PATENT APPLICATIONS, COPYRIGHTS, DEPOSIT ACCOUNTS,
AND INCOME TAX REFUNDS (COLLECTIVELY, THE "GENERAL INTANGIBLES"); AND
(IV)
ALL RECEIVABLES OF THE COMPANY INCLUDING ALL INSURANCE PROCEEDS,
AND RIGHTS TO REFUNDS OR INDEMNIFICATION WHATSOEVER OWING, TOGETHER WITH ALL
INSTRUMENTS, ALL DOCUMENTS OF TITLE REPRESENTING ANY OF THE FOREGOING, ALL
RIGHTS IN ANY MERCHANDISING, GOODS, EQUIPMENT, MOTOR VEHICLES AND TRUCKS WHICH
ANY OF THE SAME MAY REPRESENT, AND ALL RIGHT, TITLE, SECURITY AND GUARANTIES
WITH RESPECT TO EACH RECEIVABLE, INCLUDING ANY RIGHT OF STOPPAGE IN TRANSIT;
(V)
ALL OF THE COMPANY'S DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER,
FILES, RECORDS, BOOKS OF ACCOUNT, BUSINESS PAPERS, COMPUTER PROGRAMS AND THE
PRODUCTS AND PROCEEDS OF ALL OF THE FOREGOING COLLATERAL SET FORTH IN CLAUSES
(I)-(IV) ABOVE;
(VI)
ALL OF THE CAPITAL STOCK OF ANY CORPORATION OWNED BY THE COMPANY.
(B)
"COMPANY" SHALL MEAN, COLLECTIVELY, COMPANY AND THE WHOLLY OWNED
SUBSIDIARY OF COMPANY.
(C)
"OBLIGATIONS" MEANS ALL OF THE COMPANY'S OBLIGATIONS UNDER THIS
AGREEMENT AND THE NOTES, IN EACH CASE, WHETHER NOW OR HEREAFTER EXISTING,
VOLUNTARY OR INVOLUNTARY, DIRECT OR INDIRECT, ABSOLUTE OR CONTINGENT, LIQUIDATED
OR UNLIQUIDATED, WHETHER OR NOT JOINTLY OWED WITH OTHERS, AND WHETHER OR NOT
FROM TIME TO TIME DECREASED OR EXTINGUISHED AND LATER DECREASED, CREATED OR
INCURRED, AND ALL OR ANY PORTION OF SUCH OBLIGATIONS OR LIABILITIES THAT ARE
PAID, TO THE EXTENT ALL OR ANY PART OF SUCH PAYMENT IS AVOIDED OR RECOVERED
DIRECTLY OR INDIRECTLY FROM THE SECURED PARTY AS A PREFERENCE, FRAUDULENT
TRANSFER OR OTHERWISE AS SUCH OBLIGATIONS MAY BE AMENDED, SUPPLEMENTED,
CONVERTED, EXTENDED OR MODIFIED FROM TIME TO TIME.
(D)
"UCC" MEANS THE UNIFORM COMMERCIAL CODE, AS CURRENTLY IN EFFECT IN
THE STATE OF CALIFORNIA.
2.
GRANT OF SECURITY INTEREST.
AS AN INDUCEMENT FOR THE SECURED
PARTY TO PURCHASE THE NOTES AND TO SECURE THE COMPLETE AND TIMELY PAYMENT,
PERFORMANCE AND DISCHARGE IN FULL, AS THE CASE MAY BE, OF ALL OF THE
OBLIGATIONS, THE COMPANY HEREBY, UNCONDITIONALLY AND IRREVOCABLY, PLEDGES,
GRANTS AND HYPOTHECATES TO THE SECURED PARTY, A CONTINUING SECURITY INTEREST IN,
A RIGHT TO POSSESSION AND DISPOSITION OF AND A RIGHT OF SET-OFF AGAINST, IN EACH
CASE TO THE FULLEST EXTENT PERMITTED BY LAW, ALL OF THE COMPANY'S RIGHT, TITLE
AND INTEREST OF WHATSOEVER KIND AND NATURE IN AND TO THE COLLATERAL, SUBJECT TO
WESTERN COMMERCIAL BANK'S SECURITY INTEREST IN THE COLLATERAL
(THE "SECURITY
INTEREST").
2
3.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
COMPANY.
THE COMPANY REPRESENTS AND WARRANTS TO, AND COVENANTS AND AGREES WITH,
THE SECURED PARTY AS FOLLOWS:
(A)
THE COMPANY HAS THE REQUISITE CORPORATE POWER AND AUTHORITY TO
ENTER INTO THIS AGREEMENT AND OTHERWISE TO CARRY OUT ITS OBLIGATIONS
THEREUNDER.
THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THIS
AGREEMENT AND THE FILINGS CONTEMPLATED THEREIN HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY ACTION ON THE PART OF THE COMPANY AND NO FURTHER ACTION IS REQUIRED BY
THE COMPANY.
THIS AGREEMENT CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION
OF THE COMPANY ENFORCEABLE IN ACCORDANCE WITH ITS TERMS, EXCEPT AS
ENFORCEABILITY MAY BE LIMITED BY