EXHIBIT 10.3


SECURITY AGREEMENT


           This
SECURITY AGREEMENT, dated as of November 1, 2011 (this “Agreement”), is
among Rodman & Renshaw Capital Group, Inc., a Delaware corporation (the “Company”),
the Subsidiaries of the Company signatory hereto (such subsidiaries, the “Guarantors”
and together with the Company, the “Debtors”) and the holders of the
Company’s 10% Senior Secured Convertible Debentures due October 31, 2013 in the
original aggregate principal amount of up to $__,000,000 (collectively, the “Debentures”)
signatory hereto, their endorsees, transferees and assigns (collectively, the “Secured
Parties”).


W I T N E S S E T H:


          WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to purchase the Debentures; 


          WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the “Guarantee”),
each of the Guarantors have agreed to provide for a limited guarantee of such
Debentures and to provide a security interest in certain of their assets as
collateral to secure repayment of the Debentures; and


          WHEREAS, in
order to induce the Secured Parties to purchase the Debentures, each Debtor has
agreed to execute and deliver to the Secured Parties this Agreement and to
grant each Secured Party, pari passu with each other Secured
Party and through the Agent (as defined in Section 18 hereof), a security
interest in certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company’s obligations under the
Debentures and the Guarantors’ obligations under the Guarantee.


          NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:


          1. Certain Definitions. As used in this
Agreement, the following terms shall have the meanings set forth in this
Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting
obligations”) shall have the respective meanings given such terms in Article 9
of the UCC.


	
  

 	
  

 
	
  

 	
           (a) “Collateral”
 means all of the following property and assets of the Debtors, whether
 presently owned or existing or hereafter acquired or coming into existence,
 wherever situated, and all additions and accessions thereto and all
 substitutions and replacements thereof, and all proceeds, products and
 accounts thereof, including, without limitation, all proceeds of insurance
 covering the same and of any tort claims in 

 


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 connection therewith, and all dividends, interest, cash, notes,
 securities, equity interest or other property at any time and from time to
 time acquired, receivable or otherwise distributed in respect thereof, or in
 exchange therefor, and all proceeds from the sale or transfer of any of the
 foregoing: (i) any and all payments and/or amounts receivable and/or received
 by any Debtor arising out of, relating to or in connection with the prior
 sale by Aceras BioMedical LLC (“Aceras”) to BioMarin Pharmaceutical,
 Inc. of Huxley Pharmaceuticals, Inc., and (ii) the warrants received as
 compensation for investment banking services by Rodman & Renshaw, LLC
 including, without limitation the warrants listed on Schedule H-1
 hereto (as the same may be modified from time to time pursuant to the terms
 hereof) and all other warrants issued as compensation issued to any Debtor on
 or after the date hereof, and all certificates representing such warrants
 and, with respect to such warrants, all rights, options, warrants, stock,
 interests, other property or proceeds, other securities and/or equity
 interests that may hereafter be received, receivable or distributed in
 respect of, upon the exercise of, or exchanged for, any of the foregoing and
 all rights arising under or in connection with such warrants, including, but
 not limited to, all dividends, interest, cash and all proceeds from the
 exercise or sale of any such warrant, any stock or other equity interest
 receivable upon exercise of any such warrant or any of the other foregoing
 (such proceeds being net of any applicable brokerage commissions and
 applicable exercise prices paid in cash). No such compensation warrant which
 is subject to a limitation on disposition pursuant to FINRA Rule 5110(g)
 (each of which such warrants as of the date of this Agreement shall be noted
 as “FINRA Restricted” on Schedule H attached hereto) shall be part of
 the Collateral until the expiration of such limitation, at which time such
 warrant shall become Collateral. Notwithstanding the foregoing, Rodman &
 Renshaw, LLC may transfer up to 35% (or, if required by an employment
 agreement, such greater number as is required thereunder) of any of such
 warrants received by it after the date hereof to its employees as
 compensation (other than any of the Founders (as defined in the Purchase
 Agreement) or any of their Affiliates) as compensation so long as such
 transfer is in the ordinary course of business and consistent with past practice.

 
	
  

 	
  

 
	
  

 	
           Notwithstanding
 the foregoing, nothing herein shall be deemed to constitute an assignment of
 any asset which, in the event of an assignment, becomes void by operation of
 applicable law or the assignment of which is otherwise prohibited by
 applicable law (in each case to the extent that such applicable law is not
 overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
 applicable law); provided, however, that to the extent
 permitted by applicable law, this Agreement shall create a valid security
 interest in such asset and, to the extent permitted by applicable law, this
 Agreement shall create a valid security interest in the proceeds of such
 asset.

 
	
  

 	
  

 
	
  

 	
           (b) “Majority
 in Interest” means, at any time of determination, not less than 67%
 (based on then-outstanding principal amounts of Debentures at the time of
 such determination) of the Secured Parties.

 
	
  

 	
  

 
	
  

 	
           (d)
 “Necessary Endorsement” means undated stock powers endorsed in blank
 or other proper instruments of assignment duly executed and such other
 instruments or documents as the Agent (as that term is defined below) may
 reasonably request.

 


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           (e) “Obligations”
 means all of the liabilities and obligations (primary, secondary, direct,
 contingent, sole, joint or several) due or to become due, of any Debtor to
 the Secured Parties under this Agreement, the Debentures, the Guarantee and
 any other instruments, agreements or other documents executed and/or
 delivered in connection herewith or therewith, in each case, whether now or
 hereafter existing, voluntary or involuntary, direct or indirect, absolute or
 contingent, liquidated or unliquidated, whether or not jointly owed with
 others, and whether or not from time to time decreased or extinguished and
 later increased, created or incurred, and all or any portion of such
 obligations or liabilities that are paid, to the extent all or any part of
 such payment is avoided or recovered directly or indirectly from any of the
 Secured Parties as a preference, fraudulent transfer or otherwise as such
 obligations may be amended, supplemented, converted, extended or modified
 from time to time. Without limiting the generality of the foregoing, the term
 “Obligations” shall include, without limitation: (i) principal of, and
 interest on, the Debentures; (ii) any and all other fees, indemnities, costs,
 obligations and liabilities of the Debtors from time to time under or in
 connection with this Agreement, the Debentures, the Guarantee and any other
 instruments, agreements or other documents executed and/or delivered in
 connection herewith or therewith; and (iii) all amounts (including but not
 limited to post-petition interest) in respect of the foregoing that would be
 payable but for the fact that the obligations to pay such amounts are
 unenforceable or not allowable due to the existence of a bankruptcy,
 reorganization or similar proceeding involving any Debtor.

 
	
  

 	
  

 
	
  

 	
           (f) “Organizational
 Documents” means with respect to any Debtor, the documents by which such
 Debtor was organized (such as a certificate of incorporation, certificate of
 limited partnership or articles of organization, and including, without
 limitation, any certificates of designation for preferred stock or other
 forms of preferred equity) and which relate to the internal governance of
 such Debtor (such as bylaws, a partnership agreement or an operating, limited
 liability or members agreement).

 
	
  

 	
  

 
	
  

 	
           (g) “Pledged
 Securities” means those instruments described in Section 1(a)(ii) above.

 
	
  

 	
  

 
	
  

 	
           (h) “UCC”
 means the Uniform Commercial Code of the State of New York and or any other
 applicable law of any state or states which has jurisdiction with respect to
 all, or any portion of, the Collateral or this Agreement, from time to time.
 It is the intent of the parties that defined terms in the UCC should be
 construed in their broadest sense so that the term “Collateral” will be
 construed in its broadest sense. Accordingly if there are, from time to time,
 changes to defined terms in the UCC that broaden the definitions, they are
 incorporated herein and if existing definitions in the UCC are broader than
 the amended definitions, the existing ones shall be controlling.

 


          2. Grant of Security Interest in Collateral.
As an inducement for the Secured Parties to purchase the Debentures and to
secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, each Debtor hereby unconditionally
and irrevocably pledges, grants, assigns, conveys, transfers and hypothecates
to 


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the Secured Parties and the Agent (on its behalf and on behalf of the
Secured Parties), a security interest in and to, a lien upon and a right of
set-off against all of their respective right, title and interest of whatsoever
kind and nature in and to, the Collateral whether now existing or hereafter
arising (a “Security Interest” and, collectively, the “Security
Interests”).


          3. Delivery of Certain Collateral. Not later
than November 30, 2011, the Debtors shall deliver to the Agent a fully-executed
original of a deposit account control agreement in form and substance
reasonably acceptable to the Secured Parties (the “Secured Party DACA”)
by and among a bank reasonably acceptable to the Secured Parties (such bank,
the “Bank”), Rodman Principal Investments, LLC (“RPI”), the Agent
and the Secured Parties and on or before establishing such Secured Party DACA,
the Debtors shall deliver or cause to be delivered to the Agent a true and
correct copy of RPI’s directive to Aceras (which directive shall be in form and
substance acceptable to Secured Parties) to deposit Debtors’ share of all
amounts in respect of or arising out of the sale of Huxley Pharmaceuticals into
a deposit account (the “Secured Party Deposit Account”) established with
Bank and subject to the Secured Party DACA. Debtors shall not close such
Secured Party Deposit Account until all of the Obligations are no longer
outstanding and have been paid in full (or converted) and discharged and the
Debentures are satisfied in full in accordance with the terms thereof, at which
time the parties shall terminate the Secured Party Deposit Account (at the
Debtors’ expense).


          4. Representations, Warranties, Covenants and Agreements
of the Debtors. Except as set forth under the corresponding section
of the disclosure schedules delivered to the Secured Parties concurrently
herewith (the “Disclosure Schedules”), which Disclosure Schedules shall
be deemed a part hereof, each Debtor represents and warrants to, and covenants
and agrees with, the Secured Parties as follows:


	
  

 	
  

 
	
  

 	
           (a) Each
 Debtor has the requisite corporate, partnership, limited liability company or
 other power and authority to enter into this Agreement and otherwise to carry
 out its obligations hereunder. The execution, delivery and performance by
 each Debtor of this Agreement and the filings contemplated herein have been
 duly authorized by all necessary action on the part of such Debtor and no
 further action is required by such Debtor. This Agreement has been duly
 executed by each Debtor. This Agreement constitutes the legal, valid and
 binding obligation of each Debtor, enforceable against each Debtor in
 accordance with its terms except as such enforceability may be limited by
 applicable bankruptcy, insolvency, reorganization and similar laws of general
 application relating to or affecting the rights and remedies of creditors and
 by general principles of equity.

 
	
  

 	
  

 
	
  

 	
           (b) The
 Debtors have no place of business or offices where their respective books of
 account and records are kept (other than temporarily at the offices of its
 attorneys or accountants) or places where Collateral is stored or located,
 except as set forth on Schedule A attached hereto. 

 
	
  

 	
  

 
	
  

 	
           (c) The
 Debtors are the sole owners of their respective Collateral (except for
 non-exclusive licenses granted by any Debtor in the ordinary course of
 business), free and clear of any liens, security interests, encumbrances,
 rights or claims, and are fully 

 


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 authorized to grant the Security Interests. There is not on file in
 any governmental or regulatory authority, agency or recording office an
 effective financing statement, security agreement, license or transfer or any
 notice of any of the foregoing (other than those that will be filed in favor
 of the Secured Parties pursuant to this Agreement) covering or affecting any
 of the Collateral. As long as this Agreement shall be in effect, the Debtors
 shall not execute and shall not knowingly permit to be on file in any such
 office or agency any other financing statement or other document or
 instrument with respect to the Collateral (except to the extent filed or
 recorded in favor of the Secured Parties pursuant to the terms of this
 Agreement).

 
	
  

 	
  

 
	
  

 	
           (d) No
 written claim has been received that any Collateral or any Debtor’s use of
 any Collateral violates the rights of any third party. There has been no
 adverse decision to any Debtor’s claim of ownership rights in or exclusive
 rights to use the Collateral in any jurisdiction or to any Debtor’s right to
 keep and maintain such Collateral in full force and effect, and there is no
 proceeding involving said rights pending or, to the best knowledge of any
 Debtor, threatened before any court, judicial body, administrative or regulatory
 agency, arbitrator or other governmental authority.

 
	
  

 	
  

 
	
  

 	
           (e) Each
 Debtor shall at all times maintain its books of account and records relating
 to the Collateral at its principal place of business and its Collateral at
 the locations set forth on Schedule A attached hereto and may not
 relocate such books of account and records or tangible Collateral unless it
 delivers to the Secured Parties at least 30 days prior to such relocation (i)
 written notice of such relocation and the new location thereof (which must be
 within the United States) and (ii) evidence that appropriate financing
 statements under the UCC and other necessary documents, if any, have been
 filed and recorded and other steps have been taken to perfect the Security
 Interests to create in favor of the Secured Parties a valid, perfected and
 continuing perfected first priority lien in the Collateral.

 
	
  

 	
  

 
	
  

 	
           (f) This
 Agreement creates in favor of the Secured Parties a valid security interest
 in the Collateral securing the payment and performance of the Obligations.
 Upon making the filings described in the immediately following paragraph, all
 security interests created hereunder in any Collateral which may be perfected
 by filing Uniform Commercial Code financing statements shall have been duly
 perfected. No consent of any third parties and no authorization, approval or
 other action by, and no notice to or filing with, any governmental authority
 or regulatory body is required for (i) the execution, delivery and
 performance of this Agreement, (ii) the creation of the Security Interests
 created hereunder in the Collateral or (iii) the enforcement of the rights of
 the Agent and the Secured Parties hereunder.

 
	
  

 	
  

 
	
  

 	
           (g) Each
 Debtor hereby authorizes the Agent to file, on behalf of the Secured Parties,
 one or more financing statements under the UCC, with respect to the Security
 Interests, with the proper filing and recording agencies in any jurisdiction
 deemed proper by it.

 


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           (h) The
 execution, delivery and performance of this Agreement by the Debtors does not
 (i) violate any of the provisions of any Organizational Documents of any
 Debtor or any judgment, decree, order or award of any court, governmental
 body or arbitrator or any applicable law, rule or regulation applicable to
 any Debtor or (ii) conflict with, or constitute a default (or an event that
 with notice or lapse of time or both would become a default) under, or give
 to others any rights of termination, amendment, acceleration or cancellation
 (with or without notice, lapse of time or both) of, any agreement, credit
 facility, debt or other instrument (evidencing any Debtor’s debt or
 otherwise) or other understanding to which any Debtor is a party or by which
 any property or asset of any Debtor is bound or affected. If any, all
 required consents (including, without limitation, from stockholders or
 creditors of any Debtor) necessary for any Debtor to enter into and perform
 its obligations hereunder have been obtained.

 
	
  

 	
  

 
	
  

 	
           (i) The
 warrants listed on Schedule H hereto represent all of the compensation
 warrants currently owned by Rodman & Renshaw, LLC. Rodman & Renshaw,
 LLC is the legal and beneficial owner of the Pledged Securities, free and
 clear of any lien, security interest or other encumbrance except for the
 security interests created by this Agreement. The parties agree that no
 physical delivery of the Pledged Securities shall be made to the Agent or any
 Secured Party prior to the occurrence of an Event of Default, and that the
 Secured Parties shall only file a UCC-1 filing against such Collateral.
 Promptly after an Event of Default (but in no event later than three (3)
 Business Days after the occurrence of such Event of Default), Rodman &
 Renshaw, LLC shall deliver to the Agent, for the benefit of the Secured
 Parties, all certificates evidencing the Pledged Securities together with any
 endorsements and other documents or instruments requested by any one or more
 of the Secured Parties.

 
	
  

 	
  

 
	
  

 	
           (j) Each
 Debtor shall at all times maintain the liens and Security Interests provided
 for hereunder as valid and perfected first priority liens and security
 interests in the Collateral in favor of the Secured Parties until this
 Agreement and the Security Interest hereunder shall be terminated pursuant to
 Section 14 hereof. Each Debtor hereby agrees to defend the same against the
 claims of any and all persons and entities. Each Debtor shall safeguard and
 protect all Collateral for the account of the Secured Parties. At the request
 of the Agent, each Debtor will sign and deliver to the Agent on behalf of the
 Secured Parties at any time or from time to time one or more financing
 statements pursuant to the UCC in form reasonably satisfactory to the Agent
 and will pay the cost of filing the same in all public offices wherever
 filing is, or is deemed by the Agent to be, necessary or desirable to effect
 the rights and obligations provided for herein. Without limiting the
 generality of the foregoing, each Debtor shall pay all fees, taxes and other
 amounts necessary to maintain the Collateral and the Security Interests
 hereunder, and each Debtor shall obtain and furnish to the Agent from time to
 time, upon demand, such releases and/or subordinations of claims and liens
 which may be required to maintain the priority of the Security Interests
 hereunder.

 
	
  

 	
  

 
	
  

 	
           (k) No
 Debtor will transfer, pledge, hypothecate, encumber, license, sell or
 otherwise dispose of any of the Collateral without the prior written consent
 of the Agent.

 


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           (l) Each
 Debtor shall promptly execute and deliver to the Agent, for the benefit of
 the Secured Parties, such further assignments, security agreements, financing
 statements or other instruments, documents, certificates and assurances and
 take such further action as the Agent may from time to time request and may
 in its sole discretion deem necessary to perfect, protect or enforce the
 Secured Parties’ security interest in the Collateral in which the Secured
 Parties have been granted a security interest hereunder, substantially in a form
 reasonably acceptable to the Agent, provided, that Rodman & Renshaw, LLC
 shall not be required to physically deliver the Pledged Securities to the
 Agent or any Secured Party prior to the occurrence of an Event of Default.

 
	
  

 	
  

 
	
  

 	
           (m) Each
 Debtor shall permit the Agent and its representatives and agents to inspect
 the Collateral during normal business hours and upon reasonable prior notice,
 and to make copies of records pertaining to the Collateral as may be
 reasonably requested by the Agent from time to time.

 
	
  

 	
  

 
	
  

 	
           (n) Each
 Debtor shall take all steps reasonably necessary to diligently pursue and
 seek to preserve, enforce and collect any rights, claims, causes of action
 and accounts receivable in respect of the Collateral; provided, Rodman &
 Renshaw, LLC shall not be required to exercise or sell any of the Pledged
 Securities.

 
	
  

 	
  

 
	
  

 	
           (o) Each Debtor shall promptly notify the
 Secured Parties in sufficient detail upon becoming aware of any attachment,
 garnishment, execution or other legal process levied against any Collateral
 and of any other information received by such Debtor that may materially
 affect the value of the Collateral, the Security Interest or the rights and
 remedies of the Secured Parties hereunder.

 
	
  

 	
  

 
	
  

 	
           (p) All information heretofore, herein or
 hereafter supplied to the Secured Parties by or on behalf of any Debtor with
 respect to the Collateral is accurate and complete in all material respects
 as of the date furnished.

 
	
  

 	
  

 
	
  

 	
           (q) The Debtors shall at all times preserve
 and keep in full force and effect their respective valid existence and good
 standing and any rights and franchises material to its business.

 
	
  

 	
  

 
	
  

 	
           (r) No Debtor will change its name, type of
 organization, jurisdiction of organization, organizational identification
 number (if it has one), legal or corporate structure, or identity, or add any
 new fictitious name unless it provides at least 30 days prior written notice
 to the Agent of such change and, at the time of such written notification,
 such Debtor provides any financing statements necessary to perfect and
 continue the perfection of the Security Interests granted and evidenced by
 this Agreement.

 
	
  

 	
  

 
	
  

 	
           (s) No
 Debtor may relocate its chief executive office to a new location without
 providing 30 days prior written notification thereof to the Secured Parties
 and so long as, at the time of such written notification, such Debtor
 provides any financing 

 


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 statements or fixture filings necessary to perfect and continue the
 perfection of the Security Interests granted and evidenced by this Agreement.

 
	
  

 	
  

 
	
  

 	
           (t) Each
 Debtor was organized and remains organized solely under the laws of the state
 set forth next to such Debtor’s name in Schedule D attached hereto, which
 Schedule D sets forth each Debtor’s organizational identification
 number or, if any Debtor does not have one, states that one does not exist.

 
	
  

 	
  

 
	
  

 	
           (u) The
 actual name of each Debtor is the name set forth in Schedule D
 attached hereto and no Debtor has any trade names except as set forth on Schedule
 E attached hereto.

 
	
  

 	
  

 
	
  

 	
           (v) To the extent that any Collateral is in
 the possession of any third party, the applicable Debtor shall join with the
 Agent in notifying such third party of the Secured Parties’ security interest
 in such Collateral and shall use its best efforts to obtain an
 acknowledgement and agreement from such third party with respect to the
 Collateral, in form and substance reasonably satisfactory to the Agent.

 
	
  

 	
  

 
	
  

 	
           (w) Each
 Debtor shall register the pledge of the applicable Pledged Securities on the
 books of such Debtor. Further, the applicable Debtor shall deliver to Agent
 an acknowledgement of pledge (which, where appropriate, shall comply with the
 requirements of the relevant UCC with respect to perfection by registration)
 signed by the issuer of the applicable Pledged Securities, which
 acknowledgement shall confirm that: (a) it has registered the pledge on its
 books and records; and (b) at any time directed by Agent during the
 continuation of an Event of Default, such issuer will transfer the record
 ownership of such Pledged Securities into the name of any designee of Agent,
 will take such steps as may be necessary to effect the transfer, and will
 comply with all other instructions of Agent regarding such Pledged Securities
 without the further consent of the applicable Debtor.

 
	
  

 	
  

 
	
  

 	
           (x)
 Each Debtor will from time to time, at the joint and several
 expense of the Debtors, promptly execute and deliver all such further
 instruments and documents, and take all such further action as may be
 necessary or desirable, or as the Agent may reasonably request, in order to
 perfect and protect any security interest granted or purported to be granted
 hereby or to enable the Secured Parties to exercise and enforce their rights
 and remedies hereunder and with respect to any Collateral or to otherwise
 carry out the purposes of this Agreement.

 
	
  

 	
  

 
	
  

 	
           (y) The
 Debtors shall direct Aceras to promptly deposit the Debtors’ share of any and
 all amounts receivable and/or otherwise owing to any Debtor arising out of,
 relating to or in connection with the sale by Aceras to BioMarin
 Pharmaceutical, Inc. of Huxley Pharmaceuticals, Inc. directly into the
 Secured Party Deposit Account. 

 
	
  

 	
  

 
	
  

 	
           (z) The
 Debtors shall not cause or permit any amendment or modification, and no such
 amendment or modification shall be made, to that certain Operating Agreement
 of Aceras BioMedical, LLC dated as of May 9, 2008, as amended as of May 

 


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 1, 2009 and October 31, 2011, that would be adverse to any of the
 Secured Parties in any manner.

 
	
  

 	
  

 
	
  

 	
           (aa) The
 Debtors shall cause all warrants issuable in respect of compensation owed, or
 other amounts payable to, any of the Debtors or any of their Significant
 Subsidiaries (as defined in the Debentures) to be issued only to Rodman &
 Renshaw, LLC.

 


          5. Effect of Pledge on Certain Rights. If any
of the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the pledge of such equity or ownership interests pursuant to this Agreement or
the enforcement of any of Agent’s rights hereunder shall not be deemed to be
the type of event which would trigger such conversion rights notwithstanding
any provisions in the Organizational Documents or agreements to which any
Debtor is subject or to which any Debtor is party.


          6. Defaults. The following events shall be “Events
of Default”:


	
  

 	
  

 
	
  

 	
           (a) The
 occurrence of an Event of Default (as defined in the Debentures) under the
 Debentures;

 
	
  

 	
  

 
	
  

 	
           (b) Any
 representation or warranty of any Debtor in this Agreement shall prove to
 have been incorrect in any material respect when made; or

 
	
  

 	
  

 
	
  

 	
           (d) If
 any provision of this Agreement shall at any time for any reason be declared
 to be null and void, or the validity or enforceability thereof shall be
 contested by any Debtor, or a proceeding shall be commenced by any Debtor, or
 by any governmental authority having jurisdiction over any Debtor, seeking to
 establish the invalidity or unenforceability thereof, or any Debtor shall
 deny that any Debtor has any liability or obligation purported to be created
 under this Agreement.

 
	
  

 	
  

 
	
           7. Duty To Hold In Trust. 

 
	
  

 	
  

 
	
  

 	
           (a) Upon
 the occurrence of any Event of Default and at any time thereafter, each
 Debtor shall, upon receipt of any revenue, income, dividend, interest or
 other sums or property or proceeds subject to the Security Interests, whether
 payable pursuant to the Debentures or otherwise, or of any check, draft,
 note, trade acceptance or other instrument evidencing an obligation to pay
 any such sum, hold the same in trust for the Secured Parties and shall
 forthwith endorse and transfer any such sums or instruments, or both, to the
 Secured Parties, pro-rata in proportion to their respective then-currently
 outstanding principal amount of Debentures for application to the
 satisfaction of the Obligations (and if any Debenture is not outstanding,
 pro-rata in proportion to the initial purchases of the remaining Debentures).
 

 


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           (b) If
 any Debtor shall become entitled to receive or shall receive any securities
 or other property (including, without limitation, Pledged Securities or
 instruments representing Pledged Securities acquired after the date hereof,
 or any options, warrants, rights or other similar property or certificates
 representing a dividend, or any distribution in connection with any
 recapitalization, reclassification or increase or reduction of capital, or
 issued in connection with any reorganization of such Debtor or any of its
 direct or indirect subsidiaries) in respect of the Pledged Securities
 (whether as an addition to, in substitution of, or in exchange for, such
 Pledged Securities or otherwise), such Debtor agrees to (i) accept the same
 as the agent of the Secured Parties, (ii) hold the same in trust on behalf of
 and for the benefit of the Secured Parties, (iii) provide written notice
 thereof to the Agent and the Secured Parties within three (3) Business Days
 and (iv) take any and all actions pursuant to paragraph 4(i) hereof.

 
	
  

 	
  

 
	
           8. Rights and Remedies Upon Default. 

 
	
  

 	
  

 
	
  

 	
           (a) Upon
 the occurrence of any Event of Default and at any time thereafter, the
 Secured Parties, acting through the Agent, shall have the right to exercise
 all of the remedies conferred hereunder and under the Debentures, and the
 Secured Parties shall have all the rights and remedies of a secured party
 under the UCC and applicable law. Without limitation, the Agent, for the
 benefit of the Secured Parties, shall have the following rights and powers:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i) The
 Agent shall have the right to take possession of the Collateral and, for that
 purpose, enter, with the aid and assistance of any person, any premises where
 the Collateral, or any part thereof, is or may be placed and remove the same,
 and each Debtor shall assemble the Collateral and make it available to the
 Agent at places which the Agent shall reasonably select, whether at such Debtor’s
 premises or elsewhere, and make available to the Agent, without rent, all of
 such Debtor’s respective premises and facilities for the purpose of the Agent
 taking possession of, removing or putting the Collateral in saleable or
 disposable form.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii) Upon
 notice to the Debtors by Agent, all rights of each Debtor to exercise the
 voting rights, exercise rights and other consensual rights which it would
 otherwise be entitled to exercise and all rights of each Debtor to receive
 the dividends and interest which it would otherwise be authorized to receive
 and retain in respect of the Collateral, shall cease. Upon such notice, Agent
 shall have the right to receive, for the benefit of the Secured Parties, any
 interest, cash dividends or other payments on the Collateral and, at the
 option of Agent, to exercise in such Agent’s discretion all voting rights and
 exercise rights pertaining thereto. Without limiting the generality of the
 foregoing, Agent shall have the right (but not the obligation) to exercise
 all rights with respect to the Collateral as it were the sole and absolute
 owner thereof, including, without limitation, to vote and/or to exchange, at
 its sole discretion, any or all of the Collateral in connection with a
 merger, reorganization, consolidation, recapitalization or other 

 


10









	
  

 	
  

 	
  

 
	
  

 	
  

 	
 readjustment concerning or involving the Collateral or any Debtor or
 any of its direct or indirect subsidiaries.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii) The
 Agent shall have the right to assign, sell, lease or otherwise dispose of and
 deliver all or any part of the Collateral, at public or private sale or
 otherwise, either with or without special conditions or stipulations, for
 cash or on credit or for future delivery, in such parcel or parcels and at
 such time or times and at such place or places, and upon such terms and
 conditions as the Agent may deem commercially reasonable, all without (except
 as shall be required by applicable statute and cannot be waived)
 advertisement or demand upon or notice to any Debtor or right of redemption
 of a Debtor, which are hereby expressly waived. Upon each such sale, lease,
 assignment or other transfer of Collateral, the Agent, for the benefit of the
 Secured Parties, may, unless prohibited by applicable law which cannot be
 waived, purchase all or any part of the Collateral being sold, free from and
 discharged of all trusts, claims, right of redemption and equities of any
 Debtor, which are hereby waived and released.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv) The
 Agent shall have the right (but not the obligation) to notify any account
 debtors and any obligors under instruments or accounts to make payments
 directly to the Agent, on behalf of the Secured Parties, and to enforce the
 Debtors’ rights against such account debtors and obligors.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (v) The
 Agent, for the benefit of the Secured Parties, may (but is not obligated to)
 direct any financial intermediary or any other person or entity holding any
 investment property to transfer the same to the Agent, on behalf of the
 Secured Parties, or its designee.

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 The Agent shall comply with any applicable law in connection with a
 disposition of Collateral and such compliance will not be considered
 adversely to affect the commercial reasonableness of any sale of the
 Collateral. The Agent may sell the Collateral without giving any warranties
 and may specifically disclaim such warranties. If the Agent sells any of the
 Collateral on credit, the Debtors will only be credited with payments
 actually made by the purchaser. In addition, each Debtor waives any and all
 rights that it may have to a judicial hearing in advance of the enforcement
 of any of the Agent’s rights and remedies hereunder, including, without
 limitation, its right following an Event of Default to take immediate
 possession of the Collateral and to exercise its rights and remedies with
 respect thereto.

 


          9. Applications of Proceeds. The proceeds of
any such sale, lease or other disposition of the Collateral hereunder or from
payments made on account of any insurance policy insuring any portion of the
Collateral shall be applied first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like (including,
without limitation, any taxes, fees and other costs incurred in connection therewith)
of the Collateral, to the reasonable attorneys’ fees and expenses incurred by
the Agent in enforcing the Secured Parties’ rights hereunder and in connection
with collecting, storing and disposing of the 


11





Collateral, and then to satisfaction of the Obligations pro rata among
the Secured Parties (based on then-outstanding principal amounts of Debentures
at the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds or to such other party as required by
law or judicial proceeding. If, upon the sale, license or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Parties are legally entitled, the Debtors will be liable for
the deficiency, together with interest thereon, at the rate of 12% per annum or
the lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency. To the extent permitted by applicable law, each Debtor waives
all claims, damages and demands against the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely
to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.


          10.
Securities Law Provision. Each
Debtor recognizes that Agent may be limited in its ability to effect a sale to
the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers
who may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or resale
thereof. Each Debtor agrees that sales so made may be at prices and on terms
less favorable than if the Pledged Securities were sold to the public, and that
Agent has no obligation to delay the sale of any Pledged Securities for the
period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws. Each Debtor shall cooperate with Agent in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable
to the sale of the Pledged Securities by Agent.


          11. Costs and Expenses. Each Debtor agrees to
pay all reasonable out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including without limitation,
any financing statements pursuant to the UCC, continuation statements, partial
releases and/or termination statements related thereto or any expenses of any
searches reasonably required by the Agent. The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Agent is reasonably
likely to prejudice, imperil or otherwise affect the Collateral or the Security
Interests therein. The Debtors will also, upon demand, pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Agent, for the
benefit of the Secured Parties, may incur in connection with the creation,
perfection, protection, satisfaction, foreclosure, collection or enforcement of
the Security Interest and the preparation, administration, continuance,
amendment or enforcement of this Agreement and pay to the Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Agent, for the benefit of
the Secured Parties, and the Secured Parties may incur in connection with (i)
the enforcement of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, or
(iii) the exercise or enforcement of any of the rights of the Secured Parties
under the Debentures. Until so paid, any fees payable hereunder shall be added
to the principal amount of the Debentures and shall bear interest at the
Default Rate.


12





          12. Responsibility for Collateral. The Debtors
assume all liabilities and responsibility in connection with all Collateral,
and the Obligations shall in no way be affected or diminished by reason of the
loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the
foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has
any obligation to prepare the Collateral for sale, and (b) each Debtor shall
remain obligated and liable under each contract or agreement included in the
Collateral to be observed or performed by such Debtor thereunder. Neither the
Agent nor any Secured Party shall have any obligation or liability under any
such contract or agreement by reason of or arising out of this Agreement or the
receipt by the Agent or any Secured Party of any payment relating to any of the
Collateral, nor shall the Agent or any Secured Party be obligated in any manner
to perform any of the obligations of any Debtor under or pursuant to any such contract
or agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be
entitled at any time or times.


          13. Security Interests Absolute. All rights of
the Agent and the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof; (b)
any change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver
of or consent to departure from any other collateral for, or any guarantee, or
any other security, for all or any of the Obligations; (d) any action by the
Secured Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full, the rights of the Secured Parties hereunder shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each
Debtor expressly waives presentment, protest, notice of protest, demand, notice
of nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, each Debtor’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment
thereof and/or cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and 


13





provisions hereof. Each Debtor waives all right to require the Secured
Parties to proceed against any other person or entity or to apply any
Collateral which the Secured Parties may hold at any time, or to marshal assets,
or to pursue any other remedy. Each Debtor waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.


          14. Term of Agreement. This Agreement and the
Security Interests shall terminate on the date on which all of the Debentures
have been satisfied in full in accordance with the terms thereof and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex A hereto) shall survive and remain operative and in full
force and effect regardless of the termination of this Agreement.


          15. Power of Attorney; Further Assurances.


	
  

 	
  

 
	
  

 	
           (a) Each
 Debtor authorizes the Agent, and does hereby make, constitute and appoint the
 Agent and its officers, agents, successors or assigns with full power of
 substitution, as such Debtor’s true and lawful attorney-in-fact, with power,
 in the name of the Agent or such Debtor, to, after the occurrence and during
 the continuance of an Event of Default, (i) endorse any note, checks, drafts,
 money orders or other instruments of payment (including payments payable
 under or in respect of any policy of insurance) in respect of the Collateral (including,
 without limitation, any Pledged Securities) that may come into possession of
 the Agent; (ii) to sign and endorse any financing statement pursuant to the
 UCC or any invoice, freight or express bill, bill of lading, storage or
 warehouse receipts, drafts against debtors, assignments, verifications and
 notices in connection with accounts, and other documents relating to the
 Collateral; (iii) to pay or discharge taxes, liens, security interests or
 other encumbrances at any time levied or placed on or threatened against the
 Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue
 for monies due in respect of the Collateral; and (v) generally, at the option
 of the Agent, and at the expense of the Debtors, at any time, or from time to
 time, to execute and deliver any and all documents and instruments and to do
 all acts and things which the Agent deems necessary to protect, preserve and
 realize upon the Collateral and the Security Interests granted therein in
 order to effect the intent of this Agreement and the Debentures all as fully
 and effectually as the Debtors might or could do; and each Debtor hereby
 ratifies all that said attorney shall lawfully do or cause to be done by
 virtue hereof. This power of attorney is coupled with an interest and shall
 be irrevocable for the term of this Agreement and thereafter as long as any
 of the Obligations shall be outstanding. The designation set forth herein
 shall be deemed to amend and supersede any inconsistent provision in the
 Organizational Documents or other documents or agreements to which any Debtor
 is subject or to which any Debtor is a party.

 
	
  

 	
  

 
	
  

 	
           (b) On a
 continuing basis, each Debtor will make, execute, acknowledge, deliver, file
 and record, as the case may be, with the proper filing and recording agencies
 in any jurisdiction, including, without limitation, the jurisdictions
 indicated on Schedule C attached hereto, all such instruments, and
 take all such action as may reasonably be deemed necessary or advisable, or
 as reasonably requested by the Agent, to perfect the 

 


14









	
  

 	
  

 
	
  

 	
 Security Interests granted hereunder and otherwise to carry out the
 intent and purposes of this Agreement, or for assuring and confirming to the
 Agent the grant or perfection of a perfected security interest in all the
 Collateral under the UCC.

 
	
  

 	
  

 
	
  

 	
           (c) Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Agent’s discretion,
to take any action and to execute any instrument which the Agent may deem
necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law, which
financing statements shall describe the Collateral as set forth herein, and
not as “all assets” or words of like import, and ratifies all such actions
taken by the Agent. This power of attorney is coupled with an interest and
shall be irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding. 

 


          16. Notices. All notices, requests, demands and
other communications hereunder shall be subject to the notice provision of the
Purchase Agreement (as such term is defined in the Debentures).


          17. Other Security. To the extent that the
Obligations are now or hereafter secured by property other than the Collateral
or by the guarantee, endorsement or property of any other person, firm,
corporation or other entity, then the Agent shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting any of the
Secured Parties’ rights and remedies hereunder.


          18. Appointment of Agent. The Secured Parties
hereby appoint Kingsbrook Opportunities Master Fund LP to act as their agent
(“Kingsbrook” or “Agent”) for purposes of exercising any and all rights
and remedies of the Secured Parties hereunder. Such appointment shall continue
until revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent, provided that Kingsbrook may not be removed
as Agent unless Kingsbrook shall then hold less than $200,000 in principal
amount of Debentures; provided, further, that such removal may
occur only if each of the other Secured Parties shall then hold not less than
an aggregate of $500,000 in principal amount of Debentures. The Agent shall
have the rights, responsibilities and immunities set forth in Annex A
hereto and the parties hereto agree to the terms thereof.


          19. Miscellaneous.


	
  

 	
  

 
	
  

 	
           (a) No
 course of dealing between the Debtors and the Secured Parties, nor any
 failure to exercise, nor any delay in exercising, on the part of the Secured
 Parties, any right, power or privilege hereunder or under the Debentures shall
 operate as a waiver thereof; nor shall any single or partial exercise of any
 right, power or privilege hereunder or thereunder preclude any other or
 further exercise thereof or the exercise of any other right, power or
 privilege.

 


15









	
  

 	
  

 
	
  

 	
           (b) All
 of the rights and remedies of the Secured Parties with respect to the
 Collateral, whether established hereby or by the Debentures or by any other
 agreements, instruments or documents or by law shall be cumulative and may be
 exercised singly or concurrently.

 
	
  

 	
  

 
	
  

 	
           (c) This
 Agreement, together with the exhibits and schedules hereto, contain the
 entire understanding of the parties with respect to the subject matter hereof
 and supersede all prior agreements and understandings, oral or written, with
 respect to such matters, which the parties acknowledge have been merged into
 this Agreement and the exhibits and schedules hereto. No provision of this
 Agreement may be waived, modified, supplemented or amended except in a
 written instrument signed, in the case of an amendment, by the Debtors and
 the Secured Parties holding a Majority in Interest, or, in the case of a
 waiver, by the party against whom enforcement of any such waived provision is
 sought. In the event the Company issues additional debentures and warrants
 pursuant to clause (d) of the definition of “Exempt Issuance” (as defined in
 the Purchase Agreement), such holder shall be joined as parties to this
 Agreement without the consent of the Secured Parties or Agent and such
 holders shall agree in writing to be bound by the provisions of this
 Agreement that apply to the “Secured Parties.”

 
	
  

 	
  

 
	
  

 	
           (d) If
 any term, provision, covenant or restriction of this Agreement is held by a
 court of competent jurisdiction to be invalid, illegal, void or
 unenforceable, the remainder of the terms, provisions, covenants and
 restrictions set forth herein shall remain in full force and effect and shall
 in no way be affected, impaired or invalidated, and the parties hereto shall
 use their commercially reasonable efforts to find and employ an alternative
 means to achieve the same or substantially the same result as that
 contemplated by such term, provision, covenant or restriction. It is hereby
 stipulated and declared to be the intention of the parties that they would
 have executed the remaining terms, provisions, covenants and restrictions
 without including any of such that may be hereafter declared invalid,
 illegal, void or unenforceable.

 
	
  

 	
  

 
	
  

 	
           (e) No
 waiver of any default with respect to any provision, condition or requirement
 of this Agreement shall be deemed to be a continuing waiver in the future or
 a waiver of any subsequent default or a waiver of any other provision,
 condition or requirement hereof, nor shall any delay or omission of any party
 to exercise any right hereunder in any manner impair the exercise of any such
 right.

 
	
  

 	
  

 
	
  

 	
           (f) This
 Agreement shall be binding upon and inure to the benefit of the parties and
 their successors and permitted assigns. The Company and the Guarantors may
 not assign this Agreement or any rights or obligations hereunder without the
 prior written consent of each Secured Party (other than by merger). Any
 Secured Party may assign any or all of its rights under this Agreement to any
 Person (as defined in the Purchase Agreement) to whom such Secured Party
 assigns or transfers any Obligations, provided such transferee agrees in
 writing to be bound, with respect to the transferred Obligations, by the
 provisions of this Agreement that apply to the “Secured Parties.”

 


16











	
  

 	
  

 
	
  

 	
           (g) Each
 party shall take such further action and execute and deliver such further
 documents as may be necessary or appropriate in order to carry out the
 provisions and purposes of this Agreement.

 
	
  

 	
  

 
	
  

 	
           (h) All
 questions concerning the construction, validity, enforcement and
 interpretation of this Agreement shall be governed by and construed and
 enforced in accordance with the internal laws of the State of New York,
 without regard to the principles of conflicts of law thereof. Except to the
 extent mandatorily governed by the jurisdiction or situs where the Collateral
 is located, each Debtor agrees that all proceedings concerning the
 interpretations, enforcement and defense of the transactions contemplated by
 this Agreement and the Debentures (whether brought against a party hereto or
 its respective affiliates, directors, officers, shareholders, partners,
 members, employees or agents) shall be commenced exclusively in the state and
 federal courts sitting in the City of New York, Borough of Manhattan. Each
 Debtor hereby irrevocably submits to the exclusive jurisdiction of the state
 and federal courts sitting in the City of New York, Borough of Manhattan for
 the adjudication of any dispute hereunder or in connection herewith or with any
 transaction contemplated hereby or discussed herein, and hereby irrevocably
 waives, and agrees not to assert in any proceeding, any claim that it is not
 personally subject to the jurisdiction of any such court, that such
 proceeding is improper. Each party hereto hereby irrevocably waives personal
 service of process and consents to process being served in any such
 proceeding by mailing a copy thereof via registered or certified mail or
 overnight delivery (with evidence of delivery) to such party at the address
 in effect for notices to it under this Agreement and agrees that such service
 shall constitute good and sufficient service of process and notice thereof.
 Nothing contained herein shall be deemed to limit in any way any right to
 serve process in any manner permitted by law. Each party hereto hereby
 irrevocably waives, to the fullest extent permitted by applicable law, any
 and all right to trial by jury in any legal proceeding arising out of or
 relating to this Agreement or the transactions contemplated hereby.

 
	
  

 	
  

 
	
  

 	
           (i) This
 Agreement may be executed in any number of counterparts, each of which when
 so executed shall be deemed to be an original and, all of which taken
 together shall constitute one and the same Agreement. In the event that any signature
 is delivered by facsimile transmission, such signature shall create a valid
 binding obligation of the party executing (or on whose behalf such signature
 is executed) the same with the same force and effect as if such facsimile
 signature were the original thereof.

 
	
  

 	
  

 
	
  

 	
           (j) Each
 Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
 Parties and their respective partners, members, shareholders, officers,
 directors, employees and agents (and any other persons with other titles that
 have similar functions) (collectively, “Indemnitees”) from and against
 any and all losses, claims, liabilities, damages, penalties, suits, costs and
 expenses, of any kind or nature, (including fees relating to the cost of
 investigating and defending any of the foregoing) imposed on, incurred by or
 asserted against such Indemnitee in any way related to or arising from or
 alleged to arise from this Agreement or the Collateral, except any such
 losses, claims, liabilities, damages, penalties, suits, costs and expenses
 which result from the gross 

 


17









	
  

 	
  

 
	
  

 	
 negligence or willful misconduct of the Indemnitee as determined by a
 final, nonappealable decision of a court of competent jurisdiction. This
 indemnification provision is in addition to, and not in limitation of, any
 other indemnification provision in the Debentures, the Purchase Agreement (as
 such term is defined in the Debentures) or any other agreement, instrument or
 other document executed or delivered in connection herewith or therewith.

 
	
  

 	
  

 
	
  

 	
           (k)
 Nothing in this Agreement shall be construed to subject Agent or any Secured
 Party to liability as a partner in any Debtor or any if its direct or
 indirect subsidiaries that is a partnership or as a member in any Debtor or
 any of its direct or indirect subsidiaries that is a limited liability
 company, nor shall Agent or any Secured Party be deemed to have assumed any
 obligations under any partnership agreement or limited liability company
 agreement, as applicable, of any such Debtor or any of its direct or indirect
 subsidiaries or otherwise, unless and until any such Secured Party exercises
 its right to be substituted for such Debtor as a partner or member, as
 applicable, pursuant hereto.

 
	
  

 	
  

 
	
  

 	
           (l) To
 the extent that the grant of the security interest in the Collateral and the
 enforcement of the terms hereof require the consent, approval or action of
 any partner or member, as applicable, of any Debtor or any direct or indirect
 subsidiary of any Debtor or compliance with any provisions of any of the
 Organizational Documents, the Debtors hereby grant such consent and approval
 and waive any such noncompliance with the terms of said documents.

 
	
  

 	
  

 
	
  

 	
           (m) It is
 expressly understood and agreed that (i) the parties have entered into this
 Agreement for the sole purpose of perfecting each Secured Party’s security
 interest in the Collateral of the Debtors, (ii) there is no agreement or
 other understanding between or among the parties hereto to act together for
 the purpose of acquiring, holding, voting or disposing of “equity securities”
 (as defined in Rule 13d-1(i) promulgated under the Securities Exchange Act of
 1934, as amended) of any of the Debtors and (iii) each of the parties hereto
 shall act independent of one another in making decisions with respect to the
 acquiring, holding, voting or disposing of “equity securities” of each of the
 Debtors.

 
	
  

 	
  

 
	
  

 	
           (n)
 References in this Agreement to any rights granted to the Secured Parties or
 actions to taken by the Secured Parties shall also mean the rights granted to
 the Agent, for the benefit of the Secured Parties and actions to be taken by
 the Agent, for the benefit of the Secured Parties.

 
	
  

 	
  

 
	
  

 	
           (o) Each
 Secured Party and the Agent, for the benefit of the Secured Parties, hereby
 acknowledges and agrees that, notwithstanding the time or order of the filing
 of any financing statement or other registration or document with respect to
 the Collateral and the security interests granted by the Debtors to the
 Secured Parties and the Agent, for the benefit of the Secured Parties, or any
 provision of this Agreement, any other security document, the UCC or other
 applicable law, solely as amongst the Secured Parties and the Agent, for the
 benefit of the Secured Parties, the security interests of the Secured Parties
 and the Agent, for the benefit of the Secured Parties, shall have the same
 rank and 

 


18









	
  

 	
  

 
	
  

 	
 priority; provided, that, the foregoing shall not apply to any
 security interest of a Secured Party or the Agent, for the benefit of the Secured
 Parties, that is void or voidable as a matter of law.

 


[SIGNATURE PAGES FOLLOW]


19





          IN WITNESS
WHEREOF, the parties hereto have caused this Security Agreement to be duly
executed on the day and year first above written.


	
  

 	
  

 
	
 RODMAN & RENSHAW CAPITAL GROUP, INC.

 
	
  

 	
  

 
	
 By:

 	
  

 
	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
  

 
	
 RODMAN PRINCIPAL INVESTMENTS, LLC

 
	
  

 	
  

 
	
 By:

 	
  

 
	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
  

 
	
 RODMAN & RENSHAW, LLC

 
	
  

 	
  

 
	
 By:

 	
  

 
	
  

 	

 


 
	
  

 	
  Name:

 
	
  

 	
  Title:

 





	
  

 	
  

 
	
  

 	
 [SIGNATURE PAGE OF HOLDERS FOLLOWS]

 


20





[SIGNATURE PAGE OF
HOLDERS TO RODM SA]


Name of Investing
Entity: __________________________


Signature
of Authorized Signatory of Investing entity: _________________________


Name of Authorized
Signatory: _________________________


Title of Authorized
Signatory: __________________________


	
  

 	
  

 
	
  

 	
  [SIGNATURE PAGE OF
 HOLDERS FOLLOWS]

 


21





SCHEDULE A


Principal Place of
Business of Debtors:


1251 Avenue of the
Americas, New York, New York.


SCHEDULE D
Legal Names and Organizational Identification Numbers


Delaware


SCHEDULE E
Names; Mergers and Acquisitions

None


SCHEDULE H

Pledged Securities


[TO
BE PROVIDED]


22





ANNEX
A

to

SECURITY

AGREEMENT


THE AGENT


                    1.
Appointment. The Secured Parties (all capitalized
terms used herein and not otherwise defined shall have the respective meanings
provided in the Security Agreement to which this Annex A is attached (the “Agreement”)),
by their acceptance of the benefits of the Agreement, hereby designate
Kingsbrook Opportunities Master Fund LP (“Kingsbrook” or “Agent”)
as the Agent to act as specified herein and in the Agreement. Each Secured
Party shall be deemed irrevocably to authorize the Agent to take such action on
its behalf under the provisions of the Agreement, the Secured Party DACA and
any other Transaction Document (as such term is defined in the Purchase
Agreement) and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents or employees.


                    2.
Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement and the
Secured Party DACA. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction.
The duties of the Agent shall be mechanical and administrative in nature; the
Agent shall not have by reason of the Agreement, the Secured Party DACA or any
other Transaction Document a fiduciary relationship in respect of any Debtor or
any Secured Party; and nothing in the Agreement, the Secured Party DACA or any
other Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement, the Secured Party DACA or any other Transaction Document except as
expressly set forth herein and therein.


                    3.
Lack of Reliance on the Agent.
Independently and without reliance upon the Agent, each Secured Party, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Company
and its subsidiaries in connection with such Secured Party’s investment in the
Debtors, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with 





respect thereto,
whether coming into its possession before any Obligations are incurred or at
any time or times thereafter. The Agent shall not be responsible to the Debtors
or any Secured Party for any recitals, statements, information, representations
or warranties herein or in any document, certificate or other writing delivered
in connection herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectibility, priority or sufficiency
of the Agreement or any other Transaction Document, or for the financial
condition of the Debtors or the value of any of the Collateral, or be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of the Agreement or any other Transaction
Document, or the financial condition of the Debtors, or the value of any of the
Collateral, or the existence or possible existence of any default or Event of
Default under the Agreement, the Debentures or any of the other Transaction
Documents.


                    4.
Certain Rights of the Agent. The
Agent shall have the right to take any action with respect to the Collateral,
on behalf of all of the Secured Parties. To the extent practical, the Agent
shall request instructions from the Secured Parties with respect to any
material act or action (including failure to act) in connection with the
Agreement, the Secured Party DACA or any other Transaction Document, and shall
be entitled to act or refrain from acting in accordance with the instructions
of a Majority in Interest; if such instructions are not provided despite the
Agent’s request therefor, the Agent shall be entitled to refrain from such act
or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to
be taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary
to this Agreement, the Transaction Documents or applicable law.


                    5.
Reliance. The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any writing, resolution,
notice, statement, certificate, facsimile, e-mail, order or other document or
telephone message signed, sent or made by the proper person or entity, and,
with respect to all legal matters pertaining to the Agreement and the other
Transaction Documents and its duties thereunder, upon advice of counsel
selected by it and upon all other matters pertaining to this Agreement and the
other Transaction Documents and its duties thereunder, upon advice of other
experts selected by it. Anything to the contrary notwithstanding, the Agent
shall have no obligation whatsoever to any Secured Party to assure that the
Collateral exists or is owned by the Debtors or is cared for, protected or insured
or that the liens granted pursuant to the Agreement have been properly or
sufficiently or lawfully created, perfected, or enforced or are entitled to any
particular priority.





                    6.
Indemnification. To the extent that the Agent is not
reimbursed and indemnified by the Debtors, the Secured Parties will jointly and
severally reimburse and indemnify the Agent, in proportion to their initially
purchased respective principal amounts of Debentures, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in performing its
duties hereunder or under the Agreement or any other Transaction Document, or
in any way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to
further appeal) of a court of competent jurisdiction to have resulted solely
from the Agent’s own gross negligence or willful misconduct. Prior to taking
any action hereunder as Agent, the Agent may require each Secured Party to
deposit with it sufficient sums as it determines in good faith is necessary to
protect the Agent for costs and expenses associated with taking such action.


                    7.
Resignation by the Agent.


	
  

 	
  

 
	
  

 	
           (a)
 The Agent may resign from the performance of all its functions and duties
 under the Agreement and the other Transaction Documents at any time by giving
 30 days’ prior written notice (as provided in the Agreement) to the Debtors
 and the Secured Parties. Such resignation shall take effect upon the
 appointment of a successor Agent pursuant to clauses (b) and (c) below.

 
	
  

 	
  

 
	
  

 	
           (b)
 Upon any such notice of resignation, the Secured Parties, acting by a
 Majority in Interest, shall appoint a successor Agent hereunder.

 
	
  

 	
  

 
	
  

 	
           (c)
 If a successor Agent shall not have been so appointed within said 30-day
 period, the Agent shall then appoint a successor Agent who shall serve as
 Agent until such time, if any, as the Secured Parties appoint a successor
 Agent as provided above. If a successor Agent has not been appointed within
 such 30-day period, the Agent may petition any court of competent jurisdiction
 or may interplead the Debtors and the Secured Parties in a proceeding for the
 appointment of a successor Agent, and all fees, including, but not limited
 to, extraordinary fees associated with the filing of interpleader and
 expenses associated therewith, shall be payable by the Debtors on demand.

 


                    8.
Rights with respect to Collateral. Each Secured Party agrees with all other
Secured Parties and the Agent (i) that it shall not, and shall not attempt to,
exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of
the other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral
other than as set forth in this Agreement and the other Transaction Documents. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, 





powers, privileges
and duties of the retiring Agent and the retiring Agent shall be discharged
from its duties and obligations under the Agreement. After any retiring Agent’s
resignation or removal hereunder as Agent, the provisions of the Agreement
including this Annex B shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.