Exhibit 10.8


 


EXECUTION
VERSION


 


 


PLEDGE
AND SECURITY AGREEMENT


 


PLEDGE
AND SECURITY AGREEMENT (this “Agreement”),
dated as of September 16, 2005, by and among GenuTec Business Solutions, Inc.,
a Montana corporation (the “Company”), GenuTec
Marketing, Inc., a Nevada corporation, and Smart Acquisition, LLC, a Nevada
limited liability company, each of which is a wholly-owned subsidiary of the
Company (the “Subsidiary Grantors”; the
Company and the Subsidiary Grantors, and such other parties as may become Grantors
hereunder after the date hereof, being sometimes herein collectively called the
“Grantors”, and each individually a “Grantor”), and Technology Investment
Capital Corp., as Collateral Agent for the benefit of the Purchasers described
below (together with its successors and assigns in such capacity, the “Secured Party”).


WHEREAS, pursuant to a Note Purchase Agreement of
even date herewith (as amended, modified or supplemented and in effect from
time to time, the “Purchase Agreement”) among the
Company, the Secured Party and the Purchasers named in Schedule I thereto
(together with their respective successors and assigns, the “Purchasers”), the Company has agreed
to issue and sell to the Purchasers certain Senior Secured Notes Due 2010 (the “Notes”) in exchange for certain shares
of Series A Exchangeable Preferred Stock, par value $.0001 per share,
previously issued and sold to them by the Company (the “Preferred
Shares”); and


WHEREAS, in connection therewith the Grantors are
required to execute and deliver to the Secured Party a pledge and security
agreement in substantially the form hereof; and


WHEREAS, the Grantors wish to grant security
interests in favor of the Secured Party as herein provided;


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


1.             Definitions.  All
capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Purchase Agreement.  The term “Secured Obligations” means all Obligations (as such term
is defined in the Purchase Agreement) hereafter existing or outstanding at any
time on or after the first date on which Notes shall be issued, or shall be
deemed to be issued, to any Purchaser in exchange for Preferred Shares pursuant
to the provisions of the Purchase Agreement. The term “State”, as used herein, means the State of New
York.  All terms defined in the NYUCC and
used herein shall have the same definitions herein as specified therein.
However, 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.


2.             Grant of Security Interest.  To secure the
timely payment and performance in full of all of the Secured Obligations, the
Grantors hereby pledge to the Secured Party, and grant to the Secured Party a
security interest in, all of the following properties, assets and rights of the
Grantors, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof (all of the same being hereinafter called
the “Collateral”):


 

















 


(i)            all goods
(including inventory, equipment and any accessions thereto),


(ii)           all instruments
(including promissory notes),


(iii)           all documents,


(iv)          all accounts
(including health-care-insurance receivables),


(v)           all chattel paper
(whether tangible or electronic),


(vi)          all deposit
accounts, including, without limitation, the deposit accounts listed on Schedule A hereto,


(vii)         all letter-of-credit
rights (whether or not the letter of credit is evidenced by a writing),


(viii)        all commercial tort
claims, if any, set forth on Schedule B hereto,


(ix)           all supporting
obligations,


(x)            all contract rights
or rights to the payment of money, insurance claims and proceeds,


(xi)           all general
intangibles, including, without limitation, all payment intangibles, Patents,
Patent applications, Trademarks, Trademark applications, trade names, service
marks, Copyrights, Copyright applications, Software (including without
limitation the Proprietary Software), engineering drawings, source code, domain
names, customer lists, databases, goodwill, and all Licenses, permits,
agreements of any kind or nature pursuant to which the Grantors possess, use or
have authority to possess or use property (whether tangible or intangible) of
other Persons or pursuant to which other Persons possess, use or have authority
to possess or use property (whether tangible or intangible) of the Grantors,
all other Intellectual Property, and all books, records and recorded data of
any kind or nature, regardless of the medium of recording including, without
limitation, all writings, plans, specifications and schematics;


(xii)          all now existing and
hereafter acquired or arising (A) shares of capital stock and other Equity
Interests in any Person, and other securities (certificated or uncertificated),
security entitlements, securities accounts, commodity contracts, commodity
accounts and other investment property (including, without limitation, the
shares of capital stock described on Schedule
C hereto), (B) cash dividends and cash distributions with respect to
the foregoing (“Dividends”),
(C) all non-cash dividends paid on capital securities, liquidating dividends
paid on capital securities, shares of capital securities resulting from (or in
connection with the exercise of) stock splits, reclassifications, warrants,
options, non-cash dividends, mergers, consolidations, and all other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any capital securities constituting Collateral (excluding Dividends,
“Distributions”),
and (D) all certificates, agreements (including stockholders agreements,
partnership agreements, operating agreements and limited liability company
agreements), books, 


 


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records,
ledgers, writings, databases, information and other property relating to, used
or useful in connection with, evidencing, embodying, incorporating or referring
to, any of the foregoing; and


(xiii)         all other personal
property of each of the Grantors of any kind, wherever located, whether now
owned or hereafter acquired or arising.


3.             Authorization to File Financing Statements.  The Grantors hereby
irrevocably authorize the Secured Party at any time and from time to time to
file in any applicable Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto against each Grantor 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 Uniform Commercial Code of the
applicable 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 Uniform Commercial Code of the applicable jurisdiction for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether such Grantor is an organization, the type of
organization and any organization identification number issued to such Grantor
and, (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  The Grantors agree to furnish any such
information to the Secured Party promptly upon request.  Each Grantor also ratifies its authorization
for the Secured Party to have filed in any Uniform Commercial Code jurisdiction
any like initial financing statements or amendments thereto if filed prior to
the date hereof.


4.             Other Actions.  Further to insure
the attachment, perfection and first priority (subject to Permitted Liens) of,
and the ability of the Secured Party to enforce, the Secured Party’s security
interest in the Collateral, the Grantors agree, in each case at the Grantor’s
own expense, to take the following actions with respect to the following
Collateral:


4.1.         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, pledge and deliver the same to the
Secured Party, accompanied by such instruments of transfer or assignment duly
executed in blank as the Secured Party may from time to time specify.


4.2.         Deposit Accounts.  For each deposit
account (each, a “Deposit
Account”) that any Grantor at any time opens or maintains at any
depository bank (each, a “Depository
Bank”), the Grantor shall, immediately upon opening such Deposit
Account, give written notice to the Secured Party thereof and deliver to the Secured
Party a Control Agreement with respect to such Deposit Account duly executed by
the Grantor and the Depositary Bank, in form and substance reasonably satisfactory
to the Secured Party.  The Secured Party
agrees with the Grantors that the Secured Party shall not give any instructions
to such Depositary Bank directing the disposition of funds credited to such
Deposit Account, or withhold any withdrawal rights from the Grantors, unless an
Event of Default has occurred and is continuing, or, after giving effect to any
withdrawal not otherwise permitted by the Note Documents, would occur.


 


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4.3.         Investment Property.  If any Grantor
shall at any time hold or acquire any certificated securities, the Grantor
shall forthwith endorse, pledge and deliver the same to the Secured Party,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Secured Party may from time to time specify. If any securities now
or hereafter acquired by any Grantor are uncertificated and are issued to the
Grantor or its nominee directly by the issuer thereof, the Grantor shall
immediately notify the Secured Party thereof and, at the Secured Party’s
request and option, pursuant to an agreement in form and substance reasonably satisfactory
to the Secured Party, either (a) cause the issuer to agree to comply with
instructions from the Secured Party as to such securities, without further
consent of the Grantor or such nominee, or (b) arrange for the Secured Party to
become the registered owner of the securities. If any securities, whether
certificated or uncertificated, or other investment property now or hereafter
acquired by any Grantor are held by the Grantor or its nominee through a
securities intermediary or commodity intermediary, the Grantor shall
immediately give written notice to the Secured Party thereof and, pursuant to
an agreement in form and substance reasonably satisfactory to the Secured Party,
cause such securities intermediary or commodity intermediary (as the case may
be) to 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 the Grantor or such
nominee.  The Secured Party agrees with
the Grantors 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 the Grantors, 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 Note Documents, would
occur.


4.4.         Collateral in the Possession of a Bailee.  If any goods are at
any time in the possession of a bailee, the Grantors shall promptly notify the Secured
Party thereof and, if requested by the Secured Party, shall promptly obtain an
acknowledgement from the bailee, in form and substance reasonably satisfactory
to the Secured Party, that the bailee holds such Collateral for the benefit of
the Secured Party and shall act upon the instructions of the Secured Party,
without the further consent of the Grantor. 
The Secured Party agrees with the Grantors 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 the Grantors
with respect to the bailee.


4.5.         Electronic Chattel Payer 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, the Grantor shall
promptly notify the Secured Party thereof and, at the request 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 NYUCC, 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 the Grantors that the Secured Party will
arrange, pursuant to procedures reasonably satisfactory to the Secured Party
and so long as such procedures will not result in the Secured Party’s loss of
control, for the Grantors to make alterations to the electronic chattel paper
or transferable record permitted under Section 9-105 of the NYUCC or, as the
case may be, Section 201 of the federal Electronic Signatures in Global and
National Commerce Act 


 


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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 the Grantors with respect to such electronic chattel
paper or transferable record.


4.6.         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 the Grantor, the Grantor shall promptly notify the Secured Party
thereof and, at the request and option of the Secured Party, the Grantor shall,
pursuant to an agreement in form and substance reasonably satisfactory to the Secured
Party, either (i) arrange for the issuer and any confirmer of such letter of
credit to consent to an assignment to the Secured Party of the proceeds of any
drawing under the letter of credit or (ii) arrange for the Secured Party to
become the transferee beneficiary of the letter of credit, with the Secured
Party agreeing, in each case, that the proceeds of any drawing under the letter
to credit are to be applied as provided in the Purchase Agreement.


4.7.         Commercial Tort Claims.  If any Grantor
shall at any time hold or acquire a commercial tort claim, the Grantor shall
immediately notify the Secured Party in a writing signed by the 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
Agreement, with such writing to be in form and substance reasonably satisfactory
to the Secured Party.


4.8.         Intellectual Property.


(a)           Each Grantor shall notify the Secured
Party promptly (i) of its acquisition after the Closing Date of any Patent,
Patent License, Copyright, Copyright License, Trademark or Trademark License
and (ii) if it knows, or has reason to know of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or any court) regarding such Grantor’s ownership of any Patent
or Trademark, its right to register the same, or to keep and maintain the same.
In the event that any Patent, Patent License, Copyright, Copyright License,
Trademark or Trademark License is infringed, misappropriated or diluted by a
third party, the affected Grantor shall notify the Secured Party promptly after
it learns thereof and shall, unless such Grantor and the Secured Party shall
jointly determine that any such action would be of immaterial economic value,
promptly sue for infringement, misappropriation or dilution and to recover any
and all resulting damages and take such other actions as may be appropriate
under the circumstances to protect such Patent, Patent License, Copyright,
Copyright License, Trademark or Trademark License.


 


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(b)           Each Grantor agrees, either itself or
through any agent, employee or licensee, to notify the Secured Party upon the
filing of an application for the registration of any Patent, Trademark or
Copyright with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof; and, upon issuance of any such Patent, Trademark
or Copyright, to notify the Secured Party of such issuance and to execute and
deliver any and all agreements, instruments, documents and papers the Secured
Party may reasonably request to evidence the security interest of the Secured
Party in such Patent, Trademark or Copyright and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby, including,
without limitation, Copyright Security Agreements in the form of Exhibit I hereto, Patent Security Agreements in the form of Exhibit II hereto and Trademark Security Agreements in the
form of Exhibit III hereto, as applicable. Each
Grantor hereby constitutes the Secured Party as its attorney-in-fact to execute
and file all such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed, and such power, being coupled
with an interest, shall be irrevocable until the Secured Obligations are paid
in full.


(c)           Each Grantor shall preserve and
maintain in all material respects rights in the Intellectual Property which is
material to the conduct of its business and, upon and after the occurrence and
during the continuance of an Event of Default, if requested by the Secured
Party, use its best efforts to obtain any consents, waivers or agreements
necessary to enable the Secured Party to exercise its remedies with respect to
the Intellectual Property. No Grantor shall abandon any right to file a
Copyright, Patent or Trademark application that is material to the business of
such Grantor nor shall such Grantor abandon any such pending Copyright, Patent
or Trademark application, or Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License without the prior written consent of
the Secured Party.


(d)           The Grantors hereby assign, transfer
and convey to the Secured Party, effective upon the occurrence and during the
continuance of any Event of Default, the nonexclusive right and license to use
all Intellectual Property owned or used by the Grantors, together with any
goodwill associated therewith, all to the extent necessary to enable the Secured
Party to realize on the Collateral (including, without limitation, completing
production of, advertising for sale and selling the Collateral) and any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees
of the Secured Party and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed
in lieu of foreclosure or otherwise. Such right and license is granted free of
charge, without requirement that any monetary payment whatsoever be made to
Grantor by the Secured Party.


5.             Other Actions as to any and all Collateral.  The Grantors further agree to take any other
action reasonably requested by the Secured Party to insure the attachment,
perfection and first priority (subject to Permitted Liens) of, and the ability
of the Secured Party to enforce, the Secured Party’s security interest in any
and all of the Collateral including, without limitation, (a) preparing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the Uniform Commercial Code of any applicable
jurisdiction, (b) causing 


 


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the
Secured Party’s name to be noted as secured
party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the Secured Party’s security interest in such Collateral, (c)
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
attachment, perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party’s security interest in such Collateral, (d)
obtaining governmental and other third party consents and approvals, including
without limitation any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from landlords in form and
substance reasonably satisfactory to the Secured Party, (f) taking all actions
required by any earlier versions of the Uniform Commercial Code or by other
law, as applicable in any relevant Uniform Commercial Code jurisdiction, or by
other law as applicable in any foreign jurisdiction, (g) delivery to the Secured
Party of stock certificates (and stock powers duly executed in blank in favor
of the Secured Party) covering all of the securities or other financial assets
described on Schedule C, and (h)
if the Maturity Date is extended, at the time of such extension entering into
with Secured Party and a service company reasonably acceptable to Secured Party
and Grantors, a contract requiring (i) the service company to file continuation
statements and (ii) the Grantors to pay the cost of all filings and creation of
continuation and termination statements .


6. 
          Relation to Other Security Documents.


6.1.         Rights and Remedies Not Exclusive.  The provisions of this Agreement supplement
the provisions of the other Note Documents. 
Nothing contained in any such Note Document shall derogate from any of
the rights or remedies of the Secured Party hereunder.  The provisions of this Agreement shall
be read and construed with the other Security Documents referred to below in
the manner so indicated.


6.2.         Copyright, Trademark and Patent Security Agreements.  If required by the Secured Party,
concurrently herewith the Grantors are also executing and delivering to the Secured
Party, or may be required hereafter to execute and deliver to the Secured Party,
one or more Copyright Security Agreements, Trademark Security Agreements and
Patent Security Agreements, pursuant to which the Grantor is granting or will
grant to the Secured Party security interests in certain Collateral consisting
of Copyrights, Trademarks,  and Patents,
respectively, registrations thereof and other collateral as therein
provided.  The provisions of such
Copyright Security Agreements, Trademark Security Agreements and Patent
Security Agreements are supplemental to the provisions of this Agreement, and
nothing contained in any thereof shall derogate from any of the rights or
remedies of the Secured Party hereunder. 
Neither the delivery of, nor anything contained in, any of such
agreements shall be deemed to prevent or postpone the time of attachment or
perfection of any security interest in such Collateral created hereby.


7.             Representations and Warranties Concerning
Grantor’s Legal Status.  Each Grantor has previously delivered to the Secured
Party a certificate signed by each Grantor and entitled “Perfection Certificate”
(the “Perfection Certificate”).  Each Grantor represents and warrants to the Secured
Party as follows: (a) the Grantor’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof, (b) the Grantor is an
organization of the type and organized in the jurisdiction set forth in the
Perfection Certificate, (c) the Perfection 


 


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Certificate
accurately sets forth the Grantor’s organizational identification number or
accurately states that the Grantor has none, (d) the Perfection Certificate
accurately sets forth the Grantor’s place of business or, if more than one, its
chief executive office as well as the Grantor’s mailing address if different
and (e) all other information set forth on the Perfection Certificate
pertaining to the Grantor is accurate and complete.


8.             Covenants Concerning Grantor’s Legal Status.  Each Grantor
covenants with the Secured Party as follows: (a) without providing at least 30
days prior written notice to the Secured Party, the Grantor will not change its
name, its place of business or, if more than one, chief executive office, or
its mailing address or organizational identification number if it has one, (b)
if the Grantor does not have an organizational identification number and later
obtains one, the Grantor shall forthwith notify the Secured Party of such
organizational identification number, and (c) the Grantor will not change its
type of organization, jurisdiction of organization or other legal structure.


9.             Representations and Warranties Concerning
Collateral.  Each Grantor further represents and warrants
to the Secured Party as follows:  (a) the
Grantor is the owner of or has other rights in or power to transfer the
Collateral, free from any adverse lien, security interest or other encumbrance,
except for the security interest created by this Agreement and the Permitted
Liens, (b) there exists no “adverse claim”
as defined in Section 8-102 of the NYUCC with respect to the Equity
Interests listed on Schedule C or
any other Collateral which constitutes a financial asset as defined in such
Section 8-102, (c) none of the Collateral constitutes, or is the
proceeds of, “farm products” as defined in Section 9-102(a)(34) of the NYUCC, (d)
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
like federal, state or local statute or rule in respect of such Collateral, (e)
the Grantor holds no commercial tort claim except as indicated on Schedule B hereto as modified from time to
time, (f) the 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, and (g) all other information set forth on the
Perfection Certificate pertaining to the Collateral is accurate and complete.


10.          Covenants Concerning Collateral Etc.  Each Grantor further
covenants with the Secured Party as follows: (a) the Collateral, to the extent
not delivered to the Secured Party pursuant to Section 4, will be kept at those
locations listed on the Perfection Certificate and the Grantor will not remove
the Collateral from such locations, except as required in the ordinary course
of business, without providing at least 30 days prior written notice to the Secured
Party, (b) except for the security interest herein granted and Permitted Liens, the Grantor shall be
the owner of or have other rights in the Collateral free from any lien,
security interest or other encumbrance, and the Grantor 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, (c) the Grantor shall not
pledge, mortgage or create, or suffer to exist a security interest in the
Collateral in favor of any person other than the Secured Party except for
Permitted Liens, (d) the Grantor will not use the Collateral in violation of
any policy of insurance thereon, (e) the Grantor will permit the Secured Party,
or its designee, to inspect the Collateral, wherever located, at any reasonable
time during business hours upon prior notice, (f) the Grantor will pay promptly
when 


 


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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 Agreement other than any taxes contested in good faith
and for which appropriate reserves have been established by the Grantor, (g)
the Grantor will continue to operate, 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, and (h) the Grantor will not sell or otherwise
dispose, or offer to sell or otherwise dispose, of the Collateral or any
interest therein except as permitted by the Purchase Agreement.


11.          Insurance.


11.1.       Maintenance of Insurance.  Each Grantor shall maintain, with independent
insurers reasonably believed by it to be financially sound and reputable, (i) property
damage and casualty insurance on all Collateral and other real and personal
property of such Grantor 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, and (ii) other insurance
with respect to its business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar
circumstances by such other Persons, including in any event workers’
compensation insurance, public liability (including products/completed
operations liability coverage) and business interruption insurance. All
property damage and casualty insurance shall name the Secured Party as lender
loss payee/mortgagee, all liability insurance shall name the Secured Party as
an additional insured and all business interruption insurance shall name the Secured
Party as assignee.


11.2.       Insurance Proceeds.  The proceeds of any
casualty insurance in respect of any casualty loss of any of the Collateral
shall, subject to the rights, if any, of other parties with a prior interest in
the property covered thereby, (i) so long as no Default or Event of Default has
occurred and is continuing and to the extent that the amount of such proceeds
is less than $100,000, be disbursed to the Grantor for direct application by
the Grantor solely to the repair or replacement of the Grantor’s property so
damaged or destroyed and (ii) in all other circumstances, be held by the Secured
Party as cash collateral for the Secured Obligations and (except to the extent
disbursed pursuant to the next sentence) may be applied to the Secured Obligations
pursuant to Section 3.1(b) of the Purchase Agreement. The Secured Party may, at
its sole option, disburse from time to time all or any part of such proceeds so
held as cash collateral, upon such terms and conditions as the Secured Party
may reasonably prescribe, for direct application by the Grantor solely to the
repair or replacement of the Grantor’s property so damaged or destroyed, or the
Secured Party may apply all or any part of such proceeds to the Secured Obligations.


11.3.       Notice of Cancellation etc.  All policies of property
and casualty insurance shall provide for at least 30 days prior written
cancellation notice to the Secured Party. 
In the event of failure by any Grantor to provide and maintain insurance



 


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as herein provided, the Secured Party
may, at its option, provide such insurance and charge the amount thereof to the
Grantor. Each Grantor shall furnish the Secured Party upon its request with
certificates of insurance and policies evidencing compliance with the foregoing
insurance provision.


12.          Collateral Protection Expenses;
Preservation of Collateral.


12.1.       Expenses Incurred by Secured Party.  In its reasonable
discretion, the Secured Party may discharge taxes and other encumbrances at any
time levied or placed on any of the Collateral, make repairs thereto and pay
any necessary filing fees or, if any Grantor fails to do so, insurance
premiums. Each Grantor agrees to reimburse the Secured Party on demand for any
and all expenditures so made. The Secured Party shall have no obligation to the
Grantors to make any such expenditures, nor shall the making thereof relieve
the Grantor of any default.  Any expenses
incurred under this Section 12 shall constitute Secured Obligations.


12.2.       Secured Party’s Obligations and Duties.  Anything herein to
the contrary notwithstanding, each Grantor shall remain liable under each
contract or agreement comprised in the Collateral to be observed or performed
by the Grantor thereunder. The Secured Party shall not have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating to
any of the Collateral, nor shall the Secured Party be obligated in any manner
to perform any of the obligations of the Grantor under or pursuant to any such
contract or agreement, 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 or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party’s sole duty 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 deals with similar property
for its own account.


13.          Securities and Deposits.  The Secured Party
may at any time following 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 Secured Obligations. Whether or not any Secured
Obligations are due, the Secured Party may following 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 Secured Obligations,
any deposits or other sums at any time credited by or due from the Secured
Party to the Grantors may at any time be applied to or set off against any of
the Secured Obligations then due and owing.


14.          Notification to Account Debtors and Other
Persons Obligated on Collateral.  If an Event of Default shall have occurred
and be continuing, the Grantors shall, at the request of 


 


10

















 


the
Secured Party, notify account debtors and other persons obligated on any of the
Collateral of the security interest of the Secured Party in any account, chattel
paper, general intangible, instrument or other Collateral and that payment
thereof is to be made directly to the Secured Party or to any financial
institution designated by the Secured Party as its agent therefor, and the Secured
Party may itself, if an Event of Default shall have occurred and be continuing,
without notice to or demand upon the Grantor, so notify account debtors and
other persons obligated on Collateral. After the making of such a request or
the giving of any such notification, the Grantors shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Grantor as trustee for the Secured Party
without commingling the same with other funds of the Grantor and shall turn the
same over to the Secured Party in the identical form received, together with
any necessary endorsements or assignments. The Secured Party shall apply the
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Secured Party to the Secured
Obligations, such proceeds to be immediately entered after final payment in
cash or other immediately available funds of the items giving rise to them.


15.          Investment
Property; Event of Default.


15.1.       Further
Assurances. The Grantors, at their cost and expense (including
the cost and expense of any of the following referenced consents and approvals)
will promptly execute and deliver or cause the execution and delivery of all
applications, certificates, instruments, registration statements, and all other
documents and papers the Secured Party may reasonably request during the
continuance of an Event of Default in connection with the obtaining of any
consent, approval, registration, qualification, permit, license, accreditation,
or authorization of any other official body or other Person necessary or
appropriate for the effective exercise of any rights hereunder or under the
other Note Documents.  Without limiting
the generality of the foregoing, the Grantors agree that in the event the Secured
Party shall exercise its rights hereunder or pursuant to the other Note
Documents during the continuance of an Event of Default, to sell, transfer, or
otherwise dispose of, or vote, consent, operate, or take any other action in
connection with any of the Collateral, the Grantors shall execute and deliver
(or cause to be executed and delivered) all applications, certificates,
assignments and other documents that the Secured Party requests to facilitate
such actions and shall otherwise promptly, fully, and diligently cooperate with
the Secured Party and any other Persons in making any application for the prior
consent or approval of any official body or any other Person to the exercise by
the Secured Party or any such rights relating to all or any of the Collateral.


15.2.       Dividends
and Distributions. The Grantors agree promptly upon the
occurrence and continuance of an Event of Default and without any request
therefor by the Secured Party, so long as such Event of Default shall continue,
(i) to deliver (properly endorsed where required hereby or requested by Secured
Party) to the Secured Party all Dividends and Distributions with respect to investment
property and all proceeds of the Collateral, in each case thereafter received
by the Grantor, all of which shall be held by Secured Party as additional
Collateral, and (ii) with respect to Collateral consisting of general partner
interests or limited liability company interests, to make modifications to all
necessary documents to admit the Secured Party as a general partner or member, 


 


11

















 


respectively.  All Dividends, Distributions, interest,
principal, cash payments, payment intangibles and proceeds which may at any
time and from time to time be held by any Grantor but which the Grantor is then
obligated to deliver to the Secured Party, shall, until delivery to the Secured
Party, be held by the Grantor separate and apart from its other property in
trust for the Secured Party.


15.3.       Voting
Rights.  The Grantors
agree promptly upon the occurrence and continuance of an Event of Default, so
long as such Event of Default shall continue, (i) that Secured Party may
exercise (to the exclusion of the Grantor) the voting power and all other
incidental rights of ownership with respect to any Collateral constituting investment
property of the Grantor and the Grantor hereby grants Secured Party an
irrevocable proxy, exercisable under such circumstances, to vote such investment
property; and (ii) that it shall promptly deliver to the Secured Party such
additional proxies and other documents as may be necessary to allow the Secured
Party to exercise such voting power. 
Except when an Event of Default has occurred and is continuing, the Grantors
may continue to vote all investment property included in the Collateral; provided
that no vote shall be cast, or consent, waiver, or ratification given, or
action taken by the Grantor that would violate any provision of any Note
Document.  The Grantors agree promptly
upon the occurrence and continuance of an Event of Default and without any
request therefor by the Secured Party, so long as such Event of Default shall
continue, with respect to Collateral consisting of general partner interests or
limited liability company interests, to make modifications to all necessary
documents to admit the Secured Party as a general partner or member,
respectively.


15.4.       Compliance
With Securities Laws.  The
Grantors hereby acknowledge that the sale by Secured Party of any investment
property pursuant to the terms hereof in compliance with the Securities Act, as
well as applicable “Blue Sky” or other state securities laws, may require
strict limitations as to the manner in which Secured Party or any subsequent
transferee of the investment property may dispose thereof.  The Grantors acknowledge and agree that, to
protect Secured Party’s interests, it may be necessary to sell the investment
property at a price less than the maximum price attainable if a sale were delayed
or made in another manner, such as a public offering under the Securities
Act.  The Grantors do not have an
objection to a sale in such manner and the Grantors agree that Secured Party
does not have an obligation to obtain the maximum possible price for all or any
part of the investment property.  Without
limiting the generality of the foregoing, the Grantors agree that Secured Party
may, pursuant to the terms hereof and subject to applicable law, from time to
time attempt to sell all or any part of the investment property by a private
placement, restricting the bidders and prospective purchasers to those Persons
who will represent and agree that they are purchasing for investment only and
not for distribution.  In so doing, Secured
Party may solicit offers to buy the investment property or any part thereof for
cash from a limited number of investors deemed by Secured Party, in its
reasonable judgment, to be institutional investors or other responsible Persons
who might be interested in purchasing the investment property.  If Secured Party shall solicit such offers,
then acceptance by Secured Party of one of the offers shall be deemed to be a
commercially reasonable method of disposition of the Collateral.


 


12

















 


16.          Power of Attorney.


16.1.       Appointment and Powers of Secured Party.  To the fullest
extent permitted by applicable law, the Grantors hereby irrevocably constitute
and appoint the Secured Party and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantors or in the Secured
Party’s own name, for the purpose of carrying out the terms of this Agreement,
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 Agreement and, without limiting the generality of the foregoing, hereby
gives said attorney the power and right, on behalf of the Grantors, without
notice to or assent by the Grantors, to do the following:


(A)          upon the occurrence and during the continuance of an Event of Default, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise 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 to protect,
preserve or realize upon the Collateral and the Secured Party’s security
interest therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Grantor might do, including, without limitation, (i) the
filing and prosecuting of registration and transfer applications with the
appropriate federal or local agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Grantors, the exercise of 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 (iii) the execution,
delivery 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 the Grantors’ authorization given in
Section 3 is not sufficient, to file such financing statements with respect
hereto, with or without the Grantor’ signature, or a photocopy of this
Agreement in substitution for a financing statement, as the Secured Party may
deem appropriate and to execute in the Grantor’s name such financing statements
and amendments thereto and continuation statements which may require the
Grantor’s signature.


16.2.       Ratification by Grantors.  To the extent
permitted by law, the Grantors hereby ratify all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and shall be irrevocable.


16.3.       No Duty on Secured Party.  The powers
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon it 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 


 


13

















 


nor any of its officers, directors,
employees or agents shall be responsible to the Grantor for any act or failure
to act, except for the Secured Party’s own gross negligence or willful
misconduct.


17.          Remedies.  If an Event of Default shall have occurred
and be continuing, the Secured Party may, without notice to or demand upon the
Grantors, declare this Agreement to be in default, and the Secured Party shall
thereafter 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 or of any jurisdiction in which Collateral is located,
including, without limitation, the right to take possession of the Collateral,
and for that purpose the Secured Party may, so far as the Grantors 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 reasonable
discretion require the Grantors to assemble all or any part of the Collateral
at such location or locations within the jurisdiction(s) of the Grantors’
principal office(s) or at such other locations as the Secured Party may
reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party shall give to the Grantors at least ten Business 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. The Grantors hereby acknowledge that ten Business Days prior
written notice of such sale or sales shall be reasonable notice. In addition,
the Grantors waive 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, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights with respect
thereto.


18.          Standards for Exercising Remedies.  To the extent that applicable law imposes duties on the Secured
Party to exercise remedies in a commercially reasonable manner, the Grantors
acknowledge and agree 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, (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 or encumbrances on or any adverse claims
against 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 the 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 


 


14

















 


Secured
Party a guaranteed return from the collection or disposition of Collateral, or
(1) to the extent deemed appropriate by the Secured Party, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. The Grantors acknowledge that the purpose of this
Section 18 is to provide non-exhaustive indications of what actions or
omissions by the Secured Party would not be commercially unreasonable in the Secured
Party’s exercise of remedies against the Collateral and that other actions or
omissions by the Secured Party shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 18. Without limitation
upon the foregoing, nothing contained in this Section 18 shall be construed to
grant any rights to the Grantors or to impose any duties on the Secured Party
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section 18.


19.          No Oral Change; Amendments; Security Agreement Supplements for
Additional Grantors.  No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by the Grantors
and the Secured Party, and no waiver of any provision of this Agreement, and no
consent to any departure by the Grantors therefrom, shall be effective unless
it is in writing and signed by the Secured Party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.  Notwithstanding
the foregoing, additional Persons may become Grantors under this Agreement
without consent of any other Grantor through execution and delivery to the Secured
Party of an Assumption Agreement in the form of Annex 1 hereto or any other
form of supplement reasonably acceptable to the Secured Party.  Nothing in this Section 19 shall be construed
to permit any Grantor to form a Subsidiary unless expressly permitted to do so
under the Purchase Agreement.


20.          Suretyship Waivers by Grantors.  Each Grantor waives
demand, notice, protest, notice of acceptance of this 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.
With respect to both the Secured Obligations and the Collateral, the Grantors
assent to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of or failure to perfect
any security interest in any Collateral, to the addition or release of any
party or person primarily or secondarily liable, to the acceptance of partial
payment thereon and the settlement, compromising or adjusting of any thereof,
all in such manner and at such time or times as the Secured Party may deem
advisable. 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
12.2. The Grantors further waive any and all other suretyship defenses.


21.          Marshalling.  The Secured Party
shall not be required to marshal any present or future collateral security
(including but not limited to this Agreement and the Collateral) for, or other
assurances of payment of, the Secured 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, however existing or arising. To the extent that it lawfully may, the
Grantors hereby agree that it will not invoke any law relating to the 


 


15

















 


marshalling
of collateral which might cause delay in or impede the enforcement of the Secured
Party’s rights under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured
Obligations is outstanding or by which any of the Secured Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Grantors hereby irrevocably waive the benefits of all such
laws.


22.          Proceeds of Dispositions; Expenses.  The Grantors shall
pay to the Secured Party on demand any and all expenses, including reasonable
attorneys’ fees and disbursements, incurred or paid by the Secured Party in
protecting, preserving or enforcing the Secured Party’s rights under or in
respect of any of the Secured Obligations or any of the Collateral. After
deducting all of said expenses, the residue of any proceeds of collection or
sale of the Secured Obligations or Collateral shall, to the extent actually
received in cash, be applied to the payment of the Secured Obligations in such
order as is provided in the Purchase Agreement, proper allowance and provision
being made for any Secured Obligations not then due. Upon the final payment and
satisfaction in full of all of the Secured Obligations 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 the Grantors shall remain liable
for any deficiency in the payment of the Secured Obligations.


23.          Overdue Amounts.  Until paid, all
amounts due and payable by the Grantors 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 Section 2.1(c) of the Purchase Agreement or,
if an Event of Default shall have occurred and be continuing, at the rate of
interest set forth in Section 2.1(d) of the Purchase Agreement.


24.          Termination.  This Agreement and the Liens and security
interests granted hereunder shall not terminate until the termination of the
Purchase Agreement and the full and complete performance and indefeasible
satisfaction of all the Secured Obligations, whereupon the Secured Party shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral to or on the order of the applicable Grantor. The Secured Party
shall also execute and deliver to each Grantor upon such termination such
Uniform Commercial Code termination statements and such other documentation as
shall be reasonably requested by such Grantor to effect the termination and
release of the Liens and security interests in favor of the Secured Party
affecting the Collateral.


25.          Governing Law; Consent to Jurisdiction.


(a)           THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW OR TO THE EXTENT THE
PERFECTION OR PRIORITY OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES
HEREUNDER, IN RESPECT OF ANY COLLATERAL, ARE GOVERNED BY THE LAW OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.


 


16

















 


(b)           EACH GRANTOR CONSENTS AND AGREES TO THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN.


(c)           EACH GRANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY HAND DELIVERY OR BY REGISTERED OR CERTIFIED UNITED
STATES MAIL TO IT AT ITS ADDRESS FOR NOTICE SET FORTH IN SECTION 27 HEREOF.  EACH GRANTOR HEREBY FURTHER DESIGNATES AND
APPOINTS CORPORATION SERVICE COMPANY AND SUCH OTHER PERSONS AS MAY HEREAFTER BE
SELECTED BY SUCH GRANTOR WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS
AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH GRANTOR TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED OR CERTIFIED UNITED STATES MAIL TO SUCH
GRANTOR AT ITS ADDRESS PROVIDED IN SECTION 27 EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS.


(d)           NOTHING
IN THIS SECTION 25 SHALL AFFECT THE RIGHT OF THE SECURED PARTY TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE SECURED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST
ANY GRANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.


26.          Waiver of Jury Trial.  EACH OF THE GRANTORS AND THE SECURED PARTY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.  THE GRANTORS AND THE SECURED PARTY HEREBY
AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH 


 


17

















 


ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.


27.          Notices.  All notices hereunder shall be in writing and
shall be conclusively deemed to have been received and shall be effective (a)
on the day on which delivered if delivered personally or transmitted by
facsimile transmission, (b) one Business Day after the date on which the same
is delivered to a nationally recognized overnight courier service, (c) three
Business Days after being sent by registered or certified United States mail,
return receipt requested, or (d) if sent by e-mail as provided below, and shall
be addressed:


(i)            if
to the Secured Party, to:


Technology Investment Capital Corp.


8 Sound Shore Drive, Suite 255


Greenwich, CT  06830


Attention:  Saul B. Rosenthal


Facsimile: (203) 983-5290


E-mail: srosenthal@ticc.com;


 


with a copy to:


 


Nixon Peabody LLP


437 Madison Avenue


New York, NY 10022


Attention: Philip A. Haber


Facsimile: (866) 855-0026


E-mail:
phaber@nixonpeabody.com;


 


(ii)           if
to any of the Grantors, to:


GenuTec Business Solutions, Inc.


6A Liberty Street, Suite 200


Aliso Viejo, CA  92656


Attention: Lee J. Danna, President


Facsimile: (949) 268-3175


E-mail: ldanna@genutec.com;


 


with a copy to:


 


Gersten Savage, LLP


600 Lexington Avenue


New York, NY  10022


Attention: Stephen A. Weiss


Facsimile: (212) 980-5192


E-mail: sweiss@gskny.com;


 


18

















 


or to such other address or addresses or
telecopy number or numbers as either of such Persons may most recently have
designated in writing to the others by such notice.  Notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day.


 


28.          Miscellaneous;
Agreement to be Bound by Provisions of Note Documents Applicable to Grantors.  The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Grantors and their respective successors and assigns, and
shall inure to the benefit of the Secured Party and its successors and assigns.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as
if such invalid, illegal or unenforceable term had not been included herein.
The Grantors acknowledge receipt of a copy of this Agreement.  Each Grantor agrees to be bound by each
provision of every other Note Document which purports to be applicable to it as
if such provision were set forth herein.


 


[REMAINDER
OF PAGE INTENTIONALLY BLANK.  SIGNATURES
FOLLOW.]


 


 


19

















 


IN
WITNESS WHEREOF, intending to be legally bound, the Grantors and Secured Party
have caused this Agreement to be duly executed as of the date first above
written.


	
   

  	
  GRANTORS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENUTEC
  BUSINESS SOLUTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee Danna

  
	
   

  	
   

  	
  Name:
  Lee J. Danna

  
	
   

  	
   

  	
  Title:
  President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  GENUTEC
  MARKETING, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee Danna

  
	
   

  	
   

  	
  Name:
  Lee J. Danna

  
	
   

  	
   

  	
  Title:
  President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  SMART
  ACQUISITION, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee Danna

  
	
   

  	
   

  	
  Name:
  Lee J. Danna

  
	
   

  	
   

  	
  Title:
  President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECURED
  PARTY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TECHNOLOGY INVESTMENT
  CAPITAL CORP.,

  	
   

  	
   

  
	
  as Collateral Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Saul B. Rosenthal

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Saul B. Rosenthal

  	
   

  	
   

  
	
   

  	
  Title: President

  	
   

  	
   

  
						



 


 


 


 


 


 


Pledge and Security Agreement


 

















 


Schedule A


to Pledge and Security Agreement


Deposit Accounts


 


	
  Name of Grantor

  	
   

  	
  Name of Bank

  	
   

  	
  Account Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


Schedule B


to Pledge and Security Agreement


Commercial Tort Claims


 

















 


Schedule C


to Pledge and Security Agreement


Pledged Stock


 


	
  

  Pledgor

  	
   

  	
  

  Issuer

  	
   

  	
  Shares 

  Pledged

  	
   

  	
  Certificate

  Number(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 

















 


Exhibit I


to Pledge and Security Agreement


Copyright Security
Agreement


                                COPYRIGHT
SECURITY AGREEMENT, dated as of             ,
20     (this “Agreement”), is by and among
the parties identified as “Grantors” on the signature pages hereto and such
other parties as may become Grantors hereunder after the date hereof
(individually a “Grantor”, and collectively the “Grantors”) and Technology
Investment Capital Corp., as secured party (together with its successors and
assigns, the “Secured Party”).


 


                Grantors
and the Secured Party hereby agree as follows:


SECTION 1.


Definitions; Interpretation.


                (a)           Terms
Defined in Purchase Agreement.
All capitalized terms used in this Agreement and not otherwise defined herein
shall have the meanings assigned to them in the Purchase Agreement.


                (b)           Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:


                “Collateral”
has the meaning set forth in Section 2.


                “Copyright
Office” means the United States Copyright Office.


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


                “Purchase
Agreement” means that certain Note and Warrant Purchase Agreement, dated as
of             , 20    ,
between                     ,
a                     ,
and Technology Investment Capital Corp., as it may modified, supplemented
and amended from time to time.


                (c)           Terms
Defined in NYUCC. Where
applicable in the context of this Agreement and except as otherwise defined
herein, terms used in this Agreement shall have the meanings assigned to them
in the NYUCC.


                (d)           Construction. 
In this Agreement, the following rules of construction and
interpretation shall be applicable: (i) no reference to “proceeds” in this
Agreement authorizes any sale, transfer, or other disposition of any Collateral
by Grantor; (ii) “includes” and “including” are not limiting; (iii) “or” is not
exclusive; and (iv) “all” includes “any” and “any” includes “all.” To the
extent not inconsistent with the foregoing, the rules of construction and
interpretation applicable to the Purchase Agreement shall also be applicable to
this Agreement and are incorporated herein by this reference.

















 


SECTION 2.


Security Interest.


(a)           Grant
of Security Interest. As
security for the payment and performance of the Secured Obligations, Grantor
hereby assigns, transfers and conveys to the Secured Party, and grants a
security interest in and mortgage to the Secured Party of, all of Grantor’s
right, title and interest
in, to and under the following property, in each case whether now or hereafter
existing or arising or in which Grantor now has or hereafter owns, acquires or
develops an interest and wherever located (collectively, the “Collateral”):


(i)            All of Grantor’s present and future
United States registered copyrights and copyright registrations, including
Grantor’s United States registered copyrights and copyright registrations
listed in Schedule A to this Agreement, all of Grantor’s present and future
United States applications for copyright registrations, including Grantor’s
United States applications for copyright registrations listed in Schedule B to
this Agreement, and all of Grantor’s present and future copyrights that are not
registered in the Copyright Office including, without limitation, derivative
works (collectively, the “Copyrights”), and any and all royalties,
payments, and other amounts payable to Grantor in connection with the
Copyrights, together with all renewals and extensions of the Copyrights, the
right to recover for all past, present, and future infringements of the
Copyrights, and all manuscripts, documents, writings, tapes, disks, storage
media, computer programs, computer databases, computer program flow diagrams,
source codes, object codes and all tangible property embodying or incorporating
the Copyrights, and all other rights of every kind whatsoever accruing thereunder
or pertaining thereto;


(ii)           All
of Grantor’s right, title and interest in and to any and all present and future
license agreements with respect to the Copyrights;


(iii)          All
present and future accounts and other rights to payment arising from, in connection
with or relating to the Copyrights; and


(iv)          All
cash and non-cash proceeds of any and all of the foregoing.


(b)           Continuing
Security Interest. Grantor
agrees that this Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until terminated in accordance with
Section 11.


SECTION 3.


Supplement
to Security Agreement.


                This
Agreement has been entered into in conjunction with the security interests
granted to the Secured Party under the Security Agreement, and other security
documents referred to therein. The rights and remedies of the Secured Party
with respect to the security interests granted herein are without prejudice to,
and are in addition to those set forth in the Security 

















Agreement or any other security
documents referred to therein, all terms and provisions of which are
incorporated herein by reference.


SECTION 4.


Representations and Warranties.


                Grantor
represents and warrants to the Secured Party that:


                (a)           Copyright Registrations. A
true and correct list of all of Grantor’s United States registered copyrights
and copyright registrations is set forth in Schedule A.


                (b)           Applications for Copyright
Registration. A true and correct list of all of Grantor’s United States
applications for copyright registrations is set forth in Schedule B.


SECTION 5.


Further Acts.


                On
a continuing basis, Grantor shall make, execute, acknowledge and deliver, and
file and record in the proper filing and recording places, all such instruments
and documents, and take all such action as may be necessary or advisable or may
be requested by the Secured Party to carry out the intent and purposes of this
Agreement, or for assuring, confirming or protecting the grant or perfection of
the security interest granted or purported to be granted hereby, to ensure
Grantor’s compliance with this Agreement or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to the
Collateral, including any documents for filing with the Copyright Office or any
applicable state office. The Secured Party may record this Agreement, an
abstract thereof, or any other document describing the Secured Party’s interest
in the Copyrights with the Copyright Office, at the expense of Grantor. In
addition, Grantor authorizes the Secured Party to file financing statements
describing the Collateral in any Uniform Commercial Code filing office deemed
appropriate by the Secured Party.


SECTION 6.


Authorization
to Supplement.


                Grantor
shall give the Secured Party prompt notice of any additional United States
copyright registrations or applications therefor after the date hereof. Grantor
authorizes the Secured Party unilaterally to modify this Agreement by amending
Schedule A or B to include any future United States registered copyrights or
applications therefor of Grantor. Notwithstanding the foregoing, no failure to
so modify this Agreement or amend Schedules A or B shall in any way affect,
invalidate or detract from the Secured Party’s continuing security interest in
all Collateral, whether or not listed on Schedule A or B.

















 


SECTION 7.


Binding
Effect.


                This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
Grantor, the Secured Party and their respective successors and assigns. Grantor
may not assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder except as specifically permitted by the
Purchase Agreement.


SECTION 8.


Governing Law.


                This
Agreement shall be governed by, and construed in accordance with, the law of
the State of New York, except as required by mandatory provisions of law or to
the extent the perfection or priority of the security interests hereunder, or
the remedies hereunder, in respect of any Collateral are governed by the law of
a jurisdiction other than the State of New York.


SECTION 9.


Entire Agreement; Amendment.


                No amendment of
any provision of this Agreement shall be effective unless it is in writing and
signed by the Grantors and the Secured Party, and no waiver of any provision of
this Agreement, and no consent to any departure by the Grantors there from,
shall be effective unless it is in writing and signed by the Secured Party, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. 
Notwithstanding the foregoing, the
Secured Party unilaterally may re-execute this Agreement or modify, amend or
supplement the Schedules hereto as provided in Section 6 hereof. To the extent
that any provision of this Agreement conflicts with any provision of the
Purchase Agreement, the provision giving the Secured Party greater rights or
remedies shall govern, it being understood that the purpose of this Agreement
is to add to, and not detract from, the rights granted to the Secured Party
under the Purchase Agreement.  Nothing in this
Section 9 shall be construed to permit any Grantor to form a Subsidiary unless
expressly permitted to do so under the Purchase Agreement.


SECTION 10.


Counterparts.


                This
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
but one and the same agreement. Delivery of an executed counterpart of this
Agreement by facsimile shall be equally as effective as delivery of a manually
executed counterpart. Any party hereto delivering a counterpart of this
Agreement by facsimile shall also 

















 


deliver a manually executed
counterpart, but the failure to so deliver a manually executed counterpart
shall not affect the validity, enforceability, or binding effect hereof.


SECTION 11.


Termination.


                Upon
payment and performance in full of all Secured Obligations, the security
interests created by this Agreement shall terminate and the Secured Party (at
Grantor’s expense) shall promptly execute and deliver to Grantor such documents
and instruments reasonably requested by Grantor as shall be necessary to
evidence termination of all such security interests given by Grantor to the
Secured Party hereunder, including cancellation of this Agreement by written
notice from the Secured Party to the Copyright Office.


SECTION 12.


No Inconsistent Requirements.


                Grantor
acknowledges that this Agreement and the other documents, agreements and
instruments entered into or executed in connection herewith may contain
covenants and other terms and provisions variously stated regarding the same or
similar matters, and Grantor agrees that all such covenants, terms and provisions
are cumulative and all shall be performed and satisfied in accordance with
their respective terms.


SECTION 13.


Severability.


                If
one or more provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect in any jurisdiction or with respect to any party,
such invalidity, illegality or unenforceability in such jurisdiction or with
respect to such party shall, to the fullest extent permitted by applicable law,
not invalidate or render illegal or unenforceable any such provision in any
other jurisdiction or with respect to any other party, or any other provisions
of this Agreement.


SECTION 14.


Notices.


                All
notices and other communications hereunder shall be in writing and shall be
mailed, sent or delivered in accordance with the Purchase Agreement.


[REMAINDER OF PAGE INTENTIONALLY
BLANK. SIGNATURES FOLLOW.]

















 


IN WITNESS WHEREOF,
the parties hereto have duly executed this Agreement, as of the date first
above written.


	
   

  	
  [NAME OF GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND ACKNOWLEDGED BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TECHNOLOGY INVESTMENT
  CAPITAL CORP.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Saul B. Rosenthal

  	
   

  	
   

  
	
   

  	
  Title: President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					



 

















 


Schedule A


to Copyright Security
Agreement


 


Grantor: [                                                            ]


Registered Copyrights


	
  Title of Work

  	
   

  	
  Registration Number

  	
   

  	
  Date of
  Registration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 








Schedule B


to Copyright
Security Agreement


 


Grantor: [                                                            ]


Copyright Applications


	
  Title of Work

  	
   

  	
  Application Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


 

















Exhibit
II


 


to Pledge and Security Agreement


Patent Security Agreement


PATENT SECURITY
AGREEMENT, dated as of ______, 20__, by ___________, a ______________ (“Grantor”),
in favor of TECHNOLOGY INVESTMENT CAPITAL CORP., a Maryland corporation, as
secured party (the “Secured Party”).


W I  T  N  E  S  S
E  T  H:


WHEREAS, pursuant to that
certain Note and Warrant Purchase Agreement dated as of ______, 20__ (including
all exhibits and schedules thereto, and as from time to time amended, restated,
supplemented or otherwise modified, the “Purchase Agreement”) by and
between _________ (the “Company”) and the Secured Party, the Secured
Party is purchasing or has purchased certain Notes issued by the Company; and


WHEREAS, pursuant to the
Purchase Agreement, the Secured Party, the Company and certain other parties
are executing or have executed that certain Pledge and Security Agreement dated
as of ______, 20__ (including all exhibits and schedules thereto, as from time
to time amended, restated, supplemented or otherwise modified, the “Security
Agreement”); and


WHEREAS, pursuant to the
Security Agreement, Grantor is required to execute and deliver to the Secured
Party this Patent Security Agreement;


NOW, THEREFORE, in
consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor hereby agrees as follows:


1.     Defined Terms.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Purchase Agreement.


2.     Grant of Security
Interest in Patent Collateral. 
Grantor hereby grants to the Secured Party a continuing first priority
security interest in all of Grantor’s right, title and interest in, to and
under the following, whether presently existing or hereafter created or
acquired (collectively, the “Collateral”):


(a)           all of its Patents
and Patent applications to which Grantor is or shall be a party, including
those referred to on Schedule I hereto;


(b)           all reissues,
continuations or extensions of the foregoing; and


(c)           all products and
proceeds of the foregoing, including, without limitation, all claims by Grantor
against third parties for past, present or future infringement or dilution of
any Patent, any Patent registrations issued with respect to the Patent
applications referred in Schedule I.


 

















 


3.     Security Agreement.  The security interests granted pursuant to
this Patent Security Agreement are granted in conjunction with the security
interests granted to the Secured Party pursuant to the Security Agreement.  Grantor hereby acknowledges and affirms that
the rights and remedies of the Secured Party with respect to the security
interest in the Collateral made and granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.


4.             Further Acts.  On a continuing basis, Grantor shall make,
execute, acknowledge and deliver, and file and record in the proper filing and
recording places, all such instruments and documents, and take all such action
as may be necessary or advisable or may be requested by the Secured Party to
carry out the intent and purposes of this Agreement, or for assuring,
confirming or protecting the grant or perfection of the security interest
granted or purported to be granted hereby, to ensure Grantor’s compliance with
this Agreement or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to the Collateral, including any
documents for filing with the United States Patent and Trademark Office or any
applicable state office. The Secured Party may record this Agreement, an
abstract thereof, or any other document describing the Secured Party’s interest
in the Collateral with the United States Patent and Trademark Office, at the
expense of Grantor. In addition, Grantor authorizes the Secured Party to file
financing statements describing the Collateral in any Uniform Commercial Code
filing office deemed appropriate by the Secured Party.


5.             Authorization to Supplement.  Grantor shall give the Secured Party prompt
notice of any additional United States patents or applications therefor after
the date hereof. Grantor authorizes the Secured Party unilaterally to modify
this Agreement by amending Schedule I hereto to include any future United
States patents or applications therefor of Grantor. Notwithstanding the
foregoing, no failure to so modify this Agreement or amend Schedule I hereto
shall in any way affect, invalidate or detract from the Secured Party’s
continuing security interest in all Collateral, whether or not listed on
Schedule I.


6.             Binding Effect.  This Agreement shall be binding upon, inure
to the benefit of and be enforceable by Grantor, the Secured Party and their
respective successors and assigns. Grantor may not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder except as specifically permitted by the Purchase Agreement.


7.             Termination.  Upon payment and performance in full of all Secured
Obligations, the security interests created by this Agreement shall terminate
and the Secured Party (at Grantor’s expense) shall promptly execute and deliver
to Grantor such documents and instruments reasonably requested by Grantor as
shall be necessary to evidence termination of all such security interests given
by Grantor to the Secured Party hereunder, including cancellation of this
Agreement by written notice from the Secured Party to the United States Patent
and Trademark Office.


8.             Notices.  All notices and other communications hereunder shall be in writing and shall
be mailed, sent or delivered in accordance with the Purchase Agreement.


9.             Governing Law. 
This Agreement shall be governed
by, and construed in accordance with, the law of the State of New York, except
as required by mandatory provisions 


 


2

















 


of
law or to the extent the perfection or priority of the security interests
hereunder, or the remedies hereunder, in respect of any Collateral are governed
by the law of a jurisdiction other than the State of New York.


 [REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]


 


3

















 


IN WITNESS WHEREOF,
Grantor has caused this Patent Security Agreement to be executed and delivered
by its duly authorized officer as of the date first set forth above.


 


	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 


 


ACCEPTED AND ACKNOWLEDGED BY:


TECHNOLOGY INVESTMENT CAPITAL CORP.


 


 


 


	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Saul B. Rosenthal

  	
   

  
	
   

  	
  Title:President

  	
   

  



 

















 


SCHEDULE I

to

PATENT SECURITY
AGREEMENT


 


U.S. Patent
Registrations


	
  Title

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issuance

  	
   

  	
  Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


U.S.
Patent Applications


 


	
  Title

  	
   

  	
  Application No.

  	
   

  	
  Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 

















 


Exhibit III


to Pledge and Security Agreement


Trademark Security
Agreement


TRADEMARK SECURITY
AGREEMENT, dated as of ______, 20__, by ___________, a ______________
corporation (“Grantor”), in favor of TECHNOLOGY INVESTMENT CAPITAL
CORP., a Maryland corporation, as secured  party (the “Secured Party”).


W I  T  N  E  S  S
E  T  H:


WHEREAS, pursuant to that
certain Note and Warrant Purchase Agreement dated as of _____, 20__ (including
all exhibits and schedules thereto, and as from time to time amended, restated,
supplemented or otherwise modified, the “Purchase Agreement”) by and
between ____________ (the “Company”) and the Secured Party, the Secured
Party is purchasing or has purchased certain Notes issued by the Company; and


WHEREAS, pursuant to the
Purchase Agreement, the Secured Party, the Company and certain other parties
are executing or have executed that certain Pledge and Security Agreement dated
as of ______, 20__ (including all exhibits and schedules thereto, as from time
to time amended, restated, supplemented or otherwise modified, the “Security
Agreement”); and


WHEREAS, pursuant to the
Security Agreement, Grantor is required to execute and deliver to the Secured
Party this Trademark Security Agreement;


NOW, THEREFORE, in
consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor hereby agrees as follows:


1.             Defined Terms.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Purchase Agreement.


2.             Grant of Security Interest in
Trademark Collateral.  Grantor hereby
grants to the Secured Party a continuing first priority security interest in
all of Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the “Collateral”):


(a)           all of its
Trademarks, Trademark registrations and Trade­mark applications to which it is
or shall be a party, including, without limitation, the Trademarks, Trademark
registrations, and Trademark applications referred to in Schedule I annexed
hereto, and all of the goodwill of the business connected with the use of, and
symbolized by, each Trademark, Trademark registration or  Trademark application;


(b)           all renewals of the
foregoing; and


(c)           all products and
proceeds of the foregoing, including, without limitation, all claims by Grantor
against third parties for past, present or future (i) infringement or 


 

















 


dilution of any
Trademark or Trademark registration including, without limitation, the Trade­marks
and Trademark registrations referred to in Sched­ule I annexed hereto, the
Trademark registrations issued with respect to the Trademark applications
referred in Schedule I, or (ii) injury to the goodwill associated with any
Trademark or Trademark registration.


3.             Security Agreement.  The security interests granted pursuant to
this Trademark Security Agreement are granted in conjunction with the security
interests granted to the Secured Party pursuant to the Security Agreement.  Grantor hereby acknowledges and affirms that
the rights and remedies of the Secured Party with respect to the security
interest in the Collateral made and granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.


4.             Further Acts.  On a continuing basis, Grantor shall make,
execute, acknowledge and deliver, and file and record in the proper filing and
recording places, all such instruments and documents, and take all such action
as may be necessary or advisable or may be requested by the Secured Party to
carry out the intent and purposes of this Agreement, or for assuring,
confirming or protecting the grant or perfection of the security interest
granted or purported to be granted hereby, to ensure Grantor’s compliance with
this Agreement or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to the Collateral, including any
documents for filing with the United States Patent and Trademark Office or any
applicable state office. The Secured Party may record this Agreement, an
abstract thereof, or any other document describing the Secured Party’s interest
in the Collateral with the United States Patent and Trademark Office, at the
expense of Grantor. In addition, Grantor authorizes the Secured Party to file
financing statements describing the Collateral in any Uniform Commercial Code
filing office deemed appropriate by the Secured Party.


5.             Authorization to Supplement.  Grantor shall give the Secured Party prompt
notice of any additional United States trademarks or applications therefor
after the date hereof. Grantor authorizes the Secured Party unilaterally to
modify this Agreement by amending Schedule I hereto to include any future
United States trademarks or applications therefor of Grantor. Notwithstanding
the foregoing, no failure to so modify this Agreement or amend Schedule I
hereto shall in any way affect, invalidate or detract from the Secured Party’s
continuing security interest in all Collateral, whether or not listed on
Schedule I.


6.             Binding Effect.  This Agreement shall be binding upon, inure
to the benefit of and be enforceable by Grantor, the Secured Party and their
respective successors and assigns. Grantor may not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder except as specifically permitted by the Purchase Agreement.


7.             Termination.  Upon payment and performance in full of all Secured
Obligations, the security interests created by this Agreement shall terminate
and the Secured Party (at Grantor’s expense) shall promptly execute and deliver
to Grantor such documents and instruments reasonably requested by Grantor as
shall be necessary to evidence termination of all such security interests given
by Grantor to the Secured Party hereunder, including cancellation of this
Agreement by written notice from the Secured Party to the United States Patent
and Trademark Office.


 


2

















 


8.             Notices.  All notices and other communications hereunder shall be in writing and shall
be mailed, sent or delivered in accordance with the Purchase Agreement.


9.             Governing Law. 
This Agreement shall be governed
by, and construed in accordance with, the law of the State of New York, except
as required by mandatory provisions of law or to the extent the perfection or
priority of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
the State of New York.


[REMAINDER OF PAGE INTENTIONALLY
BLANK.  SIGNATURES FOLLOW.]


 


3

















 


IN WITNESS WHEREOF,
Grantor has caused this Trademark Security Agreement to be executed and
delivered by its duly authorized officer as of the date first set forth above.


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 


ACCEPTED AND ACKNOWLEDGED BY:


TECHNOLOGY INVESTMENT CAPITAL CORP.


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Saul B. Rosenthal

  	
   

  
	
   

  	
  Title: President

  	
   

  



 


 


4

















 


SCHEDULE I

to

TRADEMARK SECURITY
AGREEMENT


 


U.S.
Trademark Registrations


 


	
  Mark

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issuance

  	
   

  	
  Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


U.S.
Trademark Applications


 


	
  Mark

  	
   

  	
  Application No.

  	
   

  	
  Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 

















 


Annex 1 to


Pledge and Security
Agreement


                ASSUMPTION AGREEMENT,
dated as of ________________, 200__, made by __________________, a _________
(the “Additional Grantor”), in favor of Technology Investment Capital
Corp., as Collateral Agent (the “Secured Party”) for the benefit of the
Purchasers named in Schedule I to under the Note Purchase Agreement dated as of
September 16, 2005 (as it may be amended, supplemented or restated from time to
time, the “Purchase Agreement”) among GenuTec Business Solutions, Inc.,
a Montana corporation (the “Company”) and such Purchasers.  Capitalized terms not defined herein shall
have the meaning ascribed to them in the Purchase Agreement.


 


W I  T  N  E  S  S  E  T  H :


WHEREAS, in connection
with the Purchase Agreement, the Company and certain of its Affiliates (other
than the Additional Grantor) have entered into the Pledge and Security Agreement
dated as of September 16, 2005 (as it may be amended, supplemented or otherwise
modified from time to time, the “Security Agreement”) in favor of the Secured
Party;  and


WHEREAS, the
Additional Grantor has agreed to execute and deliver this Assumption Agreement
in order to become a party to the Security Agreement;


NOW,
THEREFORE, IT IS AGREED:


1.  Security Agreement.  By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 19 of the Security
Agreement, hereby becomes a party to the Security Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder.


2.  Representations and Warranties Concerning
Grantor’s Legal Status.  The Additional Grantor has previously
delivered to the Secured Party a certificate signed by the Additional Grantor
and entitled “Perfection Certificate” (the “Perfection Certificate”)
(form of Perfection Certificate to be completed is attached hereto as Schedule
1).  The Additional Grantor
represents and warrants to the Secured Party as follows: (a) the Additional
Grantor’s exact legal name is that indicated on the Perfection Certificate and
on the signature page hereof, (b) the Additional Grantor is an organization of
the type and organized in the jurisdiction set forth in the Perfection
Certificate, (c) the Perfection Certificate accurately sets forth the Additional
Grantor’s organizational identification number or accurately states that the
Additional Grantor has none, (d) the Perfection Certificate accurately sets
forth the Additional Grantor’s place of business or, if more than one, its
chief executive office as well as the Additional Grantor’s mailing address if
different (e) all other information set forth on the Perfection Certificate
pertaining to the Additional Grantor is accurate and complete and (f) each of
the representations and warranties contained in the Note Documents relating to
it are true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.


 

















 


3.  Governing Law.  THIS ASSUMPTION AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.


IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.


	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


2

















 


 


Schedule 1


to


Assumption Agreement to Pledge
and Security Agreement


 


PERFECTION CERTIFICATE


The
undersigned, the                                                           of [Additional Grantor] a ____________ (the “Company”),
hereby certifies, with reference to a certain Pledge and Security Agreement
dated as of _____, 20__ (terms defined in such Security Agreement having the
same meanings herein as specified therein), between the Grantors named therein
and Technology Investment Capital Corp., as Collateral Agent (the “Secured
Party”), as follows:


1.  Names.  (a)       The
exact corporate name of the Company as that name appears on its [Certificate of
Incorporation] is as follows:


(b)           The following is a list of all other
names (including trade names or similar appellations) used by the Company, or
any other business or organization to which the Company became the successor by
merger, consolidation, acquisition, change in form, nature or jurisdiction of
organization or otherwise, now or at any time during the past five years:


2.  Other
Identifying Factors.  (a)      The following is the type of organization
of the Company:


(b)           The following is the jurisdiction of
the Company’s organization:


(c)           The following is the Company’s state
issued organizational identification number [state “None” if the state
does not issue such a number]:


(d)           The following is the Company’s
federal employer identification number:


(e)           Attached hereto as Schedule 2 is the information required
above in this Section 2 for any other business or organization to which the
Company became the successor by merger, consolidation, acquisition, change in
form, nature or jurisdiction of organization or otherwise, now or at any time
during the past five years:


 


3.  Chief Executive Office.


(a)           The chief executive office of the
Company is located at the following address:


 


	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


3

















 


(b)           The principal mailing address of the
Company is the following address, if different from the chief executive office
address:


 


	
  Mailing Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


4.  Other Current
Locations.


(a)           The following are all other locations
in the United States of America in which the Company maintains any books or
records relating to any of the Collateral consisting of accounts, contract
rights, chattel paper, general intangibles or mobile goods:


 


	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


(b)                                                                                 The
following are all other places of business of the Company in the United States
of America:


 


	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


(c)           The following are all other locations
in the United States of America where any of the Collateral consisting of
inventory or equipment is located:


 


	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


4

















 


(d)           The following are the names and
addresses of all persons or entities other than the Company, such as lessees,
consignees, warehousemen or purchasers of chattel paper, which have possession
or are intended to have possession of any of the Collateral consisting of
chattel paper, inventory or equipment:


 


	
  Name

  	
   

  	
  Mailing Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


5.  Prior
Locations.  (a)        Set forth below is the information
required by Section 3 and by subparagraphs (a) and (b) of Section 4 with respect
to each location or place of business previously maintained by the Company at
any time during the past five years in a state in which the Company has
previously maintained a location or place of business at any time during the
past four months:


 


	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


(b)           Set forth below is the information
required by subparagraphs (c) and (d) of Section 4 with respect to each other
location at which, or other person or entity with which, any of the Collateral
consisting of inventory or equipment has been previously held at any time
during the past twelve months:


 


	
  Name

  	
   

  	
  Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


5

















 


6.  Fixtures.  Attached hereto as Schedule 6
is the information required by Uniform Commercial Code Section 9-402(5) or by Uniform
Commercial Code Section 9-502(b) of each state in which any of the Collateral
consisting of fixtures are or are to be located and the name and address of
each real estate recording office where a mortgage on the real estate on which
such fixtures are or are to be located would be recorded.


7.  Intellectual
Property.  Attached hereto as Schedule 7
is a complete list of all United States and foreign patents, copyrights,
trademarks, trade names and service marks registered or for which applications
are pending in the name of the Company.


8.  Securities;
Instruments.  Attached hereto as Schedule 8
is a complete list of all stocks, bonds, debentures, notes and other securities
and investment property owned by the Company (provide
name of issuer, a description of security and value):


9.  Motor
Vehicles.  The following is a
complete list of all motor vehicles owned by the Company (describe
each vehicle by make, model and year and indicate for each the state in which
registered and the state in which based):


 


	
  Vehicle

  	
   

  	
  State of Registration

  	
   

  	
  State in Which Based

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


 


 


 


 


10. Other
Titled Collateral.  The
following is a complete list of aircraft and boats and all other inventory,
equipment and other goods of the Company which are subject to any certificate
of title or other registration statute of the United States, any state or any
other jurisdiction (provide description of
covered goods and indicate registration system and jurisdiction):


 


	
  Goods

  	
   

  	
  Registration System

  	
   

  	
  Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


11. Bank
Accounts.  The following is a
complete list of all bank accounts (including securities and commodities
accounts) maintained by the Company (provide name and address
of depository bank, type of account and account number):


 


 


6

















 


	
  Depository Bank

  	
   

  	
  Bank Address

  	
   

  	
  Type of Account

  	
   

  	
  Acct. No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


12. Unusual
Transactions.  Except for those
purchases, acquisitions and other transactions described on Schedule 2
or on Schedule 12 attached hereto, all of the Collateral has
been originated by the Company in the ordinary course of the Company’s business
or consists of goods which have been acquired by the Company in the ordinary
course from a person in the business of selling goods of that kind.


13. Termination
Statements.  An authorized
termination statement on Form UCC-3 in form acceptable to the Secured Party  has been duly filed in each applicable
jurisdiction identified in Sections [2], 3, 4 and 5 or on Schedules 2
and 12 hereto[ or, in the
case of Schedule 2 or 12, a release acceptable to the
Secured Party signed by the person from which the Company purchased or
otherwise acquired the Collateral identified on Schedule 2
or 12], has been delivered
to the Secured Party.  Attached hereto as
Schedule 13 is a true copy of each such filing duly
acknowledged by the filing officer[ and of each such release].


14. Schedule
of Filing.  Attached hereto as Schedule 14
is a schedule setting forth filing information with respect to the filings
described in Section 13 above.


15. Filing
Fees.  All filing fees and taxes
payable in connection with the filings described in Section 13 have been paid.


IN
WITNESS WHEREOF, the undersigned has signed this Certificate on _______, 200_.


 


 


	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  



 


7