Prepared by MERRILL CORPORATION









EXHIBIT 10.48




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  EACH GUARANTOR’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


  	

   


  





 




















SUBSIDIARY

GUARANTOR SECURITY AGREEMENT




THIS SUBSIDIARY

GUARANTOR SECURITY AGREEMENT (this "Agreement"), dated as of

October 12, 2001, is among the undersigned (each an “Guarantor”

and, together with any other entity that becomes party hereto pursuant to Section

7.13 hereof, collectively, the "Guarantors"), 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, BMC

Industries, Inc. (the "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, pursuant

to the Amended and Restated Subsidiary Guarantee Agreement, dated the date

hereof, each Guarantor has jointly and severally guaranteed to the Secured

Creditors the payment when due of certain obligations of Borrower and each

Guarantor under or with respect to the Loan Documents, the Interest Rate

Protection or Other Hedging Agreements and the US Bank Letter of Credit

Facility (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);




WHEREAS, it is a

condition precedent to each of the above-described extensions of credit that

each Guarantor shall have executed and delivered this Agreement; and




WHEREAS, each

Guarantor 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 each Guarantor, the receipt and sufficiency of which are

hereby acknowledged, each Guarantor 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, each Guarantor 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 such Guarantor 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 any

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




1.2           Power

of Attorney.  Each Guarantor 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 such Guarantor or otherwise), in the Administrative Agent’s

reasonable discretion, to take any action and to execute any instrument

required by this Agreement if such Guarantor has failed to do so after demand

by the Administrative Agent.




 











ARTICLE II


GENERAL

REPRESENTATIONS WARRANTIES AND COVENANTS




 




Each Guarantor

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 such Guarantor

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

hereof by such Guarantor 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, such Guarantor 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 each Guarantor

is indicated on Annex A hereto. 

No Guarantor will change its state of incorporation except as in accordance

with the last sentence of this Section 2.2.  No Guarantor shall 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 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.




 











2.3           Trade Names; Change of Name.  No Guarantor operates in any jurisdiction

under, nor in the preceding 12 months 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 each Guarantor identified in Annex C.  No Guarantor shall 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.  No

Guarantor shall 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

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 (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.  No Guarantor will do anything 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.  Each Guarantor 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, each Guarantor 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. 

Each Guarantor 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 any Guarantor 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. 

Each Guarantor 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.  Each Guarantor will

pay any applicable filing fees, recordation taxes and related expenses relating

to its Collateral.  Each Guarantor

hereby authorizes the Administrative Agent to file any such Uniform Commercial

Code financing statements without the signature of such Guarantor where

permitted by law.




 




ARTICLE IV


REMEDIES UPON OCCURRENCE OF EVENT OF

DEFAULT




 




4.1           Remedies; Obtaining the Collateral Upon

Default.  Each Guarantor 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 such Guarantor 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 such Guarantor’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 such Guarantor; 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

such Guarantor in respect of such Collateral; and











 (c)          sell,

assign or otherwise liquidate, or direct such Guarantor 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 such Guarantor in writing to deliver the same to

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

Administrative Agent, in which event such Guarantor 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

each Guarantor’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 such Guarantor 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 the relevant Guarantor 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 the relevant Guarantor 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 such Guarantor or any nominee of such Guarantor

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 the relevant Guarantor 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 such Guarantor.  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 the

relevant Guarantor as hereinabove specified, the Administrative Agent need give

such Guarantor only such notice of disposition as shall be reasonably

practicable in view of such mandatory requirements of applicable law.  Each Guarantor 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 such Guarantor’s expense.




 











4.3           Waiver of Claims. 

Except as otherwise provided in this Agreement, EACH GUARANTOR 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 SUCH GUARANTOR WOULD OTHERWISE HAVE UNDER THE

CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each

Guarantor 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 such Guarantor, 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 such Guarantor therein and thereto, and shall be a perpetual

bar both at law and in equity against such Guarantor 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 such Guarantor.











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 any Guarantor 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 such Guarantor 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 each

Guarantor 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 any Guarantor 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 any Guarantor 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

each Guarantor, 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)  Each

Guarantor 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 such Guarantor under this Section

5.1(a) are unenforceable for any reason, such Guarantor 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, each Guarantor 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, each Guarantor 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 such Guarantor 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 any Guarantor under this Section 5.1 are unenforceable

for any reason, each Guarantor 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 each Guarantor 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.




"Guarantor"

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




“Bank Creditor”

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




“Borrower”

shall have the meaning provided in the first WHEREAS clause 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 an Guarantor (including, without

limitation, all rights to payment) under each Contract.




“Contracts”

shall mean all contracts between an Guarantor and one or more additional

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

an Guarantor 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 an Guarantor, 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 an Guarantor.




“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 an Guarantor.




“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 and each Guarantor now existing

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

Agreement or any other Loan Document to which Borrower or any Guarantor is a

Party and the due performance and compliance by Borrower and each Guarantor

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 or any Guarantor 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 each Guarantor 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 each Guarantor 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 such Guarantor; (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 such Guarantor 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 each

Guarantor and their respective successors and assigns, provided that no

Guarantor may 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 each Guarantor herein or in any certificate or other

instrument delivered by such Guarantor 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           Each Guarantor’s Duties.  It is expressly agreed, anything herein

contained to the contrary notwithstanding, that each Guarantor 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 such Guarantor 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 the

Guarantors, will execute and deliver to each Guarantor 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 each Guarantor (without recourse and

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

Guarantor 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 the Guarantors, will duly assign, transfer and deliver to the

relevant Guarantor (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 an Guarantor 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 each Guarantor 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.




 




                7.13         Additional Guarantors.  It is understood and agreed that any

Subsidiary of Borrower that is required to become a party to this Agreement

after the Restatement Date pursuant to Section 7.12 of the Credit

Agreement shall automatically become a party hereunder upon the execution and

delivery by such Subsidiary of an instrument in the form of Annex D

hereto and the delivery of same to the Administrative Agent, with the same

force and effect as if originally named as a party herein.  The execution and delivery of any instrument

adding an additional party to this Agreement shall not require the consent of

any party hereunder or of any Secured Creditor.  The rights and obligations of each party hereunder shall remain

in full force and effect notwithstanding the addition of any new party hereto.




 




 




 




 




[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.




 




	

   


  	

  VISION-EASE LENS, INC.,


  as Guarantor


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

     /s/Bradley

  D. Carlson


  
	

   


  	

  Name:


  	

    Bradley D.

  Carlson


  
	

   


  	

  Title:


  	

     Treasurer


  
	

   


  	

   


  
	

   


  	

  VISION-EASE LENS AZUSA,

  INC.,
 as Guarantor


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

     /s/Bradley

  D. Carlson


  
	

   


  	

  Name:


  	

    Bradley D.

  Carlson


  
	

   


  	

  Title:


  	

     Treasurer


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  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




 




Vision-Ease

Lens, Inc.




                Hennepin County,

Minnesota




                Anoka County,

Minnesota




                Stearns County,

Minnesota




 




Vision-Ease

Lens Azusa, Inc.




                Hennepin County,

Minnesota




                Los Angeles

County, California











ANNEX C




to




Security Agreement




SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES




 




 




Vision-Ease

Lens, Inc.:




 




                Vision-Ease Lens,

Inc.                                         ID#:  41-1837709




                Vision-Ease Lens




                Vision-Ease




                Optifacts




                Envia Vision




                SunSport




                Custom Rx Lab




 




Vision-Ease

Lens Azusa, Inc.:




 




                Vision-Ease Lens

Azusa, Inc.                            ID#:  41-1904176




                Vision-Ease Lens

Azusa




                Vision-Ease Lens




                Vision-Ease




                SunSport




 




 











ANNEX D




to




Subsidiary Guarantor

Security Agreement




ADDITION

OF NEW GUARANTOR




TO SUBSIDIARY GUARANTOR

SECURITY AGREEMENT




 




ADDITION OF NEW GUARANTOR

TO SUBSIDIARY GUARANTOR SECURITY AGREEMENT (this "Instrument"),

dated as of ___________ __, ______, amending that certain Subsidiary Guarantor

Security Agreement dated as of October __, 2001 (as the same may be amended,

restated, supplemented or otherwise modified from time to time, the "Agreement")

by and among the Guarantors (the "Guarantors") party thereto

and Bankers Trust Company, as Administrative Agent (the "Administrative

Agent") for the Secured Creditors.




Reference is made

to the Amended and Restated Credit Agreement, dated as of June 25, 1998,  by and among BMC Industries, Inc. (the

"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”) 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 October

__, 2001 and as amended by that certain Second Amendment and Restatement

Agreement dated as of the October _, 2001, 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).




Capitalized terms

used herein and not otherwise defined herein shall have the meanings assigned

to such terms in the Agreement and the Credit Agreement.




The Guarantors

have entered into the Agreement in order to induce the Lenders to extend credit

pursuant to the Credit Agreement and to induce the Other Creditors to extend

Interest Rate Protection or other Hedging Agreements.  Pursuant to Sections 7.12 of the Credit Agreement, the

undersigned is required to enter into the Agreement.  Section 7.13 of the Agreement provides that additional

parties may become a party under the Agreement by execution and delivery of an

instrument in the form of this Instrument. 

The undersigned (the "New Party") is executing this

Instrument in accordance with the requirements of the Credit Agreement to

become a party under the Agreement in order to induce the Lenders to extend and

continue the extension of credit pursuant to the Credit Agreement.




Accordingly,

the New Party agrees as follows:











SECTION 1.           In accordance with the Agreement, the

New Party by its signature below becomes a party to the Agreement with the same

force and effect as if originally named therein as a party and the New Party

hereby (a) agrees to all the terms and warrants that the representations and

warranties made by it as a party thereunder are true and correct in all

material respects on and as of the date hereof.  Each reference to an "Guarantor" in the Agreement shall

be deemed to include the New Party.  The

Agreement is hereby incorporated herein by reference.




SECTION 2.           The New Party represents and warrants

to the Administrative Agent and the Secured Creditors that this Instrument has

been duly authorized, executed and delivered by it and constitutes its legal,

valid and binding obligation, enforceable against it in accordance with its

terms, except to the extent that the enforceability thereof may be limited by

applicable bankruptcy, insolvency, reorganization, moratorium or similar laws

generally affecting creditors' rights and by equitable principles (regardless

of whether enforcement is sought in equity or at law).




SECTION 3.           This Instrument may be executed in

counterparts, each of which shall constitute an original, but all of which when

taken together shall constitute a single contract.  This Instrument shall become effective when the Administrative

Agent shall have received a counterpart of this Instrument that bears the

signatures of the New Party.




SECTION 4.           Except as expressly supplemented

hereby, the Agreement shall remain in full force and effect.




SECTION 5.         THIS INSTRUMENT 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.




SECTION 6.           All communications and notices

hereunder shall be in writing and given as provided in the Agreement.  All communications and notices hereunder to

the New Party shall be given to it at the address set forth under its signature

below.




IN WITNESS

WHEREOF, the New Party has duly executed this Addition of New Guarantor to

Subsidiary Guarantor Security Agreement as of the day and year first above

written.




	

   


  	

  [NAME OF NEW PARTY],


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

   


  
	

   


  	

  Name:


  	

   


  
	

   


  	

  Title:


  	

   


  
	

   


  	

  Address: