Exhibit 10.2


GUARANTEE AND SECURITY AGREEMENT


made by


HC INNOVATIONS, INC.


and its Subsidiaries


in favor of


BRAHMA FINANCE (BVI) LIMITED


as Secured Party


Dated as of October 19, 2009





TABLE OF CONTENTS


	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 1 DEFINED TERMS

 	
  

 	
 4

 
	
  

 	
 1.1

 	
 Definitions

 	
  

 	
 4

 
	
  

 	
 1.2

 	
 Other Definitional Provisions

 	
  

 	
 8

 
	
 ARTICLE 2 GUARANTEE

 	
  

 	
 8

 
	
  

 	
 2.1

 	
 Guarantee

 	
  

 	
 8

 
	
  

 	
 2.2

 	
 Right of Contribution

 	
  

 	
 9

 
	
  

 	
 2.3

 	
 No Subrogation

 	
  

 	
 9

 
	
  

 	
 2.4

 	
 Amendments, Etc. With Respect to the
 Obligations

 	
  

 	
 10

 
	
  

 	
 2.5

 	
 Guarantee Absolute and Unconditional

 	
  

 	
 10

 
	
  

 	
 2.6

 	
 Reinstatement

 	
  

 	
 11

 
	
  

 	
 2.7

 	
 Payments

 	
  

 	
 11

 
	
 ARTICLE 3 GRANT OF SECURITY INTEREST

 	
  

 	
 11

 
	
  

 	
 3.1

 	
 Grant of Security Interest

 	
  

 	
 11

 
	
  

 	
 3.2

 	
 Perfection: Authorization to File Financing
 Statements

 	
  

 	
 12

 
	
 ARTICLE 4 PLEDGE OF SECURITIES

 	
  

 	
 12

 
	
  

 	
 4.1

 	
 Pledge

 	
  

 	
 12

 
	
  

 	
 4.2

 	
 Delivery of the Pledged Collateral

 	
  

 	
 13

 
	
  

 	
 4.3

 	
 Representations, Warranties and Covenants

 	
  

 	
 14

 
	
  

 	
 4.4

 	
 Certification of Limited Liability Company
 and Limited Partnership Interests

 	
  

 	
 15

 
	
  

 	
 4.5

 	
 Registration in Nominee Name; Denominations

 	
  

 	
 15

 
	
  

 	
 4.6

 	
 Voting Rights; Dividends and Interest

 	
  

 	
 15

 
	
 ARTICLE 5 REPRESENTATIONS AND WARRANTIES

 	
  

 	
 17

 
	
  

 	
 5.1

 	
 Representations in Senior Secured Note

 	
  

 	
 17

 
	
  

 	
 5.2

 	
 Title; No Other Liens

 	
  

 	
 17

 
	
  

 	
 5.3

 	
 Perfected First Priority Liens

 	
  

 	
 18

 
	
  

 	
 5.4

 	
 Chief Executive Office; Inventory and
 Equipment

 	
  

 	
 18

 
	
  

 	
 5.5

 	
 Farm Products

 	
  

 	
 18

 
	
  

 	
 5.6

 	
 Accounts

 	
  

 	
 19

 
	
 ARTICLE 6 COVENANTS

 	
  

 	
 19

 
	
  

 	
 6.1

 	
 Covenants in Senior Secured Note

 	
  

 	
 19

 
	
  

 	
 6.2

 	
 Other Actions

 	
  

 	
 19

 
	
  

 	
 6.3

 	
 Covenants Regarding Patent, Trademark and
 Copyright Collateral

 	
  

 	
 21

 
	
  

 	
 6.4

 	
 Payment of Obligations

 	
  

 	
 23

 
	
  

 	
 6.5

 	
 Maintenance of Perfected Security Interest;
 Further Documentation

 	
  

 	
 23

 
	
  

 	
 6.6

 	
 Changes in Locations, Name, etc.

 	
  

 	
 23

 
	
  

 	
 6.7

 	
 Notices

 	
  

 	
 24

 
	
  

 	
 6.8

 	
 Accounts

 	
  

 	
 24

 
	
  

 	
 6.9

 	
 Maintenance of Inventory and Equipment

 	
  

 	
 24

 
	
  

 	
 6.10

 	
 Additional Shares

 	
  

 	
 24

 
	
 ARTICLE 7 REMEDIAL PROVISIONS

 	
  

 	
 25

 
	
  

 	
 7.1

 	
 Certain Matters Relating to Accounts

 	
  

 	
 25

 
	
  

 	
 7.2

 	
 Communications with Obligors; Grantors
 Remain Liable

 	
  

 	
 25

 
	
  

 	
 7.3

 	
 Proceeds to be Turned Over To Secured Party

 	
  

 	
 26

 
	
  

 	
 7.4

 	
 Application of Proceeds

 	
  

 	
 26

 
	
  

 	
 7.5

 	
 New York UCC and Other Remedies

 	
  

 	
 26

 



2









	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 7.6

 	
 Waiver; Deficiency

 	
  

 	
 27

 
	
 ARTICLE 8 SECURED PARTY POWERS ETC.

 	
  

 	
 27

 
	
  

 	
 8.1

 	
 Secured Party’s Appointment by Grantors as
 Attorney-in-Fact, Etc.

 	
  

 	
 27

 
	
  

 	
 8.2

 	
 Execution of Financing Statements

 	
  

 	
 29

 
	
 ARTICLE 9 MISCELLANEOUS

 	
  

 	
 29

 
	
  

 	
 9.1

 	
 Amendments in Writing

 	
  

 	
 29

 
	
  

 	
 9.2

 	
 Notices

 	
  

 	
 29

 
	
  

 	
 9.3

 	
 No Waiver by Course of Conduct; Cumulative
 Remedies

 	
  

 	
 29

 
	
  

 	
 9.4

 	
 Enforcement Expenses; Indemnification

 	
  

 	
 30

 
	
  

 	
 9.5

 	
 Successors and Assigns

 	
  

 	
 30

 
	
  

 	
 9.6

 	
 Set-Off

 	
  

 	
 30

 
	
  

 	
 9.7

 	
 Counterparts

 	
  

 	
 31

 
	
  

 	
 9.8

 	
 Severability

 	
  

 	
 31

 
	
  

 	
 9.9

 	
 Section Headings

 	
  

 	
 31

 
	
  

 	
 9.10

 	
 Integration

 	
  

 	
 31

 
	
  

 	
 9.11

 	
 GOVERNING LAW

 	
  

 	
 31

 
	
  

 	
 9.12

 	
 Submission To Jurisdiction; Waivers

 	
  

 	
 31

 
	
  

 	
 9.13

 	
 Acknowledgements

 	
  

 	
 32

 
	
  

 	
 9.14

 	
 WAIVER OF JURY TRIAL

 	
  

 	
 32

 
	
  

 	
 9.15

 	
 Additional Guarantors; Additional Grantors

 	
  

 	
 32

 
	
  

 	
 9.16

 	
 Releases

 	
  

 	
 32

 






	
  

 	
  

 
	
 SCHEDULES AND ANNEXES

 
	
 ANNEX 1

 	
 Grantor
 Assumption Agreement

 
	
 SCHEDULE 1(i)

 	
 Copyrights

 
	
 SCHEDULE
 1(r)

 	
 License

 
	
 SCHEDULE
 1(w)

 	
 Patents

 
	
 SCHEDULE
 1(ff)

 	
 Trademarks

 
	
 SCHEDULE 4.1

 	
 Pledged
 Securities 

 
	
 SCHEDULE 5.4

 	
 Chief
 Executive Office and Places of Business

 
	
 SCHEDULE 6.2

 	
 Account
 Control Agreement

 


3





GUARANTEE
AND SECURITY AGREEMENT


          GUARANTEE
AND SECURITY AGREEMENT, dated as of October 19, 2009, among HC Innovations,
Inc., a Delaware corporation (the “Company”), each of the Subsidiaries
of the Company identified herein (the Company, such Subsidiaries and any other
entity that may become a party hereto pursuant to Section 9.15,
together, the “Grantors”), and Brahma Finance (BVI) Limited, a company
organized under the laws of the British Virgin Islands (the “Secured Party”).


W I T N E S S E T H:


          WHEREAS,
the Company has issued to the Secured Party a Senior Secured Note (the “Senior
Secured Note”) of even date herewith in the principal amount of $2,400,000,
the proceeds of which will be used by the Company for general corporate
purposes; 


          WHEREAS,
the Grantors are members of an affiliated group of companies engaged in related
businesses, and each Grantor will derive substantial direct and indirect
benefit from the transactions contemplated by the Senior Secured Note; and


          WHEREAS,
the Senior Secured Note contemplates that it shall be entitled to the benefits
of this Agreement.


          NOW,
THEREFORE, in consideration of the premises and to induce the Secured Party to
consummate the transactions contemplated by the Senior Secured Note, each
Grantor hereby agrees, for the benefit of the Secured Party, as follows:


ARTICLE
1



DEFINED TERMS


     1.1     Definitions


     The following terms shall have the
following meanings:


          (a)          “Accounts”
means, collectively, and in each instance however and wherever arising all
accounts receivable and other rights to payment arising out of the sale or
lease of goods and services, whether or not such right is evidenced by an
Instrument or Chattel Paper, and whether or not earned by performance, including,
without limitation, all “accounts” as such term is defined in the New York UCC
and all other obligations of any kind at any time due or owing to Grantors


          (b)          “Agreement”
means this Guarantee and Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.


          (c)          “Collateral”
has the meaning set forth in Section 3.1 hereof.


          (d)          “Collateral
Account” means any collateral account established by the Secured Party as
provided in Section 7.1.


4





          (e)          “Collateral
Party” means the pledgor, mortgagor or grantor of a security interest for
the benefit of the Secured Party under any Security Document.


          (f)          “Company”
has the meaning set forth in the preamble to this Agreement.


          (g)         “Company
Obligations” means, collectively, the unpaid principal of and interest on
the Senior Secured Note and all other obligations and liabilities of the
Company to the Secured Party, 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 Senior Secured Note, this
Agreement, the other Transaction Documents, or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, premium, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Secured Party that are required to be paid by
the Company pursuant to the terms of any of the foregoing agreements).


          (h)         “Copyright
License” means any written agreement, now or hereafter in effect. granting
any right to any third party under any copyright now or hereafter owned by any
Grantor or that such Grantor otherwise has the right to license, or granting
any right to any Grantor under any copyright now or hereafter owned by any
third party, and all rights of such Grantor under any such agreement.


          (i)          “Copyrights”
means all of the following, whether now owned or hereafter acquired by any
Grantor: (i) all copyright rights in any work subject to the copyright laws of
the United States or any other country, whether as author, assignee, transferee
or otherwise, and (ii) all registrations and applications for registration of
any such copyright in the United States or any other country, including
registrations, recordings, supplemental registrations and pending applications
for registration in the United States Copyright Office, including those listed
on Schedule 1.1(i).


          (j)          “Documents”
means, collectively, the Pledged Securities, all chattel paper, all
instruments, all investment property and all documents and all payments
thereunder and instruments and other property from time to time delivered in
respect thereof or in exchange therefor, and all bills of lading, warehouse
receipts and other documents of title and other documents, including, without
limitation, all “chattel paper”, “instruments”, “investment property” and
documents”, as such terms are defined in the New York UCC, in each instance
whether now owned or hereafter acquired by such Grantor.


          (k)         “Equipment”
means all machinery and equipment, all manufacturing, distribution, selling,
data processing and office equipment, all furniture, furnishings, appliances,
tools, tooling, molds, dies, vehicles, vessels, aircraft and all other goods of
every type and description, in each instance whether now owned or hereafter
acquired by any Grantor and wherever located, including without limitation all
“equipment”, as such term is defined in the New York UCC; provided that
equipment shall not include “fixtures” as defined in Section 9-313 of the New
York UCC.


          (l)          “Financing
Statement” means, as the context may require, any and all UCC-1 financing
statements naming the Grantors as the debtor and the Secured Party as secured
party.


5





          (m)         “Fully
Satisfied” means, with respect to the Obligations as of any date, that, on
or before such date, (i) the principal of and interest accrued to such date on
such Obligations shall have been paid in full in cash, and (ii) all fees,
expenses and other amounts then due and payable which constituted Obligations
shall have been paid in full in cash; provided, however, that, on such
date, the Secured Party shall not have made any claims in respect of
Obligations against the Company or any Guarantor under any provision of any of
the Transaction Documents that has not been cash collateralized by an amount
sufficient in the reasonable judgment of the Secured Party to secure such
claim.


          (n)          “General
Intangibles” means, collectively, and in each instance however and wherever
arising: (i) all rights, interests, choses in action, causes of action, claims
and all other intangible property of any Grantor of every kind and nature, in
each instance whether now owned or hereafter acquired by any Grantor, including,
without limitation, all corporate and other business records; (ii) all loans,
royalties, and other obligations receivable; (iii) all Trademarks, inventions,
designs, patents, patent applications, (including any applications for the
foregoing and whether or not registered) and the goodwill of any Grantor’s
business connected with and symbolized by the same; (iv) trade secrets,
computer programs, software, printouts and other computer materials, goodwill,
registrations, U.S. registered copyrights, licenses relating to trademarks and
U.S. registered copyrights, franchises, customer lists, credit files,
correspondence and advertising materials; (v) all customer and supplier
contracts, firm sale orders, rights under license and franchise agreements, and
other contracts and contract rights; (vi) all interests in partnerships, joint
ventures and other entities; (vii) all tax refunds and tax refund claims;
(viii) all right, title and interest under leases, subleases, licenses and
concessions and other agreements relating to real or personal property; (ix)
all payments due or made to any Grantor in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property by any person
or governmental authority; (x) all deposit accounts (general or special) with
any bank or other financial institution; (xi) all credits with and other claims
against carriers and shippers; (xii) all rights to indemnification; (xiii) all
reversionary interests in pension and profit sharing plans and reversionary,
beneficial and residual interest in trusts; (xiv) all proceeds of insurance of
which any Grantor is a beneficiary; (xv) all letters of credit, guaranties,
liens, security interests and other security held by or granted to any Grantor;
and (xvi) all other intangible property, whether or not similar to the
foregoing, including, without limitation, all “general intangibles,” as such
term is defined in the New York UCC.


          (o)          “Grantors”
has the meaning set forth in the preamble to this Agreement.


          (p)          “Guarantor”
means each of the Company’s Subsidiaries.


          (q)          “Guarantor
Obligations” means, with respect to any Guarantor, the collective reference
to (i) the Company Obligations and (ii) all obligations and liabilities of such
Guarantor which may arise under or in connection with this Agreement or any
other Transaction Document to which such Guarantor is a party, in each case
whether on account of guarantee obligations, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Secured Party that are required to be
paid by such Guarantor pursuant to the terms of this Agreement or any other
Transaction Document).


          (r)          “Instrument”
means a negotiable instrument or any other writing that evidences a right to
the payment of a monetary obligation, is not itself a security agreement or
lease, and is of


6





a type that in the ordinary course of business is transferred by
delivery with any necessary indorsement or assignment, including, without
limitation, all “instruments” as such term is defined in the New York UCC.


          (s)           “Inventory”
means, collectively, and in each instance, however and wherever arising, all
inventory, finished goods, raw materials, work in process and other goods,
including, without limitation, all “inventory” as such term is defined in the
New York UCC.


          (t)           “License”
means any Patent License, Trademark License, Copyright License or other license
or sublicense agreement to which any Grantor is a party, including those listed
on Schedule 1.1(r).


          (u)          “New
York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York.


          (v)          “Obligations”
mean (i) in the case of the Company, the Company Obligations, and (ii) in the
case of each Guarantor, its Guarantor Obligations.


          (w)         “Other
Property” means, collectively, all property or interests in property now
owned or hereafter acquired by any Grantor which now may be owned or hereafter
may come into the possession, custody or control of the Secured Party or any
agent or affiliate of the Secured Party in any way or for any purpose (whether
for safekeeping, deposit, custody, pledge, transmission, collection or
otherwise); and all rights and interests of any Grantor, now existing or
hereafter arising and however and wherever arising, in respect of any and all
(i) notes, drafts, letters of credit, bank accounts, stocks, bonds, and debt
and equity securities, whether or not certificated, and warrants, options, puts
and calls and other rights to acquire or otherwise relating to the same; (ii)
money; (iii) proceeds of loans; and (iv) insurance proceeds and books and
records relating to any of the Collateral.


          (x)          “Patent
License” means any written agreement, now or hereafter in effect, granting
to any third party any right to make, use or sell any invention on which a
patent, now or hereafter owned by any Grantor or that any Grantor otherwise has
the right to license, is in existence, or granting to any Grantor any right to
make, use or sell any invention on which a patent, now or hereafter owned by
any third party, is in existence, and all rights of any Grantor under any such
agreement.


          (y)          “Patents”
means all of the following now owned or hereafter acquired by any Grantor: (i)
all letters patent of the United States or the equivalent thereof in any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or the equivalent thereof in any other
country, including registrations, recordings and pending applications in the
United States Patent and Trademark Office or any similar offices in any other
country, including those listed on Schedule 1(w), and (ii) all reissues,
continuations, divisions, continuations-in-past, renewals or extensions
thereof. and the inventions disclosed or claimed therein, including the right
to make, use and/or sell the inventions disclosed or claimed therein.


          (z)          “Pledged
Collateral” has the meaning set forth in Section 4.1(f) hereof.


          (aa)        “Pledged
Debt” has the meaning set forth in Section 4.1(b) hereof.


7





          (bb)        “Pledged
Securities” has the meaning set forth in Section 4.1(a) hereof.


          (cc)         “Secured
Party” has the meaning set forth in the preamble to this Agreement.


          (dd)        “Securities
Act”: means the Securities Act of 1933, as amended.


          (ee)         “Senior
Secured Note” has the meaning set forth in the recitals to this Agreement.


          (ff)          “Trademark
License” means any written agreement, now or hereafter in effect, granting
to any third party any right to use any trademark now or hereafter owned by any
Grantor or that any Grantor otherwise has the right to license, or granting to
any Grantor any right to use any trademark now or hereafter owned by any third
party, and all rights of any Grantor under any such agreement.


          (gg)        “Trademarks”
means all of the following, whether now owned or existing or hereafter adopted
or acquired by any Grantor: (i) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names,
trade styles, trade dress, logos, other source or business identifiers, designs
and general intangibles of like nature, all registrations and recordings
thereof, and all registration and recording applications filed in connections
therewith, including without limitation registrations and registration
applications in the United States Patent and Trademark Office or any similar
offices in any state of the United States or any other country or any political
subdivision thereof, and all extensions or renewals thereof, including without
limitation those listed in Schedule 1.1(ff), (ii) all goodwill
associated therewith or symbolized thereby and (iii) all other assets, rights
and interests that uniquely reflect or embody such goodwill.


     1.2     Other Definitional Provisions.


          (a)          Unless
otherwise defined herein, terms defined in the Senior Secured Note and used
herein shall have the meanings given to them in the Senior Secured Note, and
the following terms which are defined in the New York UCC in effect on the date
hereof are used herein as so defined: Chattel Paper, Equity Interests,
Instruments and Proceeds.


          (b)          The
words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section and Schedule references
are to this Agreement unless otherwise specified.


          (c)          The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.


ARTICLE 2



GUARANTEE


     2.1     Guarantee


          (a)          Each
of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Secured Party, for the benefit of the Secured
Party and its successors, indorsees, transferees and assigns, the prompt and
complete payment and


8





performance by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Company Obligations.


          (b)          Each
of the Guarantors further agrees that its guarantee hereunder constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Secured Party to any security held for
the payment of the Obligations or to any balance of any deposit account or
credit on the books of the Secured Party in favor of the Company or any other
Person.


          (c)          Anything
herein or in any other Transaction Document to the contrary notwithstanding,
the maximum liability of each Guarantor hereunder and under the other
Transaction Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).


          (d)          Each
Guarantor agrees that the Company Obligations may at any time and from time to
time exceed the amount of the liability of such Guarantor hereunder without
impairing the guarantee contained in this ARTICLE 2 or affecting the
rights and remedies of the Secured Party hereunder.


          (e)          The
guarantee contained in this ARTICLE 2 shall remain in full force and
effect until all the Guarantor Obligations shall have been Fully Satisfied.


          (f)          No
payment made by the Company, any of the Guarantors, any other guarantor or any
other Person or received or collected by the Secured Party from the Company,
any of the Guarantors, any other guarantor or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Company Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability of
any Guarantor hereunder which shall, notwithstanding any such payment (other
than any payment made by such Guarantor in respect of the Company Obligations
or any payment received or collected from such Guarantor in respect of the
Company Obligations), remain liable for the Company Obligations up to the
maximum liability of such Guarantor hereunder until the Company Obligations are
paid in full.


     2.2     Right
of Contribution


     Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor’s right of
contribution shall be subject to the terms and conditions of Section 2.3.
The provisions of this Section 2.2 shall in no respect limit the
obligations and liabilities of any Guarantor to the Secured Party, and each
Guarantor shall remain liable to the Secured Party for the full amount
guaranteed by such Guarantor hereunder.


     2.3     No
Subrogation


     Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Secured Party, no Guarantor shall be entitled to be subrogated to any of
the rights of the Secured Party against the Company or any other Guarantor or any


9






collateral security or guarantee or right of offset held by the Secured
Party for the payment of the Company Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from the Company or
any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Secured Party on account of the Obligations are
Fully Satisfied. If any amount shall be paid to any Guarantor on account of
such subrogation rights at any time when all of the Obligations shall not have
been Fully Satisfied, such amount shall be held by such Guarantor in trust for
the Secured Party, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Secured Party
in the exact form received by such Guarantor (duly indorsed by such Guarantor
to the Secured Party, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Secured Party may determine.



     2.4          Amendments,
Etc. With Respect to the Obligations 


     Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Secured Party may be
rescinded by the Secured Party and any of the Obligations continued, and the
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, extended, accelerated, compromised, waived,
surrendered or released by the Secured Party, and the Senior Secured Note and
the other Transaction Documents and any other documents executed and delivered
in connection therewith may be amended, modified, supplemented or terminated,
in whole or in part, as the Secured Party may deem advisable from time to time,
and any collateral security, guarantee or right of offset at any time held by
the Secured Party for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. The Secured Party shall not have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Obligations or for the guarantee contained in this ARTICLE
2 or any property subject thereto. 


     2.5          Guarantee
Absolute and Unconditional 


     Each Guarantor waives any and all notice
of the creation, renewal, extension or accrual of any of the Obligations and
notice of or proof of reliance by the Secured Party upon the guarantee
contained in this ARTICLE 2 or acceptance of the guarantee contained in
this ARTICLE 2; the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this ARTICLE
2; and all dealings between the Company and any of the Guarantors, on the
one hand, and the Secured Party, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this ARTICLE 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or any of the Guarantors with respect to the Obligations.
Each Guarantor understands and agrees that the guarantee contained in this ARTICLE
2 shall be construed as a continuing, absolute and unconditional guarantee
of payment without regard to (a) the validity or enforceability of the Senior
Secured Note or any other Transaction Document, any of the Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be 


10





available to or be asserted by the Company or any other Person against
the Secured Party, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of the Company or such Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Company for the Company Obligations, or of such Guarantor under the guarantee
contained in this ARTICLE 2, in bankruptcy or in any other instance.
When making any demand hereunder or otherwise pursuing its rights and remedies
hereunder against any Guarantor, the Secured Party may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Company, any other Guarantor or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by the Secured Party
to make any such demand, to pursue such other rights or remedies or to collect
any payments from the Company, any other Guarantor or any other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of the Company, any other Guarantor or any
other Person or any such collateral security, guarantee or right of offset,
shall not relieve any Guarantor of any obligation or liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Secured Party against any Guarantor. For
the purposes hereof “demand” shall include the commencement and continuance of
any legal proceedings. 


     2.6          Reinstatement



     The guarantee contained in this ARTICLE
2 shall continue to be effective, or be reinstated, as the case may be, if
at any time payment, or any part thereof, of any of the Company Obligations is
rescinded or must otherwise be restored or returned by the Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Company or
any Guarantor or any substantial part of its property, or otherwise, all as
though such payments had not been made. 


     2.7          Payments



     Each Guarantor hereby guarantees that
payments hereunder will be paid to the Secured Party without set-off or
counterclaim in United States Dollars at such place as the Secured Party may
from time to time designate in writing to such Guarantor. 


ARTICLE 3


GRANT OF SECURITY INTEREST 


     3.1          Grant
of Security Interest


     Each Grantor hereby assigns, transfers
and grants to the Secured Party a first priority security interest (the “Security
Interest”) in all of the following property now owned or at any time
hereafter acquired by such Grantor, or in which such Grantor now has or at any
time in the future may acquire any right, title or interest, in each instance,
with all accessions and additions thereto, substitutions therefor, and
replacements, proceeds and products thereof (collectively, the “Collateral”),
as collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of such
Grantor’s Obligations: 


11









	
  

 	
  

 	
  

 
	
  

 	
  (a)

 	
 all
 Accounts; 

 
	
  

 	
  

 	
  

 
	
  

 	
  (b)

 	
 all
 Equipment; 

 
	
  

 	
  

 	
  

 
	
  

 	
  (c)

 	
 all General
 Intangibles;

 
	
  

 	
  

 	
  

 
	
  

 	
  (d)

 	
 all Pledged
 Collateral; 

 
	
  

 	
  

 	
  

 
	
  

 	
  (e)

 	
 all
 Inventory; 

 
	
  

 	
  

 	
  

 
	
  

 	
  (f)

 	
 all
 Documents; and 

 
	
  

 	
  

 	
  

 
	
  

 	
  (g)

 	
 all Other
 Property. 

 



     3.2          Perfection:
Authorization to File Financing Statements 


     Each Grantor hereby irrevocably
authorizes the Secured Party, at any time and from time to time, to file in any
filing office in any Uniform Commercial Code jurisdiction any initial financing
statements and/or “in lieu of” financing statements and/or amendments of any
financing statements filed at any time and from time to time that (a) indicate
the Collateral (i) as all assets of each Grantor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by Part 5 of Article 9
of the Uniform Commercial Code of the State or such other jurisdiction for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such
Grantor and, (ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or timber to be cut,
a sufficient description of real property to which the Collateral relates. Each
Grantor agrees to furnish any such information to the Secured Party promptly
upon request. Each Grantor also ratifies its authorization for the Secured
Party to file in any relevant jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. The Secured Party is
further authorized to file with the United States Patent and Trademark Office
or United States Copyright Office (or any successor office or any similar
office in any other country) such documents as may be necessary or advisable
for the purpose of perfecting, confirming, continuing, enforcing or protecting
the Security Interest granted by each Grantor, without the signature of any
Grantor, and naming any Grantor or the Grantors as debtors and the Secured
Party as secured party. The Security Interest is granted as security only and
shall not subject the Secured Party to or in any way alter or modify, any
obligation or liability of any Grantor with respect to or arising out of the
Collateral. Without limiting the foregoing, the Secured Party will file the
Financing Statements. 


12






ARTICLE 4


PLEDGE OF SECURITIES 


     4.1          Pledge




     As security for the payment or
performance, as the case may be,
in full of the Obligations, each Grantor hereby assigns, pledges and grants to the Secured Party, its successors and
assigns, a security interest in, all of such Grantor’s
right, title and interest in, to and under 


          (a)          the
shares of capital stock and other Equity
Interests owned by it and listed on Schedule 4.1 and any other Equity
Interests obtained in the future
by such Grantor and the certificates representing all such Equity Interests (the “Pledged Securities”);
provided that the Pledged Securities shall not include more than 65% of the issued and outstanding
voting Equity Interests of any Foreign Subsidiary,


          (b)          (i)
the debt securities listed opposite the name of such Grantor on Schedule 4.1,
(ii) any debt securities in the
future issued to such Grantor and (iii) the promissory notes and any other
instruments evidencing such debt securities (the “Pledged Debt”), 


          (c)          all
other property that may be delivered to and
held by the Secured Party pursuant to the terms of this Section 4.1,


          (d)          subject
to Section 4.6, all payments of principal or interest, dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed
in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the
securities referred to in clauses (a) and (b) above, 


          (e)          subject
to Section 4.6, all rights and privileges of such Grantor with respect
to the securities and other
property referred to in clauses (a), (b), (c) and (d) above, and 


          (f)          all Proceeds of any of the foregoing (the
items referred to in clauses (a) through (f) above being collectively referred
to as the “Pledged Collateral”).


          TO HAVE AND
TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Secured Party, its successors and assigns, forever; subject, however, to the
terms, covenants and conditions hereinafter set forth. 


     4.2          Delivery
of the Pledged Collateral 


          (a)          Each
Grantor agrees promptly to deliver or cause to be delivered to the Secured
Party any and all Pledged Collateral. 


          (b)          Each
Grantor will cause any Indebtedness for borrowed money owed to such Grantor by
any Person to be evidenced by a duly executed promissory note that is pledged
and delivered to the Secured Party pursuant to the terms hereof. 


          (c)          Upon
delivery to the Secured Party, (i) any Pledged Securities shall be accompanied
by stock powers duly executed in blank or other instruments of transfer
satisfactory to the Secured Party and by such other instruments and documents
as the Secured Party may reasonably request and (ii) all other property
comprising part of the Pledged Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Grantor and such
other instruments or documents as the Secured Party may reasonably request.
Each delivery 


13





of Pledged Collateral shall be accompanied by a schedule describing the
securities, which schedule shall be attached hereto as Schedule 4.1 and made a
part hereof; provided that failure to attach any such schedule hereto shall not
affect the validity of such pledge of such Pledged Collateral. Each schedule so
delivered shall supplement any prior schedules so delivered. 


     4.3          Representations,
Warranties and Covenants 


     The Grantors jointly and severally
represent, warrant and covenant to and with the Secured Party, that: 


          (a)          Schedule
4.1 correctly sets forth the percentage of the issued and outstanding units
of each class of the Equity Interests of the issuer thereof represented by the
Pledged Securities as of the date hereof and includes all Equity Interests,
debt securities and promissory notes legally or beneficially owned by Grantor; 


          (b)          the
Pledged Securities and Pledged Debt have been duly and validly authorized and
issued by the issuers thereof and (i) in the case of Pledged Securities, are
fully paid and nonassessable and (ii) in the case of Pledged Debt are legal,
valid and binding obligations of the issuers thereof; 


          (c)          except
for the security interests granted hereunder, each of the Grantors (i) is and will
continue to be the direct owner, beneficially and of record, of the Pledged
Collateral indicated on Schedule 4.1 as owned by such Grantor, (ii)
holds the same free and clear of all Liens, other than Liens created by this
Agreement or Permitted Liens, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security
interest in or other Lien on, the Pledged Collateral, other than Liens created
by this Agreement or Permitted Liens and (iv) will defend its title or interest
thereto or therein against any and all Liens (other than the Lien created by
this Agreement and Permitted Liens), however, arising, of all Persons
whomsoever; 


          (d)          except
for restrictions and limitations imposed by the Transaction Documents or
securities laws generally, the Pledged Collateral is and will continue to be
freely transferable and assignable, and none of the Pledged Collateral is or
will be subject to any option, right of first refusal, shareholders agreement, charter
or bylaw provisions or contractual restriction of any nature that might
prohibit, impair, delay or otherwise affect the pledge of such Pledged
Collateral hereunder, the sale or disposition thereof pursuant hereto or the
exercise by the Secured Party of rights and remedies hereunder; 


          (e)          each
of the Grantors has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated; 


          (f)          no
consent or approval of any Governmental Authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and
effect); 


14





          (g)          by
virtue of the execution and delivery by the Grantors of this Agreement, when
any Pledged Collateral is delivered to the Secured Party in accordance with
this Agreement, the Secured Party will obtain a legal, valid and perfected lien
upon and security interest in such Pledged Collateral as security for the
payment and performance of the Obligations; and 


          (h)          the
pledge effected hereby is effective to vest in the Secured Party the rights of
the Secured Party in the Pledged Collateral as set forth herein. 


     4.4          Certification
of Limited Liability Company and Limited Partnership Interests



     Each interest in any limited liability
company or limited partnership controlled by any Grantor and pledged hereunder
shall be represented by a certificate, shall be a “security” within the meaning
of Article 8 of the New York UCC and shall be governed by Article 8 of the New
York UCC. 


     4.5          Registration
in Nominee Name; Denominations 


     The Secured Party shall have the right
(in its sole and absolute discretion) to hold the Pledged Collateral in its own
name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the
name of the applicable Grantor, indorsed or assigned in blank or in favor of
the Secured Party. Each Grantor will promptly give to the Secured Party copies
of any notices or other communications received by it with respect to Pledged
Collateral registered in the name of such Grantor. The Secured Party shall at
all times have the right to exchange the certificates representing Pledged
Collateral for certificates of smaller or larger denominations for any purpose
consistent with this Agreement. 


     4.6          Voting
Rights; Dividends and Interest 


          (a)          Unless
and until an Event of Default shall have occurred and be continuing and the
Secured Party shall have notified the Grantors that their rights under this
Section 4.6 are being suspended:


	
  

 	
  

 
	
  

 	
                 (i)          
 Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers
 inuring to an owner of Pledged Collateral or any part thereof for any purpose consistent with the terms of this
 Agreement, the Senior Secured
 Note and the other Transaction Documents; provided that such rights and powers shall not be exercised in any
 manner that could materially and adversely affect
 the rights inuring to a holder of any Pledged Collateral or the rights and remedies of the Secured Party under this Agreement or the Senior Secured
 Note or any other Transaction Document or the ability of the Secured Party to exercise the same.

 
	
  

 	
  

 
	
  

 	
                 (ii)          The
 Secured Party shall execute and deliver to each Grantor, or cause to be executed and delivered to
 such Grantor, all such proxies, powers of attorney
 and other instruments as such Grantor may reasonably request for the purpose of enabling such 

 


15









	
  

 	
  

 
	
  

 	
 Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise
 pursuant to subparagraph (i) above.

 
	
  

 	
  

 
	
  

 	
                 (iii)          
 Each Grantor shall be entitled to receive and retain
 any and all dividends, interest,
 principal and other distributions paid on or distributed in respect of the Pledged Collateral to the
 extent and only to the extent that such dividends,
 interest, principal and other distributions are permitted by, and otherwise paid or distributed in
 accordance with, the terms and conditions of the Senior Secured Note, the other Transaction Documents and
 applicable laws; provided that any
 noncash dividends, interest, principal or other distributions that would constitute Pledged Securities or Pledged
 Debt, whether resulting from a subdivision,
 combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Collateral or
 received in exchange for Pledged Collateral
 or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or
 other exchange of assets to which such issuer
 may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any
 Grantor, shall not be commingled by such Grantor
 with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for
 the benefit of the Secured Party and shall
 be forthwith delivered to the Secured Party in the same form as so received (with any necessary
 indorsement).

 


          (b)          Upon
the occurrence and during the continuance of an Event of Default, after the Secured Party shall
have notified the Grantors of the suspension of
their rights under paragraph (a)(iii) of this Section 4.6, then all
rights of any Grantor to
dividends, interest, principal or other distributions that such Grantor is
authorized to receive pursuant to
paragraph (a)(iii) of this Section 4.6 shall cease, and all such rights shall thereupon become vested in the
Secured Party, which shall have the sole and exclusive
right and authority to receive and retain such dividends, interest, principal
or other distributions. All
dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of
this Section 4.6 shall be held in trust for the benefit of the Secured Party, shall be
segregated from other property or funds of such
Grantor and shall be forthwith delivered to the Secured Party upon demand in the same form as so received (with any
necessary indorsement). Any and all money and
other property paid over to or received by the Secured Party pursuant to the provisions of this paragraph (b) shall be
retained by the Secured Party in an account
to be established by the Secured Party upon receipt of such money or other property and shall be applied in
accordance with the provisions of Section 7.4. After all Events of Default have been cured or waived and the
Company has delivered to the
Secured Party a certificate to that effect, the Secured Party shall promptly repay to each Grantor (without
interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be
permitted to retain pursuant to the
terms of paragraph (a)(iii) of this Section 4.6 and that remain in such
account.


          (c)          Upon
the occurrence and during the continuance of an Event of Default, after the Secured Party shall
have notified the Grantors of the suspension of
their rights under paragraph (a)(i) of this Section 4.6, then all rights
of any Grantor to exercise the
voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 4.6,
and the obligations of the Secured Party under
paragraph (a)(ii) of this Section 4.6. shall cease, and all such rights
shall thereupon become vested in
the Secured Party, which shall have the sole and


16






exclusive right and authority to exercise such voting and consensual
rights and powers; provided,
however, that the Secured Party shall have the right from time to time
following and during the continuance of an Event
of Default to permit the Grantors to exercise such rights.


          (d)          Any
notice given by the Secured Party to the Grantors suspending their rights under paragraph (a) of this Section
4.6 (i) may be given to one or more of the Grantors
at the same or different times and (ii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph
(a)(iii) in part without suspending all such rights (as specified by the Secured Party in its sole
and absolute discretion) and without waiving
or otherwise affecting the Secured Party ‘s rights to give additional notices from time to time suspending other
rights so long as an Event of Default has occurred
and is continuing. 


ARTICLE 5


REPRESENTATIONS AND WARRANTIES


          To induce
the Secured Party to purchase the Senior Secured Note from the Company, the
Company and each Guarantor hereby represents and warrants to the Secured Party
that: 


     5.1     Representations in Senior Secured Note


     In the case of each Guarantor, the
representations and warranties of the Company set forth in the Senior Secured
Note as they relate to such Guarantor or to the Transaction Documents to which
such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Secured Party shall be entitled to rely
on each of them as if they were fully set forth herein, provided that each
reference in each such representation and warranty to the Company’s knowledge
shall, for the purposes of this Section 5.1, be deemed to be a reference to
such Guarantor’s knowledge.  


     5.2     Title; No Other Liens


          (a)          No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as are
permitted by the Senior Secured Note. 


          (b)          Each
Grantor is the legal and beneficial owner of the Collateral free and clear of
all liens, security interests or other encumbrances, except as expressly
permitted by the Senior Secured Note.


          (c)          For
the past five years, each Grantor has conducted business only under its own
corporate name and not under any trade name or other name.


          (d)          Each
Grantor has exclusive possession and control of the Inventory (other than raw
materials and work in process) and Equipment, except for (i) Inventory and
Equipment in the possession and control of such Grantor’s lessees and licensees
under written lease and license agreements entered into in the ordinary course
of business and consistent with past practice and (ii) Inventory and Equipment
in transit with common or other carriers. 


          (e)          The
Pledged Securities have been duly authorized and validly issued and are fully
paid and non-assessable. The Pledged Debt of each Grantor’s Subsidiaries (if
any), and, to the


17





best of each Grantor’s knowledge, all other Pledged Debt, has been duly
authorized, issued and delivered, and is the legal, valid, binding and
enforceable obligation of the issuers thereof.


          (f)          The
Pledged Securities indicated on Schedule 4.1 hereto constitute all of the
shares held by each Grantor of the respective issuers thereof and constitute
100% of all of the shares of stock of the respective issuers who are
Subsidiaries of such Grantor. 


          (g)          Other
than filings with the United States Patent and Trademark Office, filings and
registrations with the United States Copyright Office and filings under the
Uniform Commercial Code in effect in each relevant jurisdiction no
authorization, approval or other action by, and no notice to or filing with,
any federal, state or local governmental authority in the United States that
have not already been taken or made and which are in full force and effect, is
required (i) for the pledge by each Grantor of the Pledged Collateral or for
the grant by each Grantor of the security interest in the Collateral granted
hereby or for the execution, delivery or performance of this Agreement by such
Grantor, (ii) for the exercise by the Secured Party of the voting or other
rights provided in this Agreement with respect to the Pledged Collateral or the
remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with the disposition thereof by laws
affecting the offering and sale of securities generally), or (iii) for the
exercise by the Secured Party of any of its other rights or remedies hereunder.



     5.3     Perfected First Priority Liens


     In the case of each Grantor, the security
interests granted pursuant to this Agreement (a) upon completion of the filings
and other actions specified in Section 6.2 (which, in the case of all filings
and other documents referred to in Section 6.2, have been delivered to the
Secured Party in completed and duly executed form) will constitute valid
perfected security interests in all of the Collateral in favor of the Secured
Party as collateral security for such Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of such Grantor and any
Persons purporting to purchase any Collateral from such Grantor (except as to
the ability of the Secured Party to have the U.S. federal government make
payments directly to the Secured Party in respect of Accounts arising under
contracts with the U.S. federal government as to which no filing has been or
will be made under the Federal Assignment of Claims Act) and (b) are prior to
all other Liens on the Collateral in existence on the date hereof.  


     5.4     Chief Executive Office; Inventory and Equipment


     On the date hereof, each Grantor’s
jurisdiction of organization, the location of such Grantor’s chief executive
office and principal place of business are specified on Schedule 5.4. As of the
date of this Agreement, the locations listed on Schedule 5.4 to this Agreement
constitute all locations at which its Inventory (other than raw materials and
work in process) or Equipment is located, except for (a) Inventory or Equipment
temporarily in transit from one location listed on Schedule 5.4 to another location
listed on Schedule 5.4 or (b) Inventory or Equipment in transit with common or
other carriers to a location listed on Schedule 5.4.  


     5.5     Farm Products


     None of the Collateral constitutes, or is
the Proceeds of, Farm Products. 


18





     5.6     Accounts 


          (a)          In
the case of each Grantor, no amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Secured Party.


          (b)          In
the case of each Grantor, the amounts represented by such Grantor to the
Secured Party from time to time as owing to such Grantor in respect of the
Accounts will at such times be accurate. 


ARTICLE 6


COVENANTS


          Each
Grantor covenants and agrees with the Secured Party that, from and after the
date of this Agreement until the Obligations shall have been Fully Satisfied: 


     6.1     Covenants in Senior Secured Note


     Each Grantor shall take, or shall refrain
from taking, as the case may be, each action that is necessary to be taken or
not taken, as the case may be, so that no Event of Default is caused by the
failure to take such action or to refrain from taking such action by such
Grantor or any of its Subsidiaries. 


     6.2     Other Actions 


     In order to further insure the
attachment, perfection and priority of, and the ability of the Secured Party to
enforce, the Security Interest, each Grantor agrees, in each case at such
Grantor’s own expense, to take the following actions with respect to the
following Collateral: 


          (a)          Instruments.
If any Grantor shall at any time hold or acquire any Instruments, such Grantor
shall forthwith indorse, assign and deliver the same to the Secured Party,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Secured Party may from time to time reasonably request. 


          (b)          Deposit
Accounts. For each deposit account that any Grantor at any time opens or
maintains, such Grantor and the Secured Party shall either (i) cause the
depositary bank to agree to comply with instructions from the Secured Party to
such depositary bank directing the disposition of funds from time to time
credited to such deposit account, without further consent of such Grantor or
any other Person, pursuant to a duly executed and completed Account Control
Agreement substantially in the form of Schedule 6.2 or in such other
form proposed by such depository bank as shall be acceptable to the Secured
Party, it being understood that the Secured Party shall issue such instructions
to such depositary banks only in connection with the exercise of remedies
following the occurrence of an Event of Default, or (ii) arrange for the
Secured Party to become the customer of the depositary bank with respect to the
deposit account, with the Grantor being permitted, only with the consent of the
Secured Party, to exercise rights to withdraw funds from such deposit account.
The provisions of this paragraph shall not apply to (A) any deposit account for
which any Grantor, the depositary bank and the Secured Party have entered into
a cash collateral agreement specially negotiated among such Grantor, the
depositary 


19





bank and the Secured Party for the specific purpose set forth therein and
(B) deposit accounts for which the Secured Party is the depositary. 


          (c)          Investment
Property. Except to the extent otherwise provided in ARTICLE 4, if
any Grantor shall at any time hold or acquire any certificated securities, such
Grantor shall forthwith indorse, assign and deliver the same to the Secured
Party, accompanied by such instruments of transfer or assignment duly executed
in blank as the Secured Party may from time to time specify. If any securities
now or hereafter acquired by any Grantor are uncertificated and are issued to
such Grantor or its nominee directly by the issuer thereof, such Grantor shall
immediately notify the Secured Party thereof and, at the Secured Party’s
request and option, pursuant to an agreement in form and substance reasonably
satisfactory to the Secured Party, either (i) cause the issuer to agree to
comply with instructions from the Secured Party as to such securities, without
further consent of any Grantor or such nominee, or (ii) arrange for the Secured
Party to become the registered owner of the securities. If any securities,
whether certificated or uncertificated, or other investment property now or
hereafter acquired by any Grantor are held by such Grantor or its nominee
through a securities intermediary or commodity intermediary, such Grantor shall
immediately notify the Secured Party thereof and, at the Secured Party’s
request and option, pursuant to an agreement in form and substance reasonably
satisfactory to the Secured Party, either (i) cause such securities
intermediary or (as the case may be) commodity intermediary to agree to comply
with entitlement orders or other instructions from the Secured Party to such
securities intermediary as to such security entitlements, or (as the case may
be) to apply any value distributed on account of any commodity contract as
directed by the Secured Party to such commodity intermediary, in each case
without further consent of any Grantor or such nominee, or (ii) in the case of
financial assets or other investment property held through a securities
intermediary, arrange for the Secured Party to become the entitlement holder
with respect to such investment property, with the Grantor being permitted,
only with the consent of the Secured Party, to exercise rights to withdraw or
otherwise deal with such investment property. The Secured Party agrees with
each of the Grantors that the Secured Party shall not give any such entitlement
orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by any Grantor, unless an
Event of Default has occurred and is continuing, or, after giving effect to any
such investment and withdrawal rights would occur. The provisions of this
paragraph shall not apply to any financial assets credited to a securities
account for which the Secured Party is the securities intermediary. 


          (d)          Electronic
Chattel Paper and Transferable Records. If any Grantor at any time holds or
acquires an interest in any electronic chattel paper or any “transferable
record,” as that term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act, or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, such
Grantor shall promptly notify the Secured Party thereof and, at the request of
the Secured Party, shall take such action as the Secured Party may reasonably
request to vest in the Secured Party control under New York UCC Section 9-105
of such electronic chattel paper or control under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in
such jurisdiction, of such transferable record. The Secured Party agrees with
such Grantor that the Secured Party will arrange. pursuant to procedures
reasonably satisfactory to the Secured Party and so long as such procedures
will not result in the 


20






Secured Party’s loss of control. for the Grantor to make alterations to
the electronic chattel paper or transferable record permitted under UCC Section
9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to allow without loss of control,
unless an Event of Default has occurred and is continuing or would occur after
taking into account any action by such Grantor with respect to such electronic
chattel paper or transferable record. 


          (e)          Letter-of-Credit
Rights. If any Grantor is at any time a beneficiary under a letter of
credit now or hereafter issued in favor of such Grantor, such Grantor shall
promptly notify the Secured Party thereof and, at the request and option of the
Secured Party, such Grantor shall, pursuant to an agreement in form and
substance reasonably satisfactory to the Secured Party, either (i) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to the Secured Party of the proceeds of any drawing under the letter
of credit or (ii) arrange for the Secured Party to become the transferee
beneficiary of the letter of credit, with the Secured Party agreeing, in each
case, that the proceeds of any drawing under the letter of credit are to be
paid to the applicable Grantor unless an Event of Default has occurred or is
continuing. 


          (f)          Commercial
Tort Claims. If any Grantor shall at any time hold or acquire a commercial
tort claim in an amount reasonably estimated to exceed $100,000, such Grantor
shall promptly notify the Secured Party thereof in a writing signed by such
Grantor including a summary description of such claim and grant to the Secured
Party 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 reasonably satisfactory to the Secured Party. 


          (g)          Leasehold
Deposits. If any Grantor shall at any time hold or acquire any leasehold
deposits, such Grantor shall promptly notify the Secured Party thereof, and
shall authorize the Secured Party to file a UCC-9 financing statement in the
county where the leasehold is located and in the state of organization of such
Grantor. 


     6.3     Covenants Regarding Patent, Trademark and Copyright
Collateral. 


          (a)          Each
Grantor agrees that it will not do any act or omit to do any act (and will
exercise commercially reasonable efforts to prevent its licensees from doing
any act or omitting to do any act) whereby any Patent that is material to the
conduct of such Grantor’s business may become invalidated or dedicated to the public,
and agrees that it shall continue to mark any products covered by a Patent with
the relevant patent number as necessary and sufficient to establish and
preserve its maximum rights under applicable patent laws. 


          (b)          Each
Grantor (either itself or through its licensees or its sublicensees) will, for
each Trademark material to the conduct of such Grantor’s business, (i) maintain
such Trademark in full force free from any claim of abandonment or invalidity
for non-use, (ii) maintain the quality of products and services offered under
such Trademark, (iii) display such Trademark with notice of Federal or foreign
registration to the extent necessary and sufficient to establish and preserve
its maximum rights under applicable law and (iv) not knowingly use or knowingly
permit the use of such Trademark in violation of any third party rights. 


21





          (c)          Each
Grantor (either itself or through its licensees or sublicensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary
and sufficient to establish and preserve its maximum rights under applicable
copyright laws. 


          (d)          Each
Grantor shall notify the Secured Party promptly if it knows or has reason to
know that any Patent, Trademark or Copyright material to the conduct of its
business may become abandoned, lost or dedicated to the public, or of any
materially adverse determination or development (including the institution of,
or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, United States Copyright Office or any court
or similar office of any country) regarding such Grantor’s ownership of any
Patent, Trademark or Copyright, its right to register the same, or its right to
keep and maintain the same. 


          (e)          In
no event shall any Grantor, either itself or through any agent, employee,
licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in
any other country or any political subdivision thereof, unless it promptly
informs the Secured Party, and, upon request of the Secured Party, executes and
delivers any and all agreements, instruments, documents and papers as the
Secured Party may reasonably request to evidence the Secured Party’s security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Secured Party as its attorney-in-fact to execute and file 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. 


          (f)          Each
Grantor will take all necessary steps that are consistent with the practice in
any proceeding before the United States Patent and Trademark Office, United
States Copyright Office or any office or agency in any political subdivision of
the United States or in any other country or any political subdivision thereof,
to maintain and pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or registration)
and to maintain each issued Patent and each registration of the Trademarks and
Copyrights that is material to the conduct of any Grantor’s business, including
timely filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancellation
proceedings against third parties. 


          (g)          In
the event that any Grantor has reason to believe that any Collateral consisting
of a Patent. Trademark or Copyright material to the conduct of any Grantor’s
business has been or is about to be infringed, misappropriated or diluted by a
third party, such Grantor promptly shall notify the Secured Party and shall, if
consistent with good business judgment. promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral. 


          (h)          Upon
and during the continuance of an Event of Default, each Grantor shall use its
best efforts to obtain all requisite consents or approvals by the licensor of
each Copyright 


22





License, Patent License or Trademark License to effect the assignment
of all such Grantor’s right, title and interest thereunder to the Secured Party
or its designee. 


     6.4     Payment of Obligations


     Each Grantor will pay and discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all taxes,
assessments and governmental charges or levies imposed upon the Collateral or
in respect of income or profits therefrom as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge need be
paid if the amount or validity thereof is currently being contested in good
faith by appropriate proceedings, reserves in conformity with GAAP with respect
thereto have been provided on the books of such Grantor and such proceedings
could not reasonably be expected to result in the sale, forfeiture or loss of
any material portion of the Collateral or any interest therein. 


     6.5     Maintenance of Perfected Security Interest; Further
Documentation


          (a)          Each
Grantor shall maintain the security interest created by this Agreement as a
perfected security interest having first priority pursuant to Section 5.3
and shall defend such security interest against the claims and demands of all
Persons whomsoever. 


          (b)          Each
Grantor will furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Secured Party may reasonably
request, all in reasonable detail.


          (c)          At
any time and from time to time, upon the written request of the Secured Party,
and at the sole expense of each Grantor, such Grantor, will promptly and duly
execute and deliver, and have recorded, such further instruments and documents
and take such further actions as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby. 


     6.6     Changes in Locations, Name, etc.


          No Grantor
will, except upon 15 days prior written notice to the Secured Party and
delivery to the Secured Party of all additional executed financing statements
and other documents reasonably requested by the Secured Party to maintain the
validity, perfection and priority of the security interests provided for herein:



          (a)          change
its jurisdiction of organization, the location of its chief executive office,
or the location of its sole place of business from that referred to in Schedule
5.4 above; or 


          (b)          change
its name, identity or corporate structure to such an extent that any financing
statement filed by the Secured Party in connection with this Agreement would
become misleading; or 


23





          (c)          make
any other change(s) which might affect the perfection or priority of the
Secured Parties’ Lien in the Collateral. 


     6.7     Notices


     In the case of each Grantor, such Grantor will advise the Secured Party
promptly, in reasonable detail, of:


          (a)          any
Lien (other than security interests created hereby or Liens permitted under the
Senior Secured Note) on any of the Collateral which would adversely affect the
ability of the Secured Party to exercise any of its remedies hereunder; and


          (b)          of
the occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby. 


     6.8     Accounts 


          (a)          Each
Grantor, other than in the ordinary course of business consistent with its past
practice, will not (i) grant any extension of the time of payment of any
Account, (ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the payment
of any Account, (iv) allow any credit or discount whatsoever on any Account or
(v) amend, supplement or modify any Account in any manner that could adversely
affect the value thereof. 


     6.9     Maintenance of Inventory and Equipment


          (a)          Each
Grantor hereby covenants that is shall keep the Inventory and Equipment (other
than raw materials and work in process and Inventory sold in the ordinary
course of business) at the places specified on Schedule 5.4 hereof and
deliver written notice to the Secured Party at least 30 days prior to
establishing any other location at which it reasonably expects to maintain
Inventory (other than raw materials and work in process) or Equipment, in which
jurisdiction all action required by paragraph (b) hereof shall have been taken
with respect to all such Inventory or Equipment, as the case may be, in order
to perfect the security interest granted therein under this Agreement.


          (b)          Maintain
or cause to be maintained in good repair, working order and condition,
excepting ordinary wear and tear and damage due to casualty, all of the
Inventory or Equipment, and make or cause to be made all appropriate repairs,
renewals and replacements thereof, to the extent not obsolete and consistent
with past practice of the each Grantor, as quickly as practicable after the
occurrence of any loss or damage thereto which are necessary or desirable to
such end. Each Grantor shall promptly furnish to the Secured Party a statement
respecting any material loss or damage as a result of a single occurrence to
any of its Inventory or Equipment which has an aggregate fair market value
exceeding $25,000. 


     6.10     Additional Shares


     Each Grantor agrees that it will (a)
cause each issuer of the Pledged Securities subject to its control not to issue
any stock or other securities in addition to or in substitution for the Pledged
Securities issued by such issuer, except to such Grantor, and (b) pledge,
hereunder, immediately 


24






upon its acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each issuer of the Pledged
Securities. Each Grantor hereby authorizes the Secured Party to modify this
Agreement by amending Schedule 4.1 to include such additional shares or
other securities. 


ARTICLE 7


REMEDIAL PROVISIONS


     7.1          Certain
Matters Relating to Accounts 


          (a)          The
Secured Party shall have the right to make test verifications of the Accounts
in any manner and through any medium that it reasonably considers advisable,
and each Grantor shall furnish all such assistance and information as the
Secured Party may require in connection with such test verifications. At any
time and from time to time, upon the Secured Party’s request and at the expense
of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Secured Party to furnish to the
Secured Party reports showing reconciliations, aging and test verifications of,
and trial balances for, the Accounts. 


          (b)          The
Secured Party hereby authorizes each Grantor to collect such Grantor’s
Accounts, subject to the Secured Party’s direction and control, and the Secured
Party may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default. If required by the Secured
Party at any time after the occurrence and during the continuance of an Event
of Default, any payments of Accounts, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Secured Party if required, in a Collateral Account maintained under the sole dominion
and control of the Secured Party, subject to withdrawal by the Secured Party
for the account of the Secured Parties only as provided in Section 7.4, and
(ii) until so turned over, shall be held by such Grantor in trust for the
Secured Party, segregated from other funds of such Grantor. Each such deposit
of Proceeds of Accounts shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the
deposit. 


          (c)          At
the Secured Party’s request, each Grantor shall deliver to the Secured Party
all original and other documents evidencing, and relating to, the agreements
and transactions which gave rise to the Accounts, including, without
limitation, all original orders, invoices and shipping receipts. 


     7.2          Communications
with Obligors; Grantors Remain Liable 


          (a)          The
Secured Party in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Accounts to verify with them to the Secured Party’s
satisfaction the existence, amount and terms of any Accounts.


          (b)          Upon
the request of the Secured Party at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall notify obligors on
the Accounts that the Accounts have been assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. 


25





          (c)          Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Accounts to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with the terms
of any agreement giving rise thereto. The Secured Party shall not have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by the
Secured Party of any payment relating thereto, nor shall the Secured Party be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times. 


     7.3          Proceeds
to be Turned Over To Secured Party 


     In addition to the rights of the Secured
Party specified in Section 7.1 with respect to payments of Accounts, if
an Event of Default shall occur and be continuing, all Proceeds received by any
Grantor consisting of cash, checks and other near-cash items shall be held by
such Grantor in trust for the Secured Party, segregated from other funds of
such Grantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Secured Party in the exact form received by such Guarantor (duly
indorsed by such Grantor to the Secured Party, if required). All Proceeds
received by the Secured Party hereunder shall be held by the Secured Party in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Secured Party in a Collateral Account (or by such Grantor in
trust for the Secured Party) shall continue to be held as collateral security
for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 7.4. 


     7.4          Application
of Proceeds 


     If an Event of Default shall have
occurred and be continuing, at any time at the Secured Party’s election, the
Secured Party may apply all or any part of Proceeds held in any Collateral
Account in payment of the Obligations in such order as the Secured Party may
elect, and any part of such funds which the Secured Party elects not so to
apply and deems not required as collateral security for the Obligations shall
be paid over from time to time by the Secured Party to the Company or to
whomsoever may be lawfully entitled to receive the same. Any balance of such
Proceeds remaining after the Obligations shall have been Fully Satisfied shall
be paid over to the Company or to whomsoever may be lawfully entitled to
receive the same. 


     7.5          New
York UCC and Other Remedies 


     If an Event of Default shall occur and be
continuing, the Secured Party, on behalf of the Secured Parties, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to
the Obligations, all rights and remedies of a secured party under the New York
UCC or any other applicable law. Without limiting the generality of the
foregoing, the Secured Party, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the 


26





Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker’s board or office of the Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Secured Party shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each Grantor further agrees, at the Secured Party’s request, to
assemble the Collateral and make it available to the Secured Party at places
which the Secured Party shall reasonably select, whether at such Grantor’s
premises or elsewhere. The Secured Party shall apply the net proceeds of any
action taken by it pursuant to this Section 7.5, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys’ fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as the
Secured Party may elect, and only after such application and after the payment
by the Secured Party of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the New York UCC, need
the Secured Party account for the surplus, if any, to any Grantor. To the
extent permitted by applicable law, each Grantor waives all claims, damages and
demands it may acquire against the Secured Party arising out of the exercise by
them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. 


     7.6          Waiver;
Deficiency 


     Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Secured Party to collect such deficiency. 


ARTICLE 8


SECURED PARTY POWERS ETC.


     8.1          Secured
Party’s Appointment by Grantors as Attorney-in-Fact, Etc.



          (a)          Each
Grantor hereby irrevocably constitutes and appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Secured Party the power and right, on behalf of such Grantor,
without notice to or assent by such Grantor, to do any or all of the following:



27









	
  

 	
  

 
	
  

 	
           (i)     in
 the name of such Grantor or its own name, or otherwise, take possession of
 and indorse and collect any checks, drafts, notes, acceptances or other instruments
 for the payment of moneys due under any Account or with respect to any other
 Collateral and file any claim or take any other action or proceeding in any
 court of law or equity or otherwise deemed appropriate by the Secured Party
 for the purpose of collecting any and all such moneys due under any Account
 or with respect to any other Collateral whenever payable;

 
	
  

 	
  

 
	
  

 	
           (ii)     upon
 such Grantor’s failure to do so, pay or discharge taxes and Liens levied or
 placed on or threatened against the Collateral, effect any repairs or any
 insurance called for by the terms of this Agreement and pay all or any part
 of the premiums therefor and the costs thereof;

 
	
  

 	
  

 
	
  

 	
           (iii)     execute,
 in connection with any sale provided for in Section 7.5, any
 indorsements, assignments or other instruments of conveyance or transfer with
 respect to the Collateral; and

 
	
  

 	
  

 
	
  

 	
           (iv)     (A)
 direct any party liable for any payment under any of the Collateral to make
 payment of any and all moneys due or to become due thereunder directly to the
 Secured Party or as the Secured Party shall direct; (B) ask or demand for,
 collect, and receive payment of and receipt for, any and all moneys, claims
 and other amounts due or to become due at any time in respect of or arising
 out of any Collateral; (C) sign and indorse any invoices, freight or express
 bills, bills of lading, storage or warehouse receipts, drafts against
 debtors, assignments, verifications, notices and other documents in
 connection with any of the Collateral; (D) commence and prosecute any suits,
 actions or proceedings at law or in equity in any court of competent
 jurisdiction to collect the Collateral or any portion thereof and to enforce
 any other right in respect of any Collateral; (E) defend any suit, action or
 proceeding brought against such Guarantor with respect to any Collateral; (F)
 settle, compromise or adjust any such suit, action or proceeding and, in
 connection therewith, give such discharges or releases as the Secured Party
 may deem appropriate; and (G) generally, sell, transfer, pledge and make any
 agreement with respect to or otherwise deal with any of the Collateral as
 fully and completely as though the Secured Party were the absolute owner
 thereof for all purposes, and do, at the Secured Party’s option and such
 Grantor’s expense, at any time, or from time to time, all acts and things
 which the Secured Party deems necessary to protect, preserve or realize upon
 the Collateral and the Secured Party’s security interests therein and to
 effect the intent of this Agreement, all as fully and effectively as such
 Grantor might do. Anything in this Section 8.1(a) to the contrary
 notwithstanding, the Secured Party agrees that it will not exercise any
 rights under the power of attorney provided for in this Section 8.1(a)
 unless an Event of Default shall have occurred and be continuing.

 


          (b)          If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Secured Party, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement. The Secured Party shall use its best efforts to notify each Grantor
if the Secured Party shall itself perform or comply, or otherwise, cause
performance or compliance, with any of such Grantor’s agreements hereunder, but
failure of the Secured Party to so notify such Grantor should not affect the
obligations of such Grantor. 


28





          (c)          The
expenses of the Secured Party incurred in connection with actions undertaken as
provided in this Section 8.1, together with interest thereon at a rate per
annum equal to the rate per annum at which interest would then be accruing on
the Senior Secured Note from the date of payment by the Secured Party up to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to
the Secured Party on demand. 


          (d)          Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. All powers, authorizations and agencies contained in
this Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are released.



     8.2          Execution
of Financing Statements 


     Pursuant to Section 9-402 of the New York
UCC and any other applicable law, each Grantor authorizes the Secured Party to
file or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Secured Party reasonably
determines appropriate to perfect the security interests of the Secured Party
under this Agreement. A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction. 


ARTICLE 9


MISCELLANEOUS


     9.1          Amendments
in Writing


     None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with the Senior Secured Note. 


     9.2          Notices



     All notices, requests and demands to or
upon the Secured Party or the Company or any Guarantor hereunder shall be effected
in the manner provided for in the Senior Secured Note; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 5.4.  


     9.3          No
Waiver by Course of Conduct; Cumulative Remedies 


     The Secured Party shall not by any act
(except by a written instrument pursuant to Section 9.1), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default. No failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Party would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law. 


29





     9.4          Enforcement
Expenses; Indemnification 


          (a)          Each
Guarantor agrees to pay or reimburse the Secured Party for all its reasonable
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in ARTICLE 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Transaction Documents to which such
Guarantor is a party, including, without limitation, the reasonable fees and
disbursements of counsel to the Secured Party. 


          (b)          The
Company and each Guarantor agrees to pay, and to save the Secured Party
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.


          (c)          The
Company and each Guarantor agrees to pay, and to save the Secured Party
harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Company
would be required to do so pursuant to the Senior Secured Note.


          (d)          The
agreements in this Section 9.4 shall survive repayment of the Obligations and
all other amounts payable under the Senior Secured Note and the other
Transaction Documents.  


     9.5          Successors
and Assigns 


     This Agreement shall be binding upon the
successors and assigns of the Company and each Guarantor and shall inure to the
benefit of the Secured Party and their successors and assigns; provided, that
neither the Company nor any Guarantor may assign, transfer or delegate any of
its rights or obligations under this Agreement without the prior written
consent of the Secured Party. 


     9.6          Set-Off



     The Company and each Guarantor hereby
irrevocably authorizes the Secured Party at any time and from time to time
following the occurrence of and during the continuation of an Event of Default,
without notice to the Company or such Guarantor or any other Guarantor, any
such notice being expressly waived by the Company and each Guarantor, to
set-off and appropriate and apply any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Secured Party to or for the credit or the account of such Person,
or any part thereof in such amounts as the Secured Party may elect, against and
on account of the obligations and liabilities of such Person to the Secured
Party hereunder and claims of every nature and description of the Secured Party
against such Person, in any currency, whether arising hereunder, under the
Senior Secured Note, any other Transaction Document or otherwise, as the
Secured Party may elect, whether or not the Secured Party has made any demand
for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Secured Party shall notify such Person promptly of
any such set-off and the application made by the Secured Party of the proceeds
thereof, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Secured Party under
this Section 9.6 are in  


30





addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Secured Party may have. 


     9.7          Counterparts



     This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. 


     9.8          Severability



     Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. 


     9.9          Section
Headings 


     The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof. 


     9.10          Integration



     This Agreement and the other Transaction
Documents represent the agreement of the Company, the Guarantors and the Secured
Party with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Secured Party
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Transaction Documents. 


     9.11          GOVERNING
LAW 


     THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS RULES THEREOF. 


     9.12          Submission
To Jurisdiction; Waivers 


     The Company and each Guarantor hereby
irrevocably and unconditionally: 


          (a)          submits
for itself and its property in any legal action or proceeding relating to this
Agreement and the other Transaction Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;


          (b)          consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same; 


31





          (c)          agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Company or such Guarantor, as
the case may be, at its address referred to in Schedule 5.4 or at such other
address of which the Secured Party shall have been notified pursuant thereto; 


          (d)          agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and


          (e)          waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages. 


     9.13          Acknowledgements



     The Company and each Guarantor hereby
acknowledges that: 


          (a)          it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Transaction Documents to which it is a party;


          (b)          the
Secured Party has no fiduciary relationship with or duty to the Company or any
Guarantor arising out of or in connection with this Agreement or any of the
other Transaction Documents, and the relationship between the Company and the
Guarantors, on the one hand, and the Secured Party, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and


          (c)          no
joint venture is created hereby or by the other Transaction Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Company or
the Guarantors and the Secured Party. 


     9.14          WAIVER
OF JURY TRIAL 


     THE COMPANY AND EACH GUARANTOR AND, BY
ACCEPTANCE OF THE BENEFITS HEREOF, THE SECURED PARTY, HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN. 


     9.15          Additional
Guarantors; Additional Grantors 


          Each
Subsidiary of the Company not a party hereto as of the date hereof shall become
a Grantor for all purposes of this Agreement upon execution and delivery by
such Subsidiary of a Grantor Assumption Agreement in the form of Annex 1 hereto.  


     9.16          Releases



          (a)          At
such time as Obligations have been Fully Satisfied, 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 the Secured
Party, the Company and each Guarantor 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 the Grantors. At the request 


32





and sole expense of any Grantor following any such termination, the
Secured Party shall deliver to such Grantor any Collateral held by the Secured
Party hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.


          (b)          If
any of the Collateral shall be sold, transferred or otherwise disposed of by
any Grantor, then the Secured Party, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral.


[signature pages follow]


33






          IN
WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Security
Agreement to be duly executed and delivered as of the date first above written.



	
  

 	
  

 	
  

 	
  

 	
  

 
	
 COMPANY

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 HC Innovations, Inc.

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	 

 	
  

 	
  

 	
  

 
	
 Name: John Randazzo

 	
  

 	
  

 	
  

 
	
 Title: Interim Chief Executive Officer

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 SUBSIDIARIES:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ENHANCED CARE INITIATIVES, INC.

 	
  

 	
 ENHANCED CARE INITIATIVES OF

 
	
  

 	
  

 	
  

 	
 ALABAMA, INC.

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 NP CARE, LLC,

 	
  

 	
 NP CARE, LLC,

 
	
 a Connecticut limited liability company

 	
  

 	
 a Florida limited liability company

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 TEXAS ENHANCED CARE

 	
  

 	
 ENHANCED CARE INITIATIVES OF

 
	
 INITIATIVES, INC.

 	
  

 	
 MASSACHUSETTS, INC.

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 













	
  

 	
  

 	
  

 	
  

 	
  

 
	
 NP CARE OF NEW JERSEY, LLC

 	
  

 	
 ENHANCED CARE INITIATIVES OF

 
	
  

 	
  

 	
  

 	
 NEW YORK, INC.

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 RESIDENT CARE MEDICINE OF NEW

 	
  

 	
 NP CARE OF OHIO, LLC

 
	
 YORK, PLLC

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ENHANCED CARE INITIATIVES OF

 	
  

 	
 NP CARE OF TENNESSEE, LLC

 
	
 TENNESSEE, INC.

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	 

 	
  

 	
  

 	 

 
	
 Name: John
 Randazzo

 	
  

 	
 Name: John
 Randazzo

 
	
 Title:

 	
  

 	
 Title:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 NP CARE OF MASSACHUSETTS, LLC

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	 

 	
  

 	
  

 	
  

 
	
 Name: John
 Randazzo

 	
  

 	
  

 	
  

 
	
 Title:

 	
  

 	
  

 	
  

 













	
  

 	
  

 	
  

 
	
 SECURED PARTY:

 	
  

 
	
  

 	
  

 	
  

 
	
 BRAHMA FINANCE (BVI) LIMITED

 	
  

 
	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 
	
  

 	 

 	
  

 
	
 Name: John
 M. Clapp

 	
  

 
	
 Title:
 Attorney-In-Fact

 	
  

 



[Signature page to Guarantee and Amended and Restated Security
Agreement] 






ANNEX 1


GRANTOR ASSUMPTION AGREEMENT


          GRANTOR
ASSUMPTION AGREEMENT, dated as of ________________, 20__, made by
______________________________, a ______________ corporation (the “Additional
Grantor”), in favor of [___________], as secured party (in such capacity,
the “Secured Party”) and those individuals and entities who may become
holders of the Senior Secured Note from time to time (collectively, the “Secured
Parties”). Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Senior Secured Note. 


W I T N E S S E T H :


          WHEREAS, in
connection with the Senior Secured Note, the Company and certain of its
Subsidiaries (other than the Additional Grantor) have entered into the
Guarantee and Security Agreement, dated as of ___________, 2009 (as amended,
supplemented or otherwise modified from time to time, the “Guarantee and
Security Agreement”) in favor of the Secured Party; 


          WHEREAS,
the Additional Grantor has agreed to execute and deliver this Assumption
Agreement in order to become a party to the Guarantee and Security Agreement; 


          NOW,
THEREFORE, IT IS AGREED: 


          1.          Guarantee
and Security Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 9.15 of the
Guarantee and Security Agreement, hereby becomes a party to the Guarantee and
Security Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Exhibit A hereto is
hereby added to the information set forth in Schedules ____________ to the
Guarantee and Security Agreement. The Additional Grantor hereby represents and
warrants that each of the representations and warranties contained in ARTICLE
5 of the Guarantee and Security Agreement is true and correct on and as the
date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date. 


          2.          GOVERNING
LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.





IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.


[ADDITIONAL GRANTOR] 


	
  

 	
  

 	
  

 
	
 By: 

 	
  

 	
  

 
	
  

 	 

 	
  

 
	
 Name:

 	
  

 
	
 Title:

 	
  

 









Schedule 1(i): List of Copyrights


There are no existing Copyrights or pending Copyrights





SCHEDULE 1 (r) List of Licenses


There are no existing or pending Licenses







 

Schedule 1(w): List of Patents*



	(1)      	Method of generating a
          healthcare plan or wellness plan for a member of a group.

	 
	(2)      	Method and criterion for
          selecting patients for treatment.

	 
	(3)      	Care management method
          for managing the treatment of high risk patients.

	 
	(4)      	Care management method
          for managing the treatments of high risk mentally unstable patients.

	 






*All Patents were filed under Enhanced Care Initiatives, Inc. of Connecticut. On August 18, 2009, Enhanced Care Initiatives, Inc. of Connecticut was informed that the United States Patent and
Trademark Office has rejected all pending claims.  The Company is currently assessing what actions to take, if any, relative to such rejected applications. 








Schedule 1(ff): List of Trademarks

	
      (1)      		
MARK—SAMehr:
	
	 
	 	
a.      		
It is intended that the above identified Trademark shall be used for medical software, namely, – MEDICAL MANAGEMENT SOFTWARE FOR MONITORING AND
INTEGRATING DIFFERENT ASPECTS OF THE PATIENT’S CARE AND TREATMENT – in International Class 9 (Electrical & Scientific Apparatus).

	
	 
	
      (2)      		
MARK—Enhanced Care Initiatives Innovative/Targeted Health Solutions
	
	 
	 	
  a.      		
Medical coordination and assessment services to provided to patients by state licensed medical managers
	
	 
	
      (3)      		
MARK—Easy Care (Stylized)
	
	 
	 	
  a.      		
The Mark is used on advertising materials, advertising banners, billing statements, brochures, business cards, company e-mail accounts, company proprietary software, electronic and biometric devices furnished to
patients, electronic medical records of patients, electronic presentations published for medical personnel, envelopes, exercise protocols for patients, giveaway promotional items, namely, T-shirts, pens and mugs, letterhead stationary, medical
records for patients, notebooks, papers for medical records, prescription pads and treatment protocols for patients.
	
	 
	
      (4)      		
Enhanced Care Initiatives, Inc.,
    acquired all right, title, interest and goodwill in and to US Application
    for Registration – EASY CARE – Serial Number 76612724.
	
	 
	
      (5)      		
Enhanced Care Initiatives, Inc.,
    acquired all right, title, interest and goodwill in and to US Trademark Registration
    No. 3,075,366 – MINDFUL PATHS – Serial Number 76631406.
	
	 







Schedule 4.1: Pledged Securities


There are no existing Pledged Securities








Schedule 5.4: Chief Executive Office and Place of Business


			
	
      Alabama: 	  	 		 	
	 	 o 	
      Enhanced Care Initiatives of Alabama, Inc. 
    
	
 		 		 	
	
      Connecticut: 	  
	 	 o 	
      Enhance Care Initiatives, Inc.  	
	 	 o 	
      NP Care, LLC 	
	
 		 		 	
	
      Delaware:	 		 	
	 	 o 	
      HC Innovations, Inc. (PARENT COMPANY) 	
	
 		 		 	
	
      Florida:  	 		 	
	 	 o 	
      NP Care, LLC  
	
 		 		 	
	
      Massachusetts:  
	 	 o 	
      Enhanced Care Initiatives of MA, Inc.  
	 	 o 	
      NP Care of Massachusetts, LLC  
	
 		  	  
	
      New Jersey:  	  	  
	 	 o 	
      NP Care of New Jersey, LLC  
	
 		  	  
	
      New York:  	  	  
	 	 o 	
      Enhanced Care Initiative of New York, Inc.  
	 	 o 	
      Resident Care Medicine of New York, PLLC  
	
 		  	  
	
      Ohio:  	  	  
	 	 o 	
      NP Care of Ohio, LLC  
	
 		  	  
	
      Tennessee:  	  	  
	 	 o 	
      Enhanced Care Initiatives of Tennessee, Inc.  
	 	 o 	
      NP care of Tennessee, LLC  
	
 		  	  
	
      Texas:  	  	  
	 	 o 	
      Texas Enhanced Care Initiatives, Inc.  













SCHEDULE 6.2


ACCOUNT CONTROL AGREEMENT


ACCOUNT CONTROL AGREEMENT, dated as of _________, 20__, made by
_________________, as “Secured Party,”____________________,
as “Grantor,”___________ as “Bank” in regards to Account Number ______________________.


WITNESSETH:


          WHEREAS,
in connection with the Senior Secured Note dated ______, 2009, Grantor has
granted Secured Party a security interest in the financial assets in the
securities account identified above (the “Account”), maintained by Bank for
Grantor.  


          WHEREAS,
the parties are entering into this Agreement to provide for the control of the
Account as a means to perfect the security interest of Secured Party. 


          WHEREAS,
Bank has no responsibility to Secured Party in respect to the validity or
perfection of such security interest otherwise than to act in accordance with
the terms and conditions of this Agreement.


          NOW,
therefore, it is agreed: 


          1. The Account. Bank represents and
warrants to Secured Party that Bank maintains the Account. Bank represents and
warrants that except for the claim and interest of Grantor and Secured Party,
Bank does not know of any claim to or interest in the Account or any financial
assets credited thereto.


          2. Control by Secured Party. Bank will
comply with all written notifications it receives directing it to transfer or
redeem any financial assets in the Account (an “Entitlement Order”) (as set
forth in Exhibit A attached hereto) originated by an authorized person
of the Secured Party (an “Authorized Person
of Secured Party,” as set forth in Exhibit B attached hereto) without
further consent by Grantor.  


          3. Grantor’s Rights in Account. Until Bank
receives an Entitlement Order from an Authorized Person of Secured Party, Bank
may accept and comply with any Entitlement Order signed by an authorized person of the Grantor (an “Authorized Person of
Grantor,” as set forth in Exhibit C attached hereto). If an
Authorized Person of Secured Party gives Bank an entitlement order notifying
Bank that Secured Party will exercise exclusive control over the Account, Bank
will cease complying with entitlement orders or other directions concerning the
Account originated by an Authorized Person of Grantor. All instructions
required under this Agreement will be delivered to Bank in writing, in either
original or facsimile form, executed by an Authorized Person. In its capacity
as Bank, Bank will accept all instructions and documents complying with the
above under the indemnities provided in this Agreement, and reserves the right
to refuse to accept any instructions or documents which fail, or appear to
fail, to comply.  





Further to
this procedure, Bank reserves the right to telephone an Authorized Person to
confirm the details of such instructions or documents if they are not already
on file with Bank as standing instructions. The parties agree that the above
constitutes a commercially reasonable security procedure. Entitlement orders
received after 12:00 p.m. E.S.T. will be treated as if received on the next
succeeding business day in New York. 


          4. Investments: Assets in the Account may
be invested only in investments specifically directed to the Bank in writing.
Neither Bank nor any of its affiliates
assume any duty or liability for monitoring the investment rating on any
investments hereunder. 


          5. Priority of Secured Party’s Security Interest.
Bank subordinates in favor of Secured Party any interest lien or right of
setoff it may have, now or in the future, against the Account or financial
assets in the Account (except that Bank may set off all amounts due to it in
respect of customary fees and expenses for the routine maintenance and
operation of the Account).


          6. Statements, Confirmations and Notices of Adverse
Claims. Bank will send copies of all statements and confirmations
for the Account simultaneously to Grantor and Secured Party. Bank will use
reasonable efforts promptly to notify Secured Party and Grantor if any other
person claims that it has a property interest in the Account or any financial
asset in the Account.


          7. Bank’s Responsibility.


          (a)          Bank
will not be liable to Secured Party for complying with entitlement orders from
an Authorized Person of Grantor that are received by Bank before Bank receives
and has a reasonable opportunity to act on an entitlement order from an
Authorized Person of Secured Party.


          (b)          If
at any time Bank is served with any judicial or administrative order, judgment,
decree, writ or other form of judicial or administrative process which in any
way affects the Account (including but not limited to orders of attachment or
garnishment or other forms of levies or injunctions or stays relating to the
transfer of the Account or any financial asset in the Account), Bank is
authorized to comply therewith in any manner it or legal counsel of its own
choosing deems appropriate; and if Bank complies with any such judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process, Bank will not be liable to any of the parties hereto or
to any other person or entity even though such order, judgment, decree, writ or
process may be subsequently modified or vacated or otherwise determined to have
been without legal force or effect. 


          (c)          Bank
will be entitled to conclusively rely upon any order, judgment, certification,
demand, notice, instrument or other writing delivered to it hereunder without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity or the service thereof. Bank may
act in reliance upon any instrument or signature believed by it to be genuine
and may assume that any person purporting to give receipt or advice to make any






statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so. 


          (d)          Bank
will not be responsible in any respect for the form, execution, validity, value
or genuineness of documents or securities deposited hereunder, or for any
description therein, or for the identity, authority or rights of persons
executing or delivering or purporting to execute or deliver any such document,
security or endorsement. Bank will not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder. 


          (e)          This
Agreement does not create any obligation of Bank except for those expressly set
forth in this Agreement. In particular, Bank need not investigate whether
Secured Party is entitled under Secured Party’s agreement with Grantor to give
an entitlement order.


          (f)          Bank
will maintain the Account and financial assets in the same manner as it
maintains accounts and assets for its custodial customers. During the term of
this Agreement, Bank will remain a securities intermediary within the meaning
of such term in Section 8- 102(a)(14) of Article 8 of the Uniform Commercial
Code of the State of New York as in effect from time to time (the “UCC”) and 31
C.F.R. 357.2.


          8. Indemnity


          (a)          The
duties, responsibilities and obligations of Bank will be limited to those
expressly set forth herein and no duties, responsibilities or obligations will
be inferred or implied. Bank will not be subject to, nor required to comply
with, any other agreement to which Grantor or Secured Party is a party, even
though reference thereto may be made herein, or to comply with any direction or
instruction (other than those contained herein or delivered in accordance with
this Agreement) from Grantor or an entity acting on its behalf. 


          (b)          Grantor
will be liable for and will reimburse and indemnify and hold Bank harmless from
and against any and all claims, losses, actions, liabilities, costs, damages or
expenses (including reasonable attorneys’ fees and expenses) (collectively
“Losses”) arising from or in connection with its administration of this
Agreement, provided, however, that nothing contained herein will require Bank
to be indemnified for Losses caused by its own gross negligence or own willful
misconduct. 


          (c)          Bank
may consult with legal counsel of its own choosing at the expense of the
Grantor and Secured Party as to any matter relating to this Agreement, and Bank
will not incur any liability in acting in good faith in accordance with any
advice from such counsel. 


          (d)          Bank
will not incur any liability for not performing any act or fulfilling any duty,
obligation or responsibility hereunder by reason of any occurrence beyond the
control of Bank including, but not limited to any act or provision of any
present or future law or regulation or governmental authority, any act of God
or war or terrorism, or the unavailability of the Federal Reserve Bank wire or
facsimile or other wire or communication facility.





          9. Termination; Survival. Secured Party may
terminate this Agreement by notice to Bank and Grantor. Upon receipt of a
notice of termination, Bank will cease accepting any entitlement order from
Grantor, and any previous entitlement order delivered by Grantor will be deemed
to be of no further force and effect. If Secured Party notifies Bank that its
security interest in the Account or all of the financial assets therein has
terminated, this Agreement will immediately terminate. Section 5, “Compensation”,
Section 6, “Bank’s
Responsibility” and Section 7, “Indemnity,” will survive termination of
this Agreement.


          10. Governing Law. Regardless of any
provision in any other agreement, for purposes of the UCC, New York shall be
deemed to be the “securities intermediary’s jurisdiction”, and this Agreement
and the Account (including all interests, duties and obligations with respect
thereto, as well as the entitlement orders related thereto) will be governed by
the laws of the State of New York. Bank and Grantor may not change the law
governing the Account without Secured Party’s express written agreement. Each
of the Grantor and Secured Party hereby submits to the personal jurisdiction
of, and each agrees that all proceedings relating hereto will be brought in,
courts located within the City and State of New York. 


          11. Entire Agreement. This Agreement is the
entire agreement and supersedes any prior agreements and contemporaneous oral
agreements, of the parties concerning its subject matter.


          12. Amendments. No amendment of, or waiver
of a right under, this Agreement will be binding unless it is in writing and
signed by each of the parties hereto.


          13. Severability. To the extent a provision
of this Agreement is unenforceable, this Agreement will be construed as if the
unenforceable provision were omitted.


          14. Financial Assets. The Account and all
property (including cash) credited to the Account will be treated as financial
assets under the Article 8 of the UCC.


          15. Successors and Assigns. A successor to
or assignee of Secured Party’s rights and obligations under the agreement
between Secured Party and Grantor will succeed to Secured Party’s rights and
obligations under this Agreement.


          16. Notices A notice or other communication
to a party under this Agreement will be in writing (except that entitlement
orders will be given in accordance with procedures as Bank may reasonably
specify), will be sent to the party’s address set forth below or to such other
address as the party may notify the other parties and will be effective on
receipt.


          17. Miscellaneous. 


          (a)          IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government
fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information
that identifies each person who opens an account. When an account is opened,
Bank will ask for information that will allow it to identify relevant parties.





          (b)          Each
of Grantor and Secured Party hereby represents and warrants (a) that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes its legal, valid and binding obligation and (b) that the execution,
delivery and performance of this Agreement by it does not and will not violate
any applicable law or regulation.


          18. Counterparts. This Agreement may be
executed in any number of counterparts, all of which will constitute one and
the same instrument, and any party hereto may execute this Agreement by signing
and delivering one or more counterparts.






SIGNATURES


[SECURED PARTY]


	
  

 	
  

 
	
 BY:  

 	
 

 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
 Address:

 



[GRANTOR]


	
  

 	
  

 
	
 BY:  

 	
 

 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
 Address:

 



[BANK] 


	
  

 	
  

 
	
 BY:  

 	
 

 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
 Address:

 









FORM OF ENTITLEMENT ORDER


VIA FACSIMILE:
212-657-2762


[Depositary
Bank]


Pursuant to
the Account Control Agreement dated [ ], among [specify parties], and Citibank, N.A., we hereby instruct you of the following:


	
  

 	
  

 	
  

 
	
  

 	
 RECEIVE/DELIVER

 
	
  

 	
  

 
	
  

 	
  

 	
 ACCOUNT
 NUMBER:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 USD:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 VALUE DATE:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 WIRE TO:

 






	
  

 	
  

 	
  

 
	
  

 	
 [                         ]

 
	
  

 	
 as [Secured
 Party][Grantor]

 
	
  

 	
 
By: 

 	
  

 
	
  

 	
  

 	
 


 
	
  

 	
    Name:

 
	
  

 	
    Title:

 









EXHIBIT
B


	
  

 	
  

 
	
 Authorized Person of Secured
Party 

 	
 Authorized Person of Grantor