**Exhibit 10.3**

 

**AMENDED ANDRESTATED SECURITY AGREEMENT**

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THIS AMENDED AND RESTATED SECURITY AGREEMENT (this “**Security Agreement**”), dated as ofFebruary 25, 2004, is by and between **CHEROKEEINTERNATIONAL CORPORATION**, a Delaware corporation and successor bymerger to Cherokee International, LLC (“**Grantor**”),and **GENERAL ELECTRIC CAPITAL CORPORATION**,a Delaware corporation, in its capacity as Agent for Lenders.

 

**W I T N E S S E TH:**

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WHEREAS, pursuant to that certain Amended and RestatedCredit Agreement dated as of the date hereof (including all annexes, exhibitsand schedules thereto, as from time to time amended, restated, supplemented orotherwise modified, the “**Credit Agreement**”)by and among Grantor, Agent and Lenders, the Lenders have agreed to make Loansand to issue Letters of Credit on behalf of Grantor;

 

WHEREAS, the Credit Agreement amends and restates that certain Amendedand Restated Credit Agreement dated November 27, 2002 (as the samehas been amended, supplemented or otherwise modified from time to time, the “**Original Credit Agreement**”) by and among Grantor, HellerFinancial, Inc., as agent thereunder (the ”**OriginalAgent**”), and the financial institutions party thereto as lenders(the ”**Original Lenders**”) which OriginalCredit Agreement in turn amended and restated that certain Credit Agreementdated April 30, 1999, in each case without effecting a novation of theindebtedness and obligations existing thereunder;

 

WHEREAS, the Obligations of Grantor under the Original Credit Agreementare secured by Liens granted by Grantor pursuant to that certain SecurityAgreement dated as of April 30, 1999, as amended and restated by thatcertain Amended and Restated Security Agreement dated as of November 27,2002 (the ”**Original SecurityAgreement**”) in favor of the Original Agent;

 

WHEREAS, Original Agent has resigned as agent underthe Original Credit Agreement and the Original Lenders have assigned, andGeneral Electric Capital Corporation has accepted and assumed, all of suchOriginal Lenders’ rights, title and interest thereunder (including all Loansand all commitments) and has appointed itself as Agent as aforesaid; and

 

WHEREAS, Grantor has agreed to amend and restate, inits entirety and without constituting a novation thereof, the Original SecurityAgreement in order to ensure continuing security for the payment andperformance of its Obligations under and as defined in the Credit Agreement.

 

NOW, THEREFORE, in consideration of the premises andmutual covenants herein contained and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree to amend and restate the Original Security Agreementin its entirety as follows, without effecting a novation thereof or otherwisedisturbing the Liens created thereunder:

 

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# 1.                                       DefinedTerms.

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## (a)                                  Allcapitalized terms used but not otherwise defined herein have the meanings givento them in the Credit Agreement or in Annex A thereto.  All other terms contained in this SecurityAgreement, unless the context indicates otherwise, have the meanings providedfor by the Code to the extent the same are used or defined therein.

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## (b)                                 “**Uniform Commercial Code jurisdiction**” meansany jurisdiction that has adopted all or substantially all of Article 9 ascontained in the 2000 Official Text of the Uniform Commercial Code, asrecommended by the National Conference of Commissioners on Uniform State Lawsand the American Law Institute, together with any subsequent amendments ormodifications to the Official Text.

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# 2.                                       Reaffirmationand Grant of Lien.

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## (a)                                  Tosecure the payment, performance and observance of all of the Obligations andall renewals, extensions, restructurings and refinancings thereof, Grantorhereby confirms and reaffirms the grant of the security interests heretoforegranted by it under the Original Security Agreement, agrees that such Lienscontinue to secure the Obligations under the Credit Agreement and, for theavoidance of doubt but without in any manner limiting, qualifying, prejudicingor otherwise affecting the previous grant by Grantor under the OriginalSecurity Agreement as aforesaid, hereby grants a continuing security interestin, right of setoff against and an assignment to Agent of all Grantor’spersonal property and rights to personal property, and other assets, in eachcase whether now owned by or owing to, or hereafter acquired by or arising infavor of Grantor (including under any trade names, styles or derivationsthereof), and whether owned or consigned by or to, or leased from or to, Grantor,and regardless of where located (all of which being hereinaftercollectively referred to as the “**Collateral**”),including:

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### (i)                                     allAccounts;

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### (ii)                                  allChattel Paper;

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### (iii)                               allDocuments;

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### (iv)                              allGeneral Intangibles (including payment intangibles and Software);

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### (v)                                 allGoods (including Inventory, Equipment and Fixtures);

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### (vi)                              allInstruments;

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### (vii)                           allInvestment Property;

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### (viii)                        allDeposit Accounts (as such term is defined in the Code) of Grantor,including Blocked Accounts (as defined in Section 6 below),Concentration Accounts (as defined in Section 6 below),Disbursement Accounts, and all other bank accounts and all deposits therein;

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### (ix)                                allmoney, cash or cash equivalents of Grantor;

 

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### (x)                                   allSupporting Obligations and Letter-of-Credit Rights of Grantor; and

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### (xi)                                tothe extent not otherwise included, all Proceeds, tort claims, insurance claimsand other rights to payment not otherwise included in the foregoing andproducts of the foregoing and all accessions to, substitutions and replacementsfor, and rents and profits of, each of the foregoing.

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## (b)                                 Inaddition, to secure the prompt and complete payment, performance and observanceof the Obligations and in order to induce Agent and Lenders as aforesaid,Grantor has granted to Agent and, for the avoidance of doubt but withoutlimiting or qualifying the previous grant by Grantor under the OriginalSecurity Agreement, does hereby grant and confirm and reaffirm its grant underthe Original Security Agreement to Agent, for the benefit of Agent and theLenders, a right of setoff against the property of Grantor held by Agent or anyLender, consisting of property described above in Section 2(a) nowor hereafter in the possession or custody of or in transit to Agent or anyLender, for any purpose, including safekeeping, collection or pledge, for theaccount of Grantor, or as to which Grantor may have any right or power.

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## (c)                                  Notwithstandinganything herein to the contrary, in no event shall the security interestgranted hereunder attach to (i) any lease, license, contract, property rightsor agreement to which Grantor is a party or any of its rights or intereststhereunder if and for so long as the grant of such security interest shallconstitute or result in (A) the abandonment, invalidation or unenforceabilityof any right, title or interest of Grantor therein or (B) in a breach ortermination pursuant to the terms of, or a default under, any such lease,license, contract, property rights or agreement (other than to the extent anysuch term would be rendered ineffective by the UCC or any other applicable law(including the Bankruptcy Code) or principles of equity), provided, however,that such security interest shall attach immediately at such time as thecondition causing such abandonment, invalidation or unenforceability shall beremedied and, to the extent severable, shall attach immediately to any portionof such lease, license contract, property right or agreement that does notresult in any of the consequences specified in clauses (A) or (B); or (ii) anyof the outstanding capital stock of an entity formed in a jurisdiction outsideof the United States (each such entity, a **“ForeignSubsidiary”**) in excess of 65% of the voting power of all classes ofcapital stock of such Foreign Subsidiary entitled to vote, providedthat, upon an amendment to the IRC to allow a pledge of a greater percentage ofthe voting power of capital stock in a Foreign Subsidiary without adverse taxconsequences to Grantor, as reasonably determined by Grantor with respect toFederal income taxes, the Collateral shall include, and the security interestgranted by the Grantor shall attach to, such greater percentage of capitalstock of each Foreign Subsidiary.

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## (d)                                 Notwithstandinganything herein to the contrary, so long as no Event of Default has occurredand is continuing, Grantor shall have the exclusive, non-transferable right andlicense to use the Intellectual Property and the exclusive right to grant toother Persons licenses and sublicenses with respect to the IntellectualProperty.

 

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# 3.                                       Agent’sand Lenders’ Rights; Limitations on Agent’s and Lenders’ Obligations.

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## (a)                                  Itis expressly agreed by Grantor that, anything herein or in any other LoanDocument to the contrary notwithstanding, Grantor shall remain liable undereach of its Contractual Obligations, including all Licenses, to observe andperform all the conditions and obligations to be observed and performed by it thereunder.  Neither Agent nor any Lender shall have anyobligation or liability under any Contractual Obligation by reason of orarising out of this Security Agreement or any other Loan Document or thegranting herein of a Lien thereon or the receipt by Agent or any Lender of anypayment relating to any Contractual Obligation pursuant hereto.  Neither Agent nor any Lender shall berequired or obligated in any manner to perform or fulfill any of theobligations of Grantor under or pursuant to any Contractual Obligation, or tomake any payment, or to make any inquiry as to the nature or the sufficiency ofany payment received by it or the sufficiency of any performance by any partyunder any Contractual Obligation, or to present or file any claims, or to take anyaction to collect or enforce any performance or the payment of any amountswhich may have been assigned to it or to which it may be entitled at any timeor times.  Neither Agent nor any Lendershall have any liability in contract or tort for Grantor’s act or omissions.

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## (b)                                 Atany time after an Event of Default has occurred and is continuing with one (1)Business Day’s prior notice to Grantor, Agent may (i) notify Account Debtorsand other Persons obligated on any of the Collateral that Agent has a securityinterest therein, and that payments shall be made directly to Agent, for itselfand the benefit of Lenders.  Upon therequest of Agent, Grantor shall so notify Account Debtors and other Personsobligated on Collateral.  Once any suchnotice has been given to any Account Debtor or other Person obligated onCollateral, Grantor shall not give any contrary instructions to such AccountDebtor or other Person without Agent’s prior written consent, (ii) exercise therights of Grantor with respect to the obligation of the Account Debtor to makepayment or otherwise render performance to Grantor and with respect to anyproperty that secures the obligations of the Account Debtor or any other Personobligated on the Collateral; and (iii) adjust, settle or compromise the amountor payment of such Accounts.  After theoccurrence and during the continuance of an Event of Default (i) all amountsand Proceeds received by Grantor with respect to the Accounts shall be receivedin trust for the benefit of Agent (on behalf of Lenders), shall besegregated from other funds of Grantor and shall be forthwith paid over toAgent in the same form as so received (with any necessary endorsement) to beheld in the Deposit Account pursuant to Section 6 or appliedpursuant to the relevant provisions of the Credit Agreement.  Grantor shall not adjust, settle orcompromise the amount or payment of any Account, or release wholly or partlyany customer or obligor thereof, or allow any credit or discount thereon (otherthan adjustments, credits, discounts, and other non-material compromises, ineach case, in the ordinary course of business and in amounts which are notmaterial to Grantor) without the prior consent of Agent.

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## (c)                                  Agentmay at any time, in Agent’s reasonable discretion, in Agent’s own name, in thename of a nominee of Agent or in the name of Grantor communicate (by mail,telephone, facsimile or otherwise) with Account Debtors, parties to ContractualObligations and obligors in respect of Instruments to verify with such Persons,to Agent’s satisfaction, the existence, amount, terms of, and any other matterrelating to, Accounts, Instruments, Chattel Paper and/or paymentintangibles.  If a Default or Event ofDefault shall have occurred and be continuing, Grantor, at its own expense,shall cause the independent certified public accountants then engaged by

 

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Grantor to prepare and deliver to Agent and each Lender at any time andfrom time to time promptly upon Agent’s request the following reports withrespect to Grantor: (i) a reconciliation of all Accounts; (ii) an aging of allAccounts; (iii) trial balances; and (iv) a test verification of such Accountsas Agent may request.  Grantor, at itsown expense, shall deliver to Agent the results of each physical verification,if any, which Grantor may in its discretion have made, or caused any otherPerson to have made on its behalf, of all or any portion of its Inventory.

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# 4.                                       Representationsand Warranties.  Grantor representsand warrants that:

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## (a)                                  Grantorhas rights in and the power to transfer each item of the Collateral upon whichit purports to grant a Lien hereunder free and clear of any and all Liens otherthan Permitted Encumbrances.

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## (b)                                 Noeffective security agreement, financing statement, equivalent security or Lieninstrument or continuation statement covering all or any part of the Collateralis on file or of record in any public office, except such as may have beenfiled (i) by Grantor in favor of Agent pursuant to this Security Agreement orthe other Loan Documents, and (ii)  inconnection with any other Permitted Encumbrances.

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## (c)                                  ThisSecurity Agreement is effective to create a valid and continuing Lien on and,upon the filing of the appropriate financing statements listed on Schedule Ihereto, a perfected Lien in favor of Agent, for itself and the benefit ofLenders, on the Collateral with respect to which a Lien may be perfected byfiling pursuant to the Code.  Such Lienis prior to all other Liens, except Permitted Encumbrances that would be priorto Liens in favor of Agent for the benefit of Agent and Lenders as a matter oflaw, and is enforceable as such as against any and all creditors of andpurchasers from Grantor (other than purchasers and lessees of Inventory in theordinary course of business and non-exclusive licensees of General Intangiblesin the ordinary course of business). Except as set forth in Sections 4(d) and 4(h) hereof, all action byGrantor necessary or desirable to protect and perfect such Lien on each item ofthe Collateral has been duly taken.  Noauthorization, approval or consent is required to be obtained from anyGovernmental Authority or other Person for the grant of the security interestherein, the perfection thereof or the exercise by Agent of its rights andremedies hereunder.

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## (d)                                 Schedule IIhereto lists all Stock, material Instruments, Documents, Letter of CreditRights and Chattel Paper in which Grantor has an interest as of the datehereof.  All action by Grantor necessaryor desirable to protect and perfect the Lien of Agent on each item set forth onSchedule II (including the delivery of all originals thereof toAgent and the legending of all material Chattel Paper as required by Section 5(b)hereof) has been duly taken.  The Lienof Agent, for the benefit of Agent and Lenders, on the Collateral listed on Schedule IIhereto is prior to all other Liens, except Permitted Encumbrances that would beprior to the Liens in favor of Agent as a matter of law, and is enforceable assuch against any and all creditors of and purchasers from Grantor.

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## (e)                                  Grantor’sname as it appears in official filings in the state of its incorporation orother organization, all prior names of Grantor, as they appeared from time totime in official filings in the state of its incorporation or otherorganization, the type of entity of Grantor (including corporation,partnership, limited partnership or limited liability company), organizational

 

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identification number issued by Grantor’s state of incorporation ororganization or a statement that no such number has been issued, Grantor’sstate of organization or incorporation, the location of Grantor’s chiefexecutive office, principal place of business, other offices, all warehouses,consignees and processors with whom Inventory is stored or located and otherpremises where Collateral is stored or located, and the locations of its booksand records concerning the Collateral are set forth on Schedule IIIhereto.  Schedule III heretoalso sets forth the name as it appears in official filings in the state of itsincorporation or other organization of any Person from whom Grantor hasacquired assets during the past five (5) years, other than assets acquired inthe ordinary course of Grantor’s business. Grantor has only one state of incorporation or organization.

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## (f)                                    Withrespect to the Accounts, except as specifically disclosed on the most recentBorrowing Base Certificate or other collateral report delivered to Agent (i) theyrepresent bona fide sales or leases of Inventory or rendering of services toAccount Debtors in the ordinary course of Grantor’s business and are notevidenced by a judgment, Instrument or Chattel Paper; (ii) there are nosetoffs, claims or disputes existing or asserted with respect thereto andGrantor has not made any agreement with any Account Debtor for any extension oftime for the payment thereof, any compromise or settlement for less than thefull amount thereof, any release of any Account Debtor from liability therefor,or any deduction therefrom except a discount or allowance allowed by Grantor inthe ordinary course of its business for prompt payment and disclosed to Agent,if material; (iii) to Grantor’s knowledge, there are no facts, events oroccurrences which in any way impair the validity or enforceability thereof orcould reasonably be expected to reduce the amount payable thereunder as shownon Grantor’s books and records and any invoices, statements and Borrowing BaseCertificate, subject to Section 6.1(d) of the Credit Agreement or othercollateral report delivered to Agent and Lenders with respect thereto; (iv)Grantor has not received any notice of proceedings or actions which arethreatened or pending against any Account Debtor which might result in anyadverse change in such Account Debtor’s financial condition; (v) Grantor has noknowledge that any Account Debtor is unable generally to pay its debts as theybecome due; (vi) they constitute the legally valid and binding obligation of theapplicable Account Debtors; (vii) the amounts shown on all invoices,statements, Borrowing Base Certificates and collateral reports which may bedelivered to Agent with respect thereto are actually and absolutely owing toGrantor as indicated thereon and are not in any way contingent; (viii) nopayments have been or shall be made thereon except payments immediatelydelivered to the Blocked Accounts (as defined in Section 6below) or Agent; and (ix) to Grantor’s knowledge, all Account Debtors have thecapacity to contract; provided, that with respect to clauses (ii)through (ix) hereof, subject to the parenthetical contained inSection 6.1(d) of the Credit Agreement.

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## (g)                                 Withrespect to any Inventory scheduled or listed on the most recent Borrowing BaseCertificate or other collateral report delivered to Agent pursuant to the termsof this Security Agreement or the Credit Agreement (i) except for the sale ofInventory in the ordinary course of business and dispositions expresslypermitted in the Credit Agreement, any material portion of such Inventory islocated at one of the locations set forth on Schedule III hereto,(ii) if Inventory with an aggregate book value in excess of $500,000 is now, orshall at any time or times hereafter be stored at such other location, Grantorwill execute and deliver such instruments, documents and notices (including,but not limited to landlord waivers, bailee or warehouseman letters) and takesuch actions as Agent deems reasonably necessary to create,

 

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perfect and protect the security interests in such Inventory, (iii)Grantor has good and marketable title to such Inventory and such Inventory isnot subject to any Lien or security interest or document whatsoever except for theLien granted to Agent, for the benefit of Agent and Lenders, and except forPermitted Encumbrances, and (iv) except as specifically disclosed in the mostrecent Borrowing Base Certificate or other collateral report delivered toAgent, such Inventory is Eligible Inventory of good and merchantable quality,free from any material defects, (v) such Inventory is not subject to anylicensing, patent, royalty, trademark, trade name or copyright agreements withany third parties which would require any consent of any third party upon saleor other disposition of that Inventory or the payment of any monies to anythird party upon such sale or other disposition.

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## (h)                                 Grantordoes not have any ownership interest in, or title to, any Patent, Trademark orCopyright except as set forth in Schedule 5.6 of the CreditAgreement.  This Security Agreement iseffective to create a valid and continuing Lien on and, upon filing of theCopyright Security Agreements with the United States Copyright Office andfiling of the Patent Security Agreements and the Trademark Security Agreementswith the United States Patent and Trademark Office, perfected Liens in favor ofAgent on Grantor’s federally registered Patents, Trademarks  and Copyrights and such perfected Liens areenforceable as such as against any and all creditors of and purchasers fromGrantor.  Upon filing of the CopyrightSecurity Agreements with the United States Copyright Office and filing of thePatent Security Agreements and the Trademark Security Agreements with the UnitedStates Patent and Trademark Office and the filing of appropriate financingstatements listed on Schedule I hereto, all action necessary ordesirable to protect and perfect Agent’s Lien on Grantor’s federally registeredPatents, Trademarks or Copyrights shall have been duly taken.

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## (i)                                     Allmotor vehicles (other than motor vehicles not having a market value in excessof $50,000 in the aggregate) owned by Grantor as of the date hereof are listedon Schedule IV hereto, by model, model year and vehicle identificationnumber (“**VIN**”).  If reasonably requested by Agent (other thanwith respect to the vehicle listed on Schedule IV as of the datehereof), Grantor shall deliver to Agent motor vehicle title certificates forall motor vehicles having a market value in excess of $50,000 in the aggregatefrom time to time owned by it and shall cause those title certificates to befiled (with Agent’s Lien noted thereon) in the appropriate state motor vehiclefiling office.

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## (j)                                     Except as set forth on Schedule IIhereto, Grantor has no interest in any Commercial Tort Claims.

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# 5.                                       Covenants.  Without limiting Grantor’s covenants andagreements contained in the Credit Agreement and the other Loan Documents,Grantor covenants and agrees with Agent, for the benefit of Agent and Lenders,that from and after the date of this Security Agreement and until theTermination Date:

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## (a)                                  FurtherAssurances; Pledge of Instruments; Chattel Paper.

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### (i)                                     Atany time and from time to time, upon the written request of Agent and at thesole expense of Grantor, Grantor shall promptly and duly execute and deliverany and all such further instruments and documents and take such furtheractions as Agent

 

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### may reasonablydeem desirable to obtain the full benefits of this Security Agreement and ofthe rights and powers herein granted, including (A) using its best effortsto secure all consents and approvals necessary or appropriate for theassignment to or for the benefit of Agent to enforce the security interestsgranted hereunder; and (B) filing any financing or continuation statementsunder the Code with respect to the Liens granted hereunder or under any otherLoan Document.

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### (ii)                                  UnlessAgent shall otherwise consent in writing (which consent may be revoked),Grantor shall deliver to Agent all Collateral consisting of negotiableDocuments, certificated Stock, Chattel Paper and Instruments having a value inexcess of $250,000, individually or in the aggregate, (in each case,accompanied by stock powers, allonges or other instruments of transfer executedin blank) promptly after such Credit Party receives the same.  Upon acquiring any negotiable Document,certificated Stock, Chattel Paper or Instrument, in each such case having avalue in excess of $250,000, individually or in the aggregate, Grantor willprovide prompt written notice thereof to Agent.

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### (iii)                               Grantorshall, to the extent required by the Credit Agreement, obtain waivers orsubordinations of Liens from landlords, bailees and mortgagees, and Grantorshall in all instances obtain signed acknowledgements of Agent’s Liens frombailees having possession of Grantor’s Goods that they hold for the benefit ofAgent.

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### (iv)                              Grantorshall obtain authenticated letters of control from each issuer of uncertificatedsecurities, securities intermediary, or commodities intermediary issuing orholding any financial assets or commodities to or for Grantor.

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### (v)                                 Asrequired by this Security Agreement, Grantor shall obtain a blocked account,lockbox or similar agreement with each bank or financial institution holding aDeposit Account for Grantor.

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### (vi)                              IfGrantor is or becomes the beneficiary of a letter of credit, Grantor shallpromptly, and in any event promptly after becoming a beneficiary, notify Agentthereof and enter into a tri-party agreement with Agent and the issuer and/orconfirmation bank with respect to Letter-of-Credit Rights assigning suchLetter-of-Credit Rights to Agent and directing all payments thereunder to aDeposit Account subject to a Bank Agency and Control Agreement (as definedin Section 6 below), all in form and substance reasonablysatisfactory to Agent.  Grantor willtake any and all actions necessary (or reasonably required or requested byAgent), from time to time reasonably requested by Agent, to cause Agent toobtain exclusive Control of any Letter-of-Credit Rights owned by Grantor in amanner reasonably acceptable to Agent.

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### (vii)                           Grantorshall take all steps necessary to grant Agent control of all electronic ChattelPaper in accordance with the Code and all “transferable records” as defined ineach of the Uniform Electronic Transactions Act and the Electronic Signaturesin Global and National Commerce Act.

 

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### (viii)                        Grantorhereby irrevocably authorizes Agent at any time and from time to time to filein any filing office in any Uniform Commercial Code jurisdiction any initialfinancing statements and amendments thereto that (a) indicate the Collateral(i) as “all assets” of Grantor or words of similar effect, regardless ofwhether any particular asset comprised in the Collateral falls within the scopeof Article 9 of the Code or such jurisdiction, or (ii) as being of anequal or lesser scope or with greater detail, and (b) contain any otherinformation required by part 5 of Article 9 of the Code for thesufficiency or filing office acceptance of any financing statement oramendment, including (i) whether Grantor is an organization, the type oforganization and any organization identification number issued to Grantor, and(ii) in the case of a financing statement filed as a fixture filing orindicating Collateral as as-extracted collateral or timber to be cut, asufficient description of real property to which the Collateral relates.  Grantor agrees to furnish any suchinformation to the Agent promptly upon request.  Grantor also ratifies its authorization for the Agent to havefiled in any Uniform Commercial Code jurisdiction any initial financing statementsor amendments thereto if filed prior to the date hereof.

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### (ix)                                Grantorshall notify Agent promptly upon Grantor becoming aware that it holds anycommercial tort claim the value of which is in excess of $100,000.  With respect to any new commercial tortclaims, Grantor will execute and deliver such documents as Agent deemsreasonably necessary to create, perfect and protect Agent’s security interestin such commercial tort claim.

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## (b)                                 Maintenanceof Records.  Grantor shall keep andmaintain, at its own cost and expense, satisfactory and complete records of theCollateral, including a record of any and all payments received and any and allcredits granted with respect to the Collateral and all other dealings with theCollateral, all in reasonable detail. Grantor shall mark its books and records pertaining to the Collateral toevidence this Security Agreement and the Liens granted hereby.  If Grantor retains possession of any ChattelPaper or Instruments having a value in excess of $250,000, individually or inthe aggregate, with Agent’s consent, such Chattel Paper and Instruments shallbe marked with the following legend: “This writing and the obligations evidenced or secured hereby aresubject to the security interest of General Electric Capital Corporation, asAgent, for the benefit of Agent and certain Lenders.”

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## (c)                                  CovenantsRegarding Patent, Trademark and Copyright Collateral.

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### (i)                                     Grantorshall notify Agent promptly if it knows or has reason to know that anyapplication or registration relating to any Patent, Trademark or Copyright (nowor hereafter existing) may become abandoned or dedicated, or of any adversedetermination or development (including the institution of, or any suchdetermination or development in, any proceeding in the United States Patent andTrademark Office, the United States Copyright Office or any court) regardingGrantor’s ownership of any Patent, Trademark or Copyright, its right toregister the same, or to keep and maintain the same.

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### (ii)                                  If,before the Obligations are paid in full, Grantor acquires or becomes entitledto any new or additional ownership rights in Patents, Trademarks or federallyregistered Copyrights, or rights thereto, Grantor shall give to Agent promptwritten notice

 

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### thereof, andGrantor shall execute and deliver any and all Patent Security Agreements,Copyright Security Agreements or Trademark Security Agreements as Agent mayrequest to evidence Agent’s Lien on such Patent, Trademark or Copyright, andthe General Intangibles of Grantor relating thereto or represented thereby.

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### (iii)                               Grantorshall take all actions necessary or reasonably requested by Agent to maintainand pursue (and not abandon) each application, to obtain the relevantregistration and to maintain the registration of each of the Patents,Trademarks and Copyrights (now or hereafter existing), including the filing ofapplications for renewal, affidavits of use, affidavits of noncontestabilityand opposition and interference and cancellation proceedings, unless Grantorshall determine that such Patent, Trademark or Copyright is not material to theconduct of its business.

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### (iv)                              Inthe event that any of the Patent, Trademark or Copyright Collateral isinfringed upon, or misappropriated or diluted by a third party, Grantor shallcomply with Section 5(a)(ix) of this Security Agreement.  Grantor shall, unless it shall reasonablydetermine that such Patent, Trademark or Copyright Collateral is in no waymaterial to the conduct of its business or operations, promptly sue forinfringement, misappropriation or dilution and to recover any and all damagesfor such infringement, misappropriation or dilution, and shall take such otheractions as Agent shall deem appropriate under the circumstances to protect suchPatent, Trademark or Copyright Collateral.

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## (d)                                 Compliancewith Terms of Accounts, etc.  In allmaterial respects, Grantor will perform and comply with all obligations inrespect of the Collateral and all other agreements to which it is a party or bywhich it is bound relating to the Collateral.

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## (e)                                  Limitationon Liens on Collateral.  Grantorwill not create, permit or suffer to exist, and will defend the Collateralagainst, and take such other action as is necessary to remove, any Lien on anyof the Collateral except Permitted Encumbrances, and will defend the right,title and interest of Agent and Lenders in and to any of Grantor’s rights underthe Collateral against the claims and demands of all Persons whomsoever.

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## (f)                                    FurtherIdentification of Collateral. Grantor will furnish to Agent, from time to time upon request by Agent,statements and schedules further identifying and describing the Collateral andsuch other reports in connection with the Collateral as Agent may reasonablyrequest, all in reasonable detail. Grantor shall promptly notify Agent in writing upon acquiring anyinterest hereafter in property that is of a type where a security interest orlien must be or may be registered, recorded or filed under, or notice thereofgiven under, any federal statute or regulation.

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## (g)                                 Notices.  Grantor will advise Agent promptly, inreasonable detail, (i) of any Lien (other than Permitted Encumbrances) orclaim made or asserted against any material portion of the Collateral, and(ii) of the occurrence of any other event which could reasonably beexpected to have a Material Adverse Effect on the aggregate value of theCollateral or on the Liens created hereunder or under any other Loan Document.

 

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## (h)                                 GoodStanding Certificates.  If andwhenever reasonably requested by Agent, Grantor shall provide to Agent acertificate of good standing from its state of incorporation or organization.

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## (i)                                     Organizational/CollateralLocation Changes; No Reincorporation. Grantor will give Agent at least five (5) Business Days’ prior writtennotice of any change required to be made to Schedule III hereto, tothe extent needed to make said Schedule III up to date andaccurate.  Without limiting theprohibitions on mergers involving the Grantor contained in the CreditAgreement, Grantor shall not reincorporate or reorganize itself under the lawsof any jurisdiction other than the jurisdiction in which it is incorporated ororganized as of the date hereof without at least five (5) Business Day’s priorwritten notice to Agent and provided such action could not, in the reasonablejudgment of Agent, result in a Material Adverse Effect.

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## (j)                                     Terminations;Amendments Not Authorized.  Grantoracknowledges that it is not authorized to file any financing statement or amendmentor termination statement with respect to any financing statement filed in favorof Agent without the prior written consent of Agent and agrees that it will notdo so without the prior written consent of Agent, subject to Grantor’s rightsunder Section 9-509(d)(2) of the Code.

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## (k)                                  AuthorizedTerminations.  Following theTermination Date, Agent will promptly deliver to Grantor for filing orauthorize Grantor to prepare and file termination statements and releases inaccordance with Section 9-513(c) of the Code.

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## (l)                                     Useof Collateral.  Grantor will donothing to impair the rights of Agent in any of the Collateral.  Grantor will not use or permit anyCollateral to be used unlawfully or in violation of any provision of applicablelaw, or any insurance policy covering any of the Collateral.  Without limiting the foregoing, Grantor willnot permit the production of Inventory in violation of any provision of theFair Labor Standards Act and Grantor will not adjust, settle or compromise theamount or payment of any Account, or release wholly or partly any AccountDebtor thereof or allow any credit or discount thereon (other than credits anddiscounts in the ordinary course of business).

##  

## (m)                               FederalClaims.  Grantor shall notify Agentpromptly of any Collateral which constitutes a claim against the United Statesgovernment or any instrumentality or agent thereof, the assignment of whichclaim is restricted by federal law. Upon the request of Agent, Grantor shall take such steps as may benecessary to comply with any applicable federal assignment of claims laws orother comparable laws.

##  

## (n)                                 HotGoods.  Grantor shall not, and shallnot permit any Domestic Subsidiary to, produce any Inventory in violation ofthe Fair Labor Standards Act of 1938, as amended, or in violation of any otherapplicable federal, state or local law. Grantor shall not permit any Foreign Subsidiary to produce any Inventoryin violation of any law applicable to such Foreign Subsidiary.

##  

# 6.                                       BankAccounts; Collection of Accounts and Payments.

#  

Grantor shall enter into a bank agency and controlagreement (“**Bank Agency and Control Agreement**”),in a form reasonably acceptable to Agent, with each financial

 

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institution with which Grantor maintains from time to time any DepositAccounts.  Each Bank Agency and ControlAgreement shall provide, among other things, that (a) all items of paymentdeposited in each Deposit Account subject thereto shall be held by theapplicable financial institution as Agent or bailee-in-possession for Agent, onbehalf of itself and Lenders, (b) the financial institution executing suchagreement has no rights of offset or recoupment of any other claim against anyDeposit Account subject thereto, as the case may be, other than for payment ofits services and other charges directly related to the administration of eachsuch Deposit Account and for returned checks or other items of payment,(c) to the extent provided below, the financial institution will transferall amounts held or deposited from time to time in any such Deposit Account asAgent may so direct, and (d) the applicable financial institution will agree inwriting to comply with instructions originated by Agent directing dispositionof the funds in the Deposit Account without further consent by Grantor.  Grantor hereby grants to Agent, for thebenefit of Agent and Lenders, a continuing lien upon, and security interest in,all such accounts and all funds at any time paid, deposited, credited or heldin such accounts (whether for collection, provisionally or otherwise) orotherwise in the possession of such financial institutions, and each suchfinancial institution shall act as Agent’s agent in connection therewith.  Grantor shall not establish any DepositAccount with any financial institution unless prior thereto Agent and Grantorshall have entered into a Bank Agency and Control Agreement with such financialinstitution.  Except as expresslypermitted in writing by Agent, Grantor shall not establish or maintain anysecurities account(s), as defined in the Code.

 

Grantor shall establish lockbox or blocked accounts(collectively, “**Blocked Accounts**”)in Grantor’s name with such banks as are reasonably acceptable to Agent (“**Collecting Banks**”), subject to a BankAgency and Control Agreement pursuant to which all Account Debtors shalldirectly remit all payments on Accounts and in which Grantor will immediatelydeposit all cash payments for Inventory or other cash payments constitutingproceeds of Collateral in the identical form in which such payment was made,whether by cash or check.  In addition,Agent, for the benefit of Agent and Lenders, may establish one or moredepository accounts at each Collecting Bank or at a centrally located bank inthe name of Agent or Grantor as customer (collectively, the “**Concentration Accounts**”).  All amounts held or deposited from time totime in the Blocked Accounts held by such Collecting Bank shall be transferredon a daily basis to Agent (as Agent may direct) or any of the ConcentrationAccounts for application by Agent to the Obligations as provided in the CreditAgreement.  Subject to the foregoing,Grantor hereby agrees that all payments received by Agent or any Lender whetherby cash, check, wire transfer or any other instrument, made to such BlockedAccounts or Concentration Accounts or otherwise received by Agent or any Lenderand whether on the Accounts or as proceeds of other Collateral or otherwisewill be the sole and exclusive property of Lenders.  Grantor, and any of its Affiliates, employees, agents and otherPersons acting for or in concert with Grantor shall, acting as trustee forAgent and Lenders, receive, as the sole and exclusive property of Lenders, anymoneys, checks, notes, drafts or other payments relating to and/or constitutingproceeds of Accounts or other Collateral which come into the possession orunder the control of Grantor or any Affiliates, employees, agent, or otherPersons acting for or in concert with Grantor, and immediately upon receiptthereof, Grantor or such Persons shall deposit the same or cause the same to bedeposited in kind, in a Blocked Account or other account subject to a BankAgency and Control Agreement.

 

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If at any time a Collecting Bank is obligated totransfer to Agent or any Concentration Account all amounts held or deposited inthe Blocked Accounts held by such Collecting Bank, Grantor shall not nor shallGrantor permit any Domestic Subsidiary to, accumulate or maintain cash in any disbursementor payroll account, as of any date, in an amount in excess of checksoutstanding against such account as of such date and amounts necessary to meetminimum balance requirements.

 

Grantor shall close any of its accounts (and promptlyestablish replacement accounts with a financial institution which has executed,or is willing to execute, a Bank Agency and Control Agreement) maintained withany financial institution which is the subject of a notice from Agent that thecreditworthiness of such financial institution or any of its affiliates is nolonger acceptable to Agent in its Permitted Discretion, or that the operatingperformance, funds transfer or availability procedures or performance withrespect to any Bank Agency and Control Agreement of such financial institutionis no longer acceptable in Agent’s reasonable judgment.

 

Notwithstanding anything to the contrary containherein, Grantor shall enter into a Bank Agency and Control Agreement andsecurities control agreement to evidence certain lockbox arrangements andinvestment account(s), respectively, on or prior to the date of first fundingas provided for in the Credit Agreement.

 

# 7.                                       Agent’sAppointment as Attorney-In-Fact.

#  

On the Closing Date Grantor shall execute and deliverto Agent a power of attorney (the ”**Powerof Attorney**”) substantially in the form attached hereto as Exhibit A.  The power of attorney granted pursuant tothe Power of Attorney is a power coupled with an interest and shall beirrevocable until the Termination Date. The powers conferred on Agent, for the benefit of Agent and Lenders,under the Power of Attorney are solely to protect Agent’s interests (for thebenefit of Agent and Lenders) in the Collateral and shall not impose any dutyupon Agent or any Lender to exercise any such powers.  Agent agrees that (a) except for the powers granted in clause (h)of the Power of Attorney, it shall not exercise any power or authoritygranted  under the Power of Attorneyunless an Event of Default has occurred and is continuing, and (b) Agent shallaccount for any moneys received by Agent in respect of any foreclosure on ordisposition of Collateral pursuant to the Power of Attorney provided that noneof Agent nor any Lender shall have any duty as to any Collateral, and Agent andLenders shall be accountable only for amounts they actually receive as a resultof the exercise of such powers.  NONE OFAGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT ORFAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT  IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TOTHEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY ACOURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT ORCONSEQUENTIAL DAMAGES.

 

# 8.                                       Remedies;Rights Upon Default.

#  

## (a)                                  Inaddition to all other rights and remedies granted to it under this SecurityAgreement, the Credit Agreement, the other Loan Documents and under any otherinstrument or

 

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agreement securing, evidencing or relating to any of the Obligations,if any Event of Default shall have occurred and be continuing, Agent mayexercise all rights and remedies of a secured party under the Code.  Without limiting the generality of theforegoing, Grantor expressly agrees that in any such event Agent, withoutdemand of performance or other demand, advertisement or notice of any kind(except the notice specified below of time and place of public or private sale)to or upon Grantor or any other Person (all and each of which demands,advertisements and notices are hereby expressly waived to the maximum extentpermitted by the Code and other applicable law), may forthwith (personally orthrough its agents or attorneys) enter upon the premises where any Collateralis located, without any obligation to pay rent, through self-help, withoutjudicial process, without first obtaining a final judgment or giving Grantor orany other Person notice and opportunity for a hearing on Agent’s claim oraction and may take possession of, collect, receive, assemble, process,appropriate, remove and realize upon the Collateral, or any part thereof, andmay forthwith sell, lease, license, assign, give an option or options topurchase, or otherwise dispose of and deliver said Collateral (or contractto do so), or any part thereof, in one or more parcels at a public or privatesale or sales, at any exchange at such prices as it may deem acceptable, forcash or on credit or for future delivery without assumption of any creditrisk.  To facilitate the foregoing, uponthe occurrence and during the continuance of an Event of Default, Agent shallhave the right to take possession of Grantor’s original books and records, toobtain access to Grantor’s data processing equipment, computer hardware andSoftware and to use all of the foregoing and the information contained thereinin any manner which Agent deems appropriate. Agent or any Lender shall have the right upon any such public sale orsales and, to the extent permitted by law, upon any such private sale or sales,to purchase for the benefit of Agent and Lenders, the whole or any part of saidCollateral so sold, free of any right or equity of redemption, which equity ofredemption Grantor hereby releases. Such sales may be adjourned and continued from time to time with orwithout notice.  Agent shall have theright to conduct such sales on Grantor’s premises or elsewhere and shall havethe right to use Grantor’s premises without charge for such time or times asAgent deems necessary or advisable.

##  

If any Event of Default shall have occurred and becontinuing, Grantor further agrees, at Agent’s request, to assemble theCollateral and make it available to Agent at a place or places designated byAgent which are reasonably convenient to Agent and Grantor, whether atGrantor’s premises or elsewhere. Without limiting the foregoing, Agent shall also have the right torequire that Grantor store and keep any Collateral pending further action byAgent, and while Collateral is so stored or kept, provide such guards andmaintenance services as shall be necessary to protect the same and to preserveand maintain the Collateral in good condition. Until Agent is able to effect a sale, lease, license or otherdisposition of Collateral, Agent shall have the right to hold or useCollateral, or any part thereof, to the extent that it deems appropriate forthe purpose of preserving Collateral or its value or for any other purposedeemed appropriate by Agent.  Agentshall have no obligation to Grantor to maintain or preserve the rights ofGrantor as against third parties with respect to Collateral while Collateral isin the possession of Agent.  Agent may,if it so elects, seek the appointment of a receiver or keeper to takepossession of Collateral and to enforce any of Agent’s remedies (for thebenefit of Agent and Lenders), with respect to such appointment without priornotice or hearing as to such appointment. Agent shall apply the net proceeds of any sale, lease, license, otherdisposition of, or any collection, recovery, receipt, or realization on, theCollateral to the Obligations as provided in the Credit Agreement, and onlyafter so paying over such net proceeds, and after the payment by Agent of anyother amount required by any provision of law, need Agent account for thesurplus, if any, to

 

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Grantor.  To the maximum extentpermitted by applicable law, Grantor waives all claims, damages, and demandsagainst Agent or any Lender arising out of the repossession, retention or saleof the Collateral except such as arise solely out of the gross negligence orwillful misconduct of Agent or such Lender as finally determined by a court ofcompetent jurisdiction.  Grantor agreesthat, to the extent notice of sale shall be required by law, a reasonableauthenticated notification of disposition shall be a notification given atleast ten (10) days prior to any such sale and such notice shall (i) describeAgent and Grantor, (ii) describe the Collateral that is the subject of theintended disposition, (iii) state the method of intended disposition, (iv)state that the Grantor is entitled to an accounting of the Secured Obligationsand stating the charge, if any, for an accounting, and (v) state the time andplace of any public disposition or the time after which any private sale is tobe made.  Notwithstanding any suchnotice of sale, Agent shall not be obligated to make any sale ofCollateral.  In connection with anysale, lease, license or other disposition of Collateral, Agent may disclaim anywarranties that might arise in connection therewith and Agent shall have noobligation to provide any warranties at such time.  To the extent permitted by law, Grantor shall remain liable forany deficiency if the proceeds of any sale or disposition of the Collateral areinsufficient to pay all Obligations, including any reasonable attorneys’ feesor other expenses incurred by Agent or any Lender to collect such deficiency.

 

## (b)                                 Exceptas otherwise specifically provided herein, Grantor hereby waives presentment,demand, protest or any notice (to the maximum extent permitted byapplicable law) of any kind in connection with this Security Agreement or anyCollateral.

##  

## (c)                                  Tothe extent that applicable law imposes duties on Agent to exercise remedies ina commercially reasonable manner, Grantor acknowledges and agrees that it isnot commercially unreasonable for Agent (i) to fail to incur expensesreasonably deemed significant by Agent to prepare Collateral for disposition orotherwise to complete raw material or work in process into finished goods orother finished products for disposition, (ii) to fail to obtain third partyconsents for access to Collateral to be disposed of, or to obtain or, if notrequired by other law, to fail to obtain governmental or third party consentsfor the collection or disposition of Collateral to be collected or disposed of,(iii) to fail to exercise collection remedies against Account Debtors or otherPersons obligated on Collateral or to remove Liens on or any adverse claimsagainst Collateral, (iv) to exercise collection remedies against AccountDebtors and other Persons obligated on Collateral directly or through the useof collection agencies and other collection specialists, (v) to advertisedispositions of Collateral through publications or media of generalcirculation, whether or not the Collateral is of a specialized nature, (vi) tocontact other Persons, whether or not in the same business as the Grantor, forexpressions of interest in acquiring all or any portion of such Collateral,(vii) to hire one or more professional auctioneers to assist in the dispositionof Collateral, whether or not the Collateral is of a specialized nature, (viii)to dispose of Collateral by utilizing internet sites that provide for theauction of assets of the types included in the Collateral or that have thereasonable capacity of doing so, or that match buyers and sellers of assets,(ix) to dispose of assets in wholesale rather than retail markets, (x) todisclaim disposition warranties, such as title, possession or quiet enjoyment,(xi) to purchase insurance or credit enhancements to insure Agent against risksof loss, collection or disposition of Collateral or to provide to Agent aguaranteed return from the collection or disposition of Collateral, or (xii) tothe extent deemed appropriate by Agent, to obtain the services of otherbrokers, investment bankers, consultants and other professionals to assist Agentin the collection or disposition of any of the Collateral.  Grantor acknowledges that the purpose ofthis Section 8(c)

 

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is to provide non-exhaustive indications of what actions or omissionsby Agent would not be commercially unreasonable in Agent’s exercise of remediesagainst the Collateral and that other actions or omissions by Agent shall notbe deemed commercially unreasonable solely on account of not being indicated inthis Section 8(c).  Withoutlimitation upon the foregoing, nothing contained in this Section 8(c)shall be construed to grant any rights to Grantor or to impose any duties onAgent that would not have been granted or imposed by this Security Agreement orby applicable law in the absence of this Section 8(c).

##  

## (d)                                 NeitherAgent nor any Lender shall be required to make any demand upon, or pursue orexhaust any of their rights or remedies against, Grantor, any other obligor,guarantor, pledgor or any other Person with respect to the payment of theObligations or to pursue or exhaust any of their rights or remedies withrespect to any Collateral therefor or any direct or indirect guaranteethereof.  Neither Agent nor any Lendershall be required to marshal the Collateral or any guarantee of the Obligationsor to resort to the Collateral or any such guarantee in any particular order,and all of its and their rights hereunder or under any other Loan Documentshall be cumulative.  To the extent itmay lawfully do so, Grantor absolutely and irrevocably waives and relinquishesthe benefit and advantage of, and covenants not to assert against Agent or anyLender, any valuation, stay, appraisement, extension, redemption or similarlaws and any and all rights or defenses it may have as a surety now orhereafter existing which, but for this provision, might be applicable to thesale of any Collateral made under the judgment, order or decree of any court,or privately under the power of sale conferred by this Security Agreement, orotherwise.

##  

# 9.                                       Grantof License to Use Property.  For thepurpose of enabling Agent to exercise rights and remedies under Section 8hereof (including, without limiting the terms of Section 8 hereof,in order to take possession of, collect, receive, assemble, process, appropriate,remove, realize upon, sell, lease, license, assign, give an option or optionsto purchase  or otherwise dispose ofCollateral) at such time as Agent shall be lawfully entitled to exercise suchrights and remedies, Grantor hereby grants to Agent (to the extent permitted bythe agreements governing such Intellectual Property and applicable law),effective upon the occurrence and during the continuance of any Event ofDefault, for the benefit of Agent and Lenders, an irrevocable, nonexclusivelicense (exercisable without payment of royalty or other compensation toGrantor) to use, license or sublicense any Intellectual Property now owned orhereafter acquired by Grantor, and wherever the same may be located, andincluding in such license access to all media in which any of the licenseditems may be recorded or stored and to all Software and programs used for thecompilation or printout thereof and an irrevocable license (exercisable withoutpayment of rent or other compensation to Grantor) to use and occupy all realestate owned or leased by Grantor.

#  

# 10.                                 Limitationon Agent’s and Lenders’ Duty in Respect of Collateral.  Agent and each Lender shall use reasonablecare with respect to the Collateral in its possession or under itscontrol.  Neither Agent nor any Lendershall have any other duties concerning the custody and preservation of anyCollateral in its possession or control or in the possession or control of anyagent or nominee of Agent or such Lender, or any income thereon or as to thepreservation of rights against prior parties or any other rights pertainingthereto.  Agent shall be deemed to haveexercised reasonable care in the custody and preservation the Collateral in itspossession if the Collateral is accorded treatment substantially equal to thatwhich it accords its own property.

 

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Agent shall not be liable or responsible for any loss or damage to anyof the Collateral, or for any diminution in the value thereof, by reason of theact or omission of any warehousemen, carrier, forwarding agency, consignee orother agent or bailee selected by Agent in good faith.

#  

# 11.                                 Reinstatement.  This Security Agreement shall remain in fullforce and effect and continue to be effective should any petition be filed byor against Grantor for liquidation or reorganization, should Grantor becomeinsolvent or make an assignment for the benefit of any creditor or creditors orshould a receiver or trustee be appointed for all or any significant part ofGrantor’s assets, and shall continue to be effective or be reinstated, as thecase may be, if at any time payment and performance of the Obligations, or anypart thereof, is, pursuant to applicable law, rescinded or reduced in amount,or must otherwise be restored or returned by any obligee of the Obligations,whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, allas though such payment or performance had not been made.  In the event that any payment, or any partthereof, is rescinded, reduced, restored or returned, the Obligations shall bereinstated and deemed reduced only by such amount paid and not so rescinded,reduced, restored or returned.

#  

# 12.                                 Expensesand Attorneys Fees.  Withoutlimiting Grantor’s obligations under the Credit Agreement or the other LoanDocuments, Grantor agrees to promptly pay all fees, costs, charges and expensesof Agent (including reasonable attorneys’ fees and expenses) incurred inconnection with (a) protecting, storing, warehousing, appraising, insuring,handling, maintaining and shipping the Collateral, (b) creating, perfecting,maintaining and enforcing Agent’s Liens and (c) collecting, enforcing,retaking, holding, preparing for disposition, processing and disposing ofCollateral.  Grantor shall also pay anyand all excise, property, sales and use taxes imposed by any federal, state,local or foreign authority on any of the Collateral, or with respect toperiodic appraisals and inspections of the Collateral, or with respect to thesale or other disposition thereof.  IfGrantor fails to promptly pay any portion of the above costs, fees and expenseswhen due or to perform any other obligation of Grantor under this SecurityAgreement, Agent or any other Lender may, at its option, but shall not berequired to, pay or perform the same and charge Grantor’s account for all fees,costs and expenses incurred therefor, and Grantor agrees to reimburse Agent orsuch Lender therefor on demand.  Allsums so paid or incurred by Agent or any other Lender for any of the foregoing,any and all other sums for which Grantor may become liable hereunder and allfees, costs and expenses (including attorneys’ fees, legal expenses and courtcosts) incurred by Agent or any other Lender in enforcing or protecting theLiens or any of their rights or remedies under this Security Agreement shall bepayable on demand, shall constitute Obligations, shall bear interest until paidat the highest rate provided in the Credit Agreement and shall be secured bythe Collateral.

#  

# 13.                                 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 servedupon any of the parties by any other party, or whenever any of the parties desiresto give and serve upon any other party any communication with respect to thisSecurity Agreement, each such notice, demand, request, consent, approval,declaration or other communication shall be in writing and shall be given inthe manner, and deemed received, as provided for in the Credit Agreement.

 

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# 14.                                 Limitationby Law.  All rights, remedies andpowers provided in this Security Agreement may be exercised only to the extentthat the exercise thereof does not violate any applicable provision of law, andall the provisions of this Security Agreement are intended to be subject to allapplicable mandatory provisions of law that may be controlling and to belimited to the extent necessary so that they shall not render this SecurityAgreement invalid, unenforceable, in whole or in part, or not entitled to berecorded, registered or filed under the provisions of any applicable law.

#  

# 15.                                 Terminationof this Security Agreement.  Subjectto Section 11 hereof, this Security Agreement shall terminate uponthe Termination Date.

#  

# 16.                                 Successorsand Assigns.  This SecurityAgreement shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns except that Grantor may not assignits rights or obligations hereunder without the written consent of allLenders.  No sales of participations,other sales, assignments, transfers or other dispositions of any agreementgoverning or instrument evidencing the Obligations or any portion thereof orinterest therein shall in any manner impair the Lien granted to Agent, for thebenefit of Agent and Lenders, hereunder.

#  

# 17.                                 Counterparts.  This Security Agreement and any amendments,waivers, consents or supplements may be executed in any number of counterpartsand by different parties hereto in separate counterparts, each of which when soexecuted and delivered shall be deemed an original, but all of whichcounterparts taken together shall constitute but one in the same instrument.  This Security Agreement shall becomeeffective upon the execution of a counterpart hereof by each of the partieshereto.  This Security Agreement may beauthenticated by manual signature, facsimile or, if approved in writing byAgent, electronic means, all of which shall be equally valid.

#  

# 18.                                 ApplicableLaw.  PURSUANT TO 735 ILCS 105/5-5OF THE ILLINOIS CIVIL PROCEDURE-CHOICE OF LAW AND FORUM ACT, THIS SECURITYAGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED INACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT OTHERWISEGIVING EFFECT TO ILLINOIS’ CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THEAPPLICATION OF LAWS OTHER THAN THE LAWS OF THE STATE OF ILLINOIS.

#  

# 19.                                 Headings.  Section headings are included hereinfor convenience of reference only and shall not constitute a part of thisSecurity Agreement for any other purposes or be given substantive effect.

#  

# 20.                                 Benefitof Lenders.  All Liens granted orcontemplated hereby shall be for the benefit of Agent, individually, andLenders, and all proceeds or payments realized from Collateral in accordanceherewith shall be applied to the Obligations in accordance with the terms ofthe Credit Agreement.

#  

# 21.                                 Amendmentand Restatement; No Novation.  ThisSecurity Agreement amends and restates the Original Security Agreement in itsentirety and shall not be deemed to constitute

 

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a novation thereof.  It is theexpress intention of the parties hereto that the execution and delivery of thisAmended and Restated Credit Agreement shall not extinguish, terminate, serve asa replacement of or otherwise impair or diminish, in any manner, the existingLiens granted by Grantor under the Original Security Agreement.  The parties hereto hereby agree that theLiens granted to Agent pursuant to the Original Security Agreement remain infull force and effect to secure the Obligations and hereby are ratified andconfirmed in all respects.  Such Liensremain and continue to be granted, created, attached, perfected andenforceable, and shall constitute first-priority perfected security interestsof the Agent for the benefit of the Lenders. Notwithstanding but without limiting the foregoing, Grantor has grantedLiens hereunder in favor of Agent for the benefit of the Lenders, not inaddition to or substitution or denigration of the existing Liens, but ratherout of an abundance of caution.

#  

# 22.                                 IntercreditorAgreement.  All rights and remediesprovided for herein to Agent and all obligations of Grantor hereunder aresubject to the applicable terms and provisions of the Intercreditor Agreement.

#  

*Remainder of Page Intentionally Left BlankSignature Page Follows*

 

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IN WITNESS WHEREOF, each of the parties hereto hascaused this Amended and Restated Security Agreement to be executed anddelivered by its duly authorized officer as of the date first set forth above.

 

 
|   | **CHEROKEE INTERNATIONAL  CORPORATION**, a Delaware corporation |
|--------|-----------------------------------------------------------------|
|   |                                                            |
|   |                                                            |
|   | By:                                                             | /s/ Van Holland |   |
|   | Name: Van Holland                                               |
|   | Title: Chief Financial Officer                                  |
|   |                                                            |
|   |                                                            |
|   | **GENERAL ELECTRIC CAPITAL  CORPORATION**, as Agent             |
|   |                                                            |
|   |                                                            |
|   | By:                                                             | /s/ Randall J. Boba |   |
|   | Name: Randall J. Boba                                           |
|   | Title: Its Duly Authorized Signatory                            |
|        |                                                                 |  |  |  |

 

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**SCHEDULE ItoSECURITY AGREEMENT**

** **

**Filing Jurisdictions**

 

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**SCHEDULE IItoSECURITY AGREEMENT**

** **

**Stock,Instruments, Documents, Chattel Paper, CommercialTort Claims and Letter of Credit Rights**

** **

**[to be completedby Grantor]**

 

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**SCHEDULE IIItoSECURITY AGREEMENT**

** **

**Schedule ofOrganizational Identification, Offices,Locations of Collateraland Records Concerning Collateral**

** **

I.                                         Grantor’s official name:

 

II.                                     Prior official names of Grantor:

 

III.                                 Type of entity (e.g. corporation,partnership, business trust, limited partnership, limited liability company):

 

IV.                                 Organizational identification numberissued by Grantor’s state of incorporation or organization or a statement thatno such number has been issued:

 

V.                                     State of organization or incorporation ofGrantor:

 

VI.                                 Chief executive office and principalplace of business of Grantor:

 

VII.                             Other offices of Grantor:

 

VIII.                         Warehouses, Consignees and Processors:

 

IX.                                Other premises at which Collateral isstored or located:

 

X.                                    Locations of records concerningCollateral:

 

XI.                                Persons from whom assets have beenacquired, during the past five (5) years, other than in the ordinary course ofbusiness:

 

**[to be completed by Grantor]**

 

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**SCHEDULE IVtoSECURITY AGREEMENT**

** **

 

| **Motor Vehicle  Make/Model** |   | **Model Year** |   | **VIN** |   |
|-------------------------------|--------|----------------|--------|---------|--------|
|                          |   |           |   |    |   |
|                          |   |           |   |    |   |

 

 

**[to be completed by Grantor]**

 

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**EXHIBIT A**

** **

**POWER OF ATTORNEY**

 

This Power of Attorney is executed and delivered byCHEROKEE INTERNATIONAL CORPORATION, a Delaware corporation (“**Grantor**”), to GENERAL ELECTRIC CAPITALCORPORATION, a Delaware corporation (hereinafter referred to as “**Attorney**”), as Agent for the benefit ofAgent and Lenders, under an Amended and Restated Credit Agreement and anAmended and Restated Security Agreement, both dated as ofFebruary    , 2004, and other related documents (the ”**Loan Documents**”).  No person to whom this Power of Attorney is presented, asauthority for Attorney to take any action or actions contemplated hereby, shallbe required to inquire into or seek confirmation from Grantor as to theauthority of Attorney to take any action described below, or as to the existenceof or fulfillment of any condition to this Power of Attorney, which is intendedto grant to Attorney unconditionally the authority to take and perform theactions contemplated herein, and Grantor irrevocably waives any right tocommence any suit or action, in law or equity, against any person or entitywhich acts in reliance upon or acknowledges the authority granted under thisPower of Attorney.  The power ofattorney granted hereby is coupled with an interest, and may not be revoked orcanceled by Grantor without Attorney’s written consent.

 

Grantor hereby irrevocably constitutes and appointsAttorney (and all officers, employees or agents designated by Attorney), withfull power of substitution, as Grantor’s true and lawful attorney-in-fact withfull irrevocable power and authority in the place and stead of Grantor and inthe name of Grantor or in its own name, from time to time in Attorney’sdiscretion, to take any and all appropriate action and to execute and deliverany and all documents and instruments which may be necessary or desirable toaccomplish the purposes of the Loan Documents and, without limiting thegenerality of the foregoing, Grantor hereby grants to Attorney the power andright, on behalf of Grantor, without notice to or assent by Grantor, and at anytime, to do the following:  (a) changethe mailing address of Grantor, open a post office box on behalf of Grantor,open mail for Grantor, and ask, demand, collect, give acquittances and receiptsfor, take possession of, endorse any invoices, freight or express bills, billsof lading, storage or warehouse receipts, drafts against debtors, assignments,verifications, and notices in connection with any property of Grantor; (b)effect any repairs to any asset of Grantor, or continue to obtain any insuranceand pay all or any part of the premiums therefor and costs thereof, and make,settle and adjust all claims under such policies of insurance, and make alldeterminations and decisions with respect to such policies; (c) pay ordischarge any taxes, liens, security interests, or other encumbrances levied orplaced on or threatened against Grantor or its property; (d) defend any suit,action or proceeding brought against Grantor if Grantor does not defend suchsuit, action or proceeding or if Attorney believes that Grantor is not pursuingsuch defense in a manner that will maximize the recovery to Attorney, andsettle, compromise or adjust any suit, action, or proceeding described aboveand, in connection therewith, give such discharges or releases as Attorney maydeem appropriate; (e) file or prosecute any claim, litigation, suit orproceeding in any court of competent jurisdiction or before any arbitrator, ortake any other action otherwise deemed appropriate by Attorney for the purposeof collecting any and all such moneys due to Grantor whenever payable and toenforce any other right in respect of Grantor’s property; (f) cause thecertified public accountants then engaged by Grantor to

 

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prepare and deliver to Attorney at any time and from time to time,promptly upon Attorney’s request, the following reports:  (1) a reconciliation of all accounts, (2) anaging of all accounts, (3) trial balances, (4) test verifications of suchaccounts as Attorney may request, and (5) the results of each physicalverification of inventory; (g) communicate in its own name with any party toany contract with regard to the assignment of the right, title and interest ofsuch Grantor in and under the contract and other matters relating thereto; (h)to file such financing statements with respect to the Security Agreement, withor without Grantor’s signature, or to file a photocopy of the SecurityAgreement in substitution for a financing statement, as the Agent may deemappropriate and to execute in Grantor’s name such financing statements andamendments thereto and continuation statements which may require the Grantor’ssignature; (i) execute, in connection with any sale provided for in any LoanDocument, any endorsements, assignments or other instruments of conveyance ortransfer with respect to collateral subject to the Loan Documents and tootherwise direct such sale or resale; (j) exercise the rights of Grantor withrespect to the obligation of all account debtors to make payment or otherwiserender performance to Grantor; (k) exercise the rights of Grantor to, and takeany and all actions that Attorney deems appropriate to realize the benefit of,any intellectual property; and (l) assert any claims Grantor may have, fromtime to time, against any other party to any contract to which Grantor is aparty and to otherwise exercise any right or remedy of Grantor thereunder allas though Attorney were the absolute owner of the property of Grantor for allpurposes, and to do, at Attorney’s option and grantor’s expense, at any time orfrom time to time, all acts and other things that Attorney reasonably deemsnecessary to perfect, preserve, or realize upon Grantor’s property or assetsand Attorney’s liens thereon, all as fully and effectively as Grantor mightdo.  Grantor hereby ratifies, to theextent permitted by law, all that said Attorney shall lawfully do or cause tobe done by virtue hereof.

 

IN WITNESS WHEREOF, this Power of Attorney is executedby Grantor pursuant to the authority of its board of directors this            day of                      ,2004.

 

 
|   | **GRANTOR:**                                                    |
|--------|-----------------------------------------------------------------|
|   | **CHEROKEE INTERNATIONAL  CORPORATION**, a Delaware corporation |
|   |                                                            |
|   |                                                            |
|   | By:                                                             |   |   |
|   | Title:                                                          |   |   |
|        |                                                                 |  |  |  |

 

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**NOTARY PUBLICCERTIFICATE**

 

On this            day of                   ,200  , [officer’s name] who is personally known to me appeared beforeme in his/her capacity as the [title] of [Grantor] (“Grantor”) and executed onbehalf of Grantor the Power of Attorney in favor of General Electric CapitalCorporation to which this Certificate is attached.

 

 
|   |          |   |
|--------|---------------|--------|
|   | Notary Public |

 

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