**Exhibit10.7**

 

**PLEDGEAND SECURITY AGREEMENT**

(Non-Borrower)

 

THISPLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time totime, this “Security Agreement”) is entered into as of August 15,2003 by and between MAGNETEK LEASING CORPORATION, a Delaware corporation with an address of 10900 Wilshire Boulevard, Suite 850, LosAngeles, California  90024 (the “Grantor”), and BANK ONE, NA, anational banking association having its principal office in Chicago, Illinoiswith an address of 8044 Montgomery Road, Cincinnati, Ohio 45236 (“Lender”).

 

PRELIMINARY STATEMENT

 

The Grantor, the Lender and the Loan Parties areentering into a Credit Agreement dated of even date herewith (as it may beamended or modified from time to time, the “Credit Agreement”).  The Grantor is entering into this SecurityAgreement in order to induce the Lender to enter into and extend credit underthe Credit Agreement.

 

ACCORDINGLY, the Grantor and the Lender hereby agreeas follows:

 

 

**ARTICLE I**

**DEFINITIONS**

 

1.1.                              TermsDefined in Credit Agreement.  Allcapitalized terms used herein and not otherwise defined shall have the meaningsassigned to such terms in the Credit Agreement.

 

1.2.                              TermsDefined in UCC.  Terms defined inthe UCC which are not otherwise defined in this Security Agreement are usedherein as defined in the UCC.

 

1.3.                              Definitionsof Certain Terms Used Herein.  Asused in this Security Agreement, in addition to the terms defined in thePreliminary Statement, the following terms shall have the following meanings:

 

“Accounts” shall have the meaning set forth inArticle 9 of the UCC.

 

“Article” means a numbered article of thisSecurity Agreement, unless another document is specifically referenced.

 

“Assigned Contracts” means, collectively, allof the Grantor’s rights and remedies under, and all moneys and claims for moneydue or to become due to the Grantor under any contracts, and any and allamendments, supplements, extensions, and renewals thereof including, withoutlimitation, all rights and claims of the Grantor now or hereafter existing: (a)under any insurance, indemnities, warranties, and guarantees provided for orarising out of or in connection with any of the foregoing agreements; (b) forany damages arising out of or for breach or default under or in connection withany of the foregoing agreements; (c) to all other amounts from time to timepaid or payable under or in connection with any of the foregoing agreements; or(d) to exercise or enforce any and all covenants, remedies, powers andprivileges thereunder.

 

“Chattel Paper” shall have the meaning setforth in Article 9 of the UCC.

 

“Collateral” shall have the meaning set forthin Article II.

 

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“Collateral Report” means any certificate,report or other document delivered by the Grantor to the Lender with respect tothe Collateral pursuant to any Loan Document.

 

“Control” shall have the meaning set forth inArticle 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107of Article 9 of the UCC.

 

“Copyright Collateral”has the meaning set forth in Article II.

 

“Copyright License Rights”means all right, title and interest of Grantor as licensor or licensee under,and with respect to, any Copyrights, including under any Licenses.

 

“Copyrights” means, with respect to any Person,all of such Person’s right, title, and interest in and to the following:  (a) all copyrights, rights and interests incopyrights, works protectable by copyright, copyright registrations, andcopyright applications; (b) all licenses of the foregoing, whether as licenseeor licensor; (c) all renewals of any of the foregoing; (d) all income,royalties, damages, and payments now or hereafter due and/or payable under anyof the foregoing, including, without limitation,  damages or payments for past or future infringements for any ofthe foregoing; (e) the right to sue for past, present, and future infringementsof any of the foregoing; and (f) all rights corresponding to any of theforegoing throughout the world.

 

“Default” means an event described in Section 5.1.

 

“Deposit Accounts” shall have the meaning setforth in Article 9 of the UCC.

 

“Documents” shall have the meaning set forth inArticle 9 of the UCC.

 

“Equipment” shall have the meaning set forth inArticle 9 of the UCC.

 

“Exhibit” refers to a specific exhibit to thisSecurity Agreement, unless another document is specifically referenced.

 

“Farm Products” shall have the meaning setforth in Article 9 of the UCC.

 

“Fixtures” shall have the meaning set forth inArticle 9 of the UCC.

 

“General Intangibles” shall have the meaningset forth in Article 9 of the UCC.

 

“Goods” shall have the meaning set forth inArticle 9 of the UCC.

 

“Instruments” shall have the meaning set forthin Article 9 of the UCC.

 

“Inventory” shall have the meaning set forth inArticle 9 of the UCC.

 

“Investment Property” shall have the meaningset forth in Article 9 of the UCC.

 

“Letter-of-Credit Rights” shall have themeaning set forth in Article 9 of the UCC.

 

“License Rights” means, collectively, allCopyright License Rights, Patent License Rights and Trademark License Rights.

 

“Licenses” means, with respect to any Person,all of such Person’s right, title, and interest in and to (a)

 

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any and all licensingagreements or similar arrangements in and to any Patents, Copyrights, orTrademarks, (b) all income, royalties, damages, claims, and payments now orhereafter due or payable under and with respect thereto, including, withoutlimitation,  damages and payments forpast and future breaches thereof, and (c) all rights to sue for past, present,and future breaches thereof.

 

“Patent Collateral”has the meaning set forth in Article II.

 

“Patent License Rights”means all right, title and interest of Grantor as licensor or licensee under,and with respect to, any Patent, including under any Licenses.

 

“Patents” means, with respect to any Person,all of such Person’s right, title, and interest in and to:  (a) any and all patents and patentapplications; (b) all inventions and improvements described and claimedtherein; (c) all reissues, divisions, continuations, renewals, extensions, andcontinuations-in-part thereof; (d) all licenses of the foregoing, whether aslicensee or licensor; (e) all income, royalties, damages, claims, and paymentsnow or hereafter due or payable under and with respect thereto, including,without limitation,  damages andpayments for past and future infringements thereof; (f) all rights to sue forpast, present, and future infringements thereof; and (g) all rightscorresponding to any of the foregoing throughout the world.

 

“Pledged Collateral” means all Instruments,Securities and other Investment Property physically delivered to the Lenderpursuant to this Security Agreement.

 

“Receivables” means the Accounts, ChattelPaper, Documents, Investment Property, Instruments and any other rights orclaims to receive money which are General Intangibles or which are otherwiseincluded as Collateral.

 

“Section” means a numbered section of thisSecurity Agreement, unless another document is specifically referenced.

 

“Security” has the meaning set forth inArticle 8 of the UCC.

 

“Stock Rights” means all dividends, instrumentsor other distributions and any other right or property which the Grantor shallreceive or shall become entitled to receive for any reason whatsoever withrespect to, in substitution for or in exchange for any Capital Stockconstituting Collateral, any right to receive Capital Stock and any right toreceive earnings, in which the Grantor now has or hereafter acquires any right,issued by an issuer of such Capital Stock.

 

“Trademark Collateral”has the meaning set forth in Article II.

 

“Trademark License Rights”means all right, title and interest of Grantor as licensor or licensee under,and with respect to, any Trademark, including under any Licenses.

 

“Trademarks” means, with respect to any Person,all of such Person’s right, title, and interest in and to the following:  (a) all trademarks (including, withoutlimitation, service marks), trade names, trade dress, and trade styles and theregistrations and applications for registration thereof and the goodwill of thebusiness symbolized by the foregoing; (b) all licenses of the foregoing,whether as licensee or licensor; (c) all renewals of the foregoing; (d) allincome, royalties, damages, and payments now or hereafter due or payable withrespect thereto, including, without limitation,  damages, claims, and payments for past and future infringementsthereof; (e) all rights to sue for past, present, and future infringements ofthe foregoing, including, without limitation, the right to settle suitsinvolving claims and demands for royalties owing; and (f) all rights corresponding to any of the foregoingthroughout the world; *provided however*, nothing in this SecurityAgreement is intended to be,

 

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ormay be construed to be, an assignment of any application to register anytrademark or service mark based on any intent to use filed by, or on behalf of,Grantor (“Intent to Use Applications”), and any Intent to UseApplications are specifically excluded from Trademark Collateral for purposesof this Agreement.

 

“UCC” means the Uniform Commercial Code, as ineffect from time to time, of the State of Ohio****or of any other state thelaws of which are required as a result thereof to be applied in connection withthe attachment, perfection or priority of, or remedies with respect to,Lender’s Liens on any Collateral.

 

The foregoing definitions shall be equally applicableto both the singular and plural forms of the defined terms.

 

 

**ARTICLE II**

**GRANT OF SECURITY INTEREST**

 

The Grantor hereby pledges, assigns and grants to theLender a continuing security interest in and Lien on, all of its right, titleand interest in, to and under all personal property and other assets, whethernow owned by or owing to, or hereafter acquired by or arising in favor of theGrantor (including, without limitation, under any trade name or derivationsthereof), and whether owned or consigned by or to, or leased from or to, theGrantor, and regardless of where located (all of which will be collectivelyreferred to as the “Collateral”), including, without limitation:

 
| (i)    |   | all Accounts;                                                                                                          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                   |
| (ii)   |   | all Chattel  Paper;                                                                                                    |
|   |   |                                                                                                                   |
| (iii)  |   | all Goods;                                                                                                             |
|   |   |                                                                                                                   |
| (iv)   |   | all Documents;                                                                                                         |
|   |   |                                                                                                                   |
| (v)    |   | all Equipment;                                                                                                         |
|   |   |                                                                                                                   |
| (vi)   |   | all Fixtures;                                                                                                          |
|   |   |                                                                                                                   |
| (vii)  |   | all General  Intangibles;                                                                                              |
|   |   |                                                                                                                   |
| (viii) |   | all Instruments;                                                                                                       |
|   |   |                                                                                                                   |
| (ix)   |   | all Inventory;                                                                                                         |
|   |   |                                                                                                                   |
| (x)    |   | all Investment  Property;                                                                                              |
|   |   |                                                                                                                   |
| (xi)   |   | all cash or cash  equivalents;                                                                                         |
|   |   |                                                                                                                   |
| (xii)  |   | all letters of credit  and Letter-of-Credit Rights;                                                                    |
|   |   |                                                                                                                   |
| (xiii) |   | all Deposit  Accounts with any bank or other financial institution;                                                    |
|   |   |                                                                                                                   |
| (xiv)  |   | all Assigned  Contracts;                                                                                               |
|   |   |                                                                                                                   |
| (xv)   |   | all Farm  Products;                                                                                                    |
|   |   |                                                                                                                   |
| (xvi)  |   | all Copyrights,  Licenses with respect to Copyrights and Copyright License Rights (“Copyright  Collateral”); |
|   |   |                                                                                                                   |
| (xvii) |   | all Patents,  Licenses with respect to Patents and Patent License Rights (“Patent  Collateral”);             |

 

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| (xviii) |   | all Trademarks,  Licenses with respect to Trademarks and Trademark License Rights (“Trademark  Collateral”);                                                                                                                                                                                                                     |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                       |
| (xix)   |   | and all  accessions to, substitutions for and replacements, proceeds (including,  without limitation, Stock Rights), insurance proceeds and products of the  foregoing, together with all books and records, customer lists, credit files,  computer files, programs, printouts and other computer materials and records  related thereto; |

 

to secure the prompt and complete payment and performance of theSecured Obligations.

 

 

**ARTICLE III**

**REPRESENTATIONSAND WARRANTIES**

 

The Grantor represents and warrants to the Lenderthat:

 

3.1.                              Title,Perfection and Priority.  TheGrantor has good and valid rights in or the power to transfer the Collateraland title to the Collateral with respect to which it has purported to grant asecurity interest in, and Lien on, hereunder, free and clear of all Liensexcept for Liens permitted under Section 4.1(e), and has full powerand authority to grant to the Lender the security interest in and Lien on suchCollateral pursuant hereto.  Whenfinancing statements have been filed in the appropriate offices against theGrantor in the locations listed on Exhibit H, the Lender will have afully perfected first priority security interest in that Collateral in which asecurity interest may be perfected by filing, subject only to Liens permittedunder Section 4.1(e).

 

3.2.                              Typeand Jurisdiction of Organization, Organizational and Identification Numbers.  The type of entity of the Grantor, itsjurisdiction of organization, the organizational number issued to it by itsjurisdiction of organization and its federal employer identification number areset forth on Exhibit A.

 

3.3.                              PrincipalLocation.  The Grantor’s mailingaddress and the location of its place of business (if it has only one) or itschief executive office (if it has more than one place of business), is, as ofthe Closing Date, disclosed in Exhibit A; as of the Closing Date, theGrantor has no other places of business except those set forth in Exhibit A.

 

3.4.                              CollateralLocations.  All of Grantor’s locationswhere Collateral is located, as of the Closing Date, are listed on Exhibit A.  All of said locations are owned by theGrantor except for locations (i) which are leased by the Grantor as lessee anddesignated in Part VII(b) of Exhibit A and (ii) at whichInventory is held in a public warehouse or is otherwise held by a bailee or onconsignment as designated in Part VII(c) of Exhibit A.

 

3.5.                              DepositAccounts.  All of the Grantor’sDeposit Accounts as of the Closing Date are listed on Exhibit B.

 

3.6.                              ExactNames.  The Grantor’s name in whichit has executed this Security Agreement is the exact name as it appears in theGrantor’s organizational documents, as amended, as filed with the Grantor’sjurisdiction of organization.

 

3.7.                              Letter-of-CreditRights and Chattel Paper.  ExhibitC lists as of the Closing Date all of Grantor’s Letter-of-Credit Rights andChattel Paper.  All action by theGrantor necessary to protect and perfect the Lender’s security interest andLiens on each item listed on Exhibit C (including, without limitation,the delivery of all originals and the placement of a legend on all ChattelPaper as required hereunder) has been duly

 

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taken. The Lenderwill have a fully perfected first priority security interest and Lien in theCollateral listed on Exhibit C, subject only to Liens permitted under Section 4.1(e).

 

3.8.                              Accountsand Chattel Paper.  The names of theobligors, amounts owing, due dates and other information with respect to theAccounts and Chattel Paper are and will be correctly stated in all records ofthe Grantor relating thereto and in all invoices and Collateral Reports withrespect thereto furnished to the Lender by the Grantor from time to time.  As of the time when each Account or eachitem of Chattel Paper arises, the Grantor shall be deemed to have representedand warranted that such Account or Chattel Paper, as the case may be, and allrecords relating thereto, are genuine and in all respects what they purport tobe.

 

3.9.                              Inventory.  With respect to any Inventory scheduled orlisted on the most recent Collateral Report, (a) such Inventory (other thanInventory in transit) is located at one of the Grantor’s locations set forth onExhibit A as such Exhibit may be updated from time to time upon mutualagreement of Grantor and Lender, (b) no Inventory (other than Inventory intransit) is now, or shall at any time or times hereafter be stored at any otherlocation except as permitted by Section 4.1(g), (c) the Grantor hasgood, indefeasible and merchantable title to such Inventory and such Inventoryis not subject to any Lien or document whatsoever except for the Liens grantedto the Lender, and except for Permitted Liens, (d) such Inventory is notsubject to any licensing, patent, royalty, trademark, trade name or copyrightagreements with any third parties which would require any consent of any thirdparty upon sale or disposition of that Inventory or the payment of any moniesto any third party upon such sale or other disposition, (e) such Inventory hasbeen produced in accordance with the Federal Fair Labor Standards Act of 1938,as amended, and all rules, regulations and orders thereunder and (f) thecompletion of manufacture, sale or other disposition of such Inventory by theLender following a Default shall not require the consent of any Person andshall not constitute a breach or default under any contract or agreement towhich the Grantor is a party or to which such property is subject.

 

3.10.                        Intellectual Property.

 

(a)                                  TheGrantor does not have any interest in, or title to, any Patent Collateral,Trademark Collateral or Copyright Collateral except as set forth in ExhibitD.  This Security Agreement iseffective to create a valid and continuing Lien and, upon filing of thisSecurity Agreement (and, in the case of Copyright Collateral described inSection 4.7(g), any amendments hereto) with the United States CopyrightOffice and the filing of appropriate financing statements in the appropriatefiling offices, fully perfected first priority security interests in favor ofthe Lender on the Grantor’s Patents, Trademarks and Copyrights (subject toPermitted Liens), and, upon completion of the foregoing actions, all actionnecessary or desirable to protect and perfect the Lender’s security interest and Liens on the Patent Collateral,Trademark Collateral or Copyright Collateral shall have been duly taken.

 

(b)                                 Each registered Patent identified in ExhibitD is subsisting and has not been adjudged invalid, unpatentable, or unenforceable,in whole or in part, and is enforceable, except as otherwise set forth on Exhibit D.  Grantor has not granted any license,release, covenant not to sue, or non-assertion assurance to any Person withrespect to any part of the Patent Collateral except as otherwise disclosed in ExhibitD.  The Patent License Rights are infull force and effect, and Grantor is not in default under any of the PatentLicense Rights, and, to Grantor’s knowledge, no event has occurred which withnotice, the passage of time, the satisfaction of any other condition, or all ofthem, might constitute a default by Grantor under the Patent License Rights.

 

(c)                                  Each registered Trademark identified in ExhibitD is subsisting and has not been adjudged invalid, unregisterable or unenforceable,in whole or in part, and each registered trademark and service mark and, toGrantor’s knowledge, each application for trademark and service markregistration is valid, registered or registrable and enforceable.  Grantor has notified Lender in writing ofall prior uses of any material item of Trademark Collateral of which Grantor isaware which could lead to such item becoming

 

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invalid or unenforceable, including prior unauthorized uses by third partiesand uses which were not supported by the goodwill of the business connectedwith such item.  Grantor has not grantedany license, release, covenant not to sue, or non-assertion assurance to anyPerson with respect to any part of the Trademark Collateral except as otherwisedisclosed in Exhibit D. Reasonable and proper statutory notice has been used in connection withthe use of each registered trademark and service mark.  The Trademark License Rights are in fullforce and effect, and Grantor is not in default under any of the TrademarkLicense Rights and, to Grantor’s knowledge, no event has occurred which withnotice, the passage of time, the satisfaction of any other condition, or all ofthem, might constitute a default by Grantor under the Trademark License Rights.

 

(d)                                 Each registered Copyright identified in ExhibitD is subsisting and has not been adjudged invalid, unregisterable orunenforceable, in whole or in part, and each registered Copyright and, toGrantor’s knowledge, each application for copyright registration is valid,registered or registrable and enforceable. Grantor has not granted any license, release, covenant not to sue, ornon-assertion assurance to any Person with respect to any part of the CopyrightCollateral except as otherwise disclosed in Exhibit D.  Reasonable and proper statutory notice hasbeen used in connection with the use of each registered copyright.  The Copyright License Rights are in fullforce and effect, and Grantor is not in default under any of the Copyright LicenseRights and, to Grantor’s knowledge, no event has occurred which with notice,the passage of time, the satisfaction of any other condition, or all of them,might constitute a default by Grantor under the Copyright License Rights.

 

3.11.                        Filing Requirements.  As of the Closing Date, none of theEquipment is covered by any certificate of title, except for the vehiclesdescribed in Part I of Exhibit E. None of the Collateral is of a type for which Liens may be perfected byfiling under any federal statute except for (a) the vehicles described in PartII of Exhibit E and (b) Patents, Trademarks and Copyrights held by theGrantor and described in Exhibit D. The county and street address of each property on which any Fixtures arelocated is set forth in Exhibit F together with the name and address ofthe record owner of each such property.

 

3.12.                        No Financing Statements,Security Agreements.  No validfinancing statement or security agreement describing all or any portion of theCollateral which has not lapsed or been terminated naming the Grantor as debtorhas been filed or is of record in any jurisdiction except (a) for financingstatements or security agreements naming the Lender as the secured party and(b) as permitted by Section 4.1(e).

 

3.13.                        Pledged Collateral,Instruments and Other Investment Property.

 

(a)                                  ExhibitG sets forth, as of the Closing Date, a complete and accurate list of allof the Pledged Collateral delivered to the Lender and all of the Instruments,Securities and Investment Property owned by the Grantor.  The Grantor is the direct, sole beneficialowner and sole holder of record of each Instrument, Security and other type ofInvestment Property listed on Exhibit G as being owned by it, free andclear of any Liens, except for the Liens granted to the Lender.  The Grantor further represents and warrantsthat (i) all such Instruments, Securities or other types of Investment Propertywhich are Capital Stock of a Subsidiary have been (to the extent such conceptsare relevant with respect to such Instrument, Security or other type ofInvestment Property) duly authorized, validly issued, are fully paid andnon-assessable, (ii) with respect to any certificates delivered to the Lenderrepresenting Capital Stock, either such certificates are Securities as definedin Article 8 of the UCC as a result of actions by the issuer or otherwise,or, if such certificates are not Securities, the Grantor has so informed theLender so that the Lender may take steps to perfect its security interest thereinas a General Intangible, (iii) except as agreed by Lender, all such Securitiesor other types of Investment Property held by a securities intermediary arecovered by a control agreement among the Grantor, the securities intermediaryand the Lender pursuant to which the Lender has Control and (iv) allInstruments which represent Indebtedness owed to the Grantor by a Subsidiarythereof have been duly authorized, authenticated or issued

 

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and delivered bythe issuer of such Indebtedness, are the legal, valid and binding obligation ofsuch issuer and such issuer is not in default thereunder.

 

(b)                                 Inaddition, (i) none of the Pledged Collateral has been issued or transferred inviolation of the securities registration, securities disclosure or similar lawsof any jurisdiction to which such issuance or transfer may be subject, (ii)there are existing no options, warrants, calls or commitments of any characterwhatsoever relating to the Pledged Collateral or which obligate the issuer ofany Capital Stock included in the Pledged Collateral to issue additionalCapital Stock, and (iii) no consent, approval, authorization, or other actionby, and no giving of notice, filing with, any governmental authority or anyother Person is required for the pledge by the Grantor of the PledgedCollateral pursuant to this Security Agreement or for the execution, deliveryand performance of this Security Agreement by the Grantor, or for the exerciseby the Lender of the voting or other rights provided for in this SecurityAgreement or for the remedies in respect of the Pledged Collateral pursuant tothis Security Agreement, except as may be required in connection with suchdisposition by laws affecting the offering and sale of securities generally.

 

(c)                                  Exceptas set forth in Exhibit G, the Grantor owns 100% of the issued andoutstanding Capital Stock which constitutes Pledged Collateral and none of thePledged Collateral which represents Indebtedness owed to the Grantor issubordinated in right of payment to other Indebtedness or subject to the termsof an indenture.

 

 

**ARTICLE IV**

**COVENANTS**

 

From the date of this Security Agreement, andthereafter until this Security Agreement is terminated:

 

4.1.                              General.

 

(a)                                  CollateralRecords.  The Grantor will maintaincomplete and accurate books and records with respect to the Collateral, andfurnish to the Lender such reports relating to the Collateral as the Lendershall from time to time request.

 

(b)                                 Authorizationto File Financing Statements and Recordation Form Cover Sheets; Ratification.  The Grantor hereby authorizes the Lender tofile, and if requested will deliver to the Lender, all financing statements andother documents and take such other actions as may from time to time berequested by the Lender in order to maintain a first perfected securityinterest in, Lien on and, if applicable, Control of, the Collateral.  Any financing statement filed by the Lendermay be filed in any filing office in any UCC jurisdiction and may (i) indicatethe Collateral (1) as all assets of the Grantor or words of similar effect,regardless of whether any particular asset comprised in the Collateral fallswithin the scope of Article 9 of the UCC or such jurisdiction, or (2) byany other description which reasonably approximates the description containedin this Security Agreement, and (ii) contain any other information required bypart 5 of Article 9 of the UCC for the sufficiency or filing officeacceptance of any financing statement or amendment, including, withoutlimitation, (A) whether the Grantor is an organization, the type oforganization and any organization identification number issued to the Grantor,and (B) in the case of a financing statement filed as a fixture filing orindicating Collateral as as-extracted collateral or timber to be cut, asufficient description of real property to which the Collateral relates.  The Grantor also agrees to furnish any suchinformation to the Lender promptly upon request.  The Grantor also ratifies its authorization for the Lender tohave filed in any UCC jurisdiction any initial financing statements oramendments thereto if filed prior to the date hereof.  The Grantor hereby authorizes the Lender to complete, execute andfile any document cover sheets and recordation form cover sheets evidencingsecurity interests in the Copyright Collateral, the Trademark Collateral andthe Patent

 

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Collateral,permitted or required to evidence such security interests by the United StatesCopyright Office or the United States Patent and Trademark Office (and therespective regulations and laws governing the same), and this SecurityAgreement, any extracts hereof and any amendments hereto (pursuant toSection 4.7(g)), with the United States Copyright Office and the UnitedStates Patent and Trademark Office.

 

(c)                                  FurtherAssurances.  The Grantor will, if sorequested by the Lender, furnish to the Lender, as often as the Lenderrequests, statements and schedules further identifying and describing theCollateral and such other reports and information in connection with theCollateral as the Lender may reasonably request, all in such detail as theLender may specify.  The Grantor alsoagrees to take any and all actions necessary to defend title to the Collateralagainst all Persons and to defend the Liens of the Lender in the Collateral andthe priority thereof against any Lien not expressly permitted hereunder.

 

(d)                                 Dispositionof Collateral.  The Grantor will notsell, lease or otherwise dispose of the Collateral except for dispositionsspecifically permitted pursuant to Section 6.20 of the Credit Agreement.

 

(e)                                  Liens.  The Grantor will not create, incur, orsuffer to exist any Lien on the Collateral except (i) the Liens created by thisSecurity Agreement, and (ii) other Permitted Liens.

 

(f)                                    OtherFinancing Statements.  The Grantorwill not authorize the filing of any financing statement naming it as debtorcovering all or any portion of the Collateral, except as permitted by Section 4.1(e).  The Grantor acknowledges that it is notauthorized to file any financing statement or amendment or terminationstatement with respect to any financing statement without the prior writtenconsent of the Lender, subject to the Grantor’s rights under Section 9-509(d)(2)of the UCC.

 

(g)                                 Locations.The Grantor will not (i) maintain any Collateral at any location other thanthose locations listed on Exhibit A (as the same may be updated fromtime to time), (ii) otherwise change, or add to, such locations without theLender’s prior written consent, and if the Lender gives such consent, theGrantor will concurrently therewith obtain, to the extent required by theCredit Agreement, a Collateral Access Agreement for each such location, or(iii) change the location of its place of business or chief executive officefrom the location identified in Exhibit A, unless it gives the Lender atleast ten (10) days’ prior written notice thereof and executes any documentsthat the Lender may reasonably request in connection therewith.

 

(h)                                 Compliancewith Terms.  The Grantor willperform and comply with all obligations in respect of the Collateral and allagreements to which it is a party or by which it is bound relating to theCollateral.

 

(i)                                     Jurisdictionof Organization.  The Grantor willnot change its jurisdiction of organization without the prior written consentof Lender.

 

4.2.                              Receivables.

 

(a)                                  CertainAgreements on Receivables.  TheGrantor will not make or agree to make any discount, credit, rebate or otherreduction in the original amount owing on a Receivable or accept insatisfaction of a Receivable less than the original amount thereof, exceptthat, prior to the occurrence of a Default, the Grantor may reduce the amountof Accounts arising from the sale of Inventory in accordance with its presentpolicies and in the ordinary course of business.

 

(b)                                 Collectionof Receivables.  Except as otherwiseprovided in this Security Agreement, the Grantor will collect and enforce, atthe Grantor’s sole expense, all amounts due or hereafter due to the Grantorunder the Receivables.

 

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(c)                                  Deliveryof Invoices.  The Grantor willdeliver to the Lender immediately upon its request after the occurrence andduring the continuation of a Default duplicate invoices with respect to eachAccount bearing such language of assignment as the Lender shall specify.

 

(d)                                 Disclosureof Counterclaims on Receivables.  If(i) any discount, credit or agreement to make a rebate or to otherwise reducethe amount owing on a Receivable exists or (ii) if, to the knowledge of theGrantor, any dispute, setoff, claim, counterclaim or defense exists or has beenasserted or threatened with respect to a Receivable, the Grantor will promptlydisclose such fact to the Lender in writing. The Grantor shall send the Lender a copy of each credit memorandum inexcess of $25,000 as soon as issued, and the Grantor shall promptly report eachcredit memorandum.

 

(e)                                  ElectronicChattel Paper.  The Grantor shalltake all steps necessary to grant the Lender Control of all electronic chattelpaper in accordance with the UCC and all “transferable records” as defined ineach of the Uniform Electronic Transactions Act and the Electronic Signaturesin Global and National Commerce Act.

 

4.3.                              Inventoryand Equipment.

 

(a)                                  Maintenanceof Goods.  The Grantor will do allthings necessary to maintain, preserve, protect and keep the Inventory and theEquipment in good repair and working and saleable condition, except for damagedor defective goods arising in the ordinary course of the Grantor’s business andexcept for ordinary wear and tear in respect of the Equipment.

 

(b)                                 ReturnedInventory.  If an Account Debtorreturns any Inventory to the Grantor when no Default exists, then the Grantorshall promptly determine the reason for such return and shall issue a creditmemorandum to the Account Debtor in the appropriate amount.  The Grantor shall immediately report to theLender any return involving an amount in excess of $25,000.  Each such report shall indicate the reasonsfor the returns and the locations and condition of the returned Inventory.  In the event any Account Debtor returnsInventory to the Grantor when a Default exists, the Grantor, upon the requestof the Lender, shall: (i) hold the returned Inventory in trust for the Lender;(ii) segregate all returned Inventory from all of its other property; (iii)dispose of the returned Inventory solely according to the Lender’s writteninstructions; and (iv) not issue any credits or allowances with respect theretowithout the Lender’s prior written consent. All returned Inventory shall be subject to the Lender’s Liens thereon.

 

(c)                                  InventoryCount; Perpetual Inventory System. The Grantor will conduct a physical count of the Inventory at least onceper Fiscal Year, and after and during the continuation of a Default, at suchother times as the Lender requests.  TheGrantor will maintain a perpetual inventory reporting system at all times. TheGrantor, at its own expense, shall deliver to the Lender the results of eachphysical verification, which the Grantor may in its discretion have made, orcaused any other Person to have made on its behalf, of all or any portion ofits Inventory.

 

(d)                                 Equipment.  The Grantor shall promptly inform the Lenderof any additions to or deletions from the Equipment which individually exceed$50,000.  The Grantor shall not permitany Equipment to become a fixture with respect to real property or to become anaccession with respect to other personal property with respect to which real orpersonal property the Lender does not have a Lien.  The Grantor will not, without the Lender’s prior written consent,alter or remove any identifying symbol or number on any of the Grantor’sEquipment constituting Collateral.

 

(e)                                  TitledVehicles.  The Grantor will give theLender notice of its acquisition of any vehicle covered by a certificate oftitle and deliver to the Lender, upon request, the original of any vehicletitle

 

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certificate andprovide and/or file all other documents or instruments necessary to have theLien of the Lender noted on any such certificate or with the appropriate stateoffice.

 

4.4.                              Deliveryof Instruments, Securities, Chattel Paper and Documents. The Grantor will(a) deliver to the Lender immediately upon execution of this Security Agreementthe originals of all Chattel Paper, Securities and Instruments constitutingCollateral (if any then exist), (b) hold in trust for the Lender upon receiptand immediately thereafter deliver to the Lender any Chattel Paper, Securitiesand Instruments constituting Collateral, (c) upon the Lender’s request, deliverto the Lender (and thereafter hold in trust for the Lender upon receipt andimmediately deliver to the Lender) any Document evidencing or constitutingCollateral and (d) upon the Lender’s request, deliver to the Lender a dulyexecuted amendment to this Security Agreement, in the form of Exhibit I-1hereto, pursuant to which the Grantor will pledge such additional Collateral.  The Grantor hereby authorizes the Lender toattach each such amendment to this Security Agreement and agrees that alladditional Collateral set forth in such amendments shall be considered to bepart of the Collateral.

 

4.5.                              UncertificatedSecurities and Certain Other Investment Property. The Grantor will permitthe Lender from time to time to cause the appropriate issuers (and, if heldwith a securities intermediary, such securities intermediary) of uncertificatedsecurities or other types of Investment Property not represented bycertificates which are Collateral to mark their books and records with thenumbers and face amounts of all such uncertificated securities or other typesof Investment Property not represented by certificates and all rollovers andreplacements therefor to reflect the Liens of the Lender granted pursuant tothis Security Agreement.  The Grantorwill take any actions necessary to cause (a) the issuers of uncertificatedsecurities which are Collateral and which are Securities and (b) any securitiesintermediary which is the holder of any Investment Property, to cause theLender to have and retain Control over such Securities or other InvestmentProperty.  Without limiting theforegoing, the Grantor will, with respect to Investment Property held with asecurities intermediary, cause such securities intermediary to enter into acontrol agreement with the Lender, in form and substance satisfactory to theLender, giving the Lender Control.

 

4.6.                              PledgedCollateral.

 

(a)                                  Changesin Capital Structure of Issuers. Except as permitted by Section 6.19 of the Credit Agreement, theGrantor will not (i) permit or suffer any issuer of Capital Stock constitutingPledged Collateral to dissolve, merge, liquidate, retire any of its CapitalStock or other Instruments or Securities evidencing ownership, reduce itscapital, sell or encumber all or substantially all of its assets (except forPermitted Liens and sales of assets permitted pursuant to Section 4.1(d))or merge or consolidate with any other Person, or (ii) vote any PledgedCollateral in favor of any of the foregoing.

 

(b)                                 Issuanceof Additional Securities.  TheGrantor will not permit or suffer the issuer of Capital Stock constitutingPledged Collateral to issue additional Capital Stock, any right to receive thesame or any right to receive earnings, except to the Grantor.

 

(c)                                  Registrationof Pledged Collateral.  The Grantorwill permit any registerable Pledged Collateral to be registered in the name ofthe Lender or its nominee at any time at the option of the Lender.

 

(d)                                 Exerciseof Rights in Pledged Collateral.

 

(i)                                     Withoutin any way limiting the foregoing and subject to clause (ii) below, the Grantorshall have the right to exercise all voting rights or other rights relating tothe Pledged Collateral for all purposes not inconsistent with this SecurityAgreement, the Credit Agreement or any other Loan Document; *providedhowever*, *that* no vote or

 

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other right shall be exercised or action taken whichwould have the effect of impairing the rights of the Lender in respect of thePledged Collateral.

 

(ii)                                  TheGrantor will permit the Lender or its nominee at any time after the occurrenceof a Default, without notice, to exercise all voting rights or other rightsrelating to Pledged Collateral, including, without limitation,  exchange, subscription or any other rights,privileges, or options pertaining to any Capital Stock or Investment Propertyconstituting Pledged Collateral as if it were the absolute owner thereof.

 

(iii)                               The Grantor shall beentitled to collect and receive for its own use all cash dividends and interestpaid in respect of the Pledged Collateral to the extent not in violation of theCredit Agreement other than any of the following distributions andpayments (collectively referred to as the “Excluded Payments”): (A)dividends and interest paid or payable other than in cash in respect of anyPledged Collateral, and instruments and other property received, receivable orotherwise distributed in respect of, or in exchange for, any PledgedCollateral;  (B) dividends and otherdistributions paid or payable in cash in respect of any Pledged Collateral inconnection with a partial or total liquidation or dissolution or in connectionwith a reduction of capital, capital surplus or paid-in capital of an issuer;and (C) cash paid, payable or otherwise distributed, in respect of principalof, or in redemption of, or in exchange for, any Pledged Collateral; *providedhowever, that* until actually paid, all rights to such distributionsshall remain subject to the Liens created by this Security Agreement; and

 

(iv)                              AllExcluded Payments and all other distributions in respect of any of the PledgedCollateral, whenever paid or made, shall be delivered to the Lender to hold asPledged Collateral and shall, if received by the Grantor, be received in trustfor the benefit of the Lender, be segregated from the other property or fundsof the Grantor, and be forthwith delivered to the Lender as Pledged Collateralin the same form as so received (with any necessary endorsement).

 

4.7.                              IntellectualProperty.

 

(a)                                  TheGrantor will use its best efforts to secure all consents and approvalsnecessary or appropriate for the assignment to or benefit of the Lender of anyLicense or any License Right held by the Grantor and to enforce the securityinterests granted hereunder.

 

(b)                                 TheGrantor shall notify the Lender immediately if it knows or has reason to knowthat any application or registration relating to any material Patent, Trademarkor Copyright (now or hereafter existing) may become abandoned or dedicated, orof any adverse determination or development (including, without limitation, theinstitution of, or any such determination or development in, any proceeding inthe United States Patent and Trademark Office, the United States CopyrightOffice or any court) regarding the Grantor’s ownership of any Patent, Trademarkor Copyright, its right to register the same, or to keep and maintain the same.

 

(c)                                  Inno event shall the Grantor, either directly or through any employee, licenseeor designee, file an application for the registration of any Patent, Trademarkor Copyright with the United States Patent and Trademark Office, the UnitedStates Copyright Office or any similar office or agency without giving theLender prior written notice thereof, and, upon request of the Lender, theGrantor shall execute and deliver any and all security agreements as the Lendermay request to evidence the Lender’s first priority security

 

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interest on suchPatent, Trademark or Copyright, and the General Intangibles of the Grantorrelating thereto or represented thereby.

 

(d)                                 TheGrantor shall take all actions necessary or requested by the Lender to maintainand pursue each application, to obtain the relevant registration and tomaintain the registration and enforceability of each of the Patents, Trademarksand Copyrights (now or hereafter existing), including, without limitation, thefiling of applications for renewal, affidavits of use, affidavits ofnoncontestability and opposition and interference and cancellation proceedings,unless the Grantor, in its reasonable judgment shall determine that suchPatent, Trademark or Copyright is not material to the conduct of Grantor’sbusiness.

 

(e)                                  TheGrantor shall, unless it shall reasonably determine that such PatentCollateral, Trademark Collateral or Copyright Collateral is in no way materialto the conduct of its business or operations, promptly sue for infringement,misappropriation or dilution and to recover any and all damages for suchinfringement, misappropriation or dilution, and shall take such other actionsas the Lender shall deem appropriate under the circumstances to protect such PatentCollateral, Trademark Collateral or Copyright Collateral.  In the event that the Grantor institutessuit because any of the Patents Collateral, Trademark Collateral or CopyrightCollateral constituting Collateral is infringed upon, or misappropriated ordiluted by a third party, the Grantor shall comply with Section 4.8.

 

(f)                                    The Grantor shall not enter into anyLicenses, as licensor or licenses, except in the ordinary course of businesswithout the prior written consent of Bank. Grantor will continue to use, and will cause the use of, reasonable andproper statutory notice in connection with its use of each Patent, Trademarkand Copyright.

 

(g)                                 The Grantor agrees that, should it obtain anyright, title or interest in any material Copyright Collateral, PatentCollateral, or Trademark Collateral which is not now identified in Exhibit D,(i) Grantor shall give prompt written notice to Lender, (ii) the provisions of Article IIwill automatically apply to the Copyright Collateral, Patent Collateral, orTrademark Collateral acquired or obtained, and (iii) each of such CopyrightCollateral, Patent Collateral, or Trademark Collateral will automaticallybecome part of the Collateral.  Uponthe Lender’s request, Grantor shall to deliver to the Lender a duly executedamendment to this Security Agreement in the form of Exhibit I-2 hereto,and Grantor authorizes Lender to modifythis Security Agreement, to amend Exhibit D to include any CopyrightCollateral, Patent Collateral, or Trademark Collateral which becomes part ofthe Collateral under this Section 4.7(g). The Grantor hereby authorizes the Lender to attach each suchamendment to this Security Agreement and agrees that all additional Collateralset forth in such amendments shall be considered to be part of the Collateral.

 

4.8.                              CommercialTort Claims.  The Grantor shallpromptly, and in any event within two Business Days after the same is acquiredby it, notify the Lender of any commercial tort claim (as defined in the UCC)acquired by it and, unless the Lender otherwise consents, the Grantor shallenter into a supplement to this Security Agreement, granting to Lender a firstpriority security interest in such commercial tort claim.

 

4.9.                              Letter-of-CreditRights.  If the Grantor is orbecomes the beneficiary of a letter of credit, the Grantor shall promptly, andin any event within two Business Days after becoming a beneficiary, notify theLender thereof and cause the issuer and/or confirmation bank to (i) consent tothe assignment of any Letter-of-Credit Rights to the Lender and (ii) agree todirect all payments thereunder to a Deposit Account at the Lender or subject toa Deposit Account Control Agreement for application to the Secured Obligations,in accordance with Section 2.16 of the Credit Agreement, all in form andsubstance reasonably satisfactory to the Lender.

 

4.10.                        Federal, State or MunicipalClaims.  The Grantor will promptlynotify the Lender of any Collateral which constitutes a claim against theUnited States government or any state or local government or

 

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anyinstrumentality or agency thereof, the assignment of which claim is restrictedby federal, state or municipal law.

 

4.11.                        No Interference.  The Grantor agrees that it will notinterfere with any right, power and remedy of the Lender provided for in thisSecurity Agreement or now or hereafter existing at law or in equity or bystatute or otherwise, or the exercise or beginning of the exercise by theLender of any one or more of such rights, powers or remedies.

 

4.12.                        Assigned Contracts.  The Grantor shall fully perform all of itsobligations under each of the Assigned Contracts, and shall enforce all of itsrights and remedies thereunder, in each case, as it deems appropriate in itsbusiness judgment.  Without limiting thegenerality of the foregoing, the Grantor shall take all action necessary orappropriate to permit, and shall not take any action which would have anymaterially adverse effect upon, the full enforcement of all indemnification rightsunder its Assigned Contracts. The Grantor shall notify the Lender in writing,promptly after the Grantor becomes aware thereof, of any event or fact whichcould give rise to a material claim by it for indemnification under any of itsmaterial Assigned Contracts, and shall diligently pursue such right and reportto the Lender on all further developments with respect thereto.  The Grantor shall deposit into a DepositAccount at the Lender or subject to a Deposit Account Control Agreement forapplication to the Secured Obligations, in accordance with Section 2.16 ofthe Credit Agreement, all amounts received by the Grantor as indemnification orotherwise pursuant to its Assigned Contracts. If the Grantor shall fail after the Lender’s demand to pursue diligentlyany right under its material Assigned Contracts, or if a Default then exists,the Lender may directly enforce such right in its own or the Grantor’s name andmay enter into such settlements or other agreements with respect thereto as theLender shall determine.  In any suit,proceeding or action brought by the Lender under any material Assigned Contractfor any sum owing thereunder or to enforce any provision thereof, the Grantorshall indemnify and hold the Lender and Lender harmless from and against allexpense, loss or damage suffered by reason of any defense, setoff,counterclaims, recoupment, or reduction of liability whatsoever of the obligorthereunder arising out of a breach by the Grantor of any obligation thereunderor arising out of any other agreement, indebtedness or liability at any timeowing from the Grantor to or in favor of such obligor or its successors.  All such obligations of the Grantor shall beand remain enforceable only against the Grantor and shall not be enforceableagainst the Lender.  Notwithstanding anyprovision hereof to the contrary, the Grantor shall at all times remain liableto observe and perform all of its duties and obligations under its AssignedContracts, and the Lender’s exercise of any of its rights with respect to theCollateral shall not release the Grantor from any of such duties andobligations.  The Lender shall not beobligated to perform or fulfill any of the Grantor’s duties or obligationsunder its Assigned Contracts or to make any payment thereunder, or to make anyinquiry as to the nature or sufficiency of any payment or property received byit thereunder or the sufficiency of performance by any party thereunder, or topresent or file any claim, or to take any action to collect or enforce anyperformance, any payment of any amounts, or any delivery of any property.

 

 

**ARTICLE V**

**DEFAULT**

 

5.1.                              Theoccurrence of any one or more of the following events shall constitute a“Default” hereunder:

 

(a)                                  Anyrepresentation or warranty made by or on behalf of the Grantor under or inconnection with this Security Agreement shall be materially false as of thedate on which made.

 

(b)                                 Thebreach by the Grantor of any of the terms or provisions of Article IVor Article VII.

 

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(c)                                  Thebreach by the Grantor (other than a breach which constitutes a Default underany other Section of this Article V) of any of the terms orprovisions of this Security Agreement which is not remedied within ten daysafter such breach.

 

(d)                                 Theoccurrence of any “Default” under, and as defined in, the Credit Agreement.

 

(e)                                  AnyCapital Stock which is included within the Collateral shall at any timeconstitute a Security or the issuer of any such Capital Stock shall take anyaction to have such interests treated as a Security unless (i) all certificatesor other documents constituting such Security have been delivered to the Lenderand such Security is properly defined as such under Article 8 of the UCCof the applicable jurisdiction, whether as a result of actions by the issuerthereof or otherwise, or (ii) the Lender has entered into a control agreementwith the issuer of such Security or with a securities intermediary relating tosuch Security and such Security is defined as such under Article 8 of theUCC of the applicable jurisdiction, whether as a result of actions by theissuer thereof or otherwise.

 

5.2.             Remedies.

 

(a)                                  Uponthe occurrence of a Default, the Lender may exercise any or all of thefollowing rights and remedies:

 

(i)                                     thoserights and remedies provided in this Security Agreement, the Credit Agreement,or any other Loan Document; *provided that* this Section 5.2(a)shall not be understood to limit any rights or remedies available to the Lenderprior to a Default;

 

(ii)                                  thoserights and remedies available to a secured party under the UCC (whether or notthe UCC applies to the affected Collateral) or under any other applicable law(including, without limitation,  any lawgoverning the exercise of a bank’s right of setoff or bankers’ lien) when adebtor is in default under a security agreement;

 

(iii)                               give notice of solecontrol or any other instruction under any Deposit Account Control Agreement orand other control agreement with any securities intermediary and take anyaction therein with respect to such Collateral;

 

(iv)                              withoutnotice (except as specifically provided in Section 8.1 or elsewhereherein), demand or advertisement of any kind to Grantor or any other Person,enter the premises of the Grantor where any Collateral is located (throughself-help and without judicial process) to collect, receive, assemble, process,appropriate, sell, lease, assign, grant an option or options to purchase orotherwise dispose of, deliver, or realize upon, the Collateral or any partthereof in one or more parcels at public or private sale or sales (which salesmay be adjourned or continued from time to time with or without notice and maytake place at the Grantor’s premises or elsewhere), for cash, on credit or forfuture delivery without assumption of any credit risk, and upon such otherterms as the Lender may deem commercially reasonable; and

 

(v)                                 concurrentlywith written notice to the Grantor, transfer and register in its name or in thename of its nominee the whole or any part of the Pledged Collateral, toexchange certificates or instruments representing or evidencing PledgedCollateral for certificates or instruments of smaller or larger denominations,to exercise the voting and all other rights as a holder with respect thereto,to collect and receive all cash

 

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dividends, interest, principal and other distributionsmade thereon and to otherwise act with respect to the Pledged Collateral asthough the Lender was the outright owner thereof.

 

(b)                                 TheLender may comply with any applicable state or federal law requirements inconnection with a disposition of the Collateral and compliance will not beconsidered to adversely affect the commercial reasonableness of any sale of theCollateral.

 

(c)                                  TheLender shall have the right upon any such public sale or sales and, to theextent permitted by law, upon any such private sale or sales, to purchase forthe benefit of the Lender, the whole or any part of the Collateral so sold,free of any right of equity redemption, which equity redemption the Grantorhereby expressly releases.

 

(d)                                 Untilthe Lender is able to effect a sale, lease, or other disposition of Collateral,the Lender shall have the right to hold or use Collateral, or any part thereof,to the extent that it deems appropriate for the purpose of preservingCollateral or its value or for any other purpose deemed appropriate by theLender. The Lender may, if it so elects, seek the appointment of a receiver orkeeper to take possession of Collateral and to enforce any of the Lender’sremedies, with respect to such appointment without prior notice or hearing asto such appointment.

 

(e)                                  If,after the Credit Agreement has terminated by its terms and all of theObligations have been paid in full, there remain Rate Management Obligationsoutstanding, the Lender may exercise the remedies provided in this Section 5.2upon the occurrence of any event which would allow or require the terminationor acceleration of any Rate Management Obligations pursuant to the terms of theagreement governing any Rate Management Transaction.

 

(f)                                    Notwithstandingthe foregoing, the Lender shall not be required to (i) make any demand upon, orpursue or exhaust any of its rights or remedies against, the Grantor, any otherobligor, guarantor, pledgor or any other Person with respect to the payment ofthe Secured Obligations or to pursue or exhaust any of its rights or remedieswith respect to any Collateral therefor or any direct or indirect guaranteethereof, (ii) marshal the Collateral or any guarantee of the SecuredObligations or to resort to the Collateral or any such guarantee in anyparticular order, or (iii) effect a public sale of any Collateral.

 

(g)                                 TheGrantor recognizes that the Lender may be unable to effect a public sale of anyor all the Pledged Collateral and may be compelled to resort to one or moreprivate sales thereof in accordance with clause (a) above.  The Grantor also acknowledges that anyprivate sale may result in prices and other terms less favorable to the sellerthan if such sale were a public sale and, notwithstanding such circumstances,agrees that any such private sale shall not be deemed to have been made in acommercially unreasonable manner solely by virtue of such sale being private.  The Lender shall be under no obligation todelay a sale of any of the Pledged Collateral for the period of time necessaryto permit the Grantor or the issuer of the Pledged Collateral to register suchsecurities for public sale under the Securities Act of 1933, as amended, orunder applicable state securities laws, even if the Grantor and the issuerwould agree to do so.

 

5.3.                              Grantor’sObligations Upon Default.  Upon therequest of the Lender after the occurrence of a Default, the Grantor will:

 

(a)                                  assembleand make available to the Lender the Collateral and all books and recordsrelating thereto at any place or places specified by the Lender, whether at theGrantor’s premises or elsewhere;

 

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(b)                                 permitthe Lender, by the Lender’s representatives and agents, to enter any premiseswhere all or any part of the Collateral, or the books and records relatingthereto, or both, are located, to take possession of all or any part of theCollateral or the books and records relating thereto, or both, to remove all orany part of the Collateral or the books and records relating thereto, or both,and to conduct sales of the Collateral;

 

(c)                                  prepareand file, or cause an issuer of Pledged Collateral to prepare and file, withthe Securities and Exchange Commission or any other applicable governmentagency, registration statements, a prospectus and such other documentation inconnection with the Pledged Collateral as the Lender may request, all in formand substance satisfactory to the Lender, and furnish to the Lender, or causean issuer of Pledged Collateral to furnish to the Lender, any informationregarding the Pledged Collateral in such detail as the Lender may specify;

 

(d)                                 take,or cause an issuer of Pledged Collateral to take, any and all actions necessaryto register or qualify the Pledged Collateral to enable the Lender toconsummate a public sale or other disposition of the Pledged Collateral; and

 

(e)                                  atits own expense, cause the independent certified public accountants then engagedby the Grantor to prepare and deliver to the Lender and each Lender, at anytime, and from time to time, promptly upon the Lender’s request, the followingreports with respect to the Grantor: (i) a reconciliation of all Accounts; (ii)an aging of all Accounts; (iii) trial balances; and (iv) a test verification ofsuch Accounts as the Lender may request.

 

5.4.                              Grantof Intellectual Property License. For the purpose of enabling the Lender to exercise the rights andremedies under this Article V at such time as the Lender shall belawfully entitled to exercise such rights and remedies, the Grantor hereby (a)grants to the Lender an irrevocable, nonexclusive license (exercisable withoutpayment of royalty or other compensation to the Grantor) to use, license orsublicense any Intellectual Property Rights now owned or hereafter acquired bythe Grantor, and wherever the same may be located, and including, withoutlimitation, in such license access to all media in which any of the licenseditems may be recorded or stored and to all computer software and programs usedfor the compilation or printout thereof and (b) irrevocably agrees that theLender may sell any of the Grantor’s Inventory directly to any Person,including, without limitation, Persons who have previously purchased theGrantor’s Inventory from the Grantor and in connection with any such sale orother enforcement of the Lender’s rights under this Security Agreement, maysell Inventory which bears any Trademark owned by or licensed to the Grantor andany Inventory that is covered by any Copyright owned by or licensed to theGrantor and the Lender may finish any work in process and affix any Trademarkowned by or licensed to the Grantor and sell such Inventory as provided herein.

 

 

**ARTICLE VI**

**ATTORNEY IN FACT; PROXY**

 

6.1.                              Authorizationfor Secured Party to Take Certain Action.

 

(a)                                  TheGrantor irrevocably authorizes the Lender at any time and from time to time inthe sole discretion of the Lender and appoints the Lender as its attorney infact (i) to execute on behalf of the Grantor as debtor and to file financingstatements and document cover sheets and recordation form cover sheets (andthis Security Agreement, any extracts hereof and any amendments hereto(pursuant to Section 4.7(g)), necessary or desirable in the Lender’s solediscretion to perfect and to maintain the perfection and priority of theLender’s security interest in the Collateral, (ii) to endorse and collect anycash proceeds of the Collateral,

 

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(iii) to file acarbon, photographic or other reproduction of this Security Agreement or anyfinancing statement with respect to the Collateral as a financing statement andto file any other financing statement or amendment of a financing statement(which does not add new collateral or add a debtor) in such offices as theLender in its sole discretion deems necessary or desirable to perfect and tomaintain the perfection and priority of the Lender’s security interest in theCollateral, (iv) to contact and enter into one or more agreements with theissuers of uncertificated securities which are Collateral and which areSecurities or with securities intermediaries holding other Investment Propertyas may be necessary or advisable to give the Lender Control over suchSecurities or other Investment Property, (v) to apply the proceeds of anyCollateral received by the Lender to the Secured Obligations as provided in theCredit Agreement, (vi) to discharge past due taxes, assessments, charges, feesor Liens on the Collateral (except for such Liens as are specifically permittedhereunder), and the Grantor agrees to reimburse the Lender on demand for anypayment made or any expense incurred by the Lender in connection therewith; *providedthat,* this authorization shall not relieve the Grantor of any of itsobligations under this Security Agreement or under the Credit Agreement, (vii)to demand payment or enforce payment of the Receivables in the name of theLender or the Grantor and to endorse any and all checks, drafts, and otherinstruments for the payment of money relating to the Receivables, (viii) tosign the Grantor’s name on any invoice or bill of lading relating to theReceivables, drafts against any Account Debtor of the Grantor, assignments andverifications of Receivables, (ix) to exercise all of the Grantor’s rights andremedies with respect to the collection of the Receivables and any otherCollateral, (x) to settle, adjust, compromise, extend or renew the Receivables,(xi) to settle, adjust or compromise any legal proceedings brought to collectReceivables, (xii) to prepare, file and sign the Grantor’s name on a proof ofclaim in bankruptcy or similar document against any Account Debtor of theGrantor, (xiii) to prepare, file and sign the Grantor’s name on any notice ofLien, assignment or satisfaction of Lien or similar document in connection withthe Receivables, (xiv) to change the address for delivery of mail addressed tothe Grantor to such address as the Lender may designate and to receive, openand dispose of all mail addressed to the Grantor, and (xv) to do all other actsand things necessary to carry out this Security Agreement.  In addition, the Lender may at any time, inthe Lender’s own name (if a Default exists), in the name of a nominee of theLender (if a Default exists), or in the name of the Grantor communicate (bymail, telephone, facsimile or otherwise) with the Account Debtors of suchGrantor, parties to contracts with the Grantor and obligors in respect ofInstruments of the Grantor to verify with such Persons, to the Lender’ssatisfaction, the existence, amount, terms of, and any other matter relatingto, Accounts, Instruments, Chattel Paper, payment intangibles and/or otherReceivables.

 

(b)                                 Allacts of said attorney or designee are hereby ratified and approved. The powersgranted pursuant to this Section 6.1(a) are coupled with aninterest and shall be irrevocable until the termination of this SecurityAgreement pursuant to the terms of Section 8.15.  The powers conferred on the Lender underthis Section 6.1(a) are solely to protect the Lender’s interests inthe Collateral and shall not impose any duty upon the Lender to exercise anysuch powers.  NONE OF THE LENDER OR ITSAFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BERESPONSIBLE TO THE GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWERGRANTED HEREUNDER OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCEOR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENTJURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIALDAMAGES.

 

6.2.                              PROXY.THE GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE LENDER AS THE PROXYAND ATTORNEY-IN-FACT OF THE GRANTOR WITH RESPECT TO THE PLEDGED COLLATERAL,SECURITIES, INSTRUMENTS AND OTHER INVESTMENT PROPERTY, INCLUDING THE RIGHT TOVOTE SUCH COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO.  THE APPOINTMENT OF THE LENDER AS PROXY ANDATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THEDATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.15.  IN

 

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ADDITION TO THERIGHT TO VOTE ANY SUCH COLLATERAL, THE APPOINTMENT OF THE LENDER AS PROXY ANDATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS,PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH COLLATERAL WOULD BE ENTITLED(INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLINGSPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALLBE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDINGANY TRANSFER OF ANY SUCH COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF)BY ANY PERSON (INCLUDING THE ISSUER OF SUCH COLLATERAL OR ANY OFFICER OR THEAGENT THEREOF), UPON THE OCCURRENCE OF A DEFAULT.  NOTWITHSTANDING THE FOREGOING, THE LENDER SHALL NOT HAVE ANY DUTYTO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FORANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.

 

 

**ARTICLE VII**

**DEPOSITACCOUNTS**

** **

7.1.                              CovenantRegarding New Deposit Accounts; Lock Boxes.  Before opening or replacing any Deposit Account, or establishinga new lock box, the Grantor shall (a) obtain the Lender’s consent in writing tothe opening of such Deposit Account or lock box, and (b) cause each bank orfinancial institution in which it seeks to open (i) a Deposit Account, to enterinto a Deposit Account Control Agreement with the Lender in order to give theLender Control of such Deposit Account, or (ii) a lock box, to enter into alock box Agreement with the Lender in order to give the Lender Control of thelock box.  In the case of DepositAccounts or a lock box maintained with Lender, the terms of such letter shall besubject to the provisions of the Credit Agreement regarding setoffs.

 

 

**ARTICLE VIII**

**GENERAL PROVISIONS**

 

8.1.                              Waivers.  The Grantor hereby waives notice of the timeand place of any public sale or the time after which any private sale or otherdisposition of all or any part of the Collateral may be made.  To the extent such notice may not be waivedunder applicable law, any notice made shall be deemed reasonable if sent to theGrantor, addressed as set forth in Article IX, at least ten daysprior to (i) the date of any such public sale or (ii) the time after which anysuch private sale or other disposition may be made.  To the maximum extent permitted by applicable law, the Grantorwaives all claims, damages, and demands against the Lender arising out of therepossession, retention or sale of the Collateral, except such as arise solelyout of the gross negligence or willful misconduct of the Lender as finallydetermined by a court of competent jurisdiction. To the extent it may lawfullydo so, the Grantor absolutely and irrevocably waives and relinquishes thebenefit and advantage of, and covenants not to assert against the Lender, anyvaluation, stay, appraisal, extension, moratorium, redemption or similar lawsand any and all rights or defenses it may have as a surety now or hereafterexisting which, but for this provision, might be applicable to the sale of anyCollateral made under the judgment, order or decree of any court, or privatelyunder the power of sale conferred by this Security Agreement, or otherwise.  Except as otherwise specifically providedherein, the Grantor hereby waives presentment, demand, protest or any notice(to the maximum extent permitted by applicable law) of any kind in connectionwith this Security Agreement or any Collateral.

 

8.2.                              Limitationon Lender’s Duty with Respect to the Collateral.  The Lender shall have no obligation to clean-up or otherwiseprepare the Collateral for sale. The Lender shall use reasonable care withrespect to the Collateral in its possession or under its control.  The Lender shall not have any other duty asto

 

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any Collateral in its possession or control or in thepossession or control of any agent or nominee of the Lender, or any incomethereon or as to the preservation of rights against prior parties or any otherrights pertaining thereto. To the extent that applicable law imposes duties onthe Lender to exercise remedies in a commercially reasonable manner, theGrantor acknowledges and agrees that it is commercially reasonable for theLender (i) to fail to incur expenses deemed significant by the Lender toprepare Collateral for disposition or otherwise to transform raw material orwork in process into finished goods or other finished products for disposition,(ii) to fail to obtain third party consents for access to Collateral to bedisposed of, or to obtain or, if not required by other law, to fail to obtaingovernmental or third party consents for the collection or disposition ofCollateral to be collected or disposed of, (iii) to fail to exercise collectionremedies against Account Debtors or other Persons obligated on Collateral or toremove Liens on or any adverse claims against Collateral, (iv) to exercisecollection remedies against Account Debtors and other Persons obligated onCollateral directly or through the use of collection agencies and othercollection specialists, (v) to advertise dispositions of Collateral throughpublications or media of general circulation, whether or not the Collateral isof a specialized nature, (vi) to contact other Persons, whether or not in thesame business as the Grantor, for expressions of interest in acquiring all orany portion of such Collateral, (vii) to hire one or more professionalauctioneers to assist in the disposition of Collateral, whether or not theCollateral is of a specialized nature, (viii) to dispose of Collateral byutilizing internet sites that provide for the auction of assets of the typesincluded in the Collateral or that have the reasonable capacity of doing so, orthat match buyers and sellers of assets, (ix) to dispose of assets in wholesalerather than retail markets, (x) to disclaim disposition warranties, such astitle, possession or quiet enjoyment, (xi) to purchase insurance or creditenhancements to insure the Lender against risks of loss, collection ordisposition of Collateral or to provide to the Lender a guaranteed return fromthe collection or disposition of Collateral, or (xii) to the extent deemedappropriate by the Lender, to obtain the services of other brokers, investmentbankers, consultants and other professionals to assist the Lender in thecollection or disposition of any of the Collateral.  The Grantor acknowledges that the purpose of this Section 8.2is to provide non-exhaustive indications of what actions or omissions by theLender would  be commercially reasonablein the Lender’s exercise of remedies against the Collateral and that otheractions or omissions by the Lender shall not be deemed commerciallyunreasonable solely on account of not being indicated in this Section 8.2.  Without limitation upon the foregoing,nothing contained in this Section 8.2 shall be construed to grantany rights to the Grantor or to impose any duties on the Lender that would nothave been granted or imposed by this Security Agreement or by applicable law inthe absence of this Section 8.2.

 

8.3.                              Compromisesand Collection of Collateral.  TheGrantor and the Lender recognize that setoffs, counterclaims, defenses andother claims may be asserted by obligors with respect to certain of theReceivables, that certain of the Receivables may be or become uncollectible inwhole or in part and that the expense and probability of success in litigatinga disputed Receivable may exceed the amount that reasonably may be expected tobe recovered with respect to a Receivable. In view of the foregoing, the Grantor agrees that the Lender may at anytime and from time to time, if a Default has occurred and is continuing,compromise with the obligor on any Receivable, accept in full payment of anyReceivable such amount as the Lender in its sole discretion shall determine orabandon any Receivable, and any such action by the Lender shall be commerciallyreasonable so long as the Lender acts in good faith based on information knownto it at the time it takes any such action.

 

8.4.                              SecuredParty Performance of Debtor Obligations. Without having any obligation to do so, the Lender may perform or payany obligation which the Grantor has agreed to perform or pay in this SecurityAgreement and the Grantor shall reimburse the Lender for any amounts paid bythe Lender pursuant to this Section 8.4.  The Grantor’s obligation to reimburse the Lender pursuant to thepreceding sentence shall be a Secured Obligation payable on demand.

 

8.5.                              SpecificPerformance of Certain Covenants. The Grantor acknowledges and agrees that a breach of any of thecovenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.5,4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 5.3,or

 

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8.7 or in Article VIIwill cause irreparable injury to the Lender, that the Lender and Lender have noadequate remedy at law in respect of such breaches and therefore agrees,without limiting the right of the Lender to seek and obtain specificperformance of other obligations of the Grantor contained in this SecurityAgreement, that the covenants of the Grantor contained in the Sections referredto in this Section 8.5 shall be specifically enforceable againstthe Grantor.

 

8.6.                              Useand Possession of Certain Premises. Upon the occurrence of a Default, the Lender shall be entitled to occupyand use any premises owned or leased by the Grantor where any of the Collateralor any records relating to the Collateral are located until the SecuredObligations are paid or the Collateral is removed therefrom, whichever firstoccurs, without any obligation to pay the Grantor for such use and occupancy.

 

8.7.                              DispositionsNot Authorized.  The Grantor is notauthorized to sell or otherwise dispose of the Collateral except as set forthin Section 4.1(d) and notwithstanding any course of dealing betweenthe Grantor and the Lender or other conduct of the Lender, no authorization tosell or otherwise dispose of the Collateral (except as set forth in Section 4.1(d))shall be binding upon the Lender unless such authorization is in writing signedby the Lender.

 

8.8.                              NoWaiver; Amendments; Cumulative Remedies. No delay or omission of the Lenderto exercise any right or remedy granted under this Security Agreement shallimpair such right or remedy or be construed to be a waiver of any Default or anacquiescence therein, and any single or partial exercise of any such right orremedy shall not preclude any other or further exercise thereof or the exerciseof any other right or remedy. No waiver, amendment or other variation of theterms, conditions or provisions of this Security Agreement whatsoever shall bevalid unless in writing signed by the Lender and then only to the extent insuch writing specifically set forth. All rights and remedies contained in this Security Agreement or by lawafforded shall be cumulative and all shall be available to the Lender until theSecured Obligations have been paid in full.

 

8.9.                              Limitationby Law; Severability of Provisions. All rights, remedies andpowers provided in this Security Agreement may be exercised only to the extentthat the exercise thereof does not violate any applicable provision of law, andall the provisions of this Security Agreement are intended to be subject to allapplicable mandatory provisions of law that may be controlling and to belimited to the extent necessary so that they shall not render this SecurityAgreement invalid, unenforceable or not entitled to be recorded or registered,in whole or in part.  Any provision inany this Security Agreement that is held to be inoperative, unenforceable, orinvalid in any jurisdiction shall, as to that jurisdiction, be inoperative,unenforceable, or invalid without affecting the remaining provisions in thatjurisdiction or the operation, enforceability, or validity of that provision inany other jurisdiction, and to this end the provisions of this SecurityAgreement are declared to be severable.

 

8.10.                        Reinstatement.  This Security Agreement shall remain in fullforce and effect and continue to be effective should any petition be filed byor against the Grantor for liquidation or reorganization, should the Grantorbecome insolvent or make an assignment for the benefit of any creditor orcreditors or should a receiver or trustee be appointed for all or anysignificant part of the Grantor’s assets, and shall continue to be effective orbe reinstated, as the case may be, if at any time payment and performance ofthe Secured Obligations, or any part thereof, is, pursuant to applicable law,rescinded or reduced in amount, or must otherwise be restored or returned byany obligee of the Secured Obligations, whether as a “voidable preference,”“fraudulent conveyance,” or otherwise, all as though such payment orperformance had not been made.  In theevent that any payment, or any part thereof, is rescinded, reduced, restored orreturned, the Secured Obligations shall be reinstated and deemed reduced onlyby such amount paid and not so rescinded, reduced, restored or returned.

 

8.11.                        Benefit of Agreement.  The terms and provisions of this SecurityAgreement shall be binding upon and inure to the benefit of the Grantor, theLender and its successors and assigns (including, without

 

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limitation, allPersons who become bound as a debtor to this Security Agreement), except thatthe Grantor shall not have the right to assign its rights or delegate itsobligations under this Security Agreement or any interest herein, without theprior written consent of the Lender.  Nosales of participations, assignments, transfers, or other dispositions of anyagreement governing the Secured Obligations or any portion thereof or interesttherein shall in any manner impair the Liens granted to the Lender hereunder.

 

8.12.                        Survival of Representations.  All representations and warranties of theGrantor contained in this Security Agreement shall survive the execution anddelivery of this Security Agreement.

 

8.13.                        Taxes and Expenses.  Any taxes (including, without limitation,income taxes) payable or ruled payable by Federal or State authority in respectof this Security Agreement shall be paid by the Grantor, together with interestand penalties, if any.  The Grantorshall reimburse the Lender for any and all out-of-pocket expenses and internalcharges (including, without limitation, reasonable attorneys’, auditors’ andaccountants’ fees and reasonable time charges of attorneys, paralegals,auditors and accountants who may be employees of the Lender) paid or incurredby the Lender in connection with the preparation, execution, delivery,administration, collection and enforcement of this Security Agreement and inthe audit, analysis, administration, collection, preservation or sale of theCollateral (including, without limitation, the expenses and charges associatedwith any periodic or special audit of the Collateral).  Any and all costs and expenses incurred bythe Grantor in the performance of actions required pursuant to the terms hereofshall be borne solely by the Grantor.

 

8.14.                        Headings.  The title of and section headings inthis Security Agreement are for convenience of reference only, and shall notgovern the interpretation of any of the terms and provisions of this SecurityAgreement.

 

8.15.                        Termination.  This Security Agreement shall continue ineffect (notwithstanding the fact that from time to time there may be no SecuredObligations outstanding) until (i) the Credit Agreement has terminated pursuantto its express terms and (ii) all of the Secured Obligations have beenindefeasibly paid and performed in full and no commitments of the Lender whichwould give rise to any Secured Obligations are outstanding.

 

8.16.                        Entire Agreement.  This Security Agreement embodies the entireagreement and understanding between the Grantor and the Lender relating to theCollateral and supersedes all prior agreements and understandings between theGrantor and the Lender relating to the Collateral.

 

8.17.                        **CHOICE OF LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNEDBY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OFCONFLICTS) OF THE STATE OF OHIO, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLETO NATIONAL BANKS.**

 

8.18.                        **CONSENT TO JURISDICTION.  THE GRANTOR HEREBY IRREVOCABLY SUBMITS TOTHE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR OHIO STATE COURT SITTINGIN CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TOTHIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AND THE GRANTOR HEREBYIRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDINGMAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANYOBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS ANINCONVENIENT FORUM.  NOTHING HEREINSHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE GRANTOR INTHE**

 

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**COURTS OF ANY OTHERJURISDICTION.  ANY JUDICIAL PROCEEDINGBY THE GRANTOR AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING,DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, ORCONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BEBROUGHT ONLY IN A COURT IN CINCINNATI, OHIO.**

 

8.19.                        **WAIVER OF JURY TRIAL. THEGRANTOR AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGINVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITHTHIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIPESTABLISHED THEREUNDER.**

 

8.20.                        Indemnity.  The Grantor hereby agrees to indemnify theLender and its successors, assigns, agents and employees, from and against anyand all liabilities, damages, penalties, suits, costs, and expenses of any kindand nature (including, without limitation, all expenses of litigation or preparation therefor (including, withoutlimitation, reasonable attorneys’ fees) whether or not the Lender is a partythereto) imposed on, incurred by or asserted against the Lender, or itssuccessors, assigns, agents and employees, in any way relating to or arisingout of this Security Agreement, or the manufacture, purchase, acceptance,rejection, ownership, delivery, lease, possession, use, operation, condition,sale, return or other disposition of any Collateral (including, withoutlimitation, latent and other defects, whether or not discoverable by the Lenderor the Grantor, and any claim for Patent, Trademark or Copyright infringement).

 

8.21.                        Counterparts.  This Security Agreement may be executed inany number of counterparts, all of which taken together shall constitute oneagreement, and any of the parties hereto may execute this Security Agreement bysigning any such counterpart.

 

**ARTICLE IX**

**NOTICES**

 

9.1.                              SendingNotices.  Any notice required orpermitted to be given under this Security Agreement shall be sent by UnitedStates mail, telecopier, personal delivery or nationally established overnightcourier service, and shall be deemed received (a) when received, if sent byhand or overnight courier service, or mailed by certified or registered mailnotices or (b) when sent, if sent by telecopier (except that, if not given duringnormal business hours for the recipient, shall be deemed to have been given atthe opening of business on the next Business Day for the recipient), in eachcase addressed to the Grantor at the address set forth on Exhibit A asits principal place of business, and to the Lender at the address set forth inthe Credit Agreement.

 

9.2.                              Changein Address for Notices.  Each of theGrantor and the Lender may change the address for service of notice upon it bya notice in writing to the other parties.

 

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Grantor and the Lender have executed thisSecurity Agreement as of the date first above written.

 
|   | GRANTOR:                      |
|--------|-------------------------------|
|   |                          |
|   | MAGNETEK LEASING  CORPORATION |
|   |                          |
|   | By:                           | /s/ David P.  Reiland |   |
|   | Name:                         | David P. Reiland |
|   | Title:                        | President |
|   |                          |
|   |                          |
|   | LENDER:                       |
|   |                          |
|   | BANK ONE, NA                  |
|   |                          |
|   | By:                           | /s/ David L.  Carey |   |
|   | Name:                         | David L. Carey |
|   | Title:                        | Director |
|        |                               |  |  |  |  |  |

 

 

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**EXHIBIT I-1**

(See Section 4.4 of Security Agreement)

 

AMENDMENT

 

 

This Amendment, dated                            ,         is delivered pursuant to Section 4.4of the Security Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto orincorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations andwarranties in Article III of the Security Agreement are andcontinue to be true and correct.  Theundersigned further agrees that this Amendment may be attached to that certainSecurity Agreement, dated August 15, 2003, between the undersigned, as theGrantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and thatthe Collateral listed on Schedule I to this Amendment shall be andbecome a part of the Collateral referred to in said Security Agreement andshall secure all Secured Obligations referred to in said Security Agreement.

 
|   | MAGNETEK LEASING CORPORATION |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          |   |
|   | Name:                        |   |   |
|   | Title:                       |   |   |
|        |                              |  |  |  |  |

 

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SCHEDULE  I TOAMENDMENT

 

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**EXHIBIT I-2**

(See Section 4.7(g) of Security Agreement)

 

AMENDMENT

 

 

This Amendment, dated                           ,         is delivered pursuant to Section 4.7(g)of the Security Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto orincorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations andwarranties in Article III of the Security Agreement are andcontinue to be true and correct.  Theundersigned further agrees that this Amendment may be attached to that certainSecurity Agreement, dated August 15, 2003, between the undersigned, as theGrantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and thatthe Collateral listed on Schedule I to this Amendment shall be andbecome a part of the Collateral referred to in said Security Agreement andshall secure all Secured Obligations referred to in said Security Agreement.

 
|   | MAGNETEK LEASING CORPORATION |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          |   |
|   | Name:                        |   |   |
|   | Title:                       |   |   |
|        |                              |  |  |  |  |

 

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SCHEDULE I TOAMENDMENT

 

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