Prepared by MERRILL CORPORATION









	

  EXHIBIT 10.47


  
	

   


  
	

   


  
	

   


  
	

  TABLE OF CONTENTS


  
	

   


  
	

  ARTICLE I SECURITY

  INTERESTS


  
	

   


  
	

  1.1  GRANT OF SECURITY INTERESTS


  
	

  1.2  POWER OF ATTORNEY


  
	

   


  
	

  ARTICLE

  II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS


  
	

   


  
	

  2.1  CHIEF EXECUTIVE OFFICE/INVENTORY AND

  EQUIPMENT LOCATIONS


  
	

  2.2  STATE OF INCORPORATION


  
	

  2.3  TRADE NAMES; CHANGE OF NAME


  
	

   


  
	

  ARTICLE

  III PROVISIONS CONCERNING ALL COLLATERAL


  
	

   


  
	

  3.1  PROTECTION OF ADMINISTRATIVE AGENT’S

  SECURITY


  
	

  3.2  WAREHOUSE RECEIPTS NON-NEGOTIABLE;

  THIRD-PARTY ACKNOWLEDGMENTS


  
	

  3.3  FURTHER ACTIONS


  
	

  3.4  FINANCING STATEMENTS


  
	

   


  
	

  ARTICLE IV REMEDIES UPON OCCURRENCE OF EVENT

  OF DEFAULT


  
	

   


  
	

  4.1  REMEDIES; OBTAINING THE COLLATERAL UPON

  DEFAULT


  
	

  4.2  REMEDIES; DISPOSITION OF THE COLLATERAL


  
	

  4.3  WAIVER OF CLAIMS


  
	

  4.4  APPLICATION OF PROCEEDS


  
	

  4.5  REMEDIES CUMULATIVE


  
	

  4.6  DISCONTINUANCE OF PROCEEDINGS


  
	

   


  
	

  ARTICLE V INDEMNITY


  
	

   


  
	

  5.1  INDEMNITY


  
	

  5.2  INDEMNITY OBLIGATIONS SECURED BY

  COLLATERAL; SURVIVAL


  
	

   


  
	

  ARTICLE VI DEFINITIONS


  
	

   


  
	

  ARTICLE VII

  MISCELLANEOUS


  
	

   


  
	

  7.1  NOTICES


  
	

  7.2  WAIVER; AMENDMENT


  
	

  7.3  OBLIGATIONS ABSOLUTE


  
	

  7.4  SUCCESSORS AND ASSIGNS


  
	

  7.5  HEADINGS DESCRIPTIVE


  
	

  7.6  SEVERABILITY


  
	

  7.7  GOVERNING LAW


  
	

  7.8  BORROWER’S DUTIES


  
	

  7.9  TERMINATION; RELEASE


  
	

  7.10  COUNTERPARTS


  
	

  7.11  THE ADMINISTRATIVE AGENT


  
	

   


  
	

  ARTICLE VIII


  
	

   


  












ANNEX A             Schedule

of Chief Executive Offices




ANNEX B              Schedule of Inventory and

Equipment Locations




ANNEX C              Schedule of Trade, Fictitious and

Other Names




 




















SECURITY

AGREEMENT




THIS

SECURITY AGREEMENT, dated as of October 12, 2001, is between BMC

INDUSTRIES, INC., a Minnesota corporation (“Borrower”), BANKERS TRUST

COMPANY, as administrative agent (the “Administrative Agent”) and U.S.

BANK NATIONAL ASSOCIATION (“US Bank”) for the benefit of (i) the Lenders

and the Agent under the Credit Agreement hereinafter referred to (such Lenders

and the Agent are hereinafter called the “Bank Creditors”), (ii) if one

or more Lenders (or any Affiliate thereof) enter into one or more (A) interest

rate protection agreements (including, without limitation, interest rate swaps,

caps, floors, collars and similar agreements), (B) foreign exchange

contracts, currency swap agreements or other similar agreements or arrangements

designed to protect against the fluctuations in currency values and/or

(C) other types of hedging agreements from time to time (collectively, the

“Interest Rate Protection or Other Hedging Agreements”) with, or

guaranteed by, Borrower, any such Lender or Lenders or any Affiliate of such

Lender or Lenders (even if the respective Lender subsequently ceases to be a

Lender under the Credit Agreement for any reason) so long as any such Lender or

Affiliate participates in the extension of such Interest Rate Protection or

Other Hedging Agreements and their subsequent assigns, if any (collectively,

the “Other Creditors”) and (iii) US Bank as lender under the US Bank

Letter of Credit Facility (as defined below) (the “LC Creditor” and,

together with the Other Creditors and the Bank Creditors, hereinafter called

the “Secured Creditors”).  Except

as otherwise defined herein, terms used herein and defined in the Credit

Agreement (as hereinafter defined) shall be used herein as so defined.




W I T N E S S E T H

:




WHEREAS,

Borrower, the financial institutions (the “Lenders”) from time to time

party thereto and Bankers Trust Company, as Administrative Agent (together with

any successor agent, the “Agent”), have entered into an Amended and

Restated Credit Agreement, dated as of June 25, 1998, providing for the making

of Loans and the issuance of, and participation in, Letters of Credit as

contemplated therein (as used herein, the term “Credit Agreement” means

the Credit Agreement described above in this paragraph, as in effect on the

date hereof and as amended by that certain Second Amendment and Restatement

Agreement dated as of the date hereof, as the same may be amended, modified,

extended, renewed, replaced, restated or supplemented from time to time, and

including any agreement extending the maturity of or restructuring of all or

any portion of the Indebtedness under such agreement or any successor

agreements);




WHEREAS,

Borrower may at any time and from time to time enter into, or guarantee, one or

more Interest Rate Protection or Other Hedging Agreements with one or more

Other Creditors;




WHEREAS,

it is a condition precedent to each of the above-described extensions of credit

that Borrower shall have executed and delivered this Agreement; and











WHEREAS,

Borrower desires to enter into this Agreement in order to satisfy the condition

described in the preceding paragraph;




NOW,

THEREFORE, in consideration of the extensions of credit to be made to Borrower

and other benefits accruing to Borrower, the receipt and sufficiency of which

are hereby acknowledged, Borrower hereby makes the following representations

and warranties to the Administrative Agent for the benefit of the Secured

Creditors and hereby covenants and agrees with the Administrative Agent for the

benefit of the Secured Creditors as follows:




ARTICLE

I


SECURITY

INTERESTS




 




1.1           Grant

of Security Interests. 

(a)  As security for the prompt and complete payment and

performance when due of all of the Obligations, Borrower does hereby pledge and

grant to the Administrative Agent for the benefit of the Secured Creditors, a

continuing security interest of first priority (subject to Liens evidenced by

Permitted Filings and other Permitted Liens) in, all of the right, title and

interest of Borrower in, to and under all of the following, whether now

existing or hereafter from time to time acquired:  (i) each and every Account, (ii) all Contracts, together with all

Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment,

(v) all other Goods, General Intangibles, Chattel Paper, Documents, Investment

Property and Instruments, and (vi) all Proceeds and products of any and all of

the foregoing (all of the above, collectively, the “Collateral”).




 




(b)  The

security interests of the Administrative Agent under this Agreement extend to

all Collateral of the kind which is the subject of this Agreement which

Borrower may acquire at any time during the continuation of this Agreement.




1.2           Power

of Attorney.  Borrower hereby constitutes and appoints the

Administrative Agent its true and lawful attorney, with full power after the

occurrence of and during the continuance of an Event of Default (in the name of

Borrower or otherwise), in the Administrative Agent’s reasonable discretion, to

take any action and to execute any instrument required by this Agreement if

Borrower has failed to do so after demand by the Administrative Agent.




 




ARTICLE

II


GENERAL

REPRESENTATIONS, WARRANTIES AND COVENANTS




 




Borrower

represents, warrants and covenants, which representations, warranties and

covenants shall survive execution and delivery of this Agreement, as follows:




2.1           Chief Executive

Office/Inventory and Equipment Locations.  The chief executive office of Borrower is

located at the address indicated on Annex A hereto.  All Inventory and Equipment held on the date

hereof by Borrower is located at one of the locations shown on Annex B

hereto (other than (i) immaterial portions of Inventory or Equipment or (ii)

Equipment out for repair).    Prior to

January 1, 2002, the Borrower shall not (x) move its chief executive office to

any of the States of Mississippi, Alabama or Florida, or (y) move any Inventory

or Equipment to any of the States of Mississippi, Alabama or Florida until (i)

it shall have given to the Administrative Agent not less than 30 days’ prior

written notice of its intention to do so, (ii) with respect to such move, it

shall have taken all action, reasonably satisfactory to the Administrative

Agent, to maintain the security interest of the Administrative Agent in the

Collateral intended to be granted and perfected under the Uniform Commercial

Code hereby at all times fully perfected and in full force and effect, (iii) at

the reasonable request of the Administrative Agent, it shall have furnished a

customary opinion of counsel reasonably acceptable to the Administrative Agent

to the effect that all financing or continuation statements and amendments or

supplements thereto have been filed in the appropriate filing office or

offices, and all other actions (including, without limitation, the payment of

all filing fees and taxes, if any, payable in connection with such filings)

have been taken, in order to perfect (and maintain the perfection and priority

of) the security interest granted hereby and (iv) the Administrative Agent

shall have received evidence that all other actions (including, without

limitation, the payment of all filing fees and taxes, if any, payable in

connection with such filings) have been taken, in order to perfect (and

maintain the perfection and priority of) the security interest granted hereby.











 




2.2           State of Incorporation.  The state of incorporation of Borrower is

indicated on Annex A hereto. 

Borrower will not change its state of incorporation except as in

accordance with the last sentence of this Section 2.2.  Borrower shall not establish a new state of

incorporation until (i) it shall have given to the Administrative Agent not

less than 30 days’ prior written notice of its intention to do so, clearly

describing such new state of incorporation and providing such other information

in connection therewith as the Administrative Agent may reasonably request,

(ii) with respect to such new state of incorporation, it shall have taken all

action, reasonably satisfactory to the Administrative Agent, to maintain the

security interest of the Administrative Agent in the Collateral intended to be

granted and perfected under the Uniform Commerical Code hereby at all times

fully perfected and in full force and effect, (iii) at the reasonable request

of the Administrative Agent, it shall have furnished a customary opinion of counsel

reasonably acceptable to the Administrative Agent to the effect that all

financing or continuation statements and amendments or supplements thereto have

been filed in the appropriate filing office or offices, and all other actions

(including, without limitation, the payment of all filing fees and taxes, if

any, payable in connection with such filings) have been taken, in order to

perfect (and maintain the perfection and priority of) the security interest

granted hereby and (iv) the Administrative Agent shall have received evidence

that all other actions (including, without limitation, the payment of all

filing fees and taxes, if any, payable in connection with such filings have

been taken, in order to perfect (and maintain the perfection and priority of)

the security interest granted hereby.




 




2.3           Trade Names; Change of

Name.  Borrower does not have and has not operated

in any jurisdiction under, or in the preceding 12 months has not had nor has

operated in any jurisdiction under, any trade names, fictitious names or other

names (including, without limitation, any names of divisions or operations)

except its legal name and such other trade, fictitious or other names as are

listed on Annex C hereto. 

The corporation identification number or other applicable formation

identification number shall be set forth across from the exact legal name of

Borrower identified in Annex C. 

Borrower shall not change its legal name or assume or operate in any

jurisdiction under any trade, fictitious or other name in any manner which

might make any financing statement or continuation statement filed in

connection therewith seriously misleading except those names listed on Annex

C hereto and new names (including, without limitation, any names of

divisions or operations) established in accordance with the last sentence of

this Section 2.3.  Borrower shall

not assume or operate in any jurisdiction under any new trade, fictitious or

other name that would make any financing statement or continuation statement

filed in connection therewith, seriously misleading until (i) it shall have

given to the Administrative Agent not less than 30 days’ prior written notice

of its intention so to do, clearly describing such new name and the

jurisdictions in which such new name shall be used and providing such other

information in connection therewith as the Administrative Agent may reasonably

request, (ii) with respect to such new name, it shall have taken all action to

maintain the security interest of the Administrative Agent in the Collateral intended

to be granted hereby at all times fully perfected and in full force and effect,

(iii) at the reasonable request of the Administrative Agent, it shall have

furnished a customary opinion of counsel reasonablyacceptable to the

Administrative Agent to the effect that all financing or continuation

statements and amendments or supplements thereto have been filed in the

appropriate filing office or offices, and (iv) the Administrative Agent shall

have received evidence that all other actions (including, without limitation,

the payment of all filing fees and taxes, if any, payable in connection with

such filings) have been taken, in order to perfect (and maintain the perfection

and priority of) the security interest granted hereby.




 











 




ARTICLE

III


PROVISIONS

CONCERNING ALL COLLATERAL




 




3.1           Protection of

Administrative Agent’s Security.  Borrower will do nothing to impair the

rights of the Administrative Agent in the Collateral other than dispositions,

the creation of Liens and other encumbrances and other actions permitted

hereunder and under the Credit Agreement and other Loan Documents.




 




3.2           Warehouse Receipts

Non-Negotiable; Third-Party Acknowledgments.  Borrower agrees that if any warehouse

receipt or receipt in the nature of a warehouse receipt is issued with respect

to any of its Inventory, such warehouse receipt or receipt in the nature

thereof shall not be “negotiable” (as such term is used in Section 7-104

of the Uniform Commercial Code as in effect in any relevant jurisdiction or

under other relevant law).  Where

Collateral with a fair market value of greater than $100,000 is in the

possession of a third party, Borrower will join with the Administrative Agent

in notifying the third party of the Administrative Agent’s security interest

and obtaining an acknowledgment from the third party that it is holding the

Collateral for the benefit of the Administrative Agent.




 




3.3           Further Actions.  Borrower will, at its own expense, make,

execute, endorse, acknowledge, file and/or deliver to the Administrative Agent from

time to time such lists, descriptions and designations of its Collateral,

warehouse receipts, receipts in the nature of warehouse receipts, bills of

lading, documents of title, vouchers, invoices, schedules, confirmatory

assignments, conveyances, financing statements, transfer endorsements, powers

of attorney, certificates, reports and other assurances or instruments and take

such further steps relating to the Collateral and other property or rights

covered by the security interest hereby granted, which the Administrative Agent

deems reasonably appropriate or advisable to perfect, preserve or protect its

security interest in the Collateral.  Notwithstanding any other provision of this

Agreement, so long as no Unmatured Event of Default or Event of Default shall

have occurred and be continuing, the only obligation of the Borrower arising

hereunder in connection with the perfection of the security interests granted

in the Collateral listed in Sections 1.1(a)(ii) and (v) above (and Section

1.1(a)(vi), but solely to the extent it relates to Sections 1.1(a)(ii)

and (v)) shall be to deliver financing statements pursuant to Section

3.4 below.











 




3.4           Financing Statements.  Borrower agrees to deliver to the

Administrative Agent such financing statements, in form reasonably acceptable

to the Administrative Agent, as the Administrative Agent may from time to time

reasonably request or as are reasonably 

necessary (or desirable in the reasonable opinion of the Administrative

Agent) to establish and maintain a valid, enforceable, first priority perfected

security interest (subject only to Permitted Liens) in the Collateral as

provided herein and the other rights and security contemplated hereby all in

accordance with the Uniform Commercial Code as enacted in any and all relevant

jurisdictions or any other relevant law. 

Borrower will pay any applicable filing fees, recordation taxes and

related expenses relating to its Collateral. 

Borrower hereby authorizes the Administrative Agent to file any such

Uniform Commerical Code financing statements without the signature of Borrower

where permitted by law.




 




ARTICLE

IV


REMEDIES

UPON OCCURRENCE OF EVENT OF DEFAULT




 




4.1           Remedies; Obtaining the

Collateral Upon Default.  Borrower agrees that, if any Event of

Default shall have occurred and be continuing, then and in every such case,

subject to any mandatory requirements of applicable law then in effect, the

Administrative Agent, in addition to any rights now or hereafter existing under

applicable law, shall have all rights as a secured creditor under the Uniform

Commercial Code in all relevant jurisdictions and may:




 




(a)           personally, or by agents or

attorneys, immediately take possession of the Collateral or any part thereof,

from Borrower or any other Person who then has possession of any part thereof

with or without notice or process of law, and for that purpose may enter upon

Borrower’s premises where any of the Collateral is located and remove the same

and use in connection with such removal any and all services, supplies, aids

and other facilities of Borrower; and




(b)           instruct the obligor or obligors on

any agreement, instrument or other obligation (including, without limitation,

the Accounts and the Contracts) constituting the Collateral to make any payment

required by the terms of such agreement, instrument or other obligation

directly to the Administrative Agent and may exercise any and all remedies of

Borrower in respect of such Collateral; and




(c)           sell, assign or otherwise liquidate,

or direct Borrower to sell, assign or otherwise liquidate, any or all of the

Collateral or any part thereof, and take possession of the proceeds of any such

sale or liquidation; and




(d)           take possession of the Collateral or

any part thereof, by directing Borrower in writing to deliver the same to the Administrative

Agent at any place or places reasonably designated by the Administrative Agent,

in which event Borrower shall at its own expense:





(i)            forthwith cause the same to be moved

to the place or places so designated by the Administrative Agent and there

delivered to the Administrative Agent, and




(ii)           store and keep any Collateral so

delivered to the Administrative Agent at such place or places pending further

action by the Administrative Agent as provided in Section 6.2 hereof,

and




(iii)          while the Collateral shall be so

stored and kept, provide such guards and maintenance services as shall be

necessary to protect the same and to preserve and maintain them in good

condition; and




it

being understood that Borrower’s obligation so to deliver the Collateral is of

the essence of this Agreement and that, accordingly, upon application to a

court of equity having jurisdiction, the Administrative Agent shall be entitled

to seek a decree requiring specific performance by Borrower of said obligation.




4.2           Remedies; Disposition of

the Collateral.  If an Event of Default shall have occurred

and be continuing, then any Collateral repossessed by the Administrative Agent

under or pursuant to Section 4.1 hereof and any other Collateral whether

or not so repossessed by the Administrative Agent, may be sold, assigned,

leased or otherwise disposed of under one or more contracts or as an entirety,

and without the necessity of gathering at the place of sale the property to be

sold, and in general in such manner, at such time or times, at such place or

places and on such terms as the Administrative Agent may, in compliance with

any mandatory requirements of applicable law, determine to be commercially

reasonable.  Any of the Collateral may

be so sold, leased or otherwise disposed of, in the condition in which the same

existed when taken by the Administrative Agent or after any overhaul or repair

at the expense of Borrower which the Administrative Agent shall determine to be

commercially reasonable.  Any such

disposition which shall be a private sale or other private proceedings

permitted by such requirements shall be made upon not less than 10 days’

written notice to Borrower specifying the time at which such disposition is to

be made and the intended sale price or other consideration therefor, and shall

be subject, for the 10 days after the giving of such notice, to the right of

Borrower or any nominee of Borrower to acquire the Collateral involved at a

price or for such other consideration at least equal to the intended sale price

or other consideration so specified. 

Any such disposition which shall be a public sale permitted by such

requirements shall be made upon not less than 10 days’ written notice to

Borrower specifying the time and place of such sale and, in the absence of applicable

requirements of law, shall be by public auction (which may, at the

Administrative Agent’s option, be subject to reserve), after publication of

notice of such auction not less than 10 days prior thereto in two newspapers in

general circulation in the City of New York or in such other locations as may

be necessary in order for the sale to be “commercially reasonable” (as such

term is used in Article 9 Part V of the New York Uniform Commercial Code).  To the extent permitted by any such

requirement of law, the Administrative Agent and the Secured Creditors may bid

for and become the purchaser of the Collateral or any item thereof, offered for

sale in accordance with this Section without accountability to Borrower.  If, under mandatory requirements of applicable

law, the Administrative Agent shall be required to make disposition of the

Collateral within a period of time which does not permit the giving of notice

to Borrower as hereinabove specified, the Administrative Agent need give

Borrower only such notice of disposition as shall be reasonably practicable in

view of such mandatory requirements of applicable law.  Borrower agrees to do or cause to be done

all such other acts and things as may be reasonably necessary to make such sale

or sales of all or any portion of the Collateral valid and binding and in

compliance with any and all applicable laws, regulations, orders, writs,

injunctions, decrees or awards of any and all courts, arbitrators or

governmental instrumentalities, domestic or foreign, having jurisdiction over

any such sale or sales, all at Borrower’s expense.




 











4.3           Waiver of Claims.  Except as otherwise provided in this

Agreement, BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,

NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT’S

TAKING POSSESSION OR THE ADMINISTRATIVE AGENT’S DISPOSITION OF ANY OF THE

COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING

FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH BORROWER WOULD

OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF

ANY STATE, and Borrower hereby further waives, to the extent permitted by law:




 




(a)           all damages occasioned by such taking

of possession except any damages which are the direct result of the

Administrative Agent’s gross negligence or willful misconduct;




(b)           all other requirements as to the

time, place and terms of sale or other requirements with respect to the

enforcement of the Administrative Agent’s rights hereunder; and




(c)           all rights of redemption,

appraisement, valuation, stay, extension or moratorium now or hereafter in

force under any applicable law in order to prevent or delay the enforcement of

this Agreement or the absolute sale of the Collateral or any portion thereof,

and Borrower, for itself and all who may claim under it, insofar as it or they

now or hereafter lawfully may, hereby waives the benefit of all such laws.




Any

sale of, or the grant of options to purchase, or any other realization upon,

any Collateral shall operate to divest all right, title, interest, claim and

demand, either at law or in equity, of Borrower therein and thereto, and shall

be a perpetual bar both at law and in equity against Borrower and against any

and all Persons claiming or attempting to claim the Collateral so sold,

optioned or realized upon, or any part thereof, from, through and under

Borrower.




4.4           Application of Proceeds.  (a) 

All moneys collected by the Administrative Agent (or, to the extent the

Pledge Agreement or any Mortgage to which Borrower is a party requires proceeds

of Collateral under such agreement to be applied in accordance with the

provisions of this Agreement, the Pledgee or Mortgagee under such other

agreement) upon any sale or other disposition of the Collateral, together with

all other moneys received by the Administrative Agent hereunder, shall be

applied as follows:  (i)          first, to the payment of all amounts

owing the Administrative Agent of the type described in clauses (iii) and (iv)

of the definition of “Obligations”;





(ii)           second, to the extent proceeds remain

after the application pursuant to the preceding clause (i), an amount equal to

the outstanding Primary Obligations shall be paid to the Secured Creditors as

provided in Section 4.4(e) hereof, with each Secured Creditor receiving

an amount equal to such outstanding Primary Obligations or, if the proceeds are

insufficient to pay in full all such Primary Obligations, its Pro Rata Share of

the amount remaining to be distributed;




(iii)          third, to the extent proceeds remain

after the application pursuant to the preceding clauses (i) and (ii), an amount

equal to the outstanding Secondary Obligations shall be paid to the Secured

Creditors as provided in Section 4.4(e), with each Secured Creditor

receiving an amount equal to its outstanding Secondary Obligations or, if the

proceeds are insufficient to pay in full all such Secondary Obligations, its

Pro Rata Share of the amount remaining to be distributed; and




(iv)          fourth, to the extent proceeds remain

after the application pursuant to the preceding clauses (i) through (iii),

inclusive, and following the termination of this Agreement pursuant to Section

7.9(a) hereof, to Borrower or to whomever may be lawfully entitled to

receive such surplus.




(b)           For purposes of this Agreement (i) “Pro

Rata Share” shall mean, when calculating a Secured Creditor’s portion of

any distribution or amount, that amount (expressed as a percentage) equal to a

fraction the numerator of which is the then unpaid amount of such Secured

Creditor’s Primary Obligations or Secondary Obligations, as the case may be,

and the denominator of which is the then outstanding amount of all Primary

Obligations or Secondary Obligations, as the case may be, (ii) “Primary

Obligations” shall mean (A) in the case of the Credit Agreement

Obligations, all principal of, and interest on, all Loans, all Unpaid Drawings

theretofore made (together with all interest accrued thereon), and the

aggregate Stated Amounts of all Letters of Credit issued (or deemed issued)

under the Credit Agreement, and all Fees and (B) in the case of the Other

Obligations, all amounts due under the Interest Rate Protection or Other

Hedging Agreements (other than indemnities, fees (including, without

limitation, attorneys’ fees) and similar obligations and liabilities) and (iii)

“Secondary Obligations” shall mean all Obligations other than Primary

Obligations.




(c)           When payments to Secured Creditors

are based upon their respective Pro Rata Shares, the amounts received by such

Secured Creditors hereunder shall be applied (for purposes of making

determinations under this Section 4.4 only) (i) first, to their Primary

Obligations and (ii) second, to their Secondary Obligations.  If any payment to any Secured Creditor of

its Pro Rata Share of any distribution would result in overpayment to such

Secured Creditor, such excess amount shall instead be distributed in respect of

the unpaid Primary Obligations or Secondary Obligations, as the case may be, of

the other Secured Creditors, with each Secured Creditor whose Primary

Obligations or Secondary Obligations, as the case may be, have not been paid in

full to receive an amount equal to such excess amount multiplied by a fraction

the numerator of which is the unpaid Primary Obligations or Secondary

Obligations, as the case may be, of such Secured Creditor and the denominator

of which is the unpaid Primary Obligations or Secondary Obligations, as the

case may be, of all Secured Creditors entitled to such distribution.











(d)           Each of the Secured Creditors agrees

and acknowledges that if the Bank Creditors are to receive a distribution on

account of undrawn amounts with respect to Letters of Credit issued (or deemed

issued) under the Credit Agreement (which shall only occur after all

outstanding Loans and Unpaid Drawings with respect to such Letters of Credit

have been paid in full), such amounts shall be paid to the Agent under the

Credit Agreement and held by it, for the equal and ratable benefit of the Bank

Creditors, as cash security for the repayment of Obligations owing to the Bank

Creditors as such.  If any amounts are

held as cash security pursuant to the immediately preceding sentence, then upon

the termination of all outstanding Letters of Credit, and after the application

of all such cash security to the repayment of all Obligations owing to the Bank

Creditors after giving effect to the termination of all such Letters of Credit,

if there remains any excess cash, such excess cash shall be returned by the

Agent to the Administrative Agent for distribution in accordance with Section

4.4(a) hereof.




(e)           Except as set forth in Section

4.4(d) hereof, all payments required to be made hereunder shall be made (i)

if to the Bank Creditors, to the Agent under the Credit Agreement for the

account of the Bank Creditors, and (ii) if to the Other Creditors, to the

trustee, paying agent or other similar representative (each a “Representative”)

for the Other Creditors or, in the absence of such a Representative, directly

to the Other Creditors.




(f)            For purposes of applying payments

received in accordance with this Section 4.4, the Administrative Agent

shall be entitled to rely upon (i) the Agent under the Credit Agreement and

(ii) the Representative for the Other Creditors or, in the absence of such a

Representative, upon the Other Creditors for a determination (which the Agent,

each Representative for any Secured Creditors and the Secured Creditors agree

(or shall agree) to provide upon request of the Administrative Agent) of the

outstanding Primary Obligations and Secondary Obligations owed to the Bank

Creditors or the Other Creditors, as the case may be.  Unless it has actual knowledge (including by way of written

notice from a Bank Creditor or an Other Creditor) to the contrary, the Agent and

each Representative, in furnishing information pursuant to the preceding

sentence, and the Administrative Agent, in acting hereunder, shall be entitled

to assume that no Secondary Obligations are outstanding.  Unless it has actual knowledge (including by

way of written notice from an Other Creditor) to the contrary, the

Administrative Agent, in acting hereunder, shall be entitled to assume that no

Interest Rate Protection or Other Hedging Agreements are in existence.




(g)           It is understood and agreed that

Borrower shall remain jointly and severally liable to the extent of any

deficiency between the amount of the proceeds of the Collateral hereunder and

the aggregate amount of the sums referred to in clauses (i) through (iii),

inclusive, of Section 4.4(a) hereof.











4.5           Remedies Cumulative.  Each and every right, power and remedy

hereby specifically given to the Administrative Agent shall be in addition to

every other right, power and remedy specifically given under this Agreement,

the Interest Rate Protection or Other Hedging Agreements, the other Loan

Documents or now or hereafter existing at law or in equity, or by statute and

each and every right, power and remedy whether specifically herein given or

otherwise existing may be exercised from time to time or simultaneously and as

often and in such order as may be deemed expedient by the Administrative

Agent.  All such rights, powers and

remedies shall be cumulative and the exercise or the beginning of the exercise

of one shall not be deemed a waiver of the right to exercise any other or

others.  No delay or omission of the

Administrative Agent in the exercise of any such right, power or remedy and no

renewal or extension of any of the Obligations and no course of dealing between

Borrower and the Administrative Agent or any holder of any of the Obligations

shall impair any such right, power or remedy or shall be construed to be a

waiver of any Default or Event of Default or an acquiescence therein.  No notice to or demand on Borrower in any

case shall entitle it to any other or further notice or demand in similar or

other circumstances or constitute a waiver of any of the rights of the

Administrative Agent to any other or further action in any circumstances

without notice or demand.  In the event

that the Administrative Agent shall bring any suit to enforce any of its rights

hereunder and shall be entitled to judgment, then in such suit the

Administrative Agent may recover reasonable expenses, including reasonable

attorneys’ fees, and the amounts thereof shall be included in such judgment.




 




4.6           Discontinuance of

Proceedings.  In case the Administrative Agent shall have

instituted any proceeding to enforce any right, power or remedy under this

Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall

have been discontinued or abandoned for any reason or shall have been

determined adversely to the Administrative Agent, then and in every such case

Borrower, the Administrative Agent and each holder of any of the Obligations

shall be restored to their former positions and rights hereunder with respect

to the Collateral subject to the security interest created under this Agreement

(except to the extent of any such adverse determination), and all rights,

remedies and powers of the Administrative Agent shall continue (a) as if no

such proceeding had been instituted, in the case of any such proceeding so

discontinued or abandoned, or (b) as if no proceeding had been instituted,

except to the extent of the determination, in the case of any such proceeding

so adversely determined.




ARTICLE

V


INDEMNITY




 




5.1           Indemnity.  (a)  Borrower

agrees to indemnify and hold harmless the Administrative Agent and each Secured

Creditor and their respective successors, assigns, employees, agents and

servants (individually an “Indemnitee,” and collectively the “Indemnitees”)

from and against any and all claims, demands, losses, judgments and liabilities

(including liabilities for penalties) of whatsoever kind or nature, and to

reimburse each Indemnitee for all costs and expenses, including reasonable

attorneys’ fees, growing out of or resulting from this Agreement or the

exercise by any Indemnitee of any right or remedy granted to it hereunder or

under any Interest Rate Hedging Agreement or under any other Loan Document (but

excluding any claims, demands, losses, judgments and liabilities or expenses to

the extent incurred by reason of gross negligence or willful misconduct of such

Indemnitee).  If and to the extent that

the obligations of the Borrower under this Section 5.1(a) are

unenforceable for any reason, the Borrower hereby agrees to make the maximum

contribution to the payment and satisfaction of such obligations which is

permissible under applicable law.











 




(b)           Without limiting the application of Section

5.1(a) hereof, Borrower agrees to pay, or reimburse the Administrative

Agent for any and all reasonable fees, costs and expenses of whatever kind or

nature incurred in connection with the creation, preservation or protection of

the Administrative Agent’s Liens on, and security interest in, the Collateral,

including, without limitation, all reasonable fees and taxes in connection with

the recording or filing of instruments and documents in public offices, payment

or discharge of any taxes or Liens upon or in respect of the Collateral,

premiums for insurance with respect to the Collateral and all other reasonable

fees, costs and expenses in connection with protecting, maintaining or

preserving the Collateral and the Administrative Agent’s interest therein,

whether through judicial proceedings or otherwise, or in defending or

prosecuting any actions, suits or proceedings arising out of or relating to the

Collateral.




(c)           Without limiting the application of Section

5.1(a) or (b) hereof, Borrower agrees to pay, indemnify and hold each

Indemnitee harmless from and against any loss, costs, damages and expenses

which such Indemnitee may suffer, expend or incur in consequence of or growing

out of any misrepresentation by Borrower in this Agreement, any Interest Rate

Protection or Other Hedging Agreement, any other Loan Document or in any

writing contemplated by or made or delivered pursuant to or in connection with

this Agreement, any Interest Rate Protection or Other Hedging Agreement or any

other Loan Document.




(d)           If and to the extent that the

obligations of Borrower under this Section 5.1 are unenforceable for any

reason, Borrower hereby agrees to make the maximum contribution to the payment

and satisfaction of such obligations which is permissible under applicable law.




5.2           Indemnity Obligations

Secured by Collateral; Survival.  Any amounts paid by any Indemnitee as to

which such Indemnitee has the right to reimbursement shall constitute

Obligations secured by the Collateral prior to the release of the Collateral

pursuant to the terms hereof.  The

indemnity obligations of Borrower contained in this Article V shall

continue in full force and effect notwithstanding the full payment of all the

Notes issued under the Credit Agreement, the termination of all Interest Rate

Protection or Other Hedging Agreements and the payment of all other Obligations

(but excluding any unasserted contingent and indemnification obligations which

survive the termination hereof) and notwithstanding the discharge thereof.




 




ARTICLE

VI


DEFINITIONS




 




The

following terms shall have the meanings herein specified.  Such definitions shall be equally applicable

to the singular and plural forms of the terms defined.




“Account”

shall have the meaning provided in the Uniform Commercial Code.




“Administrative

Agent” shall have the meaning provided in the first paragraph of this

Agreement.




“Agent”

shall have the meaning provided in the first WHEREAS clause of this Agreement.




“Agreement”

shall mean this Security Agreement as the same may be modified, supplemented,

extended, renewed, replaced, restated or amended from time to time in

accordance with its terms.





“Bank

Creditor” shall have the meaning provided in the first paragraph of this

Agreement.




“Borrower”

shall have the meaning provided in the first paragraph of this Agreement.




 “Chattel Paper” shall have the meaning

provided in the Uniform Commercial Code.




“Class”

shall have the meaning provided in Section 7.2 of this Agreement.




“Collateral”

shall have the meaning provided in Section 1.1(a) of this Agreement.




“Contract

Rights” shall mean all rights of Borrower (including, without limitation,

all rights to payment) under each Contract.




“Contracts”

shall mean all contracts between Borrower and one or more additional parties

(including, without limitation, (i) each partnership agreement to which

Borrower is a party and (ii) any Interest Rate Protection or Other Hedging

Agreements), but excluding licenses, agreements and leases, which are

immaterial to the operations of Borrower, to the extent that the terms thereof

prohibit the assignment of, or granting of a security interest in, such

licenses, agreements or leases.




 “Credit Agreement” shall have the

meaning provided in the first WHEREAS clause of this Agreement.




“Credit

Agreement Obligations” shall have the meaning provided in the definition of

“Obligations” in this Article VI.




“Default”

shall mean any event which, with notice or lapse of time, or both, would

constitute an Event of Default.




“Documents”

shall have the meaning provided in the Uniform Commercial Code.




“Equipment”

shall mean any “equipment,” as such term is defined in the Uniform Commercial

Code, now or hereafter owned by Borrower.




“Event

of Default” shall mean any Event of Default under, and as defined in, the

Credit Agreement and shall in any event, without limitation, include any

payment default on any of the Obligations after the expiration of any

applicable grace period.




“General

Intangibles” shall have the meaning provided in the Uniform Commercial

Code.




“Goods”

shall have the meaning provided in the Uniform Commercial Code.




 “Indemnitee” shall have the meaning provided

in Section 5.1 of this Agreement.





“Instrument”

shall have the meaning provided in Article 9 of the Uniform Commercial

Code.




“Interest

Rate Protection or Other Hedging Agreements” shall have the meaning

provided in the first paragraph of this Agreement.




“Inventory”

shall mean all “inventory” as such term is defined in the Uniform Commercial

Code, now or hereafter owned by Borrower.




“Investment

Property” shall have the meaning ascribed thereto in Article 9 of the UCC.




“LC

Creditor” shall have the meaning provided in the first WHEREAS clause of

this Agreement.




“Lenders”

shall have the meaning provided in the first WHEREAS clause of this Agreement.




 “Obligations” shall mean (i) the full

and prompt payment when due (whether at the stated maturity, by acceleration or

otherwise) of all obligations (including, without limitation, all “Obligations”

as such term is defined in the Credit Agreement and all obligations which, but

for the automatic stay under Section 362(a) of the Bankruptcy Code,

would become due) and liabilities of Borrower now existing or hereafter

incurred under, arising out of or in connection with the Credit Agreement or

any other Loan Document to which Borrower is a Party and the due performance

and compliance by Borrower with all of the terms, conditions and agreements

contained in each such Loan Document (all such obligations and liabilities

being herein collectively called the “Credit Agreement Obligations”);

(ii) the full and prompt payment when due (whether at the stated maturity, by

acceleration or otherwise) of all obligations (including obligations which, but

for the automatic stay under Section 362(a) of the Bankruptcy Code,

would become due) and liabilities of Borrower now existing or hereafter

incurred under, arising out of or in connection with (x) any Interest Rate

Protection or Other Hedging Agreement, whether such Interest Rate Protection or

Other Hedging Agreement is now in existence or hereafter arising and the due

performance and compliance by Borrower with all of the terms, conditions and

agreements contained therein and (y) the US Bank Letter of Credit Facility up

to a maximum amount of $2,000,000 (provided that at no time shall there be more

than $2,000,000 under the US Bank Letter of Credit Facility secured by the

Security Documents) (all such obligations and liabilities described in this

clause (ii) being herein collectively called the “Other Obligations”);

(iii) any and all sums advanced by the Administrative Agent in order to

preserve the Collateral or preserve its security interest in the Collateral;

(iv) in the event of any proceeding for the collection or enforcement of

any indebtedness, obligations, or liabilities of Borrower referred to in

clauses (i) and (ii), after an Event of Default shall have occurred and be continuing,

the reasonable expenses of taking, holding, preparing for sale or lease,

selling or otherwise disposing of or realizing on the Collateral, or of any

exercise by the Administrative Agent of its rights hereunder, together with

reasonable attorneys’ fees and court costs; and (v) all amounts paid by any

Indemnitee as to which such Indemnitee has the right to reimbursement under Section

6.1 of this Agreement.  It is

acknowledged and agreed that the “Obligations” shall include extensions of

credit of the types described above, whether outstanding on the date of this

Agreement or extended from time to time after the date of this Agreement.





“Other

Creditors” shall have the meaning provided in the first paragraph of this

Agreement.




“Other

Obligations” shall have the meaning provided in the definition of

“Obligations” in this Article VI.




 “Permitted Filings” shall mean any

filing or similar item that is a matter of public record on the date of this

Agreement.




“Primary

Obligations” shall have the meaning provided in Section 4.4(b) of

this Agreement.




“Pro

Rata Share” shall have the meaning provided in Section 4.4(b) of

this Agreement.




“Proceeds”

shall have the meaning provided in the Uniform Commercial Code.




 “Representative” shall have the

meaning provided in Section 5.4(e) of this Agreement.




“Required

Secured Creditors” shall mean (i) the Required Lenders (or, to the extent

required by Article XI of the Credit Agreement, all of the Lenders)

under the Credit Agreement so long as any Credit Agreement Obligations remain

outstanding and (ii) in any situation not covered by preceding clause (i),

the holders of a majority of the outstanding principal amount of the Other

Obligations.




“Requisite

Creditors” shall have the meaning provided in Section 7.2 of this

Agreement.




“Secondary

Obligations” shall have the meaning provided in Section 4.4(b) of

this Agreement.




“Secured

Creditors” shall have the meaning provided in the first paragraph of this

Agreement.




 “Termination Date” shall have the

meaning provided in Section 7.9 of this Agreement.




“Uniform

Commercial Code” or “UCC” shall mean the Uniform Commercial Code as

now or hereafter in effect from time to time in the State of New York or any

other applicable jurisdiction.




“US

Bank Letter of Credit Facility” means that certain revolving letter of

credit facility in effect on the date hereof pursuant to that certain

Continuing Reimbursement Agreement for Commercial Letters of Credit, dated as

of July 14, 2000 by and among the LC Creditor and the Borrower providing for

commercial letters of credit; provided, however, that at no time

shall there be more than a maximum amount of $2,000,000 under the US Bank

Letter of Credit Facility secured by the Security Documents.











ARTICLE

VII


MISCELLANEOUS




 




7.1           Notices.  All such notices and communications

hereunder shall be sent or delivered in accordance with the terms of the Credit

Agreement.




 




7.2           Waiver; Amendment.  None of the terms and conditions of this

Agreement may be changed, waived, modified or varied in any manner whatsoever

unless in writing duly signed by Borrower and the Administrative Agent (with

the written consent of the Required Lenders, or to the extent required by Section

11.1 of the Credit Agreement, all the Lenders); provided, however,

that any change, waiver, modification or variance affecting the rights and

benefits of a single Class of Secured Creditors (and not all Secured Creditors

in a like or similar manner) shall require the written consent of the Requisite

Creditors of such affected Class.  For

the purpose of this Agreement, the term “Class” shall mean each class of

Secured Creditors, i.e., whether (i) the Bank Creditors as holders

of the Credit Agreement Obligations or (ii) the Other Creditors as the holders

of the Other Obligations; and the term “Requisite Creditors” of any

Class shall mean each of (A) with respect to the Credit Agreement Obligations,

the Required Lenders and (B) with respect to the Other Obligations, the holders

of at least a majority of all obligations outstanding from time to time under

the Interest Rate Protection Agreements or Other Hedging Agreements.




 




7.3           Obligations Absolute.  The obligations of Borrower hereunder shall

remain in full force and effect without regard to, and shall not be impaired

by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,

composition, liquidation or the like of Borrower; (b) any exercise or

non-exercise, or any waiver of, any right, remedy, power or privilege under or

in respect of this Agreement, any other Loan Document or any Interest Rate

Protection or Other Hedging Agreement except as specifically set forth in a

waiver granted pursuant to Section 7.2 hereof; or (c) any amendment to

or modification of any Loan Document or any Interest Rate Protection or Other

Hedging Agreement or any security for any of the Obligations; whether or not

Borrower shall have notice or knowledge of any of the foregoing.




 




7.4           Successors and Assigns.  This Agreement shall be binding upon the

parties hereto and their respective successors and assigns and shall inure to

the benefit of the Administrative Agent, each Secured Creditor and Borrower and

their respective successors and assigns, provided that Borrower may not

transfer or assign any or all of its rights or obligations hereunder without

the written consent of the Required Secured Creditors.  All agreements, statements, representations

and warranties made by Borrower herein or in any certificate or other

instrument delivered by Borrower or on its behalf under this Agreement shall be

considered to have been relied upon by the Secured Creditors and shall survive

the execution and delivery of this Agreement, the other Loan Documents and the

Interest Rate Protection or Other Hedging Agreements regardless of any

investigation made by the Secured Creditors or on their behalf.











 




7.5           Headings Descriptive.  The headings of the several sections of this

Agreement are inserted for convenience only and shall not in any way affect the

meaning or construction of any provision of this Agreement.




 




7.6           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.




 




7.7           GOVERNING LAW.  THIS AGREEMENT SHALL BE DEEMED TO BE A

CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES

SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF SAID

STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.




 




7.8           Borrower’s Duties.  It is expressly agreed, anything herein

contained to the contrary notwithstanding, that Borrower shall remain liable to

perform all of the obligations, if any, assumed by it with respect to the

Collateral and the Administrative Agent shall not have any obligations or

liabilities with respect to any Collateral by reason of or arising out of this

Agreement, nor shall the Administrative Agent be required or obligated in any

manner to perform or fulfill any of the obligations of Borrower under or with

respect to any Collateral.




 




7.9           Termination; Release.  (a)  After the Termination Date,

this Agreement shall automatically terminate (provided that all indemnities set

forth herein including, without limitation, in Section 5.1 hereof shall

survive such termination) and the Administrative Agent, at the request and

expense of Borrower, will execute and deliver to Borrower a proper instrument

or instruments (including Uniform Commercial Code termination statements on

form UCC-3) acknowledging the satisfaction and termination of this Agreement,

and will duly assign, transfer and deliver to Borrower (without recourse and

without any representation or warranty) such of the Collateral of Borrower and

as has not theretofore been sold or otherwise applied or released pursuant to

this Agreement.  As used in this

Agreement, “Termination Date” shall mean the date upon which the Total

Commitment and all Interest Rate Protection or Other Hedging Agreements have

been terminated, no Note under the Credit Agreement is outstanding (and all

Loans have been repaid in full), all Letters of Credit have been terminated and

all Obligations (as defined in the Credit Agreement) then outstanding (other

than any indemnities described in Section 5.1 hereof and in Section

11.4 of the Credit Agreement with respect to which no claim has been

asserted) have been paid in full in cash.




 




(b)           In the event that any part of the

Collateral is sold or otherwise disposed of in connection with a sale or other

disposition permitted by Section 8.7 of the Credit Agreement or is

otherwise released at the direction of the Required Lenders (or all the Lenders

if required by Section 11.1 of the Credit Agreement) and the proceeds of

such sale or sales or from such release are applied in accordance with the

provisions of Section 4.4 of the Credit Agreement, to the extent

required to be so applied, such Collateral will be sold free and clear of the

Liens created by this Agreement and the Administrative Agent, at the request

and expense of Borrower, will duly assign, transfer and deliver to Borrower

(without recourse and without any representation or warranty) such of the

Collateral as is then being (or has been) so sold or released and has not

theretofore been released pursuant to this Agreement.  The Administrative Agent shall also be entitled to and is hereby

authorized and directed to duly assign, transfer and deliver such of the

Collateral as provided in Section 11.20(b) of the Credit Agreement.





(c)           At any time that Borrower desires

that the Administrative Agent take any action to acknowledge or give effect to

any release of Collateral pursuant to the foregoing Section 7.9(a) or (b),

as the case may be, it shall deliver to the Administrative Agent a certificate

signed by an Authorized Officer stating that the release of the respective

Collateral is permitted pursuant to Section 7.9(a) or (b), as the case

may be.




(d)           The Administrative Agent shall have

no liability whatsoever to any Secured Creditor as a result of any release of

Collateral by it in accordance with this Section 7.9.




7.10         Counterparts.  This

Agreement may be executed in any number of counterparts and by the different

parties hereto on separate counterparts, each of which when so executed and

delivered shall be an original, but all of which shall together constitute one

and the same instrument.  A set of counterparts

executed by all the parties hereto shall be lodged with Borrower and the

Administrative Agent.




 




7.11         The Administrative Agent.  The Administrative Agent will hold in

accordance with this Agreement all items of the Collateral at any time received

under this Agreement.  It is expressly

understood and agreed by the parties hereto and each Secured Creditor, by

accepting the benefits of this Agreement, acknowledges and agrees that the

obligations of the Administrative Agent as holder of the Collateral and

interests therein and with respect to the disposition thereof, and otherwise

under this Agreement, are only those expressly set forth in this Agreement and

as provided in the Uniform Commercial Code in the State of New York.  The Administrative Agent shall act hereunder

on the terms and conditions set forth in Article IX and Section 11.18

of the Credit Agreement.




 




                7.12         US Bank.  (a) US Bank as LC Creditor under the US Bank Letter of Credit

Facility and in its capacity as a Secured Party hereunder hereby irrevocably

designates and appoints Bankers Trust Company as Administrative Agent under

this Agreement and irrevocably authorizes Bankers Trust Company to act as its

Administrative Agent and to take such action on its behalf under the provisions

of this Agreement and to exercise such powers and perform such duties as are

expressly delegated to the Administrative Agent under this Agreement and the

Loan Documents, together with such other powers as are reasonably incidental

thereto.  Notwithstanding any provision

to the contrary in this Agreement, the Administrative Agent shall not have any

duties or responsibilities with respect to US Bank in its capacity LC Creditor

under the US Bank Letter of Credit Facility or any fiduciary relationship with

US Bank, and no implied covenants, functions, responsibilities, duties,

obligations or liabilities shall be read into this Agreement or otherwise exist

against the Administrative Agent.




 




                (b)           For avoidance of doubt, US Bank

expressly acknowledges that all rights and remedies of the Administrative Agent

hereunder shall be exercised by the Administrative Agent in accordance with the

applicable provisions of the Credit Agreement, and no consent of, or notice to,

US Bank shall be required with respect thereto and US Bank shall not undertake

any separate action with respect to the Collateral.  The sole right of US Bank hereunder shall be to receive its

proportionate share of any proceeds received by the Administrative Agent

hereunder in accordance with the terms hereof.




 




 




 




[Signature Page Follows]




















.                               IN WITNESS WHEREOF,

the parties hereto have caused this Agreement to be executed and delivered by

their duly authorized officers as of the date first above written.




 




 




	

   


  	

  BMC

  INDUSTRIES, INC.,


  
	

   


  	

  as

  Borrower


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/

  Kathleen P. Pepski


  
	

   


  	

  Name:

  


  	

  Kathleen

  P. Pepski


  
	

   


  	

  Title:   


  	

  Senior

  Vice President and


  
	

   


  	

   


  	

     Chief

  Financial Officer


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  BANKERS

  TRUST COMPANY,


  
	

   


  	

  as

  Administrative Agent


  
	

   


  	

   


  
	

   


  	

  By:   


  	

  /s/

  Robert Telesca


  
	

   


  	

  Name:


  	

  Robert

  Telesca


  
	

   


  	

  Title:    


  	

  Vice

  President


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  U.S.

  BANK NATIONAL ASSOCIATION


  
	

   


  	

   


  	

   


  
	

   


  	

  By:   


  	

  /s/

  William J. Umscheid


  
	

   


  	

  Name:  


  	

  William

  J. Umscheid


  
	

   


  	

  Title:    


  	

  Vice

  President


  





 




 




















ANNEX A




to




Security

Agreement




SCHEDULE OF CHIEF

EXECUTIVE OFFICES




 




 




(a)

Chief Executive Office




                One Meridian Crossings, Suite

850




                Minneapolis, Minnesota 55423




 




(b)

State of Incorporation




Minnesota




 




 




 




 




 











ANNEX

B




to




Security

Agreement




SCHEDULE OF INVENTORY




 




AND EQUIPMENT LOCATIONS




 




ARTICLE VIII




 




Hennepin County, Minnesota




Ramsey County, Minnesota




Cortland County, New York




Onondaga County, New York




 




 




 











ANNEX

C




to




Security

Agreement




SCHEDULE OF TRADE,

FICTITIOUS AND OTHER NAMES




 




BMC Industries, Inc.                                                                           ID#:  41-0169210




BMC Industries




BMC




Vision-Ease Lens




Vision-Ease




Buckbee-Mears




Buckbee-Mears Cortland




Buckbee-Mears St. Paul




BMSP