of
Bank as attorney-in-fact.  Debtor agrees
to take such other actions, at Debtor’s expense, as might be requested for the
perfection, continuation and assignment, in whole or in part, of the security
interests granted herein and to assure and preserve Bank’s intended priority
position.  If certificates, passbooks, or
other documentation or evidence is/are issued or outstanding as to any of the
Collateral, Debtor will cause the security interests of Bank to be properly
protected, including perfection by notation thereon or delivery thereof to
Bank.  Upon Bank’s request, Debtor will,
at its own expense:  (i) do all
things determined by Bank to be desirable to register such Collateral or
qualify for an exemption from registration, under the provisions of all
applicable securities laws, and (ii) otherwise do or cause to be done all
other acts and things as may be necessary to make the sale of the Collateral
valid, binding and in compliance with applicable law.


 


STOCK, DIVIDENDS.  If, with respect to any
securities pledged hereunder, a stock dividend is declared, any stock split
made or right to subscribe is issued, all the certificates for the shares
representing such stock dividend, stock split or right to subscribe will be
immediately delivered, duly endorsed, to the Bank as additional Collateral, and
any cash or non-cash proceeds and products thereof, including investment
property and security entitlements will be immediately delivered to Bank; provided
that, so long as no Default has occurred and is continuing under any


 


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Loan
Document, any subsidiary of Borrower or Guarantor may make dividends or
distributions to Borrower or such Guarantor. 
Debtor acknowledges that such grant includes all investment property and
security entitlements, now existing or hereafter arising, relating to such
securities.  In addition, Debtor agrees
to execute such notices and instructions to securities intermediaries as Bank
may reasonably request.


 


NO TRADING OF COLLATERAL.  Until a Default occurs, Debtor
shall have the right to vote the securities pledged hereunder and to collect and receive all cash
dividends and interest distributed periodically in the ordinary course by the
obligor or issuer of such Collateral or part thereof; provided, however, Debtor
may not sell, transfer, exchange for other property or cash (“Trade”) or
otherwise exercise rights with respect to such Collateral or receive any
distributions or proceeds from Trades of such Collateral without the prior
written consent of Bank, and any such distributions or proceeds received by
Debtor shall be held in trust for, and immediately delivered to, Bank.  Any consent pursuant to this paragraph shall
be in Bank’s sole discretion.


 


CONTROL.  Debtor will cooperate with Bank
in obtaining control with respect to Collateral consisting of electronic
chattel paper.


 


CHATTEL PAPER, ACCOUNTS, GENERAL INTANGIBLES. 
Debtor warrants that Collateral consisting of chattel paper, accounts,
or general intangibles is (i) genuine and enforceable in accordance with
its terms; (ii) not subject to any defense, set-off, claim or counterclaim
of a material nature against Debtor except as to which Debtor has notified Bank
in writing; and (iii) not subject to any other circumstances that would
impair the validity, enforceability, value, or amount of such Collateral except
as to which Debtor has notified Bank in writing.  Debtor shall not amend, modify or supplement
any lease, contract or agreement contained in Collateral or waive any provision
therein, without prior written consent of Bank.  Debtor will not create any
tangible chattel paper without placing a legend on the chattel paper acceptable
to Bank indicating that Bank has a security interest in the chattel paper.  Following the date hereof, debtor will not
create any electronic chattel paper without taking all steps deemed necessary
by Bank to confer control of the electronic chattel paper upon Bank in
accordance with the UCC.


 


ACCOUNT INFORMATION.  From time to time, at Bank’s
request, Debtor shall provide Bank with schedules describing all accounts,
including customers’ addresses, created or acquired by Debtor.  Together with each schedule, Debtor shall, if
requested by Bank, furnish Bank with copies of Debtor’s sales journals,
invoices, customer purchase orders or the equivalent, and original shipping or
delivery receipts for all goods sold.


 


ACCOUNT DEBTORS.  If a Default that is not cured within the
time period set forth in the revolving credit promissory note in the
original amount of $15,000,000.00 dated as of the date hereof (the “Revolving
Note”) or the term promissory note in the original amount of $2,500,000.00
dated as of the date hereof (the “Term Note” and, collectively with the
Revolving Note, the “Notes”) should
occur, Bank shall have the right to notify the account debtors obligated on any
or all of the Collateral to make payment thereof directly to Bank and Bank may
take control of all proceeds of any such Collateral, which rights Bank may
exercise at any time.  The cost of such
collection and enforcement, including attorneys’ fees and expenses, shall be


 


4

















 


borne
solely by Debtor whether the same is incurred by Bank or Debtor.  If a Default should occur or upon demand of
Bank, Debtor will, upon receipt of all checks, drafts, cash and other
remittances in payment on Collateral, deposit the same in a special bank
account maintained with Bank, over which Bank also has the power of withdrawal.


 


If
a Default should occur, no discount, credit, or allowance shall be granted by
Debtor to any account debtor and no return of merchandise shall be accepted by
Debtor without Bank’s consent.  Bank may,
after Default, settle or adjust disputes and claims directly with account
debtors for amounts and upon terms that Bank considers advisable, and in such
cases Bank will credit the Obligations with the net amounts received by Bank,
after deducting all of the expenses incurred by Bank.  Debtor agrees to indemnify and defend Bank
and hold it harmless with respect to any claim or proceeding arising out of any
matter related to collection of Collateral except to the extent any such claim
or proceeding results solely from the gross negligence or willful misconduct,
as determined by a final and nonappealable judgment by a court of competent
jurisdiction, of Bank.


 


GOVERNMENT CONTRACTS.  If any Collateral covered
hereby arises from obligations due to Debtor from any governmental unit or
organization, Debtor shall immediately notify Bank in writing and execute all
documents and take all actions deemed necessary by Bank to ensure recognition
by such governmental unit or organization of the rights of Bank in the
Collateral.


 


INVENTORY.  So long as no Default has occurred, Debtor
shall have the right in the regular course of business, to process and sell
Debtor’s inventory.  If a Default should
occur or upon demand of Bank, Debtor will, upon receipt of all checks, drafts,
cash and other remittances, in payment of Collateral sold, deposit the same in
a special bank account maintained with Bank, over which Bank also has the power
of withdrawal.  Debtor agrees to notify
Bank immediately in the event that any inventory purchased by or delivered to
Debtor is evidenced by a bill of lading, dock warrant, dock receipt, warehouse
receipt or other document of title and to deliver such document to Bank upon
request.


 


INSTRUMENTS, CHATTEL PAPER, DOCUMENTS.  Any
Collateral that is, or is evidenced
by, instruments, chattel paper or negotiable documents will be properly
delivered to and the originals of any such Collateral in tangible form
deposited with and held by Bank, unless Bank shall hereafter otherwise direct
or consent in writing.  Bank may,  upon a Default under the Loan Documents that
is not cured within the time period set forth in the Notes and without notice,
before or after maturity of the Obligations, exercise any or all rights of
collection, conversion, or exchange and other similar rights, privileges and
options pertaining to such Collateral, but shall have no duty to do so.


 


COLLATERAL DUTIES.  Bank shall have no custodial or
ministerial duties to perform with respect to Collateral pledged except as set
forth herein; and by way of explanation and not by way of limitation, Bank
shall incur no liability for any of the following:  (i) loss or depreciation of Collateral
(unless caused by its willful misconduct or gross negligence), (ii) failure
to present any paper for payment or protest, to protest or give notice of
nonpayment, or any other notice with respect to any paper or Collateral, (iii) failure
to ascertain, notify Debtor of, or take any action in connection with any
conversion, call, redemption, retirement or any other event relating


 


5

















 


to
any of the Collateral, or failure to notify any party hereto that Collateral
should be presented or surrendered for any such reason.  Debtor acknowledges that Bank is not an
investment advisor or insurer with respect to the Collateral; and Bank has no
duty to advise Debtor of any actual or anticipated changes in the value of the
Collateral.


 


TRANSFER OF COLLATERAL.  Bank may assign its rights in
Collateral or any part thereof to any assignee who shall thereupon become
vested with all the powers and rights herein given to Bank with respect to the
property so transferred and delivered, and Bank shall thereafter be forever relieved
and fully discharged from any liability with respect to such property so
transferred, but with respect to any property not so transferred, Bank shall
retain all rights and powers hereby given.


 


REGULATION U.  None
of the proceeds of the credit secured hereby shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in
violation of any of the provisions of Regulation U of the Board of Governors of
the Federal Reserve System (“Regulation U”), or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
margin stock or for any other purchase which might render the Loan a “Purpose
Credit” within the meaning of Regulation U.


 


CROSS COLLATERALIZATION LIMITATION.  As to
any other existing or future consumer purpose loan made by Bank to Debtor,
within the meaning of the Federal Consumer Credit Protection Act, Bank
expressly waives any security interest granted herein in Collateral that Debtor
uses as a principal dwelling and household goods.


 


ATTORNEYS’ FEES AND OTHER COSTS OF COLLECTION. 
Debtor shall pay all of Bank’s reasonable expenses incurred in enforcing
this Security Agreement and in preserving and liquidating Collateral, including
but not limited to, reasonable arbitration, paralegals’, attorneys’ and experts’
fees and expenses, whether incurred with or without the commencement of a suit,
trial, arbitration, or administrative proceeding, or in any appellate or
bankruptcy proceeding.


 


DEFAULT.  If any of the following occurs, a default (“Default”)
under this Security Agreement shall exist: 
Loan Document Default.  A default under any Loan Document.  Breach.  Any
breach of any agreement contained or referred to in this Security Agreement or
other Loan Document.  False Warranty.  A
warranty or representation made in the Loan Documents or furnished to Bank in
connection with the loans evidenced by the Notes is materially false when made.
Collateral Loss or Destruction.  Any loss, theft, substantial damage, or
destruction of Collateral not fully covered by insurance, or as to which
insurance proceeds are not remitted to Bank within 30 days of the loss.  Collateral Sale, Lease or
Encumbrance.  Any sale, lease,
or encumbrance of any Collateral not specifically permitted herein without
prior written consent of Bank.  Levy, Seizure or Attachment. 
The making of any levy, seizure, or attachment on or of Collateral which
is not removed within 10 days.  Unauthorized Collection of Collateral.  Any attempt to collect, cash in or otherwise
recover deposits that are Collateral.  Third Party Breach. 
Any default or breach by a Third Party of any provision contained in any
agreement executed in connection with any of the Collateral.  Unauthorized Termination.  Any attempt to terminate, revoke, rescind,
modify, or violate the terms of this Security Agreement or any Control
Agreement without the prior written consent of Bank.


 


6

















 


REMEDIES ON DEFAULT (INCLUDING POWER OF SALE).  If a
Default occurs Bank shall have all the rights and remedies of a secured party
under the Uniform Commercial Code. 
Without limitation thereto, Bank shall have the following rights and
remedies:  (i) to take immediate
possession of Collateral, without notice or resort to legal process, and for
such purpose, to enter upon any premises on which Collateral or any part
thereof may be situated and to remove the same therefrom, or, at its option, to
render Collateral unusable or dispose of said Collateral on Debtor’s premises; (ii) to
exercise its right of set-off or bank lien as to any monies of Debtor deposited
in accounts of any nature maintained by Debtor with Bank or affiliates of Bank,
without advance notice, regardless of whether such accounts are general or
special; and (iii) to dispose of Collateral, as a unit or in parcels,
separately or with any real property interests also securing the Obligations,
in any county or place to be selected by Bank, at either private or public sale
(at which public sale Bank may be the purchaser) with or without having the
Collateral physically present at said sale. 
In addition to the foregoing, Bank shall be authorized to:  transfer into Bank’s name or the name of its
nominee, all or any part of the Collateral; receive all interest, dividends,
and other proceeds of the Collateral; notify any person obligated on any
Collateral of the security interest of Bank therein and require such person to
make payment directly to Bank; demand, sue for, collect or receive the
Collateral and any proceeds thereof, and/or make any settlement or compromise
as Bank deems desirable with respect to any Collateral; and exercise any
voting, conversion, registration, purchase or other rights of an owner, holder
or entitlement holder of the Collateral. 
Debtor agrees that Bank may exercise its rights under this Security
Agreement without regard for the actual or potential tax consequences to Debtor
under federal or state law and without regard to any instructions or directives
given Bank by Debtor.


 


Any
notice of sale, disposition or other action by Bank required by law and sent to
Debtor at Debtor’s address shown above, or at such other address of Debtor as
may from time to time be shown on the records of Bank, at least 10 days prior
to such action, shall constitute reasonable notice to Debtor.  Notice shall be deemed given or sent when
mailed postage prepaid to Debtor’s address as provided herein via recognized overnight courier service
or certified mail.  Bank shall be
entitled to apply the proceeds of any sale or other disposition of the
Collateral, and the payments received by Bank with respect to any of the
Collateral, to Obligations in such order and manner as Bank may determine.  Collateral that is subject to rapid declines
in value and is customarily sold in recognized markets may be disposed of by
Bank in a recognized market for such collateral without providing notice of
sale.  Debtor waives any and all
requirements that the Bank sell or dispose of all or any part of the Collateral
at any particular time, regardless of whether Debtor has requested such sale or
disposition.


 


REMEDIES ARE CUMULATIVE.  No failure on the part of Bank
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by
Bank or any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any right, power or remedy.  The remedies herein provided are cumulative
and are not exclusive of any remedies provided by law, in equity, or in other
Loan Documents.


 


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INDEMNIFICATION. 
Debtor shall protect, indemnify and save harmless Bank from and against
all losses, liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys’
fees and expenses) (collectively, “Damages”) imposed upon, incurred by or
asserted against Bank on account of (i) the Loan Documents or any failure
of Debtor to comply with any of the terms or representations of this Agreement;
(ii) any claim of loss or material damage to the Collateral or any injury
or claim of injury to, or death of, any person or property that may be
occasioned by any cause whatsoever pertaining to the Collateral or the use,
occupancy or operation thereof, (iii) any failure of Debtor to comply with
any law, rule or regulation applicable to the Collateral or the use,
occupancy or operation of the Collateral (including, without limitation, the
failure to pay any taxes, fees or other charges), (iv) any Damages
whatsoever by reason of any alleged action, obligation or undertaking of Bank
relating in any way to or any matter contemplated by the Loan Documents, or (v) any
claim for brokerage fees or such other commissions relating to the Collateral
or any other Obligations; provided that such indemnity shall be effective only
to the extent of any Damages that may be sustained by Bank in excess of any net
proceeds received by it from any insurance of Debtor (other than
self-insurance) with respect to such Damages. 
Nothing contained herein shall require Debtor to indemnify Bank for any
Damages resulting from Bank’s gross negligence or its willful misconduct.  The indemnity provided for herein shall
survive payment of the Obligations and shall extend to the officers, directors,
employees and duly authorized agents of Bank. 
In the event Bank incurs any Damages arising out of or in any way
relating to the transaction contemplated by the Loan Documents (including any
of the matters referred to in this section), the amounts of such Damages shall
be added to the Obligations, shall bear interest, to the extent permitted by
law, at the interest rate borne by the Obligations from the date incurred until
paid and shall be payable on demand.


 


MISCELLANEOUS.  (i) Amendments and Waivers.  No waiver, amendment or modification of any
provision of this Security Agreement shall be valid unless in writing and
signed by Debtor and an officer of Bank. 
No waiver by Bank of any Default shall operate as a waiver of any other
Default or of the same Default on a future occasion.  (ii) Assignment.  All rights of Bank hereunder are freely
assignable, in whole or in part, and shall inure to the benefit of and be
enforceable by Bank, its successors, assigns and affiliates.  Debtor shall not assign its rights and
interest hereunder without the prior written consent of Bank, and any attempt
by Debtor to assign without Bank’s prior written consent is null and void.  Any assignment shall not release Debtor from
the Obligations.  This Security Agreement
shall be binding upon Debtor, and the heirs, personal representatives,
successors, and assigns of Debtor.  (iii) Applicable Law; Conflict Between Documents.  This Security Agreement shall be governed by
and construed under the law of the jurisdiction named in the address of the
Bank shown on the first page hereof (the “Jurisdiction”) without regard to
that Jurisdiction’s conflict of laws principles, except to the extent that the
UCC requires the application of the law of a different jurisdiction.  If any terms of this Security Agreement
conflict with the terms of any commitment letter or loan proposal, the terms of
this Security Agreement shall control.  (iv) Jurisdiction.  Debtor
irrevocably agrees to non-exclusive personal jurisdiction in the state
identified as the Jurisdiction above.  (v) Severability.  If any
provision of this Security Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective but only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Security Agreement.  (vi) Notices.  Any notices to Debtor shall be sufficiently


 


8

















 


given,
if in writing and mailed, hand
delivered or sent via telecopy (or other facsimile device), recognized
overnight courier service or certified mail to the address of Debtor shown above or such other address as provided
hereunder; and to Bank, if in writing and mailed or delivered to Wachovia Bank,
National Association, Mail Code VA7628, P. O. Box 13327, Roanoke, VA 24040 or
Wachovia Bank, National Association, Mail Code VA7628, 10 South Jefferson
Street, Roanoke, VA 24011 or such other address as Bank may specify in writing
from time to time.  Notices to Bank must
include the mail code.  In the event that
Debtor changes Debtor’s mailing address at any time prior to the date the
Obligations are paid in full, Debtor agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid.  (vii) Captions.  The
captions contained herein are inserted for convenience only and shall not
affect the meaning or interpretation of this Security Agreement or any
provision hereof.  The use of the plural
shall also mean the singular, and vice versa. 
(viii) Joint and Several
Liability.  If more than one
party has signed this Security Agreement, such parties are jointly and
severally obligated hereunder.  (ix) Binding Contract. 
Debtor by execution and Bank by acceptance of this Security Agreement,
agree that each party is bound by all terms and provisions of this Security
Agreement.  (x) Final Agreement. 
This Agreement and the other Loan Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties.  There are no unwritten oral agreements between
the parties.


 


DEFINITIONS.  Loan Documents.  The term “Loan Documents” refers to all
documents, including this Agreement, whether now or hereafter existing,
executed in connection with or related to the Obligations, and may include,
without limitation and whether executed by Debtor or others, commitment letters
that survive closing, loan agreements, promissory notes, guaranty agreements,
deposit or other similar agreements, other security agreements, letters of
credit and applications for letters of credit, security instruments, financing statements,
mortgage instruments, any renewals or modifications, whenever any of the
foregoing are executed, but does not include swap agreements (as defined in 11
U.S.C. § 101, as in effect from time to time).  Third
Party.  The term “Third Party”
means any Broker, Collateral Agent, Securities Intermediary and/or bank which
from time to time maintains a securities account, and is acting in such
capacity, for Debtor or maintains a deposit account for Debtor with respect to
any part of the Collateral.  UCC.  “UCC”
means the Uniform Commercial Code as presently and hereafter enacted in the
Jurisdiction.  Terms defined in the UCC. 
Any term used in this Agreement and in any financing statement filed in
connection herewith which is defined in the UCC and not otherwise defined in
this Agreement or any other Loan Document has the meaning given to the term in
the UCC.


 


RELEASES.  At such time as the Obligations are
repaid in full and Bank’s obligation to make Advances has expired, the
Collateral shall be released from the liens created hereby, and this Agreement
and all obligations (other than those expressly stated to survive such
termination) of Bank and Debtor hereunder shall terminate, all without delivery
of any instrument or performance of any act by any party, and all rights to the
Collateral shall revert to Debtor.  At
the request and sole expense of Debtor following any such termination, Bank
shall deliver to Debtor any Collateral held by Bank hereunder, and execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
such termination.


 


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IN WITNESS WHEREOF, Debtor, on the day and year first written above, has caused this
Security Agreement to be executed under seal.


 


 


	
  [CORPORATE SEAL]

  	
  CGI HOLDING CORPORATION, a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  MARKETSMART INTERACTIVE, INC.,
  a North Carolina corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  CHERISH, INC. (F/K/A WEBCAPADES, INC.), a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  CHECKUP MARKETING, INC., a North Carolina corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  



 


 


[Security Agreement – CGI Holding Corporation


 

















 


	
  [CORPORATE SEAL]

  	
  RIGHTSTUFF, INC., a North Carolina corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  MARKETSMART ADVERTISING, INC., a North Carolina corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  OZONA ONLINE NETWORK, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  PERSONALS PLUS, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  KOWABUNGA! MARKETING, INC., a Michigan corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  



 

















 


	
  [CORPORATE SEAL]

  	
  PRIMARYADS, INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  REAL ESTATE SCHOOL ONLINE, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  Director and Authorized Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  [CORPORATE SEAL]

  	
  VINTACOM FLORIDA, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerard M. Jacobs

  
	
   

  	
   

  	
  Name:

  	
  Gerard M. Jacobs

  
	
   

  	
   

  	
  Title:

  	
  President