**Exhibit10.13**

 

**EXECUTION VERSION**

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**PLEDGE AND SECURITY AGREEMENT**

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THIS PLEDGE AND SECURITY AGREEMENT (as it maybe amended or modified from time to time, the “Security Agreement”) isentered into as of May 12, 2010 by and between KOSS CORPORATION, a Delawarecorporation (the “Grantor”), as debtor, and JPMorgan Chase Bank, N.A.(the “Lender”), as secured party.

 

**PRELIMINARYSTATEMENT**

 

The Grantor and the Lender are entering intoa Credit Agreement dated as of the date hereof (as it may be amended ormodified 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 to theGrantor under the Credit Agreement.

 

ACCORDINGLY, the Grantor and the Lender,hereby agree as follows:

 

# **ARTICLE IDEFINITIONS**

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## 1.1.         Terms Defined in Credit Agreement.  All capitalized terms used herein and nototherwise defined shall have the meanings assigned to such terms in the CreditAgreement.

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## 1.2.         Terms Defined in UCC.  Terms defined in the UCC which are nototherwise defined in this Security Agreement are used herein as defined in theUCC.

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## 1.3.         Definitions of Certain Terms UsedHerein.  As used in this SecurityAgreement, in addition to the terms defined in the Preliminary Statement, thefollowing terms shall have the following meanings:

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

 

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

 

“Chattel Paper” shall have the meaningset forth in Article 9 of the UCC.

 

“Collateral” shall have the meaningset forth in Article II.

 

“Collateral Access Agreement” meansany landlord waiver or other agreement, in form and substance satisfactory tothe Lender, between the Lender and any third party (including any bailee,consignee, customs broker, or other similar Person) in possession of anyCollateral or any landlord of the Grantor for any real property where anyCollateral is located, as such landlord waiver or other agreement may beamended, restated, or otherwise modified from time to time.

 

“Collateral Deposit Account” shallhave the meaning set forth in Section 7.1.

 

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“Collateral Report” means anycertificate (including any Borrowing Base Certificate), report or otherdocument delivered by the Grantor to the Lender with respect to the Collateralpursuant to any Loan Document.

 

“Commercial Tort Claims” means theexisting commercial tort claims of the Grantor set forth on Exhibit A.

 

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

 

“Copyrights” means, with respect toany Person, all of such Person’s right, title, and interest in and to thefollowing:  (a) all copyrights, rightsand interests in copyrights, works protectable by copyright, copyrightregistrations, and copyright applications; (b) all renewals of any of theforegoing; (c) all income, royalties, damages, and payments now orhereafter due and/or payable under any of the foregoing, including, withoutlimitation, damages or payments for past or future infringements for any of theforegoing; (d) the right to sue for past, present, and futureinfringements of any of the foregoing; and (e) all rights corresponding toany of the foregoing throughout the world.

 

“Default” means any event or conditionwhich constitutes an Event of Default or which upon notice, lapse of time orboth would, unless cured or waived, become an Event of Default.

 

“Deposit Account Control Agreement”means an agreement, in form and substance satisfactory to the Lender, amongGrantor, a banking institution holding Grantor’s funds, and the Lender withrespect to collection and control of all deposits and balances held in adeposit account maintained by Grantor with such banking institution.

 

“Deposit Accounts” shall have themeaning set forth in Article 9 of the UCC.

 

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

 

“Effective Date” shall have themeaning set forth in the Credit Agreement.

 

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

 

“Event of Default” means an eventdescribed in Section 5.1.

 

“Exhibit” refers to a specific exhibitto this Security Agreement, unless another document is specifically referenced.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Licenses” means, with respect to anyPerson, all of such Person’s right, title, and interest in and to (a) anyand all licensing agreements or similar arrangements in and to its Patents,Copyrights, or Trademarks, (b) all income, royalties, damages, claims, andpayments now or hereafter due or 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.

 

“Patents” means, with respect to anyPerson, 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,and continuations-in-part thereof; (d) all income, royalties, damages,claims, and payments now or hereafter due or payable under and with respectthereto, including, without limitation, damages and payments for past andfuture infringements thereof; (e) all rights to sue for past, present, andfuture infringements thereof; and (f) all rights corresponding to any ofthe foregoing throughout the world.

 

“Pledged Collateral” means allInstruments, Securities and other Investment Property of the Grantor, whetheror not physically delivered to the Lender pursuant to this Security Agreement.

 

“Receivables” means the Accounts,Chattel Paper, Documents, Investment Property, Instruments and any other rightsor claims to receive money which are General Intangibles or which are otherwiseincluded as Collateral.

 

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

 

“Security” has the meaning set forthin Article 8 of the UCC.

 

“Stock Rights” means all dividends,instruments or other distributions and any other right or property which theGrantor shall receive or shall become entitled to receive for any reason whatsoeverwith respect to, in substitution for or in exchange for any Equity Interestconstituting Collateral, any right to receive an Equity Interest and any rightto receive earnings, in which the Grantor now has or hereafter acquires anyright, issued by an issuer of such Equity Interest.

 

“Supporting Obligations” shall havethe meaning set forth in Article 9 of the UCC.

 

“Trademarks” means, with respect toany Person, all of such Person’s right, title, and interest in and to thefollowing:  (a) all trademarks(including 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 paymentsfor past and future infringements thereof; (e) all rights to sue for 

 

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past, present, and futureinfringements of the foregoing, including the right to settle suits involvingclaims and demands for royalties owing; and (f) all rights correspondingto any of the foregoing throughout the world.

 

“UCC” means the Uniform CommercialCode, as in effect from time to time, of the State of Wisconsin or of any otherstate the laws of which are required as a result thereof to be applied inconnection with the attachment, perfection or priority of, or remedies withrespect to, Lender’s Lien on any Collateral.

 

The foregoing definitions shall be equallyapplicable to both the singular and plural forms of the defined terms.

 

# **ARTICLE IIGRANT OF SECURITY INTEREST**

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The Grantor hereby pledges, assigns andgrants to the Lender, a security interest in all of its right, title andinterest in, to and under all personal property and other assets, whether nowowned by or owing to, or hereafter acquired by or arising in favor of theGrantor (including under any trade name or derivations thereof), and whetherowned or consigned by or to, or leased from or to, the Grantor, and regardlessof where located (all of which will be collectively referred to as the “Collateral”),including:

 

#### (i)            all Accounts;

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#### (ii)           all Chattel Paper;

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#### (iii)          all Copyrights,Patents and Trademarks;

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#### (iv)          all Documents;

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#### (v)           all Equipment;

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#### (vi)          all Fixtures;

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#### (vii)         all GeneralIntangibles;

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#### (viii)        all Goods;

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#### (ix)          all Instruments;

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#### (x)           all Inventory;

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#### (xi)          all InvestmentProperty;

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#### (xii)         all cash or cashequivalents;

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#### (xiii)        all letters ofcredit, Letter-of-Credit Rights and Supporting Obligations;

 

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#### (xiv)        all Deposit Accountswith any bank or other financial institution;

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#### (xv)         all Commercial TortClaims;

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#### (xvi)        and all accessionsto, substitutions for and replacements, proceeds (including Stock Rights),insurance proceeds and products of the foregoing, together with all books andrecords, customer lists, credit files, computer files, programs, printouts andother computer materials and records related thereto and any GeneralIntangibles at any time evidencing or relating to any of the foregoing;

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to secure the prompt andcomplete payment and performance of the Secured Obligations.

 

# **ARTICLE IIIREPRESENTATIONS AND WARRANTIES**

# ** **

The Grantor represents and warrants to theLender that:

 

## 3.1.         Title, Perfection and Priority.  The Grantor has good and valid rights in orthe power to transfer the Collateral and title to the Collateral with respectto which it has purported to grant a security interest hereunder, free andclear of all Liens except for Liens permitted under Section 4.1(e), andhas full power and authority to grant to the Lender the security interest insuch Collateral pursuant hereto.  Whenfinancing statements have been filed in the appropriate offices against theGrantor in the locations listed on Exhibit H, the Lender will havea fully perfected first priority security interest in that Collateral in whicha security interest may be perfected by filing, subject only to Liens permittedunder Section 4.1(e).

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## 3.2.         Type and Jurisdiction ofOrganization, Organizational and Identification Numbers.  The type of entity of the Grantor, its stateof organization, the organizational number issued to it by its state oforganization and its federal employer identification number are set forth on Exhibit A.

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## 3.3.         Principal Location.  The Grantor’s mailing address and thelocation of its place of business (if it has only one) or its chief executiveoffice (if it has more than one place of business), are disclosed in Exhibit A;the Grantor has no other places of business except those set forth in Exhibit A.

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## 3.4.         Collateral Locations.  All of Grantor’s locations where Collateralis located are listed on Exhibit A. All of said locations are either (i) leased by the Grantor aslessee and designated in Part VII(b) of Exhibit A,or (ii) locations at which Inventory is held in a public warehouse oris otherwise held by a bailee or on consignment as designated in Part VII(c) ofExhibit A.

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## 3.5.         Deposit Accounts.  All of the Grantor’s Deposit Accounts arelisted on Exhibit B.

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## 3.6.         Exact Names.  The Grantor’s name in which it has executedthis Security Agreement is the exact name as it appears in the Grantor’sorganizational documents, as amended, as filed with the Grantor’s jurisdictionof organization.  The Grantor has not,during 

 

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## the past five years, beenknown by or used any other corporate or fictitious name, or been a party to anymerger or consolidation, or been a party to any acquisition.

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## 3.7.         Letter-of-Credit Rights and ChattelPaper.  Exhibit C listsall Letter-of-Credit Rights and Chattel Paper of the Grantor.  All action by the Grantor necessary ordesirable to protect and perfect the Lender’s Lien on each item listed on Exhibit C(including the delivery of all originals and the placement of a legend on allChattel Paper as required hereunder) has been duly taken. The Lender will havea fully perfected first priority security interest in the Collateral listed on Exhibit C,subject only to Liens permitted under Section 4.1(e).

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## 3.8.         Accounts and Chattel Paper.

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### (a)           The names of the obligors, amountsowing, due dates and other information with respect to the Accounts and ChattelPaper are and will be correctly stated in all records of the Grantor relatingthereto and in all invoices and Collateral Reports with respect theretofurnished to the Lender by the Grantor from time to time.  As of the time when each Account or each itemof Chattel Paper arises, the Grantor shall be deemed to have represented andwarranted that such Account or Chattel Paper, as the case may be, and allrecords relating thereto, are genuine and in all respects what they purport tobe.

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### (b)           Intentionally Deleted.

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### (c)           In addition, with respect to allAccounts, (i) the amounts shown on all invoices, statements and CollateralReports with respect thereto are actually and absolutely owing to the Grantoras indicated thereon and are not in any way contingent; and  (ii) to the Grantor’s knowledge, allAccount Debtors have the capacity to contract.

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## 3.9.         Inventory.  With respect to any Inventory scheduled orlisted on the most recent Collateral Report, (a) such Inventory (otherthan Inventory in transit) is located at one of the Grantor’s locations setforth on Exhibit A, (b) no Inventory  (other than Inventory in transit) is now, orshall at any time or times hereafter be stored at any other location except aspermitted by Section 4.1(g), (c) the Grantor has good, indefeasibleand merchantable title to such Inventory and such Inventory is not subject toany Lien or security interest or document whatsoever except for the Liengranted to the Lender, and except for Liens permitted by Section 6.02 ofthe Credit Agreement, (d) except as specifically disclosed in the mostrecent Collateral Report, such Inventory is Eligible Inventory of good andmerchantable quality, free from any defects, (e) such Inventory is notsubject to any licensing, patent, royalty, trademark, trade name or copyrightagreements with any third parties which would require any consent of any thirdparty upon sale or disposition of that Inventory or the payment of any moniesto any third party upon such sale or other disposition, (f) such Inventoryhas been produced in accordance with the Federal Fair Labor Standards Act of1938, as amended, and all rules, regulations and orders thereunder and (g) thecompletion of manufacture, sale or other disposition of such Inventory by theLender following an Event of Default shall not require the consent of anyPerson and shall not constitute a breach or default under any contract oragreement to which the Grantor is a party or to which such property is subject.

 

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## 3.10.       Intellectual Property. ThisSecurity Agreement is effective to create a valid and continuing Lien and, uponfiling of appropriate financing statements in the offices listed on Exhibit H,fully perfected first priority security interests in favor of the Lender on theGrantor’s Patents, Trademarks and Copyrights, such perfected security interestsare enforceable as such as against any and all creditors of and purchasers fromthe Grantor; and all action necessary or desirable to protect and perfect theLender’s Lien on the Grantor’s Patents, Trademarks or Copyrights shall havebeen duly taken.  Without limiting theforegoing, Grantor will take such actions as the Lender may require for thepurpose of recording its interest in the Grantor’s Patents and Trademarks withthe United States Patent and Trademark Office from time to time upon Lender’sreceipt of the initial schedule of Borrower’s Patents and Trademarks, and anyupdates thereto, each as required pursuant to the terms of the CreditAgreement.

 

## 3.11.       Filing Requirements.  None of the Equipment is covered by anycertificate of title, except for the vehicles described in Part I of Exhibit E.  None of the Collateral is of a type for whichsecurity interests or liens may be perfected by filing under any federalstatute or any state statute other than Article 9 of the UniformCommercial Code as in effect in the relevant state except for the vehiclesdescribed in Part II of Exhibit E.  The legal description, county and streetaddress of each property 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, SecurityAgreements.  No financing statementor security agreement describing all or any portion of the Collateral which hasnot lapsed or been terminated naming the Grantor as debtor has been filed or isof record in any jurisdiction except (a) for financing statements orsecurity agreements naming the Lender as the secured party and (b) aspermitted by Section 4.1(e).

 

## 3.13.       Pledged Collateral.

 

### (a)           Exhibit G sets forth acomplete and accurate list of all of the Pledged Collateral.  The Grantor is the direct, sole beneficialowner and sole holder of record of the Pledged Collateral listed on Exhibit Gas being owned by it, free and clear of any Liens, except for the securityinterest granted to the Lender hereunder and as otherwise permitted by Section 6.02of the Credit Agreement.  The Grantor furtherrepresents and warrants that (i) all Pledged Collateral constituting anEquity Interest has been (to the extent such concepts are relevant with respectto such Pledged Collateral) duly authorized, validly issued, are fully paid andnon-assessable, (ii) with respect to any certificates delivered to theLender representing an Equity Interest, either such certificates are Securitiesas defined in Article 8 of the UCC as a result of actions by the issuer orotherwise, or, if such certificates are not Securities, the Grantor has soinformed the Lender so that the Lender may take steps to perfect its securityinterest therein as a General Intangible, (iii) all Pledged Collateralheld by a securities intermediary is covered by a control agreement among the Grantor,the securities intermediary and the Lender pursuant to which the Lender hasControl and (iv) all Pledged Collateral which represents Indebtedness owedto the Grantor has been duly authorized, authenticated or issued and deliveredby the issuer of such Indebtedness, is the legal, valid and binding obligationof such issuer and such issuer is not in default thereunder.

 

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### (b)           In addition, (i) none of thePledged Collateral has been issued or transferred in violation of thesecurities registration, securities disclosure or similar laws of anyjurisdiction to which such issuance or transfer may be subject, (ii) thereare existing no options, warrants, calls or commitments of any characterwhatsoever relating to the Pledged Collateral or which obligate the issuer ofany Equity Interest included in the Pledged Collateral to issue additionalEquity Interests, and (iii) no consent, approval, authorization, or otheraction by, and no giving of notice, filing with, any governmental authority orany other 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.

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### (c)           Except as set forth in Exhibit G,the Grantor owns 100% of the issued and outstanding  Equity Interests which constitute PledgedCollateral and none of the Pledged Collateral which represents Indebtednessowed to the Grantor is subordinated in right of payment to other Indebtednessor subject to the terms of an indenture.

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# **ARTICLE IVCOVENANTS**

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

 

## 4.1.         General.

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### (a)           Collateral Records.  The Grantor will maintain complete andaccurate books and records with respect to the Collateral, and furnish to theLender, such reports relating to the Collateral as the Lender shall from timeto time request.

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### (b)           Authorization to File FinancingStatements; Ratification.  TheGrantor hereby authorizes the Lender to file, and if requested will deliver tothe Lender, all financing statements and other documents and take such otheractions as may from time to time be requested by the Lender in order tomaintain a first perfected security interest in and, if applicable, Control of,the Collateral.  Any financing statementfiled by the Lender may be filed in any filing office in any UCC jurisdictionand may (i) indicate the Collateral (1) as all assets of the Grantoror words of similar effect, regardless of whether any particular assetcomprised in the Collateral falls within the scope of Article 9 of the UCCor such jurisdiction, or (2) by any other description which reasonablyapproximates the description contained in this Security Agreement, and (ii) containany other information required by part 5 of Article 9 of the UCC for thesufficiency or filing office acceptance of any financing statement oramendment, including (a) whether the Grantor is an organization, the typeof organization and any organization identification number issued to theGrantor, and (b) in the case of a financing statement filed as a fixturefiling or indicating Collateral as as-extracted collateral or timber to be cut,a sufficient description of real property to which the Collateral relates.  The Grantor also agrees to furnish any suchinformation to the Lender promptly upon request.  The Grantor also ratifies its 

 

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### authorization for the Lenderto have filed in any UCC jurisdiction any initial financing statements oramendments thereto if filed prior to the date hereof.

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### (c)           Further Assurances.  The Grantor will, if so requested by theLender, furnish to the Lender, as often as the Lender requests, statements andschedules further identifying and describing the Collateral and such otherreports and information in connection with the Collateral as the Lender mayreasonably request, all in such detail as the Lender may specify.  The Grantor also agrees to take any and allactions necessary to defend title to the Collateral against all persons and todefend the security interest of the Lender in the Collateral and the priority thereofagainst any Lien not expressly permitted hereunder.

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### (d)           Disposition of Collateral.  The Grantor will not sell, lease or otherwisedispose of the Collateral except for dispositions specifically permittedpursuant to the Credit Agreement.

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### (e)           Liens.  The Grantor will not create, incur, or sufferto exist any Lien on the Collateral except (i) the security interestcreated by this Security Agreement, and (ii) other Liens permitted under Section 6.02of the Credit Agreement.

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### (f)            Other Financing Statements.  The Grantor will not authorize the filing ofany financing statement naming it as debtor covering all or any portion of theCollateral, except as permitted by Section 4.1(e). The Grantoracknowledges that it is not authorized to file any financing statement oramendment or termination statement with respect to any financing statementnaming the Lender as secured party or that is not expressly permitted by Section 6.02of the Credit Agreement without the prior written consent of the Lender,subject to the Grantor’s rights under Section 9-509(d)(2) of the UCC.

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### (g)           Locations. The Grantor willnot (i) maintain any Collateral at any location other than those locationslisted on Exhibit A, (ii) otherwise change, or add to, suchlocations without the Lender’s prior written consent as required by the CreditAgreement (and if the Lender gives such consent, the Grantor will concurrentlytherewith obtain a Collateral Access Agreement for each such location to theextent required by the Credit Agreement), or (iii) change its principalplace of business or chief executive office from the location identified on Exhibit A,other than as permitted by the Credit Agreement.

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### (h)           Compliance with Terms.  The Grantor will perform and comply in allmaterial respects 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.

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## 4.2.         Receivables.

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### (a)           Certain Agreements on Receivables.  The Grantor will not make or agree to makeany discount, credit, rebate or other reduction in the original amount owing ona Receivable or accept in satisfaction of a Receivable less than the originalamount thereof, except that, prior to the occurrence of an Event of Default,the Grantor may reduce the amount of Accounts arising from the sale ofInventory in accordance with its present policies and in the ordinary course ofbusiness.

 

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### (b)           Collection of Receivables.  Except for write-offs of Receivables deemedunrecoverable in accordance with its present policies and in the ordinarycourse of business or as otherwise provided in this Security Agreement, theGrantor will collect and enforce, at the Grantor’s sole expense, all amountsdue or hereafter due to the Grantor under the Receivables.

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### (c)           Delivery of Invoices.  The Grantor will deliver to the Lenderimmediately upon its request after the occurrence and during the continuationof an Event of Default duplicate invoices with respect to each Account bearingsuch language of assignment as the Lender shall specify.

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### (d)           Intentionally Deleted.

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### (e)           Electronic Chattel Paper.  The Grantor shall take all steps necessary togrant the Lender Control of all electronic chattel paper in accordance with theUCC and all “transferable records” as defined in each of the Uniform ElectronicTransactions Act and the Electronic Signatures in Global and National CommerceAct.

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## 4.3.         Inventory and Equipment.

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### (a)           Maintenance of Goods.  The Grantor will do all things necessary tomaintain, preserve, protect and keep the Inventory and the Equipment in goodrepair and working and saleable condition, except for damaged or defectivegoods arising in the ordinary course of the Grantor’s business and except forordinary wear and tear in respect of the Equipment.

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### (b)           Returned Inventory.  In the event any Account Debtor returnsInventory to the Grantor when an Event of Default exists, the Grantor, upon therequest of the Lender, shall: (i) hold the returned Inventory in trust forthe Lender; (ii) segregate all returned Inventory from all of its otherproperty; (iii) dispose of the returned Inventory solely according to theLender’s written instructions; and (iv) not issue any credits orallowances with respect thereto without the Lender’s prior writtenconsent.  All returned Inventory shall besubject to the Lender’s Liens thereon. Whenever any Inventory is returned, the related Account shall be deemedineligible to the extent of the amount owing by the Account Debtor with respectto such returned Inventory and such returned Inventory shall not be EligibleInventory.

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### (c)           Inventory Count.  The Grantor will conduct a physical count ofthe Inventory at least once per Fiscal Year, and after and during thecontinuation of an Event of Default, at such other times as the Lenderrequests. The Grantor, at its own expense, shall deliver to the Lender theresults of each physical verification, which the Grantor has made, or hascaused any other Person to make on its behalf, of all or any portion of itsInventory.

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### (d)           Equipment.  The Grantor shall promptly inform the Lenderof any additions to or deletions from the Equipment which individually exceed$250,000.  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 either does not have a Lien or has not otherwiseentered into a Collateral Access Agreement. The Grantor will not, without the Lender’s prior written consent, alteror remove any identifying symbol or number on any of the Grantor’s Equipmentconstituting Collateral.

 

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### (e)           Titled Vehicles.  The Grantor will give the Lender notice ofits acquisition of any vehicle covered by a certificate of title with a valuein excess of $50,000, and deliver to the Lender, upon request, the original ofany vehicle title certificate and provide and/or file all other documents orinstruments necessary to have the Lien of the Lender noted on any suchcertificate or with the appropriate state office.

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## 4.4.          Delivery of Instruments,Securities, Chattel Paper and Documents. The Grantor will (a) deliverto the Lender immediately upon execution of this Security Agreement theoriginals of all Chattel Paper, certificated Securities and Instrumentsconstituting Collateral (if any then exist), (b) hold in trust for theLender upon receipt and immediately thereafter deliver to the Lender anyChattel Paper, certificated Securities and Instruments constituting Collateral,(c) upon the Lender’s request, deliver to the Lender (and thereafter holdin trust for the Lender upon receipt and immediately deliver to the Lender) anyDocument evidencing or constituting Collateral and (d) upon the Lender’srequest, deliver to the Lender a duly executed amendment to this SecurityAgreement, in the form of Exhibit I hereto (the “Amendment”),pursuant to which the Grantor will pledge such additional Collateral.  The Grantor hereby authorizes the Lender toattach each Amendment to this Security Agreement and agrees that all additionalCollateral set forth in such Amendments shall be considered to be part of theCollateral.

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## 4.5.          Uncertificated Pledged Collateral.The Grantor will permit the Lender  fromtime to time to cause the appropriate issuers (and, if held with a securitiesintermediary, such securities intermediary) of uncertificated securities orother types of Pledged Collateral not represented by certificates to mark theirbooks and records with the numbers and face amounts of all such uncertificatedsecurities or other types of Pledged Collateral not represented by certificatesand all rollovers and replacements therefor to reflect the Lien of the Lendergranted pursuant to this Security Agreement. The Grantor will take any actions necessary to cause (a) theissuers of uncertificated securities which are Pledged Collateral and (b) anysecurities intermediary which is the holder of any Pledged Collateral, to causethe Lender to have and retain Control over such Pledged Collateral.  Without limiting the foregoing, the Grantorwill, with respect to Pledged Collateral held with a securities intermediary,cause such securities intermediary to enter into a control agreement with theLender, in form and substance satisfactory to the Lender, giving the LenderControl.

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## 4.6.          Pledged Collateral.

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### (a)           Changes in Capital Structure ofIssuers. Except as expressly permitted or required by the Credit Agreement,the Grantor will not (i) permit or suffer any issuer of an Equity Interestconstituting Pledged Collateral to dissolve, merge, liquidate, retire any ofits Equity Interests or other Instruments or Securities evidencing ownership,reduce its capital, sell or encumber all or substantially all of its assets(except for Liens permitted under Section 6.02 of the Credit Agreement andsales of assets permitted pursuant to Section 4.1(d)) or merge orconsolidate with any other entity, or (ii) vote any Pledged Collateral infavor of any of the foregoing.

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### (b)           Issuance of Additional Securities.  The Grantor will not permit or suffer theissuer of an Equity Interest constituting Pledged Collateral to issueadditional Equity Interests, any right to receive the same or any right toreceive earnings, except to the Grantor.

 

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### (c)           Registration of Pledged Collateral.  During the continuation of an Event ofDefault, Grantor will permit any registerable Pledged Collateral to beregistered in the name of the Lender or its nominee at any time at the optionof the Lender.

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### (d)           Exercise of Rights in PledgedCollateral.

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#### (i)            Without in any waylimiting the foregoing and subject to clause (ii) below, the Grantor shallhave the right to exercise all voting rights or other rights relating to thePledged Collateral for all purposes not inconsistent with this SecurityAgreement, the Credit Agreement or any other Loan Document; *provided however*, 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)           The Grantor willpermit the Lender or its nominee at any time after the occurrence of an Eventof 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 anyEquity Interest or Investment Property constituting Pledged Collateral as if itwere the absolute owner thereof.

####  

#### (iii)          The Grantor shallbe entitled to collect and receive for its own use all cash dividends andinterest paid in respect of the Pledged Collateral to the extent not in violationof the Credit Agreement other than any of the following distributionsand payments (collectively referred to as the “Excluded Payments”): (a) dividendsand interest paid or payable other than in cash in respect of any PledgedCollateral, and instruments and other property received, receivable orotherwise distributed in respect of, or in exchange for, any PledgedCollateral;  (b) dividends and otherdistributions paid or payable in cash in respect of any Pledged Collateral inconnection with a partial or total liquidation or dissolution or in connectionwith a reduction of capital, capital surplus or paid-in capital of an issuer;and (c) cash paid, payable or otherwise distributed, in respect ofprincipal of, or in redemption of, or in exchange for, any Pledged Collateral; *provided however, that* until actually paid, all rights tosuch distributions shall remain subject to the Lien created by this SecurityAgreement; and

####  

#### (iv)          All ExcludedPayments 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.          Intellectual Property.

###  

### (a)           The Grantor will use its best effortsto secure all consents and approvals necessary or appropriate for theassignment to or benefit of the Lender of any License held by the Grantor andto enforce the security interests granted hereunder.  Within 30 days of the date hereof, theGrantor will deliver to the Lender a schedule of any interest in, or any titleto, any

 

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### registered Patent, Trademarkor Copyright in the form of Exhibit D.  The Grantor further agrees to provide theLender, within 30 days hereof, such Patent, Trademark, and/or Copyright SecurityAgreements as the Lender may require to be filed with the United States Patentand Trademark Office to evidence the Lien granted herein.

###  

### (b)           The Grantor shall notify the Lenderimmediately if it knows or has reason to know that any application orregistration relating to any Patent, Trademark or Copyright (now or hereafterexisting) that is material to the conduct of Grantor’s business may becomeabandoned or dedicated, or of any adverse determination or development(including the institution of, or any such determination or development in, anyproceeding in the United States Patent and Trademark Office, the United StatesCopyright Office or any court) regarding the Grantor’s ownership of any Patent,Trademark or Copyright, its right to register the same, or to keep and maintainthe same.

###  

### (c)           Upon the filing of an application forthe registration of any Patent, Trademark or Copyright with the United StatesPatent and Trademark Office, the United States Copyright Office or any similaroffice or agency, the Grantor shall execute and deliver any and all securityagreements as the Lender may request to evidence the Lender’s first prioritysecurity interest on such Patent, Trademark or Copyright, and the GeneralIntangibles of the Grantor relating thereto or represented thereby.

###  

### (d)           The Grantor shall take all actionsnecessary or requested by the Lender to maintain and pursue each application,to obtain the relevant registration and to maintain the registration of each ofthe Patents, Trademarks and Copyrights (now or hereafter existing), includingthe filing of applications for renewal, affidavits of use, affidavits ofnoncontestability and opposition and interference and cancellation proceedings,unless the Grantor shall determine that such Patent, Trademark or Copyright isnot material to the conduct of its business.

###  

### (e)           The Grantor shall, unless it shallreasonably determine that such Patent, Trademark or Copyright is in no waymaterial to 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, Trademark or Copyright.  In theevent that the Grantor institutes suit because any of the Patents, Trademarksor Copyrights constituting Collateral is infringed upon, or misappropriated ordiluted by a third party, the Grantor shall comply with Section 4.8.

###  

## 4.8.          Commercial Tort Claims.  The Grantor shall promptly, and in any eventwithin two Business Days after the same is acquired by it, notify the Lender ofany commercial tort claim (as defined in the UCC) acquired by it and, unlessthe Lender otherwise consents, the Grantor shall enter into an amendment tothis Security Agreement, in the form of Exhibit I hereto, grantingto Lender a first priority security interest in such commercial tort claim.

##  

## 4.9.          Letter-of-Credit Rights.  If the Grantor is or becomes the beneficiaryof any letters of credit with an aggregate face amount in excess of $50,000,the Grantor shall promptly, and in any event within two Business Days afterbecoming a beneficiary, notify the Lender thereof and,

 

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## upon Lender’s request, causethe issuer and/or confirmation bank to consent to the assignment of anyLetter-of-Credit Rights to the Lender.

##  

## 4.10.        Federal, State or Municipal Claims.  The Grantor will promptly notify the Lenderof any Collateral which constitutes a claim against the United Statesgovernment or any state or local government or any instrumentality or agencythereof, the assignment of which claim is restricted by federal, state ormunicipal law.

##  

## 4.11.        No Interference.  The Grantor agrees that it will not interferewith any right, power and remedy of the Lender provided for in this SecurityAgreement or now or hereafter existing at law or in equity or by statute orotherwise, or the exercise or beginning of the exercise by the Lender of anyone or more of such rights, powers or remedies.

##  

## 4.12.        Insurance.

##  

### (a)           All insurance policies requiredhereunder or under Section 5.09 of the Credit Agreement shall name theLender as an additional insured or as loss payee, as applicable, and shallcontain loss payable clauses or mortgagee clauses, through endorsements in formand substance satisfactory to the Lender, which provide that: (i) allproceeds thereunder with respect to any Collateral shall be payable to theLender; (ii) no such insurance shall be affected by any act or neglect ofthe insured or owner of the property described in such policy; and (iii) thatthe insurer will endeavor to provide at least thirty days prior written noticeto the Lender that any such policy and loss payable or mortgagee clauses may becanceled, amended or terminated; provided, that, in the event that any insurerfails to give such thirty days prior written notice, the Borrower shall berequired to give such notice..

###  

### (b)           All premiums on such insurance shallbe paid when due by the Grantor, and copies of the policies delivered to theLender promptly upon Lender’s request. If the Grantor fails to obtain any insurance as required by thisSection, the Lender may obtain such insurance at the Grantor’s expense.  By purchasing such insurance, the Lendershall not be deemed to have waived any Default arising from the Grantor’sfailure to maintain such insurance or pay any premiums therefor.

###  

## 4.13.        Collateral Access Agreements.  The Grantor shall use commercially reasonableefforts to obtain a Collateral Access Agreement, from the lessor of each leasedproperty, mortgagee of owned property or bailee or consignee with respect toany warehouse, processor or converter facility or other location whereCollateral is stored or located, which agreement or letter shall provide accessrights, contain a waiver or subordination of all Liens or claims that thelandlord, mortgagee, bailee or consignee may assert against the Collateral atthat location, and shall otherwise be reasonably satisfactory in form andsubstance to the Lender. With respect to such locations or warehouse spaceleased as of the Effective Date and thereafter, if the Lender has not receiveda Collateral Access Agreement as of the Effective Date (or, if later, as of thedate such location is acquired or leased), Grantor’s Eligible Inventory at thatlocation shall be excluded from the Borrowing Base.  After the Effective Date, no real property orwarehouse space shall be leased by the Grantor and no Inventory shall beshipped to a processor or converter under arrangements established after theEffective Date,  unless and until asatisfactory Collateral Access Agreement shall first have been obtained withrespect to such location and if it

 

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## has not been obtained,Grantor’s Eligible Inventory at that location shall be excluded from theBorrowing Base.  The Grantor shall timelyand fully pay and perform its obligations under all leases and other agreementswith respect to each leased location or third party warehouse where anyCollateral is or may be located.

##  

## 4.14.        Deposit Account Control Agreements.  The Grantor will provide to the Lender uponthe Lender’s request, a Deposit Account Control Agreement duly executed on behalfof each financial institution holding a deposit account of the Grantor as setforth in the Security Agreement.

##  

## 4.15.        Change of Name or Location; Change ofFiscal Year.  The Grantor shall not (a) changeits name as it appears in official filings in the state of its incorporation ororganization, (b) change its chief executive office, principal place ofbusiness, mailing address, corporate offices or warehouses or locations atwhich Collateral is held or stored, or the location of its records concerningthe Collateral as set forth in the Security Agreement, (c) change the typeof entity that it is, (d) change its organization identification number,if any, issued by its state of incorporation or other organization, or (e) changeits state of incorporation or organization, in each case, unless the Lendershall have received at least thirty days prior written notice of such changeand the Lender shall have acknowledged in writing that either (1) suchchange will not adversely affect the validity, perfection or priority of theLender’s security interest in the Collateral, or (2) any reasonable actionrequested by the Lender in connection therewith has been completed or taken(including any action to continue the perfection of any Liens in favor of theLender in any Collateral), provided that, any new location shall be in thecontinental U.S.  The Grantor shall notchange its fiscal year which currently ends on June 30.

 

# **ARTICLEVEVENTS OF DEFAULT AND REMEDIES**

# ** **

## 5.1.          Events of Default.  The occurrence of any one or more of thefollowing events shall constitute an Event of Default hereunder:

###  

### (a)           Any representation or warranty madeby or on behalf of the Grantor under or in connection with this SecurityAgreement shall be materially false as of the date on which made.

###  

### (b)           The breach by the Grantor of any ofthe terms or provisions of Article IV or Article VII.

###  

### (c)           The breach by the Grantor (other thana breach which constitutes an Event of Default under any other Section ofthis Article V) of any of the terms or provisions of this SecurityAgreement which is not remedied within ten days after such breach.

###  

### (d)           The occurrence of any “Event ofDefault” under, and as defined in, the Credit Agreement.

 

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## 5.2.          Remedies.

##  

### (a)           Upon the occurrence of an Event ofDefault, the Lender may exercise any or all of the following rights andremedies:

####  

#### (i)            those rights andremedies provided in this Security Agreement, the Credit Agreement, or anyother Loan Document; *provided that*,this Section 5.2(a) shall not be understood to limit any rights orremedies available to the Lender prior to an Event of Default;

####  

#### (ii)           those rights andremedies available to a secured party under the UCC (whether or not the UCCapplies to the affected Collateral) or under any other applicable law(including, without limitation, any law governing the exercise of a bank’sright of setoff or bankers’ lien) when a debtor is in default under a securityagreement;

####  

#### (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)          without notice(except as specifically provided in Section 8.1 or elsewhere herein),demand or advertisement of any kind to Grantor or any other Person, enter thepremises of the Grantor where any Collateral is located (through self-help andwithout judicial process) to collect, receive, assemble, process, appropriate,sell, lease, assign, grant an option or options to purchase or otherwisedispose of, deliver, or realize upon, the Collateral or any part thereof in oneor more parcels at public or private sale or sales (which sales may beadjourned or continued from time to time with or without notice and may takeplace 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)           concurrently withwritten notice to the Grantor, transfer and register in its name or in the nameof its nominee the whole or any part of the Pledged Collateral, to exchangecertificates or instruments representing or evidencing Pledged Collateral forcertificates or instruments of smaller or larger denominations, to exercise thevoting and all other rights as a holder with respect thereto, to collect andreceive all cash dividends, interest, principal and other distributions madethereon and to otherwise act with respect to the Pledged Collateral as thoughthe Lender was the outright owner thereof.

####  

### (b)           The Lender may comply with anyapplicable state or federal law requirements in connection with a dispositionof the Collateral and compliance will not be considered to adversely affect thecommercial reasonableness of any sale of the Collateral.

###  

### (c)           The Lender shall have the right uponany such public sale or sales and, to the extent permitted by law, upon anysuch private sale or sales, to purchase for the benefit of the Lender, thewhole or any part of the Collateral so sold, free of any right of equityredemption, which equity redemption the Grantor hereby expressly releases.

 

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### (d)           Until the Lender is able to effect asale, lease, or other disposition of Collateral, the Lender shall have theright to hold or use Collateral, or any part thereof, to the extent that itdeems appropriate for the purpose of preserving Collateral or its value or forany other purpose deemed appropriate by the Lender. The Lender may, if it soelects, seek the appointment of a receiver or keeper to take possession ofCollateral and to enforce any of the Lender’s remedies, with respect to suchappointment without prior notice or hearing as to such appointment.

###  

### (e)           If, after the Credit Agreement hasterminated by its terms and all of the Obligations have been paid in full,there remain Swap Obligations outstanding, the Lender may exercise the remediesprovided in this Section 5.2 upon the occurrence of any event which wouldallow or require the termination or acceleration of any Swap Obligationspursuant to the terms of the Swap Agreement.

###  

### (f)            Notwithstanding the foregoing, theLender shall not be required to (i) make any demand upon, or pursue orexhaust any of their 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 their 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)           The Grantor recognizes that theLender may be unable to effect a public sale of any or all the PledgedCollateral and may be compelled to resort to one or more private sales thereofin 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 beingprivate.  The Lender shall be under noobligation to delay a sale of any of the Pledged Collateral for the period oftime necessary to permit the Grantor or the issuer of the Pledged Collateral toregister such securities for public sale under the Securities Act of 1933, asamended, or under applicable state securities laws, even if the Grantor and theissuer would agree to do so.

###  

## 5.3.          Grantor’s Obligations Upon Default.  Upon the request of the Lender after theoccurrence of a Default, the Grantor will:

##  

### (a)           assemble and make available to theLender the Collateral and all books and records relating thereto at any placeor places specified by the Lender, whether at the Grantor’s premises orelsewhere;

###  

### (b)           permit the Lender, by the Lender’srepresentatives and agents, to enter, occupy and use  any premises where all or any part of theCollateral, or the books and records relating thereto, or both, are located, totake possession of all or any part of the Collateral or the books and recordsrelating thereto, or both, to remove all or any part of the Collateral or thebooks and records relating thereto, or both, and to conduct sales of theCollateral, without any obligation to pay the Grantor for such use andoccupancy;

 

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### (c)           prepare and file, or cause an issuerof Pledged Collateral to prepare and file, with the Securities and ExchangeCommission or any other applicable government agency, registration statements,a prospectus and such other documentation in connection with the PledgedCollateral as the Lender may request, all in form and substance satisfactory tothe Lender, and furnish to the Lender, or cause an issuer of Pledged Collateralto furnish to the Lender, any information regarding the Pledged Collateral insuch detail as the Lender may specify;

###  

### (d)           take, or cause an issuer of PledgedCollateral to take, any and all actions necessary to register or qualify thePledged Collateral to enable the Lender to consummate a public sale or otherdisposition of the Pledged Collateral; and

###  

### (e)           at its own expense, cause theindependent certified public accountants then engaged by the Grantor to prepareand deliver to the Lender, at any time, and from time to time, promptly uponthe Lender’s request, the following reports with respect to the Grantor: (i) areconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trialbalances; and (iv) a test verification of such Accounts.

###  

## 5.4.          Grant of Intellectual PropertyLicense.  For the purpose of enablingthe Lender to exercise the rights and remedies under this Article Vat such time as the Lender shall be lawfully entitled to exercise such rightsand remedies, the Grantor hereby (a) grants to the Lender an irrevocable,nonexclusive license (exercisable without payment of royalty or othercompensation to the Grantor) to use, license or sublicense any IntellectualProperty Rights now owned or hereafter acquired by the Grantor, and wherever thesame may be located, and including in such license access to all media in whichany of the licensed items may be recorded or stored and to all computersoftware and programs used for the compilation or printout thereof and (b) irrevocablyagrees that the Lender may sell any of the Grantor’s Inventory directly to anyperson, 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.

 

# **ARTICLEVIACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY**

 

## 6.1.          Account Verification.  The Lender may, at any time after an Event ofDefault, in the Lender’s own name, in the name of a nominee of the Lender, orin the name of the Grantor communicate (by mail, telephone, facsimile orotherwise) with the Account Debtors of such Grantor, parties to contracts withthe Grantor and obligors in respect of Instruments of the Grantor to verifywith such Persons, to the Lender’s satisfaction, the existence, amount, termsof, and any other matter relating to, Accounts, Instruments, Chattel Paper,payment intangibles and/or other Receivables.

 

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## 6.2.          Authorization for Secured Party toTake Certain Action.

###  

### (a)           The Grantor irrevocably authorizesthe Lender at any time and from time to time in the sole discretion of theLender and appoints the Lender as its attorney in fact (i) to execute onbehalf of the Grantor as debtor and to file financing statements necessary ordesirable in the Lender’s sole discretion to perfect and to maintain theperfection and priority of the Lender’s security interest in the Collateral, (ii) toendorse and collect any cash proceeds of the Collateral, (iii) to file acarbon, photographic or other reproduction of this Security Agreement or anyfinancing statement with respect to the Collateral as a financing statement andto file any other financing statement or amendment of a financing statement(which does not add new collateral or add a debtor) in such offices as theLender in its sole discretion deems necessary or desirable to perfect and tomaintain the perfection and priority of the Lender’s security interest in theCollateral, (iv) to contact and enter into one or more agreements with theissuers of uncertificated securities which are Pledged Collateral or withsecurities intermediaries holding Pledged Collateral as may be necessary oradvisable to give the Lender Control over such Pledged Collateral, (v) toapply the proceeds of any Collateral received by the Lender to the SecuredObligations as provided in Section 7.3, (vi) to discharge past duetaxes, assessments, charges, fees or Liens on the Collateral (except for suchLiens as are specifically permitted hereunder), (vii) during thecontinuation of an Event of Default to contact Account Debtors for any reason, (viii) todemand payment or enforce payment of the Receivables in the name of the Lenderor the Grantor and to endorse any and all checks, drafts, and other instrumentsfor the payment of money relating to the Receivables, (ix) to sign theGrantor’s name on any invoice or bill of lading relating to the Receivables,drafts against any Account Debtor of the Grantor, assignments and verificationsof Receivables, (x) to exercise all of the Grantor’s rights and remedieswith respect to the collection of the Receivables and any other Collateral,(xi) to settle, adjust, compromise, extend or renew the Receivables, (xii) tosettle, adjust or compromise any legal proceedings brought to collectReceivables, (xiii) to prepare, file and sign the Grantor’s name on a proof ofclaim in bankruptcy or similar document against any Account Debtor of theGrantor, (xiv) to prepare, file and sign the Grantor’s name on any notice ofLien, assignment or satisfaction of Lien or similar document in connection withthe Receivables, (xv) to change the address for delivery of mail addressed tothe Grantor to such address as the Lender may designate and to receive, openand dispose of all mail addressed to the Grantor, and (xvi) to do all otheracts and things necessary to carry out this Security Agreement; and the Grantoragrees to reimburse the Lender on demand for any payment made or any expenseincurred by the Lender in connection with any of the foregoing; *provided that*, this authorization shall not relieve theGrantor of any of its obligations under this Security Agreement or under theCredit Agreement.

###  

### (b)           All acts of said attorney or designeemade in accordance herewith are hereby ratified and approved. The powersconferred on the Lender, under this Section 6.2 are solely to protect theLender’s interests in the Collateral and shall not impose any duty upon theLender to exercise any such powers.  TheLender agrees that, except for the powers granted in Section 6.2(a)(i)-(vi) andSection 6.2(a)(xvi), it shall not exercise any power or authority grantedto it unless an Event of Default has occurred and is continuing.

###  

## 6.3.          Proxy. THE GRANTOR HEREBYIRREVOCABLY CONSTITUTES AND APPOINTS THE LENDER AS THE PROXY ANDATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.2 ABOVE) OF THE GRANTOR WITHRESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGEDCOLLATERAL IN 

 

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## ACCORDANCE HEREWITH, WITHFULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT TO VOTE ANY SUCHPLEDGED COLLATERAL, THE APPOINTMENT OF THE LENDER AS PROXY AND ATTORNEY-IN-FACTSHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES ANDREMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE ENTITLED(INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLINGSPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALLBE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDINGANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUERTHEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED COLLATERAL OR ANYOFFICER OR AGENT THEREOF), UPON THE OCCURRENCE OF A DEFAULT.

##  

## 6.4.          Nature of Appointment; Limitationof Duty.  THE APPOINTMENT OF THELENDER AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH ANINTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITYAGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.14. NOTWITHSTANDINGANYTHING CONTAINED HEREIN, NEITHER THE LENDER NOR ANY OF ITS RESPECTIVEAFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALLHAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE ORTO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FORANY DELAY IN DOING SO, EXCEPT  IN RESPECTOF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFULMISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDEDTHAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT ORCONSEQUENTIAL DAMAGES.

 

# **ARTICLEVIICOLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS**

 

## 7.1.          Collection of Receivables.  If required by Lender after an Event ofDefault, the Grantor shall execute and deliver to the Lender Deposit AccountControl Agreements for each Deposit Account maintained by the Grantor intowhich all cash, checks or other similar payments relating to or constitutingpayments made in respect of Receivables will be deposited (a “CollateralDeposit Account”), which Collateral Deposit Accounts are identified as suchon Exhibit B.

##  

## 7.2.          Covenant Regarding New DepositAccounts.  After the occurrence of anEvent of Default, the Grantor shall (a) obtain the Lender’s consent inwriting before opening or replacing any Collateral Deposit Account or otherDeposit Account to the opening of such Deposit Account, and (b) cause eachbank or financial institution in which it seeks to open a Deposit Account, toenter into a Deposit Account Control Agreement with the Lender in order to givethe Lender Control of such Deposit Account.

 

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##  

## 7.3.                              Application ofProceeds; Deficiency.  The Lendermay require, at any time after the occurrence of an Event of Default, that allcash proceeds of the Collateral which are not required to be applied to theObligations pursuant to Section 2.10 of the Credit Agreement be depositedin a special non-interest bearing cash collateral account with the Lender andheld there as security for the Secured Obligations.  The Grantor shall have no control whatsoeverover said cash collateral account.  Anysuch proceeds of the Collateral shall be applied in the order set forth in Section 2.17of the Credit Agreement unless a court of competent jurisdiction shallotherwise direct.  The balance, if any,after all of the Secured Obligations have been satisfied, shall be deposited bythe Lender into the Grantor’s general operating account with the Lender. TheGrantor shall remain liable for any deficiency if the proceeds of any sale ordisposition of the Collateral are insufficient to pay all Secured Obligations,including any attorneys’ fees and other expenses incurred by the Lender or anyLender to collect such deficiency.

 

# **ARTICLEVIIIGENERAL PROVISIONS**

 

## 8.1.                              Waivers.  The Grantor hereby waives notice of the timeand place of any public sale or the time after which any private sale or otherdisposition of all or any part of the Collateral may be made.  To the extent such notice may not be waivedunder applicable law, any notice made shall be deemed reasonable if sent to theGrantor, addressed as set forth in Article IX, at least ten days prior to (i) thedate of any such public sale or (ii) the time after which any such privatesale or other disposition may be made. To the maximum extent permitted by applicable law, the Grantor waivesall 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.                              Limitation onthe Lender’s Duty with Respect to the Collateral.  The Lender shall have no obligation toclean-up or otherwise prepare the Collateral for sale. The Lender shall usereasonable care with respect to the Collateral in its possession or under itscontrol.  The Lender shall not have anyother duty as to any Collateral in its possession or control or in thepossession or control of any agent or nominee of the Lender, or any incomethereon or as to the preservation of rights against prior parties or any otherrights pertaining thereto. To the extent that applicable law imposes duties onthe Lender to exercise remedies in a commercially reasonable manner, theGrantor acknowledges and agrees that it is commercially reasonable for theLender (i) to fail to incur expenses deemed significant by the Lender toprepare Collateral for disposition or otherwise to transform raw material orwork in process into finished goods or other finished products for disposition,(ii) to fail to obtain third party consents for access to Collateral to bedisposed of, or to obtain or, if not required by other law, to fail to obtaingovernmental or third 

 

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## party consents for the collection ordisposition of Collateral to be collected or disposed of, (iii) to fail toexercise collection remedies against Account Debtors or other Persons obligatedon Collateral or to remove Liens on or any adverse claims against Collateral, (iv) toexercise collection remedies against Account Debtors and other Personsobligated on Collateral directly or through the use of collection agencies andother collection specialists, (v) to advertise dispositions of Collateralthrough publications or media of general circulation, whether or not theCollateral is of a specialized nature, (vi) to contact other Persons,whether or not in the same business as the Grantor, for expressions of interestin acquiring all or any portion of such Collateral, (vii) to hire one ormore professional auctioneers to assist in the disposition of Collateral,whether or not the Collateral is of a specialized nature, (viii) todispose of Collateral by utilizing internet sites that provide for the auctionof assets of the types included in the Collateral or that have the reasonablecapacity of doing so, or that match buyers and sellers of assets, (ix) todispose of assets in wholesale rather than retail markets, (x) to disclaimdisposition warranties, such as title, possession or quiet enjoyment, (xi) topurchase insurance or credit enhancements to insure the Lender against risks ofloss, collection or disposition of Collateral or to provide to the Lender aguaranteed return from the collection or disposition of Collateral, or (xii) tothe extent deemed appropriate by the Lender, to obtain the services of otherbrokers, investment bankers, consultants and other professionals to assist theLender in the collection or disposition of any of the Collateral.  The Grantor acknowledges that the purpose ofthis Section 8.2 is to provide non-exhaustive indications of what actionsor omissions by the Lender would  becommercially reasonable in the Lender’s exercise of remedies against theCollateral and that other actions or omissions by the Lender shall not bedeemed commercially unreasonable solely on account of not being indicated inthis Section 8.2.  Withoutlimitation upon the foregoing, nothing contained in this Section 8.2 shallbe construed to grant any rights to the Grantor or to impose any duties on theLender that would not have been granted or imposed by this Security Agreementor by applicable law in the absence of this Section 8.2.

##  

## 8.3.                              Compromises andCollection of Collateral.  TheGrantor and the Lender recognize that setoffs, counterclaims, defenses andother claims may be asserted by obligors with respect to certain of theReceivables, that certain of the Receivables may be or become uncollectible inwhole or in part and that the expense and probability of success in litigatinga disputed Receivable may exceed the amount that reasonably may be expected tobe recovered with respect to a Receivable. In view of the foregoing, the Grantor agrees that the Lender may at anytime and from time to time, if an Event of 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.                              Secured PartyPerformance of Debtor Obligations.  Without having any obligation to do so, theLender may perform or pay any obligation which the Grantor has agreed toperform or pay in this Security Agreement and the Grantor shall reimburse theLender for any amounts paid by the Lender pursuant to this Section 8.4.  The Grantor’s obligation to reimburse theLender pursuant to the preceding sentence shall be a Secured Obligation payableon demand.

##  

## 8.5.                              SpecificPerformance of Certain Covenants.  The Grantor acknowledges and agrees that abreach of any of the covenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.6,4.7, 

 

22

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## 4.8, 4.9, 4.10, 4.12, 4.13, 4.14, 4.15, 5.3,or 8.7 or in Article VII will cause irreparable injury to the Lender, thatthe Lender has no adequate remedy at law in respect of such breaches andtherefore agrees, without limiting the right of the Lender to seek and obtainspecific performance of other obligations of the Grantor contained in thisSecurity Agreement, that the covenants of the Grantor contained in the Sectionsreferred to in this Section 8.5 shall be specifically enforceable againstthe Grantor.

##  

## 8.6.                              DispositionsNot Authorized.  The Grantoris not authorized to sell or otherwise dispose of the Collateral except as setforth in Section 4.1(d) and notwithstanding any course of dealingbetween the Grantor and the Lender or other conduct of the Lender, noauthorization to sell or otherwise dispose of the Collateral (except as setforth in Section 4.1(d)) shall be binding upon the Lender unless suchauthorization is in writing signed by the Lender.

##  

## 8.7.                              No Waiver; Amendments;Cumulative Remedies. No delay or omission of the Lender to exercise anyright or remedy granted under this Security Agreement shall impair such rightor remedy or be construed to be a waiver of any Default or an acquiescencetherein, and any single or partial exercise of any such right or remedy shallnot preclude any other or further exercise thereof or the exercise of any otherright or remedy. No waiver, amendment or other variation of the terms,conditions or provisions of this Security Agreement whatsoever shall be validunless in writing signed by the Lender and then only to the extent in suchwriting specifically set forth.  Allrights and remedies contained in this Security Agreement or by law affordedshall be cumulative and all shall be available to the Lender until the SecuredObligations have been paid in full.

##  

## 8.8.                              Limitation byLaw; Severability of Provisions.  All rights, remedies and powers provided inthis Security Agreement may be exercised only to the extent that the exercisethereof does not violate any applicable provision of law, and all theprovisions 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.

##  

## 8.9.                              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,” “fraudulentconveyance,” or otherwise, all as though such payment or performance had notbeen made.  In the event that anypayment, or any part thereof, is rescinded, reduced, restored or 

 

23

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## returned, the Secured Obligations shall bereinstated and deemed reduced only by such amount paid and not so rescinded,reduced, restored or returned.

##  

## 8.10.                        Benefit ofAgreement.  The termsand provisions of this Security Agreement shall be binding upon and inure tothe benefit of the Grantor, the Lender and their respective successors andassigns (including all persons who become bound as a debtor to this SecurityAgreement), except that the Grantor shall not have the right to assign itsrights or delegate its obligations under this Security Agreement or anyinterest herein, without the prior written consent of the Lender.  No sales of participations, assignments,transfers, or other dispositions of any agreement governing the SecuredObligations or any portion thereof or interest therein shall in any mannerimpair the Lien granted to the Lender hereunder.

##  

## 8.11.                        Survival ofRepresentations.  Allrepresentations and warranties of the Grantor contained in this Security Agreementshall survive the execution and delivery of this Security Agreement.

##  

## 8.12.                        Taxes andExpenses.  Any taxes(including income taxes) payable or ruled payable by Federal or State authorityin respect of this Security Agreement shall be paid by the Grantor, togetherwith interest and penalties, if any.  TheGrantor shall reimburse the Lender for any and all out-of-pocket expenses andinternal charges (including reasonable attorneys’, auditors’ and accountants’fees and reasonable time charges of attorneys, paralegals, auditors andaccountants who may be employees of the Lender) paid or incurred by the Lenderin connection with the preparation, execution, delivery, administration,collection and enforcement of this Security Agreement and, subject to the termsand conditions set forth in the Credit Agreement, in the audit, analysis,administration, collection, preservation or sale of the Collateral (includingthe expenses 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.

##  

## 8.13.                        Headings.  The title of and section headings in thisSecurity Agreement are for convenience of reference only, and shall not governthe interpretation of any of the terms and provisions of this SecurityAgreement.

##  

## 8.14.                        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 terminatedpursuant to its express terms and (ii) all of the Secured Obligations havebeen indefeasibly paid and performed in full (except with respect to anyoutstanding Letters of Credit for which a cash deposit or Supporting Letter ofCredit has been delivered to the Lender as required by the Credit Agreement orwith respect to any other contingent obligations that survive termination ofthe Credit Agreement) and no commitments of the Lender which would give rise toany Secured Obligations are outstanding.

##  

## 8.15.                        EntireAgreement.  ThisSecurity Agreement embodies the entire agreement and understanding between theGrantor and the Lender relating to the Collateral and supersedes all prioragreements and understandings between the Grantor and the Lender relating tothe Collateral.

 

24

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## 8.16.                        **CHOICEOF LAW****.  THISSECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THEINTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF WISCONSIN, BUTGIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.**

##  

## 8.17.                        **CONSENTTO JURISDICTION****.  THEGRANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANYU.S. FEDERAL OR WISCONSIN STATE COURT SITTING IN WISCONSIN IN ANY ACTION ORPROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHERLOAN DOCUMENT AND THE GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS INRESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANYSUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTERHAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH ACOURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THELENDER TO BRING PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHERJURISDICTION.  ANY JUDICIAL PROCEEDING BYTHE GRANTOR AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING,DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, ORCONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BEBROUGHT ONLY IN A COURT IN MILWAUKEE, WISCONSIN.**

##  

## 8.18.                        **WAIVEROF JURY TRIAL****. THE GRANTOR AND THE LENDER HEREBY WAIVETRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANYMATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUTOF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOANDOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.**

##  

## 8.19.                        Indemnity.  The Grantor hereby agrees to indemnify theLender, and its successors, assigns, agents and employees, from and against anyand all liabilities, damages, penalties, suits, costs, and expenses of any kindand nature (including, without limitation, all expenses of litigation orpreparation therefor whether or not the Lender is a party thereto) imposed on,incurred by or asserted against the Lender, or its successors, assigns, agentsand employees, in any way relating to or arising out of this SecurityAgreement, or the manufacture, purchase, acceptance, rejection, ownership,delivery, lease, possession, use, operation, condition, sale, return or otherdisposition of any Collateral (including, without limitation, latent and otherdefects, whether or not discoverable by the Lender or the Grantor, and anyclaim for Patent, Trademark or Copyright infringement).

##  

## 8.20.                        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.

 

25

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# **ARTICLEIXNOTICES**

# ** **

## 9.1.                              Sending Notices.  Any notice required or permitted to be givenunder this Security Agreement shall be sent in accordance with Section 8.01 of the Credit Agreement.

##  

## 9.2.                              Change inAddress 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.

 

 

[Signatures appear onfollowing page]

 

26

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IN WITNESS WHEREOF, the Grantor and the Lender haveexecuted this Security Agreement as of the date first above written.

 
|   | GRANTOR:                             |
|--------|--------------------------------------|
|   |                                 |
|   | KOSS CORPORATION                     |
|   |                                 |   |
|   | By:                                  |   |
|   | Name:                                |   |
|   | Title:                               |   |
|   |                                 |   |
|   |                                 |   |
|   | JPMORGAN CHASE BANK, N.A., as Lender |
|   |                                 |   |
|   | By:                                  |   |
|   | Name:                                |   |
|   | Title:                               |   |

 

[SignaturePage to Security Agreement]

 

----

 

**EXHIBIT A**

(See Sections 3.2, 3.3, 3.4, 3.9 and 9.1 ofSecurity Agreement)

 

GRANTOR’S INFORMATION ANDCOLLATERAL LOCATIONS

 

##### I.                                         **Name ofGrantor**:

#####  

##### II.                                     **Stateof Incorporation or Organization**:

#####  

##### III.                                 **Type ofEntity**:

#####  

##### IV.                                 **OrganizationalNumber assigned by State of Incorporation or Organization**:

#####  

##### V.                                     **FederalIdentification Number**:

#####  

##### VI.                                 **Placeof Business** (if it has only one) **or ChiefExecutive Office** (if more than one place of business) **and Mailing Address**:

 

 

 

 

Attention:

 

##### VII.                             **Locationsof Collateral**:

######  

###### (a)                                  Properties Owned by theGrantor:

######  

###### None.

######  

###### (b)                                 Properties Leased by theGrantor (Include Landlord’s Name):

######  

###### (c)                                  Public Warehouses or otherLocations pursuant to Bailment or Consignment Arrangements (include nameof Warehouse Operator or other Bailee or Consignee):

######  

##### VIII.                         **CommercialTort Claims:**

######  

###### (a)

######  

###### (b)

 

----

 

**EXHIBIT B**

(See Section 3.5 of Security Agreement)

 

DEPOSIT ACCOUNTS

 
| **Name  of Institution** | ** ** | **Account Number** | ** ** | **Check here if Deposit  Account is a Collateral  Deposit Account** | ** ** | **Description of Deposit   Account if not a  Collateral Deposit  Account** |
|--------------------------|------------|--------------------|------------|---------------------------------------------------------------------|------------|----------------------------------------------------------------------------|
| ** **               | ** ** | ** **         | ** ** | ** **                                                          | ** ** | ** **                                                                 |
| ** **               | ** ** | ** **         | ** ** | ** **                                                          | ** ** | ** **                                                                 |
| ** **               | ** ** | ** **         | ** ** | ** **                                                          | ** ** | ** **                                                                 |

 

----

 

**EXHIBIT C**

(See Section 3.7 of Security Agreement)

 

LETTER OF CREDIT RIGHTS

 

 

CHATTEL PAPER

 

----

** **

**EXHIBITD**

(See Section 3.10 and 3.11 of SecurityAgreement)

 

INTELLECTUAL PROPERTY RIGHTS

 

PATENTS

 
| **Patent Description** | ** ** | **Patent Number** | ** ** | **Issue Date** | ** ** |
|-----------------------------|------------|------------------------|------------|---------------------|------------|
|                        |       |                   |       |                |       |
|                        |       |                   |       |                |       |
|                        |       |                   |       |                |       |

 

PATENT APPLICATIONS

 

| **Patent Application** | ** ** | **Application Filing Date** | ** ** | **Application Serial Number** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
|                        |       |                                  |       |                                    |       |
|                        |       |                                  |       |                                    |       |
|                        |       |                                  |       |                                    |       |

 

TRADEMARKS

 
| **Trademark** | ** ** | **Registration Date** | ** ** | **Registration Number** | ** ** |
|---------------|------------|----------------------------|------------|------------------------------|------------|
|          |       |                       |       |                         |       |
|          |       |                       |       |                         |       |
|          |       |                       |       |                         |       |

 

TRADEMARKS APPLICATIONS

 
| **Trademark Application** | ** ** | **Application Filing Date** | ** ** | **Application Serial Number** | ** ** |
|--------------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
|                           |       |                                  |       |                                    |       |
|                           |       |                                  |       |                                    |       |
|                           |       |                                  |       |                                    |       |

 

COPYRIGHTS

 
| **Copyright** | ** ** | **Registration Date** | ** ** | **Registration Number** | ** ** |
|---------------|------------|----------------------------|------------|------------------------------|------------|
|          |       |                       |       |                         |       |
|          |       |                       |       |                         |       |
|          |       |                       |       |                         |       |

 

COPYRIGHT APPLICATIONS

 
| **Copyright Application** | ** ** | **Application Filing Date** | ** ** | **Application Serial Number** | ** ** |
|--------------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
|                           |       |                                  |       |                                    |       |
|                           |       |                                  |       |                                    |       |
|                           |       |                                  |       |                                    |       |

 

INTELLECTUAL PROPERTYLICENSES

 
| **Name of Agreement** | ** ** | **Date of Agreement** | ** ** | **Parties to Agreement** | ** ** |
|---------------------------------|------------|---------------------------------|------------|------------------------------------|------------|
|                            |       |                            |       |                               |       |
|                            |       |                            |       |                               |       |
|                            |       |                            |       |                               |       |

 

----

 

**EXHIBITE**

(See Section 3.11 of Security Agreement)

 

TITLE DOCUMENTS

##### I.                                         Vehiclessubject to certificates of title:

 
| **Description** | ** ** | **Title Number** | ** ** | **State Where Issued** | ** ** |
|-----------------|------------|-----------------------|------------|----------------------------------|------------|
|            |       |                  |       |                             |       |
|            |       |                  |       |                             |       |
|            |       |                  |       |                             |       |

 

##### II.                                     Aircraft/engines/parts,ships, railcars and other vehicles governed by federal statute:

 
| **Description** | ** ** | **Registration Number** | ** ** |
|-----------------|------------|------------------------------|------------|
|            |       |                         |       |
|            |       |                         |       |
|            |       |                         |       |

 

----

 

**EXHIBITF**

(See Section 3.11 of Security Agreement)

 

FIXTURES

 

##### III.                                 Legaldescription, county and street address of property on which Fixtures arelocated:

 

 

 

##### IV.                                 Name andAddress of Record Owner:

 

 

 

 

 

----

 

**EXHIBITG**

(See Section 3.13 of Security Agreementand Definition of “Pledged Collateral”)

 

LIST OF PLEDGED COLLATERAL,SECURITIES AND OTHER INVESTMENT PROPERTY

 

STOCKS

 
| **Issuer** | ** ** | **Certificate  Number(s)** | ** ** | **Number of Shares** | ** ** | **Class of Stock** | ** ** | **Percentage of  Outstanding  Shares** | ** ** |
|------------|------------|----------------------------|------------|----------------------|------------|-------------------------|------------|----------------------------------------|------------|
|       |       |                       |       |                 |       |                    |       |                                   |       |
|       |       |                       |       |                 |       |                    |       |                                   |       |
|       |       |                       |       |                 |       |                    |       |                                   |       |

 

BONDS

 
| **Issuer** | ** ** | **Number** | ** ** | **Face Amount** | ** ** | **Coupon Rate** | ** ** | **Maturity** | ** ** |
|------------|------------|------------|------------|-----------------|------------|-----------------|------------|--------------|------------|
|       |       |       |       |            |       |            |       |         |       |
|       |       |       |       |            |       |            |       |         |       |
|       |       |       |       |            |       |            |       |         |       |

 

GOVERNMENT SECURITIES

 
| **Issuer** | ** ** | **Number** | ** ** | **Type** | ** ** | **Face Amount** | ** ** | **Coupon Rate** | ** ** | **Maturity** | ** ** |
|------------|------------|------------|------------|----------|------------|-----------------|------------|-----------------|------------|--------------|------------|
|       |       |       |       |     |       |            |       |            |       |         |       |
|       |       |       |       |     |       |            |       |            |       |         |       |
|       |       |       |       |     |       |            |       |            |       |         |       |

 

OTHER SECURITIES OR OTHERINVESTMENT PROPERTY(CERTIFICATED AND UNCERTIFICATED)

 
| **Issuer** | ** ** | **Description of Collateral** | ** ** | **Percentage Ownership Interest** | ** ** |
|------------|------------|-------------------------------|------------|-----------------------------------|------------|
|       |       |                          |       |                              |       |
|       |       |                          |       |                              |       |
|       |       |                          |       |                              |       |

 

[Adddescription of custody accounts or arrangements with securities intermediary,if applicable]

 

----

 

**EXHIBITH**

(See Section 3.1 of Security Agreement)

 

OFFICES IN WHICH FINANCINGSTATEMENTS HAVE BEEN FILED

 

----

 

**EXHIBITI**

(See Section 4.4 and 4.8 of SecurityAgreement)

 

AMENDMENT

 

This Amendment, dated                            ,      is delivered pursuant to Section 4.4 of theSecurity 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 therepresentations and warranties in Article III of the Security Agreementare and continue to be true and correct. The undersigned further agrees that this Amendment may be attached tothat certain Pledge and Security Agreement, dated                         ,        , betweenthe undersigned, as the Grantor, and JPMorgan Chase Bank, N.A., as the Lender,(the “Security Agreement”) and that the Collateral listed on ScheduleI to this Amendment shall be and become a part of the Collateral referredto in said Security Agreement and shall secure all Secured Obligations referredto in said Security Agreement.

 

 
|       | By:    |       |
|------------|--------|------------|
|       | Name:  |       |
| ** ** | Title: | ** ** |

 

----

 

**SCHEDULEI TO AMENDMENT**

 

STOCKS

 
| **Issuer** | ** ** | **Certificate  Number(s)** | ** ** | **Number of Shares** | ** ** | **Class of Stock** | ** ** | **Percentage of  Outstanding  Shares** | ** ** |
|------------|------------|----------------------------|------------|----------------------|------------|-------------------------|------------|----------------------------------------|------------|
|       |       |                       |       |                 |       |                    |       |                                   |       |
|       |       |                       |       |                 |       |                    |       |                                   |       |
|       |       |                       |       |                 |       |                    |       |                                   |       |

 

BONDS

 
| **Issuer** | ** ** | **Number** | ** ** | **Face Amount** | ** ** | **Coupon Rate** | ** ** | **Maturity** | ** ** |
|------------|------------|------------|------------|-----------------|------------|-----------------|------------|--------------|------------|
|       |       |       |       |            |       |            |       |         |       |
|       |       |       |       |            |       |            |       |         |       |
|       |       |       |       |            |       |            |       |         |       |

 

GOVERNMENT SECURITIES

 
| **Issuer** | ** ** | **Number** | ** ** | **Type** | ** ** | **Face Amount** | ** ** | **Coupon Rate** | ** ** | **Maturity** | ** ** |
|------------|------------|------------|------------|----------|------------|-----------------|------------|-----------------|------------|--------------|------------|
|       |       |       |       |     |       |            |       |            |       |         |       |
|       |       |       |       |     |       |            |       |            |       |         |       |
|       |       |       |       |     |       |            |       |            |       |         |       |

 

OTHER SECURITIES OR OTHERINVESTMENT PROPERTY(CERTIFICATED AND UNCERTIFICATED)

 
| **Issuer** | ** ** | **Description of Collateral** | ** ** | **Percentage Ownership Interest** | ** ** |
|------------|------------|-------------------------------|------------|-----------------------------------|------------|
|       |       |                          |       |                              |       |
|       |       |                          |       |                              |       |
|       |       |                          |       |                              |       |

 

**[**Add description of custody accounts or arrangementswith securities intermediary, if applicable**]**

 

COMMERCIAL TORT CLAIMS

 
| **Description of Claim** | ** ** | **Parties** | ** ** | **Case Number; Name of Court  where Case was Filed** | ** ** |
|------------------------------------|------------|-------------|------------|-----------------------------------------------------------------------------------------|------------|
|                               |       |        |       |                                                                                    |       |
|                               |       |        |       |                                                                                    |       |
|                               |       |        |       |                                                                                    |       |

 

----