**Exhibit10.2**

 

# **PLEDGE AND SECURITY AGREEMENT**

 

THIS PLEDGE ANDSECURITY AGREEMENT (as it may be amended or modified from time to time, this “SecurityAgreement”) is entered into as of August 15, 2003 by and betweenMAGNETEK, INC., a Delaware corporation, with an address of 10900 WilshireBoulevard, Suite 850, Los Angeles, California 90024-6501 (the “Grantor”),and BANK ONE, NA, a national banking association having its principal office inChicago, Illinois with an address of 8044 Montgomery Road, Cincinnati, Ohio45236 (“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 used hereinas 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, or Trademarks,(b) all income, royalties, damages, claims, and payments now or hereafter dueor payable under and with respect thereto, including, without limitation,  damages and payments for past and futurebreaches thereof, and (c) all rights to sue for past, present, and futurebreaches 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 of theforegoing, including, without limitation, the right to settle suits involvingclaims and demands for royaltiesowing; and (f) all rights corresponding to any of the foregoing throughout theworld; *providedhowever*, nothing in this Security Agreement 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 Use Applicationsare specifically excluded from Trademark Collateral for purposes of thisAgreement.

 

“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 OFSECURITY 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; *provided, however,* the Collateral shallnot include Excluded Foreign Stock.

 

 

**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’slocations where Collateral is located, as of the Closing Date, are listed on ExhibitA.  All of said locations are ownedby the Grantor except for locations (i) which are leased by the Grantor aslessee and designated in Part VII(b) of Exhibit A and (ii) atwhich Inventory is held in a public warehouse or is otherwise held by a baileeor on consignment 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’s jurisdictionof 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

 

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delivery of alloriginals and the placement of a legend on all Chattel Paper as requiredhereunder) has been duly taken. The Lender will have a fully perfected firstpriority security interest and Lien in the Collateral listed on Exhibit C,subject only to Liens permitted under Section 4.1(e).

 

3.8.                              Accountsand Chattel Paper.

 

(a)                                  Thenames of the obligors, amounts owing, due dates and other information withrespect to the Accounts and Chattel Paper are and will be correctly stated inall records of the Grantor relating thereto and in all invoices and CollateralReports with respect thereto furnished to the Lender by the Grantor from timeto time.  As of the time when eachAccount or each item of Chattel Paper arises, the Grantor shall be deemed tohave represented and warranted that such Account or Chattel Paper, as the case maybe, and all records relating thereto, are genuine and in all respects what theypurport to be.

 

(b)                                 Withrespect to Accounts, except as specifically disclosed on the most recentCollateral Report or otherwise identified in a Record transmitted to Lender byGrantor, (i) all Accounts are Eligible Accounts; (ii) all Accounts representbona fide sales of Inventory or rendering of services to Account Debtors in theordinary course of the Grantor’s business and are not evidenced by a judgment,Instrument or Chattel Paper; (iii) there are no setoffs, claims or disputesexisting or asserted with respect thereto and the Grantor has not made anyagreement with any Account Debtor for any extension of time for the paymentthereof, any compromise or settlement for less than the full amount thereof,any release of any Account Debtor from liability therefor, or any deductiontherefrom except a discount or allowance allowed by Grantor in the ordinarycourse of its business for prompt payment and disclosed to the Lender; (iv) toGrantor’s knowledge, there are no facts, events or occurrences which in any wayimpair the validity or enforceability thereof or could reasonably be expectedto reduce the amount payable thereunder as shown on the Grantor’s books andrecords and any invoices, statements and Collateral Reports with respectthereto; (v) the Grantor has not received any notice of proceedings or actionswhich are threatened or pending against any Account Debtor which might resultin any adverse change in such Account Debtor’s financial condition; and (vi) theGrantor has no knowledge that any Account Debtor is unable generally to pay itsdebts as they become due.

 

(c)                                  Inaddition, with respect to all Accounts, (i) the amounts shown on all invoices,statements and Collateral Reports with respect thereto are actually andabsolutely owing to the Grantor as indicated thereon and are not in any waycontingent; (ii) no payments have been or shall be made thereon except paymentsimmediately delivered to the Lock Box or a Cash Collateral Account as requiredpursuant to the Credit Agreement; and (iii) to the Grantor’s knowledge, allAccount Debtors have the capacity to contract.

 

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) except as specificallydisclosed in the most recent Collateral Report or otherwise identified in aRecord transmitted to Lender by Grantor, such Inventory is Eligible Inventoryof good and merchantable quality, free from any defects, (e) such Inventory isnot subject to any licensing, patent, royalty, trademark, trade name orcopyright agreements with any third parties which would require any consent ofany third party upon sale or disposition of that Inventory or the payment ofany monies to any third party upon such sale or other disposition, (f) suchInventory has been produced in accordance with the Federal Fair Labor StandardsAct of 1938, as amended, and all rules, regulations and orders thereunder and(g) the completion of manufacture, sale or other disposition of such Inventoryby the

 

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Lender following aDefault shall not require the consent of any Person and shall not constitute abreach or default under any contract or agreement to which the Grantor is aparty 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, orunenforceable, 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 orunenforceable, in whole or in part, and each registered trademark and servicemark and, to Grantor’s knowledge, each application for trademark and servicemark registration 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 invalid or unenforceable,including prior unauthorized uses by third parties and uses which were notsupported by the goodwill of the business connected with such item.  Grantor has not granted any license,release, covenant not to sue, or non-assertion assurance to any Person withrespect to any part of the Trademark Collateral except as otherwise disclosedin Exhibit D.  Reasonable andproper statutory notice has been used in connection with the use of eachregistered trademark and service mark. The Trademark License Rights are in full force and effect, and Grantoris not in default under any of the Trademark License Rights and, to Grantor’sknowledge, no event has occurred which with notice, the passage of time, thesatisfaction of any other condition, or all of them, might constitute a defaultby 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 CopyrightLicense 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 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

 

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for which Liensmay be perfected by filing under any federal statute except for (a) thevehicles described in Part II of Exhibit E and (b) Patents, Trademarksand Copyrights held by the Grantor and described in Exhibit D.  The county and street address of eachproperty on which any Fixtures are located is set forth in Exhibit Ftogether with the name and address of the 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 interesttherein as a General Intangible, (iii) except as agreed by Lender, all suchSecurities or other types of Investment Property held by a securitiesintermediary are covered by a control agreement among the Grantor, thesecurities intermediary and the Lender pursuant to which the Lender has Controland (iv) all Instruments which represent Indebtedness owed to the Grantor by aSubsidiary thereof have been duly authorized, authenticated or issued anddelivered by the issuer of such Indebtedness, are the legal, valid and bindingobligation of such 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.

 

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**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, regardlessof whether any particular asset comprised in the Collateral falls within thescope of Article 9 of the UCC or such jurisdiction, or (2) by any otherdescription which reasonably approximates the description contained in thisSecurity Agreement, and (ii) contain any other information required by part 5of Article 9 of the UCC for the sufficiency or filing office acceptance ofany financing statement or amendment, including, without limitation, (A)whether the Grantor is an organization, the type of organization and anyorganization identification number issued to the Grantor, and (B) in the caseof a financing statement filed as a fixture filing or indicating Collateral asas-extracted collateral or timber to be cut, a sufficient description of realproperty to which the Collateral relates. The Grantor also agrees to furnish any such information to the Lenderpromptly upon request.  The Grantor alsoratifies its authorization for the Lender to have filed in any UCC jurisdictionany initial financing statements or amendments thereto if filed prior to thedate hereof.  The Grantor herebyauthorizes the Lender to complete, execute and file any document cover sheetsand recordation form cover sheets evidencing security interests in theCopyright Collateral, the Trademark Collateral and the Patent 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 underSection 9-509(d)(2) of the UCC.

 

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(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.

 

(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 and each of the facts required to be disclosed to the Lenderin accordance with this Section 4.2(d) on the Borrowing BaseCertificates submitted by it.

 

(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

 

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damaged ordefective 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 Liensthereon.  Whenever any Inventory isreturned, the related Account shall be deemed ineligible to the extent of theamount owing by the Account Debtor with respect to such returned Inventory andsuch returned Inventory shall not be Eligible Inventory.

 

(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 certificate and provide and/or file all other documents or instrumentsnecessary to have the Lien of the Lender noted on any such certificate or withthe appropriate state office.

 

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 additionalCollateral.  The Grantor hereby authorizesthe Lender to attach each such amendment to this Security Agreement and agreesthat all additional Collateral set forth in such amendments shall be consideredto be part 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

 

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uncertificatedsecurities or other types of Investment Property not represented by certificatesand all rollovers and replacements therefor to reflect the Liens of the Lendergranted pursuant to this Security Agreement. The Grantor will take any actions necessary to cause (a) the issuers ofuncertificated securities which are Collateral and which are Securities and (b)any securities intermediary which is the holder of any Investment Property, tocause the Lender to have and retain Control over such Securities or otherInvestment Property.  Without limitingthe foregoing, the Grantor will, with respect to Investment Property held witha securities 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 6.19of the Credit Agreement, the Grantor will not (i) permit or suffer any issuerof Capital Stock constituting Pledged Collateral to dissolve, merge, liquidate,retire any of its Capital Stock or other Instruments or Securities evidencingownership, reduce its capital, sell or encumber all or substantially all of itsassets (except for Permitted 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 other right shall beexercised or action taken which would have the effect of impairing the rightsof the Lender in respect of the Pledged 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

 

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distributed, in respect of principal of, or inredemption of, or in exchange for, any Pledged Collateral; *provided however, that* untilactually paid, all rights to such distributions shall remain subject to theLiens 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 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 suchPatent Collateral, 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.

 

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(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 or becomesthe beneficiary of a letter of credit, the Grantor shall promptly, and in anyevent within two Business Days after becoming a beneficiary, notify the Lenderthereof and cause the issuer and/or confirmation bank to (i) consent to theassignment 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 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 indemnificationrights under its Assigned Contracts. The Grantor shall notify the Lender inwriting, promptly after the Grantor becomes aware thereof, of any event or factwhich could give rise to a material claim by it for indemnification under anyof its material Assigned Contracts, and shall diligently pursue such right andreport to 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 for applicationto the Secured Obligations, in accordance with Section 2.16 of the CreditAgreement, all amounts received by the Grantor as indemnification or otherwisepursuant to its Assigned

 

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Contracts.  If the Grantor shall fail after the Lender’sdemand to pursue diligently any right under its material Assigned Contracts, orif a Default then exists, the Lender may directly enforce such right in its ownor the Grantor’s name and may enter into such settlements or other agreementswith respect thereto as the Lender shall determine.  In any suit, proceeding or action brought by the Lender under anymaterial Assigned Contract for any sum owing thereunder or to enforce anyprovision thereof, the Grantor shall indemnify and hold the Lender and Lender harmlessfrom and against all expense, loss or damage suffered by reason of any defense,setoff, counterclaims, recoupment, or reduction of liability whatsoever of theobligor thereunder arising out of a breach by the Grantor of any obligationthereunder or arising out of any other agreement, indebtedness or liability atany time owing from the Grantor to or in favor of such obligor or itssuccessors.  All such obligations of theGrantor shall be and remain enforceable only against the Grantor and shall notbe enforceable against the Lender. Notwithstanding any provision hereof to the contrary, the Grantor shallat all times remain liable to observe and perform all of its duties andobligations under its Assigned Contracts, and the Lender’s exercise of any ofits rights with respect to the Collateral shall not release the Grantor fromany of such duties and obligations.  TheLender shall not be obligated to perform or fulfill any of the Grantor’s dutiesor obligations under its Assigned Contracts or to make any payment thereunder,or to make any inquiry as to the nature or sufficiency of any payment orproperty received by it thereunder or the sufficiency of performance by anyparty thereunder, or to present or file any claim, or to take any action tocollect or enforce any performance, any payment of any amounts, or any deliveryof 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.

 

(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.

 

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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 dividends, interest, principal and otherdistributions made thereon and to otherwise act with respect to the PledgedCollateral as though 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

 

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to enforce any ofthe Lender’s remedies, with respect to such appointment without prior notice orhearing as to 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;

 

(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

 

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(e)                                  atits own expense, cause the independent certified public accountants thenengaged by the Grantor to prepare and deliver to the Lender and each Lender, atany time, and from time to time, promptly upon the Lender’s request, thefollowing reports with respect to the Grantor: (i) a reconciliation of all Accounts;(ii) an aging of all Accounts; (iii) trial balances; and (iv) a testverification of such 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 Grantorand any 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**

**ATTORNEYIN 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, (iii) to file a carbon, photographic or otherreproduction of this Security Agreement or any financing statement with respectto the Collateral as a financing statement and to file any other financingstatement or amendment of a financing statement (which does not add new collateralor add a debtor) in such offices as the Lender in its sole discretion deemsnecessary or desirable to perfect and to maintain the perfection and priorityof the Lender’s security interest in the Collateral, (iv) to contact and enterinto one or more agreements with the issuers of uncertificated securities whichare Collateral and which are Securities or with securities intermediariesholding other Investment Property as may be necessary or advisable to give theLender Control over such Securities or other Investment Property, (v) to applythe proceeds of any Collateral received by the Lender to the SecuredObligations as provided in the Credit Agreement, (vi) to discharge past duetaxes, assessments, charges, fees or Liens on the Collateral (except for suchLiens as are specifically permitted hereunder), and the Grantor agrees toreimburse the Lender on demand for any payment made or any expense incurred bythe Lender in connection therewith; *provided that,* this authorization shallnot relieve the Grantor of any of its obligations under this Security Agreementor under the Credit Agreement, (vii) to demand payment or enforce payment ofthe Receivables in the name of the Lender or the Grantor and to endorse any andall checks, drafts, and other instruments for the payment of money relating tothe Receivables, (viii) to sign the Grantor’s name on any invoice or bill oflading relating to the Receivables, drafts against any Account Debtor of theGrantor, assignments and verifications of Receivables, (ix) to exercise all ofthe Grantor’s rights and remedies

 

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with respect tothe collection of the Receivables and any other Collateral, (x) to settle,adjust, compromise, extend or renew the Receivables, (xi) to settle, adjust orcompromise any legal proceedings brought to collect Receivables, (xii) toprepare, file and sign the Grantor’s name on a proof of claim in bankruptcy orsimilar document against any Account Debtor of the Grantor, (xiii) to prepare,file and sign the Grantor’s name on any notice of Lien, assignment orsatisfaction of Lien or similar document in connection with the Receivables,(xiv) to change the address for delivery of mail addressed to the Grantor tosuch address as the Lender may designate and to receive, open and dispose ofall mail addressed to the Grantor, and (xv) to do all other acts and thingsnecessary to carry out this Security Agreement.  In addition, the Lender may at any time, in the Lender’s own name(if a Default exists), in the name of a nominee of the Lender (if a Defaultexists), or in the name of the Grantor communicate (by mail, telephone,facsimile or otherwise) with the Account Debtors of such Grantor, parties tocontracts with the Grantor and obligors in respect of Instruments of theGrantor to verify with such Persons, to the Lender’s satisfaction, theexistence, amount, terms of, and any other matter relating to, Accounts,Instruments, Chattel Paper, payment intangibles and/or other Receivables.

 

(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 ADDITION TO THE RIGHT TO VOTE ANY SUCHCOLLATERAL, THE APPOINTMENT OF THE LENDER AS PROXY AND ATTORNEY-IN-FACT SHALLINCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIESTO WHICH A HOLDER OF SUCH COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING ORWITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OFSHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFEROF ANY SUCH COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON(INCLUDING THE ISSUER OF SUCH COLLATERAL OR ANY OFFICER OR THE AGENT THEREOF),UPON THE OCCURRENCE OF A DEFAULT. NOTWITHSTANDING THE FOREGOING, THE LENDER SHALL NOT HAVE ANY DUTY TOEXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANYFAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.

 

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**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 the Lock Box maintained with Lender, the terms of such letter shallbe subject to the provisions of the Credit Agreement regarding setoffs.

 

 

**ARTICLE VIII**

**GENERALPROVISIONS**

 

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, orotherwise.  Except as otherwisespecifically provided herein, the Grantor hereby waives presentment, demand,protest or any notice (to the maximum extent permitted by applicable law) ofany kind in connection with 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 any Collateral in its possession or control or in the possession or controlof any agent or nominee of the Lender, or any income thereon or as to thepreservation of rights against prior parties or any other rights pertainingthereto. To the extent that applicable law imposes duties on the Lender toexercise remedies in a commercially reasonable manner, the Grantor acknowledgesand agrees that it is commercially reasonable for the Lender (i) to fail toincur expenses deemed significant by the Lender to prepare Collateral fordisposition or otherwise to transform raw material or work in process intofinished goods or other finished products for disposition, (ii) to fail to obtainthird party consents for access to Collateral to be disposed of, or to obtainor, if not required by other law, to fail to obtain governmental or third partyconsents for the collection or disposition of Collateral to be collected ordisposed of, (iii) to fail to exercise collection remedies against AccountDebtors or other Persons obligated on Collateral or to remove Liens on or anyadverse claims against Collateral, (iv) to exercise collection remedies againstAccount Debtors and other Persons obligated on Collateral directly or throughthe use of collection agencies and other collection specialists, (v) toadvertise dispositions of Collateral through publications or media of generalcirculation, whether or not the Collateral is of a specialized nature, (vi) tocontact other Persons, whether or not in the same business as the Grantor, forexpressions of interest in

 

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acquiring all orany portion of such Collateral, (vii) to hire one or more professional auctioneersto assist in the disposition of Collateral, whether or not the Collateral is ofa specialized nature, (viii) to dispose of Collateral by utilizing internetsites that provide for the auction of assets of the types included in theCollateral or that have the reasonable capacity of doing so, or that matchbuyers and sellers of assets, (ix) to dispose of assets in wholesale ratherthan retail markets, (x) to disclaim disposition warranties, such as title,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 deemed appropriateby the Lender, to obtain the services of other brokers, investment bankers,consultants and other professionals to assist the Lender in the collection ordisposition 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 and otherclaims may be asserted by obligors with respect to certain of the Receivables,that certain of the Receivables may be or become uncollectible in whole or inpart and that the expense and probability of success in litigating a disputedReceivable may exceed the amount that reasonably may be expected to berecovered 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 8.7 or in Article VII will cause irreparable injury tothe Lender, that the Lender and Lender have no adequate remedy at law inrespect of such breaches and therefore agrees, without limiting the right ofthe Lender to seek and obtain specific performance of other obligations of theGrantor contained in this Security Agreement, that the covenants of the Grantorcontained in the Sections referred to in this Section 8.5 shall bespecifically enforceable against the Grantor.

 

8.6.                              Useand Possession of Certain Premises.  Upon the occurrence of a Default, the Lender shall be entitled tooccupy and use any premises owned or leased by the Grantor where any of theCollateral or any records relating to the Collateral are located until theSecured Obligations are paid or the Collateral is removed therefrom, whicheverfirst occurs, without any obligation to pay the Grantor for such use andoccupancy.

 

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

 

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(except as setforth in Section 4.1(d)) shall be binding upon the Lender unlesssuch authorization is in writing signed by 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 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

 

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employees of theLender) paid or incurred by the Lender in connection with the preparation,execution, delivery, administration, collection and enforcement of thisSecurity Agreement and in the audit, analysis, administration, collection,preservation or sale of the Collateral (including, without limitation, theexpenses and charges associated with any periodic or special audit of theCollateral).  Any and all costs andexpenses incurred by the Grantor in the performance of actions requiredpursuant to the terms hereof shall 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 COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE GRANTOR AGAINST THE LENDER OR ANYAFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANYWAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT ORANY OTHER LOAN DOCUMENT SHALL BE BROUGHT 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

 

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any kind andnature (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 givenduring normal business hours for the recipient, shall be deemed to have beengiven at the opening of business on the next Business Day for the recipient),in each case addressed to the Grantor at the address set forth on Exhibit Aas its principal place of business, and to the Lender at the address set forthin the 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 haveexecuted this Security Agreement as of the date first above written.

 
|   | GRANTOR:       |
|--------|----------------|
|   |           |
|   | MAGNETEK, INC. |
|   |           |
|   | By:            | /s/ David P.  Reiland |   |
|   | Name:          | David P. Reiland |
|   | Title:         | Executive Vice  President and  Chief Financial Officer |
|   |           |
|   |           |
|   | LENDER:        |
|   |           |
|   | BANK ONE, NA   |
|   |           |
|   | By:            | /s/ David L.  Carey |   |
|   | Name:          | David L. Carey |
|   | Title:         | Director |
|        |                |  |  |  |

 

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**EXHIBITI-1**

(See Section 4.4 ofSecurity Agreement)

 

**AMENDMENT**

 

 

This Amendment,dated                     ,     is delivered pursuant to Section 4.4 ofthe 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, INC. |
|--------|----------------|
|   |           |
|   | By:            |
|   | Name:          |   |   |
|   | Title:         |   |   |
|        |                |  |  |  |

 

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SCHEDULE  I TOAMENDMENT

 

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**EXHIBITI-2**

(See Section 4.7(g) of Security Agreement)

 

**AMENDMENT**

 

 

This Amendment,dated                     ,     is delivered pursuant to Section 4.7(g) ofthe 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, INC. |
|--------|----------------|
|   |           |
|   | By:            |
|   | Name:          |   |   |
|   | Title:         |   |   |
|        |                |  |  |  |

 

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SCHEDULE I TOAMENDMENT

 

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