exv10w2



 





EXHIBIT 10.2




EXECUTION COPY




 








AMENDED AND RESTATED




SECURITY AND PLEDGE AGREEMENT




Dated as of September 26, 2007




among




LUMINENT MORTGAGE CAPITAL, INC.,




and




THE SUBSIDIARIES OF THE BORROWER PARTIES HERETO,




as Grantors




and




ARCO CAPITAL CORPORATION LTD.,




as Secured Party




 








 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	SECTION 1.

	 	DEFINITIONS
	 	 	1	 
	1.01.

	 	Definition of Terms Used Herein Generally
	 	 	1	 
	1.02.

	 	Definition of Certain Terms Used Herein
	 	 	1	 
	1.03.

	 	Rules of Interpretation
	 	 	5	 
	SECTION 2.

	 	GRANT OF SECURITY INTERESTS
	 	 	5	 
	SECTION 3.

	 	AUTHORIZATION TO FILE FINANCING STATEMENTS
	 	 	6	 
	SECTION 4.

	 	RELATION TO OTHER SECURITY DOCUMENTS
	 	 	6	 
	SECTION 5.

	 	REPRESENTATIONS AND WARRANTIES
	 	 	6	 
	5.01.

	 	Grantors’ Legal Status
	 	 	6	 
	5.02.

	 	Grantors’ Legal Name
	 	 	6	 
	5.03.

	 	Grantors’ Locations
	 	 	6	 
	5.04.

	 	Title to Collateral
	 	 	7	 
	5.05.

	 	Nature of Collateral
	 	 	7	 
	5.06.

	 	Compliance with Laws
	 	 	7	 
	5.07.

	 	Pledged Securities
	 	 	7	 
	5.08.

	 	Validity of Security Interest
	 	 	8	 
	5.09.

	 	Perfection Certificate
	 	 	9	 
	5.10.

	 	Advice of Counsel
	 	 	9	 
	5.11.

	 	Required Consents
	 	 	9	 
	SECTION 6.

	 	COVENANTS
	 	 	9	 
	6.01.

	 	Grantors’ Legal Status
	 	 	9	 
	6.02.

	 	Grantors’ Name
	 	 	9	 
	6.03.

	 	Grantors’ Organizational Number
	 	 	10	 
	6.04.

	 	Locations
	 	 	10	 
	6.05.

	 	Title to Collateral
	 	 	10	 
	6.06.

	 	Promissory Notes and Tangible Chattel Paper
	 	 	10	 
	6.07.

	 	Deposit Accounts
	 	 	10	 
	6.08.

	 	Investment Property
	 	 	11	 
	6.09.

	 	Collateral in the Possession of a Bailee
	 	 	12	 
	6.10.

	 	Electronic Chattel Paper and Transferable Records
	 	 	13	 
	6.11.

	 	Letter-of-Credit Rights
	 	 	13	 
	6.12.

	 	Commercial Tort Claims
	 	 	13	 






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TABLE OF CONTENTS

(continued)







	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	6.13.

	 	Intellectual Property
	 	 	13	 
	6.14.

	 	Limitation on Modification of Accounts, Chattel
Paper, Instruments and Payment Intangibles
	 	 	15	 
	6.15.

	 	Dispositions of Collateral
	 	 	15	 
	6.16.

	 	Insurance
	 	 	15	 
	6.17.

	 	Periodic Certification
	 	 	16	 
	6.18.

	 	Other Actions as to any and all Collateral
	 	 	16	 
	6.19.

	 	Taxes
	 	 	17	 
	SECTION 7.

	 	INSPECTION AND VERIFICATION
	 	 	17	 
	SECTION 8.

	 	COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL
	 	 	17	 
	8.01.

	 	Expenses Incurred by Administrative Agent
	 	 	17	 
	8.02.

	 	Administrative Agent’s Obligations and Duties
	 	 	17	 
	8.03.

	 	Use of Collateral
	 	 	18	 
	SECTION 9.

	 	SECURITIES AND DEPOSITS
	 	 	18	 
	SECTION 10.

	 	NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL
	 	 	18	 
	SECTION 11.

	 	POWER OF ATTORNEY
	 	 	18	 
	11.01.

	 	Appointment and Powers of Administrative Agent
	 	 	18	 
	11.02.

	 	Ratification by Grantors
	 	 	19	 
	11.03.

	 	No Duty on Administrative Agent
	 	 	19	 
	SECTION 12.

	 	REMEDIES
	 	 	19	 
	12.01.

	 	Remedies upon Default
	 	 	19	 
	12.02.

	 	Grant of License to Use Intellectual Property
	 	 	20	 
	12.03.

	 	Disposition of Pledged Securities
	 	 	20	 
	SECTION 13.

	 	STANDARDS FOR EXERCISING REMEDIES
	 	 	21	 
	SECTION 14.

	 	SURETYSHIP WAIVERS BY EACH GRANTOR
	 	 	22	 
	SECTION 15.

	 	MARSHALLING
	 	 	22	 
	SECTION 16.

	 	PROCEEDS OF DISPOSITIONS; EXPENSES
	 	 	22	 
	SECTION 17.

	 	OVERDUE AMOUNTS
	 	 	23	 
	SECTION 18.

	 	REINSTATEMENT
	 	 	23	 
	SECTION 19.

	 	LIMITATIONS
	 	 	23	 
	SECTION 20.

	 	MISCELLANEOUS
	 	 	23	 






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TABLE OF CONTENTS

(continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	20.01.

	 	Notices
	 	 	23	 
	20.02.

	 	GOVERNING LAW; CONSENT TO JURISDICTION
	 	 	23	 
	20.03.

	 	WAIVER OF JURY TRIAL, ETC
	 	 	24	 
	20.04.

	 	Counterparts
	 	 	24	 
	20.05.

	 	Headings
	 	 	24	 
	20.06.

	 	Successors and Assigns
	 	 	24	 
	20.07.

	 	No Strict Construction
	 	 	25	 
	20.08.

	 	Severability
	 	 	25	 
	20.09.

	 	Survival of Agreement
	 	 	25	 
	20.10.

	 	Administrative Agent’s Fees and Expenses; Indemnification
	 	 	25	 
	20.11.

	 	Binding Effect; Several Agreement
	 	 	26	 
	20.12.

	 	Waivers; Amendment
	 	 	26	 
	20.13.

	 	Termination
	 	 	26	 
	20.14.

	 	Joint and Several Liability
	 	 	26	 






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TABLE OF CONTENTS

(continued)




SCHEDULES




	 	 	 	 	 
	Schedule I
	 	—	 	Subsidiary Guarantors in Existence on the Closing Date






EXHIBITS




	 	 	 	 	 
	Exhibit A
	 	—	 	Form of Perfection Certificate







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     AMENDED AND RESTATED SECURITY AND PLEDGE AGREEMENT, dated as of September 26, 2007 (as this
agreement may be amended, amended and restated, supplemented or otherwise modified, renewed or
replaced from time to time, the “Security Agreement”), among (i) LUMINENT MORTGAGE CAPITAL,
INC., a Maryland corporation, as the Borrower; (ii) each Subsidiary of the Borrower listed on
Schedule I hereto (such Subsidiaries listed on such Schedule I and such Subsidiaries of the
Borrower as may hereafter become parties hereto by executing an instrument of assumption and
joinder, shall be referred to herein collectively, as the “Subsidiary Guarantors” and
individually, as a “Subsidiary Guarantor”; the Subsidiary Guarantors and the Borrower are
referred to herein collectively, as the “Grantors”); and (iv) Arco Capital Corporation
Ltd., a corporation organized under the laws of the Cayman Islands (the “Lender”), as
Secured Party.



INTRODUCTORY STATEMENT




     All capitalized terms used herein and not otherwise defined above or in this Introductory
Statement, are as defined in Section 1 or as defined elsewhere herein.



     The Borrower has entered into a Credit Agreement, dated as of August 21, 2007, as amended by
the Amendment to Credit Agreement, dated as of September 12, 2007, the Second Amendment to Credit
Agreement, dated as of September 20, 2007 and the Third Amendment to Credit Agreement, dated as of
September 21, 2007 (as such agreement may be amended, supplemented, restated or otherwise modified
and in effect from time to time, the “Existing Credit Agreement”) with the Lender, pursuant
to which, among other things, the Lender made loans or otherwise extended credit to the Borrower
upon the terms and subject to the conditions specified in the Existing Credit Agreement.



     The Borrower has entered into an Amended and Restated Credit Agreement, dated as of September
26, 2007 (as such agreement may be amended, supplemented, restated or otherwise modified and in
effect from time to time, the “Credit Agreement”) with the Lender, pursuant to which, among
other things, the Borrower has requested, and the Lender has agreed, to amend and restate the
Existing Credit Agreement upon the terms and subject to the conditions specified in the Credit
Agreement.



     The Subsidiary Guarantors have entered into an Amended and Restated Subsidiary Guaranty
Agreement, dated as of the date hereof (as such agreement may be amended, supplemented, restated or
otherwise modified and in effect from time to time, the “Guaranty”), in favor of the
Lender, pursuant to which, among other things, the Subsidiary Guarantors guaranteed all obligations
of the Borrower pursuant to the Credit Agreement.



     It is a condition precedent to the effectiveness of the Credit Agreement that the Grantors
shall have executed and delivered to the Lender this Security Agreement pursuant to, and upon the
terms and subject to the conditions specified in, the Credit Agreement.



     Accordingly, the parties hereto agree as follows:



     SECTION 1. DEFINITIONS.



          1.01. Definition of Terms Used Herein Generally. All capitalized terms used but not
defined herein shall have the meanings set forth in the Credit Agreement. All terms defined in the
NYUCC and not otherwise defined herein shall have the respective meanings accorded to them therein;
provided, however, that if a term is defined in Article 9 of the NYUCC differently
than in another Article of the NYUCC, the term has the meaning specified in Article 9 of the NYUCC.




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          1.02. Definition of Certain Terms Used Herein. As used herein, the following terms
shall have the following meanings:




     “Capital Stock” means any and all shares, interests, participation or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.



     “Code” means the Internal Revenue Code of 1986, as amended from time to time.



     “Collateral” shall have the meaning assigned to such term in Section 2(a).



     “Copyright License” means (a) any written agreement, now or hereafter in effect,
granting any right to any third party under any Copyright now or hereafter owned by any Grantor or
that any Grantor otherwise has the right to license, or (b) any written agreement, now or hereafter
in effect, granting any right to a Grantor under any Copyright now or hereafter owned by any third
party, and (c) all rights of any Grantor under any such agreement referred to in clause (a) or
clause (b) above.



     “Copyright Office” means the United States Copyright Office or any successor thereto.



     “Copyrights” means all of the following, whether now owned or hereafter acquired by
any Grantor: (a) all copyrights under the laws of the United States or any other country (whether
or not the underlying works of authorship have been published), all registrations and recordings
thereof, all copyrightable works of authorship (whether or not published), and all applications for
copyright registrations under the laws of the United States or any other country including
registrations, recordings and applications in the United States Copyright Office or in any similar
office or agency of the United States, any State thereof or any other country or any political
subdivision thereof, (b) all renewals and extensions of any of the foregoing, (c) all claims for,
and rights to sue for, past, present or future infringements of any of the foregoing, and (d) all
income, royalties, damages, now or hereafter due or payable with respect to any of the foregoing,
including damages and payments for past or future infringements thereof.



     “Copyright Security Agreement Supplement” means a supplement to this Security
Agreement, executed by each Grantor that now or hereafter owns a Copyright, in favor of the Secured
Party, acceptable to the Secured Party.



     “Credit Agreement” shall have the meaning assigned to such term in the Introductory
Statement of this Security Agreement.



     “Extraordinary Payments” shall have the meaning assigned to such term in Section
6.08(d)(ii).



     “Foreign Subsidiary” means any Person that is organized under the laws of any
jurisdiction outside of the United States.



     “Foreign Subsidiary Voting Stock” means the voting Capital Stock of any Foreign
Subsidiary.



     “Indemnitee” shall have the meaning assigned to that term in Section 20.10(b).



     “Intellectual Property” means all intellectual and similar property of every kind and
nature whether now owned or hereafter acquired by any Grantor, including inventions, designs,
Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights, Copyright Licenses, domain
names, domain name registrations, trade secrets, confidential or proprietary technical and business
information, know-



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how, show-how or other data or information, software and databases and all embodiments or
fixations thereof and related documentation, registrations and franchises, licenses for any of the
foregoing and all license rights, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.




     “NYUCC” means the Uniform Commercial Code as in effect in the State of New York from
time to time.



     “Obligations” means all loans, advances, liabilities, obligations, covenants, duties,
and indebtedness owing by each Grantor to the Secured Party under the Credit Agreement or under any
other agreement or instrument with the Secured Party. The term includes interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.



     “Patent License” means (a) any written agreement, now or hereafter in effect, granting
to any third party any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or
(b) any written agreement, now or hereafter in effect, granting any right to a Grantor to make, use
or sell any invention on which a Patent, now or hereafter owned by any third party, is in
existence, and (c) all rights of any Grantor under any such agreement referred to in clause (a) or
clause (b) above.



     “Patents” means all of the following, whether now owned or hereafter acquired by any
Grantor: (a) all letters patent of the United States or any other country, all registrations and
recordings thereof, and all applications for letters patent of the United States or any other
country, including registrations, recordings and pending applications in the PTO or in any similar
office or agency of the United States, any State or Territory thereof, or any other country, (b)
all rights to sue for, past, present or future infringement thereof and (c) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions thereof, together with
inventions disclosed or claimed therein, and the right to make, use and/or sell the inventions
disclosed or claimed therein.



     “Patent Security Agreement Supplement” means a supplement to this Security Agreement,
executed by each Grantor that now or hereafter owns a Patent, in favor of the Secured Party, in the
form acceptable to the Secured Party.



     “Perfection Certificate” means a certificate substantially in the form of Exhibit
A, completed and supplemented with the schedules and attachments contemplated thereby, and duly
executed by the Grantors certifying as to the contents thereof.



     “Perfection Supplement” shall have the meaning assigned to such term in Section
6.17.



     “Permitted Encumbrances” means Liens permitted under Section 8.02 of the Credit
Agreement.



     “Pledged Notes” means all promissory notes issued to, or held by, any Grantor.



     “Pledged Securities” means collectively, the Pledged Notes and the Pledged Stock.



     “Pledged Stock” means, with respect to each Grantor, (a) all right, title and interest
of such Grantor as a holder (whether now or in the future) in (i) shares or other Capital Stock
held by such Grantor in any corporations or other entities, and (ii) all shares of stock,
certificates, instruments or other documents evidencing or representing the foregoing interests
described in clause (i) and (b) all right, title and interest of such Grantor in and to all present
and future payments, proceeds, dividends, distributions,



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instruments, compensation, property, assets, interests and rights in connection with, or
related to, the collateral listed in clause (a) above, and all monies due or to become due and
payable to such Grantor in connection with, or related to, such collateral or otherwise paid,
issued or distributed from time to time in respect of or in exchange therefor, and any certificate,
instrument or other document evidencing or representing the same (including all proceeds of
dissolution or liquidation); provided, in no event shall more than 66% of the total
outstanding Foreign Subsidiary Voting Stock be required to be pledged hereunder pursuant to
Section 2.




     “PTO” means the United States Patent and Trademark Office or any successor thereto.



     “Securities Act” shall have the meaning assigned to such term in Section
12.03(d).



     “Security Documents” means (i) the Security Agreement, (ii) any Perfection
Certificate, and (iii) each other security agreement, pledge agreement, mortgage, deed of trust,
assignment agreement and other agreement or instrument being executed and delivered by a Grantor to
the Secured Party concurrently herewith, or from time to time hereafter executed and delivered by a
Grantor to the Secured Party, pursuant to which a Lien has been granted or purported to be granted
by any of the Grantors in favor of the Secured Party on any of its assets to secure any of the
Obligations or its Guaranty of any of the Obligations (as applicable) or pursuant to which any such
Lien is perfected.



     “Security Interest” means the security interest granted pursuant to Section 2,
as well as all other security interests created or assigned as additional security for the
Obligations pursuant to the provisions of any Security Document.



     “Subsidiary” means, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in
this Security Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.



     “Trademark License” means (a) any written agreement, now or hereafter in effect,
granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or
that any Grantor otherwise has the right to license, or (b) any written agreement, now or hereafter
in effect, granting to a Grantor any right to use any Trademark now or hereafter owned by any third
party, and (c) all rights of any Grantor under any such agreement referred to in clause (a) or
clause (b) above.



     “Trademarks” means all of the following whether now owned or hereafter adopted or
acquired by any Grantor: (a) all state (including common law), federal and foreign trademarks,
service marks, trade names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers, designs and general
intangibles of like nature, all registrations and recordings thereof or similar property rights,
and all registration and recording applications filed in connection therewith (but excluding any
application to register any trademark, service mark or other mark prior to the filing under
Applicable Law of a verified statement of use (or the equivalent) for such trademark, service mark
or other mark to the extent the creation of a security interest therein or the grant of a mortgage
thereon would void or invalidate such trademark, service mark or other mark), including
registrations, recordings and registration applications in the PTO, any State of the United States
or any similar offices in any other country or any political subdivision thereof, and all reissues,
extensions or renewals thereof, (b) all rights to sue for, past, present or future infringements or



4









 




unconsented use thereof of any of the foregoing, (c) all goodwill of any business associated
therewith or symbolized thereby and (d) all other assets, rights and interests that uniquely
reflect or embody such goodwill.




     “Trademark Security Agreement Supplement” means a supplement to this Security
Agreement, executed by each Grantor that now or hereafter owns a Trademark, in favor of the Secured
Party, in the form acceptable to the Secured Party.



     “UCC” means the Uniform Commercial Code as in effect in any jurisdiction (except as
otherwise contemplated in Section 6.18).



          1.03. Rules of Interpretation. The rules of interpretation specified in Section 1.02
of the Credit Agreement shall be applicable to this Security Agreement; provided,
however, that references to “Sections,” “Exhibits” and “Schedules” shall be to Sections,
Exhibits and Schedules, respectively, of this Security Agreement unless otherwise specifically
provided. All references to statutes and related regulations shall include (unless otherwise
specifically provided herein) any amendments of same and any successor statutes and regulations.




     SECTION 2. GRANT OF SECURITY INTERESTS.



               (a) To secure the payment or performance, as the case may be, in full of the Obligations, each
Grantor hereby grants to the Secured Party, and its successors and assigns, a security interest in,
and Lien on, and pledges and assigns to the Secured Party, and its successors and assigns, the
following properties, assets and rights of each Grantor, wherever located and whether now owned or
hereafter acquired or arising, and all proceeds and products thereof (all of such properties,
assets, rights and proceeds being hereinafter collectively referred to as the
“Collateral”): all personal and fixture property of every kind and nature including all
goods (including inventory, equipment, fixtures and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), money, commercial tort claims, securities and all
other investment property (including the Pledged Securities), supporting obligations, any other
contract rights or rights to the payment of money, insurance claims and proceeds, and all general
intangibles (including all Intellectual Property, insurance policies and payment intangibles);
provided, however, that in no event shall more than 66% of the total outstanding
Foreign Subsidiary Voting Stock be required to be pledged hereunder to the extent that the pledge
of such Foreign Subsidiary Voting Stock above such amount would result in a repatriation of a
material amount of foreign earnings under the Code (including “deemed dividend” provisions of
Section 956 of the Code); provided, further, that the definition of “Collateral”
shall not include any property or assets to the extent that the Grantors are prohibited from
granting a security interest in, pledge of, or charge, mortgage or lien upon, or having a financing
statement filed with respect to, any such property or assets as of the date hereof by reason of (x)
an existing and enforceable negative pledge provision as of the date hereof to the extent such
provision does not violate the terms of any Related Document or (y) applicable law or regulation to
which such Grantors are subject, except (in the case of either of the foregoing clauses (x) and
(y)) to the extent such prohibition is ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of
the NYUCC. The Secured Party acknowledges that the attachment of its Security Interest in any
commercial tort claim of any Grantor as original collateral is subject to each Grantors’ compliance
with Section 6.12.



               (b) The Secured Party represents and warrants to the Grantors that it is a “qualified
purchaser” as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended.



5









 





               (c) It is the intention of the Grantors that the description of the Collateral set forth above
be construed to include the broadest possible range of assets.



     SECTION 3. AUTHORIZATION TO FILE FINANCING STATEMENTS. Each Grantor hereby irrevocably
authorizes the Secured Party at any time and from time to time to file in any jurisdiction in which
the UCC has been adopted any initial financing statements and amendments thereto that (a) indicate
the Collateral (i) as all assets of such Grantor or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of Article 9 of the NYUCC
or such other jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail,
and (b) contain any other information required by part 5 of Article 9 of the NYUCC, or such other
jurisdiction for the sufficiency or filing office acceptance of any initial financing statement or
amendment, including (i) whether each Grantor is an organization, the type of organization and any
organizational identification number issued to such Grantor and, (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as timber to be cut or as-extracted
collateral, a sufficient description of real property to which such Collateral relates. Each
Grantor agrees to furnish any such information to the Secured Party promptly, but no later than
five (5) days unless otherwise consented to by the Secured Party, upon request. Each Grantor also
ratifies its authorization for the Secured Party to have filed in any UCC jurisdiction any like
initial financing statements or amendments thereto if filed prior to the date hereof.



     SECTION 4. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this Security Agreement
supplement the provisions of any real estate mortgage or deed of trust granted by any Grantor to
the Secured Party and securing the payment and performance of any of the Obligations. Nothing
contained in any such real estate mortgage or deed of trust shall derogate from any of the rights
or remedies of the Secured Party hereunder. In addition to the provisions of this Security
Agreement being so read and construed with any such mortgage or deed of trust, the provisions of
this Security Agreement shall be read and construed with the other Security Documents referred to
below in the manner so indicated and any other Security Documents, as the case may be.



     SECTION 5. REPRESENTATIONS AND WARRANTIES. The Grantors jointly and severally represent and
warrant to the Secured Party as follows:



          5.01. Grantors’ Legal Status. (a) Each Grantor is a registered organization of the
type, and is organized in the jurisdiction, as set forth on the Perfection Certificate or the most
recent Perfection Supplement, as applicable, or as otherwise notified to the Secured Party pursuant
to Section 6.01; and (b) the Perfection Certificate or the most recent Perfection
Supplement, as applicable, or a written notification delivered to the Secured Party pursuant to
Section 6.03, sets forth each Grantor’s organizational identification number or states that
such Grantor has none.




          5.02. Grantors’ Legal Name. Each Grantor’s exact legal name is that set forth on the
Perfection Certificate and on the signature page hereof or the most recent Perfection Supplement,
as applicable, and from and after an amendment or modification thereto, on a written notification
delivered to the Secured Party pursuant to Section 6.02.




          5.03. Grantors’ Locations. The Perfection Certificate or the most recent Perfection
Supplement, as applicable, or a written notification delivered to the Secured Party pursuant to
Section 6.04, sets forth each Grantor’s place of business (if such Grantor has just one
place of business) or its chief executive office (if it has more than one place of business), as
well as, its mailing address if different from its place of business or chief executive office (as
applicable). Each Grantor’s place of business or (if it has more than one place of business) its
chief executive office is located in a jurisdiction that has adopted the UCC or whose laws
generally require that information concerning the existence of nonpossessory security interests be
made generally available in a filing, recording or registration system



6









 






as a condition or result of the security interest obtaining priority over the rights of a lien
creditor with respect to the collateral.




          5.04. Title to Collateral. Each Grantor is the owner of or has other rights in, and
has the power to transfer its right, title and interest in and to, the Collateral being pledged by
it, free from any right or claim of any Person or any Lien, except (other than in the case of
investment property) for Permitted Encumbrances. No Grantor has filed or consented to the filing of
(a) any financing statement or analogous document under the UCC or any other applicable laws
covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with the PTO or the Copyright
Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with any foreign governmental, municipal or other
office, in each of the foregoing cases which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each case, for Permitted
Encumbrances.




          5.05. Nature of Collateral. None of the Collateral constitutes, or is the proceeds of,
“farm products” as defined in Section 9-102(a)(34) of the NYUCC. None of the Collateral has been
purchased for, or will be used by any Grantor primarily for personal, family or household purposes.
Except as set forth on the Perfection Certificate or the most recent Perfection Supplement, as
applicable, or otherwise notified to the Secured Party pursuant to Sections 6.12 or
6.13, respectively:




               (a) none of the account debtors or other Persons obligated on any of the Collateral is a
governmental authority subject to the Federal Assignment of Claims Act (or similar Federal, state
or local statute or rule) in respect of such Collateral;



               (b) the Grantors hold no commercial tort claims;



               (c) the Grantors hold no interest in, title to or power to transfer, any Patents, Trademarks
or Copyrights; and



               (d) the Grantors hold no interest in, title to or power to transfer any Intellectual Property
that is eligible for registration in the PTO or the Copyright Office.



          5.06. Compliance with Laws. Each Grantor has at all times operated its business in
compliance with all applicable provisions of the Federal Fair Labor Standards Act, as amended, and
with all applicable provisions of Federal, state and local statutes and ordinances dealing with the
control, shipment, storage or disposal of hazardous materials or substances.




          5.07. Pledged Securities.




               (a) Set forth on Schedule II is a true, correct and complete list and description of
all of the Pledged Securities;



               (b) As of the date hereof, the Pledged Stock set forth on Part B of Schedule II
constitutes all of the respective Capital Stock of each Grantor in Subsidiaries owned directly by
such Grantor (except if such Subsidiary is a Foreign Subsidiary and the pledge of such Foreign
Subsidiary Voting Stock greater than 66% is not required to be pledged pursuant to Section 2, then
such Pledged Stock constitutes 66% of the respective Capital Stock of such Grantor in such Foreign
Subsidiary);



7









 





               (c) As of the date hereof, the Pledged Stock set forth on Part C of Schedule II
constitutes all of the respective Capital Stock of each Grantor in any corporation or other entity
other than the Pledged Stock evidencing Capital Stock in Subsidiaries;



               (d) All of the Pledged Stock has been duly authorized, validly issued and is fully paid and
non-assessable and is not subject to any options to purchase or similar rights of any Person, and
none of the Pledged Stock constitutes “margin stock” as defined in Regulation U;



               (e) To each of the Grantor’s knowledge, each of the Pledged Notes constitutes the legal, valid
and binding obligation of the obligor with respect thereto, enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; and



               (f) Such Grantor is, and at the time of delivery of the Pledged Securities to the Secured
Party, will be, the sole holder of record and the sole beneficial owner of such Pledged Securities
pledged by such Grantor (including the Pledged Securities acquired by such Grantor after the
Closing Date) free and clear of any Lien thereon or affecting the title thereto (except for the
Lien created by this Security Agreement).



          5.08. Validity of Security Interest.




               (a) (i) The Security Interest constitutes a legal and valid security interest in all of the
Collateral securing the payment and performance of the Obligations and (ii) the filing of financing
statements describing the Collateral in the offices located in the jurisdictions listed on the
Perfection Certificate or the most recent Perfection Supplement, as applicable, the recording in
the PTO of the Trademark Security Agreement Supplement and the Patent Security Agreement Supplement
and in the Copyright Office of the Copyright Security Agreement Supplement, as applicable, the
taking of all applicable actions in respect of perfection contemplated by Sections 6.06,
6.07, 6.08, 6.09, 6.10, 6.11 and 6.12 in respect of
Collateral (in which a security interest cannot be perfected by the filing of a financing statement
or such recordings in the PTO or the Copyright Office), the Security Interest will be perfected in
all Collateral in which a security interest can be perfected by the Secured Party filing a
financing statement, filing with the PTO or the Copyright Office, as applicable, taking possession
or obtaining control under the UCC.



               (b) When the UCC financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the Collateral have
been filed in each governmental, municipal or other office specified on the Perfection Certificate
or the most recent Perfection Supplement, as applicable, which are all the filings, recordings and
registrations (other than filings required to be made in the PTO and the Copyright Office in order
to perfect the Security Interest in Collateral consisting of United States Patents, Trademarks and
Copyrights) that are necessary to publish notice of and protect the validity of and to establish a
legal, valid and perfected security interest in favor of the Secured Party in respect of all
Collateral in which the Security Interest may be perfected by filing, recording or registration in
the United States (or any political subdivision thereof) and its territories and possessions will
have been made, no further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.



               (c) A fully executed Patent Security Agreement Supplement, Trademark Security Agreement
Supplement and a Copyright Security Agreement Supplement in the forms attached



8









 







hereto and containing a specific description of all Collateral consisting of United States
Patents and United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights have been delivered
by each Grantor with respect to such Grantor’s Intellectual Property to the Secured Party for
recording by the PTO and the Copyright Office, as necessary, pursuant to 35 U.S.C. § 261, 15 U.S.C.
§ 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction. When such supplements and the
UCC financing statements referred to in Section 5.08(a), as applicable, have been filed,
all the filings, recordings and registrations necessary to protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Secured Party in respect of all
Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be
perfected by filing, recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, or in any other necessary jurisdiction, will have
been made, and no further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect the Security
Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights of such
Grantor (or registration or application for registration thereof) acquired or developed after the
date hereof).



               (d) The Security Interest is and shall be prior to any other Lien on any of the Collateral
other than (except in the case of investment property) Permitted Encumbrances, which by their
terms, the time of their incurrence or otherwise pursuant to applicable law are prior to the
Security Interest.



          5.09. Perfection Certificate. All information set forth on the Perfection Certificate
is, and all information set forth on each Perfection Supplement shall be accurate and complete in
all material respects, or as otherwise notified to the Secured Party in accordance with the terms
of Sections 6.01, 6.02, 6.03, 6.04, 6.12 or
6.13.




          5.10. Advice of Counsel. Each Grantor has discussed this Security Agreement and,
specifically, the provisions of Sections 20.02 and 20.03, with its counsel.




          5.11. Required Consents. Except for consents, authorizations, approvals, notices and
filings obtained, made or waived, or as may be required in connection with any disposition of any
portion of the Pledged Securities by laws affecting the offering and sale of securities generally,
no consent of any Person (including partners, shareholders or creditors of the Grantors or of any
Subsidiary of the Grantors) and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any governmental instrumentality
is required in connection with (i) the execution, delivery, performance, validity or enforceability
of this Security Agreement; (ii) the perfection or maintenance of the Security Interest created
hereby (including the first priority nature of such Security Interest); or (iii) the exercise by
the Secured Party of the rights provided for in this Security Agreement.




     SECTION 6. COVENANTS. Each Grantor covenants and agrees with the Secured Party, in each case
at each Grantor’s own cost and expense as follows:



          6.01. Grantors’ Legal Status. Without providing at least thirty (30) days’ prior
written notice to the Secured Party, such Grantor shall not change its type of organization,
jurisdiction of organization or other legal structure.




          6.02. Grantors’ Name. Without providing at least thirty (30) days’ prior written
notice to the Secured Party, such Grantor shall not change its name.




9









 








          6.03. Grantors’ Organizational Number. Without providing at least thirty (30) days’
prior written notice to the Secured Party, such Grantor shall not change its organizational
identification number if it has one, and if such Grantor does not have an organizational
identification number and later obtains one, such Grantor shall forthwith notify the Secured Party
of such organizational identification number.




          6.04. Locations. Without providing at least thirty (30) days’ prior written notice to
the Secured Party, such Grantor shall not (a) change its place of business (if it has just one
place of business) or its chief executive office (if it has more than one place of business) or its
mailing address if different from its place of business or chief executive office (as applicable);
or (b) except to the extent delivered to the Secured Party pursuant to Sections 6.06,
6.07, 6.08 or 6.10 or otherwise permitted pursuant to Section 6.15
remove any of its property or assets constituting Collateral from the locations listed on the
Perfection Certificate or the most recent Perfection Supplement, as applicable.




          6.05. Title to Collateral. (a) Except for the Security Interest herein granted and
other Permitted Encumbrances, each Grantor shall be the owner of or have other rights in, and the
power to transfer its right, title and interest in and to, the Collateral free from any right or
claim of any other Person or any Lien, and each Grantor, at its sole cost and expense, shall defend
the same against all claims and demands of all Persons at any time claiming the same or any
interests therein adverse to the Secured Party; and (b) no Grantor shall pledge, mortgage or
create, or suffer to exist any right of any Person in or claim by any Person to the Collateral, or
any Lien on the Collateral in favor of any Person, other than the Secured Party, except for
Permitted Encumbrances.




          6.06. Promissory Notes and Tangible Chattel Paper. If any Grantor shall at any time
hold or acquire any promissory notes or tangible chattel paper, such Grantor shall forthwith
endorse, assign and deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment undated and duly executed in blank as the Secured Party may from time to
time specify.




          6.07. Deposit Accounts. For each deposit account that each Grantor at any time opens
or maintains, each Grantor shall, at the Secured Party’s request and option, either (a) cause the
depositary bank to enter into a written agreement or other authenticated record with the Secured
Party, in form and substance satisfactory to the Secured Party, pursuant to which such depositary
bank shall agree, among other things, to comply at any time with instructions from the Secured
Party, to such depositary bank directing the disposition of funds from time to time credited to
such deposit account, without further consent of any Grantor, or (b) arrange for the Secured Party,
to become the customer of the depositary bank with respect to the deposit account, with each
Grantor being permitted, only with the consent of the Secured Party, to exercise rights to withdraw
funds from such deposit account. The Secured Party agrees with each Grantor that the Secured Party
shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an
Event of Default has occurred and is continuing, or, after giving effect to any withdrawal not
otherwise permitted by the Credit Agreement, would occur. The foregoing provisions of this
Section 6.07 shall not apply to (i) deposit accounts for which the Secured Party is the
depositary bank and is in automatic control; (ii) deposit accounts specially and exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of
any Grantor’s salaried employees and (iii) deposit accounts specially and exclusively used for
petty cash, or other similar use, having an account balance which does not exceed at any time
$25,000 in the aggregate. With respect to any deposit accounts, rights arising under deposit
accounts or proceeds thereof in the possession or within the control of the Secured Party, each
Grantor waives any restriction or obligation imposed on the Secured Party by Sections 9-207(c)(1),
9-207(c)(2) and 9-208 of the NYUCC.




10









 








          6.08. Investment Property.




               (a) If any Grantor shall at any time hold or acquire any certificated securities, such Grantor
shall forthwith endorse, assign and deliver the same to the Secured Party, accompanied by such
instruments of transfer or assignment undated and duly executed in blank as the Secured Party may
from time to time specify. If any securities now owned or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such
Grantor shall immediately notify the Secured Party thereof and, at the Secured Party’s request and
option, either (A) cause the issuer to enter into a written agreement or other authenticated record
with the Secured Party, in form and substance satisfactory to the Secured Party, pursuant to which
such issuer shall agree, among other things, to comply with instructions from the Secured Party as
to such securities, without further consent of such Grantor or such nominee, or (B) arrange for the
Secured Party to become the registered owner of the securities.



               (b) If any securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by any Grantor are held or acquired by such Grantor or its nominee
through a securities intermediary or commodity intermediary, such Grantor shall immediately notify
the Secured Party thereof and, at the Secured Party’s request and option, either (A) cause such
securities intermediary or (as the case may be) commodity intermediary to enter into a written
agreement or other authenticated record with the Secured Party, in form and substance satisfactory
to the Secured Party, pursuant to which such securities intermediary or commodities intermediary,
as the case may be, shall, among other things, agree to comply with entitlement orders or other
instructions from the Secured Party to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on account of any
commodity contract as directed by the Secured Party to such commodity intermediary, in each case
without further consent of such Grantor or such nominee, or (B) in the case of financial assets or
other investment property held through a securities intermediary, arrange for the Secured Party to
become the entitlement holder with respect to such investment property, with such Grantor being
permitted, only with the consent of the Secured Party, to exercise rights to withdraw or otherwise
deal with such investment property. The Secured Party agrees with each Grantor that the Secured
Party shall not give any such entitlement orders or instructions or directions to any such issuer,
securities intermediary or commodity intermediary, and shall not withhold its consent to the
exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has
occurred and is continuing, or, after giving effect to any such investment and withdrawal rights
not otherwise permitted by the Related Documents, would occur. The provisions of this Section
6.08(b) shall not apply to (i) any financial assets credited to a securities account for which
the Secured Party is the securities intermediary and is in automatic control pursuant to Section
9-106(a) of the NYUCC or (ii) any commodity contract carried in a commodity account for which the
Secured Party is the commodity intermediary and is in automatic control pursuant to Section
9-106(b) of the NYUCC.



               (c) With respect to any investment property in the possession or within the control of the
Secured Party, each Grantor waives any restriction or obligation imposed on the Secured Party by
Sections 9-207(c)(1), 9-207(c)(2) and 9-208 of the NYUCC.



               (d) So long as no Event of Default shall have occurred and be continuing, each Grantor shall
be entitled:



                    (i) to exercise, but in a manner not inconsistent with the terms hereof, all voting power and
other consensual rights with respect to any of the Pledged Securities of such Grantor, and for that
purpose the Secured Party shall (if such Pledged Securities shall be registered in the name of the
Secured Party or its nominee) execute or cause to be executed from time to time, at the expense of
such Grantor, such proxies or other instruments in favor of such Grantor or its nominee as



11









 







shall be reasonably required by such Grantor and shall be specified in a written request
therefor, to enable it to exercise such voting power with respect to the Pledged Securities (any
such proxies or other instruments to be in form and substance satisfactory to the Secured Party in
all respects); and



                    (ii) except as otherwise provided herein or in the Credit Agreement, to receive and retain for
its own account (subject to the Liens created hereunder) any and all payments, proceeds, dividends,
distributions, monies, compensation, property, assets, instruments or rights to the extent such are
permitted pursuant to the terms of the Credit Agreement, other than (x) stock or liquidating
dividends or (y) other dividends or other amounts payable under or in connection with any
recapitalization, restructuring, or other non-ordinary course event (the dividends and amounts in
this clause (y) being “Extraordinary Payments”), paid, issued or distributed from time to
time in respect of the Pledged Securities.



               (e) In case, upon the dissolution or liquidation (in whole or in part) of any issuer of any
Pledged Securities, any sum shall be paid or payable as a liquidating dividend or otherwise upon or
with respect to any of the Pledged Securities or, in the event any other Extraordinary Payment is
paid or payable, then and in any such event, such sum shall be paid by each such Grantor over to
the Secured Party promptly, and in any event to be applied as set forth in the Credit Agreement.



               (f) In case any stock dividend shall be declared with respect to any of the Pledged
Securities, or any shares of stock or fractions thereof shall be issued pursuant to any stock split
involving any of the Pledged Securities, or any distribution of capital shall be made on any of the
Pledged Securities, or any shares, obligations or other property shall be distributed upon or with
respect to the Pledged Securities, in each case pursuant to a recapitalization or reclassification
of the capital of the issuer thereof, or pursuant to the dissolution, liquidation (in whole or in
part), bankruptcy or reorganization of such issuer, or to the merger or consolidation of such
issuer with or into another corporation, the shares, obligations or other property so distributed
shall be delivered by the Grantor to the Secured Party promptly, and in any event within ten (10)
days after receipt by such Grantor thereof, to be held by the Secured Party as Collateral hereunder
subject to the terms of this Security Agreement, and all of the same shall constitute Pledged
Securities for all purposes hereof.



               (g) Upon the occurrence and during the continuance of any Event of Default, all rights of a
Grantor to exercise or refrain from exercising any of the voting and other consensual rights that
it would otherwise be entitled to exercise pursuant to Section 6.08(d)(i) and to receive
and retain any of the payments, proceeds, dividends, distributions, monies, compensation, property,
assets, instruments or rights that the Grantor would otherwise be authorized to receive and retain
pursuant to Section 6.08(d)(ii) shall cease, and thereupon the Secured Party shall be
entitled to exercise all voting power with respect to the Pledged Securities and to receive and
retain, as Collateral hereunder, any and all payments, proceeds, dividends, distributions, monies,
compensation, property, assets, instruments or rights at any time declared or paid upon any of the
Pledged Securities during the continuance of an Event of Default and otherwise to act with respect
to the Pledged Securities as outright owner thereof.



               (h) All payments, proceeds, dividends, distributions, monies, compensation, property, assets,
instruments or rights that are received by each Grantor contrary to the provisions of this
Section 6.08 shall be received and held in trust for the benefit of the Secured Party shall
be segregated by each Grantor from other funds of such Grantor and shall be forthwith paid over to
the Secured Party as in the same form as so received (with any necessary or reasonably requested
endorsement).



          6.09. Collateral in the Possession of a Bailee. If any Collateral of any Grantor is at
any time in the possession of a bailee, such Grantor shall promptly notify the Secured Party
thereof in writing and, if requested by the Secured Party, shall promptly obtain a written
acknowledgement from such


12









 







 bailee, in form and substance satisfactory to the Secured Party, that such bailee holds
such Collateral for the benefit of the Secured Party and shall act upon the instructions of the
Secured Party at any time, without the further consent of any Grantor. The Secured Party agrees
with each Grantor that the Secured Party shall not give any such instructions unless an Event of
Default has occurred and is continuing or would occur after taking into account any action by any
Grantor with respect to such bailee. Notwithstanding the foregoing, to the extent such Grantor is
unable to promptly obtain a written acknowledgement from a bailee, then, at the request of the
Secured Party, such Grantor shall promptly move such Collateral to a bailee that shall authenticate
a record acknowledging that it is holding the Collateral for the benefit of the Secured Party.




          6.10. Electronic Chattel Paper and Transferable Records. If any Grantor at any time
holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that
term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, such Grantor shall promptly notify the Secured Party in writing thereof and, at the
request and option of the Secured Party, shall take such action as the Secured Party may reasonably
request to vest in the Secured Party control, under Section 9-105 of the UCC, of such electronic
chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as so in effect in such jurisdiction, of such transferable record. The Secured Party agrees
with each Grantor that the Secured Party shall arrange, pursuant to procedures satisfactory to the
Secured Party and so long as such procedures will not result in the Secured Party’s loss of
control, for each Grantor to make alterations to the electronic chattel paper or transferable
record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of control, unless an Event of Default
has occurred and is continuing or would occur after taking into account any action by any Grantor
with respect to such electronic chattel paper or transferable record.




          6.11. Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a
letter of credit now or hereafter issued in favor of any Grantor, or obtains or acquires any other
letter-of-credit rights, such Grantor shall promptly notify the Secured Party in writing thereof
and, at the request and option of the Secured Party, such Grantor shall either (a) arrange for the
issuer and any confirmer or other nominated Person with respect to such letter of credit to
consent, pursuant to an agreement or other authenticated record with the Secured Party (which
agreement or other authenticated record shall be in form and substance satisfactory to the Secured
Party), to an assignment to the Secured Party of the proceeds of any drawing under the letter of
credit or (b) arrange for the Secured Party to become the transferee beneficiary of the applicable
letter of credit, with the Secured Party agreeing, in each case, that the proceeds of any drawing
under the letter of credit are to be applied as provided in the Credit Agreement.




          6.12. Commercial Tort Claims. If any Grantor shall at any time hold or acquire a
commercial tort claim, such Grantor shall immediately notify the Secured Party in a writing signed
by such Grantor of the brief details thereof and grant to the Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of this Security
Agreement, with such writing to be in form and substance satisfactory to the Secured Party.




          6.13. Intellectual Property. If at any time any Grantor shall obtain or otherwise hold
any Patent, Trademark or Copyright that is not the subject of a filed Patent Security Agreement
Supplement, Trademark Security Agreement Supplement, or Copyright Security Agreement Supplement, as
the case may be, then such Grantor shall execute and deliver to the Secured Party for filing in the
PTO or the Copyright Office, as applicable, the applicable supplement. In addition, each Grantor
agrees to



13









 






comply with the following covenants in respect of any of such Grantor’s Intellectual Property
that constitutes Collateral:




               (a) each Grantor shall notify the Secured Party immediately if it knows, or has reason to
know, that any application or registration relating to any Patent, Trademark or Copyright (now or
hereafter existing) may become abandoned or dedicated or may lapse, or of any adverse determination
or development regarding each Grantor’s ownership of any Patent, Trademark, or Copyright, its right
to register the same, or to keep and maintain the same (including the institution of, or any
determination or development in, any proceeding in the PTO, the Copyright Office or any court);



               (b) in no event shall any Grantor, either itself or through any agent, employee, licensee or
designee, file an application for the registration of any Patent, Trademark, or Copyright with the
PTO, the Copyright Office or any similar office or agency of any jurisdiction without giving the
Secured Party prior written notice thereof, and, upon request of the Secured Party, such Grantor
shall execute and deliver any and all Patent Security Agreement Supplements, Trademark Security
Agreement Supplements or Copyright Security Agreement Supplements as the Secured Party may request
to evidence the Secured Party’s Security Interest in such Patent, Trademark or Copyright, and the
general intangibles of such Grantor relating thereto or represented thereby;



               (c) each Grantor promptly shall register all of its material Copyrights with the Copyright
Office and take all actions necessary or requested by the Secured Party to maintain and pursue each
application, to obtain the relevant registration and to maintain the registration of each Copyright
(now or hereafter existing), including the filing of applications for renewal, affidavits of use,
affidavits of noncontestability and opposition and interference and cancellation proceedings;



               (d) each Grantor shall take all actions necessary or requested by the Secured Party to
maintain and pursue each application, to obtain the relevant registration and to maintain the
registration of each Patent or Trademark (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings, unless such Grantor shall reasonably determine that such
Patent or Trademark is not material to the conduct of its business;



               (e) in the event that any of the Collateral consisting of Patents, Trademarks, or Copyrights
is infringed upon, or misappropriated or diluted by a third party, such Grantor shall notify the
Secured Party promptly after such Grantor learns thereof and such Grantor shall, unless such
Grantor shall reasonably determine that such Patent, Trademark or Copyright is in no way material
to the conduct of its business or operations, take all reasonable actions, including suing for
infringement, misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, shall periodically report to the Secured Party as to
the status of such actions and shall take such other actions as the Secured Party shall deem
appropriate under the circumstances to protect such Patent, Trademark or Copyright;



               (f) with respect to any Intellectual Property constituting Collateral that any Grantor has
reasonably determined continues to be useful and material to the conduct of such Grantor’s
business, unless the Secured Party otherwise consents, such Grantor will not take or omit to take
any action whereby such Intellectual Property could reasonably be expected to become abandoned,
dedicated, lapsed, invalidated or whereby the remedies in respect of such Intellectual Property
with respect to potential infringers could reasonably be expected to become weakened;



               (g) each Grantor assumes all responsibility and liability arising from the use of the
Intellectual Property and hereby indemnifies and holds the Secured Party and each other Secured



14









 







Party harmless from and against any claim, suit, loss, damage or expense (including reasonable
attorneys’ fees arising out of any alleged defect in any product manufactured, promoted or sold by
such Grantor (or any affiliate or Subsidiary thereof) in connection with such Intellectual Property
or out of the manufacture, promotion, labeling, sale or advertisement of any such product by any
Grantor (or any affiliate or Subsidiary thereof);



               (h) each Grantor will do all things that are reasonably necessary and proper within each
Grantor’s power and control to keep each license of or constituting Intellectual Property held by
such Grantor as licensee or licensor in full force and effect except to the extent that (i) such
Grantor has reasonably determined that the failure to keep any such license in full force and
effect could not be reasonably expected to have a Material Adverse Effect or (ii) any such license
would expire by its terms (as in effect on the date hereof) or is terminable at will by a Person
other than such Grantor; and



               (i) each Grantor shall not create any nonexclusive license in any Trademark, Copyright, Patent
or other Intellectual Property or general intangible, in each case owned by or licensed to any
Grantor unless such license is in writing and by its terms is expressly subject and subordinate to
the Security Interest created hereby, such subordination to include a provision expressly stating
that such license shall terminate, at the option of the Secured Party, upon foreclosure of such
Security Interest.



          6.14. Limitation on Modification of Accounts, Chattel Paper, Instruments and Payment
Intangibles. None of the Grantors will, without the Secured Party’s prior written consent: (a)
grant any extension of the time of payment of any of the Collateral consisting of accounts, chattel
paper, instruments or payment intangibles; (b) compromise, compound or settle the same for less
than the full amount thereof; (c) release, wholly or partly, any obligor liable for the payment
thereof or (d) allow any credit or discount whatsoever thereon; provided, however,
this Section 6.14 shall not restrict any other extensions, credits, discounts, compromises
or settlements granted or made by any Grantor in the ordinary course of such Grantor’s business and
consistent with such prudent practices used in industries that are the same as or similar to those
in which such Grantor is engaged.




          6.15. Dispositions of Collateral. None of the Grantors shall make or permit to be made
an assignment for security, pledge or hypothecation of the Collateral or shall grant any other Lien
in respect of the Collateral, except as expressly permitted by this Security Agreement and the
Credit Agreement. None of the Grantors shall make or permit to be made any transfer of the
Collateral, except that (a) inventory may be sold in the ordinary course of business and (b) unless
and until the Secured Party shall notify the Grantors that an Event of Default shall have occurred
and be continuing and that during the continuance thereof the Grantors shall not sell, convey,
lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by
telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in
any lawful manner not prohibited by this Security Agreement, the Credit Agreement or any other
Related Document. Notwithstanding the foregoing, in no event shall any Grantor create any lease of
Collateral owned by or leased to any Grantor unless such lease is in writing and by its terms is
expressly subject and subordinate to the Security Interest created hereby, such subordination to
include a provision expressly stating that such lease shall terminate, at the option of the Secured
Party, upon foreclosure of such Security Interest.




          6.16. Insurance.




               (a) Maintenance of Insurance. Each Grantor will maintain with financially sound and
reputable insurers insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in such minimum amounts that each
Grantor will not be deemed a co-insurer under applicable insurance laws, regulations and policies
and



15









 







otherwise shall be in such amounts, contain such terms, be in such forms and be for such
periods as may be reasonably satisfactory to the Secured Party. In addition, all such insurance
shall be payable to the Secured Party as loss payee. Without limiting the foregoing, each Grantor
will (i) keep all of its physical property insured with casualty or physical hazard insurance on an
“all risks” basis, with broad form flood and earthquake coverages and electronic data processing
coverage, with a full replacement cost endorsement and an “agreed amount” clause in an amount equal
to 100% of the full replacement cost of such property, (ii) maintain all such workers’ compensation
or similar insurance as may be required by law, and (iii) maintain, in amounts and with deductibles
equal to those generally maintained by businesses engaged in similar activities in similar
geographic areas, general public liability insurance against claims of bodily injury, death or
property damage occurring, on, in or about the properties of each Grantor; business interruption
insurance; and product liability insurance.



               (b) Insurance Proceeds. The proceeds of any casualty insurance in respect of any
casualty loss of any Collateral shall, subject to the rights, if any, of other parties with a prior
interest in the property covered thereby, be disbursed as set forth in the Credit Agreement.



          6.17. Periodic Certification. From time to time on demand from the Secured Party, but
in no event less frequently than annually, the Grantor shall deliver to the Secured Party a
supplemental perfection certificate (each, as updated by any supplement with respect to a new
Grantor pursuant to the following sentence, a “Perfection Supplement”) executed by the
Borrower either (a) certifying that the information contained in the Perfection Certificate or
Perfection Supplement, as applicable, most recently delivered remains true and correct in all
material respects or (b) updating the information contained in such Perfection Certificate or
Perfection Supplement, as applicable, as necessary to cause such information to be true and correct
in all material respects. In addition, at the time a Subsidiary shall become a Grantor hereunder,
the Borrower shall deliver to the Secured Party a supplemental perfection certificate containing
the required information for such new Grantor, which information shall be true and correct in all
material respects as of the date of delivery thereof.




          6.18. Other Actions as to any and all Collateral.




               (a) Each Grantor further agrees, upon request of the Secured Party, to take any and all other
actions as the Secured Party may determine to be necessary or useful for the attachment, perfection
and first priority of, and the ability of the Secured Party to enforce, the Security Interest in
any and all of the Collateral including (i) causing the Secured Party’s name to be noted as secured
party on any certificate of title for a titled good constituting Collateral if such notation is a
condition to attachment, perfection or priority of, or ability of the Secured Party to enforce, the
Security Interest in such Collateral; (ii) complying with any provision of any statute, regulation
or treaty of the United States as to any Collateral if compliance with such provision is a
condition to the attachment, perfection or priority of, or the ability of the Secured Party to
enforce, the Security Interest in such Collateral; (iii) obtaining governmental and other
third-party waivers, consents and approvals in form and substance satisfactory to the Secured
Party, including any consent of any licensor, lessor or other Person obligated on Collateral; (iv)
obtaining waivers from mortgagees, bailees, landlords and any other Person who has possession of or
any interest in any Collateral or any real property on which any Collateral may be located, in form
and substance satisfactory to the Secured Party; and (v) taking all actions under any earlier
versions of the UCC or under any other law, as reasonably determined by the Secured Party to be
applicable in any relevant UCC or other jurisdiction, including any foreign jurisdiction.



               (b) Each Grantor agrees that it will use reasonable efforts to take such action as shall be
necessary in order that all representations and warranties hereunder shall be true and correct in
all material respects with respect to a particular item of Collateral within thirty (30) days after
the date it has been notified in writing by the Secured Party of the specific identification of
such Collateral and the



16









 







representations and warranties that the Secured Party believes may not be true and correct in
all material respects.



          6.19. Taxes. Each Grantor shall pay promptly when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection with the use or
operation of such Collateral or incurred in connection with this Security Agreement.




     SECTION 7. INSPECTION AND VERIFICATION. The Secured Party and such Persons as the Secured
Party may designate shall have the right, at the Grantors’ own cost and expense, to inspect the
Collateral, all records related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantors’ affairs with the
officers of the Grantors and its independent accountants and to verify the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating to, the Collateral,
including by contacting account debtors or others obligated with respect to Collateral and, in the
case of Collateral in the possession of any third Person, the third Person possessing such
Collateral, as provided in the Credit Agreement.



     SECTION 8. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.



          8.01. Expenses Incurred by Administrative Agent. In its discretion, the Secured Party
may discharge taxes, assessments, charges, fees, Liens, security interests and other encumbrances
at any time levied or placed on any of the Collateral and not constituting Permitted Encumbrances,
and may pay for the maintenance and preservation of the Collateral and any necessary filing fees or
insurance premiums to the extent any Grantor fails to do so as required by the Credit Agreement or
this Security Agreement. Each Grantor jointly and severally agrees to reimburse the Secured Party
on demand for any and all expenditures so made, and all sums disbursed by the Secured Party in
connection with this Section 8.01, including reasonable attorneys’ fees, court costs,
expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the
Secured Party and shall constitute additional Obligations. The Secured Party shall have no
obligation to any Grantor to make any such expenditures, nor shall the making thereof be construed
as a waiver or cure of any Default or Event of Default of any Grantor.




          8.02. Administrative Agent’s Obligations and Duties. Anything herein to the contrary
notwithstanding, each Grantor shall remain obligated and liable under each contract, agreement or
instrument comprised in the Collateral to be observed or performed by such Grantor thereunder. The
Secured Party or any agent thereof shall not have any obligation or liability under any such
contract, agreement or instrument by reason of or arising out of this Security Agreement or the
receipt by the Secured Party of any payment relating to any of the Collateral, nor shall the
Secured Party or agent thereof be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any such contract, agreement or instrument, to make inquiry as to the
nature or sufficiency of any payment received by the Secured Party in respect of the Collateral or
as to the sufficiency of any performance by any party under any such contract, agreement or
instrument, to present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to the Secured Party or to which
the Secured Party may be entitled at any time or times. The sole duty of the Secured Party or any
agent thereof with respect to the custody, safe keeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the NYUCC or otherwise, shall be to deal with such
Collateral in the same manner as the Secured Party or such agent deals with similar property for
its own account.




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          8.03. Use of Collateral. With respect to any Collateral in the possession of the
Secured Party, or a bailee or other third party holding on its behalf, the Secured Party may use or
operate such Collateral in any manner and to the extent provided for under Section 9-207 of the
NYUCC.




     SECTION 9. SECURITIES AND DEPOSITS. Without limitation of Section 6.08, the Secured
Party may at any time after the occurrence and during the continuance of an Event of Default, at
its option, transfer to itself or any nominee any securities constituting Collateral, receive any
income thereon and hold such income as additional Collateral or apply it to the Obligations.
Whether or not any Obligations are due, the Secured Party may after the occurrence and during the
continuance of an Event of Default, demand, sue for, collect, or make any settlement or compromise
which it deems desirable with respect to the Collateral. Regardless of the adequacy of Collateral
or any other security for the Obligations, any deposits or other sums at any time credited by or
due from the Secured Party to any Grantor may at any time be applied to or set off against any of
the Obligations whether or not due and owing.



     SECTION 10. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL. If an
Event of Default shall have occurred and be continuing, (a) each Grantor shall, at the request and
option of the Secured Party, notify account debtors and other Persons obligated on any of the
Collateral of the Security Interest of the Secured Party n any account, chattel paper, general
intangible, instrument or other property of such Grantor constituting Collateral and that payment
of such obligor’s obligation is to be made directly to the Secured Party or to any financial
institution designated by the Secured Party as the Secured Party’s agent therefor, and (b) the
Secured Party may itself, without notice to or demand upon any Grantor, so notify such account
debtors and other Persons obligated on such Collateral. After the making of such a request by the
Secured Party or the giving of any such notification by the Secured Party (as applicable), each
Grantor shall hold any proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by such Grantor as trustee for the Secured Party without
commingling the same with other funds of such Grantor and shall turn the same over to the Secured
Party in the identical form received, together with any necessary endorsements or assignments. The
provisions of Section 9-209 of the NYUCC shall not apply to any account, chattel paper or payment
intangible as to which notification of assignment has been sent to the account debtor or other
Person obligated on the Collateral.



     SECTION 11. POWER OF ATTORNEY.



          11.01. Appointment and Powers of Administrative Agent. Each Grantor hereby irrevocably
constitutes and appoints the Secured Party and any director, officer or agent thereof, with full
power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and
authority in the place and stead of such Grantor or in the Secured Party’s own name, for the
purpose of carrying out the terms of this Security Agreement or any other Security Document, to
take any and all appropriate action and to execute any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of each Grantor, without notice to or assent by any Grantor, to do the following:




               (a) upon the occurrence and during the continuance of an Event of Default, generally to sell,
transfer, pledge, license, lease, otherwise dispose of, make any agreement with respect to or
otherwise dispose of or deal with any of the Collateral in such manner as is consistent with the
NYUCC and as fully and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Grantors’ expense, at any time, or from time to time, all acts and
things which the Secured Party deems necessary or desirable to protect, preserve or realize upon
the Collateral and the Secured Party’s Security Interest therein, in order to effect the intent of
this Security Agreement, all at



18









 







least as fully and effectively as the Grantors might do, including: (i) making, settling and
adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such
Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies
of insurance and for making all determinations and decisions with respect thereto; (ii) filing and
prosecuting registration and transfer applications with the appropriate Federal, state, or local
agencies or authorities with respect to trademarks, copyrights and patentable inventions and
processes; (iii) exercising voting rights with respect to voting securities, which rights may be
exercised, if the Secured Party so elects, with a view to causing the liquidation in a commercially
reasonable manner of assets of the issuer of any such securities; and (iv) executing, delivering
and recording, in connection with any sale or other disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance or transfer with respect to such
Collateral; and



               (b) to the extent that each Grantor’s authorization given in Section 3 is not
sufficient, to file such financing statements with respect hereto, with or without such Grantor’s
signature, or a photocopy of this Security Agreement in substitution for a financing statement, as
the Secured Party may deem appropriate and to execute in each Grantor’s name such financing
statements and amendments thereto and continuation statements which may require each Grantor’s
signature.



          11.02. Ratification by Grantors. To the extent permitted by law, each Grantor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this
Section 11. This power of attorney is a power coupled with an interest and is irrevocable
until the termination of this Security Agreement pursuant to Section 20.13.




          11.03. No Duty on Administrative Agent. The powers conferred on the Secured Party, its
directors, officers and agents pursuant to this Section 11 are solely to protect the
Secured Party’s interests in the Collateral and shall not impose any duty upon any of them to
exercise any such powers. The Secured Party shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Grantors for any act or
failure to act, except for such Person’s own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction, nor for any punitive, exemplary, indirect or
consequential damages.




     SECTION 12. REMEDIES.



          12.01. Remedies upon Default. (a) If an Event of Default shall have occurred and be
continuing, the Secured Party, without any notice to or demand upon any Grantor shall have in any
jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies,
the rights and remedies of a secured party under the NYUCC and any additional rights and remedies
as may be provided to a secured party in any jurisdiction in which Collateral is located, including
the right to take possession of the Collateral, and for that purpose the Secured Party may, so far
as each Grantor can give authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. The Secured Party may in its discretion require each
Grantor to assemble all or any part of the Collateral at such location or locations within the
jurisdiction(s) of such Grantor’s principal office(s) or at such other locations as the Secured
Party may reasonably designate.




               (b) Unless the Collateral is perishable, threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Secured Party shall give to the Grantor of such
Collateral at least ten (10) days’ prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended disposition is to be
made. Each Grantor hereby acknowledges that ten (10) days’ prior written notice of such sale or
sales shall be reasonable notice.



19









 





               (c) To the maximum extent permitted by applicable law, the Secured Party may purchase any
Collateral at any public sale and, if the Collateral is of a type customarily sold in a recognized
market or is of the type that is the subject of widely distributed standard price quotations, the
Secured Party may purchase such Collateral at private sale, and in each case may make payment
therefor by any means, including by release or discharge of Obligations in lieu of cash payment.



               (d) In addition, each Grantor waives any and all rights that it may have to a judicial hearing
in advance of the enforcement of any of the Secured Party’s rights hereunder, including its right
following an Event of Default to take immediate possession of the Collateral and to exercise its
rights with respect thereto. Whether or not any Obligations are due, the Secured Party may after
the occurrence and during the continuance of an Event of Default demand, sue for, collect, or make
any settlement or compromise which it deems desirable with respect to the Collateral.



          12.02. Grant of License to Use Intellectual Property. For the purpose of enabling the
Secured Party to exercise any rights and remedies it may have under this Section 12 or
otherwise at such time as the Secured Party shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to the Secured Party an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to any of the Grantors) to use,
license or sub-license any of the Collateral consisting of Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout thereof. The use of
such license by the Secured Party shall be exercised, at the Secured Party’s option upon the
occurrence and during the continuation of an Event of Default; provided, that any license,
sub-license or other transaction entered into by the Secured Party in accordance herewith shall be
binding upon each Grantor notwithstanding any subsequent cure, waiver or other termination of an
Event of Default.




          12.03. Disposition of Pledged Securities. Upon the occurrence and during the
continuance of an Event of Default:




               (a) The Secured Party may exercise in respect of the Pledged Securities, in addition to other
rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party on default under the NYUCC at that time (irrespective of whether the
NYUCC applies to the affected Pledged Securities), and the Secured Party may also, without notice
(except as specified below) or obligation to resort to other security, sell, resell, assign and
deliver, in its sole discretion, all or any of the Pledged Securities, in one or more parcels at
the same or different times, on any securities exchange on which any Pledged Securities may be
listed, or at public or private sale, for cash, upon credit or for future delivery, at such time or
times and at such price or prices and upon such other terms as the Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the market price of the
Pledged Securities, and in connection therewith the Secured Party may grant options. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or right on the part
of the Grantor, and the Grantor hereby waives (to the extent permitted by applicable law) all
rights of redemption, stay, or appraisal that it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.



               (b) If any of the Pledged Securities are sold by the Secured Party upon credit or for future
delivery, the Secured Party shall not be liable for the failure of the purchaser to purchase or pay
for the same and, in the event of any such failure, the Secured Party may resell such Pledged
Securities. In no event shall any Grantor be credited with any part of the proceeds of sale of any
Pledged Securities until cash payment therefor has actually been received by the Secured Party.



20









 





               (c) Without limitation of Section 6.08, the Secured Party may at its option, transfer
to itself or any nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.



               (d) Each Grantor recognizes that the Secured Party may be unable to effect a public sale of
all or part of the Pledged Securities consisting of securities by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the “Securities Act”), or in
applicable Blue Sky or other state securities laws, as now or hereafter in effect, but may be
compelled to resort to one or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof. Each Grantor agrees that any
such Pledged Securities sold at any such private sale may be sold at a price and upon other terms
less favorable to the seller than if sold at public sale. The Secured Party shall have no
obligation to delay the sale of any such securities for the period of time necessary to permit the
issuer of such securities, even if such issuer would agree, to register such securities for public
sale under the Securities Act. Each Grantor agrees that private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable manner.



               (e) The Secured Party shall not be obligated to make any sale of Pledged Securities if it
shall determine not to do so, regardless of the fact that notice of sale may have been given. The
Secured Party may, without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place fixed for sale, and
such sale may, without further notice, be made at the time and place to which the same was so
adjourned.



     SECTION 13. STANDARDS FOR EXERCISING REMEDIES. To the extent that applicable law imposes
duties on the Secured Party to exercise remedies in a commercially reasonable manner, each Grantor
acknowledges and agrees that it is not commercially unreasonable for the Secured Party (a) to fail
to incur expenses reasonably deemed significant by the Secured Party to prepare Collateral for
disposition or otherwise to complete raw material or work in process into finished goods or other
finished products for disposition or to postpone any such disposition pending any such preparation
or processing; (b) to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain governmental or third-party
consents for the collection or disposition of Collateral to be collected or disposed of; (c) to
fail to exercise collection remedies against account debtors or other Persons obligated on
Collateral or to remove Liens on, or any adverse claims against, any of the Collateral; (d) to
exercise collection remedies against account debtors and other Persons obligated on Collateral
directly or through the use of collection agencies and other collection specialists; (e) to
advertise dispositions of Collateral through publications or media of general circulation, whether
or not the Collateral is of a specialized nature; (f) to contact other Persons, whether or not in
the same business as any Grantor, for expressions of interest in acquiring all or any portion of
the Collateral; (g) to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized nature; (h) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types included in the
Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of
assets; (i) to dispose of assets in wholesale rather than retail markets; (j) to disclaim
disposition warranties; (k) to purchase insurance or credit enhancements to insure the Secured
Party against risks of loss, collection or disposition of Collateral or to provide to the Secured
Party a guaranteed return from the collection or disposition of Collateral; or (l) to the extent
deemed appropriate by the Secured Party, to obtain the services of brokers, investment bankers,
consultants and other professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. Each Grantor acknowledges that the purpose of this Section 13 is to
provide non-exhaustive indications of what actions or omissions by the Secured Party would fulfill
the Secured Party’s duties under the NYUCC or any other relevant jurisdiction in the Secured
Party’s exercise of remedies against the Collateral and that other actions or omissions by the
Secured Party shall



21









 







not be deemed to fail to fulfill such duties solely on account of not being indicated in this
Section 13. Without limiting the foregoing, nothing contained in this Section 13
shall be construed to grant any rights to any Grantor or to impose any duties on the Secured Party
that would not have been granted or imposed by this Security Agreement or by Applicable Law in the
absence of this Section 13.



     SECTION 14. SURETYSHIP WAIVERS BY EACH GRANTOR.



               (a) All rights of the Secured Party hereunder and the Security Interest and all obligations of
the Grantors hereunder shall be absolute and unconditional irrespective of (i) any lack of validity
or enforceability of the Credit Agreement, any other Related Document, any agreement with respect
to any of the Obligations or any other agreement or instrument relating to any of the foregoing,
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Related Document or any other agreement or instrument, (iii) any
exchange, release or non-perfection of any Lien on other Collateral, (iv) any release, amendment or
waiver of, or consent under, or departure from, or any acceptance of partial payment on and/or
settlement, compromise or adjustment of, any Obligation or of any guarantee, securing or
guaranteeing all or any of the Obligations (other than the indefeasible payment and performance in
full in cash of the Obligations, but subject to Section 18), or (v) any other circumstance
that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect
of the Obligations or this Security Agreement (other than the indefeasible payment and performance
in full in cash of the Obligations, but subject to Section 18)).



               (b) To the maximum extent permitted by applicable law, each Grantor waives demand, notice,
protest, notice of acceptance of this Security Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and all other demands and
notices of any description. The Secured Party shall have no duty as to the collection or protection
of the Collateral or any income thereon, nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights pertaining thereto beyond the safe custody
thereof as set forth in Section 8.02. Each Grantor further waives any and all other
suretyship defenses.



     SECTION 15. MARSHALLING. The Secured Party shall not be required to marshal any present or
future collateral security (including but not limited to this Security Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to
such collateral security or other assurances of payment in any particular order, and all of its
rights hereunder and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights and remedies, however existing or arising. To the
extent that it lawfully may, each Grantor hereby agrees that it shall not invoke any law relating
to the marshalling of collateral which might cause delay in or impede the enforcement of the
Secured Party’s rights under this Security Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the Obligations is outstanding or by which
any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that
it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.



     SECTION 16. PROCEEDS OF DISPOSITIONS; EXPENSES. After deducting all expenses payable by the
Grantors, including pursuant to Section 20.10(a), the residue of any proceeds of collection
or sale or other disposition of Collateral shall, to the extent actually received in cash, be
applied to the payment of the remaining Obligations in such order or preference as is provided in
the Credit Agreement, proper allowance and provision being made for any Obligations not then due or
held as additional Collateral. Upon the final payment and satisfaction in full in cash of all of
the Obligations and the termination of all commitments under the Credit Agreement and after making
any payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the NYUCC, any excess shall be
returned to the Grantors, and



22









 







in any event each Grantor shall remain liable, jointly and severally, for any deficiency
in the payment of the Obligations.



     SECTION 17. OVERDUE AMOUNTS. Until paid, all amounts due and payable by each Grantor hereunder
shall be a debt secured by the Collateral and shall bear, whether before or after judgment,
interest at the rate of interest set forth in the Credit Agreement.



     SECTION 18. REINSTATEMENT. The obligations of each Grantor pursuant to this Security Agreement
shall continue to be effective or automatically be reinstated, as the case may be, if at any time
any payment, or part thereof, of any of the Obligations is rescinded or otherwise must be restored
or returned by the Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Grantor or any other obligor or otherwise, all as though such payment had not
been made.



     SECTION 19. LIMITATIONS. All rights, remedies and powers provided in this Security Agreement
may be exercised only to the extent that the exercise thereof does not violate any applicable
provision of law. All of the provisions of this Security Agreement are intended to be subject to
all applicable mandatory provisions of law that may be controlling, and to be limited to the extent
necessary so that they shall not render this Security Agreement invalid, unenforceable, in whole or
in part, or not entitled to be recorded, registered or filed under the provisions of any applicable
law.



     SECTION 20. MISCELLANEOUS.



          20.01. Notices. Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or whenever any of the
parties desires to give and serve upon any other party any communication with respect to this
Security Agreement (including any notice required under Section 12.01), each such notice,
demand, request, consent, approval, declaration or other communication shall be in writing and
shall be given in the manner and to the address, and deemed received, as provided for in Section
10.02 of the Credit Agreement. Notwithstanding the foregoing, notices and other communications to
the Secured Party shall not be effective until received by the Secured Party. Delivery by
telecopier of an executed counterpart of any signature page, amendment or any other document or
notice delivered hereunder or waiver of any provision of this Security Agreement, Schedule,
Perfection Certificate or Perfection Supplement shall be effective as delivery of an original
executed counterpart thereof.




          20.02. GOVERNING LAW; CONSENT TO JURISDICTION. (a) THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH GRANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING
IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS SECURITY AGREEMENT OR THE OTHER RELATED DOCUMENTS, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED




23









 







BY LAW. NOTHING IN THIS
SECURITY AGREEMENT SHALL AFFECT ANY RIGHT THAT THE SECURED PARTY OR ANY LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR THE OTHER RELATED
DOCUMENTS AGAINST ANY GRANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.




               (a) Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Security Agreement or
the other Related Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.



               (b) Each party to this Security Agreement irrevocably consents to service of process in the
manner provided for notices in Section 20.01. Nothing in this Security Agreement will
affect the right of any party to this Security Agreement to serve process in any other manner
permitted by law.



          20.03. WAIVER OF JURY TRIAL, ETC. EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY LITIGATION OR DISPUTE DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. EXCEPT AS PROHIBITED BY
LAW, EACH GRANTOR WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION OR
DISPUTE REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER RELATED DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.03.




          20.04. Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which when taken together shall
constitute but one contract (subject to Section 20.11), and shall become effective as
provided in Section 20.11. Delivery of an executed signature page to this Security
Agreement by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.




          20.05. Headings. The headings of each section of this Security Agreement and the Table
of Contents are for convenience only and are not to affect the construction of, or be taken into
consideration in interpreting this Security Agreement.




          20.06. Successors and Assigns. Whenever in this Security Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of any Grantor or the Secured
Party that are contained in this Security Agreement shall bind and inure to the benefit of their
respective successors and assigns.





24











 





          20.07. No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Security Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Security Agreement.




          20.08. Severability. In the event any one or more of the provisions contained in this
Security Agreement should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a particular provision in
a particular jurisdiction shall not in and of itself affect the validity of such provision in any
other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.




          20.09. Survival of Agreement. All covenants, agreements, representations and
warranties made by any Grantor herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Security Agreement shall be considered to have
been relied upon by the Secured Party and shall survive the execution and delivery of the Related
Documents and the advance of all extensions of credit contemplated thereby, regardless of any
investigation made by the Lenders or on their behalf, and shall continue in full force and effect
until this Security Agreement shall terminate (or thereafter to the extent provided herein or
therein).




          20.10. Administrative Agent’s Fees and Expenses; Indemnification. (a) Each Grantor
jointly and severally agrees to pay upon demand to the Secured Party the amount of any and all
reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel
and of any experts or agents, which the Secured Party may incur in the manner and to the extent as
set forth in the Credit Agreement.




               (a) Without limitation of its indemnification obligations under the Credit Agreement and the
other Related Documents, each Grantor jointly and severally agrees to indemnify the Secured Party
and its officers, directors, employees, agents and advisors (each, an “Indemnitee”)
against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other charges of counsel, incurred
by or asserted against any of them arising out of, in any way connected with, or as a result of,
the execution, delivery or performance of this Security Agreement or any claim, litigation,
investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related expenses are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or any of its Affiliates.



               (b) Any such amounts payable as provided hereunder shall be additional Obligations secured
hereby and by the other Security Documents. The provisions of this Section 20.10 shall
remain operative and in full force and effect regardless of the termination of this Security
Agreement or any other Related Document, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of
this Security Agreement or any other Related Document, or any investigation made by or on behalf of
the Secured Party or any Secured Party. All amounts due under this Section 20.10 shall be
payable on written demand therefor.



25









 





          20.11. Binding Effect; Several Agreement. This Security Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have
been delivered to the Secured Party and a counterpart hereof shall have been executed on behalf of
the Secured Party, and thereafter shall be binding upon such Grantor and the Secured Party, and
shall inure to the benefit of such Grantor, the Secured Party and their respective successors and
assigns, except that no Grantor shall have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such assignment or
transfer shall be void) except as expressly contemplated by this Security Agreement or the Credit
Agreement. This Security Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor
without the approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.




          20.12. Waivers; Amendment. (a) No failure or delay on the part of the Secured Party
in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy or any abandonment or discontinuance
of steps to enforce any such right, power or remedy, preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All rights, powers and remedies hereunder and
under the other Related Documents are cumulative and are not exclusive of any other rights, powers
and remedies provided by applicable law or otherwise. No waiver of any provision of this Security
Agreement or any other Related Document or consent to any departure by any Grantor therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other
Grantor to any other or further notice or demand in similar or other circumstances.




               (a) Neither this Security Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into by the Secured Party
and the Grantor or Grantors with respect to which such waiver, amendment or modification is to
apply, subject to any consent required in accordance with Section 10.01 of the Credit Agreement.



          20.13. Termination. Notwithstanding any provision to the contrary under Sections
9-207, 9-208 or 9-209 of the NYUCC, this Security Agreement and the Security Interest shall
terminate when all the Obligations have been indefeasibly paid in cash in full, at which time the
Secured Party shall execute and deliver to the Grantors or the Grantors’ designee, at the Grantors’
expense, all UCC termination statements and similar documents which the Grantors shall reasonably
request from time to time to evidence such termination. Any execution and delivery of termination
statements or documents pursuant to this Section 20.13(a) shall be without recourse to or
warranty by the Secured Party.




          20.14. Joint and Several Liability. All agreements and obligations of the Grantors
shall be joint and several.




[Remainder of the page intentionally left blank]




26









 





     IN WITNESS WHEREOF, intending to be legally bound, each Grantor has caused this Security
Agreement to be duly executed as of the date first above written.



	 	 	 	 	 
	 	GRANTORS:



LUMINENT MORTGAGE CAPITAL, INC.

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	MERCURY MORTGAGE FINANCE STATUTORY TRUST

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	President 	 
	 
	 	LUMINENT CAPITAL MANAGEMENT, INC.

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	President and Treasurer 	 
	 
	 	PANTHEON HOLDING COMPANY, INC.

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	Chief Financial Officer and
Corporate Secretary 	 
	 
	 	PROSERPINE LLC

 	 
	 	By:  	/s/ S. Trezevant Moore, Jr.
 	 
	 	 	Name:  	S. Trezevant Moore, Jr. 	 
	 	 	Title:  	President 	 
	 
	 	MAIA MORTGAGE FINANCE STATUTORY TRUST

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	President 	 



SIGNATURE PAGE FOR AMENDED AND 

RESTATED SECURITY AND PLEDGE AGREEMENT


 










 






	 	 	 	 	 



	 	 	 	 	 
	 	SATURN PORTFOLIO MANAGEMENT, INC.

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	President and Treasurer 	 
	 
	 	MINERVA MORTGAGE FINANCE CORPORATION

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	President and Chief Financial
Officer 	 
	 
	 	MINERVA CDO DELAWARE SPV LLC

 	 
	 	By:  	/s/ Christopher J. Zyda
 	 
	 	 	Name:  	Christopher J. Zyda 	 
	 	 	Title:  	Treasurer and Assistant Secretary 	 



SIGNATURE PAGE FOR AMENDED AND 

RESTATED SECURITY AND PLEDGE AGREEMENT


 









 






	 	 	 	 	 



	 	 	 	 	 
	 	ACCEPTED:



ARCO CAPITAL CORPORATION LTD.,

as Secured Party

 	 
	 	By:  	/s/ Jay Johnston
 	 
	 	 	Name:  	Jay Johnston 	 
	 	 	Title:  	Chief Executive Officer 	 
	 



SIGNATURE PAGE FOR AMENDED AND 

RESTATED SECURITY AND PLEDGE AGREEMENT


 









 








SCHEDULE I




SUBSIDIARY GUARANTORS IN EXISTENCE ON THE CLOSING DATE




Mercury Mortgage Finance Statutory Trust




Luminent Capital Management




Pantheon Holding Company, Inc.




Proserpine LLC




Maia Mortgage Finance Statutory Trust




Saturn Portfolio Management




Minerva Mortgage Finance Corporation




Minerva CDO Delaware SPV LLC





 









 








SCHEDULE II




PLEDGED SECURITIES




PART A




Pledged Notes




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Original	 	Current	 	 	 	 	 	Instrument
	 	 	 	 	Date of	 	Principal	 	Principal	 	Maturity	 	No.
	Name of Issuer	 	Issuance	 	Amount	 	Balance	 	Date	 	(if any).





PART B




Pledged Stock




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Nature	 	Number of	 	Is	 	Certificate
	Name of	 	Type of	 	Jurisdiction	 	of	 	Shares or	 	Interest	 	No(s).
	Issuer	 	Entity	 	of Issuer	 	Interest	 	other Interests	 	Certificated?	 	(if any).





PART C




Pledged Stock




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Nature	 	Number of	 	Is	 	Certificate
	Name of	 	Type of	 	Jurisdiction	 	of	 	Shares or	 	Interest	 	No(s).
	Issuer	 	Entity	 	of Issuer	 	Interest	 	other Interests	 	Certificated?	 	(if any).